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Monday, March 31, 2008

The Regulator Regulates Health Care

One of the things that have come out in the last couple weeks when each candidate has put forward plans on everything from stimulating the economy, creating jobs, and fixing the mortgage mess is that Barack Obama hasn't met too many regulations that he hasn't fallen in love with. Here is what he said in relation to our economy recently...

To renew our economy — and to ensure that we are not doomed to repeat a cycle of bubble and bust again and again — we need to address not only the immediate crisis in the housing market; we also need to create a 21st century regulatory framework, and pursue a bold opportunity agenda for the American people

Now, by creating a "21st century regulatory framework", what that is code for is lots and lots of new regulations. Most of the nations domestic policy ills, have a regulatory solution, at least in part, in the mind of Obama. Here is what he wants to do on climate change.

Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions to the level recommended by top scientists to avoid calamitous impacts. [Obama will require carbon emissions to be “80 percent below 1990 levels by 2050” through cap & trade (with 100% allowance auction!) starting with a mandate “of reducing emissions to 1990 levels by 2020.

Of course, the mortgage mess is where he really finds lots of new places for regulations. Here are some things that Obama said.

"If you borrow from the government," he said, "you should be subject to government oversight and supervision." This echoed comments Wednesday from the
treasury secretary.

At the very least, Obama argued, "These new regulations should include liquidity and capital requirements."

He also called for "general reform of the requirements to which all regulated financial institutions are subjected. Capital requirements should be strengthened."

Specifically to mortgages, here are some of the regulations Obama has proposed.

Obama’s STOP FRAUD Act provides the first federal definition of mortgage
fraud, increases funding for federal and state law enforcement programs, creates
new criminal penalties for mortgage professionals found guilty of fraud, and
requires industry insiders to report suspicious activity.


a Home Score system that would create a simplified,standardised metric for
home mortgages – rather like the annual percentage rate(APR), the effective
interest rate a borrower ends up paying on a loan – allowing prospective home buyers easily to compare various mortgage
products so they can find out whether they can afford to make the

Here is the what Obama wants to do to regulate financial institutions.

Mr. Obama said the housing crisis was a result of the popping of yet another large bubble that has distorted the economy during the past decade. And in each case, he said, there was a failure to pass meaningful reforms. No one doubted, he noted, the need to change the Depression-era law that separated commercial banks and investment banks. But, as Mr. Obama’s aides noted in handouts supporting the speech, the banking and insurance industries spent more than $300 million on a successful campaign to repeal the 1933 Glass-Steagall Act in 1999.

So, it's clear that Obama would introduce new regulations into every part of our economy. Free market libertarians are of course weary of a regulation friendly President because new regulations create new bureaucracies, bloated government, and ultimately slow our economy down. Of course, nowhere is regulation heavier than from a universal health care proposal. In light of all of the new regulations that Obama has proposed, it is time to look at what sort of regulatory forces he wants to unleash on our health care system. Here is a sampling of some of the new regulations Obama wants to institute in health care...

Obama will establish an independent institute to guide reviews and research on comparative effectiveness, so that Americans and their doctors will have the accurate and objective information they need to make the best decisions for their health and well-being.


The Obama plan will create a National Health Insurance Exchange to help individuals who wish to purchase a private insurance plan. The Exchange will act as a watchdog group and help reform the private insurance market by creating rules and standards for participating insurance plans to ensure fairness and to make individual coverage more affordable and accessible. Insurers would have to issue every applicant a policy, and charge fair and stable premiums that will not depend upon health status. The Exchange will require that all the plans offered are at least as generous as the new public plan and have the same standards for quality and efficiency. The Exchange would evaluate plans and make the differences among the plans, including cost of services, public.


Obama will require hospitals and providers to collect and publicly report measures of health care costs and quality, including data on preventable medical errors, nurse staffing ratios, hospital-acquired infections, and disparities in care. Health plans will also be required to disclose the percentage of premiums that go to patient care as opposed to administrative costs.


Obama will strengthen antitrust laws to prevent insurers from overcharging physicians for their malpractice insurance and will promote new models for addressing errors that improve patient safety, strengthen the doctor-patient relationship and reduce the need for malpractice suits.


Barack Obama will prevent companies from abusing their monopoly power through unjustified price increases. His plan will force insurers to pay out a reasonable share of their premiums for patient care instead of keeping exorbitant amounts for profits and administration. His new National Health Exchange will help increase competition by insurers.

What gets lost in the promise of health care to all is the exponential increase in size and scope of government. Obama wants to create multiple new agencies: the National Health Exchange and the institute to guide research on comparative effectiveness to name two. These two new agencies will not only come with their own built in bureaucracy but their own regulatory powers.

He wants everything from anti trust, to quality care data, to the "fairness of insurance premiums" monitored and regulated. In other words, he wants to massively expand the size of government, the bureaucracy, and its powers. That, predictably, is the one effect that you can count on with any economic plan that Obama puts forward.

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