Myth 27. Healthcare reform is affordable.
Friday, December 4, 2009 at 11:42PM Calling something affordable, even in the title, doesn’t make it so.
Making somebody else pay the bill doesn’t make it affordable either. A massive redistribution scheme adds costs, and makes the total cost less affordable.
A CBO score less than Obama’s target of $900 billion isn’t affordable either. That’s the total net work of 900,000 millionaires.
Just looking at the gross numbers: the total cost of the bill Sen. Reid presented to the Senate was estimated to be $848 billion. It was said to extend insurance coverage to 31 million Americans (maybe, in a few years). That would be about $27,000 per additional insured person.
What will the cost be for individuals?
- When demand increases, prices increase. The simple increase in aggregate demand—newly insured persons typically double their spending—would increase the price of the typical family plan by 10%, or $1,200 per year (Wall St J 9/25/09).
- The increase in insurance premiums, for the gold-plated coverage that would become required for everybody, could reach $4,000 per year for someone earning less than $90,000 per year, and easily reach $8,000 as soon as pay topped $100,000 (CNN Money 8/20/09).
- The average premium for a family plan could reach $25,900 by 2019, substantially higher than if Congress did nothing. Wellpoint made an even more dire prediction that premiums would triple, writes Dan Perrin.
- The penalty proposed in one bill for not buying an approved plan is $750/year for individuals earning $32,500. “It’s like penalizing the homeless for not buying a mansion” (Wall St J 9/16/09). In that bill, penalties for higher income families would be $3,800.
- There are 13 major new taxes or fees in the Senate bill, including taxes on more expensive health plans, nonqualified distributions from health savings accounts, branded drugs, companies that offer private insurance, and medical devices such as pacemakers, according to the Joint Council on Taxation.
- About 90% of the tax increases would hit people earning less than $200,000/year, and 50% would fall on those earning less than $100,000, states Perrin.
- The payroll tax for Medicare Part A would be increased from 2.9% to 3.4% , a 17% increase, on wages exceeding $200,000 for an individual ($250,000 joint). This is not indexed for inflation, and the 40% tax on high-cost insurance premiums is indexed for general inflation plus 1%, not for medical inflation, which is expected to be much higher, writes James C. Capretta (National Review Online 11/19/09). The 5.4% surcharge on incomes over $500,000, and the payroll threshold over which businesses must pay an 8% penalty for not offering insurance are also not indexed for inflation (Wall St J 11/6/09).
- “Bracket creep,” despised in the 1970s, would cause an already huge $500 billion tax increase to balloon to $1.7 trillion in the second decade. And note that the negative effects of failing to index compound over the years, creating a revenue windfall for government.
- The young would be forced to subsidize the old, beyond the Medicare tax. Under the House bill the premiums for older Americans could only be twice as high as for the young, even though spending for 60 to 64 year olds is four to five times higher than for those age 18 to 24. Moreover, the current high unemployment rate of 19% for the young is depressing wages, an adverse effect that remains statistically significant even 15 years later, writes Robert Samuelson. This loss will likely be compounded by “health-care reform” (Washington Post 11/23/09).
What about the cost to government? CBO director Doug Elmendorf himself admitted that estimates were subject to “substantial uncertainty” (Dow Jones Newswires). For example, CBO apparently assumed that Medicare cuts will happen, that people won’t change their behavior to blunt tax consequences, and that a worsening economic crisis won’t slash revenues.
Elmendorf testified that, far from “bending the cost curve,” current legislation “significantly expands the federal government responsibility for health care costs,” writes John K. Iglehart (N Engl J Med 2009).
Since Medicare and Medicaid funding began in 1967, total state and federal government spending has increased by 1,791%. This is a real annual growth rate of 44%, 10 times the annual economic growth rate, writes Jim Simpson (Faultline USA 8/14/09).
In making its projections for the first decade, CBO just used accounting sleight of hand. It starts the decade in 2010, although only 1% of the 10-year costs hit before 2014. If the decade starts in 2014, the 10-year costs are $1.8 trillion (Pacific Research Institute).
Note that these costs include only on-budget costs, not the additional costs imposed on taxpayers.
Some private sources calculate estimates as high as $3.5 trillion to $4.1 trillion, writes Peter Ferrara (American Spectator 8/5/09).
Can the U.S. sustain the current level of spending? Debt service cost $202 billion this year, and could exceed $700 billion annually by 2019. The Fed will eventually have to raise interest rates to more normal levels, greatly increasing the debt-service cost (NY Times 11/23/09).
For an analogy to help understand the breakneck acceleration in U.S. indebtedness, watch this video. For those who feel reassured when hearing about the debt-to-GDP ratio, remember that that is a comparison of the government’s debt to the amount that everybody in the country produces.
More and more investors are betting that “rich” countries will default on their bonds, through credit default swaps (Financial Times 11/22/09).
“Healthcare reform” could pull the trigger.
As George Jonas of Canada pointed out, “If the problem with private medicine was that not everybody could afford it, the with socialized medicine turned out to be that nobody could afford it….” (National Post 9/22/07).
Additional information:
- AAPS director Alieta Eck writes: “In 1997, we made a video for an AAPS event [that] told the story of the 1962 debate between Dr. Edward Annis and John F. Kennedy…. JFK said that Medicare would only cost $12 to $13 per month…. Dr. Annis was truly prophetic. Part I and Part II.
- “Is Medicare the Real Target of ‘Health Care Reform’?” by Jane M. Orient, BigGovernment.com 11/22/09.
Reader Comments (14)
I wish Washington would start listening to the majority of Americans that know we cannot afford this healthcare plan and it's going to put us into debt that we will never recover from. I am stunned by the airheads that are running our country. Running it into the ground.
U.S. Senator Harry Reid may have good intentions from a millionaire’s point of view; I certainly am not wealthy and I know there are better ways to reform Healthcare. Democrat’s biggest concern is re-election, and you know Trial Lawyers are your biggest contributors; that is why Democrat Senators will not support Tort Reform. Why have you put your Credibility and Integrity in the back seat? Seniors are against the “PUBLIC OPTION” and other aspects of this ridiculous Health Care Reform Bill. Stand up like a MAN and do the right thing and vote "NO" on The Harry Reid Version of a Reform Bill.
if this health plan is so good then why did congress opt them selves out of it, they want nothing to do with it, that should prove just how bad the plan is. seems like congress is trying to really put a burden on our backs that will never go away. if we let it pass we will live to regret it.
Touch`e! I think this commentary may be one of your best in the "myth" series. It is exquisite in its common-sense simplicity and incisiveness. Thank you for reminding us that "affordability", like beauty, is a quality rightly attributable only to the "beholder", or in this case the "buyer". American tax-paying citizens: CAVEAT EMPTOR!
Kenn Beeman, Tupelo, Mississippi
CONGRESS IS PROVING ONCE AGAIN THAT COMMON SENSE IS NOT ALL THAT COMMON.
WE ARE TRYING TO FIGURE OUT HOW TO SURVIVE IN THIS FAST BECOMING COMMUNIST NATION. DO NOT LET GOVERNMENT INTRUDE IN ANYTHING ELSE THAT IS FOR THE COMMON PERSON.
This new bill will drive those of us in small solo primary care practices out of business. That is why many of us in Alaska have opted out of Medicare in order to try and preserve our practices for the rest of out patients.There is no way you can cut $460 billion dollars from Medicare and then just vote to maintain the same level of services. Any Senator that has voted for this legislation and for the Medicare cuts needs to be voted out of office. They are now trying to force MDs to stay in Medicare by writing into this bill that if those of us who have chosen to opt out write medicines,labs, xray or for other services for Medicare patients that even though we are licensed MDs that Medicare will no longer cover or honor those services we prescribe.This is how they are going to make this bill affordable by cutting out services to our valuable seniors.
The dirty little secret for both the House and Senate versions is that the Employer Mandate is that the employer must pay most of the premium for both the employee and their family (72.5% in the House version). This would increase our labor burden from 20% to 40% and put us with our 120 employees out of business. How many others are in similar situations?
I hate to admit it but we are going to get Obamacare, like it or not.
This nice site does not scare our so called "representatives" at all as I imagine they just ignore it. I've written letters, made phone calls to no avail. The paper tiger can do no more.
We don't need a government run health care that will allow them to take over our lives.They need to leave our health care along the way it is and quit trying to control us like Hitler did.If Obama wants a country like that then tell him to go to another country and run it and leave the United States along.Our Congress and Senators don't want this health care plan because they don't want to be controlled like they are trying to do to us.What they are trying to do is against our Constitution and Bill of Rights and they all know it too.They want to ignore us the people and we are the ones they work for but they don't care about us since they are lining their pockets fatter with our money.I know one thing come election time most of them in there will not be there but new ones will be and none of them will be connected in with the ones already in there either,because we are now doing our homework and researching all of them that are now running.Its time to show them we mean business too.GOD BLESS THE USA
we are witness the truth about revalation 13:1-9 this is the beast comming out of the sea with blastemy writtin on the minds of our leaders world wide they have to much knowledge & not enough spirtual wisdom, this has been going on roughly for 30 ? 40? years. these horns are the voices of leaders all over the world. the crowns are a result of the people who put them in power
I have recently read that 58 Senators have voted to send $464 billion from medicare to the new Obamacare medical plan. I understand this will help pay for present illegals or soon to be and to satisfy our egotistical ,narcississtic presidents political campaign promises
These 58 Senators might just as well resign right now, because as of the next election they will no longer have a job or I should say "position".
On top of that ,the number of doctors we presently have .wiill no longer be able to satisfy the additional 30 million more patients.
Have our legislators given any thought to just how much more money this is going to add to the present $11 trillion national debt?
Give us a break.we are taxed too much as it is! Have you no feelings for your grandchildren?
I have recently read that 58 Senators have voted to send $464 billion from medicare to the new Obamacare medical plan. I understand this will help pay for present illegals or soon to be and to satisfy our egotistical ,narcississtic presidents political campaign promises
These 58 Senators might just as well resign right now, because as of the next election they will no longer have a job or I should say "position".
On top of that ,the number of doctors we presently have .wiill no longer be able to satisfy the additional 30 million more patients.
Have our legislators given any thought to just how much more money this is going to add to the present $11 trillion national debt?
Give us a break.we are taxed too much as it is! Have you no feelings for your grandchildren?
I have recently read that 58 Senators have voted to send $464 billion from medicare to the new Obamacare medical plan. I understand this will help pay for present illegals or soon to be and to satisfy our egotistical ,narcississtic presidents political campaign promises
These 58 Senators might just as well resign right now, because as of the next election they will no longer have a job or I should say "position".
On top of that ,the number of doctors we presently have .wiill no longer be able to satisfy the additional 30 million more patients.
Have our legislators given any thought to just how much more money this is going to add to the present $11 trillion national debt?
Give us a break.we are taxed too much as it is! Have you no feelings for your grandchildren?
I have recently read that 58 Senators have voted to send $464 billion from medicare to the new Obamacare medical plan. I understand this will help pay for present illegals or soon to be and to satisfy our egotistical ,narcississtic presidents political campaign promises
These 58 Senators might just as well resign right now, because as of the next election they will no longer have a job or I should say "position".
On top of that ,the number of doctors we presently have .wiill no longer be able to satisfy the additional 30 million more patients.
Have our legislators given any thought to just how much more money this is going to add to the present $11 trillion national debt?
Give us a break.we are taxed too much as it is! Have you no feelings for your grandchildren?