Myth 27. Healthcare reform is affordable.

Calling something affordable, even in the title, doesn’t make it so.

Making somebody else pay the bill doesn’t make it affordable either. A massive redistribution scheme adds costs, and makes the total cost less affordable.

A CBO score less than Obama’s target of $900 billion isn’t affordable either. That’s the total net work of 900,000 millionaires.

Just looking at the gross numbers: the total cost of the bill Sen. Reid presented to the Senate was estimated to be $848 billion. It was said to extend insurance coverage to 31 million Americans (maybe, in a few years). That would be about $27,000 per additional insured person.

What will the cost be for individuals?

  • When demand increases, prices increase. The simple increase in aggregate demand—newly insured persons typically double their spending—would increase the price of the typical family plan by 10%, or $1,200 per year (Wall St J 9/25/09).
  • The increase in insurance premiums, for the gold-plated coverage that would become required for everybody, could reach $4,000 per year for someone earning less than $90,000 per year, and easily reach $8,000 as soon as pay topped $100,000 (CNN Money 8/20/09).
  • The average premium for a family plan could reach $25,900 by 2019, substantially higher than if Congress did nothing. Wellpoint made an even more dire prediction that premiums would triple, writes Dan Perrin.
  • The penalty proposed in one bill for not buying an approved plan is $750/year for individuals earning $32,500. “It’s like penalizing the homeless for not buying a mansion” (Wall St J 9/16/09). In that bill, penalties for higher income families would be $3,800.
  • There are 13 major new taxes or fees in the Senate bill, including taxes on more expensive health plans, nonqualified distributions from health savings accounts, branded drugs, companies that offer private insurance, and medical devices such as pacemakers, according to the Joint Council on Taxation.
  • About 90% of the tax increases would hit people earning less than $200,000/year, and 50% would fall on those earning less than $100,000, states Perrin.
  • The payroll tax for Medicare Part A would be increased from 2.9% to 3.4% , a 17% increase, on wages exceeding $200,000 for an individual ($250,000 joint). This is not indexed for inflation, and the 40% tax on high-cost insurance premiums is indexed for general inflation plus 1%, not for medical inflation, which is expected to be much higher, writes James C. Capretta (National Review Online 11/19/09). The 5.4% surcharge on incomes over $500,000, and the payroll threshold over which businesses must pay an 8% penalty for not offering insurance are also not indexed for inflation (Wall St J 11/6/09).
  • “Bracket creep,” despised in the 1970s, would cause an already huge $500 billion tax increase to balloon to $1.7 trillion in the second decade. And note that the negative effects of failing to index compound over the years, creating a revenue windfall for government.
  • The young would be forced to subsidize the old, beyond the Medicare tax. Under the House bill the premiums for older Americans could only be twice as high as for the young, even though spending for 60 to 64 year olds is four to five times higher than for those age 18 to 24. Moreover, the current high unemployment rate of 19% for the young is depressing wages, an adverse effect that remains statistically significant even 15 years later, writes Robert Samuelson. This loss will likely be compounded by “health-care reform” (Washington Post 11/23/09).

What about the cost to government? CBO director Doug Elmendorf himself admitted that estimates were subject to “substantial uncertainty” (Dow Jones Newswires). For example, CBO apparently assumed that Medicare cuts will happen, that people won’t change their behavior to blunt tax consequences, and that a worsening economic crisis won’t slash revenues.

Elmendorf testified that, far from “bending the cost curve,” current legislation “significantly expands the federal government responsibility for health care costs,” writes John K. Iglehart (N Engl J Med 2009).

Since Medicare and Medicaid funding began in 1967, total state and federal government spending has increased by 1,791%. This is a real annual growth rate of 44%, 10 times the annual economic growth rate, writes Jim Simpson (Faultline USA 8/14/09).

In making its projections for the first decade, CBO just used accounting sleight of hand. It starts the decade in 2010, although only 1% of the 10-year costs hit before 2014. If the decade starts in 2014, the 10-year costs are $1.8 trillion (Pacific Research Institute).

Note that these costs include only on-budget costs, not the additional costs imposed on taxpayers.

Some private sources calculate estimates as high as $3.5 trillion to $4.1 trillion, writes Peter Ferrara (American Spectator 8/5/09).

Can the U.S. sustain the current level of spending? Debt service cost $202 billion this year, and could exceed $700 billion annually by 2019. The Fed will eventually have to raise interest rates to more normal levels, greatly increasing the debt-service cost (NY Times 11/23/09).

For an analogy to help understand the breakneck acceleration in U.S. indebtedness, watch this video. For those who feel reassured when hearing about the debt-to-GDP ratio, remember that that is a comparison of the government’s debt to the amount that everybody in the country produces.

More and more investors are betting that “rich” countries will default on their bonds, through credit default swaps (Financial Times 11/22/09).

“Healthcare reform” could pull the trigger.

As George Jonas of Canada pointed out, “If the problem with private medicine was that not everybody could afford it, the with socialized medicine turned out to be that nobody could afford it….” (National Post 9/22/07).

Additional information:

3 thoughts on “Myth 27. Healthcare reform is affordable.

  1. This is another Ponzi scheme perpetrated on the American people, especially the young by a runaway Congress. The above numbers are just scratching the surface. And the AMA and some doctors support this? Every part of this bill will hurt physicians, either by decreasing revenue, increasing expenses, or taking profits. The insurance companies were bad enough. If you think you can trust The Man (Federal Government for non military types), you will learn quickly the folly of your decision. I believe all doctors should stand up and say, “I will not participate in this endeavor”.

  2. Until physicians unite in refusing to participate in a government run healthcare system and walk away, our government will never understand who knows what is best for healthcare and our patients.

    The AMA is a farce. With less than 20% of physicians belonging to this organization, the american people need to know that what it supports is NOT what physicians support!

  3. You don’t even mention the costs that will be generated by the coverage of alternative medicine therapies and practitioners. Unproven treatments are to be covered in the new bill, thanks to the likes of Tom Harken and others who benefit greatly from their longtime support for the alternative medicine industry. If passed, we will be paying for chiropractic, acupuncture, therapeutic touch, aromatherapy. naturopathy energy medicine, etc., etc.

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