Health Care - The Young and the Wealthy Subsidize Everyone Else in Obama's PPIP for Heathcare Proposal

According to my congressional representative, it's difficult to say exactly what is in the health care bill because there are three variations of the bill floating around Congress. Moreover, there is at least one version in the Senate and then whatever comes out of the House has to be Reconciled with the Senate version.

However, there are several things we know for sure:

1) Taxes will go up
2) In everyone of the plans, young healthy workers and the wealthy (cutoff point unknown) will subsidize everyone else
3) Whatever passes will cost far more, perhaps double or triple whatever low-ball estimates Congress comes up with

Obama has already stated taxes will go up. Indeed we knew that anyway as there is no such thing as free health care. What we do not know is how the cost is distributed.

Past experience also shows that cost of major government programs always exceeds estimates. If the cost estimate is $1 trillion, the best we can possibly hope it costs is probably $2 trillion.

Taxes and the Young

Everyone assumes the wealthy will pay for the program in a "soak the rich" scheme. Certainly a portion will come from the wealthy, but inquiring minds are reading how Health Reform Fattens Big Insurance and Taxes the Young.

Insurers agreed months ago to clean up at least some of their hated practices, such as denying insurance for prior illnesses and canceling coverage when someone gets sick. In return, they stand to get some colossal plums: a mandate not only that every American buy health insurance but that the mandated insurance be "comprehensive," another word for expensive.

What polishes this plum even more is that the new clients these companies will pluck from the ranks of 45 million uninsured Americans will tilt toward healthy people who are young and working, a group relatively inexpensive to cover and a fount of revenue and profit.

Take a concrete example. Imagine a 25-year-old man, perhaps your son, just starting out in life, with good health but a skimpy income. Right now, he can get health insurance that will meet his needs at this stage in his life and contribute toward the national goal of universal coverage. To do this he might buy a catastrophic-care policy that covers him for major medical events that could otherwise bankrupt him. This might cost as little as $500 to $600 a year and typically comes with inexpensive primary-care access. But under Obamacare, he would have to pay a premium closer to $4,000—a potential back-breaker that might force him to take a government handout, further burdening his fellow taxpayers.

Forced by government and enforced by the Internal Revenue Service, these hefty premiums would amount to a middle-class tax.

PPIP For Health Care

Everyone wants something. Democrats Urge Obama to Keep Government-Run Health-Plan Option.

President Barack Obama is facing pressure from fellow Democrats after a top administration official suggested the president may back down from including a federal insurance plan in a U.S. health-care overhaul.

“There is strong support in the House for a public option,” House Speaker Nancy Pelosi of California said yesterday. “A public option is the best option to lower costs, improve the quality of health care, ensure choice and expand coverage.”

Other Democrats called on the president to stand by his commitment to create the government-run plan to compete with private companies, saying they wouldn’t be able to support any health-reform measure that lacked such an option.

White House press secretary Robert Gibbs said the administration’s position is unchanged. Obama would like to include a government-run program as an option for consumers in a proposed health-care overhaul, Gibbs said yesterday.

“His preference is a public option,” Gibbs told reporters on Air Force One. “If there are other ideas, he’s happy to look at them.”

Can Obama take a stand on health care and keep it?

It certainly does not seem that way and that is further proof no one knows for sure what will be in the final bill.

What we do know is this mess is starting to sound like Geithner's Public Private Investment Plan (PPIP) except for health care. In Geithner's PPIP plan, the public gets royally screwed on bank bailouts. Will Obama's healthcare PPIP be any better?

Many Questions, No Answers, Bad Math

Caroline Baum questions Obama's math in Obama’s More-for-Less Health Care Doesn’t Add Up.

Obama wants to insure more people and lower the total cost of care. In economic terms, he wants to control price (P) and quantity (Q). What makes Obama think he can repeal the law of supply and demand?

Rationing is inevitable, says Paul Feldstein, professor of health-care management at the Paul Merage School of Business, University of California, Irvine, and there are only two options: with price and free choice or with regulation. Surely Obama spent enough time at the University of Chicago to understand his P’s and Q’s.

Obama says his advisers have identified $500 billion to $600 billion of inefficiencies in the system that would pay for reforms. When was the last time the government wrung inefficiencies out of anything? Medicare is plagued with waste and fraud.

Obama says the government needs to offer a public health- care option to encourage competition. This line of thinking leads “to the uncomfortable conclusion that the government must be a player in every industry,” says Cliff Asness, president of AQR Capital, a hedge fund in Greenwich, Connecticut.

What’s the prognosis if ObamaCare is enacted? “People have to get less or pay more,” Feldstein says.

Public Private Partnership Explained

Caroline Baum gets to the heart of the matter in Obama Goes Postal, Lands in Dead-Letter Office.

Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.

For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:

“If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.”

Self-sustaining? The public option? What has Obama been doing during those daily 40-minute economic briefings coordinated by uber-economic-adviser, Larry Summers?

[Mish comment: Caroline was polite. That was one of the most convoluted things Obama has ever said.]

Capitalism Explained

Government programs aren’t self-sustaining by definition. They’re subsidized by the taxpayer. If they were self-financed, we’d be off the hook.

Llewellyn Rockwell Jr., chairman of the Ludwig von Mises Institute in Auburn, Alabama, and editor of LewRockwell.com, put it this way in an Aug. 13 Obama and the Post Office commentary on Mises.org.

“The only reason for a government service is precisely to provide financial support for an operation that is otherwise unsustainable, or else there would be no point in the government’s involvement at all.”

The proliferation of Obama’s gaffes and non sequiturs on health care has exceeded the allowable limit. He has failed repeatedly to explain how the government will provide more (health care) for less (money). He has failed to explain why increased demand for medical services without a concomitant increase in supply won’t lead to rationing by government bureaucrats as opposed to the market. And he has failed to explain why a Medicare-like model is desirable when Medicare itself is going broke.

The public is left with one of two unsettling conclusions: Either the president doesn’t understand the health-insurance reform plans working their way through Congress, or he understands both the plans and the implications and is being untruthful about the impact.

The final version of the bill has yet to surface. Obama really doesn't care what it costs, or even what's in it. He just wants bragging rights that he got a bill passed when Clinton couldn't. His willingness to rush this through proves it.

Yet as the debate heats up and the mud gets thrown, there will likely be more giveaways to get needed buy-ins. What makes things harder is some "Blue Dog" Democrats want to reduce costs while others want more handouts. This makes it all the more likely that whatever passes will be the most convoluted bill in history.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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