The Congressional Budget Office (CBO) came out with a new report this week which indicated that Obamacare will end up decreasing the workforce by 800,000 jobs, or 0.5% of the work force. In the report the CBO points out that some people are working just for the healthcare benefits, while some people are working extra hours to be able to afford health insurance. The report also indicates that some businesses will shut down or not hire employees because of the costs involved with complying with the mandates on businesses in order to comply with Healthcare Reform Bill. So, according to the CBO some people will quit working because they think they will get health insurance from some other source rather than their job, and some businesses will decrease, or at least not increase, the number of employees due to the costs involved with the Healthcare Reform Bill.
How this affects the total unemployment picture is unclear. If more people stop working than are laid-off or not hired, then unemployment will decrease. But, no matter what the effect on the total unemployment picture, the CBO figures still show 800,000 fewer taxpayers paying taxes. If you assume the average wage of these 800,000 non-workers to be $30,000, then the total decrease in wages paid is $24 billion. At an average tax rate of 15% that means $6.45 billion less in tax revenue to the government, increasing the Federal deficit further.
Speaking of the CBO; the estimate of the impact of the Healthcare Reform Bill on the Federal budget ranges from a reduction in the deficit of $1.3 trillion over ten years to a cost of $1.06 trillion in the next ten years. Why such a wide discrepancy? It depends on the data that is presented to the CBO for its analysis. As we previously discussed, the only figures that the CBO can use to calculate the financial impact is based on the figures that it receives from the sponsors of legislation. GIGO (Garbage in, Garbage out) clearly describes the impact of the CBO’s analysis. Even though the media consistently quotes the CBO figures on many items, I would always be suspicious of any figures put out be the CBO.
Part of the revenue that the CBO includes in its calculations is $167 billion in new penalties on individuals and businesses. This is the penalty levied on people who choose not to participate, and purchase or provide health insurance. What does this penalty actually accomplish? The individuals or businesses which are assessed the penalty are still uninsured. If the goal of the Healthcare Reform Bill is to provide healthcare insurance for all Americans, then the penalty only makes it worse for individuals or small businesses. Now they not only don’t have insurance, but they have less money with which they can buy insurance,
This week an organization which advocates for kidney transplant recipients, released a statement that they favor younger, healthier patients needing a kidney transplant should be moved to the head of the list for transplants. Traditionally, the waiting list for transplants has been on a priority basis: First come, first served .Their logic is that we need to get the most benefit out of every kidney available for transplant. Older, less promising transplant recipients should not necessarily get kidneys, just because they have been waiting longer. This position by the kidney transplant advocates is a harbinger of the treatment that we can expect courtesy of the Healthcare Reform Bill. With a limited amount of healthcare resources, someone (a government official) will have to make a decision on who gets treatment first. This is the direction that healthcare in this country is headed. This is exactly what many opponents of nationalized healthcare have feared. The elderly will get less care, as it will be more cost effective to spend healthcare dollars on younger people, who will have the most to gain from healthcare. While, we are not at this point yet, is it the only reasonable outcome of nationalized healthcare and the Healthcare Reform Bill is the first step in that direction.
President Obama mentioned the Healthcare Reform Bill in his State of the Union Address on Tuesday. He did down play the significance of the bill, probably because of its unpopularity with the general public. Here are a couple of excerpts from the speech and the truth behind the words
“Now let’s be clear – I did not choose to tackle this issue to get some legislative victory under my belt. And by now it should be fairly obvious that I didn’t take on health care because it was good politics.”
Translation: We passed healthcare reform to put more of the American economy under control of the Federal Government, even though the American public did not want us to do so. After all, we know what’s best for the American public.
“It would give small businesses and uninsured Americans a chance to choose an affordable health care plan in a competitive market.”
Really? If that is true, then why do most Americans and small businesses oppose the Healthcare Legislation? I guess most Americans don’t want an affordable healthcare plan.
“Our approach…would reduce costs and premiums for millions of families and businesses. And according to the Congressional Budget Office – the independent organization that both parties have cited as the official scorekeeper for Congress – our approach would bring down the deficit by as much as $1 trillion over the next two decades.”
Fact: The Congressional Budget Office, which scores the cost of any bill, has to base its decision on the information supplied to it by the bill’s backers. If the information that the CBO uses to develop its cost analysis is faulty, then the conclusion reached by the CBO is faulty. The old computer adage: GIGO-Garbage In Garbage Out- fits here perfectly. The revenue increases expected by the taxes included within the Healthcare Reform Bill may not (probably won’t) be realized, and the cost cutting probably won’t be legislated into law. So the whole projection is without merit. How can adding 37 million people to the healthcare programs save the government $1trillion dollars over 20 years? See below
“More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad.”
This statement is true. I’ll get back to my point from above…If the President now says that government spending on Healthcare will continue to skyrocket, how exactly will adding millions of citizens to Medicare and Medicaid programs save the Government money?
“The approach we’ve taken would protect every American from the worst practices of the insurance industry.”
Here, President Obama can’t help himself not to take another swipe at a private industry. No one is forcing Americans to buy healthcare insurance. Oh, wait, the Healthcare Reform Bill requires all Americans to buy healthcare insurance or be fined by the Federal Government. If President Obama were truly concerned about the ‘worst practices of the insurance industry’, then he would open up insurance competition and allow insurance companies to compete across state lines and allow the expansion of HSA’s and other alternatives. In point 2, above, that’s what he claims he wants to achieve-competition. Let’s see real competition and let the marketplace work.
Separately, last week the news reports concerning the House Republicans repeal of the Healthcare Reform Bill claimed that the Republicans were just being obstructive, offering no alternatives. The truth is that the bill was actually a ‘repeal and replace’ bill. The bill requires several committees to be setup to offer alternatives to the current provisions within the bill. Once again the mainstream media did not offer the American public all the facts, further diminishing the media’s credibility and relevance.
This week a new cost analysis of the Healthcare Reform Bill was undertaken by the Congressional Budget Office (CBO). Surprisingly, (I’m being sarcastic) the new analysis projects a total budgetary deficit of over $300 billion as a result of the Healthcare Reform Bill. This is in direct contrast to the CBO’s analysis before the HRB was passed, which stated that the bill would reduce the federal deficit by $81 billion. It is important to remember that the CBO analyzes the budgetary consequences of any bill with the data that is provided to it by the bill’s sponsors. The CBO does not conduct any independent research into the accuracy of the information that is provided to it.
While this sharp about turn in budget projections after only a couple of months is disturbing, one needs to wonder about the accuracy of even these numbers. We need only to look back in history to get an idea of the accuracy of other budget projections on other major social policy changes in America.
The state of Massachusetts passed their own form of Government run (or mandated) healthcare insurance in 2006. This experiment in government healthcare insurance should give us a good indication of how well the national program might work. The governor’s budget for 2009 asked for $849 million for the healthcare program, $400 million more than in 2008, and is not sure if even this increase in funding will cover the costs. In addition to this massive increase in state funding, private insurance premiums have been rising 10-12 percent per year (about twice the national average) since the program became law. Total healthcare spending in the state has risen almost 28% since the law has gone into effect.
When Medicare was introduced in 1966 the initial annual cost was stated to be $3 billion. In 1966 the cost of the Medicare program was projected to cost the government $12 billion in 1990. The actual cost to the government in 1990 was $107 billion; a factor of almost 10 times the initial projection.
At the time of the passage of the Medicare Act in 1966, LBJ said words to the affect of, “If we had told the public the actual cost of the Medicare Bill, we would not have gotten it passed”.
What are the chances that similar thinking is taking place in Washington today?
