Today is going to be a rant. My apologies.

I’m not a hater, but what I deeply dislike is when politicians offer solutions that have little to do with the problems at hand. You see, I’m a problem solver. You should study a problem, and develop a solution that fixes the problem. Then implement the solution. It’s really not as tough as it sounds. And when you explain it like this, it doesn’t even sound very tough.

Example 1: In 2000, candidate George W. Bush ran on a platform of tax cuts. Why? Because at the time the federal government was running a surplus (though the surplus was created by social security payments, a topic we’ll get around to soon). Bush wanted to give this money back to the people who had earned it. Then to pull us out of recession, President Bush pushed through these very seem tax cuts and tax reforms in an effort to stimulate the economy.

Did the Bush administration study the recession and develop a solution for the problem? No. For the right, tax cuts are always the solution.

Example 2: Most liberals in this country want a single-payer, government run health care system. Is the cost of health care going up? Are people struggling to afford it? Are there problems with the current system? Then we need universal health care.

Did the Democrats in Congress and the Obama administration study the problems with our health care system and develop a strategy to fix the problems? No. For the left, universal health care is always the solution. And since they couldn’t get universal health care, we got ObamaCare. A system designed to push us towards universal health care in the future.

So here we are today. Unemployment remains above 9%. Economic growth is stagnant at best. The economy appears headed towards a double dip recession. But the President has a plan. Stimulus four! Or is this stimulus five? Six? I’ve lost count.

For the President, he has two solutions looking for problems. How convenient.

One, the President wants to spend more money on creating jobs. He refuses to call it economic stimulus because that wouldn’t be politically popular. This time he wants to spend approximately $450 billion. How will he spend it? Sending money to the states to help pay for teachers. More infrastructure investment — though this time he wouldn’t call them shovel ready jobs. Extend unemployment benefits and the temporary payroll tax reductions. And some targeted tax cuts and tax credits for small businesses that will do little to create jobs.

How will he pay for it? That’s easy. Another solution looking for a problem. Tax increases. The administration has proposed that we’ll raise the $450 billion in tax revenues by cutting oil subsidies, and closing loopholes so that the rich “pay their fair share”.

Spend now and raise taxes later to pay for it. Solutions looking for problems.

The President has repeatedly said that his bill should be passed “now” because these are ideas that Democrats and Republicans have agreed upon in the past. And if the bill is not passed, it’s because the GOP is putting party before the economy.

He’s partially right. These are ideas that politicians have agreed upon and tried before. That doesn’t make them the right thing to do. Matter of fact, we have already tried most of these recommendations before. It was supposed to prevent us from exceeding 8% unemployment. It didn’t work then, and it won’t work now. We had the first stimulus of more than $800 billion. We’ve printed money with QE1 and QE2 to the tune of about $2.3 trillion. The President and Congress have already passed cuts in payroll taxes and extensions to unemployment. Through tax cuts, stimulus spending and monetary policy, we have injected trillions into the economy. It hasn’t worked. Keynesian economics has failed.

Why? Because it doesn’t fix the problems at hand.

We have long-term systemic problems that the President has failed to offer solutions to fix. And many of his own policies have actually exasperated these problems.

We badly need tax reform in this country. The President has discussed cutting loopholes on corporate taxes and lowering the corporate tax rate which is among the highest in the world, but has never actually submitted a plan that does this. His own deficit commission recommended this same approach for corporate AND personal incomes taxes — closing loopholes and lowering tax rates. The President won’t do it. Why? Because you can’t play the class warfare card if you fix the tax system.

We badly need entitlement reform in this country. The President has discussed that Medicare is a long-term financial problem that needs to be fixed. It’s unsustainable in its current form. He’s right. But where is his plan? I can’t find it. And he won’t even discuss fixing social security which is every bit as unsustainable as Medicare.

We badly need regulation reform in this country. The President has said that he agrees, even writing an op-ed in the Wall Street Journal discussing his plan to cut needless regulations. He named Cass Sunstein as his regulation czar, spent months evaluating government departments, and has come up with $10 billion in savings over the next five years. It has been estimated that government rules and regulations cost the economy approximately $1.75 trillion per year. Not to mention the mountains of new regulations being written by the EPA, and implemented by ObamaCare and the Dodd-Frank banking reform legislation.

We badly need a balanced budget in this country. It’s not all Obama’s fault, but in the last few years our national debt has jumped by trillions of dollars, and our debt-to-GDP ratio has jumped to almost 100%. This is a bad number. Really bad. When you see the economies failing in Europe, that’s because their debt-to-GDP ratios have exceeded 100%. Spending is on an unsustainable path. The credit ratings agencies have warned that we must stabilize our debt-to-GDP, and that a $4 trillion deficit reduction plan is only a “good down payment”. Where is the administration’s plan to stabilize debt-to-GDP? I can’t find it.

Well, I’ll take that one back. The President’s debt commission put together a plan to stabilize debt-to-GDP. The administration just ignored it.

It has been estimated that big business has somewhere between $2-3 trillion sitting on the sidelines, much of it kept overseas. How do we get this money back in play in our own economy? By fixing our long-term systemic problems. Only then will this money be invested into our economy. And only then, will we once again be headed in the right direction.

I am often amazed by the amount of disinformation that is spread by politicians, activist organizations and members of the media. Today we’re going to look at the fuzzy math behind the Medicare debate. But before we get to Medicare, there are a couple other concepts we need to understand.

The Federal Budget
We have recently discussed how raising taxes will not fix our federal budget problems. It’s important to know how our money is spent, and the impact the entitlement programs have on the budget. Let’s split the budget info four categories:

1. Mandatory Spending: The ONLY spending that is truly mandatory is servicing the debt.
2. Entitlement Programs: social security, Medicare and Medicaid.
3. National Defense
4. Everything Else: This is often referred to a “non-military discretionary spending” but I don’t like that phrase. In my opinion, entitlements should also be considered “discretionary spending”.

Keep in mind the recent disagreements between the two parties in passing a budget, and the discussions of what can be cut from “discretionary spending”. They’re arguing over pennies. The reality is this — if we reduce “Everything Else” (the “non-military discretionary spending”) to $0, we would still be running a deficit of more than a $1 trillion this year. Reducing spending on an assortment of “discretionary” programs cannot fix the problem. And entitlements will only continue to grow  — both in a literal sense, and as a proportion of our federal budget. There is no path to fiscal responsibility that does not include reforming military spending and entitlement programs. (Here’s a good read on Politifact about the budget.)

ObamaCare Math
Now before we dive into Medicare, we also have to look at the math behind ObamaCare because it’s directly related to the recent discussions on the solvency of Medicare. According to its supporters, ObamaCare has been estimated to cost $1 trillion over the first ten years. To pay for ObamaCare, Congress plans to reduce payments to Medicare by $500 billion, and increase taxes by $500 billion, over these same ten years. I have said all along that this math is bad. That ObamaCare will cost more than $1 trillion. That Congress will not achieve $500 billion in cuts to Medicare. And that we would not likely see $500 billion generated in new tax revenues. But for today, that’s beside the point. Let’s assume that all of these numbers are golden. That we can and will pay for the first ten years of ObamaCare as explained through these cuts in Medicare and increased taxes.

So what does this have to do with Medicare math? Everything.

Medicare Solvency
As of today, the federal government receives more in Medicare tax revenues than it pays out in Medicare coverage. But as we move forward, this will no longer be true. We will continue to have a smaller percentage of people paying into the system with their Medicare taxes, and an increasing number of people receiving Medicare benefits. Expenses will soon surpass revenues.

People who oppose Medicare reform point out that the CBO says that ObamaCare extends the solvency of Medicare. That Medicare is not an impending problem and does not need to be fixed. But this is an inaccurate portrayal of what is going on, and what the CBO has said.

If you ONLY look at Medicare expenses and revenues generated from Medicare taxes, then we have indeed extended the solvency of Medicare with ObamaCare. It will take longer for Medicare to become insolvent — meaning that we’re paying out more in services than we’re bringing in in taxes. But that’s if you don’t use these savings and revenues on anything else. You can’t pay for ObamaCare AND use this money for Medicare. This is clarified by the CBO in this memo. Here’s the key part of the explanation:

The key point is that the savings to the HI trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs. Trust fund accounting shows the magnitude of the savings within the trust fund, and those savings indeed improve the solvency of that fund; however, that accounting ignores the burden that would be faced by the rest of the government later in redeeming the bonds held by the trust fund. Unified budget accounting shows that the majority of the HI trust fund savings would be used to pay for other spending under the PPACA and would not enhance the ability of the government to redeem the bonds credited to the trust fund to pay for future Medicare benefits. To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.

So you can either use this money to pay for Medicare OR you can use this money to pay for ObamaCare. But it cannot be used for both. So either we have not extended the solvency of Medicare, or a significant portion of ObamaCare is unfunded. Take your pick.

Medicare Reform
Medicare under its current form will soon become insolvent and must be reformed. Is the Paul Ryan plan a good plan for fixing Medicare? I don’t know yet. I’m still trying to fully understand it. What I can tell you is that Ryan is well intentioned. Tackling entitlements is risky politically, and may cost the Republicans in 2012. Ryan and the Republicans will continue to be demonized and demagogued (I’m not sure that’s actually a word but I like it) over Medicare.

The arguments that are being made to oppose Medicare reform are much like the arguments made by those opposing welfare reform in the ’90s. The GOP fought for welfare reform, and it was eventually signed into law by President Clinton. Today, welfare reform is viewed as highly successful. And it appears that President Clinton supports the idea of Medicare reform as well:

UPDATE 6-5-2011: As I continue to research Medicare, I’ve found that I made a pretty glaring mistake in this article shown above. Though the mistake only further illustrates our need for Medicare reform. A significant portion (about half) of the revenues used to pay for Medicare already come from other sources. A quote from PolitiFact: “Medicare, which provides health care to about 50 million elderly or disabled Americans, is financed through a combination of funding streams: a Medicare payroll tax; general revenue (mostly from federal income taxes); premiums paid by Medicare users; and a tax on Social Security benefits and state payments toward the prescription drug benefit.” I am unclear how anybody can claim that Medicare is “solvent” when half of the costs are paid for by revenues outside of premiums and the Medicare payroll tax. Read this post on PolitiFact.

This last week I exchanged a series of emails with a friend of mine. He is a proponent of a single payer, government run health care system. He also thinks the right is crazy for their talk of death panels, rationing, and how ObamaCare takes us down the road to a single payer system. I attempted to explain how virtually everything in ObamaCare leads to higher prices and higher premiums, and that it’s all done on purpose. They purposefully ignored ideas like tort reform and competition across state lines that could help to control prices. Premiums will rise. Businesses will drop their coverage. Millions will become uninsured. And my prediction all along has been that within ten years we’ll be faced with a much bigger crisis than we face today, and the only “solution” will become government run health care. It’s already playing out right in front of us.

This really isn’t new news. Many on the right have warned us about this eventuality. Many on the left have bragged how ObamaCare will eventually create a single payer system (though the media largely ignores them).

But this is not the purpose of today’s post.

During this exchange we also discussed rationing and death panels. Those on the left have criticized the right for fear mongering about death panels. They say they’re not real. Decisions will remain between patients and their doctors. I’ve criticized the right for the use of the phrase death panels as being overly dramatic. But here’s my point.

In a free market system, insurance companies decide what they will pay for and what they won’t. They ration care. But if you don’t like the offerings from one insurance company, you’re free to choose another. Competition forces insurance companies to provide care, even when some may judge the care as less beneficial or too expensive.

In today’s world, the government makes these same decisions in regards to Medicare and Medicaid without competition.

With ObamaCare, the government has taken a much bigger role in the decision of what insurance companies will pay for and what they won’t. The bigger problem is down the road with a government run system. I attempted to explain that the rationing of care will now be dictated by the federal government, and that in particular the elderly will have their care rationed because of the cost (which is high) and the perceived benefit (which is low). The government will have no competition. And if you don’t like where they decide to limit or ration care, you’ll have no alternative.

It appears that leftist economist and columnist Paul Krugman agrees with me. And to Krugman, this is good news. On ABC’s This Week, Krugman said:

Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes.

Medicare is going to have to decide what it’s going to pay for. And at least for starters, it’s going to have to decide which medical procedures are not effective at all and should not be paid for at all. In other words, (the deficit commission) should have endorsed the panel that was part of the health care reform.

And in case this wasn’t clear enough, Krugman wrote this on the New York Times website:

I said something deliberately provocative on This Week, so I think I’d better clarify what I meant (which I did on the show, but it can’t hurt to say it again.)

So, what I said is that the eventual resolution of the deficit problem both will and should rely on “death panels and sales taxes”. What I meant is that

(a) health care costs will have to be controlled, which will surely require having Medicare and Medicaid decide what they’re willing to pay for — not really death panels, of course, but consideration of medical effectiveness and, at some point, how much we’re willing to spend for extreme care

(b) we’ll need more revenue — several percent of GDP — which might most plausibly come from a value-added tax

And if we do those two things, we’re most of the way toward a sustainable budget.

It’s always interesting to me that reducing expenditures is never part of Krugman’s solutions. And on a related note from IBD:

Sharing Krugman’s belief that such a system is just fine is Dr. Donald Berwick, President Obama’s choice to head the Centers for Medicaid and Medicare Services. Berwick has said: “NICE is extremely effective and a conscientious, valuable and — importantly — knowledge-building system.” No, NICE is a system of rationing through a bureaucratic formula defining “cost-effectiveness” that has rushed untold numbers of Britons to an early grave. (Note from Lee: NICE is explained earlier in the piece from IBD. Read the full article if interested.)

“The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open,” is what Dr. Berwick told a National Institutes of Health publication when he was just president and CEO of the Institute for Health Care Improvement.

The Obama administration’s health care reform is all about cost and little about care. Dr. Berwick has opined: “We can make a sensible social decision and say, ‘Well, at this point, to have access to a particular additional benefit (new drug or medical intervention) is so expensive that our taxpayers have better use for those funds.’ ” In other words, the government will decide whether treating you and extending your life is worth it.

Sounding more and more like rationed care and death panels to me.

One of the points I made all along during the health care reform debate is that the current plan leads us down the path to a single payer, government run health care system. President Obama understands that a government run solution would never have passed Congress, so they backdoored a plan that would eventually create a single payer system. How? By making sure that businesses would be put in a situation where they couldn’t afford to comply with the new regulations and increased costs of health care coverage. The plan was never intended to reduce health care costs, but to increase them.

When President Obama said that Americans would be allowed to keep their coverage, he lied.

Many large firms including AT&T, Verizon and John Deere, have already explained how they may have to drop health care coverage for their employees. A tax change created in the new law will cost these companies millions of dollars, and it may no longer be economically viable for these companies to continue to provide health care coverage. (See this story from CNN.com.)

But what came out in a recently leaked government document is even more disturbing. We had been promised that our health care coverage would be “grandfathered” in under the new law, allowing us to keep the policies currently offered by our employers. According to a joint project that is being prepared by the departments of Health and Human Services, Labor and the IRS, they have predicted that up to 51% of employers may have to relinquish their current health care coverage under the new law.

Why? Because most of these policies will lose their “grandfathered” status within the first few years.

The “midrange estimate is that 66% of small employer plans and 45% of large employer plans will relinquish their grandfathered status by the end of 2013,” according to the document. In the worst-case scenario, 69% of employers — 80% of smaller firms — would lose that status, exposing them to far more provisions under the new health law.

If a company makes even simple adjustments to their current plan, it is now considered a “new” plan and no longer subject to the “grandfathered” status. And all NEW plans must conform with the new government regulations, which will INCREASE the costs of the coverage. Just to give you some insight, 66% of small businesses and 47% of large businesses made a change in their health care plans last year that would have forfeited their grandfathered status. (See this story from IBD.)

So what do you think will happen when millions of Americans lose their health care coverage over the next few years? Don’t worry, the government will have a solution for us. It’s called government run health care.

Polls are interesting, but it is important to understand that they’re only a snapshot in time. And polls can be misleading. Take it from a marketing professional, how a question is phrased can certainly impact the responses given. The polls that I tend to read the most are the ones that are repeated over time — the tracking polls. Even if there’s an element of bias built in to the poll — intentional or unintentional — the trend over time is still revealing. Here are a few recent poll numbers I’ve found interesting.

63% Favor Repeal of National Health Care Plan
As news continues to trickle out about the health care plan, such as the CBO’s recent revision of the costs associated with the bill, support for repeal of the plan continues to rise. According to Rasmussen Reports, 63% of U.S. voters now favor repeal of the health care plan, the highest level ever.

From the same poll, “33% of voters now believe the health care plan will be good for the country, down six points from a week ago and the lowest level of confidence in the plan to date. 55% say it will be bad for the nation. Only 3% think it will have no impact.”

Generic Congressional Ballot, Republicans Hold 8-point Lead
In Rasmussen’s Generic Congressional Ballot, Republican candidates now hold an eight-point lead over Democrats. These numbers have been fairly consistent for several months. “While solid majorities of Democrats and Republicans support their own party, the plurality (41%) of voters not affiliated with either major party now prefer the Republican candidate, while 20% like the Democrat.”

Obama’s Job Approval Numbers
Virtually all of the major polling firms has a presidential approval tracking poll. Real Clear Politics does an average across all of the major polls, and according to RCP, Obama’s favorables are at 47.9, and unfavorables are at 46.4.

64% Favor Offshore Drilling
I think this is the number that surprised me the most. According to Rasmussen: “Despite the major oil rig leak that continues to spew an estimated 5,000 barrels a day into the Gulf of Mexico, the majority of U.S. voters still support offshore oil drilling. The latest Rasmussen Reports national telephone survey of Likely Voters shows 64% believe offshore oil drilling should be allowed, up from 58% earlier this month.”

This is what happens when politicians with little understanding of business are in charge of tax policy. According to a recent article on CNN.com:

Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.

Before we get into this, let me tell you a little about my dad. My dad thought he was good with money. And to his credit, he had a few periods in his life where he made quite a bit of money. But he also had a couple periods of his life where he lost virtually everything. He had a gambler mentality. But not the smart gambler mentality that told him when to walk away. He was the gambler that never knew when to stop. And he refused to learn from his mistakes.

Dad understood that it took spending money to make money. But he had no concept of diminishing returns. This is an over-simplified explanation of diminishing returns.

Let’s say as a business owner you can spend $100 on materials and labor, make a product, and sell it for $200. That’s a $100 profit. That’s good.

Then you discover you can build a better product for $130, and sell it for $300. That’s $170 profit. You not only increased your profit by $70, you increased your cost by only $30. That’s even better.

There becomes a point where diminishing returns kick in. Let’s continue with the example and build an even better product. Your cost is now $250. And you can sell this product for $500. On first glance this looks good. You’ve now made a $250 profit. But it’s not as good as it sounds. You’ve spent an additional $120 to increase your profit by $80.

That’s diminishing returns.

My dad never understood diminishing returns.

Neither does the federal government.

So let’s get back to this new tax policy where every business must generate 1099s for every individual AND every corporation from which they buy more than $600 in goods or services in a tax year.

The Burden of Creating the 1099s
I own a very small business, and I may have one hundred vendors which I will pay $600 or more every year. I will have to contact every one of my vendors to obtain their EIN numbers and enter their information into QuickBooks. At the end of the year I will have to print 1099s for these vendors, stuff them into envelopes, stamp them, and mail them. How much time will this take? That will largely depend on how easy and responsive my vendors are in providing the information I need. I will guestimate that I’ll have a good 50-60 hours into this project in the first year, plus expenses.

That’s 50-60 hours I can’t spend growing my business. And I’m a very small business. Multiply that out across the country for EVERY business, big and small. How many businesses are there in our country? How many hours of time to gather the required information and process it? How many millions of documents will be printed? How much postage will be used to mail millions of documents? What about the resources used to do all of this? I don’t know. I guarantee that it will be substantial.

The Burden of Receiving the 1099s
Now this also means that most of my customers will be issuing me 1099s. I will have to provide them with my EIN number upon their request. And every year I’ll receive a few dozen 1099s from my customers that I’ll include with all of my tax information to my accountant. This won’t be much of a burden for me personally. As I said, I’m a very small business.

But what about larger companies? What about Dell? Office Depot? Holiday Inn? They will receive tens of thousands of 1099s in the mail every year. If not more. They will have costs involved both in sending 1099s to their vendors, as well as processing the 1099s they receive from their business customers.

Who pays for this? Oh yeah, the customer. Dell doesn’t just absorb these new costs and move along. Their are repercussions. And the repercussions will either be in increased prices for their products, or financial cuts elsewhere to compensate for the new expenses.

Diminishing Returns
Now you’ve probably been wondering why I started this post talking about my dad and explaining diminishing returns. The question becomes, what is the net result of this tax policy change?

According to the same CNN article, the IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. This is the government’s attempt to collect a portion of this tax revenue.

But how much can they truly expect to increase in their tax collections with this policy change? Who will pay more in taxes and have to declare money that had previously gone unreported? Or under-reported?

Not Dell. They report their income. Receiving potentially hundreds of thousands of 1099s will not change the amount of income they report. What about Holiday Inn? What about Office Depot? What about IHOP? What about me? Nope. I already report all of my income. And I suspect that most of these other companies do as well. But even if a large company is purposefully under-reporting their income, would we really expect a change in their behavior resulting from receiving these 1099s? I wouldn’t think so. They would still find a way to under-report their income.

I don’t have a problem believing that the IRS fails to collect a lot of money due to unreported income. But which businesses will actually feel compelled to declare more, or all, of their income who aren’t doing so already? Whose behavior will this tax policy change?

One, it would have to be a business who does most of their work for companies, not individuals, as they would only be receiving 1099s from companies. And two, a company who is actively under-reporting their income who would feel at risk if they continued this behavior. I can only imagine that this scenario fits a very small set of very small businesses. Large companies currently cheating on their taxes will continue to find ways to cheat on their taxes. And that’s probably true for most small companies as well. I don’t expect this tax policy change to net the IRS a significant increase in tax revenues. And we haven’t even discussed the new burden on the IRS of receiving millions of new 1099s to process.

So once again, what’s the net result? I couldn’t find anything online that discussed this in detail, or broke down increased costs versus increased tax revenues. Though I didn’t really expect to find anything. Common sense tells me that it will cost business significantly more than it will net the IRS in increased tax revenues.

But our politicians don’t care about diminishing returns. They don’t care if it costs business $100 for them to increase tax revenues by $10. After all, it wasn’t their $100 that was spent for them to receive the $10. It was ours.

Cartoon from Stus.com.

Don’t ask me what I want it for
If you don’t want to pay some more
Cause I’m the taxman
Yeah I’m the taxman
–George Harrison, Taxman by the Beatles

I’ve been reading a number of comments from both sides about mandated health insurance, so I thought it was time to weigh in. Lots of misinformation floating around. The point of this post isn’t to discuss the merits or intrusions of government mandated health insurance, or the Constitutionality of it, but to discuss how it will be enforced and taxed.

As many of us understand, Congress has mandated health insurance for all Americans beginning in 2016. Those who do not have coverage will be taxed. Congress calls this a “fee” but it’s a tax. (See definition of tax here.)

How You Will Be Taxed
Similar to documents you receive from an employer concerning your income and taxes withheld, insurance companies will now be required to provide people who are insured with documents proving that the person has health insurance. When you complete your federal tax returns every year, there will be a place to indicate whether or not you have coverage, and you will have to supply the documents provided by your insurance company to prove that you have coverage. If you do not have health insurance, you will have to pay a tax based on your level of income. This is lumped in with the rest of the taxes you owe, or for many, deducted from the refund that you will receive.

Who Will Pay This Tax
Here’s one of the things I find interesting about this discussion. Most taxpayers overpay taxes during the year, which means they’re due a tax return from the federal government. There’s really no way that these Americans who choose to forgo health insurance can avoid paying the tax as it will be computed with their potential refund. So basically everybody who forgoes coverage and files taxes, will have to pay this tax.

So in practicality, the only people who will be able to avoid paying the tax will be the same people who already fail to file their tax returns.

The Consequences of Non-Payment of this Tax
This has been one of the primary disagreements between proponents and opponents of mandated coverage. Some extreme opponents have claimed that people will go to jail if they don’t buy health insurance, and refuse to pay the fee. Proponents of the bill have claimed this to be a lie.

The truth is this: In earlier versions of the bill, people who chose to forgo health insurance coverage, and refused to pay the “fee” imposed by the federal government, could be prosecuted either criminally or civilly by the federal government. (Read this document prepared by Thomas A. Barthold from the Joint Committee on Taxation in November of 2009.)

Refusing to pay the “fee” is tax evasion. Few people ever go to jail for tax evasion, but it is a possible consequence of non-payment.

I have also read that the health insurance bill has been revised so that people are not penalized for non-payment of this tax. It doesn’t mean they don’t owe the tax. Just that their aren’t “penalties” for not paying this portion of their taxes. However, this will be interesting to watch in application. Basically you’re looking at a small group of individuals who fail to file their taxes, thus have also failed to pay the tax on forgoing health coverage. They can be accessed penalties and interested on the taxes owed EXCEPT on the amount that’s owed for the “fee” for forgoing health coverage.

In all practical purposes, people who forgo coverage AND refuse to pay the “fee” will be the same people who are already trying to avoid paying their taxes. Their really will not be an option for the everyday taxpayer to refuse to pay the fee if they refuse to purchase health coverage.

Like many I’ve continued to watch coverage this week of health care reform. Just a few interesting articles and nuggets today.

CBS Poll: Most Want GOP to Keep Fighting
I had expected to see Obama get a slight bump following the passage of the health care bill this weekend. According to Gallup, the favorables jumped 4 points from 45% in favor of the bill before the vote to 49% in favor of the bill after the vote. And Obama’s job approval rating jumped to 51% from a low of 46% just about a week ago. In general, Gallup has tracked more favorably for health care reform than most other polls, and by a pretty good margin. RealClearPolitics does a great job of tracking multiple polls, and you can see here that Gallup tracked the favorables of the health care reform bill by 4-10 points higher than just about everybody else. So even if health care reform gets a similar bump in the other polls, it will still be seen as an unfavorable bill by most Americans.

But what I found more interesting was in a new CBS poll that found that 62% of those polled WANT the republicans to continue to challenge the health care bill.

From CBS: “The poll finds that 62 percent want Congressional Republicans to keep challenging the bill, while 33 percent say they should not do so. Nearly nine in ten Republicans and two in three independents want the GOP to keep challenging. Even 41 percent of Democrats support continued challenges.”

Threats and Violence are Never Acceptable
Lots of media coverage of threats from health care reform opponents against democrats who voted for the legislation. This is just wrong. Though it’s interesting that Bart Stupak was receiving threats from the left when he had planned to vote against the bill, but it’s not until he receives threats from the right for voting for the bill that it becomes a news story.

There are crazies on both sides. I condemn the behavior of these extremists on the right just as I condemned the behavior of the extremists on the left.

And a Little More Reading Material
Two more articles to keep the juices flowing. This one is from IBD and details 20 ways the Obama-Care will take away our freedoms. And some coverage from PolitiFact with their top ten facts to know about health care reform.

Do you want to know what drives me crazy about our federal government? Well, lots of things drive me crazy. But in light of the passage of Obama-Care last night, simple mathematics just never add up in Washington.

I drive a ’96 pickup truck. Some day it will need to be replaced. We’re hoping that it lasts long enough so that we have our car paid off by the time we have to replace the truck. But what if my truck dies next week? It would be difficult for us to be a one car family. And it will be very difficult for us to add a second car payment to our budget. Decisions will have to be made. What else can we cut from our budget? What are our opportunities to increase our income?

If this particular health care reform bill is so vital to the future of our country, doesn’t that in turn mean that it’s MORE important than other items currently in the budget?

According to the U.S. Treasury, here’s where we spent our federal tax money in 2009.

Department of Agriculture: $114 billion
Department of Commerce: $11 billion
Department of Defense: $637 billion
Department of Education: $53 billion
Department of Energy: $24 billion
Department of Health and Human Services: $796 billion
Department of Homeland Security: $52 billion

This is just a partial overview, but you get the picture. (Data provided by the U.S. Treasury.) We really couldn’t come up with a few cuts elsewhere to help pay for health care reform?

Fuzzy Math 101

Now back to my original point. I guess it’s important to understand that supporters of this legislation don’t care what it costs. Explaining to them that the math doesn’t add up falls on deaf ears. They point to the recent report released by the CBO and say “See, this will reduce the deficit.” Well, the CBO report doesn’t tell the whole picture. And this bill will not reduce the deficit.

1. The CBO was told that we’ll cut $500 billion from Medicare. The CBO doesn’t take into account how, or if, it will actually happen. All they take into account is that they’re told that we will cut $500 billion from Medicare to help pay for health care reform.

So how will we do it? I don’t know. And obviously the government doesn’t know either. They plan to put a panel in place to make these decisions later.

So what happens if they don’t find $500 billion in cuts? Well, nothing happens. The bill has already become law. Who is going to track this and hold Obama / Pelosi / Reid accountable in 2020 if we don’t really cut $500 billion from Medicare?

With millions of baby boomers soon to flood Medicare, there’s not a chance that we’ll actually be able to cut $500 billion from Medicare.

2. The CBO was told that we’d raise another $500 billion through tax increases. The CBO doesn’t take into account how, or if, it will actually happen. All they take into account is that they’re told that we will provide an additional $500 billion through taxes.

So how will we do it? I don’t know. And obviously the government doesn’t know either, as many of the tax increases that will be needed to reach $500 billion do not exist yet. This puts the burden on future congresspeople to pass new tax increases to cover health care reform.

So what happens if they don’t raise $500 billion in new taxes? Well, nothing happens. The bill has already become law. Who is going to track this and hold Obama / Pelosi / Reid accountable in 2020 if we don’t really raise $500 billion in new taxes?

3. What about the expansion of Medicaid that will be required to fulfill the requirements of this bill? Well the CBO doesn’t care about that either. Much of this expense will be picked up by the states who implement Medicaid. Where will this money come from? Out of the state’s budget. That doesn’t factor into the CBO’s findings, or their cost analysis of health care reform.

Kansas is already going through a significant financial crisis, as are most states. Obama has pledged to help the states. With what money? Oh don’t worry, we’ll figure that out later. That doesn’t need to be included when determining the costs of the bill.

4. Last night the House of Representatives made some “reconciliations” to the Senate bill that was passed by the House. My understanding is that one of the components in the reconciliation bill deals with increasing payments to doctors through Medicare compared to the Senate’s bill, thus increasing the expense of the bill. When asked about the increased cost, Congressman Barney Frank replied “We’ll pay for that later.” So once again, more expenses that are not covered in the CBO’s analysis.

5. One component of this bill is that it mandates that Americans purchase health insurance. Who will enforce this? Well the IRS will enforce it. And it has been estimated that the IRS will need to add more than 16,000 employees in order to manage their new responsibilities. Who will pay for this? We will. Did the CBO factor this into their cost analysis? Nope.

This legislation is not budget neutral as we’ve been told repeatedly by supporters. It will cost us a lot of money.

NOTE: I’ve left my original post intact below, but the New England Journal of Medicine is now distancing themselves from this survey and content. As of this morning they had posted two detailed articles about the results of a survey conducted by The Medicus Firm. They have now removed the two articles and instead are linking to The Medicus Firms’ website for information about the survey. The NEJM now says: “The opinions expressed in the article linked to above represent those of The Medicus Firm only. That article does not represent the opinions of the New England Journal of Medicine or the Massachusetts Medical Society.”

I still find the survey interesting, but now it’s harder to know how closely this survey mirrors the opinions of doctors across the country. Maybe Rasmussen will pick up these same questions and do a new survey for us.

Lee

*****

Let me start with a personal story. I good friend of mine was seeing a doctor in Kansas City this last summer. The doctor is a specialist and widely considered among the best in his field in the country. The doctor told my friend that he was working on his MBA, and would be leaving medicine if Obama-Care passed.

One of the complaints among opponents about this massive healthcare reform bill is that it will drive doctors away from medicine. And even though I knew of a personal story about a doctor who was already planning to leave medicine, it’s been difficult for me to tell how much of this was rhetoric, and how much of it was legitimate. Until now.

In a new article from the New England Journal of Medicine, they report that a recent survey shows that “46.3% of primary care physicians (family medicine and internal medicine) feel that the passing of health reform will either force them out of medicine or make them want to leave medicine.”

See the full story here in the NEJM. And here is a quick overview of the key findings. (NOTE: These links used to take you to the two articles on NEMJ’s website, but now take you to information where they explain that it wasn’t their survey.)

Here are a few of the comments that stuck out to me:

Physicians agree that healthcare reform is needed. Only 3.6% of physicians prefer the “status quo” and feel that the U.S. health care system is best “as is”.

Only 28.7% of physicians are in favor of a public option.

62.7% of physicians feel that health reform is needed but should be implemented in a more targeted, gradual way, as opposed to the sweeping overhaul that is in legislation.

The Bureau of Labor Statistics “predicts a more than a 22 percent increase in physician jobs during the ten-year period ending in 2018. This places physician careers in the top 20 fastest-growing occupations from 2008 to 2018. Meanwhile, nearly one-third of physicians responding to the survey indicated that they will want to leave medical practice after health reform is implemented.”

“What many people may not realize is that health reform could impact physician supply in such a way that the quality of health care could suffer,” said Steve Marsh, managing partner at The Medicus Firm in Dallas. “The reality is that there may not be enough doctors to provide quality medical care to the millions of newly insured patients.”

Let me put it this way — doctors understand that we need healthcare reform. But they already know what it’s like for the federal government to get their hooks into health care. And they don’t want any more of it. They deal with Medicare every day. And they watch as Canadians come to the U.S. because they’re unable to receive high-quality of care in a reasonable amount of time in Canada.