The entire Democratic caucus in DC must be suffering the effects of swine flu, because their ideas for health care reform just keep getting worse. In the latest deal, brokered by Senate Democrats, Medicare would be expanded to uninsured Americans over the age of 55 and insurance companies would be required to spend 90 percent of the money they collect on beneficiaries. While both of these provisions sound great to a bleeding heart, the unintended consequences could prove devastating.
By expanding the eligibility for Medicare to people age 55 and older the Democrats are ballooning the size of this program when it is already running a projected 89 trillion dollar deficit.* I find it ironic that Democrats are attempting to expand a program that they, less than a week ago, said was home to more than 500 billion dollars in waste. A program is dysfunctional and their solution is to make it bigger? Yeah, that’s a great idea. The expansion of an already bloated entitlement program is never advisable, but to do so during a deep, and likely long, recession is insane.
But hold on, because the craziness doesn’t end there. The provision in the latest manifestation of DemCare, which would require companies to pay out 90 percent of their revenue to beneficiaries, is going to stick it to already struggling Americans. Let’s say, as a hypothetical, that an insurance company is taking in 80 million dollars. If we assume this company is paying out 70 million to beneficiaries, that would leave ten million left for operating costs and profit. Under the new deal being worked out in the senate, this company would have to raise their total revenue to 100 million in order to maintain the ten million dollars for profit and operating costs. This 90 percent provision all but guarantees that the cost of insurance will rise, rather than fall. Either insurance companies will see less profit or they’ll be forced to increase their revenue by raising premiums. Which do you think is more likely to occur?
*While this is a peak estimate, almost all projections place Medicare’s future deficit well into the tens of trillions.