Congressional Democrats and the White House are excited over the fact that House Democrats have come up with a plan to provide health care that would cost $1.5 trillion over ten years, and would be financed by “a surtax of 5.4 percent on couples with more than $1 million in income,” with “additional taxes on households with more than $350,000 a year in income and calls for further increases if the measure doesn’t hit a target for cost savings.” Of course, it is doubtful that these provisions would survive (a) a vote in the Senate: and/or (b) negotiations between the House and the Senate in conference, but I imagine that Democrats will nonetheless be willing to push for as much as they can in the House, if only to skew the negotiations in favor of the most interventionist and costliest health care reform package they can muster out to President Obama for his signature.
To pave the way as much as possible for the House plan, the White House is doing what everyone and the termites that live in their homes ought to have expected they would do; they are tossing aside the fig leaf calls for bipartisanship that supposedly made Barack Obama a different type of politician:
President Barack Obama may rely only on Democrats to push health-care legislation through the U.S. Congress if Republican opposition doesn’t yield soon, two of the president’s top advisers said.
“Ultimately, this is not about a process, it’s about results,” David Axelrod, Obama’s senior political strategist, said during an interview in his White House office. “If we’re going to get this thing done, obviously time is a-wasting.”
Both Axelrod and White House Chief of Staff Rahm Emanuel said taking a partisan route to enacting major health-care legislation isn’t the president’s preferred choice. Yet in separate interviews, each man left that option open.
“We’d like to do it with the votes of members of both parties,” Axelrod said. “But the worst result would be to not get health-care reform done.”
Again, no one should be surprised by this language, which is solely and exclusively meant to announce that within short order, Democrats will proceed to run roughshod over Republicans, past complaints about similar treatment from Republicans (and Democratic pledges that they would not engage in such treatment if they ever got the majority) notwithstanding.
But if the media wants to prove that it has some relevance, and can still spot hypocrisy, and report on the ugly details behind that hypocrisy, they will note this reversal in the Democratic position, and give the opportunism behind it the large amounts of negative coverage such opportunism deserves. And they will note that efforts to run roughshod over Republicans will carry with them a huge price tag that will only add to the massive budget deficit and national debt the Obama Administration is running up, plus tax increases that will only serve to further dampen future economic growth that is already expected to be tremendously weak.
And all to give us this.
This is leadership? This is bipartisan leadership? Feh.
UPDATE: Just found this excellent editorial by the Washington Post on the subject of the financing of the House Democrats’ health care proposal:
. . . there is no case to be made for the House Democratic majority’s proposal to fund health-care legislation through an ad hoc income tax surcharge for top-earning households. The new surtax would hit individual households earning $350,000 and above. It would start at 1 percent, bumping up to 1.5 percent at $500,000 in income and to 5.4 percent at $1 million. The new levy would begin in 2011 and is supposed to raise $540 billion over 10 years, about half the projected cost of health-care reform. The rest of the money would come from reduced spending on Medicare and Medicaid — though the surtax for the lower two categories would jump by a percentage point each in 2013 unless the Office of Management and Budget determines that the rest of the bill has saved more than $150 billion.
The traditional argument against sharp increases in the marginal tax rates of a very narrow band of Americans is that it could distort their economic behavior — most likely by encouraging them to put more of their money into tax shelters as opposed to productive investments. This effect could be greatest in certain states, such as New York, where a higher federal rate would add to already substantial state income taxes. The deeper issue, though, is whether it is wise to pay for a far-reaching new federal social program by tapping a revenue source that would surely need to be tapped if and when Congress and the Obama administration get serious about the long-term federal deficit.
Keith Hennessey asks the serious question: “Does the House really want to raise taxes on eight million uninsured people?”
As expected, the House bill would mandate that individuals and families have or buy health insurance.
But what if they don’t buy it?
Then Section 401 kicks in. Any individual (or family) that does not have health insurance would have to pay a new tax, roughly equal to the smaller of 2.5% of your income or the cost of a health insurance plan.
[ Technical note: From the legislative language, it appears the tax = min( 2.5% * (modified AGI – personal exemption), average premium cost). In the examples below, for simplicity I assume modified AGI = AGI. ]
I assume the bill authors would respond, “But why wouldn’t you want insurance? After all, we’re subsidizing it for everyone up to 400% of the poverty line.”
That is true. But if you’re a single person with income of $44,000 or higher, then you’re above 400% of the poverty line. You would not be subsidized, but would face the punitive tax if you didn’t get health insurance. This bill leaves an important gap between the subsidies and the cost of health insurance. CBO says that for about eight million people, that gap is too big to close, and they would get stuck paying higher taxes and still without health insurance.
As Hennessey points out, there are a whole host of people who, under the House plan, will end up paying higher taxes . . . without getting health insurance. As he further points out, then-Senator Barack Obama illustrated the problem behind this approach in a debate with then-Senator Clinton when both were seeking the Democratic Presidential nomination. Why President Obama appears to have forgotten what Senator Obama knew, is a mystery.
Meanwhile, Pete Singer is calling for rationing when it comes to health care. His excuse is that we are doing it already, just less visibly. No one doubts that we factor cost-benefit decisions into how we craft care, but when one considers that the rationing authority will likely be some board of bureaucrats that would be empowered with life-and-death decisions that used to be left to the patient and his/her family, the call for rationing is more than a little appalling. And when it comes to arguing about rationing, Glenn Reynolds has to be considered more compelling than Pete Singer. If we were discussing cost-benefit analysis in the abstract, Singer might be worth listening to. But as we are discussing the possibility that rationing might result from any health care “reform,” Singer’s efforts to set the table for a denial of health care to millions ought to raise alarms.
ANOTHER UPDATE: Curious to see what a government-run system would be like? Then consider the examples of Medicare and Medicaid:
. . . The Government Accountability Office reports that [Medicare] makes about $17 billion in improper payments each year. And that doesn’t include problems in the new $60-billion-per-year prescription-drug plan, which is a juicy target for criminals. Harvard University’s Malcolm Sparrow, a specialist in health-care fraud, recently testified to Congress that official estimates are “lacking in rigor,” are “comfortingly low and quite misleading,” and exclude many kinds of fraud and abuse. He thinks that as much as 20 percent of the federal health-care budget is consumed by fraud, which would be $85 billion a year for Medicare.
Medicare makes a staggering 1.2 billion electronic payments each year, making it highly vulnerable to cheating by health-care providers and organized-crime rings. Criminals need only fill out the government forms carefully and the “claims will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all,” according to Sparrow. A perfect example is the recent case of a high-school dropout in Miami who was able to single-handedly bilk Medicare out of $105 million from her laptop by submitting 140,000 separate claims for equipment and services.
Medicaid is also a huge abuse target. The GAO puts Medicaid fraud at $33 billion — 11 percent of state and federal spending on the program. Again, that is likely a substantial underestimate. A former Medicaid investigator believes that up to 40 percent of New York State’s Medicaid budget is siphoned off in fraud and improper payments, but New York probably has a worse problem than elsewhere. Using Sparrow’s 20 percent estimate instead, Medicaid rip-offs top $60 billion a year nationwide.
How does all this fraud and abuse occur? In many ways, including billing for services and medical equipment not provided, misrepresenting the services provided, and double billing. That last one is common. In one recent case, the University of Medicine and Dentistry of New Jersey double-billed Medicaid repeatedly over the years by directly submitting claims for outpatient physician services, even as doctors working in the hospital’s outpatient centers were submitting their own claims for exactly the same procedures.
Another trouble spot is Medicaid’s nursing-home benefits, which are meant for people with low incomes and few financial assets. Since nursing homes are expensive, the program creates a big incentive for higher-income families to falsify their status and apply for the benefits. Indeed, a whole industry of financial consultants helps ineligible seniors hide their income and assets so that they qualify. The result is that the program loses about $10 billion a year to fraudulent claims.
Why do we think that things will get any better by putting even more of the health care system under government control?