In another episode of There’s No Such Thing as a Free Lunch, we will quickly explore universal coverage legislation, which, though politically popular, is terribly expensive.

In the recent discussions for passing a national universal coverage plan, the president has noted correctly that any large health care system could reduce costs in numerous ways. For instance, a government system could rate the efficacy of different treatments to determine whether they are cost-effective. A government plan could also reduce costs by denying expensive treatments that only extend life by a few months. Also, paying doctors for outcomes, rather than services, (paying for the output, rather than the input) could reduce costs and potentially improve care. Finally, the size of any government plan gives the government great negotiating power to bargain down prices from pharmaceutical companies, hospitals and doctors.

Many of these items sound like health care rationing. In fact, they are, but as with any other limited resource, we can only afford as much health care as we’re willing to pay through tax hikes.

The New York Times recently carried an interesting op-ed advocating rationing.  The article poses some good questions that will have philosophers and ethicists arguing from their armchairs.  For instance,

You have advanced kidney cancer. It will kill you, probably in the next year or two. A drug called Sutent slows the spread of the cancer and may give you an extra six months, but at a cost of $54,000. Is a few more months worth that much?

Furthermore, does it matter if the patient is 85-years-old or 16-years old?  Some will immediately see a problem with a policy that makes distinctions like this in choosing to withhold care.  Ethically, many (I’m especially looking at you, Immanuel Kant) would be outraged that we would make such distinctions— or even any distinction— to choose to ration care.  One life is as equally worthy as another, they would say.  A rich country cannot issue a death sentence simply because care is deemed “not worth it,” they might add.

A utilitarian view would probably side with any budget analyst or any health agency head suffering from budget constraints.  Whatever provides the greatest overall benefit (to society as a whole) for the least cost is the ideal policy.  An extra month of life for an elderly person may not offset the additional tax burden (or commensurate government service reductions) to cover the cost.

However, if you’re the one being denied care under this policy, you probably won’t have much sympathy for the utilitarian view.  After all, you paid taxes to support this system and the entire pretext for this costly government program was to ensure that people wouldn’t suffer unnecessarily because of cost.

Once the program is grouped with other so-called entitlements, people will view it as, well, an entitlement.

Enough philosophy.  The reason the current reform proposals are doomed is that they will require too many sacrifices from too many powerful interest groups.  First, after years of scolding employers who provide little or no coverage for their employees, those employers who do provide superb coverage may now face a tax for doing the right thing.  Now, some in the House are proposing a tax hike on those making more than $280,000 annually.  The main problem with this, of course, is that many small businesses are sole proprietorships and the companies’ incomes are reported on the tax returns of their owners.  A tax hike on “the rich” will also hike taxes on many small-business owners.  A business tax hike, especially in this economy, could discourage small businesses from hiring.  A tough sell when the unemployment rate just topped 10%.

Furthermore, for true reform to actually reduce costs, any government plan will have to reduce payments to doctors and hospitals, who have both profited nicely from our current arrangement.  Massachusetts, with its universal coverage plan, is continuing to suffer escalating health care costs.  The commonwealth is now considering cutting payments to doctors and hospitals.  Opposition from the health lobby is muted for now:

Representatives of [health care] groups joined in a unanimous commission vote for the recommendations. But they made clear that their continued support might depend on devilish details, the kind that will determine whether their members are net losers and, if so, by how much.

Opposition will likely build as the costs become more evident.

On the national scene, the head of the Congressional Budget Office, the non-partisan Congressional agency tasked with calculating the costs of proposed legislation, testified that neither the House nor Senate bills impose the measures necessary for reducing costs.  The Post writes,

Although the House plan to cover the uninsured, for example, would add more than $1 trillion to federal health spending over the next decade, according to the CBO, it would trim about $500 billion from existing programs — increasing federal health spending overall.

Some provisions of the bill have the potential to trim spending further, [CBO head] Elmendorf said, but “the changes that we have looked at so far do not represent the sort of fundamental change, the order of magnitude that would be necessary, to offset the direct increase in federal health costs that would result from the insurance coverage proposals.”

That is because the fundamental change would require a politically impossible degree of arm-twisting from various interest groups, including doctors, pharmaceuticals, hospitals, private insurers, patients, and taxpayers.

Candidate Obama rightly criticized President Bush for hiding the costs of the Iraq War through supplemental appropriations bills, rather than including the costs in the normal budget.  Alas, Mr. Obama is pulling yet another page from Bush book: though Mr. Obama recently included Iraq spending costs in his latest $410 billion budget, he has quickly come back for more, proposing his own $83.4 billion supplemental to fund operations in Iraq and Afghanistan as well as a few international aid programs.

Though there’s nothing necessarily wrong with requesting supplemental funding, the president’s request raises two concerns.  For one, requesting this money a mere month after Congress passed his buget makes one wonder why his budget analysts didn’t foresee these new costs and just include them in the original budget.  What’s more likely is that the president just wanted to send to Congress a bill with a lower bottom line so as to appeal to moderate Democrats and GOP deficit hawks (who only now have found fiscal religion).

Secondly, it’s hypocritical for the president to critcize his predecessor for a practice that he, himself, readily adopts once in office.

Today The Post and the Gray Lady are publishing several good op-eds on Obama’s policies and methods.

Michael Gerson argues that Obama’s promise of change now rings hollow.  While Gerson’s criticism of Obama’s governing style and the Limbaugh affair are largely irrelevant, he rightly notes that the President is continuing with business-as-usual, i.e. promising everything for the price of nothing:

The pledge of “honesty” and “sacrifice” has become the deceptive guarantee of apparently limitless public benefits at the expense of a very few…. None of this is new or exceptional — which is the point. It is exactly the way things have always been done.

Charles Krauthammer argues that Obama’s stem cell and science policy is unsophisticated and contains a significant logical contradiction:

[The President declared] that we must resist the “false choice between sound science and moral values.” Yet, exactly 2 minutes and 12 seconds later he went on to declare that he would never open the door to the “use of cloning for human reproduction.”

Does he not think that a cloned human would be of extraordinary scientific interest? And yet he banned it.

Is he so obtuse as not to see that he had just made a choice of ethics over science?

Eugene Robinson defends Obama’s method of confronting all challenges (i.e. banking, health care, entitlements, infrastructure, education, etc., etc.) all at once.  He astutely dismisses the critics:

What these critics really want, though, is to delay or derail the progressive reforms that voters elected President Obama to carry out.

Judging by the scarcity of fiscal discipline over the past few years, it’s probably wise to characterize the opponents of the all-at-once agenda as really just opposing the agenda part, not the all-at-once part.

We, however, still hold by our belief that when governments rushes policy, the results are rarely wise (e.g.).

David Brooks (a conservative!) praises Obama’s nascent education policy as recognizing the importance of familial influence, teacher accountability, and charter school competition.  He writes that the President “has broken with liberal orthodoxy on school reform more than any other policy”.

Remember Sen. Obama’s campaign promise to examine the Federal buget “line-by-line” to eliminate wasteful spending and earmarks?  Shamefully, the president has gone back on his promise and instead signed the mammoth $410-billion omnibus spending bill.  An amazing 8,500 earmarks sit like barnacles on $7.7 billion of the bill.  One must suppose Senator Obama didn’t think it fair to impose burdensome campaign promises on President Obama.

While a presidential veto would have embodied the spirit of this new “era of responsibility“, the President has decided to play along to get along rather than ruffle the blue feathers at the other end of Pennsylvania Avenue.

Wait, haven’t we seen this movie before?

Ah, yes!  President George W. Bush waited five years to issue his first veto, preferring to work with Congressional Republicans quid pro quo.  The result was runaway spending and unexamined executive power.

Sadly, Pres. Obama had a chance to give us some change we could believe in.  The only change he gave us was his promise.

Robert J. Samuelson in the Post reiterates my point (though I doubt he reads Monumentality) on how the President’s budget, entitled A New Era of Responsibility, is anything but responsible.

If Obama were “responsible,” he would conduct a candid conversation about the role of government. Who deserves support and why? How big can government grow before higher taxes and deficits harm economic growth? Although Obama claims to be doing this, he hasn’t confronted entitlement psychology — the belief that government benefits once conferred should never be revoked.

Is it in the public interest for the well-off elderly (say, a couple with $125,000 of income) to be subsidized, through Social Security and Medicare, by poorer young and middle-aged workers? Are any farm subsidies justified when they aren’t essential for food production? We wouldn’t starve without them.

Given an aging America, government faces huge conflicts between spending on the elderly and spending on everything else. But even before most baby boomers retire (in 2016, only a quarter will have reached 65), Obama’s government would have grown. In 2016, federal spending is projected to be 22.4 percent of GDP, up from 21 percent in 2008; federal taxes, 19.2 percent of GDP, up from 17.7 percent.

I’m still waiting for a President willing to tell the truth: that we should pay the higher taxes necessary to fund the services we demand, or, more broadly, that we can’t always get what we want.

Now that would be an act of responsibility.

Many small businesses such as shops and doctors’ offices are sole-proprietorships, meaning the income of the store is counted on the owner’s tax return as his own personal income. As a result, many small business owners are grossing more than $250,000 annually in income, even though they must pay rent, insurance, and employees’ salaries from this income, leaving only a modest sum to remain for the owner.

These business owners, because their personal income is combined with their business income, may face higher taxes under Pres. Obama’s tax proposals. What makes this coming tax debate interesting is that tax increases will heavily fall on people who voted for the President in the first place. Is this an instance of betrayal or an instance of you get what you vote for?

Victor Davis Hanson at RealClearPolitics, addressing the new President, discusses the implications of classifying small-business owners as “the rich”. He very smartly identifies the Democratic constituencies that will face higher tax bills under the President:

In fact, for your [spending programs] to succeed, you must go after the upper, upper middle-class, those making between $250,000 and $600,000 who are restaurant owners, home builders, labor contactors, architects, surgeons, engineers, hospital executives, college administrators, Ivy-League law professors, and many dentists.

These households are wealthy, yes; but they don’t own or even fly on $50 million private jets or host private Super Bowl parties. Their income is all reported, and with such good salaries come high insurance and, in the case of business, constant reinvestment and expensive inventories. They are not greedy, but the bulwark of the United States’ productive classes who in aggregate pay over 40% of the collective income taxes, and provide most of the jobs in the country. Under your plan many in these high-tax states will pay nearly 70% of their incomes in FICA, Medicare, federal income, and state income taxes. Why gratuitously mislead the American people that those for whom you will lift FICA ceilings or up their IRS bites to 40% are in any way synonymous with the super-rich? Remember the very, very wealthy voted overwhelmingly in your favor precisely because their riches gave them immunity from high taxes, and in many cases they were far removed from the everyday risk and worry of owning a hardware store or trying to keep together a family-owned construction firm. George Clooney is a world away from a paving contractor, just as making $400,000 a year on call 24/7 is not quite making $40 million investing or $2 million for a cameo.

So please no more intellectual dishonesty, Mr. President. Those in great numbers who will pay your higher taxes are not really the rarer Warren Buffets, Bill Gateses, Diane Feinsteins, Teresa Heinz Kerrys, Sean Penns, George Soroses, Oprah Winfreys, or Tiger Woodses, whose mega-wealth really does result in private jet rides, and yet exempts them from worries that increased taxes might wreck their small businesses. (my emphasis)

Some business owners facing higher taxes may find it more economical to incorporate their businesses and file taxes separately for their respective businesses. If this is the case, the President’s plan to boost revenue to pay for all his programs may not collect as much as he anticipates.

(No worries, though, since we can always foist these financial burdens on the unborn. Since when do they vote?)

The President’s opponents highlight that his aim is to redistribute wealth downward à la Robin Hood, but the President himself prefers to highlight his aim to provide such necessities as universal health insurance coverage. However, if the President’s aim were merely to provide necessities, it’s only fair that he come clean with the true costs of these programs.

The Bush Administration, wanting to hide its deepening budget deficits, cynically and dishonestly refused to count Iraq spending as part of the normal budget, instead requesting the money as “emergency” appropriations. Though Pres. Obama is rightly including Iraq spending as part of the normal budget, he is underestimating the costs of his forthcoming health care plans, somehow imagining that taxing “the rich” (celebrities, hedgefund managers, as well as roofing company owners) can somehow finance the all-ages version of the most out-of-control government medical insurance program in the nation.

There is no such thing as free healthcare and the bill must be paid somehow, be it through escalating private premiums or through escalating tax rates.  The President is wisely persuing cost reductions through large-group bargaining of drug prices, digitization of medical records, and research into best practices to reduce mistakes.  These are worthy goals, no doubt, but like earmark reform, they will merely dent expenditures slightly, leaving hefty bills to be paid through the public treasury.

The super-rich can afford marginal increases in their tax bills, but sole-proprietors grossing more than $250,000 may find this President rather taxing.