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Posts Tagged ‘Government-Run Health Care’

Back in 2013, I got very upset when I learned that senior bureaucrats at the IRS awarded themselves big bonuses, notwithstanding the fact that the agency was deeply tarnished by scandal because of its efforts to help Obama’s reelection campaign.

That’s when I decided to put forth my “First Theorem of Government,” which simply states that the public sector is a racket for the benefit of a ruling class comprised of bureaucrats, interests groups, cronies, and other insiders.

They have figured out how to line their pockets and live very comfortable lives at the expense of people in the economy’s productive sector.

The same thing is true on the other side of the Atlantic Ocean. The U.K.-based Daily Mail reports that senior bureaucrats in the country’s government-run healthcare system get lavish taxpayer-financed pension.

Hundreds of NHS managers have amassed million-pound pension pots while presiding over the worst financial crisis in the history of the health service… As patients face crippling delays for treatment, A&E closures and overcrowded wards, bureaucrats have quietly been building up huge taxpayer-funded pensions. They will be handed tax-free six-figure lump sums on retirement, and annual payouts from the age of 60 of at least £55,000 – guaranteed for life.

Here are some of the details, all of which must be especially aggravating for the mistreated patients who suffer because of substandard care from the government.

Nearly 300 directors on NHS trust boards have accrued pension pots valued at £1million or more; At least 36 are sitting on pots in excess of £1.5million – with three topping a staggering £2 million; The NHS pays a staggering 14.3 per cent on top of employees’ salary towards their pension – almost five times the average of 3 per cent paid in the private sector; …About 500 earn more than the Prime Minister – after Health Secretary Jeremy Hunt ordered them to ‘show restraint’ on executive pay. …the scheme every year pays retired staff £10 billion more than it takes in. That black hole has to be filled by the taxpayer. The subsidies enable NHS executives – including managers, human resources bosses and directors of ‘corporate administration’ – to build up vast pensions, at minimal personal expense.

Here’s the bureaucrat with the biggest pile of loot from taxpayers.

The biggest single beneficiary is Professor Tricia Hart, who retired as chief executive of South Tees Hospitals NHS Foundation Trust in January with a £2.6 million pension. That figure entitled her to a lump sum of at least £335,000 on retirement, plus an inflation-proof annual pension of £110-115,000. …at least four HR directors have amassed million-pound pensions.

By the way, I have nothing against people accumulating big nest eggs. Even if they work for the government.

My objection, as discussed in yesterday’s column about state and local bureaucrats in America, is when bureaucrats have special taxpayer-financed deals.

Especially, as we see all too often in the U.K., when taxpayers don’t even get good healthcare in exchange for the lavish salaries and benefits.

Almost four million people are now waiting for cataract surgery, hip and knee replacements and other routine operations. The number of people forced to wait more than four hours in A&E has doubled in two years. And wards are full of elderly people who cannot be discharged – because there are no care home places for them.

A spin doctor tried to rationalize and justify the cozy scheme for bureaucrats.

…a spokesman for NHS Pensions stressed that…The amounts individuals accrued were a result of the ‘rules and regulations’ of the NHS scheme. ‘What people get paid is a matter for NHS trusts,’ he added.

I’m amused by the assertion that the lavish pensions are the result of simply following the “rules and regulations.” That’s precisely the point. Government insiders write the rules and regulations and they inevitably produce systems that are very good for them and not so good for taxpayers.

I’m also amused (and when I write “amused,” I actually mean “irritated” or “appalled”) at the claim that compensation levels are “a matter for NHS trusts”. If the spin doctor was talking about a private company, I would agree. As I’ve argued before, pay levels in private companies should be determined by managers and stockholders.

But we’re talking in this case about pay levels in a government bureaucracy. And notwithstanding the elitist attitude of some government officials, taxpayers have every right to get outraged when they learn that their money is being squandered on excessive pay and gold-plated benefits.

It’s a problem all over the world.

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What were the most noteworthy events from 2015?

Regarding bad news, there’s unfortunately a lot of competition. But if I’m forced to pick the very worst developments, here’s my list.

Resuscitation of the Export-Import Bank – I did a premature victory dance last year when I celebrated the expiration of the Export-Import Bank’s authority.  I should have known that corrupt cronyism was hard to extinguish. Sure enough, Republicans and Democrats conspired to re-authorize the Ex-Im Bank and transfer wealth from ordinary Americans to politically connected corporations.

Expansion of IMF authority – I also did a premature victory dance in 2014 when I lauded the fact that Congress did not approve increased bailout authority for the International Monetary Fund. Sadly, as part of the year-end spending agreement, Congress agreed to expand the IMF’s authority so it could continue to push for higher taxes around the world.

Busting the spending caps (again) – When I wrote last August that maintaining the spending caps was a key test of GOP integrity, I should have known that they would get a failing grade. Sure enough, Republicans deliberately fumbled the ball at the goal line and agreed to higher spending. Again.

Supreme Court ignores law to bail out Obamacare (again) – Back in 2012, the Supreme Court had a chance to rule whether Obamacare was an impermissible expansion of the power of the federal government. In a truly odious decision, Chief Justice John Roberts ignored the Constitution’s limits on federal powers and decided we could be coerced to buy health insurance. Last year, he did it again, this time by bailing out a key part of Obamacare by deciding to arbitrarily ignore the wording of the law.

Business-as-usual transportation bill – The desire of Congress to fund pork-barrel transportation projects is at least somewhat constrained by the amount of revenue generated by the gas tax. There was an opportunity for reform in 2015 because proposed spending was much higher than the trajectory of gas tax revenue, but rather than even engage in a discussion of good policy options, politicians merely bickered over what combination of tax hikes and budget gimmicks they could put together to keep the pork projects flowing.

Creeping support on the right for the value-added tax – When I wrote early last year that the 2016 election might create an opportunity for tax reform, I was being hopeful that we might get something close to a simple and fair flat tax. Yet probably the biggest news so far in this election cycle is that a couple of candidates who presumably favor small government – Rand Paul and Ted Cruz – have proposed to impose a value-added tax without fully repealing the income tax.

There’s very little good news to celebrate. Here’s my tragically sparse list, and you’ll notice that my list of victories is heavy on style and light on substance. But let’s take what we can get.

Semi-decent Republican budgets – The budget resolution produced by Congress technically doesn’t embrace specific policies, but the it’s nonetheless noteworthy that the House and Senate approved numbers that – at least conceptually – are based on genuine Medicaid and Medicare reform.

Support for spending caps – Notwithstanding the fact that GOP politicians won’t even abide by the limited spending caps that already exist, I’m somewhat encouraged by the growing consensus for comprehensive spending caps akin to the ones in place in Switzerland and Hong Kong. Heck, even international bureaucracies now agree spending caps are the only effective fiscal rule.

Good election results from the Wolverine State – It was great to see Michigan voters reject a gas tax increase that was supported by the political elite.

More companies escaping the IRS – I heartily applaud when companies figure out how to re-domicile in jurisdictions with better tax law to escape America’s high corporate tax rate and self-destructive worldwide tax system. And I’m glad these “inversions” continue to take place even though the Obama Administration is trying to stop them.

A glimmer of reality at the New York Times – I realize I’m scraping the bottom of the barrel in my search for good news, but the fact that the New York Times published a column acknowledging that feminist economic policies backfire against women hopefully is a sign that sensible thinking is possible in the establishment media.

Gun control flopping – It’s great to see that the left has totally failed in its effort to undermine 2nd Amendment rights.

Limits on asset forfeiture – The final bit of good news from 2015 was the just-before-Christmas announcement by the Obama Administration that the odious practice of asset forfeiture would be modestly curtailed.

I would offer predictions for 2016, but since my big prediction from last year that we would have gridlock was sadly inaccurate, I think I’ll avoid making a fool of myself this year.

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Time for a mea culpa.

In the past, I’ve criticized Obamacare for a variety of reasons.

But I’m not here to apologize for those views.

Instead, I feel obliged to issue somewhat of a retraction for my assertion that Obama care is a job killer.

Some of you may be scratching your heads, particularly if you read these passages from an article earlier this week in The Hill.

ObamaCare will force a reduction in American work hours — the equivalent of 2 million jobs over the next decade, Congress’s nonpartisan scorekeeper said Monday. The total workforce will shrink by just under 1 percent as a result of changes in worker participation because of the new coverage expansions, mandates and changes in tax rates, according to a 22-page report released by the Congressional Budget Office (CBO). …the law changes incentives over the years for the workers themselves both in part-time and full-time positions.

And if you go to the actual CBO report, you’ll see that the story is accurate. And the CBO report is very consistent with some of the academic research on the issue.

So why, then, am I issuing a mea culpa on Obamacare and jobs?

Well, some readers may have concluded from my writings that Obamacare is an absolute job killer.

Yet, as we see from this story in the Kansas City Star, there may be some jobs being created because of the so-called Affordable Care Act. Here are some relevant excerpts.

H&R Block expects more customers to feel the impact of the Affordable Care Act when they do their taxes early next year, providing a source of growth for the Kansas City-based business. A year ago, Block invested in marketing and training its tax preparers… “We think we’re going to start to reap the benefits of that investment,” Block chief executive Bill Cobb said Tuesday during a strategy session with analysts. …the company said an early effort will be aimed at getting back customers the company lost last year.

To be sure, H&R Block isn’t explicitly saying that it will have additional employees, but I think we can infer that some new positions will be created as the company takes advantage of the fact that many taxpayers will be overwhelmed by the complexities and penalties that are part of Obamacare.

With this in mind, I’m going to be very careful in the future to state that the President’s law is a net job killer or a relative job killer.

After all, I wouldn’t want anyone to accuse me of being unfairly or inaccurately critical of government-run healthcare. Even in cases when the jobs being created are evidence of bad legislation rather than a good economic climate.

P.S. I’m not a big fan of H&R Block. Assuming they didn’t support Obamacare, I don’t blame them for enjoying the extra profits they’ll earn because of the law. But the company has supported government rules to block competition in the tax-compliance industry. And I remember many years ago being part of a debate in Louisiana where a representative from H&R Block argued against the flat tax. Gee, I wonder why?

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Government intervention has messed up the healthcare sector, leading to needlessly high prices and massive inefficiency.

Fixing the mess won’t be easy since it would involve addressing several contributing problems, including Medicare, Medicaid, the healthcare exclusion in the tax code, Obamacare, and the mess at the Veterans Administration.

But at least we know the right solutions. We need entitlement reform and tax reform in order to restore a genuine free market and solve the government-created third-party payer crisis.

And to bolster the case for reform, we’re going to look at three new examples of how government intervention makes the healthcare system worse rather than better.

For our first example, let’s look at a new report from the National Center for Policy Analysis, which compares what happens when the federal government decides to build a hospital with a similar project constructed by a local government with private-sector involvement.

We’ll start with a look at Veterans Administration project.

…the VA hospital in Denver, Colorado, was run-down, crowded and outdated. …the VA considered renovating the medical facilities of the Fitzsimons Army Medical Center at a cost of $30 million. Then, the University of Colorado Hospital offered to open jointly-operated facilities for $200 million. VA officials passed on both ideas due to cost concerns. Instead, officials sought and received approval for a stand-alone facility.

That decision was very costly for taxpayers.

The VA failed to produce a design that could be built for its budget of $604 million, ultimately causing a budget-busting $1 billion overrun. …Soon, the plan to build an affordable replacement morphed into the most extravagant and expensive hospital construction project in VA history.

And, as is typical of government projects, the cost to taxpayers was far higher than initial estimates used to justify the project.

Now let’s look at another project, this one in Dallas, Texas.

…the original Parkland Hospital was built in Dallas to serve the young city’s indigent population. …its aging facilities could no longer meet the demand of 1 million patients admitted each year. …The project to rebuild Parkland, split roughly 60/40 in revenue sources, was accountable to both the public and its private donors. …Project managers hired an independent auditor to monitor all project transactions. Budget progress reports were made available to both Parkland’s Board and the public.

The final outcome was far from perfect (after all, local governments are also quite capable of wasting money). But the involvement of the private sector, combined with the fact that the local government was spending its own money, created incentives for a much better outcome.

On the first day of construction, Parkland’s project team was $100 million over budget. But a flexible design, and a willingness to balance needs and wants, allowed the team to deliver a larger, more cost-effective hospital than originally conceived for a mere 6 percent increase in budget.

And here’s a chart from the NCPA report that perfectly captures the difference between the federal government and a project involving a local government and the private sector.

Can you think of a better argument for local private-public partnerships over the federal government?

Yet policy keeps moving in the wrong direction in Washington.

The Obamacare boondoggle was all about increasing the federal government’s control and intervention in the healthcare sector.

And this brings us to our second not-so-great example of government-run healthcare.

The New York Times has a story with a real-world example showing how the President’s failed legislation is hurting small businesses.

LaRonda Hunter…envisioned…a small regional collection of salons. As her sales grew, so did her business, which now encompasses four locations — but her plans for a fifth salon are frozen, perhaps permanently.

And why can’t she expand her business and create jobs?

Because Obamacare makes it impossible.

Starting in January, the Affordable Care Act requires businesses with 50 or more full-time-equivalent employees to offer workers health insurance or face penalties that can exceed $2,000 per employee. Ms. Hunter, who has 45 employees, is determined not to cross that threshold. Paying for health insurance would wipe out her company’s profit and the five-figure salary she pays herself from it, she said.

And Ms. Hunter is just the tip of the iceberg.

For some business owners on the edge of the cutoff, the mandate is forcing them to weigh very carefully the price of growing bigger. “There’s kind of a deer-in-headlights moment for those who say, ‘I have this new potential client, but if I bring them on, I have to hire five additional people,’” said Philip P. Noftsinger, the payroll unit president at CBIZ, a financial services provider for businesses. “They’re really trying to assess how much the 50th employee is going to cost. …Added to that cost are the administrative requirements. Starting this year, all companies with 50 or more full-time workers — even those not yet required to offer health benefits — must file new tax forms with the Internal Revenue Service that provide details on employee head count and any health insurance offered. Gathering the data requires meticulous record-keeping. “These are some of the most complex informational returns we’ve ever seen,” said Roger Prince, a tax lawyer.

Here’s another real-world example.

The expense and distraction of all that paperwork is one of the biggest frustrations for one business owner, Joseph P. Sergio. …He is reluctant to go over the 50-employee line and incur all of the new rules that come with it. That makes bidding for new jobs an arduous and risky exercise. …”If you ramp up, and it pushes you over 50, there’s all these unknown costs and complicated rules. Are we really going to be able to benefit from going after that opportunity? It freezes you at a time when you need to be moving fast.”

And don’t forget that while Obamacare discourages entrepreneurs from creating jobs, it also discourages people from seeking jobs.

That’s the kind of two-for-one special that’s only possible with big government!

Now that we’ve cited examples of bad policy from the Veterans Administration and Obamacare, let’s turn to Medicare for our third example.

Veronique de Rugy of the Mercatus Center writes about rampant Medicare fraud in her syndicated column.

Medicare is rife with fraud, and every year, billions of dollars are improperly paid out by the federal government’s giant health care bureaucracy. According to the government’s latest estimates, Medicare fee-for-service (parts A and B) made $46 billion in improper payments last year. And Medicare Advantage (Part C) and Medicare Prescription Drug Coverage (Part D) combined for another $15 billion in improper payments. Even more disturbing is the possibility that these numbers underestimate the annual losses to taxpayers from fraud and bureaucratic bungling. According to the work of Harvard University’s Malcolm Sparrow, fraud could account for as much as 20 percent of total federal health care spending, which would be considerably higher than what the government’s figures indicate.

None of this should be a surprise. Medicare has a notorious history of waste, fraud, and abuse.

But there is a glimmer of good news. There’s actually a program to identify and recover wasted funds.

The RAC program is geared toward correcting improper payments… The auditors thus pay for themselves with the money they recoup instead of simply being handed a lump-sum check. That the RAC program has an incentive to reduce wasteful spending and save taxpayers money makes it fairly unusual among government initiatives.

Unfortunately, no good deed goes unpunished in Washington.

…bureaucrats are set to greatly diminish the program’s effectiveness in 2016. Rather than empower these fraud hunters, they are drastically reducing the number of paid claims that auditors can review every 45 days (from 2 percent down to just 0.5 percent). The new limits will make it that much harder for auditors — whose cost already amounts to just a drop in the bucket — to recoup taxpayer losses.

I’ve also written about this absurd effort to curtail the RAC program, but Veronique makes a critically important observation that has widespread applicability to so much of what happens with government.

Agency failure is routinely rewarded in Washington with bigger budgets and greater authority, but here success will not be.

This, in a nutshell, is the difference between the private sector and the government.

In my speeches, I sometimes point out that people in the private economy make mistakes all the time, but I also explain that the incentive to earn profits and avoid losses creates a powerful incentive structure to quickly learn from mistakes.

That means resources quickly get reallocated in ways that are more likely to boost economic efficiency and increase growth and living standards.

In government, by contrast, this process is reversed. Bureaucrats and politicians reflexively argue that failure simply means that budgets should be expanded.

All of which explains why these cartoons are such perfect depictions of government.

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Shortly after Obamacare was enacted, I started writing about groups victimized by the law. But after highlighting how children, low-income workers, and retirees were disadvantaged by government-run healthcare, I soon realized that I wasn’t saying anything new or different.

Heck, Obamacare has been such a disaster that lots of people have been writing lots of good articles about the law’s failure and how various segments of the population are being unjustly harmed.

So I chose a different approach. I decided to identify groups that deserve to suffer because of the law. Or at least to highlight slices of the population that are not very deserving of sympathy.

Some politicians and staffers of Capitol Hill, for instance, are very upset about the prospect of being subjected to the law that they inflicted on the rest of the country. Gee, my heart breaks for them.

The bureaucrats at the IRS are agitated about the possibility of living under Obamacare, even though the IRS got new powers as a result of the law. How sad, cry me a river.

Professors at Harvard University, including many who supported Obamacare, are now upset that the law is hurting them. Oh, the inhumanity!

Now we have another group to add to this list. And this group is definitely in the deserve-to-suffer category.

That’s because we’re going to look at the big insurance companies that supported Obamacare, but now are squealing because the law isn’t working and they’re not getting the bailouts they were promised.

Here are some excerpts from a column by the irreplaceable Tim Carney of the Washington Examiner.

Until recently, the insurance giants saw Obamacare as a cash cow. They are now finding the law’s insurance marketplaces to be sickly quagmires causing billions in losses. …United Healthcare, the nation’s largest insurer, last week announced it was suffering huge losses in the exchanges. …The company forecast $700 million in losses on the exchanges. Fellow insurance giant Aetna also said it expected to lose money on the exchanges, and other insurers said enrollment was lower than they expected.

This seems like a feel-good story, very appropriate for the holidays. After all, companies that get in bed with big government deserve bad consequences.

But hold on to your wallet.

…Obamacare insiders — the wealthy and powerful operatives who alternate between top government jobs and top industry jobs — are hustling to find more bailout money for insurers. Republicans, if they are able to hold their ground in the face of lobbyist pressure, can block the bailout of Obamacare and its corporate clientele. …Obamacare included…a three-year safety net for insurers who do much worse than expected, paid for by an extra tax on insurers who do much better. The Centers for Medicare & Medicaid Services (CMS) had announced in October that insurers losses for 2014 entitled them to $2.87 billion in bailout payments… The problem is that super-profitable insurers did not pay nearly that much into the bailout fund.

This means there will be a fight in Washington. The Obama White House wants to bail out its corporate cronies. But there’s not enough money in the bailout fund.

And, thanks to Senator Rubio of Florida, the government can’t write checks out of thin air.

In late 2014, Sen. Marco Rubio, R-Fla., inserted into the so-called Cromnibus spending bill a provision that prohibited CMS from paying out more in risk corridor payments than it takes in. Profitable insurers — not taxpayers — must subsidize their less profitable peers.

Unfortunately, the Obama Administration oftentimes doesn’t care what the law says.

CMS announced last week that the government was going to find a way to pay the insurers their full bailout, anyway. …CMS also declared the unfunded portion of Obamacare’s initial promised insurer bailout was nevertheless an “obligation of the United States Government for which full payment is required,” even though at least under the current appropriation law it is illegal.

Tim outlines the incestuous relationship between Big Insurance and the Obama White House, all of which makes for nauseating reading.

But here’s the part that matters for public policy.

Rubio’s provision…expires along with the current government funding law on December 11. The Obamacare insiders, led by Slavitt and Tavenner, will fight to free up their bailouts and put the taxpayers on the hook for their losses caused by the law they supported.

In other words, we’re about to see – as part of upcoming appropriations legislation – if Republicans have the intelligence and fortitude to retain Rubio’s anti-bailout provision.

This should be a slam-dunk issue. After all, the American people presumably will not favor bailouts for corrupt health insurance corporations.

Especially since Obamacare is still very unpopular.

But what if Obama says “boo” and threatens to veto spending legislation if it doesn’t give him carte blanche bailout authority? Will GOPers be so scared of a partial government shutdown that they instantly surrender?

After all, when there was a shutdown fight in 2013, Republicans suffered a horrible defeat in the 2014 mid-term elections. Right? Isn’t that what happened?

Oh…wait…never mind.

P.S. Let’s not forget that there is one very tiny segment of America that has unambiguously benefited from Obamacare.

P.P.S. If you have any friends who work for the corrupt health insurance companies that are worried about a potential loss of bailout money, you can cheer them up this Christmas season with some great – and very appropriate – action figure toys.

P.P.P.S. Since we’re closing with sarcasm, here’s the federal government’s universal bailout application form.

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Like many Americans, I’m suffering from Obamacare fatigue.

Health Freedom Meter before ObamacareBefore the law was implemented, I repeatedly explained that more spending and more intervention  in the health sector would worsen a system that already was suffering from too much government.

And since the law went into effect, I’ve pointed out – over and over again – the predictably negative effects of Health Freedom Meter after Obamacaregiving the government even more control.

So I’m tempted to wash my hands of the issue.

But that would be wrong, particularly since advocates of statism disingenuously might claim that silence somehow means acceptance or approval.

Moreover, we need to continuously remind ourselves that big government doesn’t work just in case there’s a chance to enact good reforms after Obama leaves office.

With that in mind, let’s look at recent developments that underscore the case against government-run healthcare.

How about the fact that Obamacare is extremely vulnerable to fraud?

…the GAO report showed that federal auditors 11 out of 12 times were able to gain subsidized coverage with fictitious applications, three of the successful applications never provided citizenship or immigration documentation. The investigators in each case were able to obtain $2,500 or around $30,000 annually in advance premium tax credits.

And what about the fact that the Obamacare co-ops have been a big flop?

Nonprofit co-ops, the health care law’s public-spirited alternative to mega-insurers, are awash in red ink and many have fallen short of sign-up goals, a government audit has found. Under President Barack Obama’s overhaul, taxpayers provided $2.4 billion in loans to get the co-ops going, but only one out of 23 — the one in Maine — made money last year, said the report out Thursday. Another one…was shut down by regulators over financial concerns. The audit by the Health and Human Services inspector general’s office also found that 13 of the 23 lagged far behind their 2014 enrollment projections.

Or what about the fact that deductibles have increased under Obamacare?

A survey released earlier this week by the Kaiser Family Foundation found that..deductibles have risen almost three times as fast since 2010 for employer-sponsored plans.

And should we care that Obamacare has meant rising health care costs?

…the actuaries estimated that health spending that year jumped by 5.5 percent, a bigger rise than the country had experienced in five years. …The actuaries cited three main reasons they think health spending is set to tick up. One is the aging of the population… Another is the improving economy… But the third, and a big one, was Obamacare’s coverage expansion.

All of the aforementioned things are contrary to what Obamacare supporters promised.

Though since I focus on policy rather than politics, I’ll take this opportunity to point out that higher deductibles in some ways are a good thing. Which is why I’ve defended Obamacare’s Cadillac tax.

But now let’s look at two additional Obamacare developments. And both represent very bad news.

First, new scholarly research shows that Obamacare will be bad news for all income levels, and even will be of questionable value to those getting big subsidies (h/t: Marginal Revolution).

…the average financial burden will increase for all income levels once insured. Subsidy-eligible persons with incomes below 250 percent of the poverty threshold likely experience welfare improvements that offset the higher financial burden, depending on assumptions about risk aversion and the value of additional consumption of medical care. However, even under the most optimistic assumptions, close to half of the formerly uninsured (especially those with higher incomes) experience both higher financial burden and lower estimated welfare.

In other words, people generally were making sensible choices when they had some degree of freedom.

But now that they’re being coerced into Obamacare, many of them are worse off. Even in many cases if they’re the ones getting subsidized!

Second, we now know that President Obama’s promise to lower health insurance premiums by $2,500 was laughably misleading.

But it’s not simply that the President exaggerated. As Investor’s Business Daily explains, the numbers actually have gone in the other direction

Since 2008, average family premiums have climbed a total of $4,865. The White House cheered the news, saying it was a sign of continued slow growth in premium costs. …Slightly less higher premiums aren’t what President Obama promised Americans when he ran for office touting his medical overhaul. He specifically said his plan would cut premiums. “We will start,” Obama said back in 2008, “by reducing premiums by as much as $2,500 per family.”

And keep in mind that Obama’s claim of big savings was not a one-time, off-the-cuff comment.

As you can see in this video, it was a pervasive part of his campaign for further government control of the health care system.

But the real story isn’t prevarication by a politician. That comes with the territory.

The real issue is that our healthcare system is more screwed up because government now is playing a bigger role.

And keep in mind that fixing the problem means a lot more than simply repealing Obamacare. We also need to deal with spending programs such as Medicare and Medicaid and address tax preferences and regulations that encourage over-insurance.

After all, never forget that our real healthcare crisis is a giant government-caused third-party payer problem.

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I’m a big fan of federalism for both policy and political reasons.

Returning programs to the states is the best way of dealing with counterproductive income-redistribution policies such as welfare, Medicaid, and food stamps.

Federalism is also the right way of unwinding bad education schemes like Obama’s Common Core and Bush’s No Bureaucrat Left Behind.

And the same principle applies for transportation, natural disasters, and social issues such as drugs.

And I can’t resist pointing out, for the benefit of those who think such things matter, that federalism is also the system that is consistent with our Constitution’s restrictions on central government power.

Simply stated, federalism is good news because we get innovation, diversity, and experimentation. States that make wise choices will be role models for their peers. And it’s also worth noting that states that screw up will provide valuable lessons as well.

But sometimes a real-world example is the most compelling evidence of all. And the news that Vermont has cancelled its proposed single-payer healthcare scheme (as predicted by Megan McArdle) shows us why federalism is such a good concept.

Let’s start by reviewing what’s happened. Here are some excerpts from a report published by the Daily Caller.

Vermont Gov. Peter Shumlin is canceling his dream plan to create a single-payer health system in the state, he announced Wednesday. …“In my judgment, now is not the right time to ask our legislature to take the step of passing a financing plan for Green Mountain Care.” The problem is, of course, how to pay for it. Even while plans were moving forward for a 2017 launch of the single-payer system, to be called Green Mountain Care, Shumlin had held off on releasing a plan for how to pay for the system, waiting until his announcement Wednesday.

So why didn’t Shumlin simply call for a big tax hike? Or look for more handouts from Washington? Or what about those fanciful assumptions that socialist health care would be more efficient?

Well, that basically was the plan.

Tax hikes required to pay for the system would include a 11.5 percent payroll tax as well as an additional income tax ranging all the way up to 9.5 percent. Shumlin admitted that in the current climate, such a precipitous hike would be disastrous for Vermont’s economy. …the report also admits that the single-payer system won’t save money as Vermont officials had planned. While both previous reports on Green Mountain Care had assumed “hundreds of millions of dollars” in savings in the very first year of operation, Shumlin’s office is now admitting that’s “not practical to achieve.” …Shumlin also cited slow economic recovery in Vermont as reason to delay, and hopes to try again in the future. But its failure, especially on economic grounds, is a resounding defeat for single-payer advocates.

Yes, this is a “resounding defeat” for socialized health care.

But it’s important to understand why Shumlin’s plan collapsed. He and other politicians obviously figured out (notwithstanding their claims when running for office) that a huge tax hike, combined with “free” healthcare, was a recipe for state disaster.

Productive people and businesses would have emigrated, while freeloaders and scroungers would have immigrated. The state would have gone into a downward spiral.

So even though Shumlin is a hard-core leftist, and even though Vermont’s electorate is so statist that the state came in first place in the Moocher Index, all these advocates of socialized healthcare were forced to recognize real-world constraints imposed by the existence of other states.

So the productive people of Vermont (at least the ones that haven’t already escaped) should be very thankful for federalism. Competition among the states, as well as freedom of movement between states, is a wonderful check on the greed and foolishness of the political class.

The crowd in Washington, by contrast, has more flexibility to impose bad policy since moving from one country to another is far bigger step than simply moving from, say, California to Texas.

Nonetheless, this also explains why I like tax competition among nations. I want greedy politicians to be haunted to at least some degree by the fear of tax flight so that they will think twice before imposing new burdens. But that’s a subject we’ve reviewed on many occasions, so no need for further details.

The bottom line is that Vermont did face real-world competitive pressure. And that meant the state’s politicians didn’t think they could successfully raise enough money to finance socialist healthcare.

This reminds me of this famous Margaret Thatcher quote about other people’s money.

I’m disappointed that I couldn’t find a clip of her actually making that statement. But if you want to see the Iron Lady in action, you can click here or here.

Let’s conclude by noting that the nation with the most decentralization and federalism is Switzerland, and that country does very well notwithstanding having different languages and cultures.

Which helps to explain why federalism is a very practical solution to the ethnic division in Ukraine.

P.S. Even though the focus of today’s column is federalism rather than policy, I can’t resist pointing out that the single-payer system in the United Kingdom generates some truly horrifying results.

P.P.S. If socialized healthcare is so wonderful, then why do politicians from countries which have that system travel to the United States for treatment?

P.P.P.S. Shifting to another topic, I’ve written before that left wingers criticize tax havens, yet it seems every rich leftist utilizes low-tax jurisdictions. Well, Business Week reports that “corporate inversions” also were created by a leftist.

John Carroll Jr., invented a whole category of corporate tax avoidance and successfully defended it in a fight with the Internal Revenue Service. …The first corporate “inversion,” as Carroll’s maneuver came to be known, was obscure then and is all but forgotten now. Yet at least 45 companies have followed the lead of Carroll’s client…and shifted their legal addresses to low-tax foreign nations.  …A committed liberal, he…once considered leaving the practice to work for antiwar candidate George McGovern’s 1972 presidential campaign. …McDermott’s chief financial officer at the time, says he sometimes puzzled over Carroll’s motivations. “It was always an enigma to me,” Lynott says. “We knew this guy was a Democrat, and yet he would take on the government in a New York minute over a tax issue. There was nothing liberal about his thinking as far as the tax code was concerned.” …The IRS fought the case for seven years, giving up in 1989 only after a federal appeals court upheld a U.S Tax Court decision in the company’s favor.

So I like what Mr. Carroll achieved, but I guess we have to say he was a hypocrite. But, then again, statists specialize in hypocrisy.

P.P.P.P.S. I can’t resist sharing one more unrelated item. The 2008 crisis presumably showed the downsides of too much debt.

Well, time for a quiz: Who do you think has responded most intelligently and least intelligently to the lessons from that crisis?

Your choices are households, financial institutions, corporations, and governments.

I imagine nobody will be surprised by this chart from the BBC.

So what lessons can we draw from the chart?

Well, politicians in developed nations have been raising taxes over and over again, so perhaps we should conclude that higher taxes simply lead to more debt because our “leaders” can’t resist spending other people’s money.

And that’s precisely the point. Experts such as Steve Hanke, Brian Wesbury, Constantin Gurdgiev, Fredrik Erixon, and Leonid Bershidsky have all pointed out the ever-increasing burden of government in Europe.

Higher taxes are only a “solution” if the goal is bigger government and more red ink.

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