What Was the Theory Behind the Affordable Care Act?

We are being saturated with information and propaganda these days about the Affordable Care Act, i.e., ObamaCare. But I, for one was not clear on exactly what was the thinking and the theoretical provisions of this recent piece of legislation that is planned to take over one sixth of our economy. For this reason, I am electing to review its essential features for my readers.

We are aware of the fact that about 47 million Americans are without health insurance. Many of those are young and healthy adults who do not want insurance. They do not seem to realize a need in that area. Nevertheless, this group does need health care from time to time; and the cost of treating them falls on hospitals and on those of us who buy insurance. Additionally, health care costs have been increasing more rapidly than the rate of inflation for many years. Everyone, both conservatives and liberals, understand this problem and seek a remedy.

The Affordable Care Act, (ACA) was designed to bring these 47 million Americans under insurance protection and to distribute health care costs throughout the population. But…how to pay for their protection—that is the question. Democrats devised a system they thought would pay the bill for health care coverage. It ran as follows:

1)      Money would be taken from Medicare and put into the funding for the ACA. $716 billion is to be taken from Medicare spending over the coming 10 years and used to fund the ACA. Concurrently with spending Medicare money on the ACA, spending reductions in Medicare reimbursement schedule for procedures will be legislatively decreased. This will mean that doctors and hospitals will receive less money for their work and for procedures that they do, which were formerly covered by Medicare.

2)      Increased money is to be raised from higher taxes charged to medical devise manufacture and to pharmaceutical and health insurance companies.

3)      Penalty money will be collected from young persons who refuse to buy insurance through ObamaCare exchanges.

4)      Increased income taxes will be levied on the wealthy, i.e., those with annual income >$200,000.

5)      Monthly premium payments from young and healthy persons will more than pay for their own care; and the overage will be used to pay for more expensive, older, and sicker people.

Democrats believe that this increasing money stream will more than pay the cost of insuring the 47 million people.  They even believe that there will be a surplus of money which can be used to decrease federal budget deficits. They believe that our country will be better off financially with ObamaCare in full operation.

Republicans do not believe that there will be nearly enough money in the kitty to pay for this program. I, personally, think that one major defect in the program will be decreasing participation in Medicare by physicians and hospitals caused by the government’s reduction of payment. I have seen doctors for decades declining Medicare payment schedules because of low payment levels. These lower ObamaCare fee schedules will aggravate that tendency.

 

 

 

 

 

 

What Success Obamacare?

President Obama and the  Democratic proponents of the Affordable Care Act emphasized three promises when promoting the health-care law.

1)      It will provide “universal coverage.”

2)      It will reduce costs, both to the consumer and to the nation, as a whole by decreasing the total costs of health care in America.
3)      It will not take away your current health-care plan if you want to continue with it.

Let us look at these three promises in order:

The primary promise was universal coverage. In the year that preceded the law’s passage, President Obama emphasized over and over again the number of Americans who were uninsured, which ranges from 30 million to 47 million, and explained that the nation had a moral imperative to cover those who could not find coverage on their own. One complicating factor in calculating the number of uninsured persons in America was that the recession increased the number of the uninsured by 6 million. The Congressional Budget Office in 2013, before the law was implemented, estimated that there would be 31 million uncovered Americans in 2019; that estimate does not bode well for the effectiveness of the Act in decreasing the number of uninsured people in America.

The second promise was to reduce the cost of health care, specifically the cost of premiums. Universal health care would provide greater economies of scale for insurance companies, while new regulations would keep insurance companies and doctors from getting too greedy. On numerous occasions, President Obama promised that his reforms would reduce the cost of premiums by $2,500 for a family of four.

This is not going to be the case. Using the same methodology that Obama used to come up with the $2,500 figure, health-care expert Avik Roy found that costs per family of four would increase by $7,450 by 2022. Furthermore, the cost hikes in certain states are going to be far worse, including a 41 percent increase in average premiums for Ohioans in 2014, and a 72 percent increase for Indianans. A recent Manhattan Institute analysis shows an overall average increase of 41 percent over the nation, as a whole. Whatever amount of increase there is, it’s not a $2,500 decrease.

Obamacare proponents note that higher premiums will not be felt because the law will provide subsidies to offset the increases. That’s nice, but premiums will still be higher under the new law. The subsidies only mask the impact of the premium increases for certain individuals. Others, not eligible for the subsidies, will get the double hit of paying more for insurance (which they are now required by law to purchase) and of paying higher taxes, now and in the future, to cover the costs of the subsidies to others. Those subsidies have to come from somewhere; and the obvious source of money for the subsidies is from the taxpayers.

In evaluating the money needed for implementing the ACA, we must remember that President Obama has repeatedly said the this program will be “budget neutral.” It will be nothing of the sort. The original 10-year cost of the bill was said to be around $940 billion, offset by tax hikes and spending reductions—most notably a $716 billion cut in Medicare. In 2013, the Congregational Budget Office (CBO) estimated the cost at $1.8 trillion; it is likely to be closer to $2.5 trillion by 2015. The gross costs of the Obamacare insurance subsidies alone will be $1.8 trillion over the first 10 years; in other words, the costs will be lowered for those who get the subsidies at a cost of $180 billion a year to everyone else. Meanwhile, a Government Accounting Office estimate suggests Obamacare’s guarantees could increase our long-term costs by $6.2 trillion over 75 years.

 In examining this second goal of the ACA, the Obamacare supporters have claimed loudly and clearly that the Affordable Care Act will save money in the federal budget. Their most vociferous and widely heard pundit, Paul Krugman of the New York Times editorial board has defended it primarily on this ground, i.e., it will and already has saved great amounts of money. Let us look at some of his reasoning.

Mr. Krugman says that the “affordable” part of the Affordable Care Act  was not just about subsidizing premiums. It was also supposed to be about slowing the seemingly inexorable rise in health costs. He recently indicated in his newspaper column that the law’s opponents believe that serious savings are supposed to come from things like raising the Medicare age. However, he points out that the Congressional Budget Office recently concluded that such this measure would hardly save any money. Krugman has also pointed out that opponents of the bill have suggested that one way of saving money would be to take many Medicaid recipients off the program. He points out that a 2011 letter signed by hundreds of health and labor economists pointed out that “the Affordable Care Act contains essentially every cost-containment provision policy analysts have considered effective in reducing the rate of medical spending.”http://www.americanprogressaction.org/wp-content/uploads/issues/2011/01/pdf/budgetcommitteefinal.pdf And he claims that the opinions of these many economists and health care experts have been ignored. However, a simple reading of the letter from these experts reveals that they did not address the idea of limiting Medicaid. I think we all know that the ACA certainly does not provide for taking people off the Medicaid roles. Medicaid in the days of the ACA will greatly expand. It is also an obvious feature of the ACA that the law did not even say one word about tort reform, which is needed because so much of health-care money is funneled into the pockets of lawyers.

It is true that in recent years, the rate of increase in federal spending has declined somewhat, which is a most welcome development. ObamaCare partisans tout this reduction in the rate of increased spending as evidence that ObamaCare is working. However, the actual AMOUNT of federal spending is not decreased—only the rate of increase in spending has decreased.

There is little to no evidence that ObamaCare has caused the reduction in the rate of spending increase, especially since ObamaCare has not yet been fully implemented. The administration’s own Medicare actuary attributes the recent reductions in the growth rate to the recent recession. Furthermore, when ObamaCare is actually implemented, evidence suggests that inflation will increase again. In 2014 the implementation of provisions of the Affordable Care Act is expected to accelerate health spending growth to 6.1 percent (considerably above the annual rate of inflation).

So, in summary of this second goal of the ACA, I think we can dispose of the idea of cost savings, to the individual consumer and to the government and the taxpayer.

Let’s look at the third promise of the promoters of the ACA; The third promise was that if you like your health-care plan, you can keep it. During his year of salesmanship, President Obama mentioned it nearly every time he spoke about the act, often stating it more than once in the same setting. The exact wording of the comment varied over time, but the political strategy behind the statement was clear: If you were among the 85 percent or so of Americans who already had insurance, ObamaCare would have its impact on other people, not on you.

The early indicators are not encouraging. One CBO analysis has estimated that ObamaCare will cause approximately 7 million people currently covered to lose employer-sponsored coverage. On top of that, millions of Americans who purchase insurance via the individual market are already receiving letters notifying them that their coverage is being terminated.
In summary, this law is not good for the American people. We do, indeed, need a modification of our health-care provisions. But…the ACA, as it stands, is NOT the answer.

Where Did Capitalism Come From; and Where Is It Going?

Capitalism is unquestionably the most productive economic system ever devised by human society. Even with its excesses and abuses as evidenced by the strikes and human suffering capitalism caused in 19^th Century America, still, it has produced goods and services that have been highly beneficial to society today.

To understand where this complex system of economics came from, we must first study the place where it did not originally arise and why it did not arise there. That place is China. The Zhou Dynasty in China was active from 1046 BC until its replacement by the Qin Dynasty in 256 BC. Zhou and Qin emperors ran a nation from a Confucian viewpoint that looked back into time and ancestry to find out how society should operate. Their administrative viewpoints were very similar to Western European feudalism. Administrators were chosen from family heritage lines and not from any merit of their own. These early dynasties did not provide the common people with property rights. Neither did they manifest rules of law. Laws that existed were only the capricious movements of the emperors acting on the instant impressions they had of how things should be adjudicated. They ruled over a society that was fraught with wars between competing states, and very little peace and security prevailed. In 256 BC, the Zhou emperors were replaced by Qin emperors who ruled China for only 15 years; but Qin rooted out the heredity system of government succession to a large extent and brought a system of merit into being for the first time. The Qin emperors were, however, very harsh governors; they taxed the people heavily and regulated all aspects of their existence. Their heavy-handed autocratic ways were so obnoxious to the people that they were soon replaced by the Han Dynasty. Confucianism reigned supreme in the thinking of the people and their administrators.

These early Chinese dynasties produced a nation with a bureaucracy and a functional situation where specialization and organization could coexist. These things were necessary for a stable economic system to develop and persist. But…although these things are necessary preliminaries for the development of a capitalistic economy, they are not sufficient.

The Chinese system of life did not lend itself to entrepreneurial, profit-seeking, businesses.

Western Europe, on the other hand, produced an environment with a very different system of thought. The difference was primarily the difference between Confucianism, which looked backward, and Christianity that saw things very differently and from a forward-looking perspective. Christians had the understanding that God had created a universe that was rational and, therefore, understandable. Christianity saw man as God’s image bearer and a creature with dignity, who deserved rights to property, and a stable rule of law, instead of the momentary judgments of emperors who might change decisions unpredictably. Christians came to believe that it is legitimate and desirable to understand God by looking carefully at his creation. Thus…the development of the forward-looking scientific method.

Science made it possible for people to profit from knowledge—thus…scientific thinking received an economic impetus. European society produced universities and scientists, the large majority of whom were professing Christians. To name a few: Francis Bacon, Johannes Kepler, Isaac Newton, Blaise Pascal, René Descartes, Robert Boyle, Michael Faraday, Clerk Maxwell, Copernicus, and Galileo.

Our Western way of life, including our capital-based economies, owe their existence to the Christian heritage we have received from the thinking of early Christian students and explorers of every type. Even such non-Christian 20^th Century thinkers as Alfred North Whitehead and J. Robert Oppenheimer have stressed that modern science was born out of the Christian worldview.

Today, however, we are in danger of reverting to the stultifying effects of high taxes and onerous regulations characteristic of the ancient Chinese. Many people seem to think that our Western system is “too big to fall;” but I fear that this is not the truth. Big government, high taxes, over-regulation, all threaten to shut down our successful free-enterprise system of government and economy. We need some government regulation, especially in the banking and medical areas; but this overactive government is drawing our economy and our nation into dangerous areas of discouragement, lack of motivation for gainful work, and resultant unemployment.

The capitalist system of economy is bound to produce some inequality of outcomes for the people, but as I expounded in my last blog post, this inequality and the opportunity to further and profit oneself in life is necessary for a healthy economic lifestyle.

 

 

Quit Thinking of Inequality as Something Bad

We live in an era of a leftward movement of the government. Our government and the governments of Europe seemingly move toward ever more collectivism of businesses and social services. The impetus for this kind of administrative agency-driven organization in the beginning was reasonable. But now…we must look at this movement critically; because it may not be the wisest policy conceivable.

One may look at the “American experiment” as one that during the 20^th Century strove to increase the gross domestic product and to distribute it evenly. That seemed to be the trend early in the Century. Now, however, the gap between the rich and the poor is obviously widening; and many observers have agreed that widening of the gap is rampant.

The late 19^th Century saw the weakness and danger of unbridled capitalism. Huge strikes became violent. Farmers went out of business because of opportunistic entrepreneurs who managed the markets to their advantage. Human suffering was immense. Railroads took advantage their monopoly of the money supply to buy up large tracts of land, which they sold at exorbitant profit. Society was shaken by the blatant inequality in our society. Socialism and anarchy were in the air among our people.

But…is it time to throw out the old, tried and true entrepreneurial system? Liberals are very upset at the growing inequalities in our culture.  They want EQUALITY! But…the liberal view of equality is equality of outcomes. Everyone must be equal, i.e., equal incomes, equal education, equal health care, etc., etc. Conservatives, also, long for equality; but they want equality of opportunity, not necessarily equality of outcomes. The conservative belief is that everyone should have an opportunity to better himself, to work for the profit of himself and for his family.

It is a biological fact that not everyone is born equal. We each have characteristics that outshine or that do not match up with the characteristics of others. Those differences are the things that make for social inequality in outcome. Founding Father James Madison asserted in Federalist Paper #10 that one of the most important functions of governments was to protect individuals’ unequal ability to acquire property. He saw inequality as a desirable feature of society. Inequality has allowed businesses and other enterprises to outperform other enterprises and produce better things. This has been done by the mechanism of free competition.

We have before us, bright examples of the equality-inequality argument. Since the Reagan-Thatcher administrations in the late 1970’s and early 1980’s inequality has been one of the top agenda items pursued by market-oriented policy makers and has been seen in the privatization of state-owned enterprises. This has been done in the name of economic efficiency. That effort has been fiercely resisted by the Left and is still being done by the Obama administration in its money redistribution activities. The final result of this administrative monetary/financial activity has been mixed. It seems to help our American lifestyle, e.g., in pulling our poorest out of their poverty; but sometimes, it does not help. 

The examples we have seen of failures of collectivization and redistribution attempts are very scary.  In the former USSR and China, the governments forced millions of unrelated peasants into collective farms. By breaking the link between individual effort and reward, collectivization undermined the incentives to work, leading to mass famines in Russia and China, and severely reduced agricultural productivity. In the former USSR, the 4% of land that remained privately owned accounted for almost one-quarter of total agricultural output. In China, beginning in 1978, collective farms were disbanded; and agricultural output doubled in the  space of just four years. Traditional English villages of the 18^th and early 19^th Centuries practiced communal ownership of grazing land in which the grazing land was shared by the members of the village. This system worked so badly that overgrazing and poor land management practically destroyed efficient farming. The solution was to privatize the grazing land; and with that change, farmers worked to care for the pastures and keep overgrazing down—production increased apace.

 
Excessive government regulation and taxation are driving our American system of free enterprise and competitive business into the ground. We need a government that will allow the free exercise of business, medicine, banking, etc. with less regulation. Our faltering economy and the growing numbers of Americans absent from the work force testify that an over-powerful central government is not doing a good job. Sure, we need some regulation in business, banking, and other things; but we have reached and passed the point where big government is beneficial.

Food Freaks of the World—Listen to This!

Dr. Marc Van Montagu, founder and chairman of the Institute of Plant Biotechnology Outreach at Ghent University in Belgium, has published in the Wall Street Journal of 10/23/13 an editorial entitled “The Irrational Fear of Genetically Modified Food.” This article deserves attention from large portions of our population that is deathly afraid of genetically modified (GM) food products.

I have been impressed for years with the large numbers of Americans who make food a fetish—who spend hours reading food journals and magazines looking for the boogey man in the grocery story who is lurking there just to pounce on the unsuspecting shopper trying to cause some deadly disease from improper food intake. Genetically modified food is thought to be a deadly culprit.

What these wary food shoppers don’t seem to understand is that mankind has been genetically modifying the food chain for 10,000 years, ever since the agricultural revolution. Cross breeding and hybridization is a practice that has given us gains in food production and environmental protection that is not only harmless, but infinitely beneficial to human health and nutrition. The present day practice of GM is only that same process speeded up and more efficient.

GM wheat, decades ago, developed by researchers at the Ford Foundation, allowed third world farmers to increase their yield of food substantially, thereby improving calorie intake and general nutrition of their populations. That change in farming practice was dubbed the “green revolution,” and it not only improved nutrition in the Third World, it proved very profitable to farmers and subsistence gardeners, allowing them to focus more income on other priorities, such as educating their children.

Herbicide-tolerant GM crops have stimulated no-tillage farming, reducing soil erosion and green-house gas emissions. Insect-resistant GM crops have cut insecticide sprayings by more than 25%--and as much as seven fold in parts of India. Crops in present development now include virus-resistant cassava, a starchy root otherwise known as tapioca and nutritionally enriched rice that can help prevent blindness and early death among children. Nitrogen efficient and pest resistance crops have been developed that reduce fertilizer runoff by allowing no-till farming techniques.

All these benefits of GM crops have been developed; and not one disease or other malady has ever been identified that results from eating GM food products. Yet, the western world has been spooked by advertised dangers of these GM foods. People have consumed billions of meals containing GM foods in the 17 years since they were first commercialized, and not one problem has been documented. This comes as no surprise. Every respected scientific organization that has studied GM crops—the American Medical Association, the National Academy of Sciences, and the World Health Organization—has found GM crops both safe for humans and positive for the environment.

Anyone who cares about alleviating hunger and protecting the environment should work quickly to remove the bias against GM crops—let’s get rid of this myth of dangerous GM foods.

Everyone who worries about “dangerous food” should realize that genetically modified foods contain on hormones, antibiotics, or insecticides. GM does not include the addition of any extraneous chemicals.

A Touching Scene—An Important Principle

Yesterday, Nancy and I saw a heart-touching scene in a church we attend in the inner-city slums of Cleveland. A mother and her 14-year-old Down’s Syndrome son were worshipping with us.  The boy was trying to hold up his hands in worship while a song was being sung. He did the best he could to sing the song; but he could not get the words right. Finally, fatigue got the best of him; and he lowered his hands, placed his head on his mother’s shoulder and put his arms around her waist.

When the song ended, she put her arms around him and kissed him.

There are many people who would abort a baby if they find out that he has Down’s Syndrome. That is a grave mistake. Down’s children are loving, affectionate, kind, and generous. They are an inspiration to parents who will consider loving them in return. Of course, they will never become a CEO of the Bank of America; but…Down’s children have their own contribution to make. For one thing, they bring out the very best of characteristics in their parents, i.e., love, consideration, and kindness—these characteristics are also distributed to brothers and sisters who help with their care.

God’s strength is demonstrated in weakness. “But God chose what is foolish in the world to shame the wise; God chose what is weak in the world to shame the strong; God chose what is low and despised in the world, even things that are not, to bring to nothing things that are, so that no human being might boast in the presence of God. And because of him you are in Christ Jesus, who became to us wisdom from God, righteousness and sanctification and redemption, so that, as it is written, ‘Let the one who boasts, boast in the Lord.’” (1 Corinthians 1:27-31)

“Healthcare Reform?” I’ll say so! (But not for the better.)

We are probably all sick of hearing about the failure of ObamaCare; but I am constrained to continue blogging on the subject, because it is of such imminent importance to each of us. This law is the most mistaken piece of legislation to have come down the pike at us in my lifetime. It had some good intentions behind it; but its unintended consequences far outweigh its good qualities. And…I am afraid that the difficulties with the registration procedures on the internet are just the beginning of more problems down the road.

I am afraid we are headed for lost jobs, an economy increasingly made up of part-time workers, higher health spending, a decline in medical innovation and medical devise production, and more difficulty retaining desirable health insurance and care.

Past polling going back to the 1940’s have consistently indicated that Americans have believed desired a system of “national health insurance;" but they have never indicated that they would be willing to pay adequate amounts out-of-pocket money to get it.

President Obama has promised the American people that the Affordable Care Act (ACA) would insure 45million uninsured people without costing middle class families one penny in new taxes; and that paying for it would not add one dime to the federal deficit. He even said that a typical family of four would save $2500 yearly in premiums before the end of his first term in office.

The Congregational Budget Office, on the other hand has calculated that by 2023, ObamaCare will have imposed over $1 trillion in new taxes. $318 billion of this amount will come from taxes aimed primarily at singles earning >$200,000 yearly and married earning >$250,000. But the remainder of the increased tax money will come in a variety of forms that will hit both middle and low income people.

When all is said and done, the folks the president assured would not see taxes go up a dime to bankroll health reform will shoulder close to 70% of ObamaCare’s tax burden.

President Obama has promised that this new law will provide health care coverage for 45 million people. But…the CBO calculates that by 2023, there will remain 31 million uninsured—a far cry from the president’s promise!

Another Obama promise: “We’ll lower premiums by up to $2500 for a typical family per year….We’ll do it by the end of my first term as president of the United States.” (June 5, 2008) But…according to the Kaiser Family Foundation/Employer Health Benefits Survey, average premiums for family coverage during that period increased from $13,375/year to $16,531/year.

The President has promised that spending on health care will “not add one dime to the deficit.” However, his own Treasury Department has calculated that federal spending, as a share of GDP will rise by more than 40% by year 2085. Rising health entitlements will account for every penny of that increase!

President Obama has said, “I will not sign a plan that adds one dime to our deficits.” (September 2, 2009) Former CBO director Douglas Holtz-Eakin has calculated that “the new reform law will raise the deficit by more than $500 billion during the 1^st 10 years and nearly$1.5 trillion in the next decade.”

President Obama has promised that “If you like your doctor, you will be able to keep your doctor, period.” (June 15, 2009) But…recently, we have seen health insurance companies one after another dropping coverage of clients because of ObamaCare’s requirements. For example:

1)   Florida Blue is dropping 300,000 policy holders.

2)   Highmark in Pittsburgh is dropping 20% of its individual market customers.
3)   Kaiser Permanente of California is dropping 160,000 patients.
4)   Independence Blue Cross Philadelphia is dropping 45% of its customers.
5)   Kaiser in Ohio (where Nancy and I get our health care coverage) is going completely out of business and selling all its coverage and business to Healthspan Integrated Care. (These figures come from FOX News Special Report of 10/23/13)

Well, so much for that promise!

(Much of this blog post is a redaction of an article in The Weekly Standard of 10-21-13. The Rest is from my own experience.)