The True Intent of Health "Reform"
The Market Ticker - Commentary on The Capital Markets
2009-12-25 14:39 by Karl Denninger
in Health Reform , 5 references Ignore this thread
The True Intent of Health "Reform"*

There are two interesting articles in the WSJ relating to the "Health Reform" bill, one by Karl Rove and the second coming from The Heritage Foundation, a conservative think tank.

Let's first talk about Karl Rove:

Taxes start going up now, Medicare cuts begin after next fall's election, and spending for subsidies commences in five years. The price tag is not the first decade's announced $871 billion cost: It is $2.4 trillion. That's the cost of the tax credits in insurance exchanges, and the additional Medicaid costs the reform generates, over the first 10 years it's fully up and running, according to Congressional Budget Office numbers compiled by Republicans on the Senate Finance Committee.

Take the partisanship out and what you have is the above, basically.  On this Mr. Rove is exactly correct.

The tax increases come now, Medicare cuts come after the next election but in point of fact the spending will come never.

I'll explain after I provide some of the second article:

The purpose of this compulsory contract, coupled with the arbitrary price ratios and controls, is to require many people to buy artificially high-priced policies to subsidize coverage for others as well as an industry saddled with other government costs and regulations. Congress lawfully could enact a general tax to pay for these subsidies or it could create a tax credit for those who buy health insurance, but that would require Congress to "pay for" or budget for the subsidies in a conventional manner. The sponsors of the current bills are attempting, through the personal mandate, to keep the transfers entirely off budget or--through the gimmick of unconstitutional taxes or penalties they dub "shared responsibility payments"--make these transfers appear to be revenue-enhancing.

This "personal responsibility" provision of the legislation, more accurately known as the "individual mandate" because it commands all individuals to enter into a contractual relationship with a private insurance company, takes congressional power and control to a striking new level. Its defenders have struggled to justify the mandate by analogizing it to existing federal laws and court decisions, but their efforts do not withstand serious scrutiny. An individual mandate to enter into a contract with or buy a particular product from a private party, with tax penalties to enforce it, is unprecedented-- not just in scope but in kind--and unconstitutional as a matter of first principles and under any reasonable reading of judicial precedents.

Congress has a responsibility, pursuant to the oath of all Senators and Representatives, to determine the constitutionality of its own actions independently of how the Supreme Court has previously ruled or may rule in the future. But it is very unlikely that the Court would extend current constitutional doctrines, or devise new ones, to uphold this new and unprecedented claim of federal power.

Got that second part?

Good, because here's my prediction.

Congress will somehow manage to put these two bills together and come up with something that both Houses of Congress will pass, and Obama will sign it.

The lawsuits will come immediately thereafter.

They will succeed, because there is simply no justification anywhere in The Constitution, nor can one be manufactured, to force someone under pain of federal fine and/or imprisonment to purchase something from a private party simply as a consequence of being alive.

This is so blatantly unconstitutional that nobody in The House or Senate can seriously expect it to stand.  Therefore, we must conclude that it is not intended to stand - both House and Senate fully expect that mandate to be struck.

When, not if, it is you will discover the what I have said all along is the truth purpose of this so-called "reform" - a single-payer system.

Here's how it will happen.

  1. Congress will pass and Obama will sign something containing this "individual mandate."

  2. This will generate immediate lawsuits which will begin their way through the system, headed for the United States Supreme Court.  That process will take several years.  Note that the so-called "benefits" of this reform will also take several years to show up.  This is not an accident.

  3. Meanwhile, the taxes begin immediately.  This is exactly what happened in the 1930s by the way - taxes were raised right into the maw of an economic recession, and helped turn it into a Depression.  Such it will be this time as well.

  4. Young, healthy people will pay the "fines" under protest and refuse to buy coverage (it's cheaper than complying with a $15,000/year mandate to pay the $750/year fine!) and join said lawsuits in Step #2.  This will in turn begin to force private companies out of the system (remember, there are also price controls in there!) as adverse selection will not be eliminated as promised.

  5. At some point the courts will strike the individual mandate.  Free to not pay the fine or buy insurance and prevented from raising rates adverse selection will collapse the remaining private health insurers.

At this point you have:

  1. Permanently higher taxes (since it is constitutional to tax!)

  2. NO private health insurers left in the market.

  3. The "standards and practices" remaining and impossible to remove (note the super-majority requirements in the bill - intentionally put there to prevent the removal of those standards and practices!)

What comes next?  Unable to impose mandatory individual payments to private companies The Government will then have "no choice" but to put in place a Canadian-style system.

For good or bad, you will get both rationing and a tax-funded medical system in The United States.  Private override insurance may remain available and you may be able to continue to buy health care for cash, but neither is assured - neither can be done (for the most part) in Canada, as just one example.

I do not believe this outcome will be an accident - indeed, I believe it is the intention of the Obama Administration and The Democrats all along.

Those who are ascribing some sort of partisan "liberalism" motive - that is, a desire to take over 20% of the economy - are wrong.  The real desire is to collapse health care spending to around 9-10% of GDP.

Since neither party is willing to have an honest debate and discussion with Americans relating to the amount of care we can afford to provide people, including but not limited to care as we age, for those who are unable to pay for it on their own, and since both parties have been co-opted by the medical device and pharmaceutical industry who have clamored for "more and more" of GDP (while delivering relatively small incremental "benefits" in the form of extending life, albeit at a questionable level of quality), this is what we're going to get.

Mark this Ticker and come back to it in three or five years - I'd make a fairly large wager that this is exactly what we will not only get but what is the true intent behind this "bill."

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