The federal Department of Health and Human Services is using tax dollars to lobby for a government takeover of the health care market. They’ve created a Web site — — and sent out press releases with a list of ways that health reform will “help” each state.

Among the reasons given for why Michigan would be helped (even though several bills are on the table in Congress and no knows what provisions any eventual legislation will contain) is that health care costs will be lowered for all citizens here. The problem is that many of the proposed provisions are unlikely to have the effects that the site claims. Here are some of the misleading details put out by HHS, with corrections.

Stay Engaged

Receive our weekly emails!

  • Ending the Hidden Tax — Saving You Money: Right now, providers in Michigan lose over $2.0 billion in bad debt which often gets passed along to families in the form of a hidden premium “tax”. Health insurance reform will tackle this financial burden by improving our health care system and covering the uninsured, allowing the 143 hospitals and the 34,091 physicians3 in Michigan to better care for their patients.

These figures are misleading at best. Actually, the cost-shifting is far less than most people believe, and the level is often exaggerated by health care providers. A study by Urban Institute economists — hardly a bastion of right-wing extremism — estimated that uninsured people received $35 billion in uncompensated care in 2001, or about 2.8 percent of total personal health care spending nationwide.

In Michigan, these costs also appear to be lower than most people imagine, and less than the approximately $1 billion in actual costs claimed by providers, according to the Senate Fiscal Agency. It cites reports to the state showing that hospitals lost about $602.2 million on uncompensated care in 2007.

Additionally, under proposed federal “reforms,” this “hidden tax” will not be ended — it will merely be shifted. Health reform does not come for free — the lowest cost estimates for the bill are still around a trillion dollars. Assuming this cost is distributed evenly by population, this will cost Michiganders well over $32 billion in the first ten years alone — assuming the government program stays within budget. Instead of a hidden premium tax, Michiganders will have an explicit health tax.

Further, even a trillion dollar plan isn’t expected to insure every American. Auto insurance mandates in Michigan have not ensured that all drivers are insured, and health insurance mandates in Massachusetts have also failed to insure everyone in the state.

Finally, cost shifting from the uninsured is not the only or the most significant cost shifting that takes place in our health care system. More significant is the cost shifting that occurs when government health insurance programs underpay for services to stay within budget and hospitals shift the costs for these people to the privately insured. There is a real concern that any government program that expands Medicaid or creates another government insurer will make this problem worse, not better, and increase Michiganders’ insurance premiums even further. (A recent Op-Ed by the CEO of a large hospital provides more details.) The administration has not presented a plan for dealing with this “hidden tax.”

  • Health Insurance Premium Relief: Premiums for residents of Michigan have risen 94% since 2000. Through health insurance reform, 1,014,000 to 1,144,600 middle class Michigan residents will be eligible for premium credits to ease the burden of these high costs.

While many in Michigan may take advantage of government health insurance subsidies under proposed legislation, this will hardly be "free." In Massachusetts, which has undergone the most extensive government-imposed health care market revisions in the country and embodies many of the president’s stated goals, premiums have increased faster than anywhere else in the country and subsidies have struggled to keep up. Massachusetts premiums are more than four times as high as Michigan’s under their “reforms,” and are rising quickly.

As a result, Massachusetts has had to start cutting back on the eligibility of these programs. Recently, they cut 30,000 legal immigrants (and taxpayers) from the ranks of those who qualify for subsidies. With Michigan already in budgetary meltdown, the state can hardly afford these higher costs. If subsidies are to be paid for by the feds, higher taxes will be needed to pay for them — and citizens here will not be exempt. And, of course, there is the question of who will have to have their subsidies cut when the going gets tough.

  • Strengthening Small Businesses: 152,737 employers in Michigan are small businesses. With tax credits and a health insurance exchange where they can shop for health plans, insurance coverage will become more affordable for them.

The main House health care bill also imposes an 8 percent tax on businesses that can’t afford to purchase the type of coverage that will be mandated by the government. Low-cost plans such as high deductible health plans and health savings accounts will be effectively banned under the bill’s provisions. Small businesses may be exempt from the tax at first, which creates a huge disincentive for them to expand and hire new workers. (Odds are the mandate will be expanded, however.) All of this significantly increases the cost of employing workers. Using various assumptions, economists estimate that employer mandates will lead to job losses ranging from 630,000 to 1.6 million — hardly the kind of “help” Michigan’s failing economy needs.

  • Reforms that Reduce Your Costs: Under health insurance reform, insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive. Insurance companies will also have to abide by yearly limits on how much they can charge for out-of-pocket expenses, helping 29,000 households in Michigan struggling under the burden of high health care expenses.

Massachusetts’ health insurance reform has led to cost overruns so high that the state is considering “global spending caps” — that is, a maximum amount that can be spent system wide on health care. The main House bill contains provisions to bring this about should costs increase more than the politicians say they expect (which of course they will). Look no further than Medicare for an example of costs that skyrocketed beyond those originally projected — that program's unfunded liabilities are well into the trillions. In every country in the world with universal health care, costs are out of control and care needs to be rationed.

This isn’t to say that rationing doesn’t occur already under private insurers, but right now Americans have some ability to choose between competing insurers that ration in different ways. This ability would be much greater if tax reforms made it possible for people to acquire affordable insurance on their own rather than through their employer. (Incidentally, “rationing” by price also occurs in the markets for groceries, gasoline, cars, etc., but there’s a huge difference between this and “fiat” rationing imposed by the government.) Government’s entry into the health care insurance market will eventually squeeze out private competition by imposing prohibitively expensive coverage mandates, and ultimately eliminate consumer choice altogether.

Given all this, “reforms” like those under consideration in Congress are unlikely to ”help” Michigan, even with the best intentions.