Last May I posted Healthcare 1099s to show just one of many flaws in the Healthcare bill.  Remember that Pelosi stated that “we had to pass this bill to see what was in it”.  This rings as one of the most irresponsibly moronic statements ever from a House leader. Well now that we have passed the bill, we see how recklessly it was constructed.

The change in 1099 reporting has nothing to do with health care except claim it is an effort to raise revenues by capturing income that was not before.  The claim is spurious at best and the requirement is so onerous that it will more likely create new black markets to avoid the paperwork.  This is the result of an administration that has such little experience in the private sector.

In the 1099 Insurrection in the Wall Street Journal Online the authors note that now “we see what is in the bill” we don’t like it and the Senate is trying to change this provision.  Yet the White House is strongly resisting even this change, fearing it will only begin the unraveling of the bill.

An excerpt:

Meanwhile, small businesses are staring in horror toward 2013, when the 1099 mandate will hit more than 30 million of them. Currently businesses only have to tell the IRS the value of services they purchase from vendors and the like. Under the new rules, they’ll have to report the value of goods and merchandise they purchase as well, adding vast accounting and paperwork costs.

Think about a midsized trucking company. The back office would have to collect hundreds of thousands of receipts from every gas station where its drivers filled up and figure out where it spent more than $600 that year. Then it would also need to match those payments to the stations’ corporate parents.

Most Democrats now claim they were blindsided and didn’t understand the implications of the 1099 provision—which is typical of the slapdash, destructive way the bill was written and passed. As the critics claimed, most Members had no idea what they were voting on. Some 239 House Democrats voted to dump the 1099 provision in August, and the repeal would have passed except Speaker Pelosi rigged the vote procedurally so it needed a two-thirds majority. She thus gave Democrats the cover of a repeal vote without actually repealing it.

I spent the afternoon reviewing my company’s health insurance policy with some very capable administrators and the presentation was mostly about how the new health insurance law would impact our coverage and what we were allowed to offer, how it was offered, and the various penalties we would face if we decided not to cover, change coverage, or did not pay enough of the share of the coverage based on a percentage of the employee’s gross income.  (Am I now to supposed to know my employee’s gross family income in order to avoid onerous penalties?)

I will spare you the technical details and get straight to the main point.  This bill will kill employment, especially for the low wage employees and especially for mid size growing entrepreneurs (50 or more workers).   All of the economists, trying to figure out why employment is lagging in spite of low interest rates and record government stimulus, should put the charts away and just read this bill. And I am not even addressing the various tax increases, cuts in Medicaid, and the bureaucratic increase in 1099 reporting.  I am only addressing how this bill will affect employment.

It is also very clear that nothing in the bill will lower medical costs, but many requirements will increase costs. Access has taken a clear priority over cost and quality. We will provide more care for more people who will be ever less likely to be able to afford it without government help.

Employers with a large base of low wage employees will be hit the hardest, but their employees will suffer the most as many employers will find no other choice but to cut their hours to under 30 hours a week to avoid the burden on ‘full time’ workers.  Any business start-up requiring low wage employees will be thoroughly discouraged by their accounting and legal advisers.

Investment firms, accounting and legal offices, and firms with mostly higher wage employees will suffer very little and will avoid most of the burdens of this bill.

This bill is an abomination. It will hurt the lowest income the most and will delay any serious recovery in employment until it is repealed.

A neighbor and friend across the street was diagnosed years ago with pancreatic cancer. Pancreatic is one of the more difficult to cure and usually requires very aggressive chemotherapy for any chance of survival.

But this patient sought a second opinion at a major cancer treatment center in Texas.  He found out the diagnosis was incorrect. He had an infection that was cured with simple antibiotics.

The first lesson is to always get a second opinion, best if from a completely different medical community. This is especially true for serious illnesses and treatment.

But this case is an analogy for much more.  Without a proper diagnosis the best treatment is worthless; it can even severely damage the host.

We are seeking a form of political chemotherapy without  a proper diagnosis.  We are seeking a radical change without understanding the problem.  We seek demons  to destroy rather than flaws to correct

A major driver of our health care system is the separation of the consumer from the provider. First dollar coverage and third party payers have removed the consumer from the decision making process.  If there is one thing most economists can agree in it is that incentives matter and we have created an incentive to over consume, increase administrative overhead, and avoid responsibility.

The problem with Obama care is that is does worse than ignore the perverse incentives we now have, it increases them. By  seeking a comprehensive solution the plan changes too much and throws out much of our  successes along with a few poorly understood problems.

The problem is not insurance company’s profits or doctor’s pay: the top ten companies’ profits are only a fraction of the Medicare fraud and abuse. The reality is that high quality health care is expensive, and that our system encourages over consumption and discourages responsibility.

We don’t agree on the treatment because we don’t agree on the diagnosis.

My article in American Thinker.
Distractions used to hide Obamacare’s failures

Excerpt:

But public outbursts fit much better into 20 second news bites than pertinent analysis or clarification of the substance of the bill that is causing such concern. It’s just too boring to report how adding a 3.8%  tax to investment income on top of another  5% point increase in capital gains taxes may reduce the private investment incentive that is needed to create jobs. They did say that creating jobs was important didn’t  they?

They certainly don’t want to wade into political philosophy and explain how one individual’s need for something entails a claim on another citizen’s assets.  Is the Constitution supposed to insure liberty or enforce equality? Is the government supposed to be the problem solver of last resort?  Can virtues in the hands of the individual become vices in the hand of the government?

Who cares that requiring health insurance while eliminating pre-existing conditions, requiring coverage for preventive care,  and capping the cost on the elderly will by the process of elimination dramatically increase the cost on the young?

As bitter as the controversy concerning the health care bill was, that was when we only discussed the generalities of the bill.  As the details come forth it looks even worse.

For example:

Employers with fewer than 25 employees can get a 33% tax credit for providing health coverage to their employees. Non profits can get a 25% credit toward their payroll tax.

Without getting a PhD in economics from Harvard, you can figure out that this is a strong incentive for an employer with 28 employees to shed a few workers, and a decent disincentive for an employer with 22 workers to grow and hire anyone.

It is precisely these companies that usually provide the majority of the new jobs coming out of a recession, and this health care bill targets these companies with an incentive not to hire. Of course that is not the intention. The intention is to give small businesses an incentive to give their employees health care, but this is a prime example of how the law of unintended consequences works.  It is also an example of what happens when the economically ignorant hold the reigns of political power.

But there is more.

An employer of a lot of low wage and low income employees such as the fast food industry is now faced with either providing employees with thousands of dollars of health care coverage or paying thousands of dollars in penalties. But the law only applies to full time workers which means those making over thirty hours a week.

You can probably guess that we will see a lot more part time workers in the fast food business. The ones who pay for this lack of foresight are the lowest paid employees that will now have to work multiple part time jobs to earn the same money they did before. In fact we will probably see part time workers being able to command a premium to help employers avoid the new mandated burdensome costs.

The political idiots designing this mess probably just expected the employers to pass on the new higher costs by charging another quarter for a bag of fries or another fifty cents for eggs and grits. If the restaurants thought they could charge another two bits for their product they would have already. Even if all of their competition are now in the same boat there is other competition that is not. The higher price may tip the customers to scramble their own eggs at home. I’ve done it, and it is really pretty easy.

Employers do not have to provide any health care coverage for the first 90 days.  Expect the ski season to shorten or winter season workers to move between slopes for employment every 90 days. The marginal cost of that employee on day 91 becomes both huge and easily avoidable.

Besides the clumsy attempt to regulate a market they poorly understand this bill was hastily and sloppily conceived.  In their effort to get something through and avoid further votes that would jeopardize the fragile chance of passing, they avoided the normal process of hashing out conflicts in committees and replaced legislative prudence with the words, “The Secretary shall deem……” This leaves 2700 pages of uncertainty left to be decided by the whim of an appointed official.

If you are a contractor bidding a job to start in 2 years what do you project for a labor rate when an interpretation  from an official can change your cost structure enough to erase any profit you pay have projected?  You may even be forced to cut wage rates to compensate for possible increases in health insurance costs. More likely few companies will take the risk of seeking opportunities when there is no way to have any certainty of your costs.

This bill is a job killer. The lowest wage workers will suffer the most.