Probing Politics: How to boil a frog
Editor's note: When The Forecaster launched Probing Politics last year, we stipulated that the column would be discontinued if Tony Payne became a candidate for re-election to the Falmouth Town Council. Because Tony has now declared his candidacy, this is his last column. We hope to present a suitable replacement in the near future.
Plunging a live frog into boiling water ensures the frog will leap out, escaping the cauldron and scalding the cook.
But a frog placed in cool water under slowly increasing heat barely recognizes the change in his environment until it’s too late.
The passage of the landmark federal health-care law has been decades in the making by serving up a virtual hot tub of warm feel-good governmental services. Entitlements like Medicare, Medicaid, drug prescription coverage, etc., are government-administered health programs that many consider necessary and efficient. Though they are under-funded, taxpayers have been told they are sitting in therapeutic waters when in fact, they are in a fiscally fouled saucepan.
David Walker, the former head of the nation’s Government Accountability Office, warned the country prior to passage of this bill that in just 10 years, “80 percent of the budget will be allocated to defense, Social Security, Medicare, Medicaid and net interest. That would leave only 20 percent for all other federal programs including homeland security activities, student loans and other education programs, law enforcement, agriculture, space exploration, scientific and medical research, national parks, the Supreme Court, the Congress and the President.”
While our seniors have been enjoying this entitlement hot tub for decades, about half the nation has feared being plunged into the scalding water of nationalized health care. Proponents, on the other hand, particularly the 32 million without insurance, have been hearing, “Come on in, the water’s fine.”
So who’s right?
I recently received an early snapshot analysis of the new law from Jim Ward, president of Patient Advocates, a health-care administration company in Maine that helps employers manage their health-care costs and quality. Ward’s message to his clients seems fair and factual.
The bill’s provisions include:
• No lifetime limits on benefits.
• No annual dollar limits on benefits, starting in 2014 .
• Preventive care benefits can have no cost sharing.
• All plans offering dependent coverage must make coverage available to dependents under the age of 26.
• No more pre-existing condition limits.
• Waiting periods for eligibility cannot exceed 60 days ($600 penalty for each employee required to wait beyond 60 days).
• Self-insured plans must comply with minimum standards established by the Department of Labor.
Here are the consequences according to Ward:
• This law will create new reporting requirements.
• It will result in greater dependence of individuals on government via subsidies (those will reach into the middle class).
• It does virtually nothing to control health-care costs.
• It does not address improving the quality of health care.
• It confers new regulatory powers on federal bureaucracies.
• It creates a new enforcement role for the Internal Revenue Service (16,500 new IRS agents will be hired).
In short, Ward said, “It's not good for your business at all.”
On the flip side to Ward’s analysis are the employers and families who have seen annual insurance costs increase at more than 10 percent, two or three times the rate of inflation. Will they ever see the cost of care or their premiums drop under this law? Don’t bet on it because that was not the objective of the bill. The net impact of new taxes will result in stagnant or lower wages and more frugal benefits.
For example, the new law withdraws government subsidies for companies that offer their retirees prescription drug benefits. Those employers will likely be dropping prescription coverage for their retirees, forcing seniors to enroll in the government plan. The cost does not go away, it just get shifted onto the taxpayers. These new conditions, however, will be phased in over time.
What does that mean for Maine? As a state of struggling small businesses in an unfriendly policy environment, this law may actually embolden a majority of the Legislature to exceed the new federal requirements. Certainly the Legislature’s record of proposing one-of-a-kind laws would suggest that many are willing to do so. Remember, this is a Legislature in which 38 percent of its elected members are or have been government employees and a majority of all our lawmakers have little experience in viewing the world through the lens of profit-and-loss, but rather as more or less public subsidy.
That’s another way of saying expect to see your taxes rise while your income falls.
Had the Congress and the Legislature encouraged health-care savings accounts and a competitive, well-regulated market, employers and families would be enjoying far more affordable health care today. Instead, Maine’s small businesses will have to do what is necessary to survive through more layoffs and lower employee compensation.
And by design, we won’t feel it immediately because a slim majority in Washington has set the burner on simmer.