ObamaCare will Fail

As I write this, many in Washington are predicting a successful vote this week in the House of Representatives. And while this may occur, nearly all democrats know that no legislation can get passed by either house without a "fix-it" bill that no one has seen and no one knows the costs of.

Am I making an amazing, and possibly wrong, prediction on the votes in Congress on health care reform? No. I am saying that even if legislation passes called "health care reform" ("ObamaCare"), it will in fact fail.

1. First, the "ObamaCare" legislation could not get passed in any conventional way. So far, we have a bill passed in by the Senate and one passed by the House that are significantly different. Neither House of Congress is willing to pass the other's bill. Even the President said he want's fixes to both. The only way "ObamaCare" gets through Congress is with political bribes, chicanery and trampling of rules that have existed for decades. Everyone agrees that this bill will have substantial affects on the health care sector of the economy. Everyone also agrees the financial impact of the proposed legislation is far reaching. The Simple Truth is that any bill that has such pervasive impacts on Americans and the US economy should not pass as a result of such trickery. And it could not pass without it.
2. Even if the legislation passes, it will result in years of litigation on multiple fronts. From issues of basic constitutionality (forced coverage) to inequal treatment of groups and states. We will never know the impact of this "ObamaCare reform" as it will be in flux for years if not decades in the courts. This too is failure.
3. Third, even if this legislation passes, it will not accomplish the goals that have been stated by its strongest advocates. It is equally likely to leave us with the same or more uninsured Americans. It is more likely to result in increased health insurance premiums and costs. And, it is likely to blow a huge hole in the side of the financial ship of America.

The Simple Truth is that this is the worst legislation ever. It deserves to fail. And if it passes... it will still fail.

The Simple Truth is that America WANTS health care reform. This legislation is not it.

CBO - "Show Me the Money"?

The new Democrat device to obscure the abysmal ObamaCare from Americans is a false premise about concerns with CBO analysis. They are insisting that Republicans are rejecting CBO analysis because they just don't like the result.

The largest problem with CBO numbers are inherent in any CBO analysis and the context of that analysis. Even the CBO would acknowledge these limitations. This problem is related to the untested assumptions and the long-term nature of the projections. They are particularly important here because the huge size of the health care sector (1/7th of the US economy) and the very long term nature of the alleged impacts.

As one commenter said about the CBO analysis of Obamacare:

"They don't pass the smell test."

Key business decision analysis rarely places reliance on projections that extend more than 5-10 years. The analytical problems include:

• The projected deficit reductions are over long periods of times and rely on many unreliable assumptions on impacts.
• The CBO estimates do not include all the provisions because the "fix bill" has not been described or analyzed. In fact, no one has even seen the fix bill or know the interaction of its provisions against the Senate Bill whatever may be included in it.
• The projected impacts presume a few years of costs in the 10 year horizon, and full 10 year taxes. Therefore analytical apples and oranges.
• The projections simply mush together service cuts (Medicare - HMO programs), tax increases (different in each bill) and alleged cost curve impacts.
• The stated deficit reduction in the first 10 years presume cuts, taxes and savings, while not comparing those to the entire health care bill for the full 10 years or the increased costs over the 10 years, both to the economy, and to the federal government.
• Many of the alleged cost curve savings make many presumptions about the impact while ignoring the small effect and limited basis for the assumption. Many of the cost curve changes are quite modest changes.
• Not discussed in the CBO savings are the full impact of the costs in insurance premiums. There is reasonable concern that insurance costs could increase substantially due to the incentive for adverse selection due to the modest penalty for choosing to be uninsured versus the benefit of "must carry".
• A very important limitation of the CBO analysis is that it seems to hide a new entitlement program that is all cost. Rarely do we discuss the specific and likely underestimated costs of the federal government subsidies of health insurance for those "in need". This cost is likely to be higher for many reasons and will not be offset by hopeful assumptions.
• The CBO analysis does not compare the costs/savings against other alternatives that might be more effective with much less analystical risk and much less cost. Any analysis has uncertainty.

The snuck out the $200 billion medicare doctor fix of the health bill and are running it through the jobs bill... so much for CBO integrity.

Did the Founders want "Redistributive Change"?

To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.” — Thomas Jefferson

Show Me the Money

Misinformation Everywhere. There are very few willing to defend health insurance companies as part of the health care reform debate. It is fair to critique their treatment of "insureds" when most vulnerable and their ineffective role as an integral part of health care financing. But, we must hold our fire for the right issues. Unfortunately, the demogogues in Washington have mis-portrayed the real money issues. Let's clean that up here.

1 . Insurance profits are not a big deal. Insurance company profits are under ten percent of the premiums collected. In many cases, their profits are two to four percent of health insurance premiums. If, as a matter of popularist policy, we confiscated all of their profits, we would a.) have no more insurance companies, and, b.) the total decrease in health insurance premium costs would only be their margin of profits. The "proverbial" drop-in-the-bucket.

2. Many Americans with health care are not "covered" by insurance companies at all. In fact, many Americans with health care protection are covered by "self-insured" plans paid for by employers. In all of these cases, the three primary costs are the cost of i.) health services paid to doctors and hospitals, ii.) reinsurance costs of large and unexpected claims, and, iii.) adminstrative costs paid to a third party administrator which may be an administrator or insurance company providing administrative services.

3. Most health costs go to doctors and hospitals, not insurance companies. The Washington rhetoric would have Americans believe that the bill for health insurance goes entirely to insurance companies. It does not. Most of the payments for health insurance, whether paid to employee insurance funds of corporations, insurance companies or even medicare, goes to doctors and hospitals. Accordingly, if we want to dramatically reduce/impact the cost of health care in America, we must reduce the utilization, and the unit costs of health care services.

The Simple Truth is that current legislation largely ignores this reality.

Its the Cost Stupid (Health Care Cost)

There are many objectionable issues with the various health care proposals floating around between the White House and Congress. However, none of them have as a central tenet, the REDUCTION of health care costs. Most would agree that health care costs seem too high. Health care costs are not what your deductible is; are not what your insurance costs, or even what you pay for COBRA between jobs. Health care costs are things like the costs of: x-rays, doctor check-ups, MRI's, emergency room visits, lab tests and surgical procedures.

The way to lower the costs of anything is simple if you return to the basics of economics:

Supply and Demand

Reducing demand by improving health outcomes needs to be the focus of "genuine" reform. Policy also needs to focus on increasing the supply of medical services, which reduces cost. Of course, regulatory elements increase the cost of providing services. We expect well-regulated health care (i.e. safedrugs, licensed doctors, safe hospital practices), but ineffective regulation and litigation increases the burden of providing health care services. Increased burden raises the price point that suppliers are willing to provide a service.

An important way to reduce "ineffective regulation" is to reform malpractice laws and framework. Patients deserve to be protected. But, our health care system should not be "held-up" by less than scrupulous lawyers and over zealous juries. Responding to these cases, reduces the supply of health care services, increases costs due to insurance and settlement costs, and, signficantly increases the use of defensive medicine to protect from possible lawsuits. Real "cost" reform cannot occur without better malpractice policy.

Dear Congressman/Senator: Not THIS Health Care Reform

If passed, the various health care reform bills in Congress may be the worst legislative events in the history of the United States. This legislation may single-handedly undermine the financial integrity of our government and country.

While there are numerous legitimate goals for health care and health-finance reform, the legislative efforts so far indicate that the real purpose of the Democrats is to initiate the take over the entire US health care system. Of the many short-comings of proposed legislation, the more significant criticisms include:

1 - The high cost (which Congress has obscured), increased premiums and taxes,
2 - The lack of interstate competition
3 - The failure to rein in malpractive lawsuits and related costs
4 - The failure to provide effective incentives to draw more people into the system (current proposals leave more than 15-20 million uninsured.)
5 - The failure to equalize tax effects of buying insurance between individuals and corporations.

The current proposals will greatly increase the cost of private health insurance, discourage people from having health insurance, and increase the incentives for people to depend on the Federal/State government for the costs of health care. Your continued support of the this legislation is a significant mistake for the citizens of your state and the entire country.

America is Exceptional

America is the greatest country in the world. Most Americans understand this and believe in it. Many previous adminstrations and leaders have talked openly about American "exceptionalism". The Wall Street Journal captured the essence of my concern (and I suspect many others) with the award of the Noble Peace Prize to President Obama. I remember how proud many were every time an American won the Noble Prize for anything.

But this time, the lack of accomplishment of President Obama reveals a hidden bias of the Nobel Prize committee (which are appointed by the Norwegian Government). This bias is in favor of an "unexceptional America". That why I am less than excited with this year's award.

Ten Best Reasons to Oppose Health Care Reform

Most of us are not opposed to health care reform (See this Washington Post link for an excellent primer on health insurnace in the US.) and most of us agree on objectives. My concern is that the leaders driving the reform bus (President Obama and Congressional Democrats) are not genuine in their real purpose. Accordingly, their legislative prosposals seem inconsistent with their goals.

For example, there is little in the bills to reduce or control costs. The current Senate Finance plan does not have any limitations on medical malpractice lawsuits. Too many Americans will remain uncovered (25 million). And, two essential elements of reform i.) tax equalization, and ii.) interstate competition of insurance companies are nowhere in sight. For those that prefer shorthand, here are the ten best reasons to oppose the current health care reform proposals:

1. Key and critical provisions are missing. a) Malpractice reform, b) tax equalization and c) interstate competition of health care insurance companies.
2. Costs are excessive. CBO estimates are based on many flawed assumptions. If medicare savings could be easily realized, why hasn't Washington done it before now.
3. Massive implicit tax increases. The Finance Committee proposal has $400 billion in tax increases. While proposed to be levied on insurance companies, if enacted at all as described, they will be pass throughs to beneficiaries.
   

Simple Campaign Finance Reform in Illinois

There is a fun suggestion going around the internet about how to reform politics in Illinois. It involves establishing a two term limit in Illinois. One in office and one in jail. Being serious for a moment, there is a quite simple solution that would dramatically reduce corruption. When all else fails, stay simple.

NO one may contribute to an Illinois election campaign more than $2,500 per campaign cycle. Only legal residents of the state of Illinois may make such contributions. No contributions to any IL political campaign, whether in-kind, or in cash, may be made by any party, committee, business or any other organization. Any organization may organize and encourage individual contributions of its members.

Now, every current politician and lobbyist in Illinois will suggest dozens of reasons why the simple formula above can't possibly work. But, ask the citizens if it works. Ask actual voters what is wrong with the above? Then listen carefully what voters say and who says it.

Cash for Clunkers and Simple Math

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.
A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.
So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.
They claim 700,000 vehicles – so that's 224 million gallons / year.
That equates to a bit over 5 million barrels of oil.
5 million barrels of oil is about ¼ of one day's US consumption.
And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.
So we all contributed to spending $3 billion to save $350 million.

How good a deal was that ???

And these are the same guys wanting to take over health care. Better check their numbers.