Small Biz Health Care Daily: House Republican Alternative on Health Care

The Democratic leadership in the U.S. House of Representatives plans to vote on its health care package on Saturday (November 7). If it passes, perhaps the vote will become known as the “Saturday Political Massacre,” as small businesses and their employees, health care consumers and providers, and the U.S. economy will be savaged by misguided politics overriding sound economics.

But there is an alternative.

House Republicans have announced a health care plan that points in a far different and more productive direction. The GOP plan features:

• boosting competition and choice by creating a nationwide insurance marketplace, allowing for health insurance purchases across state lines;

• helping small businesses by allowing them to pool together to gain access to lower cost insurance coverage;

• implementing medical liability reforms to bring down the costs of junk lawsuits and defensive medicine;

• allowing qualified participants to use funds in health savings accounts to pay the premiums for high deductible health insurance plans;

• expanding and reforming high-risk pools in order to expand insurance coverage to those with pre-existing conditions.

Rather than expanding the size and reach of government in health care, these proposals actually would enhance competition and choice in health care.

If people truly think that more government will somehow reduce costs and boost the quality of care – contrary to what economics and history teach – then they should support the plan pushed by House Democratic leaders and President Obama. But if they think that more competition and choice in the private marketplace is the right answer – again, as economics and history teach – then the House Republican plan is worthy of support.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: The Small Business Tax Credit Head Fake

President Obama and congressional leaders have been working hard to sell the idea that big government health care reform will somehow be good for small business. In particular, more government mandates, regulation, spending and taxing are supposed to lead to reduced costs for overburdened businesses.

On October 29, for example, the President declared the following to business owners: “What we will do is make the coverage that you're currently providing more affordable by offering a tax credit to small businesses that are trying to do the right thing and provide coverage for their employees. Under the House and Senate bills, millions of small businesses would be eligible for a tax credit of up to 50 percent of their premiums. That's in the legislation that's already been proposed.”

Sound too good to be true? Well, of course, it is.

First, this tax credit is limited to two years for any business. So much for any substantive, permanent reductions in cost.

Second, the credit is applicable to employers paying average compensation of $20,000 a year, and phased out for average incomes up to $40,000. Above that level, no credit is available.

Third, the credit is limited to firms with only 10 or fewer employees, and then being phased down up to 25 employees. No credit would be available beyond that level.

This is a temporary, highly targeted tax credit that amounts to nothing substantive for small businesses and for making health care more affordable. Instead, it’s a political head fake – a political move that simply tries to fool some small business owners into supporting this costly, misguided legislation.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: By the Way, the People on Health Care Reform

As President Obama and congressional Democrats continue to relentlessly and recklessly push the nation further down the road of big government health care, it is worth taking a moment to see how this effort is doing among the people.

Rasmussen Reports released its latest numbers on health care reform favored by the President and Democratic leaders in Congress on November 2.

It turns out that 54% are opposed to the effort and 42% favor it. That’s quite a change from late June when 50% were in favor and 45% opposed.

For good measure, 55% expect the plan to increase costs (23% saying it would reduce costs), and 52% agreeing that it would hurt the quality of care (with only 27% expecting an improvement in care).

The sentiments of a majority of American voters are right on target in this case. The reality is that more government involvement inevitably will lead to increased costs and diminished quality of care. That’s always the case with more government. After all, what incentives exist in government for efficiency and excellence? None.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: Health Care Bill and HSAs

In an October 31 Milwaukee Journal Sentinel op-ed, John Torinus noted how many ways that health care reform being considered by Congress is coming up short.

Many of his points are right on target, including the following about health savings accounts:

There is not even token inclusion of the principles of consumerism and individual responsibility in the new House version. Wisconsin's private sector has led the way on high-deductible plans offset by health savings accounts. They've cut costs by 20% to 40% by changing human behavior on health care. That's proven practice.

The survival of such plans in the private sector is in doubt. Their elimination would undo the huge savings made by many companies and by an increasing number of local governments as well. Companies and employees need health savings accounts and flexible spending accounts to survive.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Government vs. Small Business

On November 1, the Jacksonville (NC) Daily News ran an editorial titled “Small Businesses Bear Brunt of Government.” It is one of those rare occurrences where a newspaper editorial hits economic reality perfectly.

The editorial, in part, said:

Small businesses often work on the tiniest of profit margins. They must constantly invest back into the business to stay viable, leaving very little profit — especially during the early, startup years. Most strive to be the best of neighbors, giving back many times over to people and events in their local areas. They support their communities not just with taxes and fees, but also through charitable giving as well as providing jobs, purchasing materials and equipment and providing a reason for people to come to the community in the first place.

Governments control, tax and regulate small businesses at every level, from the city to the county to the state to the federal government. Just as with individual and families all across this country, small businesses are being squeezed, not simply by the economy’s failures, but also by governments hungry for more money and control. This not only is unfair, it is also dangerous — perhaps even lethal — when it comes to the preservation of a growing and thriving middle class.

Absolutely correct!

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council