Economic Ignorance
The WSJ is reporting that Obama's speech will propose:
Starting next year, the plan also calls for annual fees of $6 billion on health-insurance providers, $4 billion for medical-device makers, $2.3 billion on drug makers and $750 million on clinical laboratories. The fees would be levied on individual companies based on market share.
Don't you love that, by the way. The benefits are not programmed to begin until 2013 but the taxes start in 2010. But let's rewrite this paragraph to be less economically ignorant:
Starting next year, the plan also calls for annual fees of $6 billion on customers of health-insurance providers, $4 billion for customers of medical-device makers, $2.3 billion on customers of drug makers and $750 million on customers of clinical laboratories. The fees would be levied on individual companies based on market share, then passed on to their customers in the form of price increases, as are all such fees, particularly on low-margin industries such as health insurance.
Congratulations. Obama has embarked on his quest to reduce the cost of health care by increasing the costs of health care suppliers by over $13 billion per year. That should work.
For years I have been saying that the government has only one lever to reduce costs (as any thought that they might reduce costs through increased productivity is just a joke rebutted by all of history): Force people to use less, either by raising the price, reducing the supply, or outright banning certain expenditures in certain situations.
