Obamacare costs skyrocket, even pre-launch
Government can’t run health system better than the market
The stated objective of President Obama’s socialized medicine law is to expand access to quality, affordable health care in America — hence the statute’s title, the Patient Protection and Affordable Care Act. As far as intended outcomes are concerned, greater access to lower-cost health insurance is certainly a desirable objective. Shrinking the ranks of the uninsured would produce a contraction of America’s welfare state, thus reducing taxpayer obligations associated with dependency. Meanwhile, lowering health care costs would create more disposable income, thereby stimulating the nation’s consumer economy.
Clearly, these outcomes will not be achieved by Obamacare, though. Instead, this Orwellian nightmare will have precisely the opposite effect — dramatically increasing federal outlays (by an estimated $2.5 trillion in its first decade) while limiting disposable income on multiple fronts, not the least of which is its estimated $500 billion in tax increases.
Like most unnecessary expansions of government, Obamacare doesn’t achieve its objective of “affordable” coverage, either. As Obamacare’s first round of mandates and tax hikes kicked in last year, family health care costs soared by 9 percent. According to projections released by the Office of the Actuary for the Centers for Medicare & Medicaid Services, net health care costs for 2014 — the first full year of the law’s implementation — will increase by 14 percent.
Why is this happening? Because Obamacare is based upon several fatally flawed assumptions — most notably that government can run the health care industry better than the free market.
According to the Obama administration, new taxes, bureaucracies, regulations and entitlement obligations are the keys to making health care less expensive. Such a premise — like other big-government machinations — is illogical on its face. Honestly, are we to believe that a country that is already struggling to afford these costs will be magically able to manage them once the weight of this Orwellian nightmare has been placed on our health care system?
“If you think health care is expensive now, wait until you see what it costs when it’s free,” P.J. O’rourke famously said nearly two decades ago. Sadly, America is about to find out that cost. Obamacare contains at least 20 tax hikes — including the insidious “individual-mandate excise tax,” which would impose a surtax on Americans who fail to purchase health insurance from a “qualifying” provider. There is also an employer excise tax, a jobkilling surtax on investment, Medicaid payroll tax increases and numerous other levies.
Since we know that these tax hikes (and the mountain of deficit spending that accompanies them) aren’t “purchasing” lower health care costs for Americans, what are taxpayers spending all of that money on?
That’s easy — vast layers of new and expanded bureaucracies.
Obamacare creates no fewer than 159 new programs — a mammoth expansion of an already bloated federal government that will result in the hiring of thousands upon thousands of new taxpayer-funded employees.
This year, for example, the Internal Revenue Service requested nearly $400 million in additional funding to hire 1,054 new employees. Why? Because, according to the agency, Obamacare “represents the largest set of tax law changes in more than 20 years, with more than 40 provisions that amend the tax laws.”
Among the items included in the IRS request: $30 million to “administer new fees” on insurers, $11 million to “promote compliance” with Obamacare’s new tanning salon tax and $10 million to “strengthen oversight” of those medical facilities fortunate enough to be exempt from the law’s most onerous provisions.
In addition to ballooning budgets at existing bureaucracies, Obamacare creates dozens of new ones — ranging from the swarm of agencies tasked with implementing its statewide health care “exchanges” to dozens of smaller councils, committees and grant programs such as the “Indian youth life skills demonstration project” and the “demonstration projects for nursing facilities involved in the culture change movement.”
How far the federal government has come since 1798, when President John Adams broke the seal on government-funded health care by authorizing taxpayer-funded medical care for merchant seamen. In fact, television host Glenn Beck recently noted that the various new government programs created by Obamacare vastly outnumber those created during the entirety of Franklin Roosevelt’s New Deal.
At a time when America desperately needs to restore the primacy of the free market, Obamacare marks an unprecedented step in the wrong direction. If our leaders’ goal is truly to provide “affordable care,” then this monstrosity must be repealed and government’s role in health care must be dramatically scaled back. coverage. The annual rate of increase in spending by private health insurance dropped by two-thirds, to an annual increase of just 2.4 percent in 2010, according to the federal Centers for Medicare and Medicaid Services (CMS).
This tightening of private health spending has led to an overall reduction in the rate of increase for health spending to 3.9 percent in 2010, versus 7.6 percent in 2007. The Altarum Institute estimates that aggregate annual health spending for 2011 increased by a still reasonable 4.5 percent from 2010.
Before Obamacare, private health insurers responded to the squeeze by getting leaner and improving their business processes, according to Mckin-
sey and Co. Mckinsey concludes that of the various categories of health spending, expenditures on “health administration and insurance” increased the least — just 1.6 percent annually — during the period 2006 through 2009. CMS data shows that the share of health insurance that does not pay for medical claims shrank by an average of about 2 percent annually in 2008 and 2009.
But this came to a screeching halt, followed by a fast U-turn, when Obamacare was signed. The share of health insurance that does not go toward medical claims jumped by 8.4 percent in 2010 as Obamacare took effect. For the first time in seven years, growth in total private health insurance premiums exceeded growth in total benefits in 2010 and was higher than any other component of health spending.
The Milliman Medical Index (MMI) for 2011 reported total health costs (including the administrative load of insurance) for a family of four covered by a preferred-provider organization of $19,393, a 7.3 percent increase over 2010. The Kaiser Family Foundation’s latest survey of employer-based health benefits reported a significant increase of 9.5 percent from 2010 to 2011. These premiums are increasingly unaffordable for many small businesses: The proportion of small firms offering health benefits dropped from 69 percent to 60 percent just from 2010 to 2011.
There are two primary reasons for this harmful consequence of Obamacare:
First, some of the law’s anti-competitive “consumer protections” took effect in September 2010, especially eliminating pre-existing exclusions for children, coverage of preventive health services and extending dependent coverage for young adults up to age 26 on their parents’ plans. Although there is a wide range of cost estimates for each “protection” that came into force in 2010, the midpoint for the aggregate effect is a premium increase of about 3 percent.
Second, choice and competition are disappearing fast from U.S. health insurance. Reports abound of health insurers retreating, especially from smallgroup markets. For example, New York’s Empire Blue Cross Blue Shield has decided to shrink dramatically, dropping more than 20,000 small groups containing more than 200,000 beneficiaries.
As insurers flee, those who remain will reap the benefits of reduced competition. According to an analysis by Bloomberg Government, average operating profit margins for four of the largest health insurers increased by more than 8 percent in the 18 months after the law was signed. Quarterly earnings per share from continuing operations between the third quarters of 2008 and 2011 jumped 29 percent.
If Obamacare had not been passed, the recession would have been somewhat softened by moderate premium increases for health insurance. Obamacare rubs salt in the wounds of the American people — either unemployed or without a raise in four years — who are suffering unnecessary premium increases driven by that misguided reform.