Conservative Political Commentary

Anti-socialist, anti-communist, anti-globalist, pro-Constitution,
and usually with an attempt at historical and economic context

Tuesday, March 9, 2010

These Benefits Will Hurt

What would “Health Care Reform” do for employment?
1. New federal payroll taxes. These taxes are paid partly by employers and partly by employees – at least in theory. They are all paid out of money earned by employees. They all increase the cost of employing people, thus are a disincentive to hiring. Taxes on “higher income earners” potentially hurt all workers, through job losses or lower pay.

2. New state taxes. States will have to deal with unfunded mandates to handle greatly increased Medicaid enrollment. The federal government will pay a lot of this, but by no means all (except maybe in Nebraska?)

3. Employer penalties for not providing insurance coverage. Diana Furchtgott-Roth explains:

Employers who don't offer health insurance and whose workers use tax credits to purchase insurance on the private market would be fined $2,000 per worker. For some firms this would create a substantial disincentive for hiring low-wage, unskilled workers such as teens, whose unemployment rate is now 26%, or adults without high school diplomas, who have a 15% unemployment rate. Other firms would be tempted to pay the penalty and get rid of the company health plan. [1]

Americans for Prosperity reports, “CBO estimates employers would opt to drop as many as 5 million workers from private insurance, and pay the fine instead of maintaining current coverage.” Employers with 50 or more employees would be required to provide insurance or pay the fee. [2] This is about the only way employers would see any reduction in costs.

Employers with more than 200 employees would automatically be required to enroll all employees in an insurance plan. [3] Thus some additional people might be covered, but this would likely result in layoffs or hiring freezes for many employers who aren’t already doing this.

4. Taxes “Cadillac” health plans. On this, unions would get a break. Also, this tax wouldn’t start until 2018. If Obama doesn’t want to introduce this tax now, it’s doubtful is successors would, either. [4]

5. New taxes on health insurance companies and drug manufacturers will discourage employment in those fields and raise costs and premiums.

6. Taxes on investment income.

The Heritage Foundation states the following:

The new White House proposal to impose a Medicare tax on investment income would reduce demand for investment, which is the last thing that the economy needs right now. It would slow recovery, reduce employment opportunities, and hinder wage growth. [5]

The Heritage Foundation estimates that the White House plan would result in an average of 115,000 lost jobs per year, and reduce household disposable income by $17.3 billion per year (between 2011 and 2020). [6]

All these new taxes, about $493 billion [7], come at a very inopportune time, during an economic downturn. Even in better times, this plan could be expected to cause a downturn.

Heritage, again:
[T]he President's plan relies on deep cuts in Medicare payments to hospitals and other institutional providers. But the chief actuary of the Medicare program has said repeatedly that these cuts are not realistic because they would push many institutions into serious financial distress. Still, the Administration claims that hundreds of billions of dollars from these cuts will materialize from 2020 to 2030, thus justifying its claim of large deficit reduction during that time. But it is far more likely that the Medicare cuts and tax increases will never be sustained, even as the entitlement costs from the Obama plan soar.[8]

What would “Health Care reform” do for (to) consumers/workers?
All additional taxes to suppliers and providers must be passed on to consumers (or insurers), as must all upstream costs, including direct taxes, fines, fees, compliance expenses, etc. Also, consumers must purchase insurance or pay a $750 fine (tax). Failure to do so could result in jail time. Such a mandate is blatantly unconstitutional and against all U.S. tradition. And, this runs counter to Obama’s pledge not to raise taxes on people making under $250,000 per year. Further, there is no serious attempt to deal with tort reform. And, there seems to be no real assurance concerning federal spending for abortions.

Where are these lower costs supposed to come from? Lower costs will be just for those who will get subsidies. The real cost of health care will increase and quality will be diminished.

Spending estimated at more than $2.5 trillion over a decade still won’t be covered by the large tax increases, so only in the Twilight Zone would this plan reduce the deficit. Even if the plan itself tended toward deficit reduction (which it doesn’t), federal spending on many other items would more than offset any expected deficit reduction. Counting on Obama’s “reform” to create jobs and reduce the deficit is like counting on the “stimulus” to end unemployment, only less certain.

Greatly increased bureaucracies associated with “exchanges,” oversight panels, etc. will lead to ever-increasing cost and loss of freedom.

The current entitlements of Social Security and Medicare are unsustainable, and young people today should not expect to benefit from these programs when they reach retirement age. To add new entitlements through “health care reform” demonstrates either woeful ignorance or a serious lack of concern about the future of our economy. This so-called “reform” would be destructive to employment and the economy as a whole.

These entitlements, added to already ever-increasing record deficits, threaten the stability of our economy. Perhaps members of Congress will think again before repeating their mistakes.


[1] Diana Furchtgott-Roth, “Obamacare 2.0 Is a Job Killer,” 02/23/2010, Real Clear Markets.


[2] and [3] AFP Blog, “The Ten Worst Provisions in Senate Health Care Bill,” 03/05/2010, Americans for Prosperity.

[4] James C. Capretta, “The President’s Health Reform Proposal: More Like $2.5 Trillion,” 02/24/2010, The Heritage Foundation.


[5] Karen Campbell, Ph D. and Guinevere Nell, “The President's Health Proposal: Taxing Investments Undermines Economic Recovery,” 02/25/2010, The Heritage Foundation.


[6] Ibid.

[7] Furchtgott-Roth, see [1].

[8] Capretta, see [4].

Photo: Official White House photo by Chuck Kennedy. Found at whitehouse.gov.

2 comments:

The Conservative Leftist said...

I don't understand why you write about this issue as if businesses don't currently shoulder the burden of health care costs. People are already spending A LOT of money on health care, one in six dollars to be precise. The system is dysfunctional, and Obama's mild proposals (the most conservative of any president who made an attempt to expand coverage) will help reverse this trend while expanding coverage.

Hundreds of people lose their insurance every single hour in America because of an expensive, bureaucratic private insurance system that doesn't work, why do you want to sustain this system? You Republicans should have done something about it while you had the chance (Bush's absurdly expensive, poorly conceived prescription drug plan/fiasco doesn't count). Now it's the Democrats' turn to actually address America's problems, I'm pretty glad the politicians I supported aren't balking. Additionally, taken individually, Obama's proposals receive quite broad support.

Eddie said...

I don't think I indicated that businesses aren't bearing a lot of the burden of health care costs. Before I retired, I worked for medium-sized company that was basically self insured. They paid a large insurance company to administer their program and another insurer for stop-loss coverage for catastrophic expenses. It cost plenty, plus the employees also paid substantially.

The Obama program adds to their burden with new taxes, and regulations, although some employers could opt to pay the fines and drop coverage. For many, this would be the wisest choice. CBO predicted 5 million workers would be affected.

There is no way I can see to consider Obama's plan anywhere near conservative. It is fascist and socialist with the government taking control of (if not title to) a very large chunk of our economy. They have no respect for the private sector.

As for Bush's drug program, the Democrats have the opportunity to change it, but all I hear are proposals to close the doughnut hole.

The entitlements proposed are very possibly the straw that will break the camel's back. I think we're going to see a very serious correction in regard to the national debt within just a few years if not sooner. These spending levels can't last forever.

There are some people who support Obama's plan, but the underhanded methods the Democrats have used, and those still yet to be used, will alienate some of them, in addition to those who already dislike the plan. If this passes, a Supreme Court test on constitutionality at several levels is likely.

Thanks for the comment.