Health Care Quicktakes

Economics

The Senate bill was released today and I have a few thoughts about how politicians on both sides are being dishonest about the bill.

Let’s start with the Republicans. The CBO’s estimate of the effects of the bill are that the cost for the government option health insurance plan will likely be higher than private plans. On Fox News, Carl Cameron reported that this confirmed what Republicans have been saying for months — that government-run health care will be more expensive. Really? That’s not how I remember it at all. I remember Lindsay Graham (R-SC) saying that the government option would be cheaper than private plans. And because it is cheaper, companies will ditch their private health insurance plans. Private health insurance companies won’t be able to compete and they’ll be driven from the market. the government option was supposed to destroy private health insurance. Now we discover that it won’t, and that’s somehow bad too? Republicans are trying to take both sides of this issue. If the government option is less expensive, it will ruin private industry. If it’s more expensive, it’s a sign that the government is inefficient and can’t do anything right. You can’t have it both ways, guys.

Speaking of having it both ways, let’s move on to the Democrats. In trying to keep this bill deficit-neutral, they are forced to raise about a half trillion dollars in taxes. $28 billion of this is taxes is expected to come from employers that do not provide government-approved health insurance plans for their employees, so they get fined. So what happens if these companies shape up and put their employees on the government option? The government now has to pay for the health care of these individuals, and the government does not collect the tax revenue. Seems to me the Democrats are counting on money that, if their bill is successful, they won’t get. It’s just like the SCHIP bill passed a few years ago. In order to help pay for an expansion in the State Childrens Health Insurance Program, the Democrats in Congress increased cigarette taxes. If people stop smoking (as we want them to do), the government doesn’t get its money and the kids don’t get health care. As I tell my students, next time you’re smoking, just tell yourself, “I’m doing it for the kids.”

The Democrats say the bill costs $848 billion and will reduce the deficit by $130 billion. That means they’re increasing revenues by 848+130 = $978 billion. Some of this is assuming new efficiencies in Medicare that the CBO says are questionable. And the rest of it is on taxes. The goal wasn’t to reduce the deficit by increasing taxes (especially in a recession) — it was to provide affordable health care for all. If you only need $848 billion, why not increase taxes enough so that you get $848 billion in revenue. If you ask me, this extra $130 billion is because they know those Medicare cuts won’t happen.

And last but not least is the difference in timeline between costs and revenues. The Democrats start collecting taxes next year, so the $978 billion in revenues comes over 10 years. But the benefits people get in the health care bill don’t start for 5 years. So they’re actually saying that we’ll collect money for 10 years and only pay it out for 5, and somehow this is a deficit reduction. That’s like me saying that I’m only going to pay half of my bills this year and then, at the end of the year being proud of all of the cash that I have in my checking account. It’s ridiculous. And the CBO says that in the second 10-year period of the bill (2019-2029), health care costs will TRIPLE.

And politians wonder why we’re sick of their games and want to throw them out of office. They can’t be honest about the numbers. They play a shell game with our money. And they talk out of both sides of their mouths. My suggestion for 2010: vote out every single incumbent. Maybe they’ll get the message.

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