It'll Cost You Your Money, Your Job, and Maybe Your Life

IT'LL COST YOUR MONEY, YOUR JOB, AND MAYBE YOUR LIFE

July 16, 2009

Tuesday’s announcement by the House leadership of their 1018-page health care “reform” plan with the Orwellian title of “America’s Affordable Health Choices Act of 2009”) (text of bill here) purports to cover most of the nation’s uninsured but at tremendous cost and with what will amount to a government takeover of the single largest sector of our economy.

Wednesday, the Senate Health Committee passed its own bill, an equal disaster. The Obama administration is trying to force the bills through both houses before Congress goes out on its August recess.

The House bill’s supporters and the CBO’s preliminary analysis claim that it will provide or force coverage on 2/3 of the uninsured population, lowering the number of uninsured from about 50 million to about 17 million. The National Review Institute says that 50 million figure is an intentional exaggeration of the left, repeated so frequently that most Americans believe it.

(The exaggeration comes from the fact that the 50 million figure counts people who were uninsured for any period during the year. Some experts say that the real figure is less than 20 million, and many among the 20 million are people who have insurance available but choose not to pay for it. The real “uninsured” number is not known.)

The House Democrats’ plan defines acceptable private coverage and creates a “public option,” i.e. socialized medicine, offered through a “Health Insurance Exchange” (language designed to fool the public into thinking there will actually be any private market involvement) to be administered by the Secretary of Health and Human Services. The public plan would pay an average of “Medicare rates plus 5 percent to physicians” and “Medicare rates for hospital or other services not on a fee schedule.” Furthermore, the bill sets increases for those rates based on “an index of physicians’ input costs”, likely leading to lower payments to doctors.

While people will be able to keep their current health insurance, that coverage may be deemed unacceptable by government if the issuer changes any terms or conditions of the policy. Whether or not a person’s coverage is deemed acceptable, we should expect many people to drop their private coverage. For comparison, existing State Children’s Health Insurance Programs (SCHIP) show “crowd out” rates of 30%-60% based on the maximum allowed level of family income. In other words, for every 3 people who get insurance through SCHIP, one or two people drop private coverage to get their free lunch. This fact among others means that the CBO, which appears not to be considering “crowd out”, is likely to be substantially underestimating the bill’s cost.

The bill imposes a “play-or-pay” mandate on employers who must give “qualifying” health insurance to employees or be substantially penalized. It does not include the increasingly popular high-deductible plans associated with Health Savings Accounts, nor does it address the inability for consumers to buy insurance across state lines (probably the single most-needed health insurance reform) or for businesses to create insurance buying pools.

Any qualified health plan must not exclude coverage based on pre-existing conditions and must have “guaranteed issue and renewal.” Other rules including a maximum 2:1 ratio of the highest and lowest costs in a plan as rated for enrollee age, limitations on price variations based on location or composition of an enrolled family, and mandated “parity” in coverage of mental health and substance abuse (a provision partly responsible for the very cost of health insurance now in certain states.)

In order to achieve these goals, the bill offers what would likely be the largest tax hike in American history (the second-largest if cap-and-trade passes), a raft of subsidies and onerous penalties, and an indication of one of the bill’s intended side-effects, growing union power and membership. Following are some of the details as gathered from the text of the bill:

Imposes income surtaxes as follows: An additional 1% for individuals making over $280,000 or families making over $350,000. 1.5% for family incomes over $500,000 (individuals over $400,000). And an astonishing 5.4% for family incomes over $1,000,000 (individuals earning over $800,000). According to the Tax Foundation, the plan “pushes top tax rates over 50% in 39 states.”
If (when) the government does not find that “Federal health reform savings” have saved at least $150 billion per year by the end of 2012, the first two surtaxes increase to 2% for families making over $350,000 and 3% for families making over $500,000.
Creates a “tax on individuals without acceptable health care coverage” (Yes, they will decide what is “acceptable”) of 2.5% of income in excess of the filer’s exemptions (essentially $3,300 for a spouse and for each dependent).
Penalizes employers “8 percent of the average wages paid by the employer” during the relevant time period if the employer does not offer acceptable coverage, with an exemption for companies with annual payroll under $250,000, going up by 2% increments every $50,000 of payroll to reaching 8% at $400,000. Congressman Paul Ryan (R-WI) has concluded that this provision alone will kill 5 million American jobs.
Subsidizes families with income up to 400% of the Federal Poverty Level, i.e. up to $88,000 of income for a family of four.
Offers these subsidies to many or most non-citizen legal immigrants.
Create an Advisory Committee of people who have expertise in health care, whether as providers, market analysts, administrators, educators, etc., but which must include at least one representative of a union. Yes, that’s right.
Is reported as being expected to cost $1 trillion over 10 years, but that cost substantially understates the cost of the bill because spending doesn’t ramp up until 2012. According to the CBO’s initial analysis (text here), the cost in 2019 is expected to be over $200 billion net of penalties assessed against employers, with an average subsidy of $6,000 per subsidized enrollee. And the CBO admits that their estimate does not “fully capture” parts of the plan.

As if the obvious parts of the bill weren’t bad enough, Philip Klein points out in The American Spectator that it “would add hundreds of billions of dollars of spending to state budgets” -- “a bankrupting increase”, according to Sen. Lamar Alexander (R-Tenn.).

Prior to today’s news, support for this plan was polling poorly, with Rasmussen showing 49% of voters “now at least somewhat” opposed and 46% somewhat in favor. That 3 percent difference with opposition ahead of support represents an 8 % shift in opinion against the bill in two weeks. Nancy Pelosi and Democratic committee chairmen seem not to realize that America is not, even among the average Democratic voter, a nation bent on beggar-thy-neighbor policies and class warfare. And while a new USA Today/Gallup poll shows that people still favor some health care reform bill passing this year, “52% choose controlling costs as more important; 42% cite expanding coverage.” Furthermore, studies show that while Americans claim to be unhappy with the “system”, the vast majority are satisfied with their own health coverage. And a new study by John Lott of the University of Maryland concludes that an astoundingly low “2.3 percent of Americans are both uninsured and very dissatisfied with the quality of the medical care they receive” and that “Canadians are much closer to uninsured Americans than to insured Americans in their satisfaction with their health care.”

So-called “moderate” and “Blue Dog” Democrats have registered opposition to any bill with a public option; they realize it is a Trojan Horse aimed at the destruction of the private health insurance market. But with Nancy Pelosi’s iron fist it is conceivable that the House bill will pass (much as she was able to muster just enough support for cap-and-trade.) Still, the House’s healthcare “reform” bill represents an overreach coupled with an unusually large misjudgment of public opinion.

A health care bill with a public option and massive tax increases is unlikely to pass the Senate despite the Senate Health Committee having passed (on a party-line vote) a bill with a public option on Wednesday morning. The Senate Finance Committee is likely to pass something rather different, requiring interesting negotiations over the merger of the two Senate bills.