THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Douglas Holtz-Eakin

All’s not fair in health reform bills

By Douglas Holtz-Eakin
December 10, 2009

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

  • E-mail|
  • Print|
  • Reprints|
  • |
Text size +

HEALTH CARE REFORM has been cloaked in an aura of moral ascent. President Obama has called it a “core ethical and moral obligation.’’ House Speaker Nancy Pelosi introduced her bill by saying, “We also have a moral responsibility to pass health insurance reform and we will do so this year.’’ And Senate majority leader Harry Reid has opined that “health care is a moral issue.’’

Strong words on ethics and fairness. But the actual bills are unimaginably unfair. For example, a centerpiece of the Senate proposal promises “low-income’’ families (between 100 and 400 percent of poverty) that the fraction of their income devoted to health insurance will be capped. The cap would start at 2.8 percent and rise to 9.8 percent for families between 300 and 400 percent of the poverty line.

Ignore for a moment that the bill promises this magic for a family making $88,200 but not $88,201, the income at which the cap is lifted. (How fair is that?). Instead, focus on Jane, a primary breadwinner making $48,000 (in 2016) to support her family of four. If Jane is offered insurance by her employer that meets the test, she must accept it or pay a fine. That means Jane ends up paying for the entire cost of, say, a $14,100 policy, according to some economists. They say she pays the premiums out of pocket and the remainder indirectly because employers offer reduced paychecks to offset the cost of their share of health insurance.

Now, meet Julie, who also makes $48,000 and is not offered insurance at her job. Julie heads to the newly created exchange to purchase the same policy. But it costs her only $5,300. The rest - about $9,000 - comes from federal subsidies.

Fair?

As health care analyst James Capretta has pointed out, in 2008 there were 127 million Americans younger than 65 who fell in the range of 100 to 400 percent of the federal poverty line. But to keep the cost down, the bill showers subsidies on only a favored few Julies. The Congressional Budget Office estimates that only 18 million people will be getting newly subsidized insurance in 2017. The vast majority of low and moderate wage Americans - more than 85 percent - would be like Jane. All they would get under the Reid bill is the threat of a new tax if they fail to sign up with their employer plan. It will not take long for them to catch on to this basic inequity and begin raising political heat.

Of course, it’s also predictable what will happen next. In the interest of fairness, Congress will rush to expand insurance subsidies to everyone. Such is the history of entitlement programs. They always grow, bring in more people, and never shrink. And having expanded the program, Congress will congratulate itself on, yet again, addressing an unconscionable social ill - never mind that it was of Congress’ own making.

The Reid bill is already a fiscal train wreck thinly disguised by every budget gimmick in the Democratic repertoire. The taxes start in 2010, but the entitlement in 2014. Doctors’ Medicare fees are presumed to fall by more than 20 percent beginning in 2011. Hospitals and other providers would get less than inflation increases in their annual payment updates - forever. None of these assumptions stand up to the slightest scrutiny. And when the entire middle class gets on the subsidy gravy train, federal costs will soar.

Who will pay for all of this? Our children and grandchildren. They will be left to pay a debt burden of incalculable proportions.

Fair? Moral? Try explaining that to the next generation.

To add insult to injury, Reid’s bill counts on forcing young, healthy Americans into the insurance pool to offset the costs of the older and less healthy who will flock to guaranteed and ultimately subsidized insurance. In effect, there will be a massive transfer from the young to the old.

Fair?

Draping health care reform in a mantle of moral imperatives does not disguise the basic facts. The actual bills in the House and Senate are not real reform - they do not lead to quality care at lower costs. The actual bills are not vehicles to greater choice and competition for those seeking insurance. And they are not fair.

Douglas Holtz-Eakin, former director of the Congressional Budget Office, is a fellow at the Manhattan Institute.

More opinions

Find the latest columns from: