Lower Health Care Premiums? Read the Fine Print

Mar 17, 2010

The AP fact checks claims of lower health care premiums:

Buyers, beware: President Barack Obama says his health care overhaul will lower premiums by double digits, but check the fine print. Premiums are likely to keep going up even if the health care bill passes, experts say. If cost controls work as advertised, annual increases would level off with time. But don't look for a rollback. Instead, the main reason premiums would be more affordable is that new government tax credits would help cover the cost for millions of people...For most households, those added costs would be more than offset by the tax credits provided under the bill, and they would pay significantly less than they have to now...The president usually alludes to that distinction in his health care stump speech, saying the savings would accrue to those people who continue to buy "comparable" coverage to what they have today.

Weak cost containment is one of the reasons we oppose the current health reform legislation. First, the American people understand that paying for increasing costs is not reducing costs, hence the strong desire for Congress to start over. Second, in many cases government mandates on coverage means that "comparable" plans won't be available, or to put it another way "people will be forced to buy more expensive health insurance than they may want, and it will be more expensive, although money will be taken from some people and given to others." The Wall Street Journal looks at the impact of the taking part:

The forced march to pass ObamaCare continues, and all that matters now is raw politics. But opponents should go down swinging, and that means exposing such policy debacles as President Obama's 11th-hour decision to apply the 2.9% Medicare payroll tax to "unearned income." That's what savings and investment income are called in Washington, and this destructive tax wasn't in either the House or Senate bills, though it may now become law with almost no scrutiny...The Tax Policy Center of the Urban Institute and Brookings Institution estimates that 86% of the revenue from the investment tax would come from people making more than $624,000, or about 1.2 million taxpayers. This has led many liberals to claim that it won't matter to investors or harm the economy. Yet these static analyses ignore the incentive effects forecast by the Institute for Research on the Economics of Taxation. Stephen Entin and colleagues estimates that the investment tax would depress GDP by about 1.3% and reduce capital formation by 3.4%, and thus reduce the after-tax incomes of everyone not paying the tax directly in the neighborhood of 1.1% to 1.2%. Labor productivity and wages would fall across the board, while the lost government revenues from the more-sluggish economy would offset the expected receipts.

...So for reasons of political expediency, Democrats will now impose a destructive tax that will permanently skew the incentives to work, save and create jobs. Come to think of it, that sums up this entire exercise.

Tell your Representatives we need real health reform which lowers costs, not health reform which seeks to pay for increasing expenses by slowing job creation and economic growth.

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