Health Care as % of GDP ---17% now, 25% by 2025, and 33% by 2040 if no reform

Wage and Retirement Growth crowded out by Health Care Compensation

Workers pay about 27% of the health insurance premium, while employers pick up the remaining 73% of the premium.

45 million aged and disabled Americans had to pay much more for health care – up 65% from 1999 to 2008 -- while Social Security inflation adjusted benefits rose only 10%

% Federal Spending for Health care rose from 1% in 1980 to 25% in 2008

Four Problems with Health Insurance

(1) Adverse Selection – healthy avoid, unhealthy wants small companies hurt due to less pooling

(2) Moral Hazard – people overuse health care due to insurance

(3) Samaritan Dilemma– free emergency care causes less insurance sold

(4) Incomplete Insurance Contracts – contracts complicated and can be revoked

Major Topics Missing from the ERP 2010 on Health Insurance

(1)Medical Malpractice Awards Create High Costs

(2)Failure to Allow Sales of Insurance Across State Lines Raise Costs

(3)Large Numbers of Illegals Using the “Free” Health Care System

----- ERP 2010 states that certain types of US mortality for males has been 8% higher than in the other 18 industrialized countries (17% higher for women). The Report says this suggests that the health care system is at fault.

----- And, according to one survey of (uninsured) people the US population has become less satisfied with their health care system – more than other countries.

Reductions due in large part to 2 recessions – ½ of the fall made up for by public insurance increases

ERP 2010 sees this as evidence of market failure

People lose coverage during recessions – ERP 2010 fails to discuss this as a reason for the decline in the previous slide. Note that coverage was about constant 2003-2006 in the previous slide.

Unemployment rate is declining during that time

Note the young – healthy segment aged 20-35 coverage is only about 65% - 75%

The new mandate forces young people to buy insurance to help pay for the old and those with pre-existing conditions

The poor are largely covered by Medicaid run by the states – coverage varies but most families would qualify if they have incomes at or below 180% of Federally defined poverty level . That would capture many of the poor.

ERP 2010 claims that firms are providing less coverage and those that do require higher payments – reducing take home pay. However, much of this

is caused by the recession.

As you lose you job you become eligible for assistance.

Cost --- $1 trillion

Reduces Deficit -- $140 billion over first ten years (CBO estimate)

Expanded Coverage – 32 million Americans

Insurance Exchanges – subsidies to poor 133% - 400% of poverty line, separate exchanges for small businesses

Payment for Plan – higher taxes on investment income, excise tax on high benefit health insurance plans, excise tax of 10% on tanning

Medicare Expansions and Cuts -- $500 billion cut in Medicare over next ten years, expansion of drug benefits

Medicaid -- eligibility up to 133% of poverty line. Illegal immigrants ineligible, expansion of benefits to childless adults.

Health Care Signed into Law March 2010

Insurance Reforms – no longer possible to deny coverage based on pre-existing condition (children immediately, adults beginning 2014). Children allowed to stay on parents policy until aged 26.

Abortion – private funds used, no requirements for exchanges to offer abortion, states can legislate prohibition on exchange-based abortions

Individual Mandate – everyone must buy health insurance or face $700 fine (some exceptions for the poor)

Employer Responsibilities – Each employer of 50+ workers must provide health insurance or face fine of $2000 per worker per year. Illegals cannot buy health insurance on the exchange even if they use their own money.

Bureau of Labor Statistics surveys 60,000 households = 110,000 people

2000 geographic areas of the country

Who are the Unemployed?

Who is in the Labor Force?

Male earnings not growing and female earnings growing slower – rich are getting richer at the expense of the working class and there are

higher health costs crowding out

The ERP 2010 seems to be playing class warfare here. It says that it is bad that workers are not getting higher wages and salaries, but if they do get higher wages, then it is bad for the

poor. In other words, if people make higher wages we can tax them more.

If you want people to try to earn more, then you must let them keep their earnings…not tax

it away.

Somehow they cannot show us after-tax share. Also note how that during the Clinton administration things got worse…much worse. Why was that?

Again, if you go to college it is to become rich…but ERP says becoming rich just takes money away from the poor.

ERP 2010 trying to tell us education is important for greater earnings.

Is college for everyone. What about other forms of education and investment?

There may be many reasons why that the mean years are slowing since 1970.

The cost of college education is much higher in the US than in many countries – also opportunity costs may be higher. Remember that

unemployment in Europe is higher than in the US and EU is suffering massive debts.

If we only knew mathematics we would all be rich !

The ERP 2010 wants us to believe that education is important. It gives workers higher wages and helps them to do things like understand the complex health system, engage in less crime, vote more, and support freedom of speech.

Unfortunately it does not help them understand the US Federal Tax Code which is much more complicated than any of these.

Also, there is no comprehensive program discussed. Instead, certain sums or additions are included in the budget or are projected to be spent in the future.

In fact, very little practical information is given. Mostly it is platitudes about what should be done.

Indeed, LA county is a great example of how that throwing dollars at education may deliver the worst test scores and highest dropout rates. How can they explain this?