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In Washington, everybody knows about unintended consequences: the outcomes you fail to anticipate when you change the way something works. But there's another phenomenon that works somewhat in reverse: Preregulatory paranoia, or the fear that new rules meant to make the system better will instead produce mayhem and disaster.
It will be a long time before we know whether the historic healthcare reform finally passed by Congress will make the system better or worse. But the rhetoric surrounding the yearlong ordeal has already set new standards for overwrought fearmongering. There's a long history of pre-emptive hyperbole in Washington, in which the combatants on each side of an issue paint a dismal scenario if things don't go their way. But the dire predictions almost never materialize. Businesses adjust. Lawyers find loopholes. Lobbyists get new rules watered down. Entrepreneurs come up with better ways to make money, regardless of constraints. And if the new rules really do fail, we have this little process called electoral politics to make sure the government responds to voters' concerns.
Still, the overheated claims and counterclaims about healthcare reform have produced widespread confusion about what the new legislation will actually do. Here are a few of the most overblown concerns:
The government will take over one sixth of the economy. That would be alarming if it were true. But government involvement in healthcare will increase gradually over time and remain modest, especially since there's no "public option" in the current plan that would set up a government-run insurer. If you have doubts, consider the attitude of professional investors, who would stand to lose a lot if the government took over healthcare. They don't exactly seem worried. Shares of health insurers like Aetna, UnitedHealth, Wellpoint, and Cigna--subject to the strongest new rules under reform--have outperformed the stock market over the past year. The pharmaceutical and hospital industries also are considered winners because there will be millions of new customers who suddenly have insurance that can pay for treatment. That led the entire stock market higher the day after reform passed. In fact, it's hard to identify any part of the private-sector healthcare industry that stands to lose under reform.
The federal debt will explode. It might, but not because of healthcare reform. The Congressional Budget Office--which is probably the most reliable, nonpartisan number-crunching outfit in Washington--says the reforms will reduce government deficits by $143 billion through 2019, thanks to new taxes and fees and cost savings in government healthcare programs like Medicare. But opponents of the bill and powerful lobbying groups like the U.S. Chamber of Commerce say otherwise, and they seem to have had a stronger influence on public opinion than CBO's methodical analysis. A recent poll by the Kaiser Family Foundation, for example, found that 55 percent of Americans mistakenly believe the CBO has said the healthcare legislation will add to the deficit. Only 15 percent know that CBO has said the opposite.
Doctors will revolt. Doctors don't like the current system, in which insurance companies call the shots. But instead of sweeping reform and more government involvement, they prefer gradual reform that puts more control in the hands of ... doctors. In one recent survey, nearly one third of physicians said they'd consider leaving medicine if reform passes, which it now has. Doctors worry that the new rules will cut into their incomes--which may happen, eventually. But it's implausible that thousand of doctors who have dedicated years to a complex profession will simply quit. What will they do? Become accountants? Open a Subway franchise? Besides, with millions of new patients seeking care, the demand for doctors will actually rise, not decline. And if cost controls discourage the docs who are in it to get rich, maybe that will help bring costs down for everybody else. Meanwhile, the American Medical Association and dozens of other physicians' lobbying groups will continue to look out for doctors' interests in Washington.
Businesses will suffer. The new rules will impose fees on businesses with more than 50 employees if their workers receive government subsidies to buy insurance in lieu of employer-provided coverage. Business groups complain that this could stunt economic growth and slow hiring. But businesses are more resourceful than that. It's true that many companies will have to absorb additional costs, which they do every year anyway when health insurance premiums go up. But well-run companies excel at solving problems. That's what makes them successful. Smart entrepreneurs salivate at the chance to outcompete bigger firms that can't manage challenges like this. And companies already pass on the rising costs of healthcare to their employees; there's no reason to expect that will change if they can't manage costs some other way. There's also an outside chance that the new insurance exchanges will make life easier for small businesses, as intended, by giving their workers a way to buy coverage at rates comparable to what big companies are able to negotiate.
Socalized medicine is on the way. In the Kaiser poll, 41 percent of respondents said they believe the new law would require people who already get insurance through their employer to change their coverage. But most people who already have health coverage won't have to change anything, unless they want to. The new rules will have the most direct impact on people who don't have coverage, or who don't get it through an employer. Those who fear the advent of "socialized medicine" mainly seem to worry that the current set of reforms is just Phase 1, to be followed by bigger changes that will replace doctors with bureaucrats and render individual patients even more powerless than they are now. This is supposed to happen despite the likelihood that the Democrats who supported reform will lose seats in the November elections, while Republicans who opposed reform will gain seats. It seems much more likely that after surviving the battles of the last year, the current for-profit healthcare industry will be with us for the foreseeable future.
It will be a long time before we know whether the historic healthcare reform finally passed by Congress will make the system better or worse. But the rhetoric surrounding the yearlong ordeal has already set new standards for overwrought fearmongering. There's a long history of pre-emptive hyperbole in Washington, in which the combatants on each side of an issue paint a dismal scenario if things don't go their way. But the dire predictions almost never materialize. Businesses adjust. Lawyers find loopholes. Lobbyists get new rules watered down. Entrepreneurs come up with better ways to make money, regardless of constraints. And if the new rules really do fail, we have this little process called electoral politics to make sure the government responds to voters' concerns.
Still, the overheated claims and counterclaims about healthcare reform have produced widespread confusion about what the new legislation will actually do. Here are a few of the most overblown concerns:
The government will take over one sixth of the economy. That would be alarming if it were true. But government involvement in healthcare will increase gradually over time and remain modest, especially since there's no "public option" in the current plan that would set up a government-run insurer. If you have doubts, consider the attitude of professional investors, who would stand to lose a lot if the government took over healthcare. They don't exactly seem worried. Shares of health insurers like Aetna, UnitedHealth, Wellpoint, and Cigna--subject to the strongest new rules under reform--have outperformed the stock market over the past year. The pharmaceutical and hospital industries also are considered winners because there will be millions of new customers who suddenly have insurance that can pay for treatment. That led the entire stock market higher the day after reform passed. In fact, it's hard to identify any part of the private-sector healthcare industry that stands to lose under reform.
The federal debt will explode. It might, but not because of healthcare reform. The Congressional Budget Office--which is probably the most reliable, nonpartisan number-crunching outfit in Washington--says the reforms will reduce government deficits by $143 billion through 2019, thanks to new taxes and fees and cost savings in government healthcare programs like Medicare. But opponents of the bill and powerful lobbying groups like the U.S. Chamber of Commerce say otherwise, and they seem to have had a stronger influence on public opinion than CBO's methodical analysis. A recent poll by the Kaiser Family Foundation, for example, found that 55 percent of Americans mistakenly believe the CBO has said the healthcare legislation will add to the deficit. Only 15 percent know that CBO has said the opposite.
Doctors will revolt. Doctors don't like the current system, in which insurance companies call the shots. But instead of sweeping reform and more government involvement, they prefer gradual reform that puts more control in the hands of ... doctors. In one recent survey, nearly one third of physicians said they'd consider leaving medicine if reform passes, which it now has. Doctors worry that the new rules will cut into their incomes--which may happen, eventually. But it's implausible that thousand of doctors who have dedicated years to a complex profession will simply quit. What will they do? Become accountants? Open a Subway franchise? Besides, with millions of new patients seeking care, the demand for doctors will actually rise, not decline. And if cost controls discourage the docs who are in it to get rich, maybe that will help bring costs down for everybody else. Meanwhile, the American Medical Association and dozens of other physicians' lobbying groups will continue to look out for doctors' interests in Washington.
Businesses will suffer. The new rules will impose fees on businesses with more than 50 employees if their workers receive government subsidies to buy insurance in lieu of employer-provided coverage. Business groups complain that this could stunt economic growth and slow hiring. But businesses are more resourceful than that. It's true that many companies will have to absorb additional costs, which they do every year anyway when health insurance premiums go up. But well-run companies excel at solving problems. That's what makes them successful. Smart entrepreneurs salivate at the chance to outcompete bigger firms that can't manage challenges like this. And companies already pass on the rising costs of healthcare to their employees; there's no reason to expect that will change if they can't manage costs some other way. There's also an outside chance that the new insurance exchanges will make life easier for small businesses, as intended, by giving their workers a way to buy coverage at rates comparable to what big companies are able to negotiate.
Socalized medicine is on the way. In the Kaiser poll, 41 percent of respondents said they believe the new law would require people who already get insurance through their employer to change their coverage. But most people who already have health coverage won't have to change anything, unless they want to. The new rules will have the most direct impact on people who don't have coverage, or who don't get it through an employer. Those who fear the advent of "socialized medicine" mainly seem to worry that the current set of reforms is just Phase 1, to be followed by bigger changes that will replace doctors with bureaucrats and render individual patients even more powerless than they are now. This is supposed to happen despite the likelihood that the Democrats who supported reform will lose seats in the November elections, while Republicans who opposed reform will gain seats. It seems much more likely that after surviving the battles of the last year, the current for-profit healthcare industry will be with us for the foreseeable future.
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