What kind of emergency is that?

It’s not a healthcare emergency. It’s what might be called a Madoff emergency.

Whether starry-eyed utopians or cynical malefactors, the unnamed, possibly unnameable they have high ambitions for Washington to achieve their objectives. The stars are aligned for their coup d’etat, but there is one little problem: the country is out of money.

This problem threatens to stop not only their agenda, but the whole game. Washington has 2 million employees on the payroll, earning on average twice as much as those in the private sector. And probably more than a hundred million dependents—recipients of Social Security, Medicare, Medicaid, and grants and subsidies of all types. What happens if the checks stop coming?

David Brooks spilled a key insight in the New York Times: he noted that health care has become the “bank” out of which President Obama plans to fund the bulk of his agenda. “By squeezing inefficiencies out of the health care system, he could have his New Deal and also restore the nation to long-term fiscal balance.”

But most politicians and commentators appear to be in deep denial. The country has accumulated unpayable debts—not to mention future unfunded liabilities—that threaten its survival even without any new entitlements.

To keep the music going a while longer, Washington needs to suck what remains of private capital into its coffers. Healthcare is one of the few remaining healthy industries. And it is something on which human beings voluntarily spend their last dime.

While overall employment has been falling, healthcare employment has been growing. As Richard A. Cooper, M.D., former dean of the Medical College of Wisconsin, pointed out, without the 2.8 million jobs added in the healthcare sector in the past decade, unemployment last April would have been 10.5% rather than 8.5%.

Washington needs to bleed American medicine, in order to transfuse the federal government.

To do this, it needs mandated premiums and taxes, and increased control. The degree of micromanagement is reflected by the occurrence of the word “Secretary” 2,489 times in the House bill, and 2,500 times in the Senate bill.

To buy just enough votes to pass a monstrous bill, the Democrat leadership has been willing to promise whatever it takes: indefinite Medicaid subsidies, abortion rights, abortion restrictions, “mental health parity,” a “doc fix,” a continued ban on drug reimportation, and probably lots of other things that haven’t come to light.

None of these have anything to do with the heart of the bill: forced purchase of “insurance,” and a massive transfer of power to executive agencies.

And if an all-powerful executive breaks a promise, what are you really going to do about it?

A government that is already beginning to default on Social Security, by withholding cost of living increases, can’t be trusted with lesser obligations either.

So what’s the point of delaying the day of reckoning? Current officeholders might hope to be out of power, with a fat pension. But then, maybe they won’t be.

How will a population reduced to penury, dependent on government for the means of survival, bring about a regime change? No money to fund political opponents, no time to think of anything but providing for minimal food and warmth, no freedom to protest without fear of loss of eligibility for ration coupons—likely not even any pitchforks or a bus to get to Capitol Hill.

The battle for freedom in medicine is the battle for freedom.

The reason Obama is wrong, and the Left in general on issues of public options versus private enterprise, is simple human nature.  When it comes to such matters, it was never so well explained as by the legendary Milton Friedman:

“There are four ways in which you can spend money.  You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else.  For example, I buy a birthday present for someone.  Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.  Then, I can spend somebody else’s money on myself.  And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!  Finally, I can spend somebody else’s money on somebody else.  And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.  And that’s government.”

If you extrapolate that logic, you come to understand why the US Defense Department paid $500 for hammers during the 1990’s – an occurrence which infuriated the Left largely because they were anti-military and the rest of us because of the sheer waste.  The reason for such waste was rather simple:  a government bureaucrat was not spending his own money on himself – but other’s money on goods and services for others.  But it wasn’t only that – there also is the issue of what I call the reverse economies of bureaucratic scales.

Realize that if you are a one-man shop selling lemonade – you know quite well the costs of your goods, your selling price and ultimately the bottom line.  You have every incentive to be vigilant on all counts so as to achieve a profit.  As any person in business will tell you though, the more employees you hire, the harder it is to keep a close eye on them and therefore a close eye on costs.  For huge corporations, with what amounts to their own private bureaucracies, the problem is not one of simple arithmetic – but of geometric proportions because there are so many more potential opportunities for waste.  That is a simple fact of doing business because the greater the number of employees – the more distant they are from the bottom line.

It is such a major concern that larger companies hire whole divisions of people dedicated to analyzing and streamlining costs.  In doing so, they can strive to keep production costs low and they can achieve or maintain economies of scale, i.e. the ability to produce more units at a lower cost per unit as the number of units sold goes up.  Even though that is hard, it occurs because the profit motive keeps private business owners more than concerned that they are not buying $500 lemons.

Governments, however, simply do not have the same motive.  First, unlike business, a government bureaucrat knows that an unspent allocation may not be reallocated in the future thereby resulting in a loss of power and prestige.  Literally.  Thus, reducing budgets for efficiency purposes is simply not a priority – especially since they cannot benefit from the cost reduction.

Beyond that, governments simply do not dedicate nearly the amount of time and energy to costs/benefits analysis or costs oversight as does private enterprise – because they are spending somebody else’s money on somebody else on a grand scale.

Finally, and this point cannot be hammered home enough, the Obama plan will create, over time, the largest single bureaucracy in world history – over 110 new agencies/departments in all.  In other words, the geometric potential for waste will be beyond any prior experience we have seen.

All combined, that results in reverse economies of bureaucratic scales, i.e. bigger systems result in geometrically larger waste, fraud and abuse – or, as you know it, the Department of Defense paying $500 a piece for hammers.

That is why comparisons to smaller public health care systems around the world, such as Canada, are false comparisons.  Canadians spend just under $200 billion on health care a year.  The US, on the other hand,  spends well over $2 trillion dollars a year and those reverse economies of bureaucratic scales produce over $47 billion waste in just Medicare – over $1 in every $10 spent by the program.

You shouldn’t have to be hit over the head to know how many more $500 hammers can be hidden in $2 trillion system than one less than 1/10 that size – unless, of course, the cost of buying the hammer isn’t nearly as important to you as being in charge of wielding it.

Last Monday, Roll Call reported that “Senate Majority Leader Harry Reid (D-Nev.) is expected to announce on Monday afternoon that negotiations on the Senate’s final health care reform bill have concluded and that he is sending the measure to the Congressional Budget Office, according to Democratic sources.”  At the press conference, Reid said “today’s development, my sending of, in the next few hours, to CBO a – number of – anyways the proposal we are sending them for their scoring will make us a step closer to achieving a bill this year.”  Specifically, Reid asserted that he is going to include a public option with an opt out provision in the bill, then at the 1:24 mark of the video linked above said that the public option would be “included in the bill we submitted, that will be submitted to the Senate.”  Sounds like Reid announced a deal on a bill, yet in the letter Reid backed away and stated that his bill “does not exist.”

News reporters and TPMDC also seemed to get the impression that the announcement by Reid last Monday was more than a press availability to discuss the progress on Obamacare: 

• AP – “Reid says he has blended two versions in a measure that includes a government-run ‘public option’ to compete with private health insurance plans.”  Reid now says that he is “now working” to “meld them together into a single bill.”
• NYT – “Mr. Reid has now submitted several components of the developing Senate health care bill to the Congressional Budget Office for cost analysis. It will likely take several days for the nonpartisan budget office to provide results, and only after that will Mr. Reid decide whether it’s time to push for the first vote.”  It has been over week and Reid now claims that “no final decisions have been made.”
• TMPDC – “In the next several hours, Reid will send the CBO a draft bill with alternative provisions on certain issues, to get a range of cost estimates on the plan he’ll bring to the floor.”  Reid now claims that “there is no bill to release publicly.”

Reid wrote “as you also know, we are now working to take these publicly-available provisions (two committee passed Obamacare bills) and meld them together into a single bill. Apart from my decision to include a public option from which states may opt out, no final decisions have been made – and none can be made until we get more information about how CBO would score different combinations. In other words, there is no bill to release publicly – it does not exist.”  Is this a commitment from Senator Reid that he will not add any new language to the bill?  Reid’s announced version of the public option with the states having the power to op out of the program was not in either of the bills that passed Senate committees, yet he seems to have made a commitment to stick to the parameters of two Senate committees.  He also had seemed to announce a deal last Monday, so we need to take Senator Reid’s assertions with a grain of salt. 

The games Senator Ried has played with this Obamacare bill is a high risk game of Hide and Seek. Reid may have a bill written and read to go, yet he continues to hide the details of his bill from the American people.  It is too bad Senator Reid is not willing to publish the actual legislation online so the American people can read the bill.

-“Total national health expenditures under this bill would increase by an estimated 2.7 percent in 2019…”

 -“The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.”

-More than half of the expansion in coverage (18 million out of 34 million) would be from increased Medicaid coverage.

-12 million people would lose employer-sponsored coverage.

-The productivity adjustments to Medicare are “unrealistic” and providers “might end their participation” because the cuts would make serving Medicare beneficiaries unprofitable.

-Medicare Advantage enrollment would decrease by 64 percent (from a projected level of 13.2 million to 4.7 million under the proposal).

As of today, HHS still hadn’t published the analysis on their website, even though it was written by its own staff. We have a feeling it may never find a home there. So, we’ve brought it to you directly. Full financial analysis below.  

CMS OACT – Memo on Financial Impact of H R 3200 09-10-21 –