Today, the Congressional Budget Office released what may be the penultimate cost estimate of ObamaCare. Or maybe it will be the 12th-to-the-last.  Whatever.

That document — unlike the CBO’s score of the Clinton health plan — includes no cost estimates of the legislation’s private-sector mandates.  As I have written previously, the private-sector mandates accounted for 60 percent of the cost of the Clinton plan.  The Obama plan is remarkably similar, which is probably why Democrats have systematically suppressed any such estimates this time around.

President Obama has implicitly acknowledged that the CBO estimates do not reflect the legislation’s full cost.  Yet it has now been 265 days since Congress saw the first version of the Obama health plan, and we’re still waiting for a full cost estimate.

And so, the ObamaCare Cost-Estimate Watch maintains its lonely vigil.  At least The New York Times is listening.

According to Roll Call:

The Senate Parliamentarian has ruled that President Barack Obama must sign Congress’ original health care reform bill before the Senate can act on a companion reconciliation package, senior GOP sources said Thursday.

So…before you can amend a law, it has to be a law?  What a concept.

According to MSNBC, Democratic leaders have given up on trying to appease pro-life House Democrats:

House leaders have concluded they cannot change a divisive abortion provision in President Barack Obama’s health care bill and will try to pass the sweeping legislation without the support of ardent anti-abortion Democrats.A break on abortion would remove a major obstacle for Democratic leaders in the final throes of a yearlong effort to change health care in America. But it sets up a risky strategy of trying to round up enough Democrats to overcome, not appease, a small but possibly decisive group of Democratic lawmakers in the House…

Democratic Rep. Henry Waxman of California, chairman of the Energy and Commerce Committee…predicted some of the anti-abortion lawmakers in the party will end up voting for the overhaul anyway.

Pro-life Democrats will vote for taxpayer-funded abortions?  Without even a fig leaf of a compromise?

Ezra Klein quotes the Congressional Budget Office’s latest cost estimate of the Senate health care bill when he writes:

“CBO expects that the legislation would generate a reduction in the federal budgetary commitment to health care during the decade following 2019,” which is to say that this bill will cover 30 million people but the cost controls will, within a decade or so, leave us spending less on health care than if we’d done nothing.  That’s a pretty good deal. But it’s not a very well-understood deal.

Indeed, because that’s not what the CBO said.

First, the CBO said the “federal budgetary commitment to health care” would rise by $210 billion between 2010 and 2019 under the Senate bill.  Then, after 2019, it would fall from that higher level.  And it could fall quite a bit before returning to its current level.

Second, the “federal budgetary commitment to health care” is a concept that includes federal spending on health care and the tax revenue that the federal government forgoes due to health-care-related tax breaks, the largest being the exclusion for employer-sponsored insurance premiums.  If Congress creates a new $1 trillion health care entitlement and finances it with deficit spending or an income-tax hike, the “federal budgetary commitment to health care” rises by $1 trillion.  But if Congress funds it by eliminating $1 trillion of health-care-related tax breaks, the “federal budgetary commitment to health care” would be unchanged, even though Congress just increased government spending by $1 trillion.  That’s what the Senate bill’s tax on high-cost health plans does: by revoking part of the tax break for employer-sponsored insurance, it makes the projected growth in the “federal budgetary commitment to health care” appear smaller than the actual growth of government.

Third, the usual caveats about the Senate bill’s Medicare cuts, which the CBO says are questionable and Medicare’s chief actuary calls “doubtful” and “unrealistic,” apply.  If those spending cuts don’t materialize, the “federal budgetary commitment to health care” will be higher than the CBO projects.

Fourth, Medicare’s chief actuary also contradicts Klein’s claim that the Senate bill would “leave us spending less on health care than if we’d done nothing.”  The actuary estimated that national health expenditures would rise by $234 billion under the Senate bill.

And really, Klein’s claim is a little silly.  Even President Obama admits, “You can’t structure a bill where suddenly 30 million people have coverage and it costs nothing.”

From my op-ed in The Daily Caller:

ObamaCare would dramatically expand government control over health care.

Each new power ObamaCare creates would be targeted by special interests looking for special favors, and held for ransom by politicians seeking a slice of the pie.

ObamaCare would guarantee that crucial decisions affecting your medical care would be made by the same people, through the same process that created the Cornhusker Kickback, for as far as the eye can see.

When ObamaCare supporters, like Kaiser Family Foundation president Drew Altman, claim that “voters are rejecting the process more than the substance” of the legislation, they’re missing the point.

When government grows, corruption grows.  When voters reject these corrupt side deals, they are rejecting the substance of ObamaCare.

If Obama is serious about fighting corruption, he should invite C-SPAN to into every meeting he holds with members of Congress.

Then we’ll see whether he’s lobbying House members based on the Senate bill’s merits, or promising House members judgeships or ambassadorships in exchange for their votes.

What’s going on behind those closed doors, anyway?  Aren’t you just a little bit curious?

Or does corruption only happen when Billy Tauzin is in the room?

The President has announced a government crackdown on Medicare and Medicaid fraud. The effort appears to be an attempt to make it easier for Americans to swallow the health care “reform” he’s trying to shove down their throats. As House Republican leader John Boehner correctly asked, “Why can’t we crack down on fraud without a big-government takeover of health care?”

As I’ve noted before, improper payments made by Medicare and Medicaid is may well be $50 billion more than the already appalling $100 billion annual figure the president cited. Administrative efforts to rein in fraud and abuse are welcome, but they won’t solve the huge and fundamental inefficiencies of these programs. Because the law requires government health care programs to quickly get payments out the door, Uncle Sam will always be engaged in a costly game of “pay and chase.”

The broader problem is that government programs aren’t subject to market discipline. Policymakers and administrators have little incentive to be frugal because they face few or no negative consequences when playing with other people’s money.

Most of us have noticed how good private companies can be at reducing fraud. I recently received a call about questionable charges on my Discover credit card. After quizzing me on a list of purchases made with my card in the past 24 hours, it became clear that someone had gotten control of my account. Discover immediately closed the account, opened an investigation, and removed me from any liability for the fraudulent charges.

What amazed me is that I only had about $300 worth of charges on my card. It’s not a big account and thus not a big money maker for Discover. Yet, within 24 hours of a string of suspicious charges, the company was right on top of it before I even realized anything nefarious was going on. Private markets don’t always work this well, but government programs almost never do.

Noting that premium increases, such as Anthem’s proposed 39-percent hike in California, have caused individuals and employers to purchase less coverage, Kaiser Family Foundation president Drew Altman writes:

Rising health care costs and insurance company practices are leading not just to more expensive premiums, but to skimpier, less comprehensive coverage as well; slowly redefining what we have known as health insurance. To be sure, some economists argue that this is precisely what should happen…But this is not likely how regular people see it. Appropriate cost sharing is one thing, but we may be reaching the point in the individual market where the policies many people have simply cannot be considered meaningful coverage.

Of course, this is the whole idea behind President Obama’s proposed tax on high-cost health plans: higher prices will cause people to purchase less coverage, which will temper health care spending.

But whether Altman is correct depends on what the meaning of “meaningful” is.  When individuals pare back the amount of insurance they purchase, they are revealing what they consider to be meaningful coverage.  (The same is true when employers opt for less-comprehensive coverage, though employers’ revealed preferences are obviously a poor proxy for what their workers value.)

If Altman thinks the coverage that individuals are choosing “cannot be considered meaningful coverage” (note the passive voice), he is implicitly stating that individuals are not the best judges of their own welfare.  And the only way to devise an alternative definition of meaningful coverage is through the political process.

It is difficult to argue that the political process does a better job of selecting meaningful coverage.  That process forces many consumers to purchase coverage that they don’t find meaningful (e.g., chiropractic, acupuncture, circumcision), that they find offensive (e.g., abortion, contraception, in-vitro fertilization), or for treatments that are downright harmful (e.g., high-dose chemotherapy combined with autologous bone-marrow transplant for late-stage breast cancer).

Letting consumers reveal their preferences is possibly the worst way to define “meaningful coverage.”  Except for all the others.

What does it say that the American polity has consistently rejected a wholesale government takeover of health care for 100 years?

What does it say that public opinion has been consistently against the Democrats’ health care takeover since July 2009?

What does it say that Democrats are having this much difficulty enacting their health care legislation despite unified Democratic rule?  Despite large supermajorities in both chambers of Congress, including a once-filibuster-proof Senate majority (see more below)?  Despite an opportunistic change in Massachusetts law that provided that crucial 60th vote at a crucial moment?  Despite a popular and charismatic president?

What does it say that 38 House Democrats voted against the president’s health plan?

What does it say that Massachusetts voters elected, to fill the term of Ted Kennedy, a Republican who ran against the health care legislation that Kennedy helped to shape?

What does it say that the only thing bipartisan about that legislation is the opposition to it?

What does it say that 39 senators voted to declare that legislation’s centerpiece unconstitutional?

What does it say that health care researchers — a fairly left-wing lot — think the Senate bill is unconstitutional?

What does it say that the demands of pro-life and pro-choice House Democrats, each of which hold enough votes to determine the fate of this legislation, are irreconcilable?

What does it say that House Democrats are actually contemplating a legislative strategy that would deem the Senate bill to have passed the House — without the House ever actually voting on it?

Given that ours is a system of government where ambition is made to counteract ambition, what does it mean that the only way to pass this legislation is for the House to trust that the Senate will keep the House’s interests at heart?

The rationale for your proposed tax on high-cost health insurance plans is that it would encourage people to purchase less-comprehensive coverage and thereby reduce health care spending.

If that’s a good idea, then why is it bad when insurers raise premiums?

Congressman Paul Ryan (R-WI) takes the President to task for cooking the books on projected health care costs, most egregiously with the “doc fix” — namely, assuming Medicare slashes physician payments by 21.3% this year and subsequently lets them fall continuously in real terms.

What nobody seems to have noticed is that the same phony “doc fix” taints the new “Health Spending Projections Through 2019” from Centers for Medicare and Medicaid Services (CMS).

Drew Altman, president and CEO of the Kaiser Family Foundation, tries to downplay the CMS forecast “that the public sector will start paying more than half of the nation’s health care bill starting in 2012, and that government spending will grow faster than private spending from 2009 to 2019 (an average of 7.0% per year vs. 5.2%).”

Worrying about such spending trends is a foolish “ideological battle over the role of government,” says Altman, because rapid increases in government health spending is “just the byproduct of economic and demographic trends” (recession and an aging population).   “Is government health spending out of control?” he asks; answering “NO” in capital letters.  “The report simply underscores the need to control health care costs in the public and the private sectors alike.”

On the contrary, the reason government health care spending is projected to slow down to 7% a year is, the CMS explains, “due principally to the 21.3% reduction in physician payment rates . . . mandated in current law.”

Putting aside such “doctored” projections, “health spending by public payers ($1.2 trillion) is projected to have grown much faster in 2009 (8.7 percent) than that of private payers (3.0 percent).”

That was not because of high inflation in costs of medical goods and services (which should not differ much between government and private payers), but because the government has only in recent years been heavily subsidizing health insurance for the unemployed and drug insurance for seniors, and actively expanding the enrollment of Medicaid programs which (being “free”) often lure people out of employer-sponsored plans.

What Congressional Democrats call “reform” is, in fact, much more of the same—more non-poor people getting Medicaid and other subsidies that are yanked away if you work too hard.

No, It’s Not Health Inflation

Describing  runaway entitlement spending as “health inflation” is terribly misleading (even when Rep. Ryan does it), because doing so confuses rising prices with rising utilization of medical goods and services by people who are insulated from actual costs by taxpayer-financed subsidies.

Government subsidies also raise costs to those using private insurance.  The CMS notes that 2009’s 4.6% increase “private health insurance premium spending per employee . . . resulted in part from an increase in the proportion of high-cost claims—many of whom have temporary COBRA coverage” [emphasis added], which is 65% financed by taxpayers.

By contrast, health inflation per se is projected to be 2.8% this year — comparable to other labor-intensive service industries and also down from 3.2% in 2009 and 3% in 2008.     Morevoer, “out-of-pocket spending is projected to have grown 2.1 percent in 2009, down from 2.8% in 2008.”

What about all the uninformed media fuss about health insurance companies supposedly “asking for” premium increases of “up to” 39%?

If President Obama really wanted to find out how quickly typical health insurance premiums have been increasing, he could have a staffer call the Bureau of Labor Statistics and ask for Table 3A of the “Consumer Price Index Detailed Report Tables Annual Averages 2009.”  It turns out the consumer price index for health insurance premiums fell by 3.2% in 2009.

President Obama evidently thinks that if he promises not to kill health savings accounts (HSAs), opponents will swoon for his government takeover of health care.  If that doesn’t do the trick, he should make clear that his health plan would not eliminate other things too, like the Defense Department and puppies.

Of course, that hollow gesture didn’t win the president any Republican support.  But it may have cost him some Democratic support — or at least frayed the nerves of a few House Democrats.  According to CongressDaily:

Liberals, meanwhile, are fuming over an addition Obama made to his proposal to make the effort appear bipartisan and possibly switch the votes of moderate Democrats who opposed the House bill last year.

The Congressional Progressive Caucus co-chairman, Rep. Raul Grijalva, D-Ariz., said Wednesday he is disturbed and bitter about an addition he said goes against Democratic principles.

“I’ve been leaning ‘no’ for a long time. That hasn’t changed,” Grijalva said about voting for the healthcare overhaul the Senate passed in December and a package of changes that would move through a separate bill through reconciliation.

Obama indicated he might be open to a provision that would encourage the use of health savings accounts, a tax-exempt savings account that typically is used in conjunction with a high-deductible plan. The provision would allow the exchanges to offer high-deductible plans.

“For some of us, the bitterness about HSAs in and the public option completely out, I don’t know how long that’s going to linger,” Grijalva said.

Which tends to confirm what HSA supporters have long feared: killing HSAs is the Left’s game plan.

This afternoon Politico Arena asks:

Will the president’s health care remarks today sway enough votes to pass ObamaCare through “reconciliation”?

My response:

Who knows? What they show beyond all doubt, however, is the mind-set of the president and the bill’s proponents. Consider just a few of his opening words: “Everything there is to say about health care has been said and just about everyone has said it. So now is the time to make a decision about how to finally reform health care so that it works, not just for the insurance companies, but for America’s families and businesses.”

Notice first the insinuation that health care works today for the insurance companies, but not for the rest of us. Obama has to have his foil, this man with no experience in the private sector and little understanding of how that sector works. But notice, more importantly, that we need “to finally reform health care so that it works” — the implication being that this is a collective undertaking, the only question being how to do it. “We’re all in this together.” In the private sector, if we can’t reach an agreement about some proposed undertaking, we walk away. That seems inconceivable to Obama. He’s a government man: conceiving public solutions to private problems is what his life is all about.

I suppose you could say that government is so enmeshed in health care today that there are only public solutions to the problems government is largely responsible for having created — starting with the favorable tax treatment employer-provided health care affords. But the direction of reform needn’t be toward even greater government. It might be toward less government, as with health savings accounts. But that approach has been rejected from the start by Obama and his Democratic supporters. They move in only one direction.

Wouldn’t it be great if we could just get the state out of the marriage business? Perhaps. Marriage is fundamentally private, after all. It’s a matter for families, churches, and couples to decide for themselves.

Yet state recognition of marriage often acts to keep the government out of private life, to ensure family stability, and to give regular, orderly rules for all those times when, despite our best efforts, family and state still collide. Here are just a few of the things that the civil side of marriage does:

• If you’re happily married and you have children, you don’t have to worry for a moment about child custody law. Your children are yours to raise jointly, whether they are biological or adoptive.
• If you’re married and you die without a will, your spouse typically gets at least a share of your estate. You don’t have to do anything special for this to happen. It’s automatic, and I think this probably strikes most people as fair.
• If you’re married, you don’t need to do anything special to be able to make medical decisions for an incapacitated spouse. It’s presumed that you are competent to do this.
• You can sponsor your foreign spouse for U.S. citizenship.
• You can sue for wrongful death of a spouse.
• You can collect a spouse’s Social Security benefits.
• You can often keep joint personal finances without worrying that your spouse will bankrupt you.

Depending on where you live, some of these protections can be won outside of marriage, if you’re willing to go to a lawyer and spend a few hundred bucks. Others, like the last four, can’t be had without either a marriage or a blood relationship.

State recognition of marriage protects families, often from the state itself. If the state got out of the marriage business, the state would be a lot more in all of our private lives, judging, inspecting, regulating, forbidding, taxing, redistributing, and all the rest. Much of the state part of marriage is really a protection against the state.

All of this is a lead-up to saying congratulations to the same-sex couples who will now be able to marry in Washington, DC. Perhaps even more than other types of marriages, same-sex marriages need these protections. (Some, like sponsoring an immigrant or collecting Social Security, may have to wait for federal law to catch up.)

On the whole, same-sex marriage means that gays’ and lesbians’ private lives can stay private. It gives them a protection against the government, which has too often been used against them. It means that gays and lesbians can be treated the same as any other group of citizens. And it means that their basic right to be left alone is finally being honored.

In a letter to congressional leaders, President Obama wrote of his openness to including Republican proposals in his health care legislation.

Dropping a few Republican ideas into a government takeover of health care is like sterilizing the needle before a lethal injection: a nice thought, but the ultimate outcome is the same.

• Two of the four Republican ideas – federal grants to states that adopt medical malpractice liability reforms, and ratcheting upward Medicare’s physician-price controls – would increase government spending.
• The president’s health savings accounts (HSAs) proposal would merely loosen the noose around consumer-directed health plans.
• Undercover investigations in Medicare and Medicaid are likely to be as unsuccessful as past efforts to combat fraud.

This is not bipartisanship.  President Obama is creating the illusion of bipartisanship while taking the most partisan route possible: forcing his legislation through Congress via reconciliation.

(Cross-posted at National Journal’s Health Care Arena.)

From my health care reform oped in today’s Daily Caller:

President Obama wants to work with Republicans on health care reform. “I am going to be starting from scratch,” he says, “in the sense that I will be open to any ideas that help promote” controlling health care costs and making health insurance more widely available.

As it happens, many of the worst ideas are in the legislation Obama supports. Republicans have embraced some of the best ideas, but also some of the worst.

The best health care reform ideas ideas give consumers the money, let them choose a health plan regulated by a state of their choice, and reduce the federal government’s role in providing medical care to the needy.  The worst ideas?  Creating or expanding government health care programs, mandates, price controls on health insurance, and federal med mal reform.

Sen. Jim Bunning (R., Ky.) blocked “extended” unemployment benefits beyond their scheduled expiration on February 27. That thwarted bill would also have put off, again, a scheduled 21 percent cut in Medicare payments to physicians. Democrats were outraged. But why?

Bunning just wanted to use leftover “stimulus” money to pay for the benefits. Why not? Such transfer payments accounted for over 80 percent of stimulus spending last year.

Besides, as Federal Reserve policymakers noted, the evidence is overwhelming (see here and here) that extending unemployment benefits from six months to nearly two years has raised the unemployment rate by a percentage point or two. I’ve waited since 1991 for someone to prove I’m wrong about that. Nobody has, because nobody can.

If the maximum duration of jobless benefits were trimmed by 13 to 20 weeks (which is all that’s at stake), they would still be far more extended than ever before. But the unemployment rate by the time of this November’s elections would be much lower than otherwise. Would Democrats prefer to go into the elections with an unemployment rate near 10 percent or a rate below 9 percent?

As for Medicare, slashing payments to physicians is the Democrats’ favorite way of paying for expanding Medicaid enrollment and health-insurance subsidies for the non-poor. If they really think that will work, how can they possibly object to saving money sooner rather than later?

[Cross-posted at The Corner]

Since many of the politicians in Washington want America to be more like Europe (including complete government-run health care instead of the partially government-run health care system we have now), it’s worth contemplating what that would mean for the economy.

America today is richer than Western Europe. Indeed, per-capita living standards are about 30 percent higher in the United States — and that’s according to the statists at the Paris-based Organization for Economic Cooperation and Development (see page 6 of this report). And we have been growing faster, which presumably should not be the case according to convergence theory (see Annex Table No. 1 of this OECD database).

It also seems that Europe’s economy is more likely to endure a double-dip recession. Bloomberg reports:

Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending. After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. …“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” …“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” [UBS strategist Nick] Nelson said in a Feb. 23 report… “The sovereign debt crisis in Europe’s periphery reinforces drags on euro-area growth,” said Michael Saunders, an economist at Citigroup in London.

Left-wing populists genuinely seem to believe that the economy is a fixed pie, so even though they are fundamentally wrong, their fixation on redistribution is understandable. After all, given their inaccurate view of the world, robbing Peter is the only way to lift Paul. What is more mystifying is why the (presumably) thoughtful left wants America to be more like Western Europe, where living standards lag America and the gap grows wider with each passing year. The only logical conclusion is that they are so fixated on differences in income (or, less charitably, are so resentful of success) that they are willing to make poor people worse off if they can impose even greater damage on rich people.  As Winston Churchill noted, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

• Republicans and Democrats are both missing the point of true health care reform: “Health care reform cannot just be about giving more stuff to more people. It should be about actually ‘reforming’ the system. That means scrapping the current bills, and crafting the type of reform that makes consumers responsible for their health care decisions.”

• Alan Reynolds: If people looking for individual health insurance policies were allowed to shop in any state, the number of uninsured could drop by 11.1 million … or more.

• And the winner for the worst idea for health care reform goes to…

• Something you might want to brush up on: The Reconciliation Rulebook.

• In case you missed it, Cato health policy experts live-blogged part of Thursday’s health care summit.

Today, President Obama began to fulfill the promise that health care legislation would be hashed out on C-SPAN. His discussion with congressional leaders was broadcast on that cable channel and streamed live on the Internet. The nearly six-and-a-half hour-long meeting began to touch on many of the issues at stake in the health care area. 

I’ll leave observations about the merits to our experts, who live-blogged the morning session. I found a few things interesting from a transparency perspective:

The format was far more conducive to productive discussion than procedures for “debate” in Congress. What generally happens in the House and Senate is display of members’ and senators’ well-settled views.  So today interested Americans could get a real sense of the issues and how their representatives think about them.

There seemed to be a division between representatives who knew the technical subject matter and those who—for lack of a better phrase—knew the emotional subject matter. Surprisingly astute commentaries on fiscal realities were met with appeals to the story of one constituent or another—or of members’ own families’ health predicaments.

Though there was much talking past one another, these are all good things to see. It will inform the public, and a better informed public will make better decisions about health care legislation, about individual representatives, and about the proper role of government. 

I know how I feel about these things. (I’m soft-pedaling my views here as hard as I can…) My opinions didn’t change, though I adopted new nuances to my thinking.

It’s doubtful that many people’s opinions will change. But I’m confident that a more open process will lead to better results in many senses: specific policy results; electoral activity; and people’s overall sense of the role of government.

Today’s meeting only scratched the surface, of course. Sessions like this in the days and weeks to come will do more to improve the transparency of the lawmaking process, in this issue and hopefully others. Today’s transparency precedent is something that the president and federal lawmakers should not retreat from.

The White House meeting on health care began at 10:00 AM EST Thursday and Cato health policy experts offered live commentary for the opening remarks. You can read through the live-blog in the player below.

• How the stimulus raised unemployment.

• Price controls have failed in the past and there is no reason to think they will work now. So why is the president proposing price controls on health care? Michael Tanner: “Attempts to control prices by government fiat ignore basic economic laws — and the result could be disastrous for the American health-care system.”

• Does this federal government policy make me look fat? Be honest. (Yes).

• So, President Obama wants a presidential commission on the budget deficit. Isn’t that a little bit like W.C. Fields asking for a commission on sobriety?

• Podcast: “POTUS and Price Controls in Health Care” featuring Michael F. Cannon.

The Maastricht Treaty requires countries in the eurozone not to exceed a public debt of 60% of GDP. Well, now almost all of them have an official debt exceeding that ceiling. But the situation is immensely worse because European states also have huge, and largely hidden, unfunded liabilities arising from their pension and health systems. According to a 2009 study by my colleague Jagadeesh Gokhale, the true debt of the 25 European countries is, on average, 434% of GDP. And the treaties that underpin European integration do not say a word about such debt.

Greece’s true debt is 875% of GDP and its current problems are just the first act of the coming fiscal bankruptcy of Europe. In my 2004 essay “Will the Pension Time Bomb Sink the Euro?”, I concluded that Europe would end up facing a critical crossroads: either leave the Euro or abandon the Bismarckian welfare state paradigm. As it turns out, the DNA of the pay-as-you-go system allows for political manipulation and the consequent inflation of pension and health “rights.” This, exacerbated by falling fertility rates and increasing life expectancy, will lead to increasing fiscal deficits, unpayable debt, state insolvency, defaults, covert age wars, and the failure of the Eurozone project.

The welfare state has really become an arbitrary “entitlement state,” where everyone uses the state to rob someone else, and politicians from the right and the left play the transfer game to win elections. This crisis may serve to reveal the true nature and enormous flaws of the welfare state. Sooner or later, Europe will have to dismantle it and move toward a paradigm of personal responsability — that is, a system of personal accounts for pensions, health and unemployment benefits.

In a recent paper, I showed that the health care legislation passed by the House and Senate would impose punitive implicit tax rates on low- and middle-income workers.  Those bills would also result in higher health insurance premiums over time because they would create large financial incentives for healthy people to drop coverage and only purchase it when they become sick.

The health care proposal that President Obama released yesterday essentially splits the difference on most areas of disagreement between the two bills.  But a preliminary analysis shows that ObamaCare 3.0 would make these perverse incentives even worse.  Families of four earning $22,000 under the Senate bill (100 percent of the federal poverty level) or $30,000 under the House bill or the Obama plan (133 percent FPL) would face the following effective marginal tax rates as they climb the economic ladder:

• Senate bill – Average: 62 percent.  High: 73 percent.
• House bill -  Average: 74 percent. High: 82 percent.
• Obama plan – Average: 72 percent. High: 90 percent.

In other words, over broad ranges of income, families of four would see their take-home pay rise by an average of 28 cents of each additional dollar earned.  In some cases, it would rise as little as 10 cents for each additional dollar earned.  Using smaller changes in income reveals the Obama plan would create EMTRs as large as 200 percent or higher.  That is, earning more money would leave many families worse off financially.

In addition, by requiring insurers to cover all applicants without regard to illness, each of these health plans would remove any penalty on waiting until you are sick to purchase coverage.  Therefore — even after accounting for all relevant taxes, subsidies, and penalties — these plans would create large financial incentives for healthy people to drop out of the market, which would cause premiums to rise for those who remain.  That would in turn encourage more healthy people to drop out, which would cause premiums to rise further, and so on.  Those perverse incentives are much worse under the Obama plan than under the House or Senate bills.  Here are the maximum financial incentives to drop coverage that each plan would create for families of four:

• Senate bill: $8,000
• House bill: $7,800
• Obama plan: $9,900
  

By increasing the financial incentives to drop coverage, the Obama plan would cause private insurance markets to unravel even faster than the House and Senate bills would.

Newsweek’s Sarah Kliff nicely summarizes why abortion could be THE issue that stops ObamaCare.  I’ve made a similar argument in a paper on ObamaCare’s individual and employer mandates.

Two factors seem most salient:

1. One side must lose. ObamaCare would so infuse federal money into private insurance markets that either (A) taxpayers will be forced to pay for elective abortions, which would be unacceptable to pro-life Democrats, or (B) the restrictions necessary to prevent taxpayer funding would curtail access to private abortion coverage — even for women who don’t receive federal subsidies — which would be unacceptable to pro-choice Democrats.  Abortion is not one of those issues where opposing sides can meet in the middle.  There’s no way to, ahem, split the baby.
2. Abortion may be the one issue that Democrats care about more than health care. Democrats may therefore prefer to let ObamaCare die than violate their principles on abortion.  One can imagine pro-life Democrats saying, Health reform, yes — but not at the expense of the unborn, just as one can imagine pro-choice Democrats saying, Health reform yes — but not at the expense of a woman’s right to choose.

No matter which way ObamaCare comes down on abortion, the legislation could lose enough House Democrats to fall short of the 218 votes needed to win.

That’s about as believable a headline as the one on President Obama’s health reform site.

Mr. Orwell, call your office.