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Con: Can America afford health care reform?

Posted: Friday, May 21, 2010

WASHINGTON - Americans consistently said controlling health costs was their top priority for health reform. But Washington didn't listen, and independent experts now say the new health law actually will drive up the cost of health care and insurance premiums.

Federal and state governments as well as businesses, consumers and taxpayers are finding they cannot afford this massive and unpopular health overhaul law.

The Congressional Budget Office recently issued a revised estimate showing the law will cost $115 billion more than it projected the week before it was enacted. That puts the CBO's initial price tag at $1 trillion, still a conservative estimate that is based upon unrealistically high assumptions about cuts in Medicare spending and unrealistically low assumptions about the cost of the new law.

Further, the CBO says that preventive care and pilot projects designed to modernize care delivery, while important, are unlikely to reduce costs and may actually increase health spending.

A report by the Obama administration's own actuary, issued a month after Congress passed the reform legislation, showed it will increase federal health spending by $311 billion over the next decade and likely much more.

The chief actuary for the administration's Centers for Medicare and Medicaid Services, Richard Foster, also predicts higher health insurance premiums for individuals and businesses.

One reason is the billions of dollars in new fees and excise taxes the law imposes that Foster says will "generally be passed through to health consumers in the form of higher drug and devices prices and higher premiums." These include more than $20 billion in taxes on medical devices, $60 billion in taxes on health plans, and $27 billion in taxes on prescription drug companies.

Foster's report also highlights the shaky financial footing of the new long-term care insurance program - the CLASS Act, which Sen. Kent Conrad, D-N.D., has described as "a Ponzi scheme of the first order." Foster says the program faces "a significant risk of failure" and finds the program will result "in a net federal cost in the long-term."

The CBO estimates that individuals and businesses also will face at least $120 billion in fines and penalties for failing to comply with the law's new health insurance mandates. And it says families purchasing health insurance in the individual market will pay $2,100 a year more for coverage by 2016 than they would had the measure not passed.

States also fear a flood of red ink. Indiana has released a study showing that the health overhaul law could cost the state an additional $3.6 billion over 10 years - money that Hoosiers don't want to spend for a law that polls show they strongly oppose.

And major companies also face tax hits, fines and huge risks. Large, publicly traded companies have issued reports showing reduced earnings as a result of tax changes. Experts with the consulting firm Towers Watson calculate it will mean a $14 billion hit to their earnings because the law takes away part of a subsidy that encourages them to provide drug coverage to retirees.

These companies also are beginning to recognize the extraordinary risk of continuing to provide health benefits for their workers.

"Many companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government," according to Fortune magazine that reviewed internal company documents.

If employers drop health insurance, taxpayers will wind up picking up the costs of coverage for millions more Americans. And an analysis conducted by officials of the White Castle restaurant chain said that just one provision will effectively cut the chain's net income in half and reduce future jobs creation.

These company reports are the canary in the coal mine warning politicians, businesses and consumers of the dangers ahead. They are sounding alarm bells that the health care reform legislation is unpopular for a reason: It will break the bank for taxpayers, consumers and American businesses.

Grace-Marie Turner is president and founder of the Galen Institute, which is funded in part by the pharmaceutical and medical industries.



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