Costly Health Care Reform Harmful Rx For Innovation

By Newt Gingrich and David Merritt
Original Publication: www.omaha.com


Gingrich is a former speaker of the U.S. House of Representatives. He founded the Center for Health Transformation of Washington, D.C., in 2003. Merritt is vice president and national policy director at the center.

Would you like to pay more for your eyeglasses? What about hearing aids? Health insurance and prescription drugs? You would pay more for all of these under the emerging health reform legislation in Washington.

Paying more for health care is not the change most Americans had in mind last November.

Think of how many times then-candidate Barack Obama said his health care plan would save the average family $2,500 per year. But as congressional leaders attempt to raise taxes on small businesses and impose penalties on employers, it is far more likely that the average family would pay an extra $2,500 per year.

The latest examples are the new taxes proposed by U.S. Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. To pay for his health reform plan, he would levy more than $140 billion in new taxes over the next 10 years on drug makers, health insurers and companies that make medical devices.

It is Economics 101 to know that when government levies a tax, it is not the business that will ultimately pay it — consumers will. So the $23 billion tax on drug makers won’t dent their revenue. It will make your medications more expensive.

The $67 billion tax on health insurers won’t hurt insurance companies. It will raise your premiums. So said the director of the Congressional Budget Office: “That piece of the legislation would raise insurance premiums by roughly the amount of the money collected.”

Look closely at the impact of a tax on medical device companies. There are more than 80,000 medical devices in the United States, everything from artificial heart valves, pacemakers and NICU incubators to thermometers and toothbrushes.

The $40 billion tax on device makers would raise the price for thousands of products. Consumers would pay more directly through higher insurance premiums or lost wages when an employer has to pay. Thomas Barthold, chief of staff of the Joint Committee on Taxation, said this past week: “We have analyzed this as largely falling on the consumer.”

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