Friday, April 16, 2010

Thinking beyond stage one in the health care bill.

I wonder if the leadership of the AMA and the ACP have thought much past stage one in the recently passed health care bill. Stage one is in several parts; for starters let us look at individual mandates and subsidies for those who cannot afford it.

While representatives of both organizations publicly take pride in their tireless efforts promoting legislation that provides insurance for many million people (actually that will not happen for 4 years) what about the unintended consequences? Think for a moment about the "mandate" .

John Goodman offers this commentary about the mandate:

The Ever-More-Costly Mandate
. President Obama did not create the underlying problem. Health costs per capita have been rising at twice the rate of per capita income for the past 40 years. Nor is this a uniquely American problem. On the average, the same trend is in place for the entire developed world. But here is the bottom line: If you have to buy something whose cost is rising at twice the rate of growth of your income, that mandated purchase will consume more and more of your disposable income with each passing year.

To make matters worse, the normal consumer reactions to rising premiums are going to be disallowed. For example, most people would react by choosing a more limited package of benefits, or going to catastrophic coverage only or relying more on Health Savings Accounts. But these and other responses are limited or barred altogether under the new law.

Everyone (almost everyone, a few such as those with religious objections) will be forced to buy health insurance , a product whose cost so far increases at a rate greater than the rise in incomes.So you will pay a higher percentage of your income every year. So less disposable income for millions including folks who were promised taxes would not be raised.OK Its not really a tax but you still have less money to spend on things of your choosing.

See here for the entire blog entry.

Read further about the subsidies set up by the bill. According to Dr. Goodman's analysis, lower pay employees will want an employer who does not offer insurance while a higher salaried worker would want an employer to offer insurance.Subsidies for the lower group over time must lead to higher taxes. Thinking past stage two will be necessary to sort out what effect(s) that will have on labor markets and productivity and l leave speculation about that to those more adept at economic reasoning than I am.

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