Peter Morici is an economist and professor at the Robert H. Smith School of Business at the University of Maryland. He is a recognized expert on international economics, industrial policy and macroeconomics. Prior to joining the university, he served as director of the Office of Economics at the US International Trade Commission during the Clinton Administration.

Dr. Peter Morici: Health care reform is in trouble but with adjustments, President Obama could win big.

With several bills moving through the House, the elements of his preferred approach are clear.

Universal Coverage and Community Ratings—everyone plays and pays what they can, and insurers can’t charge higher premiums for preexisting conditions or cancel policyholders. Among the 46 million uninsured, many buy policies only when they anticipate major expenses, making coverage unaffordable for others seeking permanent insurance. Those reforms would fix that.

A Public Plan—an assured option for those without private insurance and more competition for private insurers.

Continued Reliance on Employer-Based Insurance—an 8 percent payroll tax on businesses that don’t offer health insurance to employees.

Subsidies for those Who Cannot Fully Afford Premiums

Together, those would get almost everyone insured, but many Americans fear loss of their private health plans and a universal system would treat them worse and be more costly.

Employers could calculate paying the 8 percent tax cheaper than their current plans, drop coverage and push employees into the public plan.

Having endured long waits and arbitrary treatment at agencies like the Veterans Administration and IRS, many Americans simply don’t want government agencies determining what treatments they receive or how fast those are delivered.

Health care costs are 50 percent higher in the United States than in Canada or Europe. The system is handicapped by huge malpractice costs, higher drug prices and physician fees, hospital and insurance bureaucracies, and lavish executive salaries foreign systems don’t carry.

Obama has negotiated savings with drug companies and other service providers, but those are hardly enough to bring U.S. costs in line. By further subsidizing health care, the President’s program would drive up demand and prices.

Congressional Republicans and Blue Dog Democrats generally oppose a public option, and several have suggested establishing private non-profits. However, those could be just as menacing if other elements of the Obama approach are not fixed.

Raise the employer payroll tax from 8 percent to the true cost of providing a decent plan, reducing incentives for businesses to push employees elsewhere.

Truly empower nonprofits to lower costs. Require pharmaceutical companies to charge them no more for drugs than paid in Canada, and let nonprofits enroll anyone who agrees to waive malpractice suits. Complaints could be resolved, through non-judicial procedures, for true damages but no punitive awards.

Require employers to offer nonprofit plans among the choices available to employees.

Then most Americans could choose to stay in a system permitting them to sue doctors, pay exorbitant drug prices, and enrich lawyers and executives. However, competition from the nonprofits would drive insurance giants like Humana to develop a renewed interest in torts reform, negotiating down drug prices, streamlining bureaucracies and hospital staffing, instead of just charging higher premiums.

Non-profits, no doubt, would look a lot like providers in Canada and Europe, but the private insurance industry would morph into something profoundly more competitive.

Republicans, Blue Dogs like competition—they could buy in.

By taking on the malpractice lawyers, drug companies and insurers, Obama could become the President he promised to be, and win big.

SEE: Finfacts article on the cost of US health care