Obama Care: A Breakdown of the Savings

Barack Obama has begun “outlining” his health care reform plan ahead of what many Washington insiders see as a messy health care fight this summer.

The Obama administration claims to have found $950 Billion dollars in savings over 10 years which will pay for health care reform. Six-hundred billion in “savings” will come from increasing taxes on those making $250,000 a year, closing tax loop-holes, and increasing government service fees.

This savings plan is flawed because A) $250,000 is not actually that much and B)  as Americans saw during the election, many of those who make $250,000 are small business owners.  Obama has promised to tax business owners who do not provide the type of health insurance the Government wants.  The outcome?  Damned if you do, damned if you don’t–either way you will be taxed.  This plan will be particularly detrimental to small businesses.

$313 billion in “savings” will come from reducing payments to hospitals, medical equipment manufactureres, and laboratories.  These entities will have to make due with the restricted funds doled out by the government.

$110 billion in “savings” will come from efficiency improvements.  I am curious how hospitals and health providers are going to be come more efficient when funding for laboratory research is going to be cut.

$106 billion will come from reducing “disproportionate share payments” which are the payments the government makes to hospitals with large numbers of uninsured.  This portion of savings is particularly skewed since those who are uninsured disproportionately use more services because they are low-income high-risk patients.  Providing them with government insurance will not necessarily reduce the cost of treating them.

In Obama’s Weekly Address he stresses that health reform will keep American firms competitive and reduce “yawning” budget deficits.  A government-run health plan will provide neither of these outcomes.  Firms will remain at a competitve disadvantage because taxes will rise to fund the government program, and deficits do not seem to concern the Obama administration, nor will they be reigned in unless the government inserts itself in the market to control prices.

Health care reform is necessary.  Individuals need to become responsible for their health care, and businesses need to be disassociated from the health care market.  One option in particular provides both of these features; Health Savings Accounts.  There is no part of the constitution which says the government has a role in providing health care. The Obama administration would serve the public well if it considered all the options–free-market measures included.


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