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March 22, 2010

A Strong Dose of Reality

I'm still trying to wrap my mind around what just happened.

I haven't written a lot about health care reform because it my gut feeling was that it was going to happen no matter how compelling the arguments against it and no matter whether or not it increased the deficit to the point where government debt eclipses our ability to create wealth:

... "at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company--only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time."

Add the unfunded portion of entitlement programs and we're at 840% of GDP.

The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.

These two charts, both created before yesterday's health care reform bill dramatically increased our debt load, say all that needs to be said. Over the years mandatory spending has increased to nearly 70% of total outlays:


What this means, quite simply, is that Congress is asking a shrinking number of tax payers to fund an ever growing package of taxpayer funded government benefits that are not subject to annual review and debate. Mandatory entitlements are crowding out discretionary spending. Even before the passage of HCR, entitlement spending was projected to exceed tax revenue sometime between 2030 and 2040:


I can't help but agree with Grim that this bill has merely hastened the inevitable:

The fact is that, pre-HCR, we had somewhere around $100 Trillion in unfunded liabilities. We've been a train racing down the mountain to Insolvency Gorge; all the HCR bill does is tear off what were already stressed and failing brakes.

From my perspective, then, all this means is that we get to the crash faster. The important questions have always been what we'd do after the crash, since it was clear these last few years that neither party in Washington intended to be the ones who avoided the crash.

Unlike some, I don't hold out much hope that SCOTUS will strike down the bill on constitutional grounds. I very much fear that history is about to repeat itself:

Even though the Social Security Act was enacted into law on August 14, 1935, the country still had to hear from the Supreme Court. This was a new untested area of federal authority and it was inevitable that it would be challenged in the courts, and until the Supreme Court ruled, no one could be sure that the nascent Social Security Act would survive its infancy.

The constitutional basis of the Social Security Act was uncertain. The basic problem is that under the "reserve clause" of the Constitution (the 10th Amendment) powers not specifically granted to the federal government are reserved for the States or the people. When the federal government seeks to expand its influence in new areas it must find some basis in the Constitution to justify its action. Obviously, the Constitution did not specifically mention the operation of a social insurance system as a power granted to the federal government!

And indeed, SCOTUS seemed determined to uphold the Constitution... at first:

Federal judges are appointed for life. The Supreme Court of the 1930s was the most elderly in the history of the Republic, with an average age of over 71. President Roosevelt would derisively refer to them as "those nine old men." Actually, he only had four of them in mind. The Court was split down the middle in political terms. On the liberal side were three justices sympathetic to the New Deal programs (Brandeis, Stone and Cardozo); on the conservative side were four justices who voted against everything the Congress and the Administration tried to do (McReynolds, Butler, Van Devanter and Sutherland). In the middle were Chief Justice Charles Evans Hughes and Justice Owen Roberts, who were often "swing votes" on many issues. In the spring of 1935 Justice Roberts joined with the conservatives to invalidate the Railroad Retirement Act. In May, the Court threw out a centerpiece of the New Deal, the National Industrial Recovery Act. In January 1936 a passionately split Court ruled the Agricultural Adjustment Act unconstitutional. In another case from 1936 the Court ruled New York state's minimum wage law unconstitutional. The upshot was that major social and political reforms, including social insurance programs, appeared headed for defeat.

Then came FDR's historic (and failed) attempt to pack the courts. To be more precise, the court packing attempt failed. But a message had been delivered to conservative opponents of the New Deal:

...The practical effect of this proposal was that the President would get to appoint six new Justices to the Supreme Court (and 44 judges to lower federal courts) thus instantly tipping the political balance on the Court dramatically in his favor. The debate on this proposal was heated, widespread and over in six months. The President would be decisively rebuffed, his reputation in history tarnished for all time. But the Court, it seemed, got the message and suddenly shifted its course. Beginning with a set of decisions in March, April and May 1937 (including the Social Security Act cases) the Court would sustain a series of New Deal legislation, producing a "constitutional revolution in the age of Roosevelt."

SCOTUS has not exactly established a track record for upholding the Constitution, nor has it been willing to issue clear, definitive rulings even when the language of the Constitution has been clear and unambiguous. As much as I'd love to believe that our big, gay judge will come riding in on a white horse to rescue the Constitution from the Camembert-and-Derrida crowd, frankly I'm not sanguine about our prospects. Even if challenges to the individual mandate succeed, the Court is unlikely to strike down the entire bill. More likely, only the objectionable provisions would be ruled unconstitutional and the court would send the mess back to an already broken Congress to "fix".

So where does that leave us? The good news is that if the GOP has been looking for a simple message, "Don't pass bills you can't pay for" is about as simple as it gets. As Grim points out, the Balanced Budget amendment garnered 32 of the 34 required votes last time around. I have a feeling we're about to see something momentous happen: an amendment to the Constitution passed by the states. The question is: how do we force Congress and the Courts to uphold even such an historic development?

Sooner or later even our free spending Congress is going to run out of other people's money to buy votes with. And when that happens, our government will begin to default on its obligations. When the gusher of federal tax dollars dries up, arguments that have been easy to ignore or dismiss as "cynical" or alarmist will no longer be theoretical. Even the thickest headed voter will realize that the cash cow just died.

The passage of ObamaCare means that moment will now come sooner instead of later. And when government itself becomes undependable, dependence upon government will no longer be such an attractive option.

Update: Welcome, Michelle Malkin readers!

Posted by Cassandra at March 22, 2010 04:11 AM

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our country will never be the same if this is allowed to stand. but that is not enough. we need to get rid of these people -- we need to win elections. we must defeat every single democrat. to believe some are moderate is a fallacy. there are just some that are not quite as left as the others! we need to completely run them out of town - a full frontal assault on leftists who brought us to this point today.

Posted by: kate at March 22, 2010 05:41 PM

What arguments do you think we should we use to win elections?

One thing is for certain - the current ones aren't working too well.

Posted by: Cassandra at March 22, 2010 06:00 PM

i think the arguments we have versus theirs are winsome actually. its the candidates we run --- lack of integrity, passion, vision.

Posted by: kate at March 22, 2010 06:25 PM

I don't know, Kate. I have a lot of friends and family who support ObamaCare. They seem completely impervious to the current crop of arguments.

To my mind, the test of an argument's effectiveness on a national scale isn't its ability to convince those who already agree. It's the ability to convince those who are undecided or even don't agree. And we do have common ground.

I guess what I'm looking for is an argument that makes sense on a gut level, regardless of political persuasion. And I think just about everyone understands that a household can't spend more than they earn indefinitely.

I've seen a lot of progressives who are concerned about paying for this bill. I think this argument would resonate with them. But hey. What do I know?

Posted by: Cassandra at March 22, 2010 06:32 PM

It is not in the ideological mindset of the Marxist to "stop" before it all comes crashing down. Why would they want to? Anarchy and turmoil will allow them to remove the final vestiges of the "ancien regime" and bring the New Red Dawn of the Revolution. We have seen this pattern repeated throughout history.

Pick any leftist revolution, and follow the yellow brick road to Oz, the worker's paradise. Russia? France? China, Cambodia, Vietnam, Nicaragua, North Korea, Cuba, Angola, Ethiopia, etc? The initial anarchy allows you to consolidate power and "cleanse" the scene of political rivals and enemies.

When your utopian ideas fail disastrously, you blame kulaks, reactionaries, foreign agitators, ethnic minorities, or other counter-revolutionaries. Cue firng squads, guillotines, "re-education camps", and so forth. You keep killing until conditions improve one way or another. You think its easy racking up casualties in the millions like Lenin, Stalin, Mao, and Pol Pot? Only the zealous true believer with a Torquemada-like faith can joyously wade through oceans of blood that deep.

Now these tactics worked in areas with long histories of blind obedience to the State by the serfs and peasants. It remains to be seen whether this will work in a country like the USA with a long tradition of resistance to govt authority, although libs have laid the groundwork to change the culture from freedom-based to a more european, govt-subservient one.

Posted by: a former european at March 22, 2010 06:35 PM

Cassandra, I believe your argument is staring you in the face.

Q: How much do you earn annually before taxes?
A: $85,000. (Insert your number here.)
Q: How comfortable would you be if you had $714,000 in debt right now? (salary x 840%)
A: {{shudder}} Not very comfortable, why?
A: Because that's how much the US owes right now, before including the cost of the health care bill.

Wait until the individual finally calms down....

Q: Would you support an amendment to the Constitution that required every budget to be balanced, including debt service?

Posted by: Antimedia at March 22, 2010 07:49 PM

I believe a Pinochet-esque end to this is more likely than Pol-Pot or Stalin.

And frankly, the thought of our military scrubbing the Leftist scum from our governing toilet sounds enticing at the moment...

Posted by: Zok at March 22, 2010 07:54 PM

That's exactly what I think we should be arguing, Antimedia :)

Posted by: Cassandra at March 22, 2010 08:01 PM

I just read that the senior staffers who authored this legislation carved out an exemption for themselves. page 158 according to Newsledger.

Posted by: kathleen at March 22, 2010 08:42 PM

I feel like am living in the Theater of Absurd: here we have the Congress push down our throats the healthscare bill despite our massive protests and in Russia the government puts up the portraits of Stalin as "the winner of the WWII" for the 65th Anniversary of the WWII end, doing it despite the protests from people who survived the GULAG and despite well documented Stalin's personal military blunders that cost millions of lives... Where is the place where I can rest my tired head down in peace?? It used to be the States, now what?? Who gave the Congress the right to put me through the f##king deja vue all over again?!

Posted by: olga at March 22, 2010 09:21 PM

Bill Whittle thinks we need to come up with a straight-forward, simple slogan:

We can learn some lessons here. We have to. One lesson is message discipline. What is message discipline? I’ll give you an example:
What’s in a Big Mac? Two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun! That’s what’s in a Big Mac. We have got to understand that saying NO! to this socialism is admirable and essential, but that from now on there has to be a counter-narrative to what these Marxists are selling, because like it or not the human brain is wired for stories — that’s how we learn (and why the real fight is not for Washington but rather Hollywood — but that’s a story for another time.)
If we want to win on health care, or any other issue, we need to have an answer to what they are selling and that answer needs to be as simple and comprehensive as the Big Mac slogan.
Our position on health care? Two tax incentives, health accounts, crossing state lines, tort reform, competition on an auto insurance bun. And if we don’t learn how to do this we will lose.

Posted by: Miss Ladybug at March 22, 2010 09:43 PM

You know, I read that this morning and it doesn't sound simple to me at all.

Everyone knows what happens when a household consistently spends more than it takes in. Sooner or later it goes bankrupt.

Everyone knows what happens when a household amasses too much credit card debt. As you amass more and more debt, you become a credit risk and banks charge you higher rates. This is already happening to the federal government. Borrow enough and no one will lend to you.

Borrow more than you can afford to repay and you default on your loans.

The difference here is that when the federal government doesn't pay its bills, federal employees don't get paid, federal and military pensions go belly up and (horror of horrors) Social Security, Medicare, Medicaid and welfare recipients don't get paid either.

People understand these budgets because we all have to live with them. People haven't lived interstate competition, health accounts or tort reform.

We missed a golden opportunity to educate the American people. They understand right now that HCR will increase the deficit. What they don't understand is: how much?

Posted by: Cassandra at March 22, 2010 10:07 PM

I know. I was participating in a discussion on fb. My cousin's husband up in WA is a political reporter and fancies himself oh-so-wise on political matters (don't get me wrong - I like Sam), but he and all his fb friends don't seem to see the problems with this. One thing is, Sam is very young (only 25) and I'm sure a product of a liberal-influenced public education. Nothing I say seems to sink in as to the trouble we're facing with this. It's written off as my being influenced by partisan information sources. And, of course, there's the "do you want someone (with a family) financially ruined because of lack of insurance?". Of course, I did have Sam admit that this legislation to lower the cost of insurance does nothing to address the real problem of the cost of care. I just think I give up on that thread. I don't have the time to keep up with it, especially when it's like talking to a brick wall.

Posted by: Miss Ladybug at March 22, 2010 10:58 PM

You're basically talking to a cultist, Miss Lady.

In those situations, it's not the facts that they need but an emotional disengagement from the cult.

Posted by: Ymarsakar at March 22, 2010 11:59 PM

"I have a feeling we're about to see something momentous happen: an amendment to the Constitution passed by the states. The question is: how do we force Congress and the Courts to uphold even such an historic development?"

How about a constitutional amendment that gives the right of removal of Supreme Court Justices to the states. Similar to the constitutional amendment process, 2/3 of the states could vote a judge off the bench. The president appoints, congress approves, and if the judges do not protect states rights, they can be canned by the states.

Posted by: astonerii at March 23, 2010 12:11 AM

The bottom line is that Obama's cult has enslaved us.

We have no control over our lives so long as the so-called "progressives" live.

Posted by: democratsarefascists at March 23, 2010 12:30 AM

We missed a golden opportunity to educate the American people. They understand right now that HCR will increase the deficit. What they don't understand is: how much?

No...what they don't understand is what it means to THEM when the stink really hits the fan. *I* am not completely clear on what it means for me and my family.

Explain THAT to them (and me) and see waht kind of an impact you have.

Posted by: HomefrontSix at March 23, 2010 04:34 AM

Excellent point, HF6. I was sloppy in my language (you all can read my mind, can't you?) :)

In my mind, "how much" entailed an understanding of consequences. But I think this is something conservatives have done quite a bit - me included. When we agree with an idea, we fail to examine it critically and that often means that we either fail to explain it clearly and adequately or we fail to anticipate counter arguments.

Posted by: Cassandra at March 23, 2010 04:49 AM

Cassandra, your analysis/presentation is simply brilliant.

Have no marketing or advertising background. But felt that GOP messaging got muddled bec. they didn't have 1 or a few central points that people could identify with quickly in a positive way. So, the White House/Democrats were able to paint them as "Party of No".

But back in January, after Scott Brown won in MA, i felt that they could have ridden the MA Miracle video http://www.youtube.com/watch?v=7nEoW-P81-0&feature=player_embedded that was part history and part campaign and added Sen. Scott's catch phrase "we can do it better". Keep the Choice part of the vid and point that the GOP way would lead not into deeper into debts and taxes we can't pay for, etc.

Also, they need to counter Obama's main selling point "It's the Right thing to do" (he uses this with all his main arguments DADT, immigration and financial reform, etc.) perhaps with a Healthcare reform is the right thing to do but to use your analogy, being 840% over your income/in debt to do it is not. The better way is ...

Antimedia's simple Q&A of engaging people is also very good.

My hunch is the GOP either didn't want to sound like they were endorsing Mitt Romney who got MA universal healthcare or didn't want to push Scott into the national stage even more so they didn't really want to talk about how the MA way of getting healthcare into law was better.

Though admittedly, MA is struggling with cost containment for years now, because that was one area they didn't really put much controls in.

One other problem is when Senators/House Reps. cooperate with the WH/Democrats, they get tarred as RINO, but at the same time being in the minority, they obviously can't pass anything just by themselves.

If they want anything good to happen in November, they had better move fast, Obama's Organizing for America has been blasted out emails including one that allows each of the 13 million recipients to be a "co-signatory of the (Obamacare)legislature"

Remember, they were able to squeeze in student loan reform with health care.

To them, this piece is just the beginning of the domino effect - in very quick succession they are looking at adding public option to the HCR, financial reform, immigration reform, cap & trade, etc.

Did you imagine back in Nov 2008 that this was what Obama meant when he spoke of change?

Posted by: code at March 23, 2010 05:26 AM


I knew he was a socialist and would be bad for individual Americans. Guess my imagination wasn't good enough to envision all the ways he would be...

Posted by: Miss Ladybug at March 23, 2010 09:10 AM

No...what they don't understand is what it means to THEM when the stink really hits the fan.

And they won't when it does, because it will have to shake their *belief*, and there's a solid 3% of the people living in this country who literally believe that Obama is a demigod.

When it hits them, personally, they'll continue to blindly accept whatever spin Obie & Company put on it, because they believe Teh Won *can't* be wrong about anything.

L. Ron Hubbard must be laughing his a$$ off.

Posted by: BillT at March 23, 2010 12:18 PM

Former European, in 1984 during the farm crisis, we owed $650,000.00 and our farm lost $12,000.00. The next year, it earned $20,000.00.

Many neighbors lost their land, but we survived and took the debt down to only $20,000.00 this year with all of the farm land now ours. It will be our salvation because I fear tangible assets will be the only measure of value in ten or twenty years.

Such indebtedness leaves little room for error. As the bills pile up options decrease and choices become harder. I think this will end badly, but we must fight on to the end.

Posted by: James at March 23, 2010 01:02 PM

So...what does it MEAN? Will the trash collection stop? Will the price of milk go up 6000%? Will my husband stop drawing a paycheck? Will the cost of ibuprofen and zoloft skyrocket? WHAT?

Because - for the majority of the people I know - the benefits outweigh the costs because they don't have a clue what the "brass tacks" are with regard to the economic fallout. Nor do I. I get it - in theory but most people are not theorists. They see that health insurance is ridiculously expensive and incredibly inefficiently run and KNOW that there needs to be some kind of change. No one else put forth anything else, therefore THIS is what they are clinging to.

I think, in many ways, those that are so up in arms over this bill (me included) need to place some of the blame upon ourselves because none of us came up with a better PLAN. We are so busy going on and on about how horrible THIS bill is and how far down the Socialist scale this country is going to slide with THIS new legislation and how far in the hole it will put us economically but my friend who owns his own business doesn't give a rip about any of that. What he gives a rip about is finding relief from health insurance premiums for his family and his employees that rivals his mortgage payment (IN HAWAII!!!). And no one on this side of the argument offered up an alternative. People who are in tough situations will seek relief wherever it is offered, even if that relief isn't truly what is warranted or needed.

I don't care to listen to an argument that doesn't offer solutions. Give me options, dammit. The reason this was "rammed down our throats" (if I hear that one more time, I might just lose what little is left of my mind) was because the American public is thirsty and this was the only option. Stop b!#@%*&g about this bill and start working up VIABLE SOLUTIONS (this latter statement is aimed at those that are in a position to do so, not necessarily the people here at VC). And then sell it. Show the people of this country that they were sold a piece of crap and show them a better alternative and they will do the work for you with regard to repealing this lousy bill.

My dad used to call that "work smarter, not harder". Seems we haven't learned that lesson yet.

Posted by: HomefrontSix at March 23, 2010 01:19 PM

That's not a question that can be definitively answered in advance. Money isn't like a faucet that is abruptly turned off - usually what happens is that as the flow decreases, we have to make hard decisions about which bills to pay and which to punt on.

One problem with the government underwriting health care premiums, retirement and disability (soc. sec.), welfare, aid to all 50 states, subsidies of education at the primary and secondary level, the military, etc. is that (as with the UK where 52% of their economy consists of federal spending) any reduction in federal spending means layoffs and reductions to income that can easily amount to half the country's income.

There is no way that would not be catastrophic, especially when you consider that many civilian businesses sell to the federal government. So it wouldn't just be the public sector that was affected.

Posted by: Cassandra at March 23, 2010 01:39 PM

Cass ~ I get that. And I also understand that those that would try to explain what some of the economic fallout would look like would probably be labeled "Chicken Little" for doing so. But most people I know are not theorists and need some kind of tangible effect to wrap their brains around before they are able to comprehend what this means for them.

So, in absence of a crystal ball (what I'd pay for one of those!!), what would have been the better option? I have my own ideas but I'm curious to know what the VC readerships sees as a basic solution to the health care debacle (and please, no one throw out the generic "get the Fed out of it and it will fix itself" platitude. Give me bullets, people.)

Posted by: HomefrontSix at March 23, 2010 02:13 PM

Here ya go:


One o' them thar "idea" thingies our Prez says Republicans don't have....

Posted by: Cassandra at March 23, 2010 02:18 PM

"Health Care" or "Health Insurance" Reform without Tort Reform is meaningless, and we'll never have Tort Reform until the AMA grows some integrity and stops covering for the butchers in its ranks.

Our family GP had a *monthly* malpractice insurance bill of $40,000 and had never had an action filed against him. In 2004, he quit -- I spent a summer teaching him waterscaping, and now that's what he does for a living. His daughter had planned to go to Med School -- he convinced her to become an RN, instead.

Posted by: BillT at March 23, 2010 03:22 PM

I'll tell you one immediate impact--your state and local taxes will go up to pay for the newly mandated health insurance. Ours won't go up quite as much as others, since New York State already mandates portability and premium coverage. School districts have had the state-granted option in the last year or two to cover children up until age 26, but our local district didn't go with it, so that's one increase right there.

Honestly, I don't understand why people think that the health insurance companies spend their own money on health care--it's paid for by premiums, which means the employer (which means it comes out of the otherwise possible employee wage increases), and in the case of our local school districts, they're self-insured using the local BC/BS to administer the program, but it's funded by us taxpayers. So our taxes will go up. Inevitably.

Yet a lot of folks think that Obama put one over on the insurance companies, instead of realizing that he put one over on them!

And I'm not even going to think about the decision I made over 40 years ago to stay in the military to take advantage of the health insurance, at a vastly reduced salary than I would have gotten if I had gone into the private sector, just to find out that now everybody will get what was once a benefit that helped offset my low wages.

Posted by: Rex at March 23, 2010 07:43 PM

And I'm not even going to think about the decision I made over 40 years ago to stay in the military to take advantage of the health insurance, at a vastly reduced salary than I would have gotten if I had gone into the private sector, just to find out that now everybody will get what was once a benefit that helped offset my low wages.

When we got married, we lived well below the federal poverty level for a family of three for the first few years until my husband joined the Marines. He signed up during his junior year of college.

Sometimes I think of all the things that man could have done with his life, had he not chosen to saddle himself with the responsibility of a wife and child. Don't ever think we ladies don't value what you guys do for us.

Posted by: Cassandra at March 23, 2010 08:25 PM

Amen, Cass. I often wonder what MacGyver could have made of himself had he chosen not to marry me and have kids. I am so glad he did though.

Posted by: HomefrontSix at March 23, 2010 09:58 PM

...just to find out that now everybody will get what was once a benefit that helped offset my low wages.

It gets better.

TRICARE and VA will be unfunded in June, unless the Dems "fix" by amendment what they could have fixed before ramming BammyCare through.

Watch what happens when MediCare is suddenly expanded by the entire population of living veterans -- and doctors' reimbursements get reduced...

Posted by: BillT at March 24, 2010 11:48 AM

As for alternative ideas here is one. I know it has some holes in it ( what idea does not ) but maybe it can be a start.

Most healthcare insurance companies are publicly traded. This means that the shareholders want a 7-10%+ return per year. This in turn, would force premiums up...yes? So how about healthcare insurance companies being private only?

Like I said, perhaps a place to start.

Posted by: Bob at March 24, 2010 12:25 PM

Cass ~ reading through Ryan's Roadmap letter. Interesting. As long as it's combined with tort reform, I'm all for it.

Bob ~ that's one of the cornerstones of what I believe health care reform should be based upon. But it's in complete opposition to what the Dems want.

Bill ~ I didn't realize it would happen in June. Guess I should get everyone in for physicals and checkups and refills ASAP then. Lovely.

Posted by: HomefrontSix at March 24, 2010 01:15 PM

Part of the problem is the coupling of insurance and employment. If you are single, you are effectively buying insurance under a monopoly situation. If you don't like your insurance you can't switch to a competitor, you have to change jobs.

This is because, as much as "community rating" got a bad rap from conservatives it is a fact of life. Unlike car insurance where pretty much everyone will pay more in premiums than they will in claims in the long run, the same is not true in health insurance. In health insurance a few people will be paid claims several orders of magnitude more than their premiums while other will pay a couple grand in premiums per year and never get sick. The volatility is just too high. The risk only becomes managable as the population increases. There is simply less volatility in the total claims of 10 people than in the claims of 1, and less still in 100, or 1000. So, group/collective/community policies are inevitable. Deal with it.

The real problem is that employers are the only entities allowed to create groups. Perhaps this is due to the employees constituting an asset to the company, the company has "an insurable interest" while the Rotary club derives no suc asset from its member and therefor has "no insurable interest". I really don't know.

Solution: Allow any entity to form groups from it's membership to obtain health insurance. By allowing Rotary, Kiwanis, Knights of Columbus, Moose Lodge, Freemasons, etc to provide insurance for it's members you introduce more suppliers to the market. Thus driving down prices.

Another part is because businesses pay taxes on profits while people pay taxes on revenue.

This means the business can provide a greater compensation package by buying stuff for you than for letting you buy that same stuff for yourselves.

In other words the business gives you $1000 in insurance you get $1000 worth of insurance. The business gives you $1000 directly to pay for your own insurance you only get $750 worth of insurance. Pick the high number. :-)

Solution: Make health insurance premiums tax deductable. It'll make the employer subsidized portion a wash compared to a cash payout to buy it on you own (plus lowering the price on the portion you buy as well). This essentially creates a larger pool of buyers even further reducing cost.

But, it'll never happen. It's far too simple and doesn't give politicians any more power.

Posted by: Yu-Ain Gonnano at March 24, 2010 01:48 PM

Update: It appears that the Congers does indeed intend to fix what they should have fixed before it needed fixing.

It looks like HR 4887 "...explicitly states in law that these health plans [TRICARE and NAF health plans] meet the minimum requirements for individual health insurance..." and there's a good chance it'll pass overwhelmingly.

Posted by: BillT at March 24, 2010 04:28 PM

Government does not spend more than it takes in.
That is my beancounter-in-training coming out.
I guess I am just over simplifying it again.

Posted by: Cricket at March 24, 2010 05:13 PM

Cricket ~ a Constitutional amendment requiring a balanced budget would stop this thing in its tracks.

Bill ~ I never realized you were LESS of a cynic than I am.

Posted by: HomefrontSix at March 24, 2010 07:31 PM

I was thinking along those same lines; self-employed who have made a steady income; the other types of small business owners who can't afford to get health insurance, but who now can't afford it at all. Leverage is a powerful thing. That is why MOAA, USAA and other groups that have the military as the backbone of their products can do as well as they do.

MOAA offers a much less costly whole life policy than PriMerica (those people remind me of Amway sales reps on Valium) for the same amount of coverage, but has a much smaller customer base.

PriMerica had $100,000 of coverage for $500.00 a year. MOAA has the same amount for $228.00 a year.

Gee, ya think?

Posted by: Cricket at March 24, 2010 08:43 PM

I looked at it logically, HF6. When Teh Won floated his suggestion that wounded troops should pay their own hospitalization and recovery costs, he almost got his lips ripped off.

The Congers who voted for BammyCare knew they were committing political seppuku (okay,okay, I *know* only honorable men were permitted seppuku -- allow me the metaphor, will ya?) by voting for it, with the promise that subsequent amendments would fix its brazillion faults and omissions. They also know that if they renege on fixing an obvious fault at the expense of the troops *and their families*, not one Dem in the nation will see political daylight, ever again.

Okay, well, Pelosi's constituency would send her back, if only to keep her off the streets and harshing their mellow...

Posted by: BillT at March 25, 2010 05:44 AM

Pelosi's constiuents are now legal.

*goes off looking at the birds, the trees...*

@ HF6: I finally read the first few responses.

Posted by: Cricket at March 25, 2010 07:54 AM

I have a feeling we're about to see something momentous happen: an amendment to the Constitution passed by the states.

This was originally mentioned in the context of the balanced budget amendment, but given Californias displeasure at Raich and several states passing laws on the intrastate sale of firearms for the exact purposes of provoking a commerce clause suit against a specifically enumerated right, what do ya'll think about the chances of a state proposed amendment to the commerce clause?

Posted by: Yu-Ain Gonnano at March 25, 2010 11:31 AM

"The real problem is that employers are the only entities allowed to create groups. Perhaps this is due to the employees constituting an asset to the company, the company has "an insurable interest" while the Rotary club derives no suc asset from its member and therefor has "no insurable interest". I really don't know."

Check out ERISA

It's a law the unions propagandized into effect by telling people that people would be out of work without business mandated pensions. Somehow healthcare got attached to it, which also includes the provision that insurance companies can cut their contractual benefits to the individual, because their real client is the business.

The companies would not purchase health care for their employees. It runs too far into unnecessary cost overruns where cost is not related to the product the company sells. Maybe some would because they have low fixed costs or employ young people, but most businesses are including the 'benefits' into the cost of the product. They would have no reason to do so unless they had a good reason that their products would sell more with higher prices.

If a company voluntarily chose to do so, certainly they would have picked an insurance company that wouldn't cut off benefits.

Posted by: Ymarsakar at March 25, 2010 04:44 PM

They would have no reason to do so unless they had a good reason that their products would sell more with higher prices.

Not necessarily. The increased costs could be offset in wages. So I could pay you $50k without subsidizing your insurance and you spend $3,000 on premiums or I could pay you $49k and your insurance premiums are only $2,000 because I put that $1k towards your insurance.

Either way your "gross income" is $47k but in the latter the business actually saved you $250 because you didn't have to pay taxes on that last $1k.

Thus the expense to the business is $50k either way, but the employer paying $49k plus benefits has an advantage over the employer paying $50k without it because the employee derives more compensation from the former.

Posted by: Yu-Ain Gonnano at March 25, 2010 06:58 PM