Health Care Bill: Prescription for Disaster 83 comments
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The health care bill unveiled this week by the House of Representatives (with the full support of the Obama administration) is one of the worst pieces of legislation ever drafted. If passed, it will reduce the quality and increase the cost of health care in America. But more importantly, it will severely undermine our already weak economy. To burden a country currently in the throes of a violent recession with such a bureaucratic albatross clearly illustrates the scarcity of economic intelligence in Washington.
In the first place, specifically taxing the rich to pay for health care for the uninsured is the wrong way to think about tax policy and is an unconstitutional redistribution of wealth. While the government has the constitutional power to tax to “promote the general welfare,” it does not have the right to tax one group for the sole and specific benefit of another. If the government wishes to finance national health insurance, the burden of paying for it should fall on every American. If that were the case, perhaps Congress would think twice before passing such a monstrosity.
In the second place, the bill is just plain bad economics. For an administration that claims to want to create jobs, this bill is one of the biggest job-killers yet devised. By increasing the marginal income tax rate on high earners (an extra 5.4% on incomes above 1 million), it reduces the incentives for small business owners to expand their companies. When you combine this tax hike with the higher taxes that will kick in once the Bush tax-cuts expire, and add in the higher income taxes being imposed by several states, many business owners might simply choose not to put in the extra effort necessary to expand their businesses. Or, given the diminishing returns on their labor, they may choose to enjoy more leisure. More leisure for employers means fewer jobs for employees.
More directly, mandating insurance coverage for employees increases the cost of hiring workers. Under the terms of the bill, small businesses that do not provide insurance will be required to pay a tax as high as 8% of their payroll. Since most small businesses currently could not afford to grant 8% across-the-board pay hikes, they will have to offset these costs by reducing wages. However, for employees working at the minimum wage, the only way for employers to offset the costs would be through layoffs.
The uninsured self-employed, or those working as independent contractors, will be forced to buy insurance or pay a tax equal to 2.5% of annual income. Either choice will divert resources from more productive uses into an already out-of-control health care bureaucracy.
Sadly, the bill does nothing to restrain or alter the dynamics that have caused health care costs to spiral ever higher. In fact, the bill will intensify these pressures.
The simplest (but by no means fullest) explanation of why health care costs so much is that demand exceeds supply. Demand is a function of how much people are prepared to pay. Insuring more people will drive demand for health care services even higher. (To truly get a handle on out-of-control health care costs, we need more people paying for routine medical care out of pocket, and tort reform for medical malpractice. See my previous commentary.)
As costs continue to soar, expect additional tax hikes to fund the added expense. As these additional taxes further encumber a weak economy, the diminished tax base will yield lower total tax revenues – despite higher rates. As the politicians attempt to pass ever higher increases to make up for revenue shortfalls, a vicious cycle toward insolvency will ensue.
The worst part of the whole fiasco is trying to imagine the bureaucracy necessary to administer this plan. My guess is that the government provider will mis-price its policies on the low side, pushing employers to dump private sector insurance for the taxpayer-subsidized alternative. Such a system will further distort health care pricing and, ultimately, make a bad situation intolerable.
The enormity, complexity, and expense of this bill could well pull the rug out from what many of my cheerleading colleagues believe to be the beginning of an economic recovery. The way I see it, the economy is walking dead anyway, and this measure is the equivalent of a stake through the heart. But even if we manage to escape the grave this time, Congress is working on a few other ideas that will surely keep us buried.
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John Galt would understand.
Basic Care: Free clinic care for everyone (paid from federal income taxes). Only basic medical tests and proceeds are covered. Medications are provided only for short-term treatments.
Middle Care: Mandatory Coverage - Patients select from a series of nationally standardized plans. The plans work on a sliding scale of procedures paid for. Patients determine their own financial risk exposure when young; however, as you age your medical plan options diminish to reflect your personal annual medical costs - using statistical modeling. All medications must be paid by the patient - no exceptions. (employee payroll deduction.)
Catastrophic Care: Mandatory Coverage - Everyone pays for catastrophic care out of their wages. With a financial lifetime cap of $250,000 (employee payroll deduction).
*** All insurance, medical, and billing forms would have to be standardize across all providers.
*** All providers would be required to use a national medical database to store all medical records.
*** Any costs over the medical coverages would have to paid by the patient.
*** Employees have to pay for 12 months of coverage in advance to provide coverage during periods of unemployment.
*** Employees would have the option to prepay for the Middle Care and Catastrophic care beyond the 12 months advanced coverage. (Like a life insurance policy except to cover future medical risk. This model could be used to prepay for coverage during retirement via wage deductions over multiple decades.)
*** No pre-existing condition blackout periods when changing providers or plans
*** No service can be denied/declined if it is covered in the plan you pay for.
The unemployed and on welfare would have only the basic care provided by the government as an incentive to seek employment for health coverage.
On Jul 19 08:38 AM Spartacuss wrote:
> Lincoln is reported to have said that he didn't think a sitting president
> could ruin the country in four years, meaning that no matter how
> bad a president was four years would not be long enough to inflict
> permanent damage.
>
> Lincoln was wrong. We have a radical president and an even more radical
> congress and change we can beleive in. Boy, do we have change we
> can beleive in. We can beleive we are on a roller coaster to hell.
it is mind-boggling how they could leave out tort reform.
cap malpractice at $5 million. even if somebody with very high income dies in a malpractice, why should the dependents be awarded tens of millions? they don't need so much money to survive. also, if the deceased didn't die, he may not necessarily spend the tens of millions he will earn in his lifetime on his dependents or bequeath all his money to them at his death.
yes, prevention is over-hyped. easier say than done. tell people to eat less meat. don't smoke. don't drink. exercise regularly. will they listen?
On Jul 20 10:50 PM Jason S. wrote:
> I am a physician who spends 100% of my time in the hospital. To
> enlighten many of you, the people in the hospital for the most part
> are not there because of a failure to PREVENT acute illness or catastrophe.
> Instead they are people are near the end of their life because they
> are either unlucky to have had bad disease that can't be treated,
> they sabotage their health, or they are old. Medicine may have a
> lot of sexy technology but in the end humans cannot control nature.
> I too agree with other commentors --- the administration's disregard
> for medical tort reform shows how out of touch they are -- and how
> little they actually want to fix the system.
>
> For a rational approach, try Clayton Christensen's "The Innovator's
> Prescription" -- I wish Obama had read this.
On Jul 19 11:01 AM kirkf wrote:
>
> Start with a basic premise: All citizens of a civilized country must
> have equal access to quality health care, regardless of race, creed
> or economic status.
>
> That should be written into the constitution.
>
> Work upwards from there.
Who doesn't have equal access to health services?
What level of quality are people entitled to in your world?
Does some bodies right to free stuff trumph my right to my property? The founders of this country highly disagree with you there, in fact they declared it, then fought and won a war against the greatest army on earth and wrote the constitution ensure future generations cliams to freedom to life, liberty and property. Maybe you could start with your basic premise somewhere else, but that's not what Americans believe... or once believed.
It looks like you don't like people being discriminated against based on race, creed or economic status... So you must be against the minority of people with higher incomes being discriminated with higher taxes " just because of their economic status"?
The difficult thing to grasp is why people want to walk down the road to serfdom.
As for walking down the road to serfdom, perhaps we should look at some of the countries who currently have universal health care:
the U.K., Canada, Australia, New Zealand, France, the Netherlands, and Germany
Not exactly a bunch of backwards-looking countries.
On Jul 22 11:51 AM John Galt wrote:
> " Start with a basic premise: All citizens of a civilized country
> must have equal access to quality health care, regardless of race,
> creed or economic status."
>
>
> Who doesn't have equal access to health services?
> What level of quality are people entitled to in your world?
>
> Does some bodies right to free stuff trumph my right to my property?
> The founders of this country highly disagree with you there, in fact
> they declared it, then fought and won a war against the greatest
> army on earth and wrote the constitution ensure future generations
> cliams to freedom to life, liberty and property. Maybe you could
> start with your basic premise somewhere else, but that's not what
> Americans believe... or once believed.
>
> It looks like you don't like people being discriminated against based
> on race, creed or economic status... So you must be against the minority
> of people with higher incomes being discriminated with higher taxes
> " just because of their economic status"?
>
> The difficult thing to grasp is why people want to walk down the
> road to serfdom.
There is government care presently called medicare and medicaid. These government options exist based on cost shifting. The cost of these programs is funded through taxes and by shifting costs to the private sector. The reason is they pay a fixed rate well below market average. In my practice I see about 20 cents on the dollar from every medicare patient I take care of. What allows me to see medicare patients at this low rate is the fact that other insurance pays better, so on the average I make a good enough living to see medicare patients. If health care costs go up however medicare reimbursement does not. What that means is the private insurer MUST make up the difference for their own increased cost AND they must make up part of the difference for the increase for medicare because medicare does not behave in a market fashion it just sucks services at a fixed low rate regardless of the "cost". Medicaid is even worse. Medicaid care is virtually free care when you take into account turn key costs. So this is the other place in this equation where the cost gets shifted. I get to do the work, take on the liability, pay my employees, and pay the taxes and my reimbursement is essentially negative. So the 2 centers of free market action in this scenario is the cost paid by the insurance company and my ability to absorb a reduction in my profit margin. The government just sits there sucking up services and shifting the cost. This is basically the Ponzy scheme that you often hear quoted.
The problem with Obama care is that he will accelerate this cost shifting until there is NO free market action left. As he accelerates the "public option" costs will rise in the private sector so quickly that private insurance will go out of existence. As you evaluate his various enrollment options just ask yourself what will that option do to the free market portion of medical care. What you will find, in every case is that is will further promote the demise of the private option. You will be able to "keep your doctor and keep your plan" but it will take all your money to pay for that privledge
Government care accounts for about 50% of the care. When I first started practice 20 years ago it was about 30% as a result the. I'm sure in the next 5 years it will dwindle to a very small percentage. That percentage left will be the government itself and unions which will be exempted. government like the senate and congress will not tolerate anything less than the absolute best. The unions will not tolerate the extra tax burden One this to be aware of is that the cost of the government plan is not capped, but you better believe the "care" provided will be capped.
I saw a book TV interview with Ezekiel Emmanual Rohm Emmanuals brother. Zeke is a big wig ivory tower NIH oncologist who wrote a book on how to destroy (err save) health care. Here was his example
Lets say you have prostate cancer and are 55 years old. There are 4 treatments for prostate cancer
1 surgery
2 radioactive seed implant
3 Radiation beam therapy
3 Another form of radiation therapy
The cost
1 11,000
2 15,000
3 30,000
4 80,000
What he said is the "government plan" would pay for the cheapest option, if you want another option you get to pay the difference. He failed to mention however the side effect profile of these treatments The side effect? Impotence
1 >60%
2 >50%
3 10%
4 5%
So the government will give you care that will yield virtual certainty of impotence for the rest of your sorry life. You see in this model the government gets to choose the criteria for treatment outcomes that "matter"
Another example (mine not his) You have coronary artery disease bad enough that you need some kind of intervention. The options
1 Nitroglycerine and medical management
2 stents
3 coronary bypass surgery
The cost
1 1000 per year
2 35,000
3 75,000
The government will pay the 1000 per year because it determines the outcome is "longevity" which means the average number of months until you die. All of these treatments share a similar longevity. This is why they are so interested in this electronic medical record. They can do a met analysis of treatments and find the criteria that matches their desired outcome and choose that as the criteria to on which to judge a treatment
The outcomes from above
1 You have good enough coronary blood flow that you can sit in a rocking chair the rest of your life
2,3 you have good enough coronary blood flow to go climb a mountain or ski the Rockies.
Another example
Your 55 you have diabetes and your kidneys fail.
The Obama response You LIVED a good life please accept your death with dignity.
As to the recent tonsil comment
Children come to pediatricians with inflamed throats and fevers. They miss school. They come month after month. Eventually they meet the criteria for tonsillectomy. The last thing their insurance company wants to do is pass on them getting surgery (cost cutting) but they finally meet the criteria. They are sick 9 months out of the year with these crappy tonsils
You heard Obama's solution Diagnosis them with allergies pat them on the ass and let them suffer. You will notice not once did the surgeon consult his "fee schedule" Not once. You have to remember we do not stand on the street with a hook hooking kids into our waiting rooms so we can greedily yank their tonsils out. What happens is parents bring their sick kids to us and together we try to find the best all around solution. That is how American medicine is practiced. So if for one minute you think you are going to get better care in a plan where the outcome is based on a government chosen mandate, you better think again.
Did you know the government considers ketchup a veggie? PS they will not provide free KY. You will be expected to provide your own.
Among the more interesting motivations FOR a plan and this has support among many health care providers and pharmaceutical companies is, quite simply, there will be so many new patients should the presently-uninsured finally have coverage. There is no doubt a plan of some kind has to be pushed through to cover the uninsured in our country who are ever-growing given these dark times, but how we do it is debatable. Congress is working through so many variations as we speak. What is not debatable is that cost has to come down. Will we see more concessions by health care providers and the drug companies to lower costs? I think we will but they know they will more than make up for it by seeing its patient base grow substantially with the "newly-insured".
Will private insurance companies fall on the wayside competing against a national plan? I don't think so neither, but they will have to change the ways they do things, and in the end, it will be better for everybody.
What the government has to do to prepare for the huge influx of the "newly-insured" regardless of whether a national plan covers them or private insurers cover them is that the number of doctors have to be increased drastically. Any rationing or cut in services will not be acceptable to the American people. Having enough physicians to serve them and allowing for choice of health plans will minimize that from happening. Competition, whether or not it's against a national plan, will force change, change against health care costs going higher and higher to astronomical amounts where Americans can no longer afford it anymore and continues to be a bigger and bigger expense to so many American companies. Doing nothing is something we cannot afford to do right now.
I'm in your corner when it comes to your assessment of the system that is taking shape (ie. something better resembling fascism than socialism). Recall Benito Mussolini's quote: "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power."
To further that notion is to deny your other point, however, about the Democrats being the "primary architects" of any of the US federal government lunacy of the past 20 years, much less the calamatous health care reforms they're about to enact. As Whidbey correctly pointed out in his comment, Bush's Medicare Part D was an deplorably irresponsible act that capped off eight years of out-of-control spending. The intention was as clear as day to anybody with half a brain: it was a shameless attempt to purchase the prescription drugs of seniors, and in so doing, lock up their votes for the GOP.
I don't let the Dems off the hook for what they're about to attempt either, but wake up, people! It DOES NOT MATTER which party is in power, the corrupting influences of the biggest lobbyists have been perverting the U.S. for a couple of centuries now, and the ghastly shape that the country is taking is the result of all these big (often divergent) interests getting exactly what they pay for when they buy off the congress and the senate. On that pleasant note, here are a couple more thoughts to leave you with:
"The world is governed by very different personages from what is imagined by those who are not behind the scenes" - Benjamin Disraeli
"It could probably be shown by facts and figures that there is no distinctly American criminal class except Congress." - Mark Twain
---------------------
On Jul 19 11:29 AM Glen L. wrote:
> Thanks to Peter Schiff for another clear, concise, and spot-on article.
>
>
> I'll go a bit further in my criticism to say the current atrocious
> legislation just builds on the horrible stuff passed since FDR's
> reign. Both parties are to blame, but the Democrats are the primary
> architects of these ruinous attempts at fascist control of the medical
> marketplace. We have all the classic fascist controls in place now,
> including cartelization of the "insurance" industry, with companies
> like Aetna and United Healthcare serving as "fiscal intermediaries"
> for the vast, corrupt Medicare system, which forces wage and price
> controls on its participants, routinely denies coverage for innovative
> treatments, and drives up prices in what's left of the private sector.
> Obamakare will square the circle by squeezing out that remnant, and
> usher in the socialist paradise of permanent shortages and sclerotic
> bureaucracy.
>
> And yet, some of the commenters here seem to think we could do better
> by simply changing the tax code. Pathetic.
I do agree with you on the corrupting influences of lobbyists. Hearing today the public option for health care have been taken off the table altogether by Congress was disappointing to say the least.
make health care providers non profit.
-Thomas Sowell
The Bureaucracy Is Unfeeling and Cold In "Execution" Of Policy.
My government ignores "Plummeting Revenues" and attempts to allocate more funds for "Private Jets For Congress" and simpletons would like to bequeath "More Authority" over their lives to make themselves feel better about the "Less Fortunate". Congress has shown that they "Do Not Have To Read" the legislation they make law and the "Easily Led By Emotion" would expect them to "Be Vigilant With Their Representation"?
Power Given Is Not So Easily Taken Back.
Would You Expect Mercy From The Devil If You Asked?
To Assume Benevolence Is Foolish.
" Taxpayers paying more money directly to insurance companies as insurance for all is now a mandate and "subsidies" will pay for people that can't afford it. (Read: People that have make a living will pay for people to sit on their couches, not make a living, yet have health insurance). Meanwhile the quality of healthcare in the US will take a nosedive.
Benefits to 1. Insurance Companies 2. Lazy/Ignorant People
Drawbacks to: 1. Working taxpaying Americans