Thursday, March 18, 2010

Why I'm STILL Against the Current Health Insurance Reform

Well, the big news today is that the Congressional Budget Office (CBO) has just finished their estimates based on the proposed House of Representatives' revisions to the health insurance reform. Those favoring this legislative package are giddy with delight, because the CBO estimates are that the revisions will lower the Federal deficit over the next 10 years, and lower it even more the decade after that.

My primary objection in my last post was that we can't afford it, so why aren't I changing my tune?

Because no legislation can change the fundamental principals of economics.

These latest estimates are for a proposed subsequent change to the health insurance legislation that the Senate passed. A reform of the reform. These estimates only apply if the House passes the exact same legislation the Senate passed in December, which has far higher CBO estimates, and then the House and Senate would both have to pass this revision. If the House passes the original Senate bill and this revision at the same time, the revision won't be applied unless the Senate passes the same revision legislation that the latest CBO estimate is for. There is almost no chance that will happen since the majority of the Senators don't want it, and probably couldn't pass it even if they did want it.

Additionally, the CBO estimates are never real-world estimates. I'm not saying that to be mean, or to exaggerate support for my position, but because the CBO isn't allowed to try to be realistic. They're required to base their estimates on whatever assumptions are included in the proposed legislation. History shows that such estimates are typically severely underestimated. Here's a closely related example: In 1966, total Medicare expenditures were about $3 billion dollars. At that time, the Congressional estimate for Medicare in 1990 was $12 billion after adjusting for inflation. The actual cost was over $107 billion. That's a little more than a rounding error, and is solid evidence that Federal "estimates" can't be relied upon.

If the House passes the Senate reform bill, Obama will sign it into law. If the House also passes the legislation they intend to reform the reform, the Senate is very unlikely to pass it, so it won't become law. The House reform to the reform will be nothing more than a footnote in history. The taxes will begin immediately, with the tax-funded benefits not beginning until the 5th year. If it's not changed before then, then tens of millions of people will begin to receive those benefits.

No legislation can change the fundamental principals of economics. If you try to provide a much greater quantity of health care without a corresponding increase in the number of qualified doctors, nurses, and hospitals, then the quality of health care has to come down, costs will go up, or both. Legislation can't change economics any more than it can change physics.

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