Coyote Blog

Kevin Drum asks whether money corrupts politics, and comes to the conclusion that it does.  I disagree.

Money does not corrupt politics, the expansion of state power corrupts politics.  Every time the state gains a new power to take money from person A and give it to person B, or to throttle company A's business in favor of company B, private individuals start to scheme how they might access that power to their own benefit.

Think back to the much smaller US government of the 19th century.  Don't you long for the day when political corruption mainly meant packing the Post Office with one's kin?  It is absolutely no coincidence that the largest political scandal of that century (the Crédit Mobilier) accompanied the largest expansion of Federal power in that century (the Federally-funded construction of the Transcontinental Railroad).

Political corruption follows the power.  Sure, this power is often bought in dollars, but if we were to entirely ban money from the political process, the corruptions would remain.  And it would shift payment from money to other goods, like quid pro quo's, barter, and access to grass roots labor supplies.  Anyone remember machine politics?

Here is an example from an Administration schooled from an early age in Chicago machine politics

The Heritage Foundation has issued a new report that charges the Obama administration sent presidential earmarks, taxpayer dollars, to Democratic lawmakers to help convince them to vote for controversial proposals such as cap and trade and the health care bill.

“When you examine the recipients of those grants, there were at least 32 vulnerable house Democrats who received significant federal grant money during the run-up or directly after the votes on those pieces of legislation,” says Lachlan Markay, one of the authors of the report.

The amount of earmarks spiked around the time of difficult votes such as cap and trade, then dropped, only to spike again around controversial financial regulations known as Dodd/Frank, and spiked the most just before the vote on the health care bill....

On their websites, lawmakers didn’t advertise their votes, but did tout at length the money they’d gotten for various local projects.

“As a way to counteract the negative voter sentiment that would come from voting for unpopular legislation,” says Markay. “These were attempts to make sure that constituents knew they were bringing money home to their district.”...

Numbers from the non-partisan Congressional Research Service show that the value of administration earmarks under President Obama increased by a 126 percent in his first two years in office and the actual number of administrative earmarks increased by 54 percent.

Those are dramatic increases that are 11 times more than Congress itself increased earmarks, which the White House did not explain today.

By the way, of all the ways that access to political power can be bought, political spending under our current rules is by far the most transparent.   Just as in narcotics or prostitution, a ban wouldn't eliminate it, it would simply drive it further underground and into other forms of currency.

This should be inscribed over the entrance to the Capitol building:

Salutatory goals and creative drafting have never been sufficient to offset an absence of enumerated powers

Unfortunately, they often have.  From the Virginia ruling on the health care bill.

From the National Industrial Recovery Act of 1933, eventually struck down by the Supreme Court:

Whenever the President shall find that destructive wage or price cutting or other activities contrary to the policy of this title are being practiced in any trade or industry or any subdivision thereof, and, after such public notice and hearing as he shall specify, shall find it essential to license business enterprises in order to make effective a code of fair competition or an agreement under this title or otherwise to effectuate the policy of this title, and shall publicly so announce, no person shall, after a date fixed in such announcement, engage in or carry on any business, in or affecting interstate or foreign commerce, specified in such announcement, unless he shall have first obtained a license issued pursuant to such regulations as the President shall prescribe. The President may suspend or revoke any such license, after due notice and opportunity for hear ing, for violations of the terms or conditions thereof. Any order of the President suspending or revoking any such license shall be final if in accordance with law.

With this law, all commerce was to be conducted only at the President's pleasure. The law also instituted code authorities, modeled on Mussolini's economic system, that would set prices, wages, production quotas and nearly every other business practice in an industry. To some extent, I would argue that the recent health care bill is the first modern American code authority.

I have blogged before about the absolute disaster that is the requirement (included in the health care bill) for businesses to submit 1099's for all goods and services purchases over $600.  We have hundreds of vendors who meet this criteria, and the process of filling out forms, collection tax ID's, etc. is insanely onerous.  Megan McArdle has more today.

Further proof that the only cost control idea the Obama administration ever had was service cuts and price controls.

Health and Human Services is once again playing freelance actuary, demanding that the health insurers hold down increases in the premiums for their Medicare Advantage plans.  As far as the administration is concerned, this is a two-fer.  When people have to pay more for their insurance, they tend to ask what the hell good this gargantuan new health care bill is doing--not the question you want them asking as they head to the polls.  But in the case of Medicare Advantage, there's another benefit.  The health care reform bill mandated a substantial cut in payments to Medicare Advantage providers, which everyone expects will translate into cuts in the extra services that Medicare Advantage plans now provide.  If they make those cuts a year early, maybe the administration gets to claim that the cuts don't have anything to do with the new health care bill.

Of course, for the insurers, it's not such a good deal.  The administration doesn't seem to have offered any evidence that insurers are overcharging; basically, they're saying that they ought to underprice their product, even if that means losing money.  Which is what has happened in Massachusetts, where the state insurance regulator refused substantial rate increases, even though as far as I know they never found an actuary to sign off on their orders.  The insurers posted big losses shortly thereafter.

A while back, Megan McArdle had what I thought was good advice - using betting as a way to hedge emotional risks.  For example, I was going to be really disappointed if the health care bill passed, so I bet that its passage would occur.  I am still unhappy, but I have some extra cash.

I have been buying on the dips for a while now.  I predicted way back last July that it was going to pass no matter what

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

Here is as good a reason as any why many businesses (like mine) are currently reluctant to invest:

I've noted any number of times that government taxes comprise 14% of the national income and government spending is at 25% of the national income.

OK, so politicians have two alternatives -- they can make tough choices to reduce spending and reduce their own power, or they can just take more money from taxpayers and in so doing increase their personal power.  Gee, I wonder which will occur?

Combine this is a health care bill no one understands but everyone suspects will raise the price of labor and a climate bill that won't quite die that will raise the price of energy and therefore most other inputs, and is it any wonder that businesses are reluctant to invest when their three highest costs (taxes, labor, energy) are going up by some undetermined amount?

If Obama really wanted to get small businesses to start investing again, he could announce that both cap-and-trade and the health care bill are dead-dead and will not be disinterred this year.   These two bills affect nearly 2/3 of our company's cost structure.  Since we have single digit margins, small changes in the wage and fuel cost lines can completely wipe out our profits.  Not knowing what 2/3 of our costs were going to look like into the future, we have been sitting on our hands.

Unfortunately, this may not be enough.  The third leg of the uncertainty stool is income taxes, and its seems likely that some huge increase almost has to be forthcoming given Congress's predilection for taxes and marked unwillingness to cut spending in any meaningful way.

Here is a very specific example.  We have an opportunity to invest about a half million dollars in a new operation in Texas.  Financing is available.  But in my evaluation spreadsheet, small changes in income tax rates combine with a potential 8% health care tax on wages and an unknown fuel tax increase to move the net present value by enormous amounts.  I am not going to risk a half million dollars on a 20-year investment when the government is considering so much legislation that will arbitrarily move the value of this investment.

This is why Obama's offer of small business financing is meaningless.   In the last decade, government sponsored cheap money lured people into housing "investments" that eventually went upside down.   Are they now luring small businesses into a new trap, encouraging them to take on debt, only to slam the door on them with future increases to their operating costs and taxes?

The Senate health care bill relies for much of its funding on a tax on so-called "Cadillac" health care plans.  But what happens when employees and employers inevitably change their behavior in the face of different incentives?

History teaches us that tax policy has a huge effect on behavior.  Witness the fact in health care the non-nonsensical fact so many people rely on their employer for health care.  As we see today, this is a really bad idea, but it was hatched because tax law provided incentives for paying compensation in the form of health insurance premiums, since these are not subject to either income or payroll taxes.

Already, employers are offering employees what are effectively buy-outs of health care -- higher pay in return for reduced health care benefits.  For employers, the upside risk on health care costs now outweigh the tax advantages of health insurance as a compensation tool.  Given this trend, what do you think will happen when employees suddenly have the same incentive, to roll back health care coverage to get under whatever bar is set for an insurance package Congress thinks is too rich (hint:  wherever the bar is set, it will be below the health insurance Congress provides itself).  Employers and employees are now going to have a shared incentive to back off on health care benefits in exchange for more cash.  Think of the sharp minds on both sides of a UAW contract negotiation - does anyone really think that these guys won't figure out a win-win to avoid paying the surtax?

Three to five years from now, even before the system goes bankrupt from inevitably expanding costs  (you didn't really buy that stuff about the operator of Amtrak and the Post Office improving the industry's efficiency, did you?), we are going to be talking about the gross shortfall in tax revenues to support these programs, all because people change their behavior in the face of changing incentives.

There are very few problems that can't be traced to information and incentives.  I thought of this when Tyler Cowen discusses an attempt to improve health care costs with better information:

The health care reform bill before the U.S. Senate would require hospitals to publicize their standard charges for services, but New Hampshire and Maine have gone much further in trying to make health care costs more transparent to consumers.

New Hampshire and Maine are the only states with Web sites that let consumers compare costs based on insurance claims paid there.

In New Hampshire, the price variation across providers hasn't lessened since the Web site went live in 2007.

The problem is that this is all useless if individuals have not particular incentive to shop.  If I were on Unemployment, would I bother to check a web site to see which unemployment offices had the lowest operating costs and go there to get my check?  No way, what incentive would I have to do so?  I am going to the closest one, or the one with the fewest lines.  Ditto with most people and health care:

Of course, the new health care bill will only make this worse.   Those of us who actually have an incentive to shop, either with high deductible policies and/or HSA's will see our policies banned.   The new health care bill has done nothing but attempt to drive this line all the way to zero.

Update: IBD publishes on the exact same topic (I beat them by 12 hours).

Patients have little direct connection in paying for their care. Their role has fallen significantly. Meanwhile, the government's involvement has grown, as has that of the insurance industry.Because so many Americans rely on an insurance policy or a government program to pay their health care bills, the internal governors that temper the rest of their purchases are turned off. When a visit to the doctor's office or a diagnostic test costs them a mere $10 or $20 co-payment out of pocket "” or there is no charge at all "” cost has little impact on their decision to see a doctor.

"By not knowing the full costs associated with health care, consumers demand more and 'overuse' it," Kenneth E. Thorpe explained a few years back in Health Affairs.

Americans would be more judicious in seeking health care "” they would self-ration "” if the right incentives were in place. An effective way to cut overuse and bring down costs would be to encourage through public policy the use of health savings accounts. If consumers used HSAs to pay the full amount for medical care at the point of service rather than letting employer-funded insurance or a government program pay the bills, the demand would fall.

The Democrats' health care legislation, however, puts more distance between Americans and the payment process and promotes dependence on government. That will only drive down consumers' out-of-pocket expenses even further and force overall health care spending upward. Under such a regime, the system will be worse off than it is now.

Via the Dallas Morning News:

A last-minute change in the federal health care bill ditched a proposed 5 percent tax on cosmetic medical procedures and replaced it with a 10 percent tax on indoor tanning services.

Goodbye Botox tax. Hello tan tax.

This seems really random.  Why should either of these businesses foot a special, disproportionate share of my health care bill?  Well, things that seem random to most of us make perfect sense in Congress.

The tan tax popped up in the health care bill last weekend after powerful medical lobbies "“ including the American Academy of Dermatology Association, American Medical Association, American Society of Plastic Surgeons and Botox-maker Allergan "“ persuaded Congress to remove a tax on cosmetic medical procedures and replace it with a 10 percent surcharge on indoor tanning services.

Lobbyists are very good at punching political hot-buttons.  Since they couldn't argue that botox is "for the children," and since it is generally used by rich white people they could not place the race or class card, they played the only card they had:

"Since 90 percent of cosmetic surgery patients are women, this would have been a very discriminatory tax," said White, who opposed the cosmetic surgery tax.

Technocrats want to believe, and perhaps honestly believe themselves, that care guidelines in the new Federal health care system will be science-based.  What possible basis do they have for thinking that?  We have 50 state laboratories, where states specify must-carry rules on procedures, and not a single one of these lists are science based -- they are loaded with special interest handouts.   I even show in this post how special interests give money to academia to produce studies whose entire conclusion is that certain procedures (performed by the special interest group funding the study) need to be in the minimum coverage laws.   The very first time out, when confronted with a science-based care recommendation (that women not receive breast cancer screening until after 50), the Congress specifically overrode it in the bill under a firestorm of public outcry.

But maybe the dermatologist guys are really looking after us?  After all:

The American Academy of Dermatology warns of significant health risks caused by indoor tanning.

But, as it turns out, it only sees health risks in the use of ultra-violet light by practitioners who are not members of their trade group.  I have bolded the key passage that gives away the game.

Indoor tanning industry groups note that dermatologists use tanning equipment in their offices for cosmetic skin conditions, such as eczema and psoriasis, in phototherapy treatments that cost up to $100 per visit billed to health insurance companies. In contrast, indoor tanning salons cost as little as $6 to $20 per session.

The tan tax would exempt phototherapy services performed by a licensed medical professional.

"This is like Coke being allowed to lobby the government to tax Pepsi, but that Coke be allowed to sell the same product and not be taxed for it," International Smart Tan Network Vice President Joseph Levy said in a statement. "It's unbelievable."

Apparently Senate Democrats have built a number of "entrenchment" provisions in the health care bill attempting to limit the ability of future Congresses to modify the law:

Jonathan notes that the health care bill includes certain "entrenchment" provisions, and asks, "can the current Senate bind future Senates in this way?"  If I understand the bill correctly, it creates an independent board that recommends ways to limit Medicare payments.  These recommendations go to the president, who in turn is supposed to submit them to Congress.  Congressional procedures are likewise constrained.  The Senate, for example, cannot debate the proposal for more than 30 hours; there are limits on House procedures as well.  The idea seems to be to constrain filibustering and other parliamentary maneuvers that would defeat cost-saving legislation in the future.  As Jonathan notes, the bill further provides that these constraints cannot be overturned by majority rule but require a 2/3 supermajority.

More here

A couple of thoughts:

1. I expect future Congressmen to be no less arrogant than current Congressmen, so there is little chance they will allow themselves to be bound by this
2. Do Democrats really think that they have gone through such a thoughtful and deliberative process in creating this bill that no future Congress can improve on it?
3. This has been tried, e.g. on balanced budget stuff.  It never works.  Even the 60-vote cloture rule could be tossed out in a second -- it is public opinion and concern for future periods when the ruling party in the minority that prevents change, not law
4. This is particularly hilarious as while this bill was being debated, there was a commission of experts that did make a recommendation of the type they are looking for in the future - in this case to limit screening of breast cancers for women under 50.  And Congress immediately overrode this recommendation with specific language in this very legislation.  No way Congress will allow itself to be bound by some unelected commission in the Administration, particularly when the two are inevitably controlled by different parties.

This is pretty funny -- the left pretends to be confused as to why the health care bill's key services don't come into effect until 2014.  As if they were not totally onboard with the strategy.

Kevin Drum is reporting, as I predicted, that the Democrats have bought off the remaining votes they needed (with our tax money) and that there will be a successful cloture vote this evening on the health care bill.  Bad news, though I have been prepared for it for a while.  I honestly believe that 90% of this country is going to end up worse off to help out the remaining 10%.  The analogy I often use is that this is just like the crappy public housing we built in the 1960's, except everyone, not just the poor, are going to have to move into it.    The only remaining questions that remain are 1) how long after passage of this bill do Democrats admit they grossly fibbed on the price and start jacking up taxes; and 2) how hard a hit (and how fast) will drug and medical innovation take.  Enjoy.  The only silver lining is that many of the folks who passed this mess are not going to have their jobs a year from now.

Update: Overlawyered has more bad news about the bill's provisions.   A lot more of this will come out as the people are actually allowed to read it.

I was reading through some leftish/alarmist environmental blogs, and I was struck by how many desperately want to buy into the story line that poorer nations are the true heroes of Copenhagen, holding the rich nations feet to the fire so they will commit to deeper CO2 cuts.

Really?  A bunch of dictators who demonstrably have little concern for their citizens and spend most of their time trying to figure out how to divert state funds into their Swiss bank accounts suddenly care about the effects of anthropogenic climate change on their nations?  Hugo Chavez, whose nation currently is avoiding following Zimbabwe down the toilet only by its oil revenues really wants the world to wean itself off oil?

Here is the perfect analogy for the Third World's sudden interest in climate:  The "I will work for food" sign.  Beggers learned that (at least for a while) this sign was a good marketing tool.  They had no intention of doing any work  (I had a friend who used to drive up to all of them and offer them landscaping work in exchange for lunch, always to be turned down flat) but they knew it made potential donors more sympathetic -  see, they really want to work but are just down on their luck.   If you haven't seen the movie Interstate 60, you really need to.  Relevant clip below:

This is exactly the equivalent of the Third World's sudden interest in climate change.  Up to this point, their leaders have shown no interest in stopping the raping of their own local ecosystems.  These guys are certainly not conservationists, but they know a good marketing tool.  Copenhagen is about these guys putting their hands out, and using climate as the marketing tool to soften up their marks in the West.  These nations certainly have no intention of having any targets or restrictions placed on their countries.   And it looks like they may succeed, at least in the treaty phase.

Obama has positioned himself in such a way that he feels that he has to have something he can call a win at Copenhagen.  So he goes to the politician's traditional playbook, which is to use taxpayer money to buy a deal to try to make himself look better.  He is working to do this with the passage of the health care bill and he probably will do this in Copenhagen, agreeing to $100 billion a year in payoffs to third world kleptocracies so he can look like a winner to western socialists.

I still think all the political to and fro on the health care bill is so much smoke and mirrors.  I still believe this:

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

Too many politicians cojones are on the line now.   They are past caring about cost or unintended consequences or even if the bill achieves their own goals they originally set for it.  They are now driven to pass something, and since it is we taxpayers and not Congress that will individually bear the burden of their mistakes, something is very likely going to pass.

Coyote Blog, July 16, 2009

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

WSJ, Nov 19, 2009

What does it take to get a wavering senator to vote for health care reform?

Here's a case study.

On page 432 of the Reid bill, there is a section increasing federal Medicaid subsidies for "certain states recovering from a major disaster."

The section spends two pages defining which "states" would qualify, saying, among other things, that it would be states that "during the preceding 7 fiscal years" have been declared a "major disaster area."

I am told the section applies to exactly one state:  Louisiana, the home of moderate Democrat Mary Landrieu, who has been playing hard to get on the health care bill.

In other words, the bill spends two pages describing would could be written with a single world:  Louisiana.  (This may also help explain why the bill is long.)

Senator Harry Reid, who drafted the bill, cannot pass it without the support of Louisiana's Mary Landrieu.

How much does it cost?  According to the Congressional Budget Office: $100 million.

House passes health care bill. I wonder if anybody really knows what is in this thing.  I am not much of a political expert, but I don't see how, if the vote was so close in the House, that they are ever going to get this pig through the Senate.  Perhaps go the conference route so they can avoid cloture.

Yours Truly, on July 16, 2009:

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

Barbara Hollingsworth, 11/4:

The Heritage Foundation's Dennis Smith says that a "manager's amendment" to Pelosi's controversial 1,900 "“page health care bill includes new provisions that will allow back-door payoffs to specific members of Congress, such as more favorable Medicare reimbursements to particular doctors or hospitals and lower taxes on medical device manufacturers in certain congressional districts.

One such earmark - which Smith says "suddenly appeared" after the Energy and Commerce Committee had already completed its work - creates a new $6 billion Medicaid slush fund for nursing homes to be doled out by Health and Human Services Secretary Kathleen Sebelius, with no input from the states, ordinary rulemaking or administrative review.

This is nothing but a blatant attempt to buy off wavering Blue Dog Democrats. Just when you thought this bloated behemoth couldn't get any worse, it does.

Via Anthony Watt, from the Oregonian

State officials deliberately underestimated the cost of Gov. Ted Kulongoski's plan to lure green energy companies to Oregon with big taxpayer subsidies, resulting in a program that cost 40 times more than unsuspecting lawmakers were told, an investigation by The Oregonian shows.

Records also show that the program, a favorite of Kulongoski's known as the Business Energy Tax Credit, has given millions of dollars to failed companies while voters are being asked to raise income taxes because the state budget doesn't have enough to pay for schools and other programs....

According to documents obtained under Oregon's public records law, agency officials estimated in a Nov. 16, 2006, spreadsheet that expanding the tax credits would cost taxpayers an additional $13 million in 2007-09. But after a series of scratch-outs and scribbled notes, a new spreadsheet pared the cost to $1.8 million. And when energy officials handed their final estimate to the Legislature in February 2007, they pegged the added cost at just $1.2 million for the first two years and $4.1 million for 2009-11.

The higher estimates were never shown to lawmakers. Current and former energy staffers acknowledged a clear attempt to minimize the cost of the subsidies.

"I remember that discussion. Everyone was saying, yes, this is going to be a huge (budget) hit," recalled Charles Stephens, a former analyst for the Energy Department who left in 2006. "The governor's office was saying, 'No, we need a smaller number.'"

Hmm, sounds eerily like what is going on with the health care bill in Congress.

Update: It turns out that all of the "green" companies so far have sold their tax credits for cash to companies like Wal-Mart and US Bank.  This is no enormous problem (though the optics are terrible for the state) but it is yet another reason why the Oregon budget gets busted by this program -- a startup solar company won't use tax credits for years as it will take some time to be profitable (if they ever are) but Wal-Mart can use them right now.

Frequent readers know I almost never call statements "a lie."  I try to take the position that reasonable people can disagree without either lying.  I hate all the "Lying liars and the lies they tell their lying supporters" type books.

But I simply can find no other way to explain this statement:

"There isn't anything we could do to satisfy them in this health care bill. Nothing," Senate Majority Leader Harry Reid (D-Nev.) said. "They are so anti-competitive. Why? Because they make more money than any other business in America today. . . .What a sweet deal they have."

I have written about this any number of times, but Carpe Diem also has the numbers at the link - health care insurers are well below average both in profit margin and return on capital, the two most common measures of profitability.  For the last couple of years, most large health care companies have made less than 5% return on sales.

The only other explanation is the neither the House Majority Leader, his staff, President Obama, or Nancy Pelosi and her staff (all of whom have echoed this same meme) have never once spent the 12 seconds going to Google finance or the Wall Street Journal to look the number up.

Nancy Pelosi once said:

I'm very pleased that our Chair of our Democratic Congressional Campaign Committee and member of the leadership will be talking too about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years. We all believe in the profit motive; we all want to reward success.  But having that success come at the expense of America's working families "” have that success come by withholding care, when a person becomes ill, is just not right and we're going to take this issue in a new direction.

Liberal pundit Kevin Drum, who really should know enough to look it up, once said:

It means the health insurance industry is scared that we might actually do something in 2009 and they want to be seen as something other than completely obstructionist. That means only one thing: they've shown fear, and now it's time to bore in for the kill and gut them like trouts. Let's get to it.

It takes eleven pages just to summarize the new 1990-page House government health care bill.  Here is the summary.

The implications for my business is staggering.  I have already mentioned in the previous post that it imposes an 8% tax on wages on my business -- a business where 50% of revenues go to wages and margins are in the 6-7% range.  You do the math.

Worse for us is that nearly all our competitors are ma and pa companies with less than $500,000 in wages a year, meaning that our competitors will be exempt from these taxes, giving them an automatic 4% cost advantage over our company.  Great.

Twelve seconds after this thing passes, I will be on my phone to my attorney to figure out if it is possible to break my company into multiple corporations that all fall under the 500,000 wage limit.  The paperwork and administration for this would be a huge hassle, but it can't be as high as 4% of sales.

Beyond this, I have not seen the detail yet, but the old House bill imposed enormous record-keeping obligations on businesses.  Basically, I would have to know at all times exactly what kind of medical insurance policy every one of my employees has.  Barf.

I have a high deductible health plan, which makes a ton of sense to me.  For reasons I don't understand, by increasing my deductible from $100 to $2500 I save over $3,000 a year in premiums.  So even if I max my deductible every year, which I don't, I still don't pay as much in a year as my old BC/BS gold-plated policy.  And as an extra, added benefit, we have actually started price-shopping health care services, and that has been a real eye-opener as well.  Bottom line - one can get things like tests and X-rays a lot cheaper if one has the incentive to shop around.

So I worry about exactly this with the new federal health care bill:

Wendy Williams and her husband liked their health insurance plan.  The premium and annual deductibles made sense for them, and a more "gold-plated" plan was not worth the money.  Yet Massachusetts' health care regulators disagreed, and forced the Williams to pay a $1,000 fine if they wished to keep their insurance plan "” a plan they prefer to a comparable state-approved alternative....

If the federal government adopts an individual mandate, Ms. Williams fears her experience could soon replay itself nationwide.  She's right to fear.  Once there is an individual mandate, interest groups will flock to Washington seeking to have their preferred treatment or service incorporated into the requirements for acceptable health care plans.  Over time, the requirements will grow, and the cost of health care plans for many Americans will increase as a result.  Consequently, many individuals who have health care plans that fully meet their needs will suddenly find themselves "underinsured" "” and taxed fined as a result.

When reading the original House health care bill, it struck me that the new taxes on employers and such began immediately, but benefits were phased in between 2012 and 2017.  Apparently, this same thing is being done in the Baucus Bill, and I have learned that this is specifically aimed at gaming the CBO numbers.  Since journalism majors were such in large part because they didn't want to do any math, this ploy will likely work with the media, who will print the CBO findings but will be uninterested or incapable of deconstructing the numbers games.  From the Gormogons via TJIC:

What the CBO does not highlight, however, is that Sen. Baucus cooked the books. Under the Baucus plan, revenue enhancement (taxes) goes into effect immediately. Coverage does not kick in for two and one-half years. So, to make the numbers work, Sen. Baucus has to collect ten years of revenue to cover seven and one-half years of cost.

'Puter thought the whole thing smelled a little fishy, so he gave Sleestak and abacus, a quill and some parchment and set him on the CBO math. Using the above numbers, Sleestak calculates that projected revenues will generate $910 billion over 10 years. Outflows will be $829 billion over 7.5 years. Based on Sleestak's math, that's an average yearly inflow of $91 billion and an average yearly outflow of $110.5 billion, or a average annual deficit of $19.5 billion each year the benefits are actually paid.

TJIC rightly asks how this kind of game is any different from the one played by Madoff.  The only difference is that folks had the right to say "no" to Madoff whereas we will not have this ability with Congress.

I often tell people that in failing organizations like the government or GM, most of the folks who are "part of the problem" aren't bad people, they just have bad incentives.  I have to remind myself this all the time when dealing with government bureaucrats who are making it impossible for our company to make progress in some area.  These folks did not grow up imagining a life in which they block all growth and innovation, they simply found themselves in organizations  which provide strong incentives to act in this way.  Such consequences may be unintended, but they certainly aren't unexpected when one studies incentives.

To this end, the incentives in the new Baucus health care bill do not look good.  Here is one example:

Because Baucus and the Dems apparently can't be bothered to post the bill online, the Washington Examiner had to get a copy the old fashioned way.  When they did, here is what they found on pages 80-81, "hidden amid a lot of similar legislative mumbo-jumbo":

"Beginning in 2015, payment would be reduced by five percent if an aggregation of the physician's resource use is at or above the 90th percentile of national utilization."  Translated into plain English, it means that in any year in which a particular doctor's average per-patient Medicare costs are in the top 10 percent in the nation, the feds will cut the doctor's payments by 5 percent.
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This provision makes no account for the results of care, its quality or even its efficiency.  It just says that if a doctor authorizes expensive care, no matter how successfully, the government will punish him by scrimping on what already is a low reimbursement rate for treating Medicare patients. The incentive, therefore, is for the doctor always to provide less care for his patients for fear of having his payments docked. And because no doctor will know who falls in the top 10 percent until year's end, or what total average costs will break the 10 percent threshold, the pressure will be intense to withhold care, and withhold care again, and then withhold it some more.  Or at least to prescribe cheaper care, no matter how much less effective, in order to avoid the penalties.

The result can't be anything but an incentive for doctors to provide less care to those who need it most, and, when they get tired of getting their pay cut for doing their job, leaving the medical profession altogether.  The article goes on to point out that nothing is done in the bill about the worst incentive to increase medical costs doctors face, the threat of unreasonable tort actions that causes doctors to order ever test and procedure imaginable to combat future second-guessing in front of a jury.