Economic Ignorance

The WSJ is reporting that Obama's speech will propose:

Starting next year, the plan also calls for annual fees of $6 billion on health-insurance providers, $4 billion for medical-device makers, $2.3 billion on drug makers and $750 million on clinical laboratories. The fees would be levied on individual companies based on market share.

Don't you love that, by the way.  The benefits are not programmed to begin until 2013 but the taxes start in 2010.  But let's rewrite this paragraph to be less economically ignorant:

Starting next year, the plan also calls for annual fees of $6 billion on customers of health-insurance providers, $4 billion for customers of medical-device makers, $2.3 billion on customers of drug makers and $750 million on customers of clinical laboratories. The fees would be levied on individual companies based on market share, then passed on to their customers in the form of price increases, as are all such fees, particularly on low-margin industries such as health insurance.

Congratulations.  Obama has embarked on his quest to reduce the cost of health care by increasing the costs of health care suppliers by over $13 billion per year.  That should work.

For years I have been saying that the government has only one lever to reduce costs (as any thought that they might reduce costs through increased productivity is just a joke rebutted by all of history):  Force people to use less, either by raising the price, reducing the supply, or outright banning certain expenditures in certain situations.


  1. T J Sawyer:

    Health care is a very labor-intensive business. Here is a way to reduce the cost of health care by probably 10 to 20 percent. Eliminate the Federal Income Tax and Payroll Tax. Done!

  2. ilovebenefits:

    Here is an article in the Wall Street Journal Op-Ed page that addresses the increasing costs, impact on GDP, and generous assumptions used to minimize the economic impact:

  3. Dave Cribbin:

    Only in the construct of the governments imaginary world can you decrease the cost of health care for consumers by raising the prices you charge them for it!

  4. ElamBend:

    This just shows the magical thinking that goes on at the top of our administration. They see these large corporations as 'too profitable' and thus they should pay their 'fair share' for health care; with no understanding (or a refusal to understand or acknowledge) that such costs will be passed on.

    I don't think cost saving was ever a goal, just a sales pitch. The goal was to make sure every single person had health coverage, no matter the cost. That is why there is such a fetish for the government option, it's the best entre into universal coverage (and then single-payer).

    The idea of cutting costs under these programs jibes with the same thinking that putting a man who's never created real jobs in charge of 'Green Jobs' policy: magical thinking. Pour some pixie dust and good feelings on it and the result will arrive; if not, spend more money.

  5. MAS1916:

    Obama will use the same old tactics he has used before to try and sell this pig to the people this evening. ( ) Unfortunately for Him, many of the people have read the legislation and have rightfully concluded that it will be very, very bad for almost everyone.

    We'll see if CNN, MSNBC and Chris Mathew's leg are starting to get bored with the same old Obama rerun.

  6. morganovich:

    you left out this very important point:

    Insurers also face an excise tax of 35% for any health plan worth more than $8,000 a year for individuals and $21,000 a year for families.

    so not only are we going to raise your costs and likely mandate many kinds of coverage, but we're also going to cap pricing.

    consider: if even if it's not a killer right now, how long until inflation makes $8000 the middle of the price curve?

    then when "capitalism fails" they can step in and deepen public control of the system/go to single payor...

    and anyone who believes that the government plan won't be bailed out at public expense once it goes into the red is someone with whom i'd love to discuss the sale of a bridge.

  7. tomw:

    But! But! but but but....

    He said he was only the top 5% would have their taxes raised. Only if you make more than a 1/4 million....

    How do you tell when TOTUS is lying? His lips are moving...


  8. tomw:

    Sorry, didn't read the next previous post
    The New Middle Class Tax
    .. working my way down from the top..tom

  9. Krovopiyca:

    Какой милый бложек, юзабилити и дизайн просто супер!

  10. Меринолюб:

    Любопытная темка была поднята, но как-то вяло её обсуждают(