the salt makers

According to the American Medical Association’s National Health Insurer Report Card for 2008, the government’s health plan, Medicare, denied medical claims at nearly double the average for private insurers: Medicare denied 6.85% of claims. The highest private insurance denier was Aetna @ 6.8%, followed by Anthem Blue Cross @ 3.44, with an average denial rate of medical claims by private insurers of 3.88%

In its 2009 National Health Insurer Report Card, the AMA reports that Medicare denied only 4% of claims—a big improvement, but outpaced better still by the private insurers. The prior year’s high private denier, Aetna, reduced denials to 1.81%—an astounding 75% improvement—with similar declines by all other private insurers, to average only 2.79%.

Maybe there’s something to be said for the need to keep your customers satisfied in order to make that profit after all.

It has been shown that the so-called "public option" for low-premium health insurance is sure to significantly crowd out, and perhaps even eliminate, the private provision of health insurance. Thanks to Senator Joseph Lieberman's courageous stand, it appears that the public option will not be a part of any bill that passes the Senate. Unfortunately, HR 3962 includes regulations that will destroy the ability of private firms to provide marketable insurance, with or without a public option.

To understand the devastation that will be wrought by this bill, one must understand how health insurance functions on a free market to transfer individuals' financial risk to large "risk pools" with less variation across time. Consumers who are risk averse pay "premiums" to insurers each month for the removal of that risk, and in turn insurers assign their clients to different pools according to their risk of large claims.

An Already-Regulated Industry

Insurance companies have already been strictly limited in their ability to assign individuals to different risk pools and charge them varying premiums. By forcing high-risk and low-risk groups into the same pool, existing regulations increase premiums for low-risk consumers and decrease premiums for high-risk consumers. This is nothing more than a coerced subsidy to the less healthy, and it drives low-risk consumers away from purchasing health insurance. This is why the majority of the uninsured are not poor and dying, but in fact healthy young people who are at almost no risk of unanticipated healthcare costs.

To cope with their inability to partition along risk levels, profit-seeking insurance companies must cut costs by excluding the highest-risk patients from insurance. In a free market, these individuals would be offered insurance at a higher premium aligned with their high risk of major claims. In human terms, this leads to the exclusion of people with preexisting conditions and those with significant claims on past insurance plans. Once again, we see how leftist economic policy harms the very class of society that its supporters desire to help.

Obamacare is a Welfare Program

Not oblivious to the exclusion of these unfortunate citizens, on page 95 of the bill, House Democrats have proposed to completely outlaw the exclusion of any customer on any of the following grounds: "health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability, or source of injury (including conditions arising out of acts of domestic violence) or any similar factors."

Thus, it will become illegal to refuse to insure any consumer on any grounds, including evidence of insurability. In addition to being unable to exclude future enrollees, insurers will be prevented by page 29 from legally dropping any consumers from their plans on any grounds other than "clear and convincing evidence of fraud."

The effect on the structure of insurance is obvious; this new law will turn health insurance into a legally-enforced entitlement program, and the new entitlement will be used by those who are too costly to be insured under the current restrictions on risk-pool partitioning. Again, it is important to remember that these patients would have the option to buy insurance on a free market, but that their plans would carry premiums that actually reflect their personal health risk.

While risk-pool separation is considerably limited by national and state regulations, the little separation that is allowed would still be able to mitigate the heavy costs of forcing insurers to cover literally every customer who wishes to buy insurance. While the high-risk individuals would not pay as much in premiums as they would on a free market, insurance companies would still be able to use slightly lower premiums to attract low-risk customers.

However, this inequality in premiums is offensive to politicians hell-bent on equality. Therefore, in the very next page of the bill, House Democrats propose to outlaw all variations in premiums except according to geographical area, age group, and whether the plan in question covers an individual or a family.

These provisions will be catastrophic to the insurance market. The bill only allows for premium variation across age by a ratio of two to one between the highest and lowest premiums. In real terms, elderly patients who cost several times as much to insure can only be charged twice as much as 20-somethings who often go entire years without claims. That this is a subsidy for the elderly hardly needs to be explicitly stated.

The bill leaves the determination of the maximum difference between individual and family plans at the discretion of the "health choices" commissioner, who is likely to find himself bombarded with visits and letters from family-centered lobbying organizations seeking subsidized health insurance paid for by singles and nonparents. This rent seeking will inevitably end up in subsidies handed out according to political objectives, whether the goal is to attract more young, single voters or more parents of children.

Turning any transaction into a subsidy both induces the subsidized class to enter the transaction and induces the subsidizing class to attempt to avoid it. In this case, it means that an even greater number of young and healthy individuals (and, most likely, nonparents) will drop their increasingly expensive insurance plans and attempt to prepare for healthcare risks on their own. This terrible result of coercive price-fixing decreases the benefit of the subsidy to high-risk consumers and decreases the ability of the insurance companies to control and reduce average payouts.

Democrats are aware of this effect of their policy, and have legislated accordingly. Pages 296–300 amend federal tax law to create a new tax on all citizens who fail to purchase health insurance. Depriving these individuals of the ability to opt out of the new, undifferentiated insurance pool is an atrocious affront to individual choice, and requires the threat of imprisonment. This new tax will help achieve the statistical goal of universal coverage, but it will do so at an incredible cost to the income and liberty of the relatively young and healthy, most of whom, ironically, voted for Obama and Democratic congressional candidates.

Soaring Costs

Not only will high-risk individuals who are now forced out of the market by regulation be legally entitled to purchase the bill's minimum standard of coverage, but both these excluded consumers and those who are now in high-risk pools will have financial incentives to buy higher levels of insurance. Facing new, subsidized prices, high-risk individuals will purchase plans with lower deductibles. Paying for a higher percentage of the price of more claims will massively increase the cost of insuring the new general pool of clients.

One of the only remaining ways for insurers to cut their costs, then, is to limit the amount that individuals are able to receive in claims. Indeed, insurance companies already use lifetime claims limits to cope with risk-partition laws and deliver lower-price packages to low-risk consumers. Predictably, page 50 of the House bill prohibits insurance companies from imposing any such limits on lifetime benefits.

Outlawing lifetime limits guarantees that all consumers will have the incentive to undergo drastically more treatments in their lifetimes, because the bill ensures that they will not be moved into a higher premium group until they enter a different age group or move to a different area. For the already-subsidized elderly, this creates incentives to undergo many more life-extending treatments in the final year of their lives. Such treatments are several times more expensive than general care for other elderly patients.

Astute readers will correctly object that while the Democrats' healthcare proposal will drastically increase the costs facing every insurance provider, the bill also requires all individuals to buy the minimum package of insurance, or to enroll in the public option. Especially because in the current discussion we are ignoring the effects of the public option, it is possible to argue that if there were no public option this bill would actually be a boon to private insurers, who are virtually guaranteed that every American will buy their plans. To survive this bill, then, insurance companies will simply increase the premiums of the packages that are forced onto every citizen.

This would indeed be true, were it not for further regulations effectively barring premium increases. Page 31 of the bill would require insurance companies to "submit a justification" for any projected future increase in premiums for any group to the secretary of Health and Human Services as well as state-level authorities.

The secretary of HHS and the state "health czars" would then annually review and approve or deny any increase in premiums. In various sections of the bill, the health choices commissioner is given power to determine the cost-accounting and other ratings methods that will determine whether a price increase is "justified" in the eyes of the DHHS Secretary.

Public officials operating under a Congressional mandate to achieve universal coverage are hardly likely to approve price increases, even though that means slowly bankrupting private insurers. Even if they are not made to "compete with" and be strangled by a public option that consumers have already funded with their tax dollars, private insurers will be absolutely ruined by restrictions on their ability to control and separate costs and to increase prices to account for their ever-rising costs.

Conclusion

While a public option would certainly hasten the death of the private-insurance market in America, it is not a necessary means to that end. By destroying the economic structure of insurance, House Resolution 3962 would convert an already-overregulated industry into a pseudo-private welfare program. Even without a public option, insurance companies would be kept from controlling costs or adjusting their prices. The inevitable result will be the complete dissolution of the private health-insurance market.

This is disgusting. For all the flak being given to insurance companies 'making a profit off of sick people,' the same individuals spewing this nonsensical platitude fail to see that the institution they seek to remediate the problem is no better. As our citizens condemn the 'abuses of the free-market' they cannot see the government swelling under their feet. Rather than reduce financial liabilities during a recession, something most private businesses are doing right now, the government continues to increase their lavish salaries on mid-level jobs. It gives one an excellent demonstration of the disconnect between how private businesses run and how government bureaucracies run. All of those who are fighting for more government control have been duped into a fool's errand, trading one set of problems for another that is far more permanent. Meanwhile, the bureaucrats feast on the wealth of the American people as we sit and watch without recourse.

The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.

Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.

The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.

When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.

The trend to six-figure salaries is occurring throughout the federal government, in agencies big and small, high-tech and low-tech. The primary cause: substantial pay raises and new salary rules.

"There's no way to justify this to the American people. It's ridiculous," says Rep. Jason Chaffetz, R-Utah, a first-term lawmaker who is on the House's federal workforce subcommittee.

Jessica Klement, government affairs director for the Federal Managers Association, says the federal workforce is highly paid because the government employs skilled people such as scientists, physicians and lawyers. She says federal employees make 26% less than private workers for comparable jobs.

The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared with $40,331 in the private sector.

Before Thanksgiving, the Senate voted to opening debate on President Obama's health-care bill, and that debate has begun in earnest this week.

Well, if they want a debate, let's let them have it. But let's not get distracted by the sideshows Senate Majority Leader Harry Reid has planned for us.

Forget about abortion. Of course the left will accept restrictions on funding for abortion, because they want to keep moderate Democrats on board for the goal they know is really important: giving the government a dominant role in health care. Everything else is just details, and funding for abortions is an issue to which the left can return at leisure later on-once government is firmly in charge of everything.

And don't bother debating the "public option," either, because it's already dead; enough Democratic senators have come out against it. But Harry Reid is all too happy to have a debate over the public option so he can make a show of "compromising" and giving it up. And while we're having that fake debate, he's hoping that we won't be challenging everything else in the bill.

So let's get straight what the real essentials of the bill are-and how disastrous they are.

Three provisions constitute the vicious heart of the Democrats' health-care overhaul.

The first is "guaranteed issue" and "community rating." This is the requirement that insurance companies have to offer coverage to people who are already sick, and that they be limited in their ability to charge higher rates for customer who pose a higher risk. The extra expense to the insurance companies of covering people with pre-existing conditions will get passed on to existing customers in the form of higher premiums. But why spend years paying these inflated premiums for insurance you're not using, when you can get exactly the same benefits by waiting until you actually fall ill? The obvious result is that million of people, especially healthy young people, will quickly realize that there is no reason to buy health insurance until they get sick.

Rather than increasing the number of insured by making health insurance more affordable, this bill makes health insurance more expensive and increases the incentive to simply drop your insurance until you need someone to pay for your medical bills. It is an attempt to turn health insurance into what the left really wants: another welfare program in which everyone is entitled to free benefits, mandated by the government. But this would wreck private health insurance, making the whole industrial financially unsustainable.

Following the usual pattern of government intervention, the health-care bill offers another intervention as the solution for the problem created by the first. The "individual mandate" requires everyone to buy health insurance and subjects us to a tax if we fail to do so. But this is an especially onerous new tax, the first tax not tied to any kind of income or activity. It's not a tax on stock-market profits, say, or a tax on buying cigarettes. It's just a tax for existing.

So fearing a public backlash, Congress didn't have the guts to make this new tax very large-only $750. Yet actual insurance can cost more than $3,000 per year-and as we shall see, this legislation goes out of its way to drive up those rates by mandating more lavish coverage. So we end up getting the worst of both worlds. This provision won't actually drive anyone to buy health insurance and prop up the risk pools for those who are insured. All it will accomplish is to create a brand new form of tax.

But the biggest power-grab in the bill is the government takeover of the entire market for health insurance. The bill requires all new policies to be sold on a government-controlled exchange run by a commissioner who is empowered to dictate what kinds of insurance policies can be offered, what they must cover, and what they can charge.

Right now, your best option for reducing the cost of your health insurance is to buy a policy with a high deductible, which leaves you to pay for routine checkups and minor injuries (preferably from savings held in a tax-free Health Savings Account) but which covers your needs in catastrophic circumstances-a bad car accident, say, or expensive treatment for cancer. This is the kind of coverage I have.

But the health-insurance exchange is intended to eliminate precisely this kind of low-cost catastrophic coverage. Its purpose is to force health-insurance companies to offer comprehensive coverage that pays for all of your routine bills-which in turn comes at a higher price. So under the guise of making health insurance more affordable, this bill will restrict your menu of choices to include only the most expensive options.

So there we have the real essence of this bill. It restricts our choice of which insurance to buy and pushes us into more expensive plans. At the same time, it destroys the economic incentive to purchase insurance in the first place and replaces insurance with a free-floating tax on one's very existence.

By all means, let's debate some of that in the Senate.

When you understand what this bill does, you can see why the Democrats would be happy to compromise and drop the public option-for now. This bill so comprehensively wrecks private health insurance that pretty soon a "public option" will seem like the only alternative, and they will already have put into place one of the new taxes needed to pay for it. If the left's goal is to impose socialized medicine in America, this bill does it in the most callous and destructive way possible. It smashes private health care-then leaves us stranded in the rubble, at which point we will be expected to come crawling back to the same people who caused the disaster and ask them to save us.

That is the final and perhaps most compelling reason to kill this bill: the sheer arrogance of the whole enterprise. It is the arrogance of stampeding an unwilling public toward a monstrous 2,000-page piece of legislation while admitting that it still has huge problems, but promising that it will all somehow be fixed later on. It's the arrogance of selling us a bill that expands government spending by hundreds of billions of dollars while telling us that it will reduce the deficit. It is the sheer unmitigated gall of appointing a bureaucrat to run a government-controlled insurance market that takes away all of our health choices-and then calling this bureaucrat the Health Choices Commissioner.

That's the kind of government arrogance that has to be smacked down hard, and that alone is reason to demand that your senator reject this vicious bill in its entirety.

I guess that whole 'constitution' thing was all for naught...

From our dear leader, Nancy Pelosi:

MYTH:"Health insurance reform could be unconstitutional…or violate the 10th amendment."

FACT: As with Medicare and Medicaid, the federal government has the Constitutional power to reform our health care system.

The 10th amendment to the U.S. Constitution states that the powers not delegated to the federal government by the Constitution, nor prohibited by it to the states, are reserved to the states … or to the people. But the Constitution gives Congress broad power to regulate activities that have an effect on interstate commerce. Congress has used this authority to regulate many aspects of American life, from labor relations to education to health care to agricultural production. Since virtually every aspect of the heath care system has an effect on interstate commerce, the power of Congress to regulate health care is essentially unlimited. [Emphasis mine]

Medicare cuts approved by House may affect access to providers

This should not surprise anyone. It is not uncommon for private practitioners to refuse medicare recipients for its dismal reimbursement rates. It also reinforces the important point that guaranteed health insurance is not equivalent to guaranteed health access. The 'positive' aspects of the report being emphasized by democrats is hardly reassuring. It claims that 'out-of-pocket expenses' would decline, but I suppose that depends upon whether you consider excessive taxation not 'out-of-pocket.' Furthermore, I have no idea how they expect anyone to believe that national health care spending will increase by only 1% over the next decade, unless they plan to significantly ration care. With the aging population, things are only going to be exacerbated.

A plan to slash more than $500 billion from future Medicare spending -- one of the biggest sources of funding for President Obama's proposed overhaul of the nation's health-care system -- would sharply reduce benefits for some senior citizens and could jeopardize access to care for millions of others, according to a government evaluation released Saturday.

The report, requested by House Republicans, found that Medicare cuts contained in the health package approved by the House on Nov. 7 are likely to prove so costly to hospitals and nursing homes that they could stop taking Medicare altogether.

Congress could intervene to avoid such an outcome, but "so doing would likely result in significantly smaller actual savings" than is currently projected, according to the analysis by the chief actuary for the agency that administers Medicare and Medicaid. That would wipe out a big chunk of the financing for the health-care reform package, which is projected to cost $1.05 trillion over the next decade.

More generally, the report questions whether the country's network of doctors and hospitals would be able to cope with the effects of a reform package expected to add more than 30 million people to the ranks of the insured, many of them through Medicaid, the public health program for the poor.

In the face of greatly increased demand for services, providers are likely to charge higher fees or take patients with better-paying private insurance over Medicaid recipients, "exacerbating existing access problems" in that program, according to the report from Richard S. Foster of the Centers for Medicare and Medicaid Services.
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Though the report does not attempt to quantify that impact, Foster writes: "It is reasonable to expect that a significant portion of the increased demand for Medicaid would not be realized."

The report offers the clearest and most authoritative assessment to date of the effect that Democratic health reform proposals would have on Medicare and Medicaid, the nation's largest public health programs. It analyzes the House bill, but the Senate is also expected to rely on hundreds of billions of dollars in Medicare cuts to finance the package that Majority Leader Harry M. Reid (D-Nev.) hopes to take to the floor this week. Like the House, the Senate is expected to propose adding millions of people to Medicaid.

The Centers for Medicare and Medicaid Services administers the two health-care programs. Foster's office acts as an independent technical adviser, serving both the administration and Congress. In that sense, it is similar to the nonpartisan Congressional Budget Office, which also has questioned the sustainability of proposed Medicare cuts.

In its most recent analysis of the House bill, the CBO noted that Medicare spending per beneficiary would have to grow at roughly half the rate it has over the past two decades to meet the measure's savings targets, a dramatic reduction that many budget and health policy experts consider unrealistic.

"This report confirms what virtually every independent expert has been saying: [House] Speaker [Nancy] Pelosi's health-care bill will increase costs, not decrease them," said Rep. Dave Camp (Mich.), the senior Republican on the House Ways and Means Committee. "This is a stark warning to every Republican, Democrat and independent worried about the financial future of this nation."

Democrats focused Saturday on the positive aspects of the report, noting that Foster concludes that overall national spending on health care would increase by a little more than 1 percent over the next decade, even though millions of additional people would gain insurance. Out-of-pocket spending would decline more than $200 billion by 2019, with the government picking up much of that. The Medicare savings, if they materialized, would extend the life of that program by five years, meaning it would not begin to require cash infusions until 2022.

"The president has made it clear that health insurance reform will protect and strengthen Medicare," said White House spokeswoman Linda Douglass. "And he has also made clear that no guaranteed Medicare benefits will be cut."

Republicans argued that the report forecasts an increase in total health-care spending of more than $289 billion.

Politico reports that the bill would actually increase costs, not reduce them as Democrats promised:

Democrats have promised that health reform would reduce health care costs, but legislation the House passed last week would increase costs over the next decade by $289 billion. By 2019, health costs would rise to 21.1 percent of GDP compared to 20.8 under current law, according to an actuarial report prepared by the Centers for Medicare and Medicaid Services. …

In other words, outside of Medicare payment cuts to hospitals, the bill doesn’t curb increasing health care costs. And even the Medicare payment cuts will be difficult to sustain.

Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.

Speaker Nancy Pelosi has reportedly told fellow Democrats that she's prepared to lose seats in 2010 if that's what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a "critical milestone," may well be the worst piece of post-New Deal legislation ever introduced.

In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.

Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.

•The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate. Most of the money goes into government-run "exchanges" where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.

At least at first, these benefits would be offered only to those whose employers don't provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this "firewall"—which is sure to cave in when people see the deal their neighbors are getting on "free" health care. Mrs. Pelosi knows this, like everyone else in Washington.

Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It "pays for" about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, "saving" about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.

• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to "pay for" universal coverage. While Medicare's price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.

As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.

Even though the House will assume 91% of the "matching rate" for this joint state-federal program—up from today's 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington's budget will collapse too, if anything like the House bill passes.

• European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point "surcharge" on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won't have any difficulty sheltering their incomes.

This surtax could hit ever more earners because, like the alternative minimum tax, it isn't indexed for inflation. Yet it still won't be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they'll claim the deficits that they created made them do it.

Under another new tax, businesses would have to surrender 8% of their payroll to government if they don't offer insurance or pay at least 72.5% of their workers' premiums, which eat into wages. Such "play or pay" taxes always become "pay or pay" and will rise over time, with severe consequences for hiring, job creation and ultimately growth. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.

Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won't buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.

• The insurance takeover. A new "health choices commissioner" will decide what counts as "essential benefits," which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.

The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.

The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as "private" health insurance.
***

All of this is intentional, even if it isn't explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama's own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back "public option" entitlement program is so that the architecture is in place for future Congresses to expand this share even further.

As Congress's balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can't regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.

Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.

The health care bill recently unveiled by Speaker Nancy Pelosi is over 1,900 pages for a reason. It is much easier to dispense goodies to favored interest groups if they are surrounded by a lot of legislative legalese. For example, check out this juicy morsel to the trial lawyers (page 1431-1433 of the bill):

Section 2531, entitled “Medical Liability Alternatives,” establishes an incentive program for states to adopt and implement alternatives to medical liability litigation. [But]…… a state is not eligible for the incentive payments if that state puts a law on the books that limits attorneys’ fees or imposes caps on damages.

So, you can’t try to seek alternatives to lawsuits if you’ve actually done something to implement alternatives to lawsuits. Brilliant! The trial lawyers must be very happy today!

While there is debate over the details, it is clear that medical malpractive lawsuits have some impact on driving health care costs higher. There are likely a number of procedures that are done simply as a defense against future possible litigation. Recall this from the Washington Post:

“Lawmakers could save as much as $54 billion over the next decade by imposing an array of new limits on medical malpractice lawsuits, congressional budget analysts said today — a substantial sum that could help cover the cost of President Obama’s overhaul of the nation’s health system. New research shows that legal reforms would not only lower malpractice insurance premiums for medical providers, but would also spur providers to save money by ordering fewer tests and procedures aimed primarily at defending their decisions in court, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, wrote in a letter to Sen. Orrin Hatch (R-Utah).”

Stay tuned. There are certainly many more terrible, horrible, no-good, very bad provisions in this massive bill.

Quick quiz: What do these enterprises have in common? Farm and construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo? Answer: They're all more profitable than the health insurance industry. In the health care debate, Democrats and their allies have gone after insurance companies as rapacious profiteers making "immoral" and "obscene" returns while "the bodies pile up."

Ledgers tell a different reality. Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.

Insurers are an expedient target for leaders who want a government-run plan in the marketplace. Such a public option would force private insurers to trim profits and restrain premiums to compete, the argument goes. This would "keep insurance companies honest," says President Barack Obama.

The debate is loaded with intimations that insurers are less than straight, when they are not flatly accused of malfeasance.

They may not have helped their case by commissioning a report that looked primarily at the elements of health care legislation that might drive consumer costs up while ignoring elements aimed at bringing costs down. Few in the debate seem interested in a true balance sheet.

But in pillorying insurers over profits, the critics are on shaky ground. A look at some claims, and the numbers:

THE CLAIMS

_"I'm very pleased that (Democratic leaders) will be talking, too, about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years." House Speaker Nancy Pelosi, D-Calif., who also welcomed the attention being drawn to insurers'"obscene profits."

_"Keeping the status quo may be what the insurance industry wants their premiums have more than doubled in the last decade and their profits have skyrocketed." Maryland Rep. Chris Van Hollen, member of the Democratic leadership.

_"Health insurance companies are willing to let the bodies pile up as long as their profits are safe." A MoveOn.org ad.

THE NUMBERS:

Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better - drugs and medical products and services were both in the top 10.

The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.

HealthSpring, the best performer in the health insurance industry, posted 5.4 percent. That's a less profitable margin than was achieved by the makers of Tupperware, Clorox bleach and Molson and Coors beers.

The star among the health insurance companies did, however, nose out Jack in the Box restaurants, which only achieved a 4 percent margin.

UnitedHealth Group, reporting third quarter results last week, saw fortunes improve. It managed a 5 percent profit margin on an 8 percent growth in revenue.

Van Hollen is right that premiums have more than doubled in a decade, according to a Kaiser Family Foundation study that found a 131 percent increase.

But were the Bush years golden ones for health insurers?

Not judging by profit margins, profit growth or returns to shareholders. The industry's overall profits grew only 8.8 percent from 2003 to 2008, and its margins year to year, from 2005 forward, never cracked 8 percent.

The latest annual profit margins of a selection of products, services and industries: Tupperware Brands, 7.5 percent; Yahoo, 5.9 percent; Hershey, 6.1 percent; Clorox, 8.7 percent; Molson Coors Brewing, 8.1 percent; construction and farm machinery, 5 percent; Yum Brands (think KFC, Pizza Hut, Taco Bell), 8.5 percent.

A group in British Columbia has offered medical waiting-list insurance to members whose government treatment is on hold — another example of why state-run health care must be avoided.

Canadians have a health care system that should be the envy of no one. It's not free, it's funded by taxpayers, and it isn't truly universal. Two Canadian Supreme Court justices made this clear three years ago when they concluded that "access to a waiting list is not access to health care."

Delayed treatment in an overused system has been the root of much unnecessary suffering. To prevent premature deaths and the needless misery that are hallmarks of Canadian care, the British Columbia Automobile Association began offering waiting-list insurance to some of its members in August as part of a pilot program.

Those who bought the coverage would receive treatment in a private clinic in British Columbia or the U.S. if they were placed on a government care waiting list longer than 45 days.

The program, which took two years to develop, never got beyond the pilot phase, however. The association shut it down when critics howled and government officials checked to see if such a program was actually legal in Canada.

"This is an example of a company that's actively soliciting for clients that have the ability to pay for the privilege of queue-jumping," said Adrian Dix, a member of B.C.'s Legislative Assembly. "In my view, and in the view of the legal opinion that we obtained, it is illegal, and it violated both provincial and national health legislation."

It's hard to understand why an elected official, or anyone else, would knowingly trap people in a system that can't take care of the public it is expected to serve. Yet there are many Canadians who would, in the name of "fairness" and "equality," deny others' right to take care of themselves outside of the collective. They are outraged that some of their countrymen could escape the agony of the waiting lists while others languish in the bureaucratic wreckage.

But the real outrage, to quote Brian Day, former director of the Canadian Medical Association, should be that a government would actually force "a citizen in a free and democratic society to simply wait for health care, and outlaw their ability to extricate themselves from a wait list."

That, however, is the system Canadians have been living and dying with for decades. Only in recent years does it seem that they've had enough of it. First in Quebec and now in B.C., private clinics have been opening to treat those who either don't want to wait or are too sick to endure the system's waiting list. Whether they will remain legal and open will be decided this fall by the courts.

Meanwhile, Canadians keep waiting — and waiting. The Fraser Institute in Canada reports that the median wait time from a general practitioner's referral to actual treatment by a specialist was 17.3 weeks in 2008 (see chart). That's a full week better than the previous year, but far worse than a decade and a half earlier when the wait time was 9.3 weeks.

Despite the decline from 2007 to 2008, the long-term trend indicates that wait times will continue to grow. It's a discouraging pattern that the U.S. will follow if Washington forces any kind of government care on this country.

Zach

7 months after the stimulus, 49 of 50 States have lost jobs. The table below compares the White House's February 2009 projection of the umber of jobs that would be created by the 2009 stimulus law (through the end of 2010) with the actual change in state payroll employment through September 2009 (the latest figures available). According to the data, 49 States and the District of Columbia have lost jobs since stimulus was enacted. Only North Dakota has seen net job creation following the February 2009 stimulus. While President Obama claimed the result of his stimulus bill would be the creation of 3.5 million jobs, the Nation has already lost a total of 2.7 million – a difference of 6.2 million jobs. To see how stimulus has failed your state, see the table below.

While many Americans are upset by ObamaCare’s $1 trillion price tag, Congress is contemplating other changes with little analysis or debate. These changes would create a massively unfair form of income redistribution and create incentives for many not to buy health insurance at all.

Let's start with basics: Insurance protects against the risk of something bad happening. When your house is on fire you no longer need protection against risk. You need a fireman and cash to rebuild your home. But suppose the government requires insurers to sell you fire "insurance" while your house is on fire and says you can pay the same premium as people whose houses are not on fire. The result would be that few homeowners would buy insurance until their houses were on fire.

The same could happen under health insurance reform. Here's how: President Obama proposes to require insurers to sell policies to everyone no matter what their health status. By itself this requirement, called "guaranteed issue," would just mean that insurers would charge predictably sick people the extremely high insurance premiums that reflect their future expected costs. But if Congress adds another requirement, called "community rating," insurers' ability to charge higher premiums for higher risks will be sharply limited.

Thus a healthy 25-year-old and a 55-year-old with cancer would pay nearly the same premium for a health policy. Mr. Obama and his allies emphasize the benefits for the 55-year old. But the 25-year-old, who may also have a lower income, would pay significantly more than needed to cover his expected costs.

Like the homeowner who waits until his house is on fire to buy insurance, younger, poorer, healthier workers will rationally choose to avoid paying high premiums now to subsidize insurance for someone else. After all, they can always get a policy if they get sick.

To avoid this outcome, most congressional Democrats and some Republicans would combine guaranteed issue and community rating with the requirement that all workers buy health insurance—that is, an "individual mandate." This solves the incentive problem, and guarantees that both the healthy poor 25-year-old and the sick higher-income 55-year-old have heath insurance.

But the combination of a guaranteed issue, community rating and an individual mandate means that younger, healthier, lower-income earners would be forced to subsidize older, sicker, higher-income earners. And because these subsidies are buried within health-insurance premiums, the massive income redistribution is hidden from public view and not debated.

If Congress goes down this road, health insurance premiums will increase dramatically for the overwhelming majority of people. Even if Congress mandates that everyone have health insurance, many will choose to go without and pay the tax penalty. If you think people are dissatisfied with health care now, wait until they understand that Congress voted to mandate hidden premium increases and lower wages.

There are wiser and more equitable ways to ensure that every American has access to affordable health insurance. Policy experts and state policy makers have experimented with different solutions, including high risk pools and taxpayer-funded vouchers subsidized for those who are both poor and sick. Medicaid, charity care, and uncompensated care provided by hospitals cover some of these costs today.

These solutions are imperfect, but so are the reforms being proposed in Congress. Congress should be explicit about who will pay more under its plans.

Yes, there are death panels. Its members won't even know whose deaths they are causing. But under the health care bill sponsored by Senate Finance Committee Chairman Max Baucus, Montana Democrat, death panels will indeed exist - oh so cleverly disguised as accountants.

The offending provision is on Pages 80-81 of the unamended Baucus bill, hidden amid a lot of similar legislative mumbo-jumbo about Medicare payments to doctors. The key sentence: "Beginning in 2015, payment would be reduced by five percent if an aggregation of the physician's resource use is at or above the 90th percentile of national utilization." Translated into plain English, it means that in any year in which a particular doctor's average per-patient Medicare costs are in the top 10 percent in the nation, the feds will cut the doctor's payments by 5 percent.

Forget results. This provision makes no account for the results of care, its quality or even its efficiency. It just says that if a doctor authorizes expensive care, no matter how successfully, the government will punish him by scrimping on what already is a low reimbursement rate for treating Medicare patients. The incentive, therefore, is for the doctor always to provide less care for his patients for fear of having his payments docked. And because no doctor will know who falls in the top 10 percent until year's end, or what total average costs will break the 10 percent threshold, the pressure will be intense to withhold care, and withhold care again, and then withhold it some more. Or at least to prescribe cheaper care, no matter how much less effective, in order to avoid the penalties.

The National Right to Life Committee concludes that this provision will cause a "death spiral" by "ensur[ing] that doctors are forced to ration care for their senior citizen patients." Every 10th doctor in the country will fall victim to it. Libertarian columnist Nat Hentoff calls the provision "insidious" and writes that "the nature of our final exit" will be very much at risk.

For all the trouble to the doctors and all the added risks to elderly patients, this provision will raise just $1 billion over six years for the federal Treasury. That doesn't account, though, for the added costs to the government - and thus to taxpayers - of tracking all this data per doctor and per patient, and then trying to collect the penalties from doctors after they already have been paid for their services.

This is far from the only part of Baucus-Pelosi-Obamacare that would almost certainly lead to rationing of care, especially for the elderly. The proposed "health care exchange," along with Obamacare's independent review panels and a national health board, will be empowered to make aggregate decisions - based on statistics, not on an individual patient's needs - about what sorts of care will be allowed and what won't. As it is in Great Britain, where thousands of cancer patients each year die prematurely due to lack of treatment, the inevitable result of government care could be the same for many Americans as if an actual panel decided case-by-case to euthanize them. The Baucus provision would only exacerbate this bureaucratic preference for death by proxy.

Zach

Does anyone really think this is going to solve our problems?



Zach

Who says more government is the answer? Just consider California a microcosm of the whole US.

This study measures and reports the cost of regulation to small business in the State of California. It uses original analyses and a general equilibrium framework to identify and measure the cost of regulation as measured by the loss of economic output to the State’s gross product, after controlling for variables known to influence output. It also measures second order costs resulting from regulatory activity by studying the total impact – direct, indirect, and induced. The study finds that the total cost of regulation to the State of California is $492.994 billion which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation results in an employment loss of 3.8 million jobs which is a tenth of the State’s population. Since small business constitute 99.2% of all employer businesses in California, and all of non-employer business, the regulatory cost is borne almost completely by small business. The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $4,359.55 per small business, indirect business taxes not generated or lost were $57,260.15 per small business, and finally roughly one job lost per small business.

Zach

For all the commotion we heard about Bush and the Patriot act, the policy which Obama supports extending, are these same people decrying the death of the freedom to choose to purchase services such as health care? A common counterargument is, "car insurance is mandated!" The problem with this argument is that 1) this is a state mandate, not a federal mandate, and 2) an individual must decide to drive a car before they are subject to this charge, rather than being penalized for merely existing. In the latter, the individual cannot choose not to participate without being penalized. This is simply astounding. I can only hope that such an outrageous mandate would be overruled by the Supreme Court.

Sen. John Ensign (R-Nev.) received a handwritten note Thursday from Joint Committee on Taxation Chief of Staft Tom Barthold confirming the penalty for failing to pay the up to $1,900 fee for not buying health insurance.

Violators could be charged with a misdemeanor and could face up to a year in jail or a $25,000 penalty, Barthold wrote on JCT letterhead. He signed it "Sincerely, Thomas A. Barthold."

Zach

With his public option stalled on the tracks, a centerpiece of President Obama's health care agenda is emerging. This new one would require insurers to cover those who have pre-existing conditions — while making them charge prices that ignore those conditions.

This would immediately inflate the prices of everyone else's insurance premiums while incentivizing millions to quit carrying coverage year-round. In doing so, it would undermine private insurance and pave the way for a government-run plan.

Furthermore, it would make it harder for the rest of the uninsured — the vast majority of whom don't have expensive pre-existing conditions — to afford coverage.

It's essential that we solve the problem of ensuring health care access to those with pre-existing conditions. But this serious issue should be dealt with in a sensible way, not in a manner that would make matters much worse.

The president's proposed experiment, like so much of his health care agenda, has already been tried in Massachusetts. Bay State insurers are banned from denying coverage or charging higher premiums to those with pre-existing conditions.

Massachusetts residents are also required by law to buy health insurance, even if they don't want it. But many did the math, realized the fine for not carrying insurance was lower than the cost of carrying it, and decided to pay the fine rather than buy the plan.

Why carry insurance year-round when you can just wait until you get sick or injured and then sign up for "insurance" (wink, wink) to cover you?

Naturally, there has been an increase in the number of Massachusetts residents who buy coverage for a few months, run up high medical bills, then dump the coverage.

One Massachusetts insurance company, Harvard-Pilgrim, estimates that from April 2008 to March 2009, 40% of its new enrollees stayed with it for less than five months. These short-term enrollees incurred $2,400 in average monthly costs compared with a companywide average of $350, according to the Wall Street Journal.

Most Americans aren't comfortable with forcing people to pay the full cost of coverage for a pre-existing condition when it's prohibitively expensive and they can't possibly afford it. But most Americans' intuitive sense of justice also recoils at the other extreme: the view that those who cost far less should be required — by law — to pay the same as those who cost far more.

A completely healthy person who exercises, doesn't smoke, and eats and drinks in moderation should not be required to pay as much for coverage as a chronic drinker or reformed smoker who's requiring expensive treatment for liver or lung disease.

And those who wait until they're sick to buy insurance should not be able to buy it at the same price as those who have been paying into the insurance pool all along.

Beyond issues of fairness, Obama's proposal would raise prices, reduce access for the uninsured who don't have expensive pre-existing conditions, and cause a mass exodus from the insurance ranks.

A better solution exists. Rather than requiring insurers to cover all comers at the same rate, we should further strengthen the high-risk pools operating in most states. Thirty-four states already have high-risk pools to help cover those who are uninsured and have pre-existing conditions.

We should increase federal support for these pools and incentivize their establishment in all 50 states. Some of the federal funds that go to covering emergency-room care for such patients could be shifted to these pools, as reliance on emergency-room care is reduced.

Perhaps Obama fails to anticipate that his proposal would lead millions of Americans to drop their insurance. But perhaps he doesn't. For if people start buying insurance only when they need care, insurers' revenue will decline but their costs will not, and insurers will have no choice but to raise costs substantially for those who remain.

As prices rise, two things will happen: More people will follow suit in treating insurance as a just-in-time good, and the public outcry against higher insurance premiums will escalate. And then who will ride to the rescue on the white horse? The government.

"You see," the president would say, "private insurance has been tried, and it hasn't worked. We need to do what works."

The predictable result would ensue.

To give the administration its due, it has repeatedly said the public option is not an end in itself, but rather the means to an end.

Is anyone really surprised about this? Obama will say anything to get his health care plan through congress. That any president will do this is nothing new, but to do so to take over 1/6 of the US economy is despicable. This reminds me of the secret tapes with LBJ and Ted Kennedy, as reported by NPR:

Johnson maneuvered every step of the way getting this bill through Congress, and one of the things he did — and this is a little dicey in today's climate — was suppress the costs. So this young kid gets elected from Massachusetts, Ted Kennedy, in 1962, and Johnson is explaining to him [over the phone] how you get a health bill through. And what he tells him is don't let them get the costs projected too far out because it will scare other people:

"A health program yesterday runs $300 million, but the fools had to go to projecting it down the road five or six years, and when you project it the first year, it runs $900 million. Now I don't know whether I would approve $900 million second year or not. I might approve 450 or 500. But the first thing Dick Russell comes running in saying, 'My God, you've got a billion-dollar program for next year on health, therefore I'm against any of it now.' Do you follow me?"

We believe, after looking at the evidence, my co-author [David Blumenthal] and I, that if the true cost of Medicare had been known — if Johnson hadn't basically hidden them — the program would never have passed. America's second-most beloved program would never have happened, if we had had genuine cost estimates.

Is Obama outright lying? No, but the essentials are the same...play down the costs or consequences so no one will know what hits them. And what about his promise to 'include language to ensure budget neutrality?' It sounds great, but once he and the current congress are mostly out of office there will be nothing stopping them from ignoring that 'language.'

Congress' chief budget officer is contradicting President Barack Obama's oft-stated claim that seniors wouldn't see their Medicare benefits cut under a health care overhaul.

The head of the nonpartisan Congressional Budget Office, Douglas Elmendorf, told senators Tuesday that seniors in Medicare's managed care plans would see reduced benefits under a bill in the Finance Committee.

The bill would cut payments to the Medicare Advantage plans by more than $100 billion over 10 years.

Elmendorf said the changes would reduce the extra benefits that would be made available to beneficiaries.

Critics say the plans are overpaid, while supporters say they work well.

Obama says cuts to Medicare providers won't reduce seniors' benefits.

Zach

The fact that doctors, by in large, do not support Obama's health reform is shockingly under-reported. It's important to remember that one of the most cited reasons for physicians going into early retirement or choosing another profession is excessive government intervention and mandates. This ultimately takes decisions from physicians and hinders their ability to practice medicine. As this poll points out, the problems are only going to be exacerbated as a physician shortage looms even without excessive government meddling. The solution? Do what the NHS does: recruit physicians from third world countries where physician standards are lower than in the US.

Doctor opposition to health care overhaul proposals is broad and deep, revealing concerns not just about soaring costs, declining care, possible rationing and a lack of limits on malpractice suits, but also about government competence and motives, detailed responses to a new IBD/TIPP Poll show.

65% of the 1,376 practicing physicians who responded to a mailed questionnaire over the last two weeks said they opposed health care plans that have emerged from the administration and Congress. Just 33% supported them.

Perhaps the most shocking result: 45% of these professionals said they would consider closing their practices or retiring early if the reforms now under consideration were enacted.

Zach

This is the second time in a week I'm giving props to Obama. The first was for calling Kanye West a jack-ass. The second is for checking the out of control leftists screaming "racism."

Lots of respect for this...but I still hate the government.

President Barack Obama said Friday that angry criticisms about his health care agenda are driven by an intense debate over the proper role of government — and not by racism.

"Are there people out there who don't like me because of race? I'm sure there are," Obama told CNN. "That's not the overriding issue here."

I am, in part, very glad that our country is having an in-depth discussion on our health care system. It's forced me to learn quite a bit about our system and the many misleading claims of the left. Many times, however, the new information I acquired did nothing more than uncover more answers. What are some of the jewels? Well, the true number of uninsured is much lower than the oft cited '47 million,' in 2007 only about eight-tenths of one percent of Americans in lived in families that filed for bankruptcy as a result of medical costs (rather than the 'every 30 seconds' as cited by Obama), and I now get to reasonably answer another question I've had...how often are individuals truly dropped from their coverage for getting sick? Congressional staffers went through millions of policies from three large insurance companies over a five year period and found that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).

Here's the next question I'm itching to know: what percentage of Americans who apply for private coverage are turned down for pre-existing illnesses? My guess is that it won't be nearly as much as they would have us believe.


In his speech to Congress last week, President Barack Obama attempted to sell a reform agenda by demonizing the private health-insurance industry, which many people love to hate. He opened the attack by asserting: "More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day."

Clearly, this should never happen to anyone who is in good standing with his insurance company and has abided by the terms of the policy. But the president's examples of people "dropped" by their insurance companies involve the rescission of policies based on misrepresentation or concealment of information in applications for coverage. Private health insurance cannot function if people buy insurance only after they become seriously ill, or if they knowingly conceal health conditions that might affect their policy.

Traditional practice, governed by decades of common law, statute and regulation is for insurers to rely in underwriting and pricing on the truthfulness of the information provided by applicants about their health, without conducting a costly investigation of each applicant's health history. Instead, companies engage in a certain degree of ex post auditing—conducting more detailed and costly reviews of a subset of applications following policy issue—including when expensive treatment is sought soon after a policy is issued.

This practice offers substantial cost savings and lower premiums compared to trying to verify every application before issuing a policy, or simply paying all claims, regardless of the accuracy and completeness of the applicant's disclosure. Some states restrict insurer rescission rights to instances where the misrepresented or concealed information is directly related to the illness that produced the claim. Most states do not.

To highlight abusive practices, Mr. Obama referred to an Illinois man who "lost his coverage in the middle of chemotherapy because his insurer found he hadn't reported gallstones that he didn't even know about." The president continued: "They delayed his treatment, and he died because of it."

Although the president has used this example previously, his conclusion is contradicted by the transcript of a June 16 hearing on industry practices before the Subcommittee of Oversight and Investigation of the House Committee on Energy and Commerce. The deceased's sister testified that the insurer reinstated her brother's coverage following intervention by the Illinois Attorney General's Office. She testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."

The president's second example was a Texas woman "about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." He said that "By the time she had her insurance reinstated, her breast cancer more than doubled in size."

The woman's testimony at the June 16 hearing confirms that her surgery was delayed several months. It also suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application.

These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).

If existing laws and litigation governing rescission are inadequate, there clearly are a variety of ways that the states or federal government could target abuses without adopting the president's agenda for federal control of health insurance, or the creation of a government health insurer.

Later in his speech, the president used Alabama to buttress his call for a government insurer to enhance competition in health insurance. He asserted that 90% of the Alabama health-insurance market is controlled by one insurer, and that high market concentration "makes it easier for insurance companies to treat their customers badly—by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates."

In fact, the Birmingham News reported immediately following the speech that the state's largest health insurer, the nonprofit Blue Cross and Blue Shield of Alabama, has about a 75% market share. A representative of the company indicated that its "profit" averaged only 0.6% of premiums the past decade, and that its administrative expense ratio is 7% of premiums, the fourth lowest among 39 Blue Cross and Blue Shield plans nationwide.

Similarly, a Dec. 31, 2007, report by the Alabama Department of Insurance indicates that the insurer's ratio of medical-claim costs to premiums for the year was 92%, with an administrative expense ratio (including claims settlement expenses) of 7.5%. Its net income, including investment income, was equivalent to 2% of premiums in that year.

In addition to these consumer friendly numbers, a survey in Consumer Reports this month reported that Blue Cross and Blue Shield of Alabama ranked second nationally in customer satisfaction among 41 preferred provider organization health plans. The insurer's apparent efficiency may explain its dominance, as opposed to a lack of competition—especially since there are no obvious barriers to entry or expansion in Alabama faced by large national health insurers such as United Healthcare and Aetna.

Responsible reform requires careful analysis of the underlying causes of problems in health insurance and informed debate over the benefits and costs of targeted remedies. The president's continued demonization of private health insurance in pursuit of his broad agenda of government expansion is inconsistent with that objective.

Millions of Americans finally got to hear the Democrats' pitch on health care reform, made by their top salesman. But they heard nothing new — just a lot of discredited myths recycled as the truth.

For the record, we support improving our health care system. As is, it has too many rules, too much government spending and too few market forces to keep costs low and quality high.

We spend north of $2 trillion every year on health care — 17% of our GDP, the most of any wealthy nation. If that sounds like a lot, remember this: An estimated 47% of that already is spent by the government. And government's share will grow even without "reform."

Look closely at the plans so far to emerge from Congress. What the Democrats have proposed, in essence, is a government takeover of nearly one-fifth of our nation's economy. When brought up in Congress, this idea has been rejected repeatedly. Yet, somehow, the idea never dies.

That's why the president's speech Wednesday night was a big disappointment.

Rather than a breakthrough that would remove government's stranglehold on a once-healthy market and move us toward true reform, we heard a lot of old bromides and myths — things we just can't let go uncorrected. Too much is at stake.

So following are 15 of the biggest misconceptions — and there are many more, we assure you — that we found in the speech:

• "The uninsured . . . live every day just one accident or illness away from bankruptcy. These are not primarily people on welfare."

Actually, of the 46 million people the census estimates don't have insurance, some 20 million have incomes above average and could afford to buy it, according to a study by former Congressional Budget Office Director June O'Neill.

Of the remaining 26 million uninsured, an estimated 13.7 million are poor. They are eligible for Medicaid — the state health care programs for the poor. But many, too, are illegals — about 8 million.

Though they're eligible, research from the Blue Cross and Blue Shield Association suggests as many as 14 million uninsured Americans qualify for public coverage, but don't enroll. And as many as 6 million are enrolled, but don't report it to the government, according to the National Center for Policy Analysis.

That leaves about 5 million people with no care.

By the way, according to the Census Bureau, America now has 37 million people in poverty. But Medicaid enrollment covers 55 million people — at a cost of $350 billion a year.

Based on this, no one should be without care. Which leads us to wonder: Is nationalizing our health care system really necessary to take care of people who already have care available to them?

• "Many other Americans . . . are still denied insurance due to previous illnesses or conditions that insurance companies decide are too risky or expensive to cover."

This statement betrays a profound ignorance of what insurance is. If you can buy insurance after you've gotten sick, it's not really insurance, is it? And why have insurance at all? It's an incentive to simply wait until you get sick, then make someone else pay for it.

To see how absurd this is, let's take the same concept to auto insurance. Why not let people buy insurance after they get in an accident? One reason, of course, is it leads to fiscal and personal recklessness.

• "There are now more than 30 million American citizens who cannot get coverage . . . every day, 14,000 Americans lose their coverage."

As noted above, the bulk of the 30-plus million uninsured actually can get coverage — and in many cases, qualify for existing government programs. But how about 14,000 Americans losing their coverage each day? A little math shows this is just a scare statistic.

Multiply it out, and it comes to 5.1 million people losing coverage in a year. Sound scary? Consider that, according to the census, 46.3 million Americans don't currently have insurance — 600,000 more than last year. That means that, along with 14,000 Americans losing their coverage each day, another 12,400 Americans are signing up for it — even in the middle of a brutal recession.

Those who lose insurance do so usually because they've lost a job. Most are without insurance for a couple of months or so. The best way to boost the number of insured — and one that "costs" nothing — is to cut taxes, ease regulations and slash government spending. Those policies are all proven job creators.

• "We spend one-and-a-half times more per person on health care than any other country, but we aren't any healthier for it."

This is a non sequitur. We spend one and a half times more per person, true. But because our health care here is better. That's right — better. True, our life expectancy of 78.1 years — which is up sharply from just a decade ago — ranks us 30th in the world in longevity. But look a little closer at the data.

The U.S. homicide rate is two to three times higher than in other industrial nations. And we drive a lot more than others, so our auto fatality rate of 14.24 deaths per 100,000 people is higher than in Germany (6.19), France (7.4) or Canada (9.25). Add to this, we eat far more than other countries on average, contributing to higher levels of heart disease, stroke, diabetes and cancer.

When all those factors are figured in, according to a recent study by Robert Ohsfeldt of Texas A&M and John Schneider of the University of Iowa, Americans actually live longer than people in other countries — thanks mainly to our excellent health care.

• Rising health care premiums are "why American businesses that compete internationally — like our automakers — are at a huge disadvantage."

Well, right and wrong. Soaring health care premiums are a problem for some. But who's to blame for this? Government health care programs, which make up 47% of all health care spending, are the biggest drivers of rising insurance premiums.

For example, Medicare forces doctors and hospitals to give patients 20% to 30% discounts on their care and drugs. Sounds great. But who pays for the "discount"? Private insurers, that's who. And they pass it on to businesses. This is yet another case of government causing a problem, then blaming the victim.

Even so, in some industries health care premiums are an enormous problem and competitive liability. This is certainly true of the auto and steel industries. But they have no one to blame but themselves.

They gave gold-plated benefit packages to their unions during the fat times, and now that times are lean, want us — taxpayers — to make good on their extravagant promises.

This is why so many big businesses support nationalized health care. It bails them out of their own bad decisions — and by those imposed by government. Just last week a congressional oversight panel announced that taxpayers were unlikely to recoup much of the $81 billion they spent to bail out GM and Chrysler. That's another indirect health care tax your children and grandchildren will have to pay.

• "Finally, our health care system is placing an unsustainable burden on taxpayers. . . . If we do nothing to slow these skyrocketing costs, we will eventually be spending more on Medicare and Medicaid than every other government program combined."

Are we supposed to believe that adding more government will bring down government costs?

Medicare is already spending more than it is taking in through payroll taxes. Medicare trustees expect the Hospital Insurance Trust Fund part of the program to be insolvent by 2019. From now through 2017, it will need $342 billion of taxpayers' money in order to keep paying hospital insurance benefits alone. Over the next 50 years or so, Medicare's shortfall is expected to hit $37 trillion — an almost unbelievable deficit nearly three times our current GDP.

If Medicare has done one thing, it's proved that government programs always cost more than their original projections. Citing the runaway costs of Medicare is an argument against, not for, further government intervention.

• "On the right, there are those who argue that we should end the employer-based system and leave individuals to buy health insurance on their own. . . . I believe it makes more sense to build on what works and fix what doesn't, rather than try to build an entirely new system from scratch."

Discouraging employer-based coverage and encouraging individuals to buy their own insurance would help. But only if lawmakers make two real reforms, neither requiring a "new system from scratch."

First, Washington must give tax credits for premiums paid on individual policies. That would make them more affordable for more people. Second, Washington has to make it easier for Americans to have health savings accounts. HSAs hold costs down because account holders self-ration treatment. They also give people more control over their health care.

• "Nothing in this plan will require you or your employer to change the coverage or the doctor you have."

Shawn Tully, Fortune editor at large, dug into the legislation and found that for "Americans in large corporations, 'keeping your own plan' has a strict deadline. In five years, like it or not, you'll get dumped into the exchange," a government program in which heavily regulated private companies sell insurance policies.

Workers who buy their own insurance or begin coverage through small businesses will also be forced into the exchange if their plans change in any way, because it's then considered a new plan. Since plans generally change policies every year, Tully says, "it's likely that millions of employees will lose their plans in 12 months."

According to a July study by the Lewin Group and the Heritage Foundation, health reform could cause as many as 88 million Americans to lose their private, employer-based coverage.

• "If you lose your job or change your job, you will be able to get coverage. If you strike out on your own and start a small business, you will be able to get coverage. We will do this by creating a new insurance exchange."

The president says this is "a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices." But it won't be a real marketplace. Participating insurers will be saddled with a host of mandates. Those that don't like the regulations will be left out. There'll be little room for competition.

The Cato Institute's Michael Tanner has said that "in practice, at least as demonstrated in Massachusetts," an exchange "can quickly devolve into a regulatory body."

• "Some of people's concerns have grown out of bogus claims . . . The best example is . . . that we plan to set up panels of bureaucrats with the power to kill off senior citizens. . . . It is a lie, plain and simple."

As far as we know, there is no provision for a death panel buried in the 1,018-page bill. But we do know how Dr. Ezekiel Emanuel, the administration's health care czar, feels about treating those who need the most help.

"When the worse-off can benefit only slightly while better-off people could benefit greatly, allocating (treatment) to the better-off is often justifiable."

So the federal government won't be actively killing the old and the sick. It will just let them die by denying them the care that will supposedly be available to every American.

• "There are those who also claim that our reform effort will insure illegal immigrants. This, too, is false — the reforms I'm proposing would not apply to those who are here illegally."

Tough words are one thing, enforcement is another. As IBD's Sean Higgins reported last week: "Some independent analysis indicates — contrary to Obama's claim — that the House health bill could result in coverage being extended to illegal immigrants."

It starts with the mandate for everyone to buy insurance, including illegals. Their choices will be presumably through the "exchange," and they won't be eligible for subsidies to buy. But the non-partisan Congressional Research Service warns there's no verification mechanism. An amendment by GOP Rep. Dean Heller of Nevada, to use electronic immigration records to verify eligibility for subsidies, was shot down by Democrats.

Enforcement woes are nothing new. The U.K.'s nationalized system treats as many as a million illegal immigrants a year because eligibility verification at the point of service is nearly impossible. It's now giving up the ghost of trying because illegals have won the right to be treated at taxpayer expense as a "human right." That's brought new waves of "health tourism" as word spreads.

Cabinet officials, such as Labor Secretary Hilda Solis, support union demands to give amnesty to 12 million illegals. If so, they will get public health care. And hospitals that continue to treat illegals through emergency rooms, are reimbursed through Medicaid.

• "My health care proposal has also been attacked by some who oppose reform as a 'government takeover' of the entire health care system . . . Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. . . Without competition, the price of insurance goes up and the quality goes down."

Obama is right about limited numbers of insurers in states. They're the last ones able to survive the layers of bureaucratic mandates and regulations without going bankrupt.

The fastest way to create choice for consumers isn't by adding a government option, but by breaking down trade barriers across state lines. By letting citizens buy insurance from any state, a truly competitive market can develop, with choices in coverage, service and price. It would be far better if each American could buy health insurance from any of the nation's 1,300 insurers, not just a handful in their own states.

• "Despite all this, some . . . argue that these private (insurance) companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public option. But they won't be. . . . (The public option) would . . . keep pressure on private insurers to keep their policies affordable and treat their customers better . . ."

When the government acts as both producer and regulator of its own and everyone else's products, the playing field is tilted because there's a basic conflict of interest. It's also a recipe for cronyism and corruption. Witness Fannie Mae and Freddie Mac.

We looked at the after-tax margins of some big health insurers over the last 12 months. Here's what we found: Among HMOs, Humana, 3.1%. Cigna, 4%. Wellpoint, 5%. United Health Group, 4.4%. Broader health insurers, like Unum (8.6% after-tax margin) and AFLAC (12.3%), do a bit better.

The point is, these are not outrageous profits. And the health care industry's $13 billion in 2008 profits pale in comparison to the $65 billion in annual fraud in Medicare alone.

• "I will not sign a plan that adds one dime to our deficits — either now or in the future. Period. And to prove that I'm serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don't materialize."

From the folks who brought us a $10 trillion deficit over the next decade, that's hard to swallow. The White House has assured us the public option would be funded by premiums. So, it's hard to know what he means by savings or spending cuts.

Although Medicare and Medicaid, are slated for $313 billion in cuts, the government has yet to eliminate the $65 billion or so that goes to waste and fraud. They don't need health reform to do that, they can do it now.

• "The only thing this plan would eliminate is the hundreds of billions of dollars in waste and fraud as well as unwarranted subsidies in Medicare that go to insurance companies — subsidies that do everything to pad their profits and nothing to improve your care."

Speaking of waste and fraud, as we said, why can't it be done today instead of waiting for some health care reform bill to pass? The president proposes $313 billion in Medicaid and Medicare cuts, saying $110 billion would come from reducing scheduled increases in Medicare payments.

"That would encourage health care providers to increase productivity," White House budget director Peter Orszag told reporters. $110 billion would come from ending payments to hospitals to treat uninsured patients. But much of that comes from treating illegals, who aren't supposed to be eligible for the public option.

Another $75 billion would come from "better pricing of Medicare drugs," Orszag said.

What he doesn't get is that some $10 billion of Medicare funding goes to dubious expenditures like hospitals padding bills because they are paid too little and must make up lost revenue in volume.

Cutting payments more means more padding, as the Mayo Clinic has warned. That means rationing. The Democrats' plan may not be explicitly mean to ration, but not paying a fair and market-determined price for services will ensure less of it for patients.

President Obama began his speech by noting it's "been nearly a century since Theodore Roosevelt first called for health reform" and that "nearly every president and Congress, whether Democrat or Republican, has attempted to meet this challenge in some way."

"A bill for comprehensive care reform was first introduced by John Dingell Sr. in 1943," he also pointed out. "Sixty-five years later, his son (Rep. John Dingell, Michigan Democrat now in his 28th term) continues to introduce that same bill at the beginning of each session."

Could it be, we wonder, that the reason why health reform of the kind the Dingells and Democrats have been pushing for 100 years has gone nowhere is that Americans want nothing to do with it? What is it about "No!" that they don't understand?

"But what we have also seen in these last months is the same partisan spectacle that only hardens the disdain many Americans have toward their own government. Instead of honest debate, we have seen scare tactics..."

Finally, something we can agree on. Scare tactics are wrong and odious.

President Barack Obama demanded Congress act now on health reform, warning more Americans would die if Washington again does nothing to expand care and cut the costs of insurance.

Sigh...

A South Carolina Republican lawmaker shouted "You lie" at President Barack Obama as he addressed Congress on Wednesday. The congressman later apologized for his "lack of civility."

Alright, so that was inappropriate. But I saw Obama sneer in his direction as if to say "stop spreading your disinformation." What a friend google is...

In what he called the "first myth" being spread by critics of his proposal for a government-run health care system, Obama said they are wrong in claiming illegal immigrants will be covered: "That is not true. Illegal immigrants would not be covered. That idea has not even been on the table." Obama said.

Well, Mr. President, that idea must have been tucked under a stack of background briefing papers over there in the corner of the table because the Congressional Research Service (CRS) says this about H.R. 3200, the Obamacare bill approved just before the recess by the House Energy and Commerce Committee chaired by Rep. Henry Waxman, D-CA:
"Under H.R. 3200, a 'Health Insurance Exchange' would begin operation in 2013 and would offer private plans alongside a public option…H.R. 3200 does not contain any restrictions on noncitzens—whether legally or illegally present, or in the United States temporarily or permanently—participating in the Exchange."

Honestly, I thought the speech was pretty good, even if inappropriately partisan at times. However, I cannot for the life of me understand how he can continue to offer specifics on any health plan that he is allowing to be written by the same neanderthals who wrote the stimulus bill. He has no idea what's going to be in it, yet he's setting a price tag of $900 billion. Why is this insane? At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion. It wasn't easy passing Medicare, but no one remembers the initial promises and projections of the program and now it's become a sacred, bloated untouchable cow. The same will happen with the public option...and we'll all be worse off for it.

Assisting the needy in health care is a "moral imperative" — not a constitutional right. The two are as different as a squirt gun and an Uzi.

If something is not permitted under our Constitution, the federal government simply cannot do it. Period.

The Founding Fathers vigorously debated the role of the federal government and defined it in Article I, Section 8 — spelling out the specific duties and obligations of the federal government.

Most notably, these included providing a military for national security, coining money, establishing rules for immigration and citizenship, establishing rules for bankruptcy, setting up a postal system, establishing trademark and copyright rules, and setting up a legal system to resolve disputes.

Charity is not there.

Early Start

Congress began ignoring its lack of authority for charity before the ink dried on the Constitution. When Congress appropriated $15,000 to assist French refugees in 1792, James Madison — a Founding Father and principal author of the Constitution — wrote:

"I cannot undertake to lay my finger on that article of the Constitution, which granted a right to Congress of expending, on objects of benevolence, the money of their constituents."

What about the Constitution's general welfare clause?

Madison said: "With respect to the words general welfare, I have always regarded them as qualified by the detail of powers (enumerated in the Constitution) connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators."

And consider government welfare's effect on people's willingness to give. During the Great Depression — before the social programs that today we accept as givens (Social Security, Medicare, Medicaid) — charitable giving increased dramatically.

After FDR began signing social programs into law, charitable giving continued, but not at the same rate. People felt that they had given at the office and/or that government was handling it.

Government "charity" is simply less efficient than private charity. Every dollar extracted from taxpayers, sent to Washington and then routed to the beneficiary loses about 70 cents in transfer costs — salaries, rent and other expenses.

The Salvation Army, by contrast, spends 2 cents in operating costs, with the remainder going to fundraising and the beneficiary. It achieves this, among other ways, by relying on volunteers to do much of the work.

After Hurricane Katrina, private companies including Home Depot and Wal-Mart provided basic needs, such as water and shelter, faster than did government. What were their motives? Generosity? Positive public relations — a form of selfishness? Does it matter?

What about the issue of moral hazard? Does government welfare distort behavior and cause people to act irresponsibly?

In 1964, President Lyndon Johnson launched a War on Poverty. Anti-poverty workers went door-to-door to inform women of their "right" to money and services — provided the recipients were unmarried and had no men living in their houses.

Out-of-wedlock births skyrocketed. In 1960, before the War on Poverty, out-of-wedlock births accounted for 2% of white births and 22% of black births. By 1994 — just three decades after Johnson began his "war" — the rates had soared to 25% and 70%, respectively.

Numerous studies conclude that children of broken homes with absentee or nonexistent fathers are likelier to commit crimes, drop out of school, do drugs and produce out-of-wedlock children.

In 1985, the Los Angeles Times asked the poor and nonpoor the following question: Do you think those on welfare have children to get on welfare? More poor people (64%) said yes to that proposition than did nonpoor (44%).

If not taxation, how then? In 1871, the city of Chicago burned to the ground. Contributions, with virtually no money from government, rebuilt the city.

After 9/11, so many Americans gave money that the Red Cross used some contributions for non-9/11 purposes.

Christianity Today wrote in January 2002: "Suddenly awash in a sea of money, relief agencies such as the Salvation Army need help. So much money — $1.5 billion so far — has come in that charities are having a hard time spending it."

Americans donated an even greater sum to those affected by Hurricanes Katrina and Rita.

A Giving Country

Three in four families donate to charity, averaging more than 3% of their income, with two-thirds going to secular charities. In total, Americans give more than $300 billion a year — more than the gross domestic product of Finland or Ireland. More than half of families also donate their time.

Absent (unconstitutional) government programs, individuals and charitable organizations can, will and — in many cases — already do provide services to the needy. A limited government — one that taxes only to fulfill its permissible duties — would allow even more disposable time and money.

People-to-people charity is more efficient, less costly, more humane and compassionate, and more likely to inspire change and self-sufficiency in the beneficiary. People can and would readily satisfy society's "moral imperative."