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Health Care Tall Tales

Health Care Tall Tales

By Robert Robb - January 11, 2010

Health care reform, as passed by the Senate, does more damage to the federal budget than the country's health care system.

That's not to say that the changes to the health care system are inconsequential.

The Senate health care bill is not socialized medicine or government-run health care. But it does complete the process of transforming health care from principally a private good into a public good, for which government is ultimately responsible.

Low-income health care programs would be expanded. But most working Americans would still get their health care from private insurance companies.

Those insurance companies, however, would be heavily regulated and rendered into something akin to public utilities.

Government would decide what benefits would be offered. Pricing and profits would be severely restricted. All insurance companies would have to accept all applicants and medical underwriting would be prohibited. What consumers would have to pay out-of-pocket would be limited by government. Government would subsidize the purchase of individual policies for those not covered by their employers up to a family income of $88,000.

This structure of delivering health care through private insurance companies regulated much as public utilities is probably unsustainable.

Given the generous subsidies for the purchase of individual insurance policies, employers are likely to gradually ease out of providing that benefit. The Congressional Budget Office estimates that eight to nine million Americans will lose their employer-provided health insurance under the Senate bill. I suspect that's a gross underestimate.

The penalties in the bill for employers not providing insurance and individuals not purchasing it are considerably less than the cost of insurance. So, the financial incentive will be for employers not to provide coverage and individuals not to purchase it until they are sick. That's not a cost burden the private insurance utility companies will be able to sustain.

Controlling costs requires telling some people they will not get the treatments they want, or at least not paid for by others. But as public utilities, each denial becomes a potential political issue, with politicians even more emboldened to meddle in the internal decision-making of nominally private insurance companies.

The odds are overwhelming that this public utility model will fail and ultimately give way to a truly national health care system comparable to those in Western Europe and Canada. I have long thought that such a fate was more likely than not. Republicans probably lost their opportunity for the alternative of a robust individual health insurance market by not pushing such reforms earlier last decade, when they had political power, and their failure, even today, to accept the concept of government as an insurer of last-resort for the non-poor.

The health care changes, while consequential, are probably just the grinding of the wheel of history, albeit in the wrong direction. The damage to the federal budget, however, is a matter of irresponsible choice.

In a town that runs on fiction, there is no taller tale in Washington than the claim that this bill will reduce the federal deficit.

With different provisions taking effect at different times, the only way to judge its fiscal impact is as fully implemented. In 2019, CBO estimates that the health care subsidies in the bill will cost nearly $200 billion a year. Supposedly that's offset, but the offsets are hoaxes.

There's $35 billion in taxes on high-value insurance policies that probably won't exist. There's $46 billion in cuts to non-physician Medicare providers Congress won't follow through on. And there's $35 billion in cuts to physicians Congress knows it will restore.

So the bill, as a practical matter, will easily add more than $100 billion a year to the federal deficit.

The state of the federal government's finances is the chief worry of the American people at this point, and for good reason. This bill makes them considerably worse.

Robert Robb is a columnist for the Arizona Republic and a RealClearPolitics contributor. Reach him at robert.robb@arizonarepublic.com

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