I should know better than to listen to political speeches hoping to hear anything inspiring, exciting, or new. What I get out of political speeches tends to be exemplified by my experience last night: I listened to Barack Obama outline his healthcare “reform” plan and realized that I am against it. In fact, I am convinced that it is a step in a worse direction from the status quo. Yes, that’s right, it would be better to do nothing to the current system than to enact this policy. I realize many of you will find this statement to be outlandish, so allow me to elaborate:

0. Demise of the Public Option
I’m going to make a slight assumption here that Barack Obama’s speech technically left vague, but I believe made very clear between the lines. I’m going to assume that the public option is dead. Obama spent more time in his speech telling progressives why they should support a bill without a public option than he did defending the potential merits of said option to anyone else. From the beginning, Obama has vested zero commitment to the concept of a public option. Given the penchant of Democrats to compromise pretty much everything when “negotiating”, I think the writing is on the wall. Many of my arguments hereon will assume that the final version of the plan will be devoid of a public option. The presence of a robust public option, pending a miracle, would mitigate some (but by no means all) of my objections.

1. Public Goods for Profit by Private Industry
A recurring theme of what I find most objectionable about the plan proposed is the individual mandate to purchase health insurance. Any plan with an individual mandate, regardless of other provisions, is going to draw scorn from me.

What’s so problematic about the individual mandate is that it’s a recognition that health insurance (or healthcare coverage of some kind, at least) is a public good. Anything so fundamental to citizenship that we would make failing to do it illegal is sort of the ultimate public good. Passing this bill would state that we have determined access to health insurance to be of maximal public value to society as a whole.

Now this is all well and good, right up till the point where only private insurers are enabled to offer this public good. Let’s consider other things we think of as public goods: fire protection, police protection, the military, highways, primary and secondary education, etc. In all but the last example, private groups are disallowed from offering services. The goods are considered simply too important to even let the private sector in the door. In the last example, education, the public option is considered the most vital aspect of the system, though competition is begrudgingly allowed from the private sector. Nevertheless, almost none of the private sector groups involved run on a principle of profit. They are non-profit organizations run as charities, often losing money on the fees they charge directly for student admission.

There is only one instance of anything remotely like a public good only being offered by private groups: car insurance. Indeed, car insurance seems to be the “inspiration” for much of this plan as it is manifesting, despite its obvious flaws. The function of the car insurance system in modern America is to serve as a regressive tax on car owners to funnel money into the hands of private for-profit insurance companies. Rather than institute a progressive tax throughout society to pay for financial liability coverage in case of a car accident, the government mandates the added expense of profit margins and the added inequality of variable coverage that requires people to bet against themselves. If you’re wondering how much profit (i.e. inefficiency) there is in the system, just look to what proportion of current advertising comes from auto insurance companies. You can think briefly about how many of these commercials you can recall from memory – Geico, Progressive, State Farm, All State, and realize how much margin there is in this industry.

The tax is regressive because people pay on a per-car basis and, often, because of the way insurance “risks” are calculated, those on the margins of society are forced to pay the most. Using this system as a model for any kind of coverage is devastatingly unfair.

But with health insurance, it’s even worse than car insurance, because at least someone can choose not to have a car. It’s very difficult in some circumstances, but it is an option. Choosing to not have a body is not an option, and thus everyone in society is swept up in the dragnet of the insurance-industry bailout known as “healthcare reform”. This is literally unprecedented in our society – never in our history has something been enacted that requires 100% participation. Not taxes (only those who are employed or make purchases in certain states), not ID cards, not voting (certainly not voting!), not conscription (only males), not education (only children), absolutely nothing has ever been mandated for everyone. And we are planning on breaking this precedent with… paying private insurers to offer you healthcare coverage?

What would be next? Saying everyone has to buy oranges because they’re healthy? Everyone has an individual mandate to buy ten oranges a day. How about mortgage-backed securities? Everyone must help the economy by buying one toxic asset from a bank per month. This is an insane way of achieving what is clearly observed to be a public good.

2. Lack of Cost Controls
You’ll note that, aside from a token mention of tort reform, Obama said nothing about keeping costs in check. Apparently, competition is supposed to be the magic force that keeps escalating healthcare costs in line, even though we’ve ostensibly had a system of competition for the last century, which has brought us onto this runaway train in the first place.

Now, there is some confusion about how the “marketplace of insurers” exchange system would work. Obama said both that the entire block of people in the exchange would act as one big group to negotiate and gain leverage AND that individuals and businesses could “shop” among options. These can’t both be true. Either the whole group negotiates as one, which would drive down price but also mean that everyone in the negotiating pool can only go with the insurer with the best bid OR the group is every person for themselves, navigating bids offered them as individuals, like a lendingtree.com for health insurance. I’ll take these issues one at a time.

If it’s Option A, where people have one choice of insurer only that’s the result of pooled negotiation, this insurer immediately becomes extremely powerful. They can raise their rates later, especially once they’ve driven many competitors out of business. They functionally become a stand-in for the public option, only motivated by private profit-driven aims.

But if it’s Option B, where people are all on their own, then there is no collective bargaining advantage to be gained, and one will have exactly the price conditions present in the status quo. The only difference is that the companies will have the leverage that buyers HAVE to buy one of the options offered, so if they all raise rates they know the customers can’t rebel and go elsewhere.

Either of these scenarios ends up actually escalating healthcare costs, because there’s no incentive to keep prices down. Right now, the only market force keeping prices down at all (and it’s not doing much) is the idea that someone can choose not to buy coverage. Once everyone has to buy, the market is a captive audience.

3. People Out in the Cold
Obviously the mandate is most troubling for the people at the very bottom levels of society – the homeless, the very poor, the Wal-Mart employees. Obama tries to allay fears about the impact of a mandate on these individuals, but my concerns are not even slightly allayed.

The first line of defense is “tax credits”, which is laughable on face. A great deal of the people who can’t afford insurance aren’t employed in the first place, either because they’re one of the one in five Americans who want a job and can’t get one, or because they’re homeless, or because they’re facing a personal health barrier to getting a job in the first place. Tax credits do absolutely zip for people not earning income. They only help people making a good income but still managing to squander money, perhaps on the clunker trade-in and the new house they were also conned into buying based on tax credits. In any event, it is extremely unlikely that a tax credit of any size will be large enough to flip the switch from insurance being unaffordable to affordable for any sizable number of Americans. This only seems to really move the needle for profitable small businesses who can then get their accountants working on exploiting this new tax loophole. Again, this plan manifests as a business bailout.

For all those not earning income, the second line of defense is a “hardship waiver”. But what does this mean? Does it mean a waiver from the mandate? Because in that case, these people are guaranteed to not have coverage, to be alone in this fact, and this plan then amounts to some sort of economic eugenics program. The only alternative is that this means people will be given health insurance coverage for free. But who’s going to pay for that without a public option? What sucker insurance company is going to be told to hold the bag on all the truly uninsured, especially given that their lack of income makes them proportionally worse bets in our society-wide game of Sickness Roulette.

There seems to be no evidence or implementation behind the idea that a waiver would enable free coverage – indeed the word “waiver” seems to imply avoiding debtor’s prison from failing the mandate far more than getting a handout. So these people are doomed… not only do they continue to not receive healthcare, but they are in an even smaller and less powerful minority of same than they were before.

CONCLUSION: Advancement of Corporate Kleptocracy
Ultimately, the end result of this plan would be to make more money for private for-profit insurance companies who are in the business of selling fear to an already terrified American public. It would further acclimate people to the idea that their public goods are only available from profit-hungry sources and that government is primarily in the business of propping up private industry.

Yes, the plan would eliminate some of the most despicable practices of the insurance industry right now in its use of pre-existing conditions and coverage cancellation. But the insurance companies would then have to recoup the profits lost from such practices by raising premiums on everyone, just in case. This would further fuel runaway costs, with the only check on this being some sort of theoretical competition that doesn’t work and has been further hamstrung by this plan. Or people would make cuts the other way (see also car insurance), by offering cut-rate plans that are the functional equivalent of not having insurance at all, but still have a daily cost. Then the medical bankruptcies and inability to pay for treatment can continue, but under the guide of a system that falsely touts its universality.

Needless to say, with Obama’s declaration that he intends to be the last President to work on healthcare reform, this plan would also be the permanent deathknell of the public option, let alone single payer. The hope of real change would be buried forever by a man who ran on exactly that platform. Even if this plan were roughly equivalent to the status quo (it’s worse), it would be worth it to have it fail to maintain the possibility of a real improvement in the future.