Recently we have seen numerous headlines about the “Baucus bill” and how Senator Max Baucus (D-Mont.) was ecstatic about the CBO estimates that the bill would be budget neutral — in fact was trumpeted as saving $81 billion over 10 years. How can spending an additional $829 billion actually save $81 billion? The truth is it can’t. Although the Baucus bill is far superior to most proposals on the table, even this bill clearly demonstrates why the federal government should never be trusted in running any program.
The CBO may have correctly projected the $81 billion in savings, but noted that the bill was using “conceptual language.” When the actual language is released, it is safe to say it will be significantly different than its current form. This is likely why congressional Democrats voted down a proposal to have the details of any final bill published for 72 hours prior to a vote.
It’s very important to note that if this bill is implemented, the various cuts in spending and several tax increases are slated to begin immediately, while there is a three- to four-year delay before the implementation of the program itself. Since this plan’s cost is really a six- to seven-year cost, not a 10-year cost, an honest 10-year cost would be nearly $1.4 trillion, not $829 billion.
What are some of the “concepts” being utilized to make this bill cost neutral? The first imposes taxes on high-cost insurance, with estimated savings of $210 billion. This will undoubtedly be an increase in taxes on the middle class, in particular unions, which traditionally have generous benefit plans. There are also penalties for not having coverage ($27 billion) and indirect offsets of $83 billion with no explanation. The two most cynical reductions in cost result from raising the “floor” on medical tax deductions from 7.5% to 10% of income and massive decreases in Medicare spending.
An example of the 7.5% to 10% tax change is as follows: A family making $50,000 may currently deduct all health care costs (including premiums) that exceed $3,750 annually. This new bill would raise the floor to $5,000 for this family, reducing their tax deductions and increasing their out-of-pocket costs. This change will most impact individuals and families with serious illnesses.
With regard to Medicare savings, this bill reduces payments to hospitals for uncompensated care by $45 billion, and reduces Medicare payments by $182 billion to hospitals, hospice care, skilled nursing homes and home health care providers based on “inflation and productivity gains.” Who and how we measure productivity gains are still a mystery. These cost reductions are simply forms of cost shifting.
Currently, 10% to 12% of private health premiums are comprised of “overcharging” to make up for doctor/hospital losses resulting from low Medicare and Medicaid reimbursements. Any potential government savings from reduced Medicare expenditures will certainly be compensated for by doctors and hospitals by further overcharging private insurers. As private insurance rates rise, a larger percentage of the population will drop out seeking public assistance plans. A potential premium death spiral could occur as Congress continues to look for increased “savings” (actually cost shifting) over the next decade.
No federal bill seems to be able to make it onto the floor without those in high positions benefiting, and the taxpayer losing. Majority Leader Harry Reid (D-Nev.) has managed to insert a provision that obtains federal dollars to pay for Nevada’s increased cost of Medicaid. Chuck Schumer (D-N.Y.) has used his influence to exempt most plans in New York from the tax on “high cost plans.” How long before others in Congress seek similar benefits for their states, exploding the cost of this bill to $2 trillion or more?
An honest discussion of health care would involve the whopping $87 trillion under-funding of Medicare over the next 40 years and the $22 trillion under-funding of Social Security over the same time period. An honest discussion would address what limits and boundaries on Medicare benefits need to be implemented to enable plan solvency, not unfunded promises of increased coverage. An honest discussion would address the fact that the young cannot afford to subsidize 85% of the current $750/month cost per Medicare beneficiary and provide for their own coverage. We need to resolve the potentially catastrophic insolvency issues of these programs before adding another massive government program.
More than 80% of the uninsured in this country have access to health care and choose not to participate. Eleven million low income Americans qualify for Medicaid or another state-run program and are not enrolled. There are 10 million uninsured college students and another six to seven million that are college age but don’t attend college. We could easily cover this large demographic of young Americans simply by changing the dependent age to age 25 without any other government regulations.
Most of the remaining uninsured choose not to enroll in available insurance plans based on their personal lifestyle choices; more than seven million of these uninsured make more than $75,000 a year. IPods, cable TV, widescreen TVs, Xbox, leather heated seats, moon roofs, four- and five-bedroom houses, eating out two to three times per week are all luxuries, not needs. Personal responsibility and setting priorities seems to have evaporated from the American way of life.
Thirty-five states already have state health plans guaranteeing care for all residents; the other 15 states should do the same. Modest changes are necessary; most changes can easily be accomplished at the state level without federal involvement. We need to make wise and responsible decisions; our elected officials need to do the same. I am terrified to see what lifestyle choices our children will need to make if we don’t.
Richard L. Stone,
Lifetime Benefits LLC
Gaithersburg, Md.
