Will Obamacare work?

Guest post by: Jeff Belokin

Sit back and relax. Below I attack the Universal Health Care (UHC) idea like a pack of ravage dogs in the Siberian tundra on a fresh carcass. There is a lot of information and opinion below but it doesn’t address all the flaws of UHC.
Most of the information I have gathered comes from a combined 100 pages of notes, memos, and random cluelessness in The Economic Case for Health Care Reform, the Congressional Budget Office’s (CBO) Long Term Budget Outlook, notes made by the Congressional Budget Office’s director Douglas W. Elmendorf, and pick through the various political comments made about Universal Health Care. These well respected organizations (or so they say) will have you believe the following:

• HC costs are spiraling out of control and will continue to do so.
• Our HC system rewards “inputs” instead of “outcomes.”
• HC is savable with Universal HC reform.
• Medicare & Medicaid are massively failing government programs, but this should not influence your opinion on granting them universal control.
• Other economic developed countries have successful versions of socialized HC.
• Universal HC will not increase health costs to people earning < $250,000.
• The proposed reform policy is not nationalized, or socialized HC.
• Every American must be insured.

Before I break this down, my personal belief is our current HC system is riddled with problems but it is far from being broken. Comparatively, American HC has fewer problems and is more affordable than in other developed countries. Since my opinions matter as much as arguing balls and strikes in baseball, let’s get to breaking this down.

1st bullet:
The talking heads claim there is outrageous price increases in HC. The CEA (Council of Economic Advisors) says “Real per person spending on health care has been increasing rapidly, rising 40% in the past decade alone.” Former Pres. Clinton needed a definition on the word “is,” I suppose I need a definition on the word “rapidly.’ Price increase of 40% over a decade can be quite concerning. However, if you do the math, that is only 3.8% per year. This is a far cry from price gouging. Unsustainable increases in price can be found in the real estate, equities, and crude markets among others. The housing, stock, and gas markets all popped in the past 2 years. When you have unsustainable growth in a FREE MARKET system you get resistance levels and new settling points. Eventually new lower prices are established. If HC starts experiencing 2005 housing appreciation levels rest assured the price for HC will fall just as fast. But the fact of the matter is it isn’t experiencing this type of inflation.

2nd bullet:
The Economic Case for Health Care Reform, a White House production written by the Council of Economic Advisors, declares, “The source of inefficiencies in the U.S. health care system include payment systems that reward medical inputs rather than outcomes, high administrative costs, and inadequate focus on disease prevention.”
In part, the CEA is pointing out that some people, when realizing they are near or over their annual deductible (typically $500), will schedule unnecessary procedures to maximize their coverage for little personal cost. This does happen; however, the government’s proposal doesn’t deter people from this practice. In fact it enables more people to take advantage of it.
The CEA memo continues on to trash HDHPs (high deductible health plans, deductibles ranging from $2000-$5500) for putting the insured in a difficult situation if they have to bear the cost of the deductible. Significantly reduced monthly premiums, freeing up savable dollars and eligibility to HSA accounts (tax-sheltered savings accounts) are some of the biggest advantages to HDHPs. In fact HDHPs prevent people from getting excessive and unnecessary care. Think about it, if you had a high deductible plan it would cost you a minimum of $2000/yr (deductible) to get to the situation above where you can start taking advantage of making the insurance company pay for a high percentage of or all of your care. Insurance companies all over America are pushing this type of insurance for several reasons, most of which relate to HDHPs helping bring the cost of health insurance back down.
My second issue with the statement is high admin costs. It is interesting not one US Gov agency has come up with a number for UHC admin costs, especially if the Gov is so troubled with high admin costs. The CBO estimates that UHC will cost $676b for the next 10yrs. This number DOES NOT include admin costs! Is it…

1) They simply can’t be estimated, or does
2) Everyone pedaling UHC know adding admin costs to current cost models makes the program a trillion dollar bill to be left to the American public.

It is an old Washington habit to pass a bill then to worry about it later. Its time this stops.
Lastly, the statement says we inadequately fund disease prevention. We spend more on prevention and research than any other country on the sphere. Without doubt UHC would call for more prevention dollars. As recently as April Pres Obama said in reference to investing in disease prevention, “will save huge amounts of money in the long run.” However the CBO in June issued a statement on health care overhaul that dismissed the notion that funding prevention saves money. On June 24 in an article from TheLedger, writer Carla Johnson finds the CBO is correct and Barry Obama is wrong. If we spend more than any other country on prevention, which isn’t adequate for our Pres, and we know that a dollar in doesn’t equal dollar out, then why would we consider dedicating more assets to it? Is being a world leader in wasteful spending not enough?

How do you tell when a politician is lying? If his mouth is moving.

3rd bullet:
Quite frankly I’m not sure how UHC saves our system. It is estimated by the CBO, despite the amount of money spent for the program, will leave anywhere from 20m – 35m Americans uninsured. Current estimates say as many as 48m people are uninsured. What a waste of program if it only insures an additional 13m people.
$676b / 13m people = $52,000 cost per person getting UHC, or
$676b / 26m people = $24,140 conservative cost per person getting UHC
Consider the fact that most of the people getting UHC are people who don’t currently pay into the Gov’s tax pool because of their low income status. So not only are they not contributing like the rest of us are but they are also receiving $24,000+ in medical service to be paid for by us. How the Gov intends to make this program affordable and enduring is incomprehensible. The current literature on UHC doesn’t adequately address the HC provided to illegal immigrants nor does it adequately address reducing Medicare/Medicaid fraud. Until we get on top of unnecessary dollars spent in HC today we shouldn’t consider revamping it for something even more faulted.

4th bullet:
I can’t believe the Gov has the moxy to ask the American people to support another entitlement program. So we all understand, UHC is an entitlement program. The Gov will make everyone eligible (just like Medicare). They will negotiate the prices for medicine, in-care, out-care, check-ups, surgery, child birth, preventative care, etc (just like Medicare). They will also tell you what services will be covered at standard rates and what services will cost you more (this allows them to dictate what health services people use. By doing so they can dictate what general direction HC goes).
As for Medicare and Medicaid, what a joke. The Washington Post on June 13, 2008 mapped out Medicare’s financial problems. The report estimated that Medicare fraud (JUST FRAUD) COSTS THE AMERICAN TAX PAYER $60B/YR. As for Medicaid, if you really want to experience the pain of knowing these problems, it would be quicker if you jumped onto a live IED.
Today hospitals are required to provide emergency HC to anyone who needs it regardless if they can pay for it (Ins or otherwise). However, for routine care like check-ups and fevers hospitals do not have to treat (Ins or otherwise). UHC will flood America’s hospitals with people that have problems which need no medical attention. Many don’t think this will happen. I ask you, if you could watch your favorite sport team live for free any day you want, would you go? Of course you would. It’s the same with UHC. If you provided UHC (potentially free), what prevents that person from going to the hospital if they have a stomach ache, a bruise, seasonal allergies, or other non-medical necessities? The answer is nothing. They are getting care either for free or nearly free. I say free in that this care is paid for by us, not the users of UHC.

5th bullet:
UHC will not increase costs on Americans earning < $250,000.
I only want to attack this from a dollars standpoint but it is relevant to know the ‘cost’ in this equation relates to many things. The quality will suffer, the availability will suffer, and some care will be disproportionate to what a normal supply and demand market would dictate. Also, until we find reason to believe otherwise, user fraud, unauthorized claims paid, and more excuses and taxes by your elected government will continue.
Back to cost. The current plan calls for additional taxes placed on $250k+ earners. The estimated revenues from this potential new tax are estimated by the CBO to account for roughly 1/3 of the total cost of UHC (total cost being the $676b currently estimated, not the $1t it is expected to actually cost). The master brewers of this Kool-Aid will have you believe the rest of the money will come from a variety of sources. For example, creating greater efficiencies in the HC market (universal linkage between all hospital and hospital like facilities) will recoup some $50b/per. They expect to cut down entitlement HC fraud by 50%, recovering anywhere form $20-$35b/yr. Another potential source of revenues will be the discount rates the government plans to negotiate through an Insurance Czar. Another source of potential revenue is to tax your currently non-taxable HC expenses. What does this mean? It means every dollar you spend for your health insurance (premiums, deductibles, meds…) through work or through a privately purchased HC provider, are now taxable. The average single person PPO (90/10 co-pay, $500 deductable) will run about $300/month. The real problem here is the portion your company pays also would become taxable. If every dollar a fortune 500 company spends for its employees medical benefits become taxable they could stand to loose tens and hundreds of millions of dollars in deductible employee pay. Ultimately this lost tax shelter will end up hitting your company’s customer in the shorts as the price of your company’s goods will have increase to meet the rising cost of production.
While I’m at it, why can’t we create a universal link between all care providing facilities without redoing the entire HC system? Why can’t Social Security, Medicare, and Medicaid departments crack down on fraud and misuse without redoing the entire HC system? These actions should be independent. We shouldn’t need to pass a massive spending bill to accomplish these things.
Ladies and gentlemen, unless the government really plans to stick it to the wealthier Americans more than they already plan to you will be taxed for UHC. Let’s assume the Gov does only plan to tax the wealthy. First, does that even seem fair? Despite the fact that the wealthiest 25% of Americans in this country pay for 90% of the taxes collected already, does it seem fair to make them pay for the people who don’t currently contribute in taxes who will receive these benefits? Second, people making 250k+ are already taxed 33% to 35%, the Gov took away their ability to save in tax free accounts, they took away their ability to write off donations made to charities, the list goes on. The Gov has stripped away the freedoms and liberties of the wealthy more than any other demographic in this country. Do they really plan to burden them with more? Lastly, how much longer do you think the 250k+ earners will sit there and accept this Gov’s moves?
Rest assured the wealthy wont stand for it. They will either stick it back to the Gov or they will take their operations over seas. So if this Gov wants to approve UHC, the cost will come back to bite the middle classes.

6th bullet:
I’m very uninterested in this “Everyone Must Have Insurance” pitch that Obama is spinning. Why must everyone have insurance? Why don’t we start there. Why must we insure illegal aliens? The majority of the truly uninsured are in the 18 – 30 year age group. This group statistically needs much less health insurance than older groups. Despite the fact that this group has fewer health needs, they still get charged the same amount for group health insurance as every other demographic. Is it possible this group knows it and prefers to self-insure? Is it possible they think they can better spend health care dollars somewhere else? Why then would we move to insure people that may not even want insurance?
Here is another angle. The proposal literature so far says you must purchase health insurance subject to your income level. So even if you chose not to purchase health insurance the Gov would be able to tax you when you file you income taxes for not having it. How peachy.
Try this one on. Employers with more than 25 employees must enroll their employees in group health insurance AND must pay 60%+ of it. It would be interesting if this bill passes and the Gov forces small business to pay for health insurance then turns around only to tax the very thing they made small business purchase. What a great scam. Let’s say you own a small business. You employ 30 people. As is, it doesn’t make business sense for you to get a group health insurance policy for your employees. This bill passes. You now have a tough decision to make. Do you go shop for group health insurance and pay for 60% of the expense? Or do you fire 5 people so you are not required to get group health insurance? It is easy to see how many small businesses would be afraid of growth, expansion, mergers, etc. The Gov can essentially force small business to stay small all the while forcing slightly bigger businesses (30-50 employee companies) to downsize.

I am not a Democrat, nor am I a Republican. I can’t be either because, well, I’m an American. So long as we sail down this path of no responsibility or accountability then I associate with no one. Until this country gets back to its roots, and goes back to governing by the good words of the Constitution I’m afraid we will always have the relentless attacks across the isle, and the relentless news coverage of this counterproductive system. I will leave you with a line from one of my favorite comedians, Lewis Black. He said it best with, “The Republicans are a party of bad ideas, and the Democrats are a party of no ideas…Here’s how it works. A Republican stands up and says ‘I HAVE A SHITTY IDEA,’ and then Democrat stands up and says ‘I CAN MAKE IT SHITTIER.’”