Not everything about the Democrats’ healthcare proposals is bad from a free-market, limited-government point of view. But enough is bad that if I were a member of the House of Representatives, I would determinedly vote “nay.” My reasons:
1) The House bill finances health insurance subsidies in part with a highly redistributive tax: a 5.4% surtax on individuals earning more than $500,000 per year and families earning more than $1 million. That tax won’t raise anything like enough money of course. It’s a wedge to open the way to further redistributive taxes, reaching someday down to the $200,000 mark, most likely.
Some measure of redistribution is inescapable in modern healthcare: Insurance has become so expensive that the less affluent half of the population cannot afford coverage unaided. But when dealing with something as costly as healthcare, it is super-dangerous to load costs on a few at the top of the income distribution. That creates malign incentives to spend, spend, spend – because only a very few voters pay the real cost.
2) The House bill imposes heavy new costs on small business at the beginning of what looks to be a weak and fragile job recovery. I thought the point of this exercise was to move AWAY from employer-provided healthcare? Instead employers with payrolls above $500,000 would be required to buy health coverage for their employees – and to pay the larger portion of the bill directly, without their employees’ feeling the cost.
3) Where are the cost controls? The excise tax on high-coverage plans is postponed into the wild blue yonder. The House bill also ends the antitrust exemption for the health insurance industry – when what is needed are STRONGER insurance companies that can impose price discipline on medical providers. The House bill envisions price discipline being imposed by government through regulation and direct buying power – not through competition.
4) Illegal aliens do not qualify for subsidies under the House plan, but they can buy into the health exchanges. We should be focusing on making the U.S. labor market less attractive to illegal labor, not more so.
5) Medicaid is perhaps the single most dysfunctional major social welfare program we have. The House bill makes it bigger. Bad idea.
6) It’s still not clear whether a so-called public option – that is, a government run insurance company – will emerge from the reconciliation process. I am assuming that the Senate will not allow it. But if it does somehow emerge, then that ought to be an absolute red line for any limited government person: NAY, NAY, NAY and again NAY.