Health Care Reform, No Miracle Cure
Politics / Healthcare Sector Sep 11, 2009 - 04:40 PM GMTBy: Jennifer_Barry
With all the problems in the U.S. economy - high unemployment, rising foreclosures, surging bank failures - one would think that Congress would focus on resolving these crises. Perhaps the legislators believe the “green shoots” spin, because they have started major new initiatives, like the cap-and-trade bill, and now health care reform.
When the health care bill (H.R. 3200) was introduced into the House of Representatives, it provoked a firestorm of controversy. Considering the emotions engendered by this issue during President Clinton’s first term, this shouldn’t have been a surprise. While most Americans would agree that the medical system needs some changes, - a 2004 survey indicates that only 25% were “very” or “somewhat” satisfied with "the availability of affordable healthcare" - the Democratic leadership tried to rush the massive 1,018 page bill to a vote before the August recess. Its huge size would have prevented most legislators the opportunity to read it or the public to comment on it before voting.
Fortunately the outcry by the public has delayed the passage of the proposed law. Despite the spin that protesters are paid agitators or “Astroturf,” the reality is that most are concerned citizens. Democratic members of Congress have been surprised by the angry reaction of constituents, many of whom voted for them.
Although Americans pay a high price for medical care - about twice the amount in Canada - the U.S. is lagging other industrialized nations in many areas. Life expectancy is 35th in the world, behind Israel and Bosnia. Infant mortality is ranked 46, worse than Slovenia and Taiwan. About 100,000 U.S. patients per year pick up a largely preventable infection in a hospital which causes or contributes to their death. Almost 200,000 Americans die from blood clots after surgery or hospitalization. The system is riddled with inefficiency, as the U.S. spends almost four times as much on administrative costs as France does, and more than twice the UK level. The price of health care rises every year, much faster than the official inflation rate.
So how did the U.S. get the medical system it has today? It was created almost by accident during World War II when wages were frozen and employers offered comprehensive health benefits in order to compete for talented workers. Even so, health insurance was rare for over a decade. Then in 1954, workplace contributions to medical plans were made tax deductible, and this preferential treatment made employer-based plans cheaper than paying out of pocket.
Medicine is one of the only areas where insurance is expected to cover basic, predictable costs. Car insurance doesn’t pay for gas, and homeowner’s insurance doesn’t cover the water bill, for example.
One of the most disturbing parts of the health care debate is the level of partisan propaganda that has reached a hysterical pitch. Most of the discussion in the media is designed to be polarizing. Opponents of the bill decry “death panels” and “euthanasia,” stirring up fear and revulsion. Proponents claim that health care is a “right,” and expanding coverage is not only humane but will save billions of dollars.
H.R. 3200 is even more cumbersome than it looks, as it amends several other huge laws like the Social Security Act. It also is vague on details in numerous areas, funding “studies” that will lead to “reports,” and involving the implementation of undefined “plans” by the Cabinet-level Secretary of Health and Human Services.
Due to the size of the bill, I was not able to read and digest all of it. Nevertheless, I did investigate some of the areas of major controversy to determine the reality behind the spin. This is what I found:
1. “Health reform” = new stealth taxes - Under the proposed law, all employers would be required to offer a qualified health plan and pay 72.5% of the premium for their workers (page 149). Noncompliance will be punished by a sliding scale tax of 0-8% of the average wages paid. Only tiny or low wage businesses with less than a $250,000 payroll will be totally exempt. Employers contemplating hiring will avoid adding workers if it causes them to make a jump to the next tax bracket. In fact, the levying of a new tax will likely cause layoffs in order to finance the added expense.
In addition, citizens choosing to go without insurance would be penalized by a 2.5% “tax on individuals without acceptable health care coverage” (page 168). Rich people will be further punished with a “surcharge,” and they will not be able to deduct this fee, as “the tax imposed under this section shall not be treated as tax" (page 203). The word “penalty” occurs 99 times in H.R. 3200, and fines are assessed for everything from failing to disclose a change in family income (page 143) to neglecting to report receiving drug samples from a manufacturer (pages 642-43).
2. The “public option” will become the only option - The Obama Administration has stated that having a government-run health plan alongside private insurance will increase choice. Unfortunately, the opposite is true. On page 16 of the bill, it details that insurance coverage in effect before the law is enacted would be “grandfathered.” However, no new enrollments would be permitted for private carriers.
Whenever a resident lost coverage due to a job change or a move, the government plan would be the only choice. These companies would receive mandates on what services will be covered and what premiums are acceptable to charge. Under this bill, medical plans will become “one size fits all” affairs where a young family and an elderly man are served equally poorly (page 25). Even before these insurers starve from lack of new customers, they are likely to go bankrupt from adhering to cost ceilings.
3. No euthanasia, but potential for abuse - Some critics of the bill have claimed that it will deny medical treatment for the disabled and elderly. Looking at pages 425-432, H.R. 3200 authorizes payment for conferences between patients and health care providers to create an “advanced care directive.” This is a medical order which may include living wills, health care proxies, hospice care, and other details on how much intervention the patient wants at the end of life. Although this plan is not mandatory, physicians receive a higher reimbursement rate if they participate. Most health care providers will comply in order to boost revenue. These incentive payments require sharing data with the government under the Physician’s Quality Reporting Initiative which includes “creation of and adherence to orders for life-sustaining treatment.” This is likely to cause conflicts between the doctor’s desire to respect the patient’s change of plan, and pressure from his/her employer to keep billing rates up.
Bioethicist Ezekiel Emanuel, a White House adviser and the brother of Chief of Staff Rahm Emanuel has become a lightning rod for euthanasia accusations. However, I found many of his provocative statements were quoted out of context or couldn’t be substantiated at all. In a 1997 article in The Atlantic, Dr. Emanuel actually argued against legalizing this practice.
Nevertheless, he has never explicitly repudiated the view that dementia patients should be denied medical care in order to conserve resources. In fact, Emanuel admits that some rationing of treatment is inevitable.
4. Yes, there will be rationing - I am in favor of having a national dialogue “establishing and updating national priorities” for medical treatment (page 620), preferably taking a few years so that every U.S. citizen can reflect on the complex issues. However, having unknown bureaucrats craft a law that Congress doesn’t read before attempting to pass it is not acceptable. Despite the rhetoric that health care reform will be beneficial for all Americans, Congress refuses to give up their own “Cadillac” plan for the much more restrictive public option.
Although the crumbling U.S. economy will force hard choices about national priorities in health and every other area of life, legislators are quick to deny there will be any rationing of care. In fact, health reform is promised to save money by increasing efficiency and cutting waste and fraud. Unfortunately, the government has a poor track record in this area, as administrative red tape has only added to medical costs. Substantial savings will require limiting access to treatment.
You won’t find the word “ration” in H.R 3200, but it’s implied. For example, on page 29, the bill imposes a limit of US$5,000 for an individual or $10,000 for a family for “cost sharing.” This cost sharing includes deductibles, co-insurance, and co-payments. While you could spend whatever you desire on “non-covered services,” the government would put a cap on any additional payments toward health care it believes should be part of the standard insurance plan. This would limit your choices to use a doctor or medication preferred by you. This ceiling would rise over time, but not nearly as fast as inflation, quickly making this an absurdly low limit.
This bill would also set different tiers for doctors. “Preferred” physicians under the plan will receive the minimal Medicare level reimbursement which Congress is currently slashing to an even lower rate. Non-preferred doctors will be slowly squeezed out of the system. A specialist like a brain surgeon will be paid the same as a general practitioner who has much less training (page 241). These policies will cause many talented physicians to leave the field, and will certainly lead to critical doctor scarcities. The end result will be long wait times for care, and rationing for those who can’t afford to travel to another country for treatment.
The reality is that the U.S. cannot afford the health care entitlements already in place, much less any additional mandates. The country already has huge unfunded liabilities of over US$100 trillion if you add in the $23.7 trillion in promises under the bailout plans. Medicare is the template for this health care “reform,” and it's responsible for $40 trillion of that deficit. Despite claims from the Obama Administration that the House bill will not add to the public debt, it’s estimated to cost an additional $1.042 trillion over a decade. Even the nonpartisan Congressional Budget Office expects the plan would add $239 billion to the deficit if enacted.
Neither the U.S. government nor the public has the savings to pay for this medical plan, so any expansion of coverage will cause further inflation of the money supply. As I wrote last year in “The Dollar Is Doomed,” hyperinflation is inevitable even if most Americans don't realize it yet. I believe we are much closer to the end game, as the United States' creditors have announced their intention to lessen their dependence on its flawed reserve currency. Enacting an expensive boondoggle like the proposed health care program would be yet another nail in the American economic coffin.
by Jennifer Barry
Global Asset Strategist
http://www.globalassetstrategist.com
Copyright 2009 Jennifer Barry
Hello, I'm Jennifer Barry and I want to help you not only preserve your wealth, but add to your nest egg. How can I do this? I investigate the financial universe for undervalued assets you can invest in. Then I write about them in my monthly newsletter, Global Asset Strategist.
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