Obamas Healthcare Reform: The Cost and Your Pocketbook
The proposed health care bills making their way through Congress will inevitably result in massive income redistribution. The ‘rich’ who pay their old insurance bill will see their premium increase (Anthem Blue Shield Blue Cross) already announced a massive increase in premiums of 40%). In addition they will pay a higher premium so the government can provide insurance cost subsidies for a large portion of the population, plus the costs of new government mandates to be included in the ‘basic package” (they may include some form of plastic surgeries and abortion coverage) plus the costs of covering illegal immigrants(inevitably, if not immediately) plus the costs of enforcement to make certain that everyone who can buy insurance indeed does so plus the costs of the new agencies and associated bureaucracies that the government is scheduled to put in place, and plus the higher premium due to the fact that insurance companies will have to shift their costs from policies that have a price ceiling on them (the basic coverage) to those who have the more generous insurance plans, especially the Cadillac plans. The cost shifting will be magnified from historical levels as about twenty million Americans will be shifted onto Medicaid.
Health care costs, you see, are like a balloon. You squeeze them on one side, they expand on the other.
These are only the indirect taxes that the average American will have to pay. The OBAMA Administration has already announced plans for higher tax rates on Medicare,higher taxes on those making more than $200,000 (initially), higher capital gains taxes, other taxes in the form of increased fees and new ones, and the employer mandates that compels them to buy health insurance for their employees at prices they cannot afford which leads them right into the government option.
While the cost of health care to those who can pay for it will inevitably increase, the question is the other side of the ledger: what are the Americans getting for all of this given that over 90% of them are quite happy with their current health care situation. We leave this discussion to another narrative.
The government option in the original health care bill has been set aside for now but will reemerge once the initial ‘reform bill’ passes. It will be incremental with ever more innovative political maneuvers to get it passed. The first increment has already started with the assault on insurance companies who are already being depicted as the enemies. The cumulative effects will be a single payer system no matter the original plan. This logic explains the sudden conversion of Congressman Dennis Kucinich on March 17, 2010. Here is how the government intrusion will occur:
- Government will load the basic coverage and offer it directly at a price that no private insurance company will be able to offer on rational economic grounds. This is because political decisions will be driving the price and the coverage and not economicrationality. A country that spends almost $800 billion to save the financial sector will not argue about a few billions here and there “to help the poor and the lower income class” obtain affordable medical care will matter much in an age of trillion dollar deficits.
- The uninsured will be required, initially or eventually, to buy insurance. The cost of the government option will be lower and the government has the power to coerce and impose penalties (using agencies like the IRS). The government will not subsidize the more expensive insurance provided by private companies as would have been the case under the McCain plan. But, buying insurance and paying for it are two different things.There will be those who sign up and end up paying none of the premiums. The government will pay for their misdeeds on the back end: free medical care at emergency rooms. Should enough people default on their premium payment, the government will by necessity take over the lower quartile of the insurance market or bail out the insurance companies they hate so much. The first option will be more ideologically correct.
- The government will declare many currently available and privately funded insurance programs as not “qualified”. One example of many will be an insurance policy that simply covers major health care costs or catastrophic cases. People holding ineligible policies will be forced to buy government insurance, or else pay a substantial penalty.
- Some coverage (e.g. abortion, which will be eventually included in a government program- it is, e.g. paid for by many programs in the state of California) may not be available in many states. Government insurance will be sold in every state including those states that do not subsidize abortion.
- The private insurance companies will be at a distinct disadvantage to compete with the government plan as current laws:
- Do not allow for the interstate sale of insurance. The US government will be selling its health insurance in every state of the union at rates determined by political-economics, if not pure political considerations.
- Do not require government to pay taxes on practically anything
- Do not allow for the creation of cooperatives for small business to purchase insurance at a reduced cost
- Allow the states to mandate the minimum coverage for basic care. Even a stripped version of that at the Federal level will place the private companies in jeopardy
- Allow trial lawyers to make the life of private insurers miserable. Government entities may well be exempted from this invasion. In fact, one version of the Bills exempts the Secretary of HHS from legal liability.
- Allow insurance companies to continue limiting portability, and excluding persons with preexisting conditions. The Federal option will have none of this. It will then become more desirable from a cost point of view and from a benefits point of view.Government in a nationalized health care system will by definition not have (on the surface) any excluded person for any reason.
- The Federal government will keep the size of the subsidies (explicit or implicit) for its insurance plan high enough so the cost of its unique insurance plan will be well below the cost of private insurance
- The government will allow for clinics throughout communities no matter how economically inefficient they are. People like “local services”
- Small business will be required to provide health insurance. They will choose government care simply to reduce cost and simultaneously meet government mandates. Else, they may face penalties of all sorts (in fact there is an explicit tax on small businesses that do not buy the government plan). The government option will be the least hassle option.
- The Federal government could impose all kinds of restrictions and taxes on insurance companies. A surtax on “excess profits” could be imposed on insurers that may benefitfrom the introduction of the government option. Insurance companies that end up cherry picking their insured will be penalized.
Conclusion
The political shift in Washington has brought about an ideological shift that is broad andfundamental. It has guided all government actions/ policies starting with the banking sector, going to the auto sector, to the health care sector, to executive wage controls, andto ever newer mechanisms for government intrusion in all segments of the economy. The absence of a government option in the revised health acre legislation is a necessary political pose. It will come later in omnibus legislations (perhaps piece by piece) or in the documentation of the failures on the new system (structured to fail) that inevitably leads to a government bailout (and ownership), especially in the basic coverage of health care.
If the OBAMA health care proposals is not stopped now, America will pay a huge price in terms of access to quality health care, total costs of health care, and the inevitable large budget deficits that accompany them.
JOE Concerned
This entry was posted on Tuesday, March 30th, 2010 at 1:37 pm and is filed under Healthcare Reform Bill. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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