The Essence of the Bill
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” – Winston Churchill
The health care bill, in its final form as House Resolution 4872, includes many different proposals to manage the health insurance market. A summary of these reforms can be found on the web page for CBS at http://www.cbsnews.com/8301-503544_162-20000846-503544.html. I will analyze each of these portions of the bill and their impact.
Health Insurance Exchange
The bill creates state-based exchanges so that those who do not have health insurance provided through their job have access to a competitive market of healthcare providers. Separate exchanges are also created for small businesses. This initiative aims to cut costs by increasing competition within states between health insurance providers. While this is certainly moving in the right direction, the effort short-arms the goal.
The exchanges are heavily regulated. The reason that the exchanges are state-based is that insurance companies are already heavily regulated at the state level. The reason most people cannot currently buy insurance from out of state is that each health insurance provider must meet the very specific requirements of individual states. Republicans hoped that the bill would establish inter-state exchanges which would serve to increase competition further, but the final bill fell short of this goal.
The bill does provide for funding to states to set up these exchanges, however many question whether or not this funding is sufficient to maintain the programs as it only guarantees money through 2014. This has led many to question whether or not the bill is in fact an unfunded mandate, forcing the states to operate expensive programs which they cannot afford in the current budgetary crises most of the states find themselves in.
Subsidies
The program aims to extend access to healthcare by subsidizing the purchase of private insurance plans. This differs from the “public option” plan that was originally supported by President Obama and was shut down in the Senate. It means that the government will not provide insurance itself. It is not an expansion of Medicare. It is funding for private access to health insurance.
The subsidies themselves are significant. Any family with an income of 100-400% of the Federal Poverty Level will have access to subsidies and these subsidies can cover as much as 98% of the premium, although that is uncommon. This means that a family of four making up to $88,200 per year will be eligible for a federal subsidy.
All of this sounds great until you realize the money has to come from somewhere, which I will get to later.
Medicare
The bill aims to close the “donut hole” which is a gap in Medicare coverage for seniors (more information here… http://en.wikipedia.org/wiki/Medicare_Part_D_coverage_gap). They do this by providing a $250 rebate to seniors who hit the donut hole in 2010 and providing a 50% discount on drugs to seniors after that.
At the same time as providing these drastic expansions in Medicare coverage, the bill cuts $500 billion from Medicare. This is part of the effort to make the bill deficit neutral; however, Medicare on its own is already bankrupt. Part of the rationale for this is that expanded coverage should lower costs for Medicare recipients by promoting access to preventative care, but it is hard to fathom how this combined with efforts to curb Medicare abuse will allow an already bankrupt system to withstand cuts of $500 billion.
Medicaid
The bill expands Medicaid to include families which make up to 133% of the Federal Poverty Level which is $29,327 for a family of four. It also forces states to expand their programs to include childless adults in 2014.
This is paid for by the federal government through 2016, but after that it is noncommittal. Once again, this has been viewed potentially as yet another unfunded mandate. It is another drastic expansion of a program that is bankrupting states across the country.
Insurance Regulation
The bill mandates that no insurance providers can deny coverage to children with pre-existing conditions starting 6 months after the bill’s passage. Starting in 2014, nobody with pre-existing conditions can be denied coverage regardless of age.
Also, parents’ plans must cover children up to age 26.
Called “insurance reforms,” these are more accurately titled regulations. They force all insurance providers to meet certain criteria that are not necessarily needed by a large portion of the populace. Still, because no insurance providers will be able to deny these specific forms of coverage, the cost will be distributed to everybody, even perfectly healthy 30 year olds who just want the most basic form of health insurance. This will force insurance premiums to rise as all people are forced to purchase more coverage.
Still, the argument can be made that this is worth the price because these are people that, at no fault of their own, are denied coverage. That is not the argument that has been made, though. The argument has been that this is a cost-cutting measure, when in fact it increases regulations and mandates higher expenses.
Abortion
The whole issue of abortion in this bill is highly complex and clouded in the remnants of a fierce battle that took place over the possibility of federal funding. If the executive order is to be taken at face value, no federal funding will be provided for coverage of abortion except in the cases of rape, incest, or health of the mother. That doesn’t necessarily end the debate but I am going to avoid it simply because I think it distracts from the real issue of health care which has plenty of things to criticize on its own.
Mandates
And now we get to the crux of the issue. All citizens of the United States must purchase health insurance. Starting in 2014, any individual without insurance will face an annual fine of $695. This is justified by those on the left by saying that it will increase the efficiency of the system by expanding coverage. The uninsured are a drain on the healthcare system as it stands today. They must be paid for by somebody and they simply can’t afford it without insurance. They are free loaders on the system. This is why, they say, it is right to force people to insure themselves; but, this is exactly the kind of affront to individual liberty that infuriates people.
First of all, when did government get into telling people what they had to buy? I know, they force you to purchase car insurance, but that is in order to purchase a car. This bill forces you to purchase health insurance in order to live here. There are some out there who simply choose not to have health insurance, many of them young people who just graduated and are willing to risk the chance of not incurring significant health care costs. Not all of them put those costs entirely on the public. Sure, it forces some of them to mound piles of debt and possibly even bankruptcy but isn’t it just as much our right to fail in this country as it is our right to succeed?
Even if that argument of liberty doesn’t get you, President Obama had his own reasons to oppose such a plan. That, in fact, was the primary point of difference highlighted between the President and Hillary Clinton in the Democratic debates during the campaign. President Obama felt that individual mandates were wrong because they forced unnecessary expenses on the American public.
“[Senator Clinton] believes that we have to force people who don't have health insurance to buy it. Otherwise, there will be a lot of people who don't get it. I don't see those folks. And I think that it is important for us to recognize that if, in fact, you are going to mandate the purchase of insurance and it's not affordable, then there's going to have to be some enforcement mechanism that the government uses. And they may charge people who already don't have health care fines, or have to take it out of their paychecks. And that, I don't think, is helping those without health insurance.”
Perhaps of even more dire consequence is the mandate for companies to provide insurance. All businesses which employ more than 50 people are forced, under this bill, to provide insurance to all of their full time employees. If they fail to do so, they face a penalty of at least $2,000 per full time employee who remains uninsured. This, in effect, raises the cost to business of employing people. In effect, it is exactly the same as raising the minimum wage. It will lead to lay-offs. Businesses are already struggling in this economy, so now we are going to increase the cost of business.
This bill will encourage businesses that are close to the 50 person cut-off to lay off individuals above that cut off so that they do not have to meet the requirement. For companies that this is impossible for, they will be forced to lay off individuals proportionally to the increased cost to employ everybody else.
Paying for the Bill
So, with all of these expansions of coverage and subsidies, somebody has to foot the bill. Here is just a subset of some of the ways the bill plans to pay for itself.
In 2012, the Medicare Payroll Tax will be expanded to include unearned income (investment.) So, once again, as our economy struggles, we are going to tax investment. This tax amounts to a 3.8% tax on investment income for families that make more than $250,000 per year.
In 2018(this was delayed as part of a compromise in the reconciliation bill), the “Cadillac Tax” will be imposed on insurance companies which will pay a 40% excise tax on high-end insurance plans worth more than $27,500 for families or $10,200 for individuals. This tax will inevitably be transferred to the consumer and will drastically increase the cost of having a high-end insurance plan. This is a perfect example of the liberal mindset of “steal from the rich and give to the poor.” In order to provide more coverage for the uninsured, your ability to get better insurance will be prohibited.
The plan also institutes a 10% excise tax on tanning salons.
It taxes pharmaceutical companies by establishing an excise tax on medical devices.
It also doubles the fees taken by the government from insurance companies.
Summary
The bill will ultimately be one of the most expensive bills to ever become law. The CBO’s projection of a price tag around $940 billion is only the beginning. It double counts the $500 billion taken from Medicare, assuming that comparable savings can be found. It also underestimates the actual price tag of the bill’s policies because most of the expenses do not kick in for another three to four years.
The most insidious omission of the report, however, is that it does not account at all for the loss of jobs that the bill will produce. All CBO projections of the budget over a long time period assume moderate economic recovery in the near future. This bill puts that future deeply into question.
Let’s play a quick game. I will list some facts about a certain President and you will try to guess who it is.
I created the Veterans Administration to handle the healthcare and payments due to veterans. I signed into law the McNary-Mapes Amendment which expanded the role of the FDA in regulating the food industry. I announced a plan to hand over federal money to the states to provide relief to individuals and businesses affected by the recession. I formed the Committee for Unemployment Relief and created federal construction projects which, after the passage of the Davis-Bacon Act, were required to pay very favorable wages. I held a conference in order to address “discontentment” among Americans who felt “short-changed” by the labor market. As a result, I created a jobs program and slashed prices. I established the Reconstruction Finance Corporation, an agency dedicated to funding (or bailing out) the nation’s banks, railroads, insurance companies, and other major businesses. I signed into law the Glass-Steagall Act expanding the role of the Federal Reserve to extend credit and release gold to businesses. I signed into law many new taxes, including the first gasoline tax.
I am Herbert Hoover, the President most often blamed for the Great Depression.
My point is that the policies of President Obama very closely mirror exactly what was done following the stock market crash in 1929. In that instance, just as today, the role of federal agencies was expanded substantially and money was provided to businesses and individuals in the name of relief. That money was raised through new taxes and tariffs which harmed the economy far more than any of these efforts helped.
This health care bill does the same thing. In the name of helping those who “can’t help themselves” as was said during the floor debate leading up to the vote on the bill, we substantially fine businesses across the country, including those in the medical industry itself. This will inevitably lead to lost jobs. These lost jobs mean more people qualifying for unemployment benefits, Medicare, and (with this bill) insurance subsidies. These lost jobs also mean fewer people paying fewer taxes. This whole line of thought is completely excluded from CBO projections. According to them, economic recovery is just around the corner. Hoover thought the same thing.
“Definite signs that business and industry have turned the corner from the he temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed that the tide of employment had changed in the right direction.” – January 21, 1930
President Hoover was wrong then and, under the current policies of President Obama, CBO projections of economic recovery seem as unlikely as ever.
In the end, this bill is a massive expansion of federal entitlements in healthcare. It drastically expands the liability of Medicare and Medicaid without addressing the basic flaws that brought those programs to the brink of bankruptcy. It mandates that all people purchase insurance and that all employers provide insurance. It heavily regulates the insurance industry and increases the cost of business. It pays for subsidies to low-income individuals and families by taxing pharmaceutical companies and applying fees to insurance companies. The fact that it was passed under budget reconciliation rules under the guise of reducing the deficit is the greatest farce in the history of American government.
On top of all of that, the high costs and remarkable strain on the economy, the bill is bad for American healthcare. The President likes to tout this bill as returning the freedom to choose to the American people and not insurance company executives. Well, you won’t have the freedom to choose whether or not you want insurance. You won’t have the freedom to choose insurance companies except the few that qualify to compete in your state’s exchange.
Even if this bill is by some miracle paid for and the cost does not harm the overall economy in any way, the mechanisms of this bill will harm the health care market. The bill removes personal responsibility from the health care marketplace. As it stands, the health care market is inclined toward innovation and high-end treatment. Cutting edge technology is where the American health care system excels in world competition. This bill will change that.
Under the current system, people do not pay for unnecessary treatment. When the responsibility is theirs and they know that they can just sit out a cold for a few days and not pay the money for the cold and sinus medication it is an effective way to reduce their own costs. When they take their baby to the doctor for a runny nose and find out that no treatment is necessary but they could pay for medication if they so choose, they very well might not take that treatment. When they find out that they have a minor case of diabetes and are told the most effective treatment is a disciplined diet but that they could also pay for an expensive shot which will help, they sometimes choose the diet.
This program takes that incentive away by providing insurance at little to no cost to many hundreds of thousands of people across the country. There will be a massive increase in the demand on those kinds of treatments, the unnecessary ones. That means fewer resources, capital, and labor in the health care industry will be available to develop and produce cutting edge treatments.
The United States, today, leads the world in cancer treatment. It regularly hosts dignitaries from across the globe for surgeries on the heart and other organs which require significant expertise. That is because our system encourages a focus on the cutting edge.
But most people don’t have access to that cutting edge treatment in the current system! I know that is what the left is screaming at the top of their lungs. Here’s the problem with that statement. All medical treatments today began as cutting edge treatments. Those simple cold and sinus medications began as cutting edge innovations. That is how the system works. By providing a profit incentive to produce as efficiently as possible, to produce as cheaply as possible to expand the potential base of consumers, those cutting edge treatments in the long run filter down to everybody.
The United States has long been the focal point of medical innovation in the world. That innovation has led to the creation of treatments that save the lives of people everywhere, every day. This bill fosters a system that takes us one step further away from that and inhibits our ability to innovate.
So, this bill is enormously expensive, extremely damaging to the economy, and detrimental to the basic system of health care in this country.
No comments:
Post a Comment