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(HealthNewsDigest.com) – The most basic promise to Americans of healthcare reform is that the rising cost of healthcare will be restrained, making affordable coverage available to nearly everyone. President Barack Obama has made this pledge many times. So have Democratic leaders in Congress who are eager to enact a massive piece of legislation transforming one-sixth of our economy. Unfortunately, regarding the control of healthcare costs, the Administration and its supporters are, “engaged in willful self-deception, public dishonesty, or both,” according to a recent article by highly respected economist Robert J. Samuelson.
Two health “reform” bills are now under consideration – the 1,990 page House bill introduced by Nancy Pelosi (D-CA) and passed by the House of Representatives, and the 2,070 page Senate bill introduced by Harry Reid (D-NV) and now before the Senate. The focus is on the Senate bill due to the pivotal requirement for 60 votes to “cut off debate” and allow a final vote. We will witness a great national debate in the US Senate this month.
The enormous costs of these bills as determined by the Congressional Budget Office (CBO) are clear: over $1.2 trillion for the House bill and $849 billion for the Senate bill. But these estimates are falsely low and highly misleading due to the restrictive directions Congress gave the CBO to produce the numbers. The real costs will be as much as twice as high. The evidence is overwhelming that Obamacare will result in a staggering increase in healthcare costs over the next decade, and that it will drive up the federal deficit to dangerous levels not seen in the history of the United States. Consider the following:
1. More covered lives will be brought into the healthcare system. Studies show that people with health insurance consume at least 35% more care than those without it. Expect this factor of increased use to be even higher among the newly covered under Obamacare because the chronically ill will benefit from subsidized lower premiums and generate even more use and costs.
2. Insurance “reforms” will make insurance more expensive. Community rating, guaranteed issue and other new requirements that prevent “discrimination” may sound good to the public, but they all cause the average cost of coverage to rise, and the insurance costs for healthy people (those who do not smoke, eat properly, exercise and are not obese) to rise significantly. Young Americans under the age of thirty are going to have the surprise of their lives when they learn that their health insurance premiums are tripling or quadrupling. Of greater impact may be the requirement that all employers must contribute a high percentage to the total cost of any health plan option, thus removing the incentive of individuals to shop and spend health dollars economically. All the insurance “reforms” provide incentives for more expensive benefit plans, more usage of services, and less individual responsibility.
3. Medicaid will be greatly expanded along with new regulatory requirements. America’s Affordable Health Choices Act envisions covering all Americans up to 133% of the federal poverty level, and adding 10 million beneficiaries to the program. Now, House Democratic leaders are considering covering an additional 6 million, by allowing enrollments for those up to 150% of the poverty level. Medicaid’s budget is already approaching $400 billion. It was projected to grow at 7.9% annually before these expansions and cannot handle its current cost growth. Proposed legislation further restricts the ability of governors to manage costs at the state level and places more control at the federal level.
4. New taxes will be levied on drugs, devices and insurance. To pay for subsidized coverage for more people, Congress plans to enact taxes totaling nearly $400 billion on drug firms, device makers and insurers. Essentially, all of these costs will be passed along to consumers who will pay more, according to a recent statement from the Congressional Budget Office.
5. Administrative costs will increase significantly. All of the bills now in Congress are extraordinarily complex. The subsidy and penalty schemes moving up and down personal and family income levels are mind-numbing. With each new political compromise and special deal to gain votes, the final bill is becoming more complicated. Small employers should prepare for considerable hassle and paperwork. Congress criticizes the high administrative costs of private health plans but they are adding to the burden.
6. Congress will never make the painful choices necessary to manage healthcare cost growth. Some would say, “Hooray,” because they do not want Congress making decisions about our personal healthcare. But we do want Congress to make the policy decisions that will foster an efficient healthcare marketplace and the effective management of federally funded healthcare programs.
My experience is that Congress is not up to this task, and it will never be. When I was at the U.S. Defense Department, we had the opportunity to save taxpayers hundreds of millions, even billions of dollars, with small and sensible health benefit changes for the Military Health System. But we were stopped repeatedly when the slightest pressures came from interest groups or congressional staff members made program management their prerogative. The same dynamic presents Congress with a future funding gap that it cannot resolve regarding Medicare physician payment. The $250 billion cost to “fix” this particular problem was removed from “reform” legislation to buy the support of the American Medical Association. The blatant arrogance and deception of this action is appalling. But it is par for this Congress.
How much will Obamacare with its highly inflationary impact cost taxpayers? Independent analysts put the true cost over 10 years (if expenditures are aligned with revenues and the Medicare physician payment fix is included) at $1.5 trillion to $2 trillion vs. a bogus $849 billion. How much faster will overall health expenditures rise? My best estimate based on long experience says spending will rise at a rate roughly 30% higher rate than it would have otherwise. Total healthcare spending in 2020 could exceed 22% of the economy and approach $5 trillion a year! This is unsustainable. It will directly damage our ability to create jobs and compete in a global marketplace. It will be a devastating blow to our economy.
Democratic members of Congress are fixed with the fantastic belief that private health insurers control the cost of healthcare—if they can be beaten into submission, all will be well. There is no recognition of the real drivers of cost growth: Medicare and Medicaid payment systems that reward unnecessary services and fragmented care, the lack of consumer cost engagement, few coverage plans that protect against unexpected high costs instead of everyday expenses, the dearth of competitive forces in poorly regulated private markets, the ongoing threat of medical liability, the lack of rewards for healthy behavior and … a Congress that tinkers endlessly with the healthcare system. Nonetheless, the attempt to convert opinions continues for “reform.” Opponents are demonized as do-nothing destructionists.
As Samuelson notes, “the campaign to pass Obama’s healthcare plan has assumed a false… cloak of moral superiority.” This moralizing seeks to persuade people that a potential source of insecurity for some – the lack of adequate health insurance – is all important. It ignores the fact that a ballooning and out of control federal budget deficit will produce much greater insecurity for all.
The national unemployment rate today is 10.2% and rising. Slow economic growth and high unemployment is expected to persist for at least the next two years. The value of the US dollar is declining and the American government is under enormous pressure from our trading partners to show more fiscal discipline. The Administration itself projects massive future deficits of $9 trillion from 2010 to 2019. Yet President Obama and his Democratic supporters in Congress want to create a massive new entitlement, redesign one-sixth of our economy, and spend nearly $2 trillion of taxpayers’ money. Their actions are the height of irresponsibility … a roll of the dice with America’s economic future and our place in the world. We can only hope that wiser minds and honest leaders will prevail in the critical weeks ahead.
William Winkenwerder, Jr., MD is the founder and chairman of The Winkenwerder Company. He served as Assistant Secretary of Defense for Health Affairs from October 2001 through April 2007, and previously for more than 20 years as a private healthcare executive and practicing physician.
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