Repealing Baucus

Having examined the Baucus bill and explained why it might not pass (and now seen the opposition grow), it’s time to talk about repealing this bill if it does pass. Can this bill be repealed. Yes. . . and I would think surprisingly easily. Here’s why.

From A Technical Standpoint, Repeal Would Be Easy

Technically speaking, repealing a law is simple: you just pass another law that repeals the first one. The government speaks through the United States Code. If you want it to shut it up, or change the way it speaks, you just pass a law that deletes or amends the relevant portion of the code.

Yet, this is often not as easy as it sounds. Some laws work their way into the system like weeds, intertwining themselves with dozens of others. This makes it difficult to repeal the law because of the disruption that would be caused the intertwined laws. Consider, for example, social security. Tax law, identification laws, disability law, employment law, medical record privacy laws, and many others rely on the Social Security Act to make their components work. If Social Security were to be repealed, each of those other laws would need to be amended as well.

The Baucus bill, however, is not like social security. The Baucus bill creates stand alone requirements that can easily be removed without causing significant disruption to any other laws or programs.

From A Political Standpoint, Repeal Should Be Easy As Well

As repeal is technically possible, we must next ask whether repeal will be politically possible. To determine that, one must examine who will fight to save the law and who will fight to repeal it, and then determine whether enough legislators will decide that repeal is in their best interests. In this case, few will defend the law and many (both interest groups and the public) will favor its repeal.

If we assume that Baucus passes largely along the lines of what has been proposed (instead of the harder left version proposed by the House), here are the likely consequences:

First, right out of the gates, the public is going to get rather angry because. . .

• Misled Supporters. This bill’s supporters have been misled. Most of the bill's supporters will be shocked to discover that almost none of them will qualify for free health care under the bill. In fact, if you make more than 133% of the poverty level, not only won’t you get coverage, but you will be forced to buy insurance or be fined. Some recent polls suggest that 60% of supporters expect to get free health care from this bill. In reality, less than 1% of the public will qualify for this. That's called disillusionment, a powerful force for killing support.

• All Pain, No Gain. Baucus has written this bill in a way that all of the “bads” (tax increases, cuts to Medicare) kick in right away, but the “goods” (subsidies, limits on insurers) don’t kick in for years. For three years, this bill be all pain and no gain to the public.

• Increased Costs for Everyone. The portion of the public that has private insurance, 60%, will find their insurance costs going up almost immediately. The insurers have estimated that the new requirements will increase the cost of a typical policy by $3,000 to $4,000 per year.

• Benefits Tax. Many members of the public will suddenly find their benefits being taxed at a 40% rate. This is the excise tax on so-called “Cadillac benefits” plans. This will apply to approximately 14% of families and 19% of singles in 2013 (despite indexing, this will increase to 31% and 34% by 2019).

• Doctor Shortage (Phase I). Seniors are going to find that the low rates paid under Medicare/Medicaid continue to force more and more doctors out of the system -- the rest will complain bitterly about cuts, as they do now. With further cuts of 21% and another 40% planned, this could drive out a great many more. Also, with the addition of several million freeloaders to the system, seniors will find the system suddenly becoming very crowded and grievance ridden.

Then, the law of unintended consequences is going to kick in as the plan’s elements slowly take effect. These will convert the public’s anger to rage:

• Failing Insurers. Profits in the insurance industry average about 6% a year, with last year’s profits being around 2%. Those margins are too low for small insurers to continue under the pricing limits imposed by Baucus. Thus, as Paul Ryan (R-Wisc.) observed, most of the nation’s 1300 insurers will go out of business. So what you ask? Well, chances are that the insurance that you currently have -- the insurance the Democrats promised you could keep -- comes from one of these 1300 insurers. Whoops.

• Doctor Shortage (Phase II). Wherever the government becomes responsible for paying for health care, it will pay only the current Medicare rates, which are already causing a revolt among doctors. Expect that doctors will refuse to participate in such plans, causing a serious shortage of available doctors. Essentially, you will have a two tiered system -- one for the rich, with doctors, and one for the rest of us, without doctors.

• Doctor Shortage (Phase III). The more the government takes control of the medical profession, the fewer people will go to medical school. This will slowly lead to a doctor shortage, which might become apparent within a few years. Watch medical school entrance exam scores for a drop in quality of applicants.

• Hospital Bankruptcies. Hospitals have been going broke all over the country, in no small part because of Medicare/Medicaid rates. The government will now withhold another $155 billion from hospitals under those programs. It will also continue to refuse to provide full reimbursement for illegal aliens. Expect this to result in a significant increase in the number of hospital bankruptcies.

• Job Market Changes. As the employer mandates kick in, employers will switch to more temporary workers (in place of permanent workers) and will reduce part time workers’ hours to below 30 hours per week to avoid fines and the need to provide insurance.

Then, right when the effects of the bill are starting to become obvious, the new programs will break the Federal budget. While the Democrats claim the budget can absorb one trillion dollars over ten years, this bill far exceeds that.

Right now this bill extends insurance to 12 million more people -- five million of whom fall into the highest cost range (uninsurables). Applying the 2007 Medicare rates, this will cost at least $133.2 billion per year. It also provides subsidies to 67% of Americans. How much is not clear because the formula depends on the cost of the policies -- they’re capped at 10% of the cost of the policy. This could be as high as $2,000 per person, but realistically will be only a fraction of that. Let’s assume an average of $200 per eligible person, all 210 million of them. That works out to a yearly cost of $40.2 billion.

Even ignoring all other costs and the inevitable increase in costs that will arise from forcing another 25 million people into a system that has no capacity to take them, these two costs alone come to $173.2 billion per year, or $1.7 trillion over ten years -- double the Democratic estimates. That’s also more than the budget deficit in 2007 ($162 billion) for which Bush was so roundly (and rightfully) criticized.

To offset this, the Democrats have proposed a $12.1 billion per year tax on drug makers, device makers, and insurers. However, most of that will be passed right back to the government in increased costs. Beyond this, the Democrats are still looking for ways to pay for this.

If you want proof of the likelihood of budget disaster, look at the experience of various states that have tried to do what the Democrats are doing now. Hawaii, Oregon, Massachusetts, Tennessee and Maine have all created some version of government-run health care, and all are a mess. Hawaii’s Prepaid Healthcare Act resulted in higher costs, fewer insurers, and doubled the number of uninsureds. Moreover, the program was so expensive, it had to be discontinued for children.

Maine’s six year old “Dirigo Health” plan has managed to cover only 18,800 of the state’s 130,000 uninsured, has cost many people their private insurance, and has run away premium costs.

After three years, Massachusetts’ “universal coverage plan” caused costs to explode, resulted in waiting lists, and still left thousands uninsured. Tennessee’s plan for low-income people, caused insurers and doctors to leave the state and has repeatedly flirted with insolvency. Oregon creates an annual list, based on budget constraints, that identifies which treatments it will cover and which it won’t.

What Should The Republicans Do

Based on all of the above, the public should be quite happy to see this plan repealed. Moreover, there is no constituency to lobby to keep this thing alive. Indeed, the biggest mistake the Democrats made was not merging Medicare into this new program. Thus, opponents cannot be charged with trying to destroy Medicare by trying to destroy Obama/PelosiCare.

But this alone is unlikely to lead to a repeal, the Republicans will need to generate sufficient pressure that even Democrats support repeal. Here’s how to do that:

1. Set up the criticism now. Tell people what is going to happen so that they know where to lay the blame when their health care costs go up, their taxes go up, they lose their insurance because their insurer goes broke, their doctor refuses to take their new insurance, they are told their jobs will be made temporary positions, their part time hours are cut, the budget deficit skyrockets, and they experience massive delays and incompetence in their dealings with the health care system. Pointing this out now, lets people attribute a cause, which focuses anger and will go a long way to selling the arguments to be made later.

2. Don’t talk about repeal, talk about replacement. Come up with a real plan, not the usual Republican garbage about giving more subsidies to insurance providers, and tell people that you intend to replace Obama/PelosiCare with a plan that will work. Start talking about this now, so that Republicans can claim they tried to change this horrid system before it took effect, and keep talking about it.

3. Generate the proof. Don’t rely on the media to investigate the effects of Obama/PelosiCare or on people to come to their own conclusions. Work with the interest groups to do the studies that back up what is happening and attribute it to Obama/PelosiCare. Do studies pointing out how health care costs go up. Point out permanent jobs lost, reductions in the number of doctors or hospitals or nurses or numbers of insurers. And most importantly, keep pounding away at how many people remain without insurance so that people understand that this was all done for nothing. Indeed, point out that Obama/PelosiCare is spending $1.7 trillion to cover 12 million people, whereas we could have bought them all private insurance for $54 billion a year without destroying every else’s health care.

4. Sell the problem. Finally, Republicans need a unified, continuous attack on the program. They need to run on a visible platform of replacing Obama/PelosiCare. And they need to focus on the key themes:

• Obama/PelosiCare is all pain, no gain. Are you better off? Is your health care better or cheaper?

• Obama/PelosiCare was futile: 30+ million people remain unemployed.

• Obama/PelosiCare was an incredible waste of money. Rather than spending $1.7 trillion to cover 12 million people, we could have bought them all private insurance for $54 billion a year.

• Obama/PelosiCare is bankrupting Medicare.

• Obama/PelosiCare is bankrupting the country. Every other government function is being squeezed or ignored to pay for this turkey. And we’re going deeper and deeper into debt every day because of this plan.

With no one supporting this bill, an angry public, and active interest group opposition, Obama/PelosiCare will become an albatross that hangs around every Democratic neck -- particularly if Obama loses in 2012. This will guarantee ever increasing Republican majorities until they either have the numbers to repeal the bill or the Democrats decide to stop standing in the way. Using the “replace not repeal” plan should hasten their abandonment of Obama/PelosiCare.