Obama’s usurpation of health care means less health care, shoddier health care, costlier health care.
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We will see the same impact on investment in human capital in health care as well as physical capital. The supply of doctors, surgeons and specialists will decline. When this is combined with the effects of greater demand for health care from the formerly uninsured, and from everyone else due to the incentive effects of the system as discussed below, the severity of inadequate supply of health care becomes even more acute.
Obama repeatedly says that under his health reform plan if you like your doctor you will be able to keep him or her. But the question is whether under his reform plan your doctor will be willing to keep you, when the government refuses to pay adequately for the health care services you want and need.
A recent report from President Obama’s Council of Economic Advisors (CEA), which he has touted as showing how his health plan would reduce health costs, elaborates even more explicit and comprehensive government rationing of health care. The CEA report says 30% of American health care is waste, which government bureaucracy is going to eliminate under Obama’s health reforms. What is the difference between waste and the health care you want? Answer: a government bureaucrat.
The CEA says the government will reduce health costs by deciding for doctors and hospitals across the country what health care works and what doesn’t. Even worse, it will decide what health care is cost effective, which means the government will decide whether your health care is worth the cost, not you and your doctor. This will be enforced through the payments to doctors and hospitals. Those who follow the government’s dictates on your health care get paid, those that don’t don’t get paid.
The CEA report projects a frightening picture of a health care system run by government bureaucrats, with health costs as the primary concern, not you and your health.
The Black Hole of Socialized Medicine
President Obama insists that his national health plan will reduce costs. But if it is going to reduce costs, why do taxes have to be increased to pay for it? Taxes have to go up under Obama’s plan because even with the health care rationing, total costs will go up not down under the plan.
Obama’s plan would increase costs first by expanding Medicaid, the government program providing medical assistance to the poor. That program is already projected to cost almost $5 trillion over the next 10 years, reaching $674 billion for 2017. Obama’s plan would expand coverage under Medicaid to those earning up to 133% of poverty. That would increase costs for federal and state budgets already mostly in deep deficit.
Obama’s plan would increase costs further by providing federal assistance for the purchase of health insurance for families earning up to $88,000 in the House bill, and over $100,000 in the Senate bill. This is a massive increase in welfare with a new entitlement irresponsibly added on top of the runaway, financially intractable entitlement promises we have already made.
Costs for health care will also go up because the Obama plan, like all national health plans, will increase the demand for health care. Expanded health insurance coverage for the uninsured will, of course, add to this demand. But with the government paying for health care or for insurance that pays for health care, everyone will have new incentives to increase the demand for health care. With the government, or an insurance company paid by the government, paying the bill, the incentive is to consume health care until the net benefit from it is equal to zero, rather than equal to costs as in an efficient market. In other words, consume it until it hurts. This increased demand will further increase prices for health care. The Obama health plan will also sharply reduce the supply of medical care, as discussed above, resulting in further price increases.
These increased prices for health care mean the price for insurance that workers and families have to pay will go up as well. New regulatory burdens under the Obama health plan, such as guaranteed issue and community rating, will also sharply increase insurance premiums, as they always have in the past. Health insurance costs will increase even more because the government will be mandating exactly what benefits must be covered, again forcing you to pay for benefits you may not want. Private health insurance costs will also rise because of the cost shifting from the “public option” government health plan paying doctors and hospitals well below market rates.
Employers not providing health insurance will have to pay a new 8% payroll tax, which may cost you your job. This is a heavy new burden sharply raising employment costs for small business, which will result in still higher unemployment. Employers already providing insurance will have to pay the higher insurance costs explained above.
Cost estimates for the Obama health plan from the Congressional Budget Office (CBO), have ranged around $1.5 trillion. But independent private estimates have ranged even higher, $3.5 trillion to $4.1 trillion. While Obama says his health plan will reduce federal deficits, even the CBO says it will increase the deficit by hundreds of billions, even with all the tax increases in the plan. This year’s deficit is already ballooning over $2 trillion, the largest in history by far, almost 10 times Reagan’s largest deficit.
The House bill also includes new income tax surcharges on small businesses and others. Along with the Obama tax rate increases already planned for 2011, the top marginal federal tax rate will soar to almost 48% from 35% today. Counting state income taxes, the average top income tax rate in America would climb to about 52%.
Such tax rates would be almost the highest in the world, higher than in socialist Europe, formerly socialist India, and Communist China. Only three countries, Denmark, Sweden, and Belgium, out of the 30 Western countries measured by the OECD, would suffer under higher top marginal tax rates. If you are a blue-collar worker with a job in manufacturing, say goodbye to it as it moves to South Korea, where the total top marginal tax rate is 38.5%. The U.S. rate would be over 35% higher, completely uncompetitive. The U.S. rate would also be higher than in France, Germany, Canada, and Poland, among 22 others in the OECD.
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H/T to National Review Online