The 'Total Cost' to the Individual of ObamaCare

America’s total annual spending on healthcare hit $2T around 2005 and is now around $3T. In “It's time to get mad about the outrageous cost of health care” in the Nov. 2014 issue of Consumer Reports, we read that “if our $3 trillion health care sector were its own country, it would be the world’s fifth-largest economy.”

The cost of healthcare in the U.S. as a percentage of the gross domestic product (GDP) was 13.8 percent in 2000 and 16.8 percent in 2008 (chart). So in eight years, spending on healthcare went from being less than one-seventh of the entire economy to being more than one-sixth. Might it become one-fifth?

From 2009 through 2011, healthcare spending leveled off at 17.9 percent of GDP. With “The end of health care’s historic spending slowdown is near” in Sep. 2014, the Washington Post reported (link added):

As the economy recovers, Obamacare expands coverage and baby boomers join Medicare in droves, the federal Centers for Medicare and Medicaid Services' actuary now projects that health spending will grow on average 5.7 percent each year through 2023, which is 1.1 percentage points greater than the expected rise in GDP over the same period. Health care's share of GDP over that time will rise from 17.2 percent now to 19.3 percent in 2023, or about $5.2 trillion…

It appears that healthcare will soon be right at one-fifth of the economy. However, those figures are just projections. The economy has been expanding for almost six years, which is a fairly long expansion. If the economy were to slow, the share that healthcare takes up of the economy could be at one-fifth even sooner. (Also, that projected 4.6 percent growth in GDP seems a bit optimistic.)

In “Policy Basics: Where Do Our Federal Tax Dollars Go?” on March 11 at the Center on Budget and Policy Priorities, we read that 24 percent of the 2014 federal budget ($836 billion) went to just four healthcare programs: Medicare, Medicaid, CHIP, and ObamaCare subsidies. With those four programs alone, the feds already pay for more than a quarter of the nation’s healthcare bill. And the feds also pay for other healthcare programs, such as for the VA and federal employees.

Back in 2010 when ObamaCare was enacted, the reason that Americans who were actually paying for their own healthcare wanted healthcare reform is because of the soaring prices they were paying for health insurance and for out-of-pocket medical expenses, like deductibles, co-pays, and, if they were self-insured, the entire bill. Democrats confidently assured Americans that they could “insure” millions of additional people (while violating the very foundations of the insurance business with their policies of “guaranteed issue” and “community rating”) and that folks’ insurance premiums would come down. Indeed, we were told that the price of health insurance policies would fall by an average of $2,500.

Americans who were paying their own way had a very precise knowledge of how much they were paying for some of their healthcare, (after all, they were seeing the amounts on their bills and writing them on their checks). But the total of what they pay for healthcare isn’t so apparent. For instance, one may think one can know what one’s share of Medicare is simply by looking at one’s payroll taxes. But lately Medicare has been funded in part with transfers from the general fund. So if you pay income taxes, your share of Medicare is higher than you might have thought. Even destitute individuals pay for (someone else’s) healthcare if they buy goods that have the cost of employee health insurance incorporated into their prices.

ObamaCare cannot throw millions more Americans onto Medicaid, and subsidize the insurance premiums of millions more, without someone having to pay more for something. Whether it’s for insurance premiums, out-of-pocket bills, interest on the national debt, or taxes, someone is going to be paying more under ObamaCare. For the individual to know the total of what he will now pay for healthcare, he would need to know about the 21 new and higher taxes that ObamaCare erected. For instance, there’s a new 3.8 percent surtax on investment income. Sell a piece of real estate and you may get hit with that surtax.

What should concern any fiscal hawk is whether the revenue from all the new ObamaCare taxes must be spent on ObamaCare only. Even if the revenue from these new taxes goes into some “trust fund” rather than the general fund, it’s likely that Congress could use it as a “slush fund,” just as they have with the revenue from the Medicare portion of the payroll tax, and with other dedicated taxes.

To pay Medicare benefits, there must be sufficient money sitting in the Medicare “trust fund” to cut checks. Not so with Medicaid. There’s no dedicated tax with Medicaid, unlike Medicare. Medicaid is welfare; if one meets the criteria, one gets Medicaid. And if there isn’t any money in the treasury to pay Medicaid, the government borrows it.

The problem with the ObamaCare health insurance subsidy program is that it’s more akin to Medicaid than Medicare; both Medicaid and the subsidies place a “mandatory” demand on the treasury. If you meet the criteria, you get a subsidy.

Healthcare is becoming a bigger and bigger share of both the economy and government. One way to get control over government spending is to put their healthcare programs on a budget. These programs should all have their own dedicated taxes, as in Medicare, and they should operate solely off of cash flow from those dedicated taxes. And if there’s a surplus from the dedicated taxes, the monies should stay with the programs, so there’d be no inter-agency “loans.” Congress needs to end the accounting gimmick they call the “unified budget.”

For the health of that patient we call America, the first goal of healthcare reform should have been to get control of price inflation in healthcare. And only after Congress had demonstrated that they could do that should they have tackled any additional coverage for the poor. Congress should also have addressed the epic waste and fraud in the government medical programs before even thinking about expanding coverage. In May 2014, The Economist reported an estimate “that fraud (and the extra rules and inspections required to fight it) added… up to $272 billion across the entire health system.” Even now a sitting U.S. Senator is involved in a multimillion-dollar Medicare overbilling case.

With ObamaCare, the “central planners” in D.C. have outlawed scarcity and mandated plenty. With ObamaCare, every blubbery couch potato will get his coronary bypass operation; every penniless wino will get his liver transplant; every corporate lawyer will get her birth control pills; every ancient Lothario will get his Viagra. With ObamaCare, everyone will get everything. And for some Americans, it will all be “free.”

Jon N. Hall is a programmer/analyst from Kansas City. 

America’s total annual spending on healthcare hit $2T around 2005 and is now around $3T. In “It's time to get mad about the outrageous cost of health care” in the Nov. 2014 issue of Consumer Reports, we read that “if our $3 trillion health care sector were its own country, it would be the world’s fifth-largest economy.”

The cost of healthcare in the U.S. as a percentage of the gross domestic product (GDP) was 13.8 percent in 2000 and 16.8 percent in 2008 (chart). So in eight years, spending on healthcare went from being less than one-seventh of the entire economy to being more than one-sixth. Might it become one-fifth?

From 2009 through 2011, healthcare spending leveled off at 17.9 percent of GDP. With “The end of health care’s historic spending slowdown is near” in Sep. 2014, the Washington Post reported (link added):

As the economy recovers, Obamacare expands coverage and baby boomers join Medicare in droves, the federal Centers for Medicare and Medicaid Services' actuary now projects that health spending will grow on average 5.7 percent each year through 2023, which is 1.1 percentage points greater than the expected rise in GDP over the same period. Health care's share of GDP over that time will rise from 17.2 percent now to 19.3 percent in 2023, or about $5.2 trillion…

It appears that healthcare will soon be right at one-fifth of the economy. However, those figures are just projections. The economy has been expanding for almost six years, which is a fairly long expansion. If the economy were to slow, the share that healthcare takes up of the economy could be at one-fifth even sooner. (Also, that projected 4.6 percent growth in GDP seems a bit optimistic.)

In “Policy Basics: Where Do Our Federal Tax Dollars Go?” on March 11 at the Center on Budget and Policy Priorities, we read that 24 percent of the 2014 federal budget ($836 billion) went to just four healthcare programs: Medicare, Medicaid, CHIP, and ObamaCare subsidies. With those four programs alone, the feds already pay for more than a quarter of the nation’s healthcare bill. And the feds also pay for other healthcare programs, such as for the VA and federal employees.

Back in 2010 when ObamaCare was enacted, the reason that Americans who were actually paying for their own healthcare wanted healthcare reform is because of the soaring prices they were paying for health insurance and for out-of-pocket medical expenses, like deductibles, co-pays, and, if they were self-insured, the entire bill. Democrats confidently assured Americans that they could “insure” millions of additional people (while violating the very foundations of the insurance business with their policies of “guaranteed issue” and “community rating”) and that folks’ insurance premiums would come down. Indeed, we were told that the price of health insurance policies would fall by an average of $2,500.

Americans who were paying their own way had a very precise knowledge of how much they were paying for some of their healthcare, (after all, they were seeing the amounts on their bills and writing them on their checks). But the total of what they pay for healthcare isn’t so apparent. For instance, one may think one can know what one’s share of Medicare is simply by looking at one’s payroll taxes. But lately Medicare has been funded in part with transfers from the general fund. So if you pay income taxes, your share of Medicare is higher than you might have thought. Even destitute individuals pay for (someone else’s) healthcare if they buy goods that have the cost of employee health insurance incorporated into their prices.

ObamaCare cannot throw millions more Americans onto Medicaid, and subsidize the insurance premiums of millions more, without someone having to pay more for something. Whether it’s for insurance premiums, out-of-pocket bills, interest on the national debt, or taxes, someone is going to be paying more under ObamaCare. For the individual to know the total of what he will now pay for healthcare, he would need to know about the 21 new and higher taxes that ObamaCare erected. For instance, there’s a new 3.8 percent surtax on investment income. Sell a piece of real estate and you may get hit with that surtax.

What should concern any fiscal hawk is whether the revenue from all the new ObamaCare taxes must be spent on ObamaCare only. Even if the revenue from these new taxes goes into some “trust fund” rather than the general fund, it’s likely that Congress could use it as a “slush fund,” just as they have with the revenue from the Medicare portion of the payroll tax, and with other dedicated taxes.

To pay Medicare benefits, there must be sufficient money sitting in the Medicare “trust fund” to cut checks. Not so with Medicaid. There’s no dedicated tax with Medicaid, unlike Medicare. Medicaid is welfare; if one meets the criteria, one gets Medicaid. And if there isn’t any money in the treasury to pay Medicaid, the government borrows it.

The problem with the ObamaCare health insurance subsidy program is that it’s more akin to Medicaid than Medicare; both Medicaid and the subsidies place a “mandatory” demand on the treasury. If you meet the criteria, you get a subsidy.

Healthcare is becoming a bigger and bigger share of both the economy and government. One way to get control over government spending is to put their healthcare programs on a budget. These programs should all have their own dedicated taxes, as in Medicare, and they should operate solely off of cash flow from those dedicated taxes. And if there’s a surplus from the dedicated taxes, the monies should stay with the programs, so there’d be no inter-agency “loans.” Congress needs to end the accounting gimmick they call the “unified budget.”

For the health of that patient we call America, the first goal of healthcare reform should have been to get control of price inflation in healthcare. And only after Congress had demonstrated that they could do that should they have tackled any additional coverage for the poor. Congress should also have addressed the epic waste and fraud in the government medical programs before even thinking about expanding coverage. In May 2014, The Economist reported an estimate “that fraud (and the extra rules and inspections required to fight it) added… up to $272 billion across the entire health system.” Even now a sitting U.S. Senator is involved in a multimillion-dollar Medicare overbilling case.

With ObamaCare, the “central planners” in D.C. have outlawed scarcity and mandated plenty. With ObamaCare, every blubbery couch potato will get his coronary bypass operation; every penniless wino will get his liver transplant; every corporate lawyer will get her birth control pills; every ancient Lothario will get his Viagra. With ObamaCare, everyone will get everything. And for some Americans, it will all be “free.”

Jon N. Hall is a programmer/analyst from Kansas City.