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Seven Things (Still) Wrong with ObamaCare

Forbes.com

The U.S. Supreme Court may have upheld most of the Patient Protection and Affordable Care Act, but that won’t fix the law’s many flaws.  Here are seven problems that riddle ObamaCare.

A Bevy of New Taxes. Supreme Court Chief Justice John Roberts engaged in some tortured reasoning to allow the mandate requiring people to have coverage based on Congress’s power to tax.  Now Obama administration officials vehemently deny the mandate is a tax, even though that’s exactly what President Obama’s Justice Department claimed in its court briefings.

But setting aside the mandate and its penalty — er, tax — ObamaCare is filled with new taxes, at least 20 by some counts.  There is a:

  • 3.8 percent surtax tax on investment income and a 0.9 percent surtax on Medicare taxes for individuals making more than $200,000 and families making more than $250,000;
  • 10 percent tax on tanning services and a 2.3 percent excise tax on medical equipment;
  • 40 percent tax on comprehensive health coverage that costs more than the designated cap; and
  • New taxes that apply to Flexible Savings Accounts and Health Savings Accounts.

Obviously, several of these taxes will hit the middle class.  So it’s more than a little strange that the administration so adamantly denies the mandate’s penalty is a tax.  What difference does one more “tax” make to an administration that has passed so many?

A Nation of Takers.  The Mercatus Center at George Mason University recently reported that about one-third of American households received Medicaid, food stamps or some other means-tested program in 2010.  Add in Medicare, Social Security and unemployment and nearly half of all households are getting a government check.

ObamaCare dramatically expands that number.  Medicaid coverage will go to an estimated 16 million more Americans.  There are health insurance subsidies for those in the exchanges with incomes up to 400 percent of the federal poverty level ($92,000 for a family of four), which is about 75 percent of all U.S. households.  We don’t know yet how many Americans will take advantage of the exchanges, but it likely will be millions — especially if employers start dropping their coverage.

Thus, thanks to ObamaCare, liberals will finally have the large majority of Americans taking money from the government (i.e., taxpayers).

A Maze of Cross Subsidies.  ObamaCare is also filled with cross subsidies, a way of transferring wealth without using the tax code.  Take one example: It requires health insurers to accept people with a pre-existing condition — which mostly affects individuals buying their own coverage — and puts a cap on how much insurers can charge.  It is a popular provision only because most Americans don’t realize they will be paying higher premiums.

In order for individuals with preexisting conditions to get coverage at less than their actuarially rated risk, young and healthy people must pay more than their fair share — a lot more.  Many of them will want to drop coverage because it will be so expensive; hence the mandate to try and force them to stay in.  But even if everyone is in the pool — which they won’t be — the young and healthy will spend billions of dollars paying higher-than-necessary premiums to cross subsidize others.

Perverse Economic Incentives. The problem with the current health care system is that the economic incentives are all wrong.  Patients have little reason to be value-conscious shoppers in the health care marketplace, because in the vast majority of cases someone else is paying the bill.

Doctors don’t know who their real customer is: the patient getting care or the government, employer or insurer paying for it.  The situation often pits health care providers against patients who want everything and the payers who want to limit costs.  It’s a no-win situation of perverse economic incentives, and ObamaCare only exacerbates the problem.

A Health Care Spending Explosion. Team Obama believes that if you get more people covered for even more services — including numerous “free” services — health care spending will go down.

Virtually any health actuary knows just the opposite will happen: health care spending will explode.  Just consider that insured people spend a little more than twice what uninsured people spend on health care.

ObamaCare is supposed to cover an extra 32 million previously uninsured people with very comprehensive coverage.  It’s a recipe for massive new spending.

Rationing Is Inevitable. And when health care spending explodes, Washington will scramble to find a way to contain what wasn’t supposed to happen — just like the unemployment rate wasn’t supposed to go above 8 percent — both for political and economic reasons.

The economic reasons are obvious: The government will be subsidizing so many people that even minor increases in health care costs will have huge budget implications.  Cuts in care and services will be made.  And the mechanism to do that, the Independent Payment Advisory Board (IPAB), is already in place.

ObamaCare’s Greatest Failure.  ObamaCare is imposing a mid-20th century health insurance model on a 21st century global economy.

  • The Internet brings consumers countless products and services from countless vendors; yet ObamaCare provides four choices from a handful of insurers.
  • Technology creates fast-paced change while ObamaCare’s 2,700 pages ties up almost everything in the snail-paced legislative and bureaucratic processes.
  • Innovators and entrepreneurs are asking what consumers want; ObamaCare tells both patients and providers what they can and can’t have.

The Affordable Care Act looks backward — to the days big-government and grand social schemes.  It is the wrong policy for the dynamic and fast-paced 21st century.  The president says he is willing to tweak it, but it can’t be tweaked enough.  It is an albatross fit for 1960, not 2012.