What a surprise: government health care increases cost and doesn’t help deficit

Turning back to the still-hot topic of Obama/Reid/PelosiCare, via Hot Air come some enlightening, but entirely unsurprising updates. Liberals have been fond of saying that the government option will leave you with the same choices and not increase your cost. In fact, they’ve claimed that the government option will likely cause people’s premiums to go down, through increased competition as insurance companies cut into their “massive” 3% profits and through generous initial government subsidies. Of course, they’ve also said that they will have a sizable excise tax on so-called “Cadillac” plans to help keep everything “revenue-neutral.” As an aside, that’s a truly ironic name, given that Cadillac is made by G(overnment) M(otors). Since there is no indexing for inflation for that tax, it won’t be long before even Subaru plans will be considered Cadillacs.

I have always agreed with the contrary position that increased mandates to insurance companies to insure the uninsured and uninsurable combined with increased insurance company administration of medical choices determined by government directives will increase costs. Now comes word that insurance premiums will go up for the great majority of Americans, according to the Congressional Budget Office and the Joint Committee on Taxation. Moreover, taxpayers will have to pay for the subsidies to those whose premiums will decrease. Either that, or the deficit will go up. Worse for the plan, but as expected, most taxpayers will try to avoid the Cadillac tax by opting for less expensive policies. That, in turn, will lessen receipts from the excise tax on which the administration is counting to fund its program. The resulting funding gap has to be plugged by further taxes or by deficit spending. People are rational and act dynamically, whereas government planners are fixed on the concept that people are robots and act statically.

Entirely unsurprising, too, at least to conservatives, is the Washington Post’s astonished recognition that the plan will do nothing for the deficit. Even the Senate bill claims to reduce the deficit only by a rounding error in a deficit projected to reach 14% of GDP by 2035. Those numbers won’t happen of course, because they are unsustainable and the country will be bankrupt long before then. But the point remains. Obama/Reid/PelosiCare won’t “bend the cost-curve downward” and help solve the deficit. Significantly, the government’s calculations assume that the massive cuts in Medicare benefit and doctor compensation come to pass along with significant planned tax increases. In reality, those are already being modified or jettisoned. Medicare cuts promised in the past have never materialized, as Congress lacks the political will to do so. Rather, benefits have always been expanded. The House is also planning to change doctor compensation for Medicare services, but change it upward. The Senate will surely follow suit.

In a further display of their ingrained elitism on display during summer’s townhall meetings, Democrats plan to push this health care “reform” law through soon anyway, even though these government health plans are more unpopular than ever, with a 10% overall negative rating that threatens Democratic majorities in 2010. They are hoping to put this political hot potato behind them well before the 2010 election and hope for a rebound of the President’s political fortunes. That threat won’t be avoided by rushed passage of a huge bill like the nearly 2100-page Senate version or the nearly 2000-page House version, according to this analysis of the impact that the passage of high-profile pet legislation has had on the public approval ratings of prior Presidents.

I am perfectly happy to have the Democrats throw themselves onto the shoals of political ruin. But the long-term cost to the country if the government takes over a huge swath of the economy and proceeds to mandate and administer in the usual excessive command-and-control mode of liberals, is simply too high. I would rather see a failure of Obama/Reid/PelosiCare and have a weakened Democratic majority retain control of Congress than to see passage of such a law and have the Republicans take over Congress in 2010.