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.

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.

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.

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.

Only Mark Steyn Could (Appropriately) Combine Pornography and Healthcare

Very funny column, but the underlying message is quite depressing:

Last Thursday, the California Occupational Safety and Health Standards Board voted to set up a committee to examine whether condoms should be required on all pornographic film shoots. California has run out of money, but it hasn't yet run out of things to regulate. For a government regulatory hearing, the testimony was livelier than usual. Porn star Madelyne Hernandez recalled an especially grueling scene in which she had been obliged to have sex with 75 men. The bureaucrats nodded thoughtfully, no doubt contemplating another languorous 18-month committee assignment looking into capping the number of group-sex participants at 60 per scene. The committee will also make recommendations on whether the "adult" movie industry should be subject to the same regulatory regime and hygiene procedures as hospitals and doctors' surgeries. ...If you've ever been in the filthy wards of Britain's National Health Service, it may make more sense after the passage of ObamaCare to require hospitals to bring themselves up to the same hygiene standards as the average Bangkok porn shoot. ...Hard to believe there will be California bureaucrats looking forward to early retirement on gold-plated pensions who'll be getting home, sinking into the La-Z-Boy and complaining to the missus about a tough day at the office working on the permits for "Debbie Does The Fresno OSHA Office." Meanwhile, ObamaCare will result in the creation of at least 16,500 new jobs. Doctors? Nurses? Ha! Dream on, suckers. That's 16,500 new IRS agents, who'll be needed to check whether you — yes, you, Mr. and Mrs. Hopendope of 27 Hopeychangey Gardens — comply with the 15 tax increases and dozens of new federal mandates about to be "deemed" into existence. ...Obama is government, and government is Obama. That's all he knows and all he's ever known. You elected to the highest office in the land a man who's never run a business or created wealth or made a payroll, and for his entire adult life has hung out with guys who've demonized such grubby activities. Obama's Cabinet has less experience of private business than any in the last century. What it knows is government, and government's default mode is to grow, and grow. Look around you, take it all in. From now on, it gets worse. If you have kids, they'll live in smaller homes, drive smaller cars, live smaller lives. If you don't have kids, you better hope your neighbors do, because someone needs to spawn a working population large enough to pay for the unsustainable entitlements the Obama party has suckered you into thinking you're entitled to.

On Healthcare, Let's Laugh Before We Cry

With the Intrade.com market now showing that the odds of Obamacare passing have jumped to more than 80 percent, let's at least enjoy some gallows humor. Here's an amusing pic I saw linked on Instapundit.

Obamacare Means Dramatic Expansion of IRS Power

I know I promised extra political humor this week, but here's some extra policy pain. Not only does government-run healthcare mean more spending, more regulation,and more taxes, but it also means more power for the internal revenue service. A new report reveals that the legislation makes the IRS the chief enforcer of the new scheme:

If H.R. 3590, the Senate Democrats’ health care bill, is enacted, which could happen as early as this week, Democrats will have vastly expanded the responsibilities of the Internal Revenue Service (IRS) and fundamentally altered the relationship between the IRS and taxpayers. Specifically, this report examines the Individual Mandate Tax (IMT) proposed in the Democrats’ health care legislation. Under this provision, Democrats make the IRS the chief enforcer for a new government-run health insurance system. One of the most troubling aspects of this new IRS authority is the newly granted power to collect additional taxes from Americans whose health insurance coverage is deemed to be insufficient to meet the definition of minimum coverage, as defined by federal bureaucrats, required to be purchased. Disturbingly, the IRS would be in charge of verifying that every American taxpayer has obtained acceptable health coverage for every month of the year. If the IRS determines that a taxpayer lacks acceptable insurance for even a single month, then the IRS would impose a new tax on that taxpayer, even auditing the taxpayer and could assess interest and penalties on top of the tax. This is an unprecedented new role for the IRS – one that will inject the IRS even further into the lives of American families. This report examines the details of the IRS’s new powers and how this federal bureaucracy will scrutinize and exercise its enhanced authority over Americans. Key findings include: IRS agents verify if you have “acceptable” health care coverage; IRS has the authority to fine you up to $2,250 or 2 percent of your income (whichever is greater) for failure to prove that you have purchased “minimum essential coverage”; IRS can confiscate your tax refund; IRS audits are likely to increase; IRS will need up to $10 billion to administer the new health care program this decade; IRS may need to hire as many as 16,500 additional auditors, agents and other employees to investigate and collect billions in new taxes from Americans; and; Nearly half of all these new individual mandate taxes will be paid by Americans earning less than 300 percent of poverty ($66,150 for a family of four).

Lies, Damned Lies, and CBO Estimates

Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President's proposal to further expand the federal government's control over the healthcare system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to "drive down red ink":

The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade - and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.

My Cato Institute colleague Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong (see first video below), in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, healthcare providers, state and local politicians, etc) will modify their behavior to become eligible for other people's money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses (see second video below).

If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That's good for Washington and bad for the country.

The Joy of Government-Run Healthcare

I don't think the number of doctors leaving the profession will come anywhere close to this level, but polling data reported by the New England Journal of Medicine is another indication of the dangers of letting politicians get even more power over the health care system. The politicians will still get quality care, but average Americans will find that going to a doctor or hospital is more akin to a visit to the Post Office or DMV:

46.3% of primary care physicians (family medicine and internal medicine) feel that the passing of health reform will either force them out of medicine or make them want to leave medicine.

To add to the grim news, Intrade.com shows that chances of passage are now up to 75 percent. I'll try to find something humorous to post later today to compensate for this grim news.