Hiding the Costs in the "Private Sector"

Just got done listening to Michael Cannon of the Cato Institute talk about some of the secret costs that are hidden in the health care bill behind our backs.

According to a memo that was released by the Congressional Budget Office back in December, the Democrats in Congress have apparently been playing games with the CBO's rules on how the costs of the health care bill will be accounted. By requiring private sector mandates that fall just short of the 90 percent that would require it be included in the federal budget.

As Cannon put it (paraphrasing here): There is no real difference between the government requiring you to pay a tax for medical coverage and calling it a tax, and the government mandating a minimum premium that you'll have to buy and calling it a private-sector mandate. It's hardly "private-sector" or "free market" if the government is forcing you to buy something. Either way, you are out that money without making a free choice to buy.

So why are they doing it this way? Because this allows them to avoid including the involuntary payment in the CBO report on what the bill will cost, so they have been able to hide a huge amount of the costs of this bill.

Furthermore, that 90 percent amount is a purely arbitrary figure that the CBO has set.

From a recent blog post of Cannon's:

"Democrats have been submitting proposals to the CBO behind closed doors and tailoring their private-sector mandates to avoid having those costs appear in the federal budget. Proposals that would result in a complete cost estimate — such as the proposal by Sen. Rockefeller discussed in the Medical Loss Ratios memo — are dropped. Because we can’t let the public see how much this thing really costs.

Crafting the private-sector mandates such that they fall just a hair short of CBO’s criteria for inclusion in the federal budget does not reduce their cost, nor does it make those mandates any less binding. But it dramatically reduces the apparent cost of the legislation. It is the reason we’re all talking about an $848 billion Reid bill, rather than a $2.1 trillion Reid bill.

If someone sold you a house, or a car, or a mutual fund this way, we would put them in jail."

--

"Cadillac Tax" Hurts Everyone

Well, the Senate Democrats reached 60 votes yesterday, so they've shut the door on the potential for a Republican filibuster to stall a vote on the health care bill. It looks like a straight-party vote could come as soon as Thursday.

I've avoided writing much about the health care debates so far, but I've got a serious problem with one particular part of the Senate's health plan: the so-called "Cadillac Tax" on high-end health care plans (which the Democrats plan to use to help pay for the higher costs of insuring everyone else).

Why? In essence, the Senate is saying that people who have these "Cadillac" plans have too much health insurance. Now, since those people are paying for their own plans with the money they are making at their jobs, who has the right to tell them that they have purchased "too much"? It's funny that they are using the metaphor of a nice car to categorize those health plans, because this is the same (from a political theory point of view) as saying to someone who owns a literal Cadillac that they have too nice of a car. Why should the rich be allowed to have Cadillacs (or Cadillac health plans) when other people have Hondas or Fords (or the equivalent vehicle-metaphor health coverage)?

I guess those evil rich people (you know, the ones who own business and employ people) just don't deserve their rich cars, big homes, and cushy health plans unless the rest of us can have them too. Never mind that they are purchasing those things from their own funds. Philosophically, this seems like a bad way to justify anything except socialism.

But wait, there's more. In reality, an excise tax on the biggest and best health plans will hurt the middle class more than the rich. Megan McArdle explains:

"Taxing their health care plans is not going to cause the executives to consume less health care; traders earning millions of dollars a year are unlikely to forgo an MRI because it might cost nearly as much as they dropped on wine last Saturday night. You might be able to get their back office folks and the secretaries to cut back a little, but those folks are pretty well paid."

The bottom line is that if you tax the rich (aka - the employers), it will mean higher costs for everyone who works below them. This is the step that the Democrats always forget about. Patricia Murphy takes a deeper look at how this plan to "tax the wealthy" will actually hurt everyone else a lot more:

"Obama said he did not want the tax to hit middle-class families, but when the bill emerged from the Senate Finance Committee in September, it proposed charging insurance companies and a 40 percent excise tax for high-dollar -- but not exactly gold-plated -- plans. The bill now calls for the tax to apply to plans exceeding $8,500 for individuals and $23,000 for families, for the cost of combining health savings accounts, medical, prescription drugs, dental, vision, etc. The tax is charged to insurance companies, but it is widely assumed they would pass it on to employers....

...Beth Umland, the research director for Mercer (an employee benefits consulting firm), explained that although the "Cadillac tax" is targeted at high-dollar plans, the cost of insurance plans is primarily driven by the age, gender, health and location of a company's workers, not the lifestyle they enjoy.

"Plans that trigger the excise tax are not necessarily generous plans," she said. "Small employers offer significantly less-generous plans than large employers, but just as many small employers are going to trigger the tax." Plans for workers in dangerous professions, like steelworkers, also have higher-cost plans because they experience more work-related health problems."

In other words, an excise tax on business owners will be passed down in the form of lower real wages to all the employees. That means that union workers making $40,000 a year (or so) are going to get hit by those costs as well. The Democrats are trying to tax the evil rich people who own businesses, produce things, and create jobs, but they are inadvertently going to skewer the middle and working classes as well. No one wins.

On one hand, it's kind of funny that union members (who played a big role in sweeping the Democrats into power in 2006/08) are now getting screwed by the party they usually support. On the other hand, it's political suicide for the Democrats to alienate one of their major bases of support.

--

The More You Know....

...the less attractive government-run health care becomes.

At least that seems to be the message from a recent Gallup poll asking people whether they believe providing health insurance is the responsibility of the federal government or not. Gallup has been polling this question since 2001, and for the first time ever the number of people opposed to government health insurance has surpassed the number in favor of it (50%-47%).

As recently as 2006, 69 percent of Americans felt that it was the government's responsibility to provide health coverage; last year that number fell to 54 percent, the previous low.

So why the dramatic shift?

"Certainly the federal government's role in the nation's health care system has been widely and vigorously debated over the last several months, including much focus on the "public option." These data suggest that one result of the debate has been a net decrease in Americans' agreement that ensuring all Americans have health care coverage is an appropriate role for the federal government."

Gallup concludes:

"The current poll results indicate that, with the renewed health care debate since President Obama took office, Americans have become less convinced that it is an appropriate goal for the federal government to take on the responsibility of ensuring that all Americans have health care coverage. It is possible that the current debate has increased the average American's awareness as to the nuances of the various roles the government could play in the health care system, helping make the generic "make sure all Americans have health care coverage" sound less appealing. Plus, the current debate may have produced more skepticism among Americans that the government's role in health care could or should be this broad."

I believe it was Socrates who said the truth can only be discovered through use of the dialectic. In other words, you don't know what you believe until you challenge it with an argument of some kind. It seems that the debates over health care are having one positive effect: convincing more people that government health care is a bad idea.

--

Tough Choices

I'm trying to stay out of the health insurance coverage as much as possible, but this is just too good to pass up.

Obama has talked a lot about the difficult choices that many Americans face. Choices between buying health insurance or paying rent or buying groceries. But this ignores the other group of uninsured who have an equally difficult choice. After all, no American should have to choose between health insurance and other cool stuff they could buy instead.

The best argument against putting government in control of Health Care...

...is the history of other government programs.

Reason TV's Ted Balaker takes a brief look at the history of some government-run operations to see what the real cost of health care reform might be.

Here's a hint: $1 trillion dollars (the amount Obama says it will cost) is probably just the beginning.

Health Care Stuff

I don't really want to write too much about the whole health care reform thing going on right now, because, honestly, I don't understand enough of it to offer much. You might want to bookmark this page, because I'm not sure when I will make a statement like that again.

Anyway, I've been using all the attention on health care to educate myself a little bit and how and why the system works the way it does (or doesn't) and regardless of the outcome from Obama's plan, at least I've learned something. Either way, I still think the best plan for me is just to avoid getting sick/serious accidents/being within a mile of an emergency room.

My biggest single problem with the very idea of health care reform is that I'm not convinced that anyone understands the system well enough to reform it, let alone a bunch of politicians. I doubt the people in Congress who are going to reform the system actually understand the system any better than I do. Do we really want, as John Stossel writes, a bunch of people who have most likely never run a small business trying to overhaul one of the most complex markets in the world? What makes them think they are capable of doing it? They do understand that "Yes We Can" was just a campaign slogan, right?



Although there are plenty of well-informed opinions out there on the health care situation, I've found (not surprisingly) some of the most lucid and convincing arguments come from Megan McArdle over at The Atlantic. In particular, these two posts - though long - are worth a read:

A Long, Long Post About My Reasons For Opposing National Health Care

It's Adverse. But is it Selection?

Ron Paul also entered the blogosphere debate today with this post on the Campaign for Liberty site. He makes more good points for why this is a bad idea.