Obama’s Cabinet: Health and Human Services

Continuing the final installment of the series on Obama’s cabinet, Reason Foundation’s Shikha Dalmia names the best and worst picks Obama could make for Secretary of Health and Human Services:

Nationalized health care has been a liberal fantasy for so long that Obama will face tremendous pressure to deliver it quickly-especially since he has a Democratic-controlled Congress at his disposal. Even if nationalized health care did not come with deadly side effects like long waiting lines and inferior care, the fact of the matter is that the country simply can’t afford another big entitlement program when it is facing an annual deficit of half a trillion dollars and unfunded Medicare and Social Security liabilities in the tens of trillions. Under such circumstances, the best way for President-elect Obama to expand coverage would be by harnessing market forces to control the soaring costs of health insurance and putting affordable coverage within the grasp of more people. This would require, as influential economist Greg Mankiw has said, stealing some Republican ideas – and perhaps some Republicans. They would certainly cut against the grain, but Obama has said he will name a Republican to his cabinet and two Republican governors would be particularly good for this job: Florida’s former Gov. Jeb Bush and South Carolina Gov. Mark Sanford. Unlike folks in Washington who have opinions about how to reform health care, they both have a track record of actually implementing practical, market-based reforms. Bush implemented a pilot program called Health Opportunity Accounts. Under it, Medicaid recipients get a fixed sum of money – adjusted for their health – to buy their own coverage from private insurers. The vast majority of recipients have opted for the program and the competition that this produced among insurance companies has curbed cost increases. Similarly, Sanford has implemented Health Savings Accounts under which Medicaid recipients get an upfront amount every year to buy coverage, rolling over what’s left into the next year. This caps the state’s liabilities while giving recipients an incentive to conserve their health care dollars. It is too early to tell whether the program will deliver promised results, but the point is that Sanford and Jeb Bush have demonstrated an openness to innovative solutions that empower patients, control costs, and improve coverage that would serve an Obama administration better than a believer in command-and-control, big government solutions. Among the good picks would be Obama’s economic advisor, Jason Furman, also under consideration for Commerce Secretary, and former Democratic Louisiana Senator John Breaux. Before John McCain unveiled his plan to reform the tax code to extend the health care deductions from employers to individuals during his presidential campaign, Furman wrote an excellent paper advocating exactly the same idea. He understands that the best way to cover the uninsured without breaking the federal budget is by making it easier for people to purchase their own coverage. “The most promising way to move forward in all three dimensions, coverage, cost, and long-run fiscal situation, is to replace the employer exclusion with a tax credit,” he noted in his paper. Breaux, who headed President Clinton’s Bipartisan Commission on the Future of Medicare, is similarly mindful of keeping a grip on government spending on health care – although he voted for extending Medicare coverage to prescription drugs, vastly increasing the program’s liabilities. While on the Commission, he demonstrated a great deal of openness to considering market-based reforms and supported Health Care Savings Accounts. For libertarians, three poor picks would be chairman of the Democratic Party and former Vermont Governor Howard Dean, New York Sen. Hillary Clinton, rumored to be the frontrunner for Secretary of State, and former Democratic Senator from South Dakota Tom Daschle. Dean, a doctor himself, tried to control soaring health care costs by expanding government control over insurance prices and hospital budgets. He also created a statewide insurance pool and formed a new bureaucracy to manage it. None of this worked and premiums – and the number of uninsured – increased under him. Clinton, of course, tried to nationalize the health care industry in one fell swoop when her husband was in office. Even though she seems to have abandoned that plan, during her presidential campaign, she advocated forcing the uninsured to buy coverage – through penalties and fines if necessary – to achieve universal coverage. Meanwhile, since leaving the Senate, Daschle has written a book titled, Critical: What We Can Do About America’s Health-Care Crisis, in which he recommends creating the equivalent of the Federal Reserve Board for health care to set treatment standards, performance requirements and impose other mandates on the industry. In short, create another layer of bureaucracy on top of the one that he would oversee and hand it even more powers. Either of them will signal a return of Big Government, big time.

Update: Reuters reports that Obama has picked Tom Daschle as Secretary of Health and Human Services. Part one, with picks for Treasury, Education and Transportation, is available here. Part two, with Dalmia’s picks for Secretary of State, Defense and Attorney General is here.