As an economist – and in particular, chief economist with a small business group – I can find nothing positive in the health care policy package that the U.S. House of Representatives is now scheduled to vote on on Sunday morning.
First, the CBO estimate that this massive expansion of government would reduce the federal budget deficit is, of course, nothing more than a wild guess based on the assumptions handed to the budget analysts by politicians. The undeniable reality is that this big government health care measure would send federal spending skyrocketing, eventually running far ahead of congressional projections. For example, presumed “savings” in Medicare will never materialize.
Second, the measure imposes tax increases that would raise the costs of starting up, investing in and operating a business. For example, individuals earning more than $200,000 and couples more than $250,000 would face a new 3.8 percent tax on income, including on capital gains. The self-employed would be forced to either buy health insurance or pay a new income tax of up to 2.5 percent. Under a play-or-pay mandate, businesses with more than 50 employees not offering health care coverage would face a tax of $2,000 per employee above the first 30 workers. And then there are new taxes on prescription drug manufacturers, insurance companies and medical device manufacturers, which consumers would wind up paying one way or another.
All of this is bad for investment, entrepreneurship, economic growth and job creation.
Third, the situation only gets worse with the effort’s vast expansion of regulations and mandates – including the ability of regulate via “insurance exchanges.” Quite simply, increased regulations and more mandates mean still higher costs, and it means that government bureaucrats will be calling many of the shots regarding health care services.
Fourth, a “public option” – that is, government insurance – with the Office of Personal Management running, operating and dictating terms for certain nonprofit plans lays the groundwork for a taxpayer bloodbath. As the system is rigged to work against private insurers, more people will feed into the government-backed plans. Think about the mess caused by Fannie Mae and Freddie Mac in housing, and now apply that to health care.
Finally, it is critical to understand that this big government health care agenda takes one of the key problems that has driven the costs of health care and health care coverage higher – that is, third-party payments, whereby someone else foots the bill (such as the taxpayers), and therefore neither health care consumers nor providers have incentives to be concerned about costs or utilization – and makes it far worse. Again, taxpayers – including entrepreneurs, small businesses and investors – will pay dearly, with patients in general suffering due to diminished quality of care and lost innovation as price controls eventually are imposed.
Nothing good would come from the U.S. House of Representatives passing this big government health care mess.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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