Obama’s Speech

During President Obama’s “not-quite-a-state-of-the-union” speech last night, he called for a new era of honesty and accountability in government — “Finally, because we’re also suffering from a deficit of trust, I am committed to restoring a sense of honesty and accountability to our budget.” [link]

Unfortunately, he broke that promise even before he left the podium. In discussing the need for health care reform, he said, “This is a cost that now causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas.”

But none of that is true. Let’s look at the claims one at a time.

Health care “is a cost that now causes a bankruptcy in America every 30 seconds.”

There are 525,600 minutes in a year, so that rate of medically-induced bankruptcy would be 1,051,200 per year. But the total number of bankruptcies in 2007 was just 822,590, and only a fraction of those, possibly as low as 5% according to a University of California study, were due to medical costs. Interestingly, the population with the greatest growth in bankruptcy rates are those covered by Medicare. Since 1991, bankruptcies have actually decreased for people below age 65, but increased 125% for those between 65 and 75 and increased 433% for those over age 75. [link]

“By the end of the year, it could cause 1.5 million Americans to lose their homes.”

This one is a mystery. Sure, plenty of people are “losing their homes,” about 3 million this year, but to think that half of those are due to medical bills rather than ARMs or lay-offs seems like a reach.

“In the last eight years, premiums have grown four times faster than wages.”

Actually, premiums have stabilized for the past five years at about 6% annual increase, while wages have been increasing about 4%, according to Mercer. Mr. Obama may have been thinking about the spike in 2002 when premiums rose 14% and wages rose about 3%, but that was a one-year exception and not representative. It’s worth remembering, also, that some companies – notably those that have adopted consumer directed plans – are seeing premium increases well below either inflation or the increase in wages. Watson Wyatt found that the “best performing” companies had a two-year cost increase of just one percent while other companies increased 10% over the same time. [link]

“And in each of these years, one million more Americans have lost their health insurance.”

That’s not true, either. According to the most recent report by EBRI in September 2008, the raw numbers of uninsured rose from 39.5 million in 2001 to 45 million in 2007. Raw numbers aren’t the right way to count in any case due to population growth. The percentage of uninsured between 2001 and 2007 went from 14.8% to 15.3% according to the Census Bureau, which is lower than the percentage in 1995 (15.4%), 1996 (15.6%), 1997 (16.1%), or 1998 (16.3%).

“It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas.”

Actually, it’s not. At least not until someone mandates that employers provide coverage. Small employers may drop coverage but they don’t go out of business because of health care costs. And the whole “ship jobs overseas” claim is a myth [link]. When American companies set up foreign affiliates it is generally to serve foreign markets, like Toyota and others have done in setting up American affiliates to serve the American market. To the extent there is an advantage in locating abroad, it has far more to do with local regulations, taxes, and wages than health care costs.

So, let’s hope that Mr. Obama starts taking his own advice and applies some “honesty and accountability” to his own speeches as well as to the national budget.

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