Thursday’s vote on Speaker Ryan’s wrong-headed plan to repeal and replace Obamacare involves far more than keeping faith with a crucial campaign pledge or the Donald’s notion that it’s just the preliminaries to “cutting the hell out of taxes”.
In fact, the passage of Obamacare Lite would mean the triumph of a runaway Welfare State in aging and job-deficient America. It would eventually result in fiscal catastrophe and the certainty of tax increases – not cuts – as far as the eye can see.
As we pointed out the other day, the nation’s bloated and unsustainable health care system consumes 18% of GDP compared to 10-12% in most of the world’s social welfare democracies. And it’s an open-ended fiscal time bomb because unlike the state controlled single payor systems elsewhere, the US system is a mutant hybrid of socialism for the recipients and crony capitalism for the providers.
Consequently, there is no brake on the volume and price of services. Health care demand is only limited by what the crony capitalist lobbies for every medical specialty and delivery system vertical can extract from payors—mainly the state.
We refer here to the staggering sum of $24 trillion in health care entitlement spending. That’s what government financing of medical programs will cost over the next decade. This total includes CBO’s $16.5 trillion cost estimate for the Federal medical programs—-plus $4 trillion in tax exclusion benefits for employer health plans and $3.5 trillion for the state share of Medicaid.
For perspective, that sum is nearly 2X the projected $13.2 trillion cost of the entire Social Security system over the next ten years, which will have 8o million retires, dependents and disability recipients by 2027.
Needless to say, the Speaker’s Obamacare Lite plan does not even address the runaway costs drivers of the medical delivery system and merely fiddles with the entitlements along the edges. For example, the combined Federal/State cost of Medicaid over the next decade would be $8.5 trillion under current Obamacare law, representing the single most explosively growing entitlement in existence.
Under the Ryan plan’s rollback of the matching ratios and the indexed per capita funding formula, the “savings” would be about $500 billion after off-setting the added costs of the State Stability Fund, repeal of the disproportionate share hospital cuts and the 11th hour “manager’s amendment” to index state Medicaid grants to a more generous medical inflation factor. But spending $8.0 trillion on Medicaid—a mere 7% cut—- from a veritable fiscal time bomb is not remotely what the doctor ordered.
Likewise, Ryan replaces the income-based Obamacare health exchange subsidies with age-based tax credits bedecked with phony eligibility caps. The former provision would save $673 billion over the decade according to the CBO, while Ryan’s tax credits and HSA (health savings account)
expansion would cost around $400 billion as presented; and would eventually eat-up the full Obamacare exchange subsidy savings via the more generous tax credits that would be needed to have any hope of passage in the Senate.
Moreover, we doubt whether anyone who can do 5th grade math will be fooled by Ryan’s double shuffle. The new provisions still amount to a massive tax credit entitlement that in some ways is for more profligate than Obama’s health exchange premium subsidies for families up to 4X the poverty line or about $100k per year.
For example, consider a family consisting of three children under 20-years old and two mid-40s adults with an annual income of $149,000—putting them on the top 5% of the income ladder. Yet under the new Ryan plan, this family would be eligible for $12,000 of tax credits against its insurance premiums compared to zero under Obamacare.
Finally, the Ryan plan merely fiddles with the regulatory straight jacket on the insurance market that caused premiums to soar under Obamacare. Ryan’s nanny state requisites include retention of the ban on annual and lifetime benefit caps, limits on age based premium variation, mandated coverage of preexisting conditions, coverage of children until the age of 26 and etc.
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