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Krugman and a "War on Logic"
Posted by Dave at 1/20/2011 8:29 AM 
Categories: government subsidies, budget, politics, government spending, economics, taxes, freedom, health care reform
Tags: Paul Krugman health care reform CBO scoring federal spending taxes
Categories: government subsidies, budget, politics, government spending, economics, taxes, freedom, health care reform
Tags: Paul Krugman health care reform CBO scoring federal spending taxes
In response to this article in the Chronicle by Paul Krugman , I sent the following letter:
re: Republicans waging a war on logic
Paul Krugman makes a common error when discussing repeal of the new health care "reform" law, commonly known as "ObamaCare", and its effect on budget deficits. The projections by the Congressional Budget Office that showed the law resulting in a "deficit reduction" over 10 years were not the result of the actual changes in the health insurance system mandated by enactment of the law, but rather the tax increases written into the bill. As the CBO relates, the law includes "an excise tax on certain health insurance plans with relatively high premiums", "certain taxes on individuals and families with relatively high incomes" and "various other changes to the federal tax code" which included new taxes on medical devices, health savings accounts, and the use of indoor tanning beds. According to the CBO, these tax increases total $770 billion over 10 years, offset by increases in spending of $540 billion.
Of course that doesn't take into account the cost to consumers and businesses as they seek to comply with the new mandates and prohibitions. As part of the new law, it will be compulsory to pay for coverages that individuals and families may neither need nor want, raising the cost of coverage. New reporting requirements will increase paperwork and accounting costs for businesses. Obstacles will be implemented to inhibit insurance companies from rewarding people with lower premiums for living healthier lifestyles.
Tax increases, mandates, and prohibitions are not the "logical" way to increase access to health insurance, reduce costs, or create jobs. Government expansion is not the "logical" way to increase jobs. It would seem that the "war on logic" is being waged by Paul Krugman and the advocates for ObamaCare.
Sincerely,
Dave Smith
Houston, TX
Dave, I'm no advocate for the insurance industry but, just as the mandate to purchase coverage from a private entity (or be fined) could be seen as intrusive for the individual, couldn't the requirement to provide coverage for people with pre-existing conditions be seen as intrusive to the insurance company? In other words, could this be seen as a government takeover of the private insurance industry? Theoretically, if all healthy people chose to decline coverage and opted to pay the fine instead, and only sick people began paying premiums and then immediately sought treatment, how would the insurance industry cope?
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I think the best way to handle the pre-existing condition is to increase competition. If you allow individuals to have the same tax benefits to buy insurance personally that companies get for providing them, you unleash a bevy of new consumers. Then you remove the prohibition against buying insurance across state lines, unleashing new competition on the market.
Combine these two reforms with a removal of obstacles against group plans (this would be partially achieved by the removal of the prohibition against interstate purchasing, but I think there are a few other things that would have to be done as well). This would allow a group like, say, the American Diabetic Association to pool together members to negotiate better insurance rates.
My thinking is that if you actually allowed a competitive, open market, you'd not have to worry so much about the pre-existing conditions -- you'd have some company out there willing to provide coverage.
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Dave, I was reading an exchange between you and tsujones on the Chron about a low-cost plan in Michigan. Soon after I turned 40, I applied twice for an individual, high-deductible plan. I don't remember which plan was which, but they were offered by Blue Cross and Humana, the deductibles were $5000 and $10,000, and the premiums were $75 and $120. I was rejected by both because of my high cholesterol (239, I believe). My insurance agent said I was denied coverage because approximately $1200 a year in premiums was not worth it to the insurance company, especially if I ended up getting some major disease at some point in the future, and the agent said I'd have a better chance getting coverage as part of a group.
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That's why it is so important to get more individuals on the market, to get rid of the prohibitions against buying across state lines, and remove obstacles to group plans. Allow groups to negotiate with the insurance companies, and I think you'd see a dramatic swing in with whom they are willing to do business.
For example, I know personally from a friend's experience that the American Institute of Architects would love to offer group plans to its members, because a lot of architects are self-employed and don't have insurance. However, government obstacles prevent the pooling together of members from across the country into a single pool that would have any real negotiating leverage. We need to remove those obstacles.
Similarly, you would then have the opportunity for, say, the American Heart Association to form a pool for those with higher cholesterol; perhaps a company in that case would even offer incentives for lowering your cholesterol.
More competition brings us better choices, lower prices, and gives more control to the consumer. I think that's a much better way to go than a confusing, complicated framework of government mandates, prohibitions, and taxes.
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Excellent article!
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