My Two Cents on Health Care

Monday, March 22, 2010

What's being called the most sweeping health care reform bill in decades passed the House of Representatives last night 219-212. Since everyone has an opinion on this topic, I figured I might as well join the fray. But, for the most part, both sides of the aisle need to be realistic about this bill. No, it will not destroy America. And, no, it will not revolutionize the entire health care industry and provide all Americans with the best coverage at no cost.

First, I have to hand it to President Obama for his ability to get this passed. In December, most of us thought the bill was dead. Some key losses in Democratic seats seemed to act as a referendum on the health care debate. But, Obama refused to give up. He rallied the Democrats and brought Republicans into the debate with a round-table discussion. Love him or hate him, I am impressed with the political ability Obama showed on this issue.

My largest problem with the bill is the cost. As I understood it, the entire reason for addressing health care at this time, a time of record deficits and a crippling recession, was to curtail the burgeoning costs of health care. Obama argued for the economic imperative of lowering the costs on our system. (On that issue, I really dislike the projections made on health care costs as if we can just regress the last 10 years and claim as fact that costs will continue their trajectory.) But even so, assuming those costs and the goal of cost reduction this bill extends coverage to roughly 32 million people and regulates insurance companies' ability to deny coverage. The CBO projects that the bill will increase deficits just under $1 trillion in the first year and then somehow cut the deficit by just over $100 billion over the next 10 years. Frankly, I don't believe it. It'll only take a year to prove me wrong but I don't see how this program will run surpluses for the next 20 years. Increasing coverage and reducing deniability does absolutely nothing to reduce the cost trajectory, absolutely nothing. The only way the CBO estimates work out is through tax increases.

Clearly, the only way for this to be possible is to raise taxes a great deal. There's a variety of taxes that will be raised in order to fund the bill but this is the worst time for that. I fully understand that the federal government will need to increase revenues in the next couple decades to pay down our record deficits and support our current spending habits. The worst thing we can do though is add entirely new entitlement programs that need funding. We cannot pay for what we already have and now we're creating new monsters to deal with. I just don't see how this helps our economic and fiscal situation.

Also, we're stealing from Medicare to pay for this program. One of the biggest problems with running pension and entitlement programs is that the managers of the plans don't save surpluses. This is a classic case of not putting Medicare in Al Gore's "lockbox". This will create shortfalls in leaner times.

Also, why is everyone demonizing the health insurance companies? There is a legitimate argument to be made as to whether we want the health insurance industry to be for-profit. I think support for non-profit firms could help. Though I don't think the profits being made are what's causing the problems. Of our five largest health insurers, 2 of them have margins just over 7% and the other 3 have sub-5% net profit margins. It's not like these firms are just printing money. Regulation on pre-existing conditions and such is important but I don't see the evil insurance company line of thinking.

Anyway, there's my health care debate ramble. This bill has some good stuff in it, some bad stuff. My primary problem is that I don't believe we can afford it. Health care for everyone is a great ideal but I don't see how it happens without sacrificing quality. There's an equilibrium between quality and coverage. America has always tilted the scale towards higher quality, lower coverage and higher cost. Increasing coverage comes with a give in other sides of this equation. I believe costs will be higher and quality will be lower over the long run.
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