The Public Policy

Behind the 8 Million Ball

With or without Tom Daschle, Congress has some dictatorial health-care reform plans in play, all designed to force everyone else to cover 8 million uninsured Americans who are already covered.

By 2.4.09

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There are roughly 8 million people in America without health insurance, who are not illegal immigrants, already eligible for coverage under Medicaid or other government health programs, or in families earning over twice the poverty level. This is out of a total U.S. population of over 300 million (less than 3%).

But not to worry. The federal government is going to fix that problem by taking over and running the entire U.S. health insurance market. In the process, the government will tell you what health insurance you must buy, and send you the bill, to be paid on your income taxes. If you don't buy that mandatory health insurance, the government will sign you up for it anyway, and send you the bill, cc: the IRS.

The federal government will also tell the insurance companies what treatments and medicines for you they can pay for, based on the opinion of a big government bureaucracy in Washington as to what will work best for you, and what will be most "cost effective." Wouldn't your doctor know that far better than some bureaucracy in Washington that doesn't even know you? Forget about that old school thinking. Under the new enlightened system, your doctor, as well as your hospital and your insurance company, will be working for the government, not for you, because their money will be coming from the government.

In the end, the government will even be able to save you money by dictating to your insurance company, doctor, and hospital, what health care to deny you, or at least make you wait several months for. If you don't like that, get over it. In this brave new world of health care, it is not going to be about you. It is going to be about social justice.

And you can have all of this social justice in return for the largest tax increase in world history, and a further explosion in federal spending.


Our Great Leaders and Their HAPI Feat

This is how the health care system would work under S. 334, the Healthy Americans Act, with Sen. Ron Wyden (D-OR) and Sen. Robert Bennett (R-UT) as the lead sponsors. This bill has more Senate co-sponsors overall than any other comprehensive health reform proposal. It also reflects thinking within the Obama Administration.

Under the bill, employers must terminate their current employee health insurance plans, and pay the savings to the workers as increased wages. All Americans except those covered by Medicare and the military must then buy from their local Health Help Agency (HHA) an eligible HAPI (Health Americans Private Insurance) insurance plan. All HAPI plans must include benefits at least as comprehensive as the Blue Cross/Blue Shield standard option plans offered through the Federal Employee Health Benefits program. This would include coverage for dental care, abortion, contraceptives, mental health services, and a low, $250 annual deductible, regardless of whether you wanted or could even use all the mandated benefits. This would be a relatively expensive health plan.

Nevertheless, workers would be required to pay the premiums for such coverage as part of their federal income taxes, with the IRS to chase after them if they do not. For workers who do not choose one of the HAPI plans, the government will pick one for them, and they will again be billed for the cost through the IRS. This would mean additional income taxes for workers of over $500 billion per year. The entire federal income tax for fiscal year 2008 was $1,220 billion.

The government will pay the premiums for workers below the poverty line. This subsidy will be phased out as income rises, until it is phased out completely at 400% of poverty. That phase-out has the same economic effect as a tax on rising wages, further discouraging work.

Employers would face a new tax as well rising from 2% of average premiums per worker for the smallest employers to 25% for the largest. Increasing tax rates for the more employees a company hires discourages employers from creating new jobs and hiring more workers. This amounts to an additional tax increase on employers of close to $100 billion per year. Because the amounts formerly paid by employers for health insurance would be included in workers' incomes as increased wages, that would result in an additional $65 billion in payroll taxes in the first year alone.

As Americans for Tax Reform (ATR) states, "On net, S. 334 is a first year tax increase of $642 billion. This is quite possibly the largest tax increase ever proposed in the history of the U.S. Congress." (Emphasis in original.) Indeed, that $642 billion number is for 2007. For 2010, it would probably be around $700 billion.

This tax increase would violate two pledges made to voters by our esteemed leaders. During his 2008 Presidential campaign, Barack Obama repeatedly stated that there would be no tax increase on those in the bottom 95% of income earners. He promised instead a tax cut for those workers. He said in one debate, "If you are in the bottom 95% of income earners, your taxes will go down," gesturing downward with his left arm. The massive tax increase in this health care bill would undoubtedly violate that promise, which was central to Obama's election.

In addition, most GOP Senators ran in their campaigns having signed the Taxpayer Protection Pledge, promising to never support a net increase in taxes. ATR, which sponsors that pledge, has stated publicly that "S. 334, the 'Healthy Americans Act,' IS THE LARGEST TAX INCREASE IN HISTORY AND A TAX PLEDGE VIOLATION."


The Practice of Medicine

The so-called stimulus bill that just passed the House of Representatives included $1.1 billion in funding for a Federal Coordinating Council for Comparative Effectiveness Research (CER). The Council is to conduct so-called federal comparative effectiveness research in regard to health care services. The sponsors of that provision explained:

By knowing what works best and presenting this information more broadly to patients and healthcare professionals, those items, procedures, and interventions that are most effective to prevent, control, and treat health conditions will be utilized, while those that are found to be less effective and in some cases, more expensive, will no longer be prescribed.

How is it that the studies of this federal bureaucracy could lead to some medical items, procedures, interventions and treatments no longer being prescribed? When the Council issues a finding prohibiting a medical item, practice, procedure or treatment, the HAAs across the country would then be expected to force their insurers to follow it, by refusing reimbursement for any such item, procedure, intervention or treatment. Ultimately, the HAA could throw out any recalcitrant insurers. But insurers generally do not need too much encouragement to deny reimbursement.

What if your doctor disagrees with the Washington bureaucracy about whether an item, procedure, intervention or treatment is effective, or worth the cost, in your case? That doesn't matter, because he is no longer in control of your care or his practice. The federal bureaucracy is. In fact, he had better keep his mouth shut, or he could be banned from the insurer's preferred provider network altogether, or even have his license yanked, for not maintaining quality standards of care, or following best practices, or upholding cost effective medicine.


The New Health Bureaucrats

Under these proposed health care reforms, the government will dictate to insurance companies what they must cover, what they can charge, who they can accept as customers, and every other aspect of their "business." They are forced to accept whoever shows up and asks for their coverage, no matter how sick or costly they may be, for the same premiums as young, healthy, virtually cost free patients. These insurers will be allowed just enough compensation to keep them from quitting, but these regulatory features will still make their insurance quite costly. These insurers are reduced to mere bureaucrats doing clerical work for the government.

Virtually the same is true for doctors and hospitals. Under this legislation, they will be working for the government, not for the patients, because it is the government that is paying them, not the patients. They will consequently follow the directives that come down from the federal bureaucracy as to how to treat their patients and "practice" medicine, regardless of whether they think the directives make sense in the case of any particular patient. In fact, these doctors and hospitals would no longer be medical professionals, but manual laborers, following the instructions of the federal bureaucracy.

And they will be compensated as such. Every year, their reimbursements will be squeezed a little more, until they are making barely enough to keep them from quitting. Indeed, if the government can offer young graduates from foreign medical schools admission to the U.S. if they will work for less, the government would be glad to replace current doctors, surgeons and practitioners with these newcomers. That would be so "cost effective," of course. If patients feel these foreign trained, inexperienced newcomers do not provide the same quality of care as traditional, experienced American doctors, they can file a complaint with the Federal Coordinating Council in Washington.

The fundamental problem is that these health care reforms turn control of health care completely over to the government. Every aspect of the system is effectively run by government: insurers, doctors, hospitals, and everything else. The patient is left with no real power, especially those who are sick and really need health care. If they don't like the way they are treated, they can leave and take their costs with them. The threat to leave would only be effective for young, healthy, cost-free patients, who the insurers and their preferred provider networks would attend to most assiduously.


Health Care Rationing and Collapsing Quality of Care

Under these health care reforms, patients have no incentive to keep their demands for health care services down. They will instead seek to utilize the coverage they are paying hefty taxes for, driving up health costs. Voters will then start to scream as the income taxes they are forced to pay for health care premiums increase with these rapidly rising costs. Politicians will consequently pressure the Federal Coordinating Council, the HAAs, and the insurers to do more to keep costs down. More top quality practices and treatments will consequently be dropped, and approval for new innovations as cost effective will be slowed sharply. These bureaucracies will put more pressure on doctors, hospitals and other practitioners to keep costs down, and that will be further enforced by lagging reimbursements not keeping up with costs. So the practitioners will reduce the quality of care, and access to care to reduce costs. That is where the waiting lists come in. And if patients complain, the politicians can hide behind the Federal Coordinating Council, the HAAs, the insurers, and those dastardly doctors and hospitals.

In this environment, who will invest in new state of the art, modern, top of the line facilities? That is why facilities always seem to deteriorate in countries that follow these socialized medicine policies. And who will invest in the research, development and production of new, innovative breakthroughs, medical technologies, pharmaceuticals, etc.? Will new innovations be approved? After how long? Will they then be adequately reimbursed in this hostile environment? That is why new advances always lag badly wherever these socialized medicine practices prevail, further reducing quality.

Advocates of these reforms argue that competition among insurers will keep costs down. But insurers have no power to keep costs down unless they have the power to deny care. Which they will demand from the politicians more and more to stay in business and remain profitable. And the politicians will be glad to give them those powers in the name of cost effectiveness. Do you see the fascism yet?


All So Unnecessary

This health care nightmare, which is another assault on the standard of living of the American middle class, is all completely unnecessary to deal with the problem of the uninsured 8 million (less than 3% of the U.S. population) who are not illegal immigrants, already eligible for government health programs, or in families earning over twice the poverty line. I don't believe in anyone suffering or losing their long-term health because they can't afford medical care. But it is not necessary for the government to take over all health care to deal with this problem.

We already spend roughly $400 billion per year on health care for the poor through Medicaid, and its costs are projected to go through the roof in the future. Block grant these program back to the states through fixed finite grants that don't increase when the states spend more. Let the states use this money more effectively to aid the poor in obtaining health insurance coverage. As a nation, we can budget more for this if necessary.

Let the states use some of these funds for uninsurable risk pools, which would provide coverage without any exclusion for preexisting conditions for the small number who are too sick to get private coverage any longer. Charge for this coverage stiff premiums to each applicant to the extent he or she can reasonably pay them, but no more. These reforms create a safety net that will assure essential health care for everyone. Notice this is accomplished without any coercive mandates of any kind. No requirement to buy an expensive government policy, no dictation to insurance companies on what to cover, no dictates to doctors and hospitals as to what care they can provide, no new taxes for workers or employers.  

But that is why the new Washington powermongers are not interested. They want the power to run health care, in their own vision. These people are dangerous.


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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.