Wednesday, March 24, 2010

How to Bankrupt a Nation

It's classic liberal illogic -- if current expenditures do not solve the problem, spend more, lots more.

Now, Can We Have Health-Care Reform? ObamaCare doubles down on a failing system.

A certain kind of person—we get emails from them all the time—understands exactly nothing about the health-care debate, but thinks they know who the villain is: the insurance industry.

Barack Obama is not one of them. In the desperate hours he played to public ignorance. But from the beginning, the industry was his ally because he set out to solve its biggest problem—which is not the same as America's biggest problem.

We'll let Angela Braly, CEO of insurer WellPoint, take the story from here. She was recently hauled before Congress to justify her company's proposed 39% rate hike in California. She explained the source was two-fold: rising medical costs and healthier customers dropping their coverage, forcing the sick to pick up the tab.

Now this sounds like two problems, but for WellPoint and other insurers it's really only one problem. Once everyone is required by government mandate to buy insurance, the industry's survival is no longer threatened: It can just pass its skyrocketing costs along to customers. Once customers can no longer refuse to buy the industry's product, the problem of costs won't be fixed, but it no longer is the insurance industry's problem.

There, in that one sentence, we give you the failure of ObamaCare, the failure of the congressional health-care debate, the failure of health-care politics in this country.

Health insurers, and indeed Corporate America as a whole, are like monkeys who are caught by staking a glass jar to the ground with a shiny trinket inside. They won't let go so they can't get their hands out of the jar. That trinket is the ruinous and regressive $250 billion-a-year tax benefit for employer-provided insurance.

Corporate America isn't brave enough to argue against a direct subsidy to its employment costs, no matter how perverse its impact in insulating consumers from the true cost of their health care choices. Insurers are not brave enough to say: Give us a tax code that lets us go back to being insurers rather than a tax laundromat for the middle class's health-care spending.

Almost any bill would have been worth having that fundamentally fixed this tax distortion, regardless of its other elements.

We say this because any bill, including the one signed by the president yesterday, will be revisited many times in the future. Millions of pages of rules will be written by regulators before we see how it really works. Congress itself will return in predictable ways: It will reverse the proposed Medicare cuts that created ObamaCare's illusion of fiscal probity. It will tighten the mandate that requires insurers to cover the sick at favorable prices. It will not tighten the requirement that the young and healthy buy insurance at prices that subsidize the old and unhealthy.

More and more tax money will have to be found to keep the jalopy on the road. More and more administrative controls on medicine will attempt vainly to keep the jalopy from bankrupting the nation.

Under the law just signed, employers have even more incentive than they did yesterday to lavish excessive health insurance on their high-end employees. They have less incentive to cover low-end workers, or even hire them.

For the young, healthy or anyone not stumbling into a giant tax handout, buying insurance at the inflated prices available in the marketplace would be an even crazier financial decision today than it was yesterday—because now you can wait and buy it when you're sick.

For insurers, the check is in the mail: So watered down is the individual mandate that it must accelerate the industry's death spiral if not for the massive subsidies the government now has obliged itself to provide to keep the industry afloat and allow insurers to continue scalping their 15% off the top for serving as gatekeeper to a tax loophole.

When all is said and done, with unerring accuracy, ObamaCare has ended up doubling down on the system's existing perversities. The one thing it doesn't do (though it would be perfectly consistent with the Democratic goal of universal access) is incentivize a health-care marketplace based on competition in price and quality.

A world-class hospital in India does heart surgery the equal of any heart surgery in America, but does so at one-tenth the cost (and increasingly attracts a world-wide clientele). The reason is not what you think: low-paid doctors and nurses. The reason is that competition works in medicine as it does in everything else when the patient cares about getting value for money. This is the great low-hanging fruit of health-care reform. It continues to hang.

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