Annapolis Institute Overview


Health-care plan on its last legs

by Phil Burgess, Unabridged from the Rocky Mountain News, February 15, 1994

The Clinton plan for healthcare reform is dead. The coup d’grace was administered by Robert Reischauer, economist and chief of the nonpartisan Congressional Budget Office.

The CBO report was devastating. It showed the Clinton proposal to be a budget buster. While the Administration said the reform would save $59 billion during the first five years, the CBO report showed it would increase the deficit by $74 billion over the same period. This difference of opinion: $133 billion.

Even more important, White House forecasters — compared to otherwise sympathetic CBO forecasters — got the sign wrong. The White House said there would be a savings (plus); the CBO showed a deficit (minus). These are the kinds of mistakes in orders of magnitude that cause ordinary citizens to lose confidence in their leaders. And orders of magnitude errors are commonplace: Costs of Medicare for older Americans have been seven times greater than 1965 government forecasts — from $8.8 billion estimated to $66 billion actual costs in 1990. Taxpayers have seen their payroll taxes skyrocket to cover higher than anticipated costs of unemployment insurance, Social Security and other Federal entitlements.

People simply don’t trust the government when it says, “Let us run it, and we will give you more healthcare for less money.” Somehow it never works out that way. That’s a major reason why the Clinton healthcare reform package is dead. It lacks credibility.

As much as people may want increased health security, their experience with the Post Office, veterans hospitals, federally-managed nuclear waste clean-up and federal responses to hurricane and earthquake emergencies tells them that giving monopoly power to the government to manage a system as complex, as important and as intimate as healthcare simply won’t work.

The CBO report also said the “premiums” paid to Clinton’s proposed health alliances are in fact taxes, and healthcare receipts and payments could not be scored “off budget.” This unexpected dose of truth in advertising stands in sharp contrast to ClintonSpeak where “taxes” are called “contributions” or “premiums,” “spending” is called “investment,” and a budget with the largest planned deficit in history is called a “deficit reduction package.” It is not surprising that Congress will use an election year to slay the latest Clinton tax monster.

Finally, the CBO report said the Clinton plan would be a job killer — that the “employer mandate” to pay 80% of the healthcare bill would eliminate between 300,000 and 1.2 million jobs.

This should not surprise anyone. There are 22 million business enterprises in the US. Only 7,000 have more than 500 employees — and the employer mandate (like Clinton’s record income tax increase last year) hits the small and mid-size employer very hard. By sharp contrast, the European Union recently unveiled a plan to combat 20 years of sluggish growth and Europe¹s average 11% unemployment. A major plank: Shift non-wage labor costs such as healthcare (and pensions) from employers to the state. Europeans have learned half the lesson: Employer mandates kill job creation. The other half: Womb to tomb welfare systems don’t work either, no matter who pays for them.

So the Clinton plan is dead. Cause of death: Public understanding. The system works. Thomas Jefferson would be proud.

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