Healthcare 101: Congressional ‘reform’ measures are bad news

With public support for his healthcare reform plan eroding fast, President Obama has attempted to cut a higher profile on the issue, most recently during a televised primetime news conference and at Town Hall meetings now taking place around the country.

Less than half of Americans approve of the president’s handling of healthcare reform, according to a recent Washington Post-ABC News poll. That’s down from 53 percent in June, and 57 percent in April.

This drop shouldn’t come as a shock. Obama supports the various health plans recently rolled out in the Senate and the House. All entail a major expansion of the government’s role in health care. That may not bode well for would-be reformers, as most Americans are both understandably skeptical of a government takeover of the health sector and vehemently opposed to the higher taxes that will inevitably accompany these plans.

Leading House Democrats on the Energy and Commerce Committee have been squabbling with the moderate Blue Dog coalition. The Blue Dogs have demanded that their party leaders pare back the House bill’s trillion-dollar price tag and postpone consideration of the bill by the full body until September. Speaker Nancy Pelosi (D-Calif.) and Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) have essentially agreed to their demands.

Meanwhile, the Senate Finance Committee under Chairman Baucus (D-MT) has just concluded bipartisan negotiations to produce a bill that would cost about $900 billion, less than the House offering and potentially able to attract support from centrist Democrats and Republicans. The bill replaces the “public option” with government-chartered co-ops and no employer mandate but a free-rider proposal.

The Senate Health, Education, Labor, and Pensions (HELP) Committee recently passed its own healthcare bill. Even though the proposal would cost “just” $600 billion over 10 years, Democrats couldn’t get a single Republican committee member to support it.

So what exactly do the Democrats have in store?

The House bill passed by the Ways and Means Committee would finance reform by imposing a new surtax on high-income earners. Individuals making more than $280,000 a year would see their tax rate increase 1 percent. The surtax increases with income, topping out at 5.4 percent for people making more than $1 million annually. The top marginal tax rate would probably top out in excess of 45 percent — a considerable increase from the current 35 percent. When the Bush tax cuts expire next year, that top rate will spiral even higher.

Given all the options available for cost-cutting in the current healthcare system, it’s downright irresponsible for House Democrats to push for tax hikes, particularly during an economic downturn and a high rate of unemployment. Americans rightly expect lawmakers to trim costs before asking for an even bigger share of their hard-earned money.

The measures from both the House and the Senate HELP Committee would create a national “pay-or-play” mandate requiring most businesses to sponsor health insurance for their employees or pay a tax or fine.

The House bill sets the minimum employer contribution at 72.5 percent of individual premiums, and 65 percent of family premiums. Firms that don’t comply would be hit with a fine of up to 8 percent of their total payroll.

Pay-or-play would exempt the very smallest businesses, but plenty of small and medium-sized employers would be dealt a severe blow by the tax or the expense associated with the mandate.

Moreover, employers that offer coverage might be forced to cut labor costs by trimming wages — or eliminating jobs altogether. Indeed, the National Federation of Independent Business estimates that a pay-or-play law would destroy one million jobs. With 14.5 million people currently unemployed, is it really wise to put another million people out of work?

The Senate and House bills would also mandate that individuals obtain health insurance and would prevent insurers from charging different prices to customers based on their medical history — which guarantees higher prices for everyone. The House bill would charge people 2.5 percent of their income if they did not comply with the individual mandate. The fine for noncompliance would increase each year.

An individual mandate will force many people to purchase insurance they can’t afford, stretching already thin family budgets.

And, just as with mandatory car insurance, many will not comply. Fifteen percent of American drivers motor around without supposedly mandatory car insurance.

Finally, all the bills under consideration would ramp up government involvement in the insurance marketplace by creating either a government-run insurance plan or a series of government-chartered nonprofit health cooperatives. Proponents claim that these new government-funded entities would keep private plans honest and bolster competition.

But the competition won’t be fair. The new government programs would have access to the public purse. Therefore, they’d be able to offer plans at artificially low prices and operate without any risk of going bankrupt. After all, both would enjoy the implicit financial backing of the federal government — just like Freddie Mac and Fannie Mae did.

And as if the game weren’t rigged enough in the government’s favor, patients would only be able to purchase private policies through a government-run “exchange,” which would dictate what plans must cover and how much they must cost. Insurers wouldn’t be able to market existing policies to customers through the Exchange — only new, government-approved ones. And Obama has just announced his eight basic consumer protections to guarantee health care security and stability which will only add to cost.

So private insurers would operate at a major disadvantage from the start. More and more consumers would opt for a lower-priced public insurance program. Many employers would stop offering coverage. The Lewin Group estimates that 119 million people would shift from their current coverage to a full-fledged public plan.

Proponents of the co-operative estimate that 12 million people would immediately enroll. It is not clear whether these are all people currently uninsured. That would make it the 3rd-largest insurer in the United States.

Eventually, private insurers would be squeezed from the market, until the public options are the only ones around. The president would get his wish — “Medicare for All.” The ultimate result will be rationed care and long waiting lists like those in Canada because the government will face exploding health care costs as the demand for care skyrockets. In order to get costs under control, global budgets with a set dollar amount per patient will become the norm.

With these dire consequences in the offing, it’s no wonder the American people are less than enthusiastic about more government involvement in the insurance market. A recent Rasmussen poll reveals that 50 percent of voters oppose a public option — a significant decline from earlier polls. Only 35 percent support the idea.

The health bills currently under consideration in Congress take the wrong approach to health reform. Americans are right to be wary of the proposals peddled by the President and his allies. If Democrats don’t address the American people’s misgivings about their reform plans, the healthcare fight could be the first major political defeat of President Obama’s tenure.

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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