Further down road to serfdom

With health care reform now the law of the land, congressional Democrats were in full celebration mode.

Unfortunately, ordinary Americans don’t have much reason to rejoice. Not only will the law deprive patients and taxpayers of ever greater amounts of cash, it will also rob them of much of their freedom. And, come November, this hugely unpopular federal overhaul could cost Democrats control of Congress.

The 2,700-page Patient Protection and Affordable Care Act represents the largest expansion of the welfare state since Lyndon Johnson’s Great Society. And just as with the Johnson era’s social programs, Americans will be paying for President Barack Obama’s health care plan for decades.

First, let’s consider some of the law’s immediate effects. Beginning this year, insurance companies will be prohibited from putting lifetime caps on coverage. Children will also be permitted to stay on their parents’ policies until they turn 26, even if they are married and have left the nest. Both new rules will drive up premiums for everyone.

Thanks to new excise taxes, patients will also pay more for insurance, drugs and medical devices, as companies will raise prices to pay for the tax. Medical device manufacturers alone will face a 2.3 percent tax on sales, which will generate the $20 billion in fees they must now pay.

In three years, families with incomes above $250,000 will face Medicare payroll taxes of 2.35 percent, up 0.9 percent from the rate today. There will also be a new Medicare tax on dividend and interest income of 3.8 percent. Many small businesses will fall prey to these taxes – and thus cut jobs or hold off on pay increases for the workers they keep.

The most troubling – and costly – provisions will take effect in 2014. “Guaranteed issue” rules will force carriers to accept all comers, regardless of health status or medical history. And new “community rating” rules will bar insurers from charging any customer more than three times as much as any other customer.

By effectively preventing insurers from managing risk, these regulations will force companies to hike premiums across the board. For many people, coverage will become unaffordable.

New York offers a preview of how these rules will impact insurance markets nationwide. A recent study of the Empire State’s health care system found that guaranteed issue and community rating increase the price of coverage by 42 percent. If these regulations were repealed in the Empire State, according to Stephen Parente and Tarron Bragdon of the Manhattan Institute, the uninsured population could decrease by up to 37 percent.

At the dawn of 2014, the federal government will also deliver a serious blow to individual liberty by requiring all Americans to purchase health insurance. Attorneys general in at least 14 states have challenged the constitutionality of this “individual mandate.”

Their cases have merit. Indeed, if the federal government can force citizens to buy insurance, what’s next? American cars? Low-fat foods?

The greatest legacy of Obamacare may be the long-term fiscal disaster it will leave for future generations of taxpayers. Official estimates peg the cost at $940 billion over the first 10 years. But the measure is likely to end up costing more than twice as much.

New entitlements have a long history of exceeding original cost estimates. When Medicare was passed in 1967, for instance, the House Ways and Means Committee projected that the program would cost $12 billion annually by 1990. But when 1990 rolled around, annual Medicare spending had actually hit $110 billion. Today, 20 years later, the program costs more than $520 billion a year.

So much for early estimates. And it will only get worse, as Obamacare offers no serious strategies for curbing health costs.

The American people have recognized the reform effort’s shortcomings for months – and approval of the bill has not mollified them. According to a Rasmussen poll conducted during the two days after President Obama signed the overhaul bill, 55 percent of Americans want the legislation repealed – and 46 percent strongly favor repeal.

This widespread distaste for the bill could cost Democrats at the ballot box in November. If Republicans can secure control of both chambers and then take back the White House in 2012, repeal in 2013 is an option.

Such action wouldn’t be unprecedented. In 1989, for instance, the Medicare Catastrophic Coverage Act was scrapped after it proved wildly unpopular with the public.

Americans will shoulder many of the burdens of Obamacare immediately, but there’s still time to reverse course. It’s only a matter of time before the voting public realizes that Democrats have pushed the country further along the road to serfdom – a road from which, history has shown, no advanced democracy has ever found an off-ramp.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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