Obamacare Myths

By Jim McVeagh 24/03/2010


Unfortunately, I have been too busy to comment on Obama’s “historic” healthcare bill, up until now. Somehow, congratulating Obama on his first real achievement seems somewhat hypocritical, considering I think the bill is the usual socialist mix of paternalistic pseudo-concern and a distressing disregard of both taxpayer’s pockets and obvious consequences. The fight to reverse this bill is likely to be more interesting than the one that forced it through to Obama’s desk. It will hinge on Republicans taking back control of both houses in November and reversing the bill while the new taxes are kicking in and hurting, but the new benefits are not yet on line. Reversing this bill once the benefits have kicked in will be, of course, politically impossible.

In the fight to destroy this bill and replace it with something more sensible, Republicans will need to dispel some of the myths that are currently circulating about Obamacare. Myths such as:

1. “This is a victory for the American People!.

I  do not believe I am the only person who finds this paternalistic drivel distasteful and offensive. Setting aside the impropriety of labeling a trillion dollar increase in taxation as a “victory”, it seems to have escaped Mr. Obama that not a single, solitary Republican voted for his bill. Seeing as the Republicans represent either a large minority or a small majority (depending on whose poll you are observing), the very fact that not one of their representatives decided to vote for Obamacare should give Mr. Obama reason to pause and consider, rather than to gloat. He has just trampled over a significant number of his fellow Americans – hardly a victory except in the strict civil-war sense. In fact, if the Republicans are right, and the majority of Americans do not like this bill, then the correct word for this is not victory but tyranny and the bouncing celebrations of “democracy” made by the US media ring hollow indeed. Admittedly, the latest Gallup poll indicates that Americans may favour the bill – though it is likely that this percentage will drop rapidly as some of the less palatable consequences trickle through to people’s consciousness.

2. “The Healthcare bill will trim the deficit by $138 billion“.

It is a truism that governments, the world over, see taxpayers as a magic, inexhaustible siphon of money. Having said that, It takes a special sort of idiot, not unlike the Congressional Budget Office, to label a trillion dollar increase in taxes as something that will “reduce the deficit”. Let us be clear here, the proper name for a budget surplus is overtaxation and it is not a good thing. The only thing that will reduce the deficit is reducing government spending. Like that will happen.

What is really happening here is that Mr. Obama is introducing alarming taxes (including a very alarming tax on passive income) in order to provide increased state-subsidized healthcare. New Zealanders should recognise this scenario instantly. Mr Michael “The Cupboard is Bare” Cullen from our previous bunch of thieves government did precisely this in 1999, increasing the top tax rate from 33% to 39%, ostensibly to pay for increased health care. A decade later that rate is only slowly drifting downwards and healthcare is considerably worse. In the meantime Mr. Cullen apparently managed to fritter squirrel away nearly a decade of surpluses (AKA excessive taxation).

Unfortunately, the US is not going to be nearly as fortunate. It is massively unlikely that Obamacare will remain in the $940 billion budget that has been prepared for it. This is a projection (guess) for a decade made by people who could not foresee the financial meltdown 18 months before it happened, despite screamingly obvious warnings. One thing I can guarantee, though, is that the bill will certainly be much, much higher than forecast. The only prediction I would care to make in planning healthcare is that people will access more services, and more expensive services, than you can anticipate. This is why a doubling of New Zealand’s health budget in the past decade has made absolutely no impression on access to healthcare.

3. “Only the rich will be taxed“.

Obama now wishes to take 3.8% of the investment income of all those whose 401K managed to survive the financial meltdown and provides an income in excess of $200,000 dollars. In addition households earning over 200K (individuals) or  250K (joint) will be taxed up to 2%. AND they will have to pay a 40% tax premium on any decent healthcare plan (“cadillac” plans – in the terms of the envious). The elderly are not happy about this (understandably) but the young apparently have not yet realised that, in 20 years time, these extra taxes will apply to nearly all of them. They will be richer than they are now (or, at least, have more inflated money) and inflationary pressures will make it all but impossible to adjust the tax thresholds (healthcare will be more expensive too – and typically at double the inflation rate).

But there are immediate effects too. Many middle income earners have these so-called “cadillac” plans which are now likely to become artificially unaffordable, forcing them to take lesser plans (and reducing the tax take that pays for this hare-brained scheme). Insurance companies will now have no choice but to take people with pre-existing conditions and will not be able to load these premiums. Mr. Middle America will therefore have to pay for this in the form of increased premiums to his healthcare plan (including his not-so-cadillac plan). Alternatively, he could partake of medicare (should he qualify) and join medicare’s rapidly shrinking pool of benefits. Welcome to the wonderful world of state-controlled health, Middle Americans.

4. “Universal Healthcare by 2014“.

Not really. The majority of states will follow Virginia and Idaho in legislating against Obamacare’s provision for fining people for not having healthcare insurance by 2014. Many young and many wealthy Americans do not wish to insure themselves. The former have very low risk and the latter can afford to pay directly for healthcare. Certain very low income groups will still not be able to afford healthcare insurance at all. Medicare benefits will be substantially reduced by 2014 in order to make the Obamacare package even remotely affordable. Extending coverage to 95% of Americans is extremely ambitious and many, many Americans will still have inadequate medical coverage, even on medicare plans.

The Bottom Line:

Good general health insurance will be rapidly forced out of the market, leaving only niche products and Medicare. Middle income Americans will find their choice of health plans to be massively curtailed and substantially more expensive (barring medicare itself). Medicare will offer seriously curtailed benefits and very little choice of doctor or hospital. Expect people to die in the multiple cracks in the system that will open up.  The next time the Democrats are back in power, they will almost certainly try to advance a state health agenda. By this time there may be little will in the US to stop them.

Oh, and the feminists should be happy. State-funded abortions are a virtual certainty.

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