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Washington Post blogger Ezra Klein writes:
[T]his idea that the health-care bill affects “16% of GDP” is inane. That 16% of GDP captures people in private insurance, Medicaid, Medicare, and assorted other arrangements purchasing medical care. This bill will not stop them from purchasing medical care nor will it change the way they purchase medical care nor is it likely to change how much medical care they purchase.
To put this even more clearly, in 2008, the country spent $2.3 trillion on health care. In 2016 — so, after implementation — this bill will spend about $150 billion helping people buy health care. Assume that national spending that year will be about $3 trillion, then the health bill is accounting for about 5 percent of our spending that year. The idea that this bill, which is going to cost fairly little in the scheme of things and do virtually nothing to people who are already insured, is somehow transforming the provision of 16 percent of GDP is misleading at best.
In reality, saying that health care legislation “affects” 16 percent of GDP is a rather modest statement. While both the House and Senate bills may largely preserve the employer-based insurance model, if passed, they would certainly allow government to get its hands on every aspect of the health care system. The individual insurance market would disappear, and instead all sales would move to government-run exchanges. Once implemented, the House bill would actually make it illegal for private insurance companies to sell policies to individuals outside of the government exchange, which would be national. While the insurance policies offered within the exchange(s) would be ostensibly private, government officials would design them (whether it ends up being the Secretary of Health and Human Services or the Health Choices Commissioner we don’t yet know). Because the government would be mandating that everybody purchase insurance, it would also be in a position to determine what constitutes insurance. Therefore, whether somebody gets insurance through the employer or individual market, they’ll have to be in a position to prove to the Internal Revenue Service that they have a qualifying insurance policy, or they’ll face a tax. In addition, the much-touted reforms of the insurance industry — eliminating pre-existing condition exclusions, capping insurers ability to charge more to smokers or older Americans, mandating certain benefits, etc. — would affect premiums througout the insurance market.
Meanwhile, the legislation affects existing government programs. It expands Medicaid by 15 million people, placing a further burden on states that are already struggling with to pay for the program. And it cuts hundreds of billions of dollars from Medicare, including cuts to Medicare Advantage plans, which have 11 million enrollees (or roughly a quarter of all Medicare beneficiaries). The Senate bill includes as one of its major cost-saving provisions an Independent Payment Advisory Board that would be able to implement changes to Medicare payments with limited Congressional intervention.
Then there are a variety of other measures that will have to be reconciled during negotiations, but either way, would have a substantial affect on the private sector. The House bill includes a mandate that employers provide health insurance that’s deemed acceptable by the Health Choices Commissioner, while the Senate bill would tax employers if they have an employee who uses government subsidies to purchase insurance on an exchange.
There’s also the revenue measures, which, depending on how the House and Senate bills get merged could mean: an income surtax; a payroll tax hike; a tax on insurers; a tax on medical device makers; a tax on drug companies; and a tax on expensive health care plans. The Senate bill also has a tax on indoor tanning, which we can all laugh about, but is actually a telling example of the arbitrary nature of government power, as well as the scope of this legislation.
In the headline I said it would affect “at least” 16 percent of GDP, and that’s because in spite of Obama administration promises that health care legislation will bend the cost curve, by the end of the decade, we’ll actually be spending a lot more on health care than we are now, and even more that we would if we were to simply do nothing. That’s according to the Centers for Medicare and Medicaid Services, which is the division at the Department of Health and Human Services tasked with tracking national health care expenditures, from which the “16 percent of GDP” statistic comes from. According to two recent reports issued by the actuary at CMS, the Senate bill would hike health care spending to 20.9 percent of GDP, and the House bill would raise it to 21.1 percent of GDP.