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Columns

April 29, 2012

The cost of Obama's medical plan

The conventional wisdom is that President Obama's medical plan for the nation will be costly and represents an unprecedented mandate.

Let's try to break down this conventional wisdom.

It is argued that the extension of insurance coverage to the uninsured will cause the medical sector to grow. This conclusion defies simple math. At the macro level, the plan will cost us all collectively more only if we each, on average, receive more coverage or more expensive coverage.

However, relatively few of us will be directly affected. Already, almost half our residents are covered by a government plan, either by Medicare, Medicaid or through jobs with federal, state and local government. It is expected that the majority of us will be under a government-sponsored plan soon, as more people retire and move to Medicare.

Still more receive it through government-sponsored agencies such as universities. These individuals will receive no change in coverage.

Most of the rest of the population receives their coverage through their employers or through their own payments as self-employed individuals. Again, these residents will not experience a change in their providers, but the self-employed may have more options, especially if President Obama embraces the Republican idea of allowing one to purchase insurance plans across state lines.

This would hopefully offer people more choice and bust up some monopolies artificially defined by state borders.

Under the new mandate, those who do not currently have insurance will either be required to purchase it or their employers will be given incentives to purchase it on their behalf, or face significant disincentives if they do not.

This system of employers paying for insurance is familiar to us but would be considered odd almost anywhere else. Other nations provide insurance through government because to impose such costs on their businesses would be a burden that makes their commerce less competitive globally.

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