The Real Problem with Health Care Reform is the Mandates, Not the Public Option
Periodically, I will be posting writings by Honeymoon with a Black Widow, here is the first:
An increasing danger with health care reform is that President Obama will make strategic concessions with respect to the public option and the “millionaires’ tax” — leaving in place the so called non-controversial items like the individual mandate, outlawing pre-existing conditions from being considered by insurance companies, and, perhaps, the employer mandate.
These are supposedly non-controversial because the Democrats running the strategy on behalf of the insurance and pharmaceutical industries have no problem with government making health care decisions for Americans, or rationing care, or functionally taking control of America ’s health care system – so long that it is done in a way that rains money on them.
But, while big government programs completing with the private sector is never a good thing, the aspect of health care reform which could completely outlaw the policies which Americans not have – and insert government into every medical decision – are the individual and employer mandate.
These provisions would write specifications for what virtually every insurance policy in America would be required to contain – and would give HHS Secretary Kathleen Sebelius virtually unfettered discretion to write the details of those policies. These provisions are contained at Section 124 of the House bill (informed by non-binding recommendations from a predominantly Obama-appointed benefits commission), Section 143 of the Kennedy-Dodd bill, and Section 111 of the Wyden-Bennett bill.
There is, for example, nothing in any of these bills to prevent Sebelius from requiring that every policy include a best practices reimbursement requirement mediated by a government agency. Thus, rationing would become the law of the land by executive fiat.
And there is a near-certainty that, as in Massachusetts , abortion coverage would be written by regulation.
How much would this government-mandated gold-plated insurance – which you or your employer would be required to purchase, under penalty of fines and, ultimately, garnishment, liens, and imprisonment – cost?
The current average cost of a family policy for a family of four is $12,700. Assuming that, between now and 2013, health care costs continue to rise no more than the 9.9%, 9.2% and 9% they are projected to rise in 2008, 2009, and 2010, respectively, the cost of a government-mandated family plan would be at least $18,200.
And this is before you figure in the cost of outlawing consideration of preexisting conditions – thereby, once again under penalty of fine, requiring the healthy, debt-ridden, poorer young to subsidize the very sick.
But let’s assume, under the House bill, that a small employer employs ten individuals with families, with a payroll of $300,000. (He may or may not be offering more limited coverage currently.) But, either way, the cost of continuing to employ and pay health care for these individuals under the House bill would be at least $118,200 (the 65% employer contribution requirement times $18,200 times ten employees). The cost of opting out of any insurance by paying a 2% fine (applicable to small companies) would be $600. Does anyone think this employer would continue to insure his employees?
Incidentally, in the case of a large employer required to pay $11,830 for each employee – or pay an 8% fine – the chances are pretty god that someone’s going to get fired.
Not only could vast numbers of Americans not be able to keep the insurance they currently have. The law would mandate that they lose their insurance, and they might not be able to keep their jobs.
And the law would be even worse for young, relatively poor, debt-ridden individuals who would be required by the House bill to purchase insurance which, essentially, requires them to pay for other people’s care.
Using the same calculations used for family policies, individuals would be required by the government to spend over $6,700 a year for government-mandated insurance. And, if the individual’s modified adjusted gross income is over $33,000 under what appears to be the emerging legislative consensus, the person would get no subsidy whatsoever. This would be over 20% of the income of the young person – often saddled with huge student debt – which would almost surely result in significantly increased home foreclosures and small business failures.
This would be less of a problem if these young, relatively healthy individuals were paying for their own insurance needs, rather than being mandated to pay for the sick – and perhaps, who were even gaming the system, which is pervasive in Massachusetts .
Make no mistake about it: Insurance which involves this sort of massive transfer payment is no longer insurance. It is a tax. And it is the very sort of tax on the middle and lower middle class that Barack Obama promised he would not sign.