Retirees Are the Third Victims of Obamacare

We've already identified kids and low-income workers as groups that are being hurt by the new scheme for government-run healthcare. Now we can add retirees to the list. Gee, I wonder what happened to that promise about being able to keep your existing health plan? Here's an excerpt from a story in the Wall Street Journal.

3M Co. confirmed it would eventually stop offering its health-insurance plan to retirees, citing the federal health overhaul as a factor. The changes won't start to phase in until 2013. But they show how companies are beginning to respond to the new law... 3M illustrates that others may not opt to retain such plans over the next few years... The company didn't specify how many workers would be impacted. It currently has 23,000 U.S. retirees. ...Sen. Charles Grassley, an Iowa Republican, said that "for all the employees who were promised they'd be able to keep their current benefits after the health-care law passed, I'm worried that the recent changes we've heard about...are just the beginning."

Low-Income Workers Are the Second Victims of Obamacare

This blog already has noted that Obamacare has crippled the market for "kids only" health insurance policies. Unsurprisingly, that is just the beginning of the bad news. The latest development is that health policies designed to provide insurance to low-income workers may no longer be economically feasible. The Wall Street Journal comments.

Among President Obama's core health-care promises was that Americans can keep their current coverage if they like it. Among the reasons that a new ObamaCare squall blows in every other day is that this claim simply is not true, as people are discovering. The latest fracas was incited by Janet Adamy's scoop in the Journal this week that McDonald's Corp. may be forced to cancel its current coverage for 29,500 employees as a result of ObamaCare. McDonald's told Health and Human Services regulators that new mandates will make its plans "economically prohibitive" and cause "a huge disruption" unless it gets a waiver. ...The entire philosophical and policy architecture of ObamaCare is explicitly designed to standardize health benefits and how those benefits should be paid for. Those choices and tradeoffs will be made for everyone by Ms. Sebelius's regulators. ...Around 2.5 million consumers are covered by "mini-med" policies, most of them concentrated in low-wage industries like fast food, hospitality and retail that have large numbers of part-time or temporary workers. In the case of the restaurants, 75% of the workforce turns over every year and nearly half are under age 25. Mini-med plans are a temporary stopgap for businesses that have low margins and face high labor and health costs. But Democrats hate mini-med and other skinny-benefit plans, calling them "underinsurance." ObamaCare is meant to run them out of the market by mandating benefits, eliminating coverage caps and certain technical rules about how premiums must be spent. ...In other words, the choice is between relatively affordable coverage that isn't as generous as Democrats think it should be and dumping coverage entirely. McDonald's may eventually offer the high-cost plans that Ms. Sebelius favors, or get its waiver, but many of its less profitable or smaller competitors won't. While subsidized ObamaCare options will be available in 2014, those costs will merely be transferred to taxpayers.

Kids Are the First Victims of Obamacare

In the real world, rational people know that companies will stop selling products if they are forced to lose money. In the political world, though, common sense doesn't matter. Or at least it ranks far below other considerations, such as power, polling, fundraising, and spite. If you think I'm being too harsh, just look at what's happened since Obamacare. As the Wall Street Journal notes, the "child-only" insurance market has been decimated by a new law that allows parents to wait until children get sick before buying insurance. Needless to say, that is an open invitation to lose money, and no business (other than crony capitalism entities such as Fannie Mae and Freddie Mac) exists to throw away shareholder funds. Obama, Pelosi, and Reid probably think this is a good development, however, since they can demagogue against "greedy" insurance companies and claim that government should fully take over the health care system.

This week, almost every big insurance company in America—including Aetna, Cigna, UnitedHealth Group, WellPoint, Humana, Coventry, some Blue Cross Blue Shield affiliates and others—stopped writing "child-only" policies in the individual market. This is a niche product that parents typically buy when their employer health plan doesn't cover dependents. The exact plans vary company to company and state to state, and the insurers will still offer family policies and make good on the child-only policies that they've already sold. But most won't be writing new ones. In other words, for-profit businesses are refusing to sell products that consumers want to buy. Exact data aren't available, but the child-only market covers roughly a million kids a year. The reason is a regulation that President Obama mentions every time he talks about health care, as he did recently in Falls Church, Virginia: "Children who have pre-existing conditions are going to be covered." Insurers are now required to cover everyone under 19 when their parents apply for coverage, regardless of health status. The problem with this kind of "guaranteed issue" is that it encourages people, in this case parents, to wait until their kids are sick before seeking coverage. This drives up premiums for the healthy, encouraging consumers in turn to drop coverage, and eventually it leads to what's known as a "death spiral," the industry term for an insurer with rapidly increasing costs as a result of population changes in its coverage pool. The child-only market is a particular death-spiral risk because it is so small and unstable, which explains why so many insurers left in a stroke. The collapse of the child-only market is a preview of what will happen when guaranteed issue and the rest of ObamaCare comes on line in 2014 for adults, except then insurers will have nowhere to flee. Exiting the market will mean going out of business.

Get the Government Out of the Business of Embryonic Stem-Cell Research

As is so often the case, Jeff Jacoby of the Boston Globe hits the nail on the head, asking why taxpayers should be forced to fund embryonic stem-cell research. The moral issues in this debate are very important, to be sure, but Jacoby's column takes a different approach and uses economic arguments to thoroughly debunk those who claimed that taxpayer funding is the only hope for people suffering from a wide range of ailments. After all, if stem-cell research is expected to yield medical miracles, it should go without saying that the private sector will jump in with both feet. Which is exactly what has happened.

James Thomson, an embryologist at the University of Wisconsin, cultivated the first embryonic stem cell lines in 1998. By then the prohibition on using federal funds for scientific research in which human embryos are destroyed was already on the books; President Bill Clinton had signed it nearly three years earlier. So how did Thomson secure a government grant to finance his landmark achievement? He didn’t. His work was funded by the Geron Corporation, a California biotechnology company that develops treatments for cancer, spinal cord injuries, and degenerative diseases. ...this a good moment to ask a threshold question: Why should the federal government be funding controversial medical research in the first place? As Thomson’s 1998 discovery proved, pathbreaking accomplishments in stem-cell science are possible even when the government isn’t footing the bill. That was no anomaly. If the feds didn’t fund the search for embryonic stem-cell therapies, the private sector would. ...For-profit corporations and their shareholders aren’t the only source of private-sector stem-cell funding. The Washington Post reported in 2006 on the private philanthropy that was building new stem-cell labs in academia. “Los Angeles philanthropist Eli Broad gave $25 million to the University of Southern California for a stem cell institute, sound-technology pioneer Ray Dolby gave $16 million to the University of California at San Francisco, and local donors are contributing to a $75 million expansion at the University of California at Davis. . . Early this year, New York Mayor Michael R. Bloomberg quietly donated $100 million to Johns Hopkins University, largely for stem-cell research.’’ ...Imagine those that would do so if the federal government stopped underwriting research that so many taxpayers find problematic. Douglas Melton, the co-director of Harvard’s Stem Cell Institute, told the Boston Globe last week that private support is “the only durable and consistent source’’ of funding for embryonic stem-cell research. He’s right. Medical research would not wither away if the government took a back seat to the private sector. In this as in so many other areas, perhaps it's time to re-think Washington’s role.

Creating Jobs: The Real World vs. Obamanomics

Michael Fleischer is a brave man. He exposed himself and his company to retribution and attack by explaining how Obama's policies are discouraging job creation in a column for the Wall Street Journal. Let's hope he doesn't mysteriously get audited, because he provides valuable real-world insight into how taxes and other forms of government intervention hinder job creation (and reduce take-home pay for those lucky enough to still have jobs).

Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally. Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security. When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year. Because my company has been conscripted by the government and forced to serve as a tax collector, we have lost control of a big chunk of our cost structure. Tax increases, whether cloaked as changes in unemployment or disability insurance, Medicare increases or in any other form can dramatically alter our financial situation. With government spending and deficits growing as fast as they have been, you know that more tax increases are coming—for my company, and even for Sally too. Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance. Now, adding to the insanity, there is ObamaCare. Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%. To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences. And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment. A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.

Government-Created Third-Party Payer Is the Number One Problem in America's Health Care System

John Goodman of NCPA has a great article about how the current healthcare system is heavily distorted by government policies that result in people making decision with other people's money (or at least what they perceive as other people's money). The excerpt below is a good summary of John's key points, but I'll add a couple of rhetorical questions. What do you think would happen if government created a tax break that made it attractive to expand auto insurance to cover the cost of oil changes and trips to the gas station? Would that make that market more efficient or less efficient? Would Jiffy Lube and Sunoco charge higher prices or lower prices? What would happen to administrative costs?

Almost everyone believes there is an enormous amount of waste and inefficiency in health care. But why is that? In a normal market, wherever there is waste, entrepreneurs are likely to be in hot pursuit — figuring out ways to profit from its elimination by cost-reducing, quality-enhancing innovations. Why isn’t this happening in health care? As it turns out, there is a lot of innovation here. But all too often, it’s the wrong kind. There has been an enormous amount of innovation in the medical marketplace regarding the organization and financing of care. And wherever health insurers are paying the bills (almost 90 percent of the market) it has been of two forms: (1) helping the supply side of the market maximize against third-party reimbursement formulas, or (2) helping the third-party payers minimize what they pay out. Of course, these developments have only a tangential relationship to the quality of care patients receive or its efficient delivery. The tiny sliver of the market (less than 10 percent) where patients pay out of pocket has also been teeming with entrepreneurial activity. In this area, however, the entrepreneurs have been lowering cost and raising quality — what most of us wish would happen everywhere else. ...Wherever there is third-party payment, the goal of innovation is to produce more products that qualify for reimbursement, even if the effects on patient outcomes are only marginal. Wherever there is no third-party reimbursement, innovators are focused on ways to lower cost and raise quality. Take cosmetic surgery. Over the past two decades there has been an enormous amount of innovation in the field — all of the cost-lowering, quality-raising variety. That explains why the volume of cosmetic surgeries grew six-fold over the past 20 years, while the real price declined by more than one-third. Similarly, there has been remarkable innovation in LASIK surgery — another area where third-party payers are not. Yet the real price of LASIK surgery has declined by 25 percent over the past decade. The same principle can be seen at work in the international marketplace. For example, India has a potentially huge market for medical care. But 80 percent of health care spending in that country is private and there is very little health insurance. So some of the companies that make expensive technology for the developed world are now finding ways to produce the same services for a fraction of the price. GE Healthcare, for example, has introduced a portable electrocardiogram machine into the Indian market that will perform the heart exam for 20 cents (compared to a normal price of $50). Siemens (another maker of high-end, expensive equipment) has built mobile diagnostics units for the Indian market with X-ray, ultrasound and pathology systems.

Great Moments in Government-Run Healthcare

While it will be nice to say "I told you so" when Obamacare leads to bad results in America, I would much prefer to avoid having stories like this appear in the American press. But in the United Kingdom, where government controls more than 90 percent of the healthcare system (as opposed to my rough guess of less than 70 percent in America), these kinds of disasters are becoming increasingly common. Here's a blurb from a story in the UK-based Telegraph.

Women in labour have been forced to wait while epidural equipment was borrowed from other hospitals, while other patients have been denied chest drains and radiology supplies, according to doctors at South London Healthcare Trust. Minutes of a meeting between medical staff and the trust’s chief executive say “cash flow” problems at the trust which has a £50 million deficit, mean vital equipment is regularly not ordered. A separate letter sent to managers of the trust, one of the largest in the country, says consultants have been misled into carrying out operations when it was not safe to go ahead because of bed shortages. ...Doctors told managers “again and again” that consultants were unable to know that equipment was missing until the last item had been used, when their patient was already lying on the table, according to the minutes of June 16 meeting. The document states that Chris Streather, the trust’s chief executive said the situation had improved to the extent that the trust could now pay some of its bills, but that he could not promise that the problem would not recur. It describes “significant risks” to patient safety because of shortages of beds, and “chaotic” failures dealing with such crises at the trust, which also runs Queen Mary’s Hospital in Sidcup, in Kent, and Queen Elizabeth Hospital in Woolwich, London, and NHS units in Orpington and Beckenham, in Kent. Patients affected include a woman who had undergone major cancer surgery who could not be found a bed.

Abortion, Third-Party Payer, and the Cost of Health Care

A major problem with America's healthcare system, both before and after Obamacare, is the fact that consumers very rarely spend their own money when obtaining healthcare. Known as third-party payer, this problem exists in part because government directly finances almost 50 percent of healthcare expenditures. But even a majority of supposedly private healthcare spending is financed by employer-provided policies that are heavily distorted by a preference in the tax code that encourages insurance payments even for routine expenses. According to government data, only 12 percent of healthcare costs are financed directly by consumers. And since consumers almost always are buying healthcare with somebody else's money, it should come as no surprise that this system results in rising costs and inefficiency. This is why repealing Obamacare is just the first step that is needed if policymakers genuinely want to restore a free market healthcare system (all of which is explained in this 4-minute video).

Unfortunately, many people think that market forces don't work in the healthcare system and that costs will always rise faster than prices for other goods and services. There are a few examples showing that this is not true, and proponents of liberalization usually cite cosmetic surgery and laser-eye surgery as examples of treatments that generally are financed by out-of-pocket payments. Not surprisingly, prices for these treatments have been quite stable - particularly when increases in quality are added to the equation.

I just ran across another example, and this one could be important since it may resonate with those who normally are very suspicious of free markets. As the chart from the Alan Guttmacher Institute shows, the price of an abortion has been remarkably stable over the past 20-plus years. Let's connect the dots to make everything clear. Abortions generally are financed by out-of-pocket payments. People therefore have an incentive to shop carefully and get good value since they are spending their own money. And because market forces are allowed, the cost of abortions is stable. The logical conclusion to draw from this, of course, is that allowing market forces for other medical services will generate the same positive results in terms of cost and efficiency.


None of this analysis, by the way, implies that abortion is good or bad, or that it should be legal or illegal. The only lesson to be learned is that market forces control costs and promote efficiency and that more government spending and intervention exacerbate the third-party payer crisis.

Are Reporters for the New York Times Biased or Stupid?

The Obama Administration has decided to mandate that insurance companies provide dozens of tests to consumers at no charge. Any person with an IQ that is above room temperature understands, of course, that this doesn't mean there is no cost for the tests. It just means that the costs are borne indirectly, most likely in the form of higher premiums charged by insurance companies. Yet Robert Pear, a reporter for the New York Times, leads off his story by saying that the tests are now free and this will be beneficial for consumers. And at no point in the story does he mention any of the various - and unavoidable - effects of the new government mandate. The only logical conclusion is that he is either completely oblivious to indirect costs or that he is an opinion writer masking as a reporter because he wants to advance an ideological agenda. You choose.

The White House on Wednesday issued new rules requiring health insurance companies to provide free coverage for dozens of screenings, laboratory tests and other types of preventive care. The new requirements promise significant benefits for consumers — if they take advantage of the services that should now be more readily available and affordable. ...The rules will eliminate co-payments, deductibles and other charges for blood pressure, diabetes and cholesterol tests; many cancer screenings; routine vaccinations; prenatal care; and regular wellness visits for infants and children.

The Way Healthcare Should Function

This article from the Weekly Standard almost makes me want to cry with frustration. It shows how the healthcare system generally would function in the absence of government-imposed distortions such as Medicare, Medicaid, and (especially!) the tax loophole for employer-provided insurance. Sadly, Obamacare will push the system even further in the wrong direction. And when those bad results become obvious, I can safely predict politicians will blame the free market and use the mess as an excuse for even more government intervention. This is "Mitchell's Law": Bad policy begets more bad policy.

On a wall inside Dr. Brian Forrest’s medical office in a suburb of Raleigh, North Carolina, is something you won’t find in most doctors’ offices, a price list... Forrest doesn’t take insurance. If he did, the prices would be far higher and not nearly as transparent. He says listing prices up front is about trying to do business in a straightforward way, “like a Jiffy Lube.” Forrest’s practice, Access Healthcare, was born out of his frustration with the bureaucratic system run by major health care providers and insurance companies. His epiphany came about 10 years ago, as he was completing his family medicine residency at Wake Forest University. “I was basically being told I needed to see 30 patients a day every day, and that’s what we had to do,” he recalls, speaking with a soft drawl. He didn’t care for that pace, preferring to spend 45 minutes to an hour with each patient. ...Because he doesn’t have to file insurance forms, he only needs a single office assistant, and the low overhead allows him to charge less than other doctors. Occasionally, his charges wind up being less than just the co-pays for Medicare or private insurance. He’s negotiated deals with a lab company to reduce his patients’ costs for tests. The lab loves being paid on the spot for services rendered and allows Forrest to charge his patients $30, for example, for a prostate-cancer screening test that the company bills to an insurer at $184. “For specialists, cash in the hand is better than a bigger amount charged to insurance,” he says. He’s found other doctors happy to join in, such as a cardiologist who’s willing to give discounts of 80 to 90 percent to his patients if he’s paid cash up front. “The discovery I made was that by getting rid of administrative, bureaucratic hassles, I was able to do very well financially and at the same time have high patient satisfaction and good quality of care,” he says. Even more surprising, most of his patients are not wealthy. Half have no insurance, and another 15 percent are on Medicare. ...in recent months, he’s been flooded with inquiries from fellow doctors. “Since the health care reform bill passed, you wouldn’t believe the number of doctors who have said they’ve had it and want to operate outside the system,” he says.

Government Thuggery and Healthcare

Congressman Henry Waxman is one of the most odious statists in a town dominated by people who love big government. From his perch as Chairman of the Energy and Commerce Committee, this career politician played a big role in concocting Obamacare - including the costly provisions that will burden the business community and undermine job creation. So it is the height of chutpah that Waxman is now holding who hearings to browbeat companies that have acknowledged - as required by law - some of the burdens in the legislation that will affect their bottom line. Investor's Business Daily savages Waxman for this unseemly thuggery:

In legally mandated filings, AT&T reported that ObamaCare will cost it $1 billion. Deere & Co. reported $150 million in new costs. Caterpillar must cough up $100 million. 3M must pay another $90 million. AK Steel gets to fork over $31 million. Valero Energy will pay $30 million. There'll be more as other companies report anticipated costs to fulfill their requirements to inform shareholders. What it shows is a huge wave of costs rolling over the private sector to pay for this bill. It's the real cost of ObamaCare, a bill House Speaker Nancy Pelosi had touted daily as "paid for" in her pitch for Congressional votes. ...As a result of ObamaCare's changes, companies now can either pay for those costs — and lay off workers, hold off expansion or move abroad — or scrap their prescription drug programs altogether, dumping their retirees onto the federal government. Either way, the costs are "paid for" — but they've also just skyrocketed, thanks to ObamaCare. Instead of admitting the economic reality voters and companies have been warning Congress about, and maybe offering to read the bill next time, Waxman seeks to blame the very businesses the Democrats have just victimized. ...Now it's time to pay the piper, and Waxman doesn't want to pay. He has decided to haul the executives into yet another round of star chamber hearings to explain just why two and two make four. This is an implied threat to companies either to cook their books or face legal or political sanctions for embarrassing Congress by revealing the true impact of its health care bill on the private sector. It has its place with what Stalin did in Soviet Russia, denouncing farmers as hoarders after setting artificially low prices for crops, and what Hugo Chavez is doing today in Venezuela, dictating prices on raw goods and limiting access to money while penalizing companies for passing on those costs to customers.

Government Corruption Watch, Part III

George Orwell's Animal Farm is famous for showing how the revolutionary zeal of the animals begins to wane after they take over the farm and the slogan "All animals are equal" is eventually amended by adding "But some animals are more equal than others." The same is true for the American government. Investor's Business Daily recently opined about the corrupt favoritism shown by Obama's education secretary when he was in charge of Chicago's miserable government school system:

Education Secretary Arne Duncan taught us Orwell this week, showing how some are more equal than others with his VIP list for admission to Chicago's best schools. ...Duncan...didn't quite persuade that city's well-connected elites of the value of his reforms, given the number who sought placement in the district's better schools. Duncan insists it was just an appeals list on which parents could place kids who didn't make it into the schools they wanted. He says that he didn't do any lobbying for special placements. ...But that argument doesn't hold water, given that the list was kept secret from the public and Duncan's initials appeared on 50 placement appeals, along with those of his wife, his mother and other political insiders with the clout to decide who got onto the list. Duncan's staff also made calls to principals. So those initials wouldn't carry any weight now, would they? And if they meant nothing, why were they there at all? The Tribune, which broke the story, noted that parents have long suspected Chicago's public school system of being rigged in favor of the connected, based on experience. The paper found that at least one student placed on the VIP list by Duncan's pal, former Democratic U.S. Sen. Carol Moseley Braun, made it into an elite school with substandard admissions scores. ...Instead of taking on the unions, demanding performance, and shutting down bad schools, Duncan declared victory and permitted special placements to shield his friends from the impact of his liberal policies. Given the government takeovers in the private sector, it's a sign of a growing problem coming down the pipeline, of two-tier systems to distribute spoils. Special privileges for the cronies, slop for the middle class.

Special access for powerful insiders is inevitable when government has too much power, so Duncan's corrupt behavior is hardly surprising. James Taranto of the Wall Street Journal applies this lesson to healthcare and poses a very relevant question:

If you and Larry Summers both get sick and need a treatment that the Medicare Advisory Commission (dysphemistically known as the Death Panel) deems too expensive, what are the odds that you'll find a way to get it anyway and he won't? How about the other way around? In the Soviet Union, those privileged by political connections were called the nomenklatura. Here, we can call it the Obamaklatura.

Free-Market Organ Sales Would Save Lives

USA Today reports on a study showing that payments to donors would significantly increase the supply of kidneys available for transplant. Such a system potentially could save thousands of lives per year, so it is perplexing that statists are so viscerally opposed. The only interpretation I can come up with - which I admit is very uncharitable - is that they are willing to let people die because they are myopically fixated on equity. No system is acceptable, in their minds, unless it results in equal death rates by income class and equal kidney donations by income class. Or am I missing a more benign explanation?

Paying people for living kidney donations would increase the supply of the organs and would not result in a disproportionate number of poor donors, a study by researchers from the University of Pennsylvania and the Philadelphia Veterans Affairs Medical Center concludes. The study, published this month in the Annals of Internal Medicine, asked 342 participants whether they would donate a kidney with varying payments of $0, $10,000 and $100,000. The study called for a real-world test of a regulated payment system. ...Though it is illegal to buy or sell any organ in the USA, payments are accepted for those who become surrogate mothers, donate eggs or participate in clinical research, Halpern says. ...Last year, 6,475 people died while on the waiting list for an organ transplant, and 4,476 were waiting for a kidney transplant, according to the Organ Procurement and Transplantation Network, part of the Health and Human Services Administration. "There's no real reason why that model has to be continued," Halpern says of the current system. "There's nothing intrinsically unique about organ donation that requires it to be a truly altruistic act."

Americans Will Pay More and Get Less, but at Least Castro Is Happy with Obamacare

I actually think this it is unfair to highlight Fidel Castro's endorsement of Obamacare, but I'm in a grumpy mood because I've started a diet, so I'll simply twist the knife a bit by noting that we probably could improve American healthcare by imposing Cuban-style rationing. I imagine many of our obesity-related health problems would disappear if we were limited to one pound of beef and 12 eggs per month. Ah, the joy of socialism! Solidarity in malnutrition. But I better stop lest I give Obama some new ideas. Here's an excerpt from the AP report of Castro's endorsement:

Cuban revolutionary leader Fidel Castro on Thursday declared passage of American health care reform "a miracle" and a major victory for Obama's presidency, but couldn't help chide the United States for taking so long to enact what communist Cuba achieved decades ago. "We consider health reform to have been an important battle and a success of his (Obama's) government," Castro wrote in an essay published in state media... "It is really incredible that 234 years after the Declaration of Independence ... the government of that country has approved medical attention for the majority of its citizens, something that Cuba was able to do half a century ago," Castro wrote.

My Big Fat Greek Budget

Since we're already depressed by the enactment of Obamacare, we may as well wallow in misery by looking at some long-term budget numbers. The chart below, which is based on the Congressional Budget Office's long-run estimates, shows that federal government spending will climb to 45 percent of GDP if we believe CBO's more optimistic "baseline" estimate. If we prefer the less optimistic "alternative" estimate, the burden of federal government spending will climb to 67 percent of economic output. These dismal numbers are driven by two factors, an aging population and entitlement programs such as Medicare, Medicaid, and Social Security. For all intents and purposes, America is on a path to become a European-style welfare state.

If these numbers don't depress you enough, here are a couple of additional observations to push you over the edge. These CBO estimates were produced last year, so they don't count the cost of Obamacare. And as Michael Cannon repeatedly has observed, Obamacare will cost much more than the official estimates concocted by CBO. And speaking of estimates, the long-run numbers in the chart are almost certainly too optimistic since CBO's methodology naively assumes that a rising burden of government will have no negative impact on the economy's growth rate. Last but not least, the data above only measures federal spending. State and local government budgets will consume at least another 15 percent of GDP, so even using the optimistic baseline, total government spending will be about 60 percent of GDP, higher than every European nation, including France, Greece, and Sweden. And if we add state and local spending on top of the "alternative" baseline, then we're in uncharted territory where perhaps Cuba and North Korea would be the most appropriate analogies.

So what do we do? There's no sure-fire solution. Congressman Paul Ryan has a reform plan to reduce long-run federal spending to less than 20 percent of GDP. This "Roadmap" plan is excellent, though it is marred by the inclusion of a value-added tax. Bill Shipman of CarriageOaks Partners put forth a very interesting proposal in a Washington Times column to make the federal government rely on states for tax revenue. And I've been an avid proponent of tax competition as a strategy to curtail the greed of the political class since it is difficult to finance redistribution if labor and capital can escape to jurisdictions with better tax law. Any other suggestions?

Walter Williams Decimates Obamacare

The famous George Mason University economist, Walter Williams, correctly summarizes what it means to make healthcare a "right."

And he also dusts off that quaint document, long forgotten in Washington, called the U.S. Constitution.

The Not-Safe-for-Work Version of Obamacare

Click at your own risk (just in case any readers don't like R-rated humor).

Fulminating on CNBC: Obama's Plan Is Centrist...on the French Political Spectrum

I don't get to talk for the first three minutes, but I then kick the you-know-what out of Obama's statist healthcare scheme.

What Now? Four Guiding Principles for Health Care

So where do we go from here now that Obama has succeeded in pushing through a corrupt and bloated healthcare bill?

Let's start with some good news. This is not the end of the world. If this was 1920, Obamacare would be a paradigm-shifting expansion in the size and scope of Washington. But we do not have a free-market healthcare system today. Government already directly finances nearly one-half of all health expenditures, and the ostensibly private part of our healthcare system is immensely distorted by regulations and tax policy (particularly the exculsion of fringe benefits in the tax code).

We have deviated so far from a free market that only 12 percent of healthcare costs are paid for out-of-pocket by consumers. And health insurance, rather than being based on risk and protecting against catastrophic expenses, has morphed into a grossly inefficient form of pre-paid health care.

So what does this mean? The way to think of Obamacare is that we are shifting from a healthcare system 68 percent controlled/directed by government to one that (when all the bad policies are phased in) is 79 percent controlled/directed by government. Those numbers are just vague estimates, to be sure, but they underscore why Obamacare is just a continuation of a terrible trend, not a profound paradigm shift. Yes, it is very bad news. Yes, it will cost more than politicians claimed. Yes, it will reduce the quality of care. All those things are true, but we are going 79 mph in the wrong direction instead of 68 mph.

By the way, the 2008 elections did not make that much difference. Republicans often are just as bad as Democrats when it comes to feckless vote buying. Our healthcare system took a big step in the wrong direction with the passage of the Medicare prescription drug entitlement under Bush. This horrible piece of legislation had the support of almost all the congressional Republicans who were railing against Obamacare last night (where was John Boehner's "Hell no" speech in 2003?). And Senator McCain's healthcare plan would have expanded the role of government, so if he won (and then did one of his infamous "bipartisan" compromises) we probably would have wound up with a healthcare system 73 percent controlled/directed by government.

What matters now is our next steps. There is no magic formula, but we should be guided by these principles:

1. Promote genuine free market principles. The only way to fix healthcare is to restore the free market. That means going back to a system where people pay out-of-pocket for most healthcare and use insurance to protect against genuine risk and catastrophic expenses. The time has come to reduce the size and scope of government.

2. Say no to RINO-style compassionate conservatism. When Republicans do the wrong thing, they are usually motivated by political fear ("if we don't pass a new prescription drug entitlement, the Democrats will accuse us of not caring about seniors"). This approach ultimately fails. The Democrats take power and have an easier time expanding the burden of government because Republicans have already done much of the work for them.

3. Change Medicare into a system based on personal health accounts and shift all means-tested spending to the states. Congressman Paul Ryan's Roadmpap plan has some good components, but check out Michael Cannon's work at Cato to get the details.

4. Adopt a flat tax. There are many reasons to implement real tax reform, but the flat tax is ideal from a healthcare perspective since it gets rid of the healthcare exclusion in the tax code as part of a shift to a tax system with low rates and no double taxation.

A Proposal that Actually Would Improve Health Care and Lower Costs

While the politicians in Washington are poised to undermine the healthcare system with additional layers of taxes, spending, and regulation, Steven Chapman proposes to use markets to improve a part of the system that is suffering from a punitive form of price controls. Orgain donors are allowed zero compensation for their sacrifice. This policy - driven by an ideological impulse against markets and voluntary exchange - directly leads to the death of thousands of people each year

Consider the economics of an organ transplant. Everyone involved gets something of value. The doctors and nurses are paid. The hospital receives money. The organ recipient gets something that will save her life. ...since 1984, it has been illegal to pay someone to surrender a body part, even posthumously. Campaigns to browbeat Americans into signing organ donor cards, however, haven't sufficed. The transplant organ shortage has grown. Since 1989, kidney donations have doubled. But the number of patients in need of them is five times higher than it was then. Last year, 4,456 people died while waiting for a kidney transplant. The story with livers follows the same line. Among the losers from this guaranteed-shortage policy are victims of cancer and other lethal diseases who need bone marrow transplants. Some of them have filed a lawsuit, which goes to court in Los Angeles this week, asking to be allowed to offer compensation to donors -- which is now a felony punishable by five years in prison. ...The ban is particularly indefensible in this realm. Someone giving up a kidney loses an important organ for good. But bone marrow donors produce new marrow to replace what is lost. Given that it's legal under federal law to buy and sell blood and sperm, why is bone marrow treated differently? ...If Americans could be paid for bone marrow, more would step forward. Nobel Prize-winning economist Gary Becker of the University of Chicago, in a 2007 paper written with Julio Jorge Elias of the State University of New York at Buffalo, figured the kidney shortage could be eliminated for $15,000 per organ.