Investors Business Daily had a front page article regarding a “discussion draft” bill released by the house Ways and Means Committee on Friday.  The bill is very generous with plans to subsidize healthcare costs, but does little to explain just how these subsidies would be paid for.  Amazingly, democrats believe that this bill will cover about 95% of Americans with some sort of healthcare benefits.

So far, it has been difficult to get any sort of comprehensive health plan through both the House and Senate due to the huge expense of such a measure.  Originally, Obama had a July 31 deadline for Congress to get a bill to his desk, but it now appears that the president will back off this aggressive time table as a viable plan still has not begun to emerge.

As of yet, there is no official word from the Congressional Budget Office as to how much this new proposal would cost, but the pricetag is expected to be above the $1 trillion estimate placed on earlier proposals by Senator Ted Kenneday and Senator Max Baucus.  Not to be discouraged, Henry Waxman from California promised that the bill would be paid for through cutting expenses on existing programs and with additional revenues.  Of course additional revenues means higher taxes.

And higher taxes will certainly be a problem if enacted.  The current economic recovery is still in question, so raising taxes to pay for such an expensive program as universal healthcare would be very unpopular and potentially economically dangerous.  Unemployment levels continue to trend higher with the expectation now set firmly in double digits for the coming months.  There is speculation of additional taxes on soda which seems absolutely rediculous but may end up helping to pay at least a portion of the costs for such an expansion.

As an investor and taxpayer, the thing that is most concerning is seeing an industry be completely nationalized as would be the case if 95% of Americans were covered by the new healthcare program.  The US government is notorious for being inefficient with programs because it is not designed to take the place of the free market.  A nationalized healthcare program would reduce much of the incentive for medical advances and would eventually lead to sub-standard care for the majority of citizens.

A free market where consumers bear some or all of the costs of their own health costs would go far in eliminating waste and weeding out physicians who overcharge for treatment.  However, if the government program places regulated pricing on payments for particular procedures and treatments, there is no free-market mechanism to encourage innovation, cost savings, or even better treatment.

Farther down the road, the healthcare profession will likely be characterized by relatively low wages and high degrees of regulation.  Hardly the type of industry a bright student would aspire to.  So it wouldn’t be surprising to see talent diverted to other fields (as has been the case with the financial industry) or even for aspiring doctors and nurses to set up practices in more business friendly countries.

Eventually, in order to receive the best care, wealthy consumers may travel internationally in order to receive first-rate care while those not in a financial position to do so are stuck with less at home.  Medical technology and drug development companies could go out of business due to lower government reimbursements, or choose to move their operations to countries with a more “pro-business” approach.

Now I don’t want to sound too capitalistic and harsh.  Obviously we need to be humane in our distribution of healthcare regardless of the economic status of the patient.  But if I am able to afford a healthcare program for my family, it should be my responsiblity and not the governments to provide for the necessary care.  So for people living below the poverty level a national healthcare plan is certainly necessary.  But in my opinion, this plan should not include citizens who are 400% above the poverty level or crafted to cover 95% of Americans.

One of the things that would make healthcare more affordable and competitive would be to create limits for malpractice litigation.  I’m not sure what the exact portion of healthcare cost can be attributed to malpractice insurance, but I’ve talked to enogh doctors to realize that this is a serious portion of the cost of medical treatment.  Litigation reform and a safety net for those who truly cannot afford basic healthcare would be much cheaper than the proposed legislation, and would promote competition, innovation and healthy business practices for the broader medical sector.

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