This is the tenth of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report argues further that the passed health-care bill will aggravate the current unprecedented US economic decline.
The Passed Health-Care Bill – Will Contribute Further to an Unprecedented Economic Decline
The passed health-care “reform” not only expands the broken government health-care entitlement system but, in an attempt to pay for the new program, foolishly enacts new taxes on the struggling economy. Among others, the bill imposes a new 3.8% tax on investment income on individual filers with incomes >$200,000 or joint filers with combined incomes >$250,000 (Yet another example of discrimination against the institution of marriage). The writers of this new tax say the rich can afford to pay more, but in fact, this tax hurts everyone. Discouraging investment further impedes the economy. And less investment in the markets means less growth and value of our stock markets in which all working households have a stake. A recent dynamic analysis done by the Heritage Foundation estimates this tax alone will:
Result in an average of 115,000 lost job opportunities per year
Reduce productivity by an average 0.01 percentage points per year
Cause a loss of $1.37 in gross domestic product (GDP) for every dollar of additional revenue collected
Reduce household disposable income by $17.3 billion per year
Reduce the stock of household real net wealth by an average $267 billion per year
The passed health-care reform bill also levies new taxes on medical device manufacturers and pharmaceutical companies – the same previously discussed industry that has created unprecedented medical care and technologic advances. Increased taxation of these companies will result in less investment back into the business, less growth of the business, and less hiring. Medtronic, a medical device manufacturer, estimated that the new tax would spur layoffs of 1000 workers.
The new law also eliminates a corporate tax subsidy in the 2003 Medicare prescription drug benefit program that encourages companies to provide drug benefits to their retirees. That subsidy costs taxpayers $665 per covered retiree but the same drug benefit provided by Medicare would cost taxpayers $1,209. The tax treatment change in the new bill will cost companies that provide the retirement drug benefit, $233 per covered retiree. As a result, most companies will eliminate their retiree drug benefit programs, sending those persons into the Medicare program, adding further to overall Medicare expenditure, i.e. Federal deficit. You would have thought this is a no brainer – $665 per retiree taxpayer burden ($233 per retiree additional corporate tax break) vs. $1209 per retiree taxpayer burden. Further because of the resultant change for corporations’ anticipated retiree health-care costs liability, this tax change has triggered a rash of corporate downward earnings revisions including – AT&T, $1billion; Deere & Co., $150million; 3M, $90million – with obvious implications for stock valuation and the markets. (When these companies announced their earnings restatement, Commerce Secretary Locke derided that action as “premature and irresponsible”. Democrat Representative Waxman of California vowed to call these CEOs in for Congressional hearings because those earning restatements conflicted with “independent analyses, which show the new law will expand coverage and bring down costs." Turns out the companies were following SEC accounting rules and we haven’t heard anything further about Congressional hearings.)
The new law also imposes new mandates on businesses of greater than 50 employees. These employers who do not offer “government approved” health plan or pay at least 60% of the employee’s health-care premium will pay a $2000 tax for every employee beyond the first 30 employees. Further, hires from low or moderate income households, who qualify for Federal health-care premium subsidy and who choose to accept that subsidy, will now generate a $3000 employer-paid tax per hire. Beyond the usual economic and employment implications of the increased cost of doing business these misconceived mandates will:
Encourage businesses to stay below or get below 50 employees – hardly a pro-employment policy.
Discourage employers from hiring individuals from households that economically qualify for Federal health-care premium subsidy.
Encourage businesses to opt out of providing health-care by paying the $2000/employee tax and shifting the cost of their health-care to the Federal government and thereby greatly exacerbating the disastrous Federal entitlement fiscal situation – This financial inducement in truth is a disguised and devious mechanism leading to a single-payer (and highly rationed) health-care system.
The next Dr. Right will begin outlining a framework for true and viable reform.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
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