Health Care Legislation

Open Letter to My Congresswoman:

Your news letters says:

The unsustainable costs of our nation’s health care system are putting increased strain on the already overstretched budgets of American families and businesses.

The Bill summary starts with the line that has become a bit overused:

The bill builds on what works in today’s health care system and fixes the parts that are broken.

This sounds good, but I disagree on what works and what is broken. The problem is simple, the increase in health care costs is the result of inflation.

Part of the problem is true (monetary) inflation; the increase in costs is a direct result of an increase in the Dollars available to pay for health care. To make it worse, there is also an increase in the demand for health care services by an aging population -- demand pull inflation.

In a recent column, David Brooks' states this very clearly:

Health care inflation is not some optional side issue that can be left out of reform. It is the core problem that undermines the viability of the health care system, the federal budget and the economy as a whole.

The problem is that the President's plan is like trying to put out the fire with Gasoline. Not only will it fail, but it will make the problem worse.

It appears that the Congressional Budget Office agrees with my assessment [NYT]:

"But the actual bill put together by House Democrats does not do that,” Mr. Boehner said. “According to the non-partisan Congressional Budget Office, our official scorekeeper, it will not lower costs. Let me repeat that: the bill will not lower costs."

The Goldwater Institute did an analysis of health care inflation:

Health insurance increases health care costs

Do not think that this is a right-wing report. They used Health & Human Services data to prepare their chart.


This chart clearly shows the problem. As the percentage of health care expenditures paid by third parties increased, the rate of health care inflation has increased. So, health insurance is fueling health care inflation and his proposed solution is more health insurance.

The first thing that is broken is health insurance. We have too much health insurance.

The President's proposal and the house bill require that everyone have health insurance. It should be easy to see how this could make things worse. When inflation is the problem, having a third party pay for health care will only fuel inflation. This results in higher health insurance costs. The Laws of Economics can not be repealed -- prices of health insurance will continue to rise until enough people are priced out of the market.

The second thing that is broken is employer provided health insurance. This results in perverse incentives to have low deductible or (even worse) first dollar coverage.

The President's proposal and the house bill require that all employers provide their workers with health coverage. Again, this will fuel inflation.

What is most seriously broken is low deductible coverage provided by employers. I do not know how much of the problem is caused by this, but the first thing is to put a stop to it rather than building the program on it.

This is simple. Health benefits provided by an employer must become 100% taxable income. But, the President says that he is unalterably opposed to doing that, but rather wants to increase employer provided health care. He insists on keeping what is broken and not fixing what doesn't work.