Health care reform is something few understand. The costs and benefits to various members of society has not been well articulated, as we saw through the embarrassing theater of the health care debate. This is where SwiftEconomics will assist the government in some of the gaping holes left in public understanding.
Yes, not only will those making more than $250,000 pay more via payroll taxes, but those that are healthier will also carry the burden of the unhealthy. And why? As we learned in DC, health care is a right. Says it right in the Constitution. Did you miss it? We all have the right to life, liberty, and the pursuit of happiness. Even Will Smith says so. Clearly access to health care is encompassed in the “life” and “pursuit of happiness” clauses of the Constitution, right? Well, I tend to doubt it. Something tells me the Founding Fathers had something else in mind. Particularly the right to be alive, free, and take whatever advantages or disadvantages you have and make the most of them. Many of the Founding Fathers, like Washington and Jefferson, abhorred the thought of public debt for any purpose.
The health care reform vision is complex, but in its simplest form, tens of millions of Americans will be brought into the health insurance system. This will occur either through state organized “exchanges”, or clusters of states, as well as through private insurance, who will no longer be able to deny coverage for pre-existing conditions beginning in 2014.
One part of the paternal nature of health care reform makes perfect sense: we need to bring health care costs down, therefore, people need to be insured. Without health insurance, any serious medical issue will bankrupt the average American, passing the costs directly to the hospital and Medicare/Medicaid (aka the taxpayer). Some people will choose not to be insured. Further, some of those people will get sick. Theoretically, bringing them into the health insurance system will increase competition, lower premiums, and protect them from back-breaking medical bills in the process. But the government has to force their hand. A hand that typically belongs to younger, healthier people. They will do this in 2014 by penalizing those who are uninsured through the tax code…because, apparently, the tax code isn’t long enough as it is.
Adults who go uninsured by 2014 will be penalized $95 or 1 percent of income. Not too bad. In 2016, you’ll be fined $695, and up to $2,085 per household, or 2.5 percent of income, whichever is greater. Much worse. The definition of “uninsured” is those that go without health insurance for more than three months of the year. And the main culprit you can thank for these provisions are the health insurance companies themselves. They fought hard for them because of a phenomenon called the death spiral. They will be forced to except everybody on their rolls: those that pose a high risk for high medical costs as well as those who pose a low risk. If the low risk stay out, many of whom are 18-30 years old, the insurance pool is skewed unfavorably for these companies. More expensive policy holders increase the costs of premiums for everyone else, causing even more of the healthy to drop out, and so on. Thus the death spiral. Penalizing the healthy for being uninsured is the actuary kings’ hedge against risk. While health insurance industry profits were roughly only 3.3% last year, the 86th most profitable industry in America, they aren’t necessarily “looking out” for you.
Massachusetts tried this experiment once already. Their individual mandate under Governor Mitt Romney, which also fined Bay Staters for going uninsured, still saw 200,000 people opt to eat the penalty as opposed to obtain health insurance after three years.
What should we learn from the individual mandate? Some people will still choose to go without health insurance; it’s expensive, even with government subsidy help. For some it might pay to ignore the mandate altogether, and incur new tax penalties instead. No health care strategy will insure everybody. The penalties will get stiff enough, I’m sure, and the subsidy help generous enough, to eventually make it economically idiotic not to obtain insurance. However, Americans have been described as much worse.
So the healthy will carry the burden, along with those making $250,000 or more. As it stands now at least. The physically fit and genetically gifted will incur penalties for not participating in these “insurance schemes”. Once a part of them, they will no doubt have higher premiums over time as a result of our gluttonous society. It wasn’t enough to be stealing from the youth of America through decades of deficit spending, entitlement promises, and the printing press. I suppose I should be used to this by now.
I plead to you: if you’re chiseled out of granite, run for the hills while you still have a chance. Probably not to the Canadian hills, I’m not sure that helps the true cost of your health care. Perhaps retire to the fine beaches of Mexico. You know, while you’re at it, go big and set up shop in the Greek Isles. I hear they’re having some debt problems right now.
(1) Carpe Diem – Health Insurance Companies Rank #86 By Industry Profit Margin, Earning $98 on Average Per Policy, mjperry.blogspot.com, retrieved April 26th, 2010, http://mjperry.blogspot.com/2009/10/health-insurance-companies-rank-86-by.html
(2) The truth about health care reform – CNNMoney.com, retrieved April 26th, 2010, http://money.cnn.com/2010/04/22/news/economy/health_care_reform.moneymag/index.htm