Repealing Disaster: The Perils of a New Entitlement
How the Entitlement Crisis of Social Security demonstrates the essentiality
for repeal of the Affordable Care Act of 2010—and what to put in its place
Jimmy Sengenberger
Capstone Seminar in U.S. Politics
Dr. Terry Schmidt
February 23, 2011
Sengenberger 1
Table of Contents
1. Introduction
2. The Philosophical Case against Entitlements
3. A Quick History of the Social Security Program
4. The ‘Nearest Thing to Eternal Life’: Additions and Failures
5. Broken Promises: Failed Predictions and Dire Straits for Social Security
6. Problems with the U.S. Healthcare System and the Need for Reform
7. The Affordable Care Act of 2010: ‘Obamacare’
8. Lessons from History: Obamacare’s Threat
9. Alternative, Market-Based Health Reforms
10. Conclusion: The Essentiality for Repeal of Obamacare
Sengenberger 2
Introduction
In 1935, in the midst of the Great Depression, President Franklin Delano Roosevelt
signed into law the Social Security Act, heralding in the beginnings of a massive entitlement that
would grow well beyond even his expectations. Such an entitlement proposes significant moral
and philosophical questions because of its explicit violation of the core principles of a free
society—especially property rights and the precept of voluntary exchange. Now, Social
Security’s unfunded liabilities total roughly $8 trillion over the next 75 years, a result of the
government’s reckless additions to the program with a lack of real reform despite impending
crisis. In March of 2009, President Barack Obama ushered in an expansive new entitlement of
his own, through the Patient Protection and Affordable Care Act, or what has derisively been
labeled “Obamacare” by opponents. The new law encompasses a number of reforms to the
nation’s healthcare system that require massive amounts of government spending and entail a
significant expansion of federal power. Unfortunately, these substantial changes to the system
will do little good but wield great harm at unsustainable costs. The failed promises of the Social
Security program, as embodied in its inability to meet changes in demographic trends and to
maintain financial stability, as well as the government program doctrine of “eternal life” and the
continued expansions of the Social Security Act throughout the last several decades, demonstrate
clearly that the United States of American cannot afford another entitlement in the form of
Obamacare. Thus, it is imperative that the PPACA be repealed and Congress implement real,
market-based reforms. The system is broken and must be repaired; however, Obamacare is an
unsustainable way of doing so and alternatives are required.
Sengenberger 3
The Philosophical Case against Entitlements
Under the leadership of President Franklin Delano Roosevelt, the 1930’s heralded in a
new age for the United States: the dawn of the Entitlement Society, also known as the Welfare
State. Prior to the implementation of the liberal New Deal, the federal government was limited
in both size and scope, in accordance with the founding principles enshrined in the Constitution.
Though there was no massive effort by the public at the time to install such programs as the
National Recovery Association, the Works Progress Administration, or, most significantly, the
Social Security program, Roosevelt devoted great pains to propagandizing the debate, shifting
the political paradigm, and securing his much-cherished New Deal initiatives. In reflecting on
his self-described “program of progress” the president noted, “As new conditions and problems
arise beyond the power of men and women to meet as individuals, it becomes the duty of the
Government itself to find new remedies with which to meet them…Government has the definite
duty to use all its power and resources to meet new social problems with new social controls.”1
Roosevelt thus presented the primary argument behind the welfare state and entitlement
programs: social and economic problems must be repaired through government initiative and
redistributive policies and programs.
Unfortunately, the methods used to “remedy” the “conditions and problems” of which
Roosevelt spoke—and thus to establish the entitlement society—explicitly violate several core
tenets of a free society. These fundamental principles necessarily entail the protection of
individual freedom and property rights, the maintenance of free and voluntary exchanges without
coercion, and the guarantees of procedural, not distributive, justice. The Declaration of
Independence itself clarifies that Americans in particular possess the inalienable rights to life,
Franklin D. Roosevelt. “The Continuing Struggle for Liberalism.” Found in Dogmas and Dreams. Edited by
Nancy S. Love. Page 85.
1
Sengenberger 4
liberty, and the pursuit of happiness. This edict largely derived from John Locke’s observation
that society exists because of a “social contract” between man and the state which is designed to
protect the fundamental rights to life, liberty, and property. Locke’s philosophy was embodied
in Thomas Jefferson’s statement that, “A wise and frugal government, which shall leave men
free to regulate their own pursuits of industry and improvement, and shall not take from the
mouth of labor the bread it has earned—this is the sum of good government.”2 Mr. Jefferson’s
ideas concerning the role of government center largely on the core value that the purpose of
government is to prevent against injustice by guaranteeing individual liberty. By liberty I mean
“the freedom of every person to make full use of his faculties, so long as he does not harm other
persons while doing so.”3 Underneath Roosevelt’s ideology is a premise which lies expressly
counter to these values. Under such a philosophy, government’s purpose is no longer to simply
ensure individual liberty and prosperity. Instead it descends into social engineering, which is
achieved by taking from the labors of one group of people and redistributing it, by force, to other
groups of people. Liberty necessitates that transactions be voluntary; thus, this practice is
fundamentally immoral, as the philosopher-economist Frédéric Bastiat observed:
Nothing can enter the public treasury for the benefit of one citizen or one class unless other citizens and
other classes have been forced to send it in. If every person draws from the treasury the amount that he has
put in it, it is true that the law then plunders nobody. But this procedure does nothing for the persons who
have no money. It does not promote equality of income. The law can be an instrument of equalization
only as it takes from some persons and gives to other persons. When the law does this, it is an instrument
of plunder…You will find that [welfare programs] are always based on legal plunder, organized injustice. 4
2
"Thomas Jefferson Quotes." Famous Quotes and Quotations at BrainyQuote. Web. 01 Mar. 2010.
<http://www.brainyquote.com/quotes/quotes/t/thomasjeff130495.html>.
3
Frédéric Bastiat. The Law. Page 39.
4
Frédéric Bastiat. The Law. Page 21.
Sengenberger 5
Do not mistake this argument for a case for the overall elimination of government’s role
in providing a hand up to the poor and the indigent. Indeed, in accordance with the social
contract among man, society, and the state, government is obliged to fulfill certain basic
functions, and a plausible case can be made for minimal government assistance. In addition,
government’s most critical purpose is to provide for the common defense and make necessary
other provisions for the protection of individual rights and liberties. Thus, public funds must be
acquired in order to fund programs that achieve these ends, including the guarantees of justice.
By justice, as noted before, I mean “procedural justice,” in which government preserves equality
under the law, meaning individual political rights (civic rights) and equal application of justice
(procedural justice) to all. Every individual goes through the very same process, with no
discrepancies between them; once this has been carried out, the end result will be fair and just,
even if the differences between certain cases are significant. This is not to say that outcomes will
be equal, as is the case in distributive justice; rather, it asserts that everyone will be treated
equally so as to guarantee the fair and proper protection and application of individual rights. In
such cases as guaranteeing procedural justice, defense, and other basic functions of government,
the case for taxation is justified. This is because it embodies the principles of a social contract:
man gives up certain natural liberties in order that he and his rights be protected through
guarantees of safety and social order. In order to fulfill these functions, taxation—access to
revenue—is a necessary fact of government. What is intended here, therefore, is a contention
which recognizes that large-scale government welfare and entitlement schemes, especially
programs like Social Security and Medicare, violate individual liberty through coercive taxation
intended to redistribute the proceeds of one individual to another—to guarantee equal outcomes,
not an equal playing field.
Sengenberger 6
Moral philosophy clearly calls into question the coercive nature of such programs in a
free society. Consider, as a specific example, two critical aspects of the Social Security program.
First, the government couches the payroll taxes which fund social security as being
“contributions.” “The impression is given that a worker’s ‘benefits’ are financed by his
‘contributions.’ The fact is that taxes collected from persons at work were used to pay benefits
to persons who had retired or to their dependents and survivors. No trust fund [which is conjured
with the term ‘contribution’] in any meaningful sense was being accumulated.”5 In this way, a
seemingly-innocuous term like “contribution” misleads citizens into believing that their wage
taxes are not coerced and that they will be guaranteed a benefit from them, when in reality it
combines a coercive tax and transfer payments. Eventually the public coffers run out and the
concept becomes a myth. Moreover, entitlement programs like Social Security are explicitly
compulsory; not only is the payroll tax mandated upon the people, but participation in the
program is required as well. This categorically rejects the fundamental principle of a free society
that individuals are free to voluntarily engage in transactions.
There is a second, critical component to the Social Security program which is both
forcible and, therefore, immoral. By definition, an entitlement program entails the mythical idea
that one individual has the right to the proceeds not just of another individual, but of future
taxpayers. Thus, such welfare projects have an adverse effect on both the givers and the socalled beneficiaries of such programs. In his classic treatise The Conscience of a Conservative,
former U.S. Senator Barry Goldwater explained:
Consider the consequences to the recipient of welfarism. For one thing, he mortgages himself to the federal
government. In return for benefits — which, in the majority of cases, he pays for — he concedes to the
government the ultimate in political power — the power to grant or withhold from him the necessities of
5
Milton Friedman. Free to Choose. Page 104.
Sengenberger 7
life as the government sees fit. Even more important, however, is the effect on him — the elimination of
any feeling of responsibility for his own welfare and that of his family and neighbors…[T]his is one of the
great evils of Welfarism — that it transforms the individual from a dignified, industrious, self-reliant
spiritual being into a dependent animal creature without his knowing it. There is no avoiding this damage to
character under the Welfare State. Welfare programs cannot help but promote the idea that the government
owes the benefits it confers on the individual, and that the individual is entitled, by right, to receive them.
Such programs are sold to the country precisely on the argument that government has an obligation to care
for the needs of its citizens. Is it possible that the message will reach those who vote for the benefits, but
not those who receive them? How different it is with private charity where both the giver and the receiver
understand that charity is the product of the humanitarian impulses of the giver, not the due of the receiver. 6
Goldwater’s assertion of the development of an entitlement mentality which, in effect, submits
individuals—who are compulsory participants in the program—to the dictates of the government
and generates a belief that one has the equivalent of a right to the provisions of others. As a
result, what you have is a “one-sided ‘compact between the generations,’ foisted on generations
that cannot give their consent.”7 This, too, violates the very principle of a social contract,
because future generations of taxpayers are bound to providing extensive benefits for previous
generations, with no say in the matter. Yet at the same time the idea that one must by nature be
“entitled” to a taxpayer-funded guaranteed income cannot be sustained because “assurance[s of
Social Security Payments] derive solely from the willingness of [these] future taxpayers to
impose taxes on themselves to pay for benefits that present taxpayers are promising themselves.”
Not only is the principle of an entitlement immoral and forcible flawed, but the very concept is
defective as well.
Irrespective of how one views the question of compulsory entitlement programs like
Social Security, which necessarily entail the threat of force, it is clear that they trample upon the
6
7
Barry Goldwater. Conscience of a Conservative. Page 73.
Milton Friedman. Free to Choose. Page 104.
Sengenberger 8
very foundations of individual liberty and are not the moral and proper “remedy” that individuals
like President Roosevelt contend for social and economic ailments.
A Quick History of the Social Security Program
The year was 1935. The United States of America was ravaged by the Great Depression,
an economic crisis so deep and so dark that it seemed to trump every other panic and recession
prior and since, beginning with the Stock Market Crash of 1929 and ending largely with the
military buildup of World War II. Franklin Delano Roosevelt, elected to the presidency in 1932,
wasted no time in devoting his “First 100 Days” to initiating a series of programs and agencies
known as the New Deal. These included the National Recovery Administration, the Federal
Communications Commission, the FDIC, and the Glass-Steagall Banking Act.8 Then again
preceding his reelection in 1936, FDR launched what was known as the “Second New Deal,”
which heralded such programs as the Revenue Act, the National Labor Relations Board, and the
Works Progress Administration.9 Also among these programs was Social Security, the federal
government’s first sweeping program intended to provide protection for the agency. The
initiative, signed into law in 1935, was intended to guarantee retirees a steady source of income
after their withdrawal from the labor market. And it worked—poverty among the elderly
declined 25 percent, from 35 percent in 1960 to 10 percent in 1995.10 The entitlement came at a
time when millions of American seniors—some of the most vulnerable in our society—were
being trampled by the crumbling economy and saw whatever savings they had stripped away.
8
Pika, Joseph A., and John A. Maltese. The Politics of the Presidency. 7th ed. Washington, D.C.: CQ, 2009. Page
378. Also used Class Notes from Dr. Jim Riley.
9
Class Notes from Dr. Jim Riley.
10
"President Bush on Social Security." CQ Public Affairs Collection. CQ Press Electronic Library, 8 Feb. 2005.
Sengenberger 9
The thinking was that they needed government assistance after working so long and hard to help
bring the nation along the path toward becoming a world superpower.
Old-age retirement benefits, however, are not the only component of the legislation as it
was originally signed into law. In addition to retirement checks, the act also provided for such
things as income for the disabled, unemployment insurance, aid to dependent children, grants to
states for maternal and child welfare, public health work, and the creation of a Social Security
Board.11 In the 1950s, 60s, and 70s, a series of amendments altered the original Social Security
Act to include such programs as Medicare and the implementation of Supplemental Security
Income, Cost of Living Allowances, and benefit increases, among other updates.12 The main
focus of Social Security reform has been more or less on retirement benefits, the primary
objective of the Social Security Program and the Reagan and Bush reform efforts of the 1980s
and 2000s, respectively.
The ‘Nearest Thing to Eternal Life’: Additions and Failures
Ronald Reagan, the former President of the United States, made an astute observation in
1964. “No government ever voluntarily reduces itself in size. Government programs, once
launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll
ever see on this earth!” he cautioned. Underneath the humorous terminology, this admonition
holds true. History, especially that of the Social Security Act, demonstrates the case in an almost
self-evident fashion. When a government program is launched, its advocates declare that it will
be limited in scope and financially sustainable. However, there are several factors that
politicians either neglect or choose not to take into account: demographic shifts, the costs
11
"Legislative History: 1935 Social Security Act." Social Security Online - The Official Website of the U.S. Social
Security Administration. Social Security Administration.
12
Cooper, Mary H. "Social Security Reform." CQ Public Affairs Collection. 24 Sept. 2004.
Sengenberger 10
associated with inflation, and pressures against reforms when necessary or in favor of expansions
when desired. Once a program begins, special interest groups will stop at nothing to halt
changes that they do not want or to advocate additions to it which they favor; never is there a
reduction as various factions of all sorts seek to feed from the trough.
No act of Congress is more seminal in proving this point than the Social Security Act,
which began as a fairly modest program.
One of the most striking facts about Social Security on the eve of its 15th anniversary was its relatively
small size. In 1949, the means-tested old-age assistance programs administered by the states actually had
twice as many beneficiaries as did Social Security’s retirement program and, further, typically paid higher
benefits… By the end of the 1950s, however, the system had been transformed through a series of
amendments to the Social Security Act. At the end of the decade, the system had become much closer to
being universal. In 1950, 61 percent of civilian workers were in jobs covered by Social Security, but by
1959, the figure exceeded 86 percent.13
Following the 1950’s, the Social Security program was drastically expanded with the
establishment of Medicare in the 1960s, the expansion of that program with the Part D
Prescription Drug benefit in the 2000s, and other, less sizable additions to the program over the
years. This section will examine these changes and explore and evaluate two failed attempts at
reforming the program: Ronald Reagan’s in 1986 and George W. Bush’s in 2005.
The Medicare Program
In the year 1964, Democratic president Lyndon Baynes Johnson declared “War on
poverty,” launching his so-called “Great Society” of the 1960s. In his philosophy, Johnson
wished to develop “an America in which every citizen shares all the opportunities of his society,
in which every man has a chance to advance his welfare to the limit of his capacities. We have
come a long way toward this goal…To finish that work I have called for a national war on
13
Patricia Martin and David Weaver. “Social Security: A Program and Policy History.” Page 7.
Sengenberger 11
poverty. Our objective: total victory.”14 His weapons in this war would be the full resources of
the U.S. national government, the intent, of course, being to provide assistance to those in need
of it, both in terms of direct cash transfers, such as welfare and unemployment checks, and
government services. As a part of these expansions, changes were made to the Social Security
program. Most especially, “[b]y the end of the decade, benefit levels had been increased twice
(7 percent in 1965 and 13 percent in 1968), the combined payroll tax had reached 8.4 percent,
and the taxable maximum stood at $7,800.” 15
These changes, though significant in their demonstration of how government programs
swell almost organically, pale in comparison to one of the most significant, expansionary
programs in the history of the federal government: the establishment of the Medicare entitlement
as a component of the Social Security program, injecting health insurance into that system. In
1965, Title 18 of the Social Security Act was instituted, thus bringing Medicare into being.
When originally enacted, Medicare had two parts, two trust funds, and two separate financing mechanisms.
Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) represent two of the four Social
Security trust funds (the others address retirement and survivors and disability income). Over the years, the
program has changed considerably. In 1972, the program was extended to certain people under age 65:
those with end-stage renal disease (kidney failure) and people receiving Social Security Disability
Insurance (DI) benefits for at least two years. In 1997, the program was further extended to cover people
under age 65 with amyotrophic lateral sclerosis (ALS). At that time, a new form of managed care was
incorporated as a Medicare option (Part C), but this portion of Medicare is financed through Parts A and
B.16
With each passing decade Congress was tempted to add a new benefit to the Medicare program
or access to the initiative for a new segment of the population, thus increasing the number of
14
" Document: Lyndon B. Johnson: The War on Poverty." Encyclopædia Britannica. 2010.
15
Patricia Martin and David Weaver. “Social Security: A Program and Policy History.” Page 8.
Friedland, Robert B. "How Medicare Works." Generations. Web. 6 Apr. 2011.
16
Sengenberger 12
people who were eligible to declare themselves “entitled” to government-sponsored medical
care. As a result, the government had taken a program original designed as a small-time
retirement “insurance” supplement—Social Security—expounded on the nature of that program,
added a whole new medical insurance option—Medicare—and added to its repertoire the list of
things that could be achieved through the program. It seemed almost never to end—and the
additions kept coming until the year 2003.
On December 8th of that year the Republican-controlled Congress passed, and President
George W. Bush signed into law, “the Medicare Prescription Drug, Improvement, and
Modernization Act, which [for the first time in history] authorizes Medicare coverage of
outpatient prescription drugs as well as a host of other changes to the program.” To the dismay
of those who question the moral foundation of entitlement programs, “The new drug assistance
represent[ed] a major new federal entitlement for Medicare beneficiaries” and was, upon passage,
“projected to cost taxpayers at least $395 billion, and possibly as much as $534 billion, over the next
decade.”17 The law was enacted in 2006. Now, four years after going into effect, Medicare Part D, the
prescription drug benefit, “alone adds some $17 trillion to the projected Medicare shortfall—an amount
greater than all of Social Security’s unfunded obligations.” 18 In passing the Medicare prescription
drug benefit, Congress, as with the Obama healthcare law in 2010, knowingly added significant
amounts of debt and unfunded liabilities for future generations in order to fulfill a new
“entitlement.” But even more strikingly, as with virtually every component of Social Security
from its inception, there was no real, significant public support behind the proposal. On the
contrary, “[i]n a poll taken in the week that President Bush signed the new Medicare law, 47
percent of senior citizens opposed the changes, and only 26 percent voiced their approval.
17
Oliver, Thomas R., Philip R. Lee, and Helene L. Lipton. "A Political History of Medicare and Prescription Drug
Coverage." Milbank Quarterly. 2004. Page 1-2.
18
Pamela Villarreal. “Social Security and Medicare Projections: 2009.” June 11, 2009.
Sengenberger 13
Among people of all ages who said they were closely following the Medicare debate, 56 percent
said they disapproved of the legislation, and 39 percent supported it (ABC News/Washington
Post Poll 2003).”19 Thus, not only did Congress and the President expand an existing entitlement
program to an extent not seen since 1965, but they did so and added new liabilities for the nation
without controlling popular opinion. Ironically, President George W. Bush would soon work
again to address a connected program, Social Security, in a vain attempt to control skyrocketing
costs.
The Reagan Reform Attempt
When Ronald Reagan took office in 1981, a looming tide was already in place for Social
Security and Medicare. Social Security in particular had prevented grave concerns at the time
that the government would be unable to fulfill its obligations to the program’s beneficiaries,
prompting Congress to double payroll taxes and take steps to stem the tide of growing benefits;
unfortunately, their efforts were unsuccessful. As a result, President Ronald Reagan initiated his
own National Commission on Social Security Reform, and “the commission's
recommendations—including delaying the cost-of-living increase, taxing the benefits of higherincome retirees and gradually increasing the retirement age from 65 to 67 by 2027--were adopted
by Congress in 1983.”20 It was expected that these measures would help to ensure the program’s
solvency on through 2063, but estimates now demonstrate that the solvency issue will unravel far
sooner. A few initiatives were put forth prior to President Bush’s 2005 push, but politicians
refused to tackle it. In fact, during the 1990s, then-House Speaker Newt Gingrich specifically
19
Oliver, Thomas R., Philip R. Lee, and Helene L. Lipton. "A Political History of Medicare and Prescription Drug
Coverage." Milbank Quarterly. 2004. Pages 2-3.
20
Glazer, Sarah. "Overhauling Social Security." CQ Researcher. 12 May 1995.
Sengenberger 14
declared the program “off limits” during his Congress, concerned about the political
consequences that would result from touching the “third rail.” 21
The Bush Reform Attempt
The 2005 proposal of President George W. Bush centered on a fundamental, long-held
conservative idea for reform: altering the program to provide for greater individual choice in how
the money one paid into the program would be allocated, thus laying the groundwork for the
future privatization of Social Security. Under Bush’s proposal, workers would be permitted to
direct a portion of the money they pay to the government in Social Security taxes to a personal
retirement account; “the funds would be invested in a limited number of investment options, and
the investment earnings would then be drawn down in retirement.” 22 Those currently retired and
nearing retirement, however, would be exempt from the changes, and those younger workers
who do participate would have still received disbursements, though they would be reduced in
consideration of the diverted funds. No younger worker would be required to switch over to the
personal accounts; rather, this would be one option workers could choose to pursue. 23 Despite
this, many in Congress, the media, and the public were highly skeptical of Social Security
privatization, even with only a portion of the program being privatized. Their concern was
largely that this plan would start the nation down a slippery slope toward total privatization of
Social Security, virtually identical to, but opposite of, conservative fears over President Obama’s
healthcare proposal today. Even more importantly, however, many of these entities argued that
there was no crisis in the first place—and they successfully made that case. Advancing the
21
Glazer, Sarah. "Overhauling Social Security." CQ Researcher. 12 May 1995.
"President Bush on Social Security." CQ Public Affairs Collection. CQ Press Electronic Library, 8 Feb. 2005.
Web. 5 Nov. 2009. <http://library.cqpress.com.dml.regis.edu/cqpac/document.php?id=hsdc05-429-186551003703&type=hitlist&num=13&>.
23
"President Bush on Social Security." CQ Public Affairs Collection. CQ Press Electronic Library, 8 Feb. 2005.
Web. 5 Nov. 2009. <http://library.cqpress.com.dml.regis.edu/cqpac/document.php?id=hsdc05-429-186551003703&type=hitlist&num=13&>.
22
Sengenberger 15
Social Security reform plan and getting it through Congress regrettably proved futile, and the
attempt was rendered even more unsuccessful than the Reagan attempt of the 1980s, which
simply prolonged the program’s solvency by a few decades.
Regrettably, the history of Social Security is fiddled with unrestrained attempts to add to
its insurance benefits, institute Medicare, and to expand that program, all without massive
amounts of public support. Despite the absence of popular backing, Congress was easily able to
expand the grip of the entitlement society—yet the two small attempts to control costs proved
vain. Indeed, if Social Security and its Medicare subsidiary demonstrate anything, it is the
wisdom of Regan’s mantra concerning “eternal life.” As a consequence of consistent and
successful efforts to expand entitlements while failing to control their growth, the fiscal
consequences of the nation’s entitlement programs are catastrophic.
Broken Promises: Failed Predictions and Dire Straits for Social Security
Speaking of the limitations on government, Frédéric Bastiat once observed, “The state
too is subject to the Malthusian law. It tends to expand in proportion to its means of existence
and to live beyond its means, and these are, in the last analysis, nothing but the substance of the
people.”24 Nowhere is this statement truer than in the failed predictions and dire straights of the
Social Security program.
Broken Promises, Failed Predictions
As is frequently the case, the U.S. federal government over-promised and falselypredicted early on in the implementation of the Social Security program. Until the year 1977,
millions of copies of a Department of Health, Education, and Welfare booklet called Your Social
Security made a pretty lofty declaration. “The basic idea of social security is a simple one:
24
Frédéric Bastiat. The Law. Page 62.
Sengenberger 16
During working years employees, their employers, and self-employed people pay social security
contributions which are pooled into special trust funds. When earnings stop or are reduced
because the worker retires, becomes disabled, or dies, monthly cash benefits are paid to replace
part of the earnings the family has lost.”25 In practice, however, the Social Security system has
never quite functioned as the HEW claimed. Despite the impression that “special trust funds”
played a considerable part in the viability of the program, the value of the funds has been
minimal and is primarily signified by IOU’s of sorts between the Treasury Department and the
Social Security Administration, wherein the former has sold T-bonds to the latter in exchange for
revenue from the Social Security (FICA) tax. In essence, one government bureau owes another
government agency significant amounts of money, as has been the case for decades.
As far back as 1962, Professor Milton Friedman recognized the problems Social Security
was beginning to face and would soon be overcome with. “[T]he system is not likely to be fully
self-financing. During the period when many were covered and paying taxes, and few had
qualified for benefits, the system appeared to be self-financing and indeed to be having a surplus.
But this appearance depends on neglecting the obligation being accumulated with respect to the
persons paying the tax. It is doubtful that the taxes paid have sufficed to finance the accumulated
obligation.”26 The problem was obvious: as the number of workers paying into the system
dwindled with age, the number of individuals eligible for Social Security old-age benefits was
increasing. When Social Security was five years old in 1940, the number of workers to
beneficiaries, in the thousands, was 35,390 to 222, or a ratio of 159.4. Today the ratio has
25
26
As reported by Milton Friedman in Free to Choose, Page 103.
Milton Friedman. Capitalism and Freedom. Page 184.
Sengenberger 17
declined to less than 3. The following table from the Social Security Administration
demonstrates the shift over the past several decades:27
Ratio of
Social Security Covered Workers to Beneficiaries
Calendar Years 1940-2009
Year
Covered
Workers
(in thousands)
Beneficiaries
(in thousands)
Ratio
1940
35,390
222
159.4
1945
46,390
1,106
41.9
1950
48,280
2,930
16.5
1955
65,200
7,563
8.6
1960
72,530
14,262
5.1
1965
80,680
20,157
4.0
1970
93,090
25,186
3.7
1975
100,200
31,123
3.2
1980
113,656
35,118
3.2
1985
120,565
36,650
3.3
1990
133,672
39,470
3.4
1995
141,446
43,107
3.3
2000
155,295
45,166
3.4
2005
159,081
48,133
3.3
2009
156,021
51,860
3
Table 1
As Table 1 demonstrates, between 1950 and 1960, when the first wave of Social Security
expansion flowed through Congress, the ratio of workers to beneficiaries shot down from 16.5 to
just 5.1 workers for every beneficiary; by 1965, the proportion declined by a factor of one. From
27
Social Security Administration online. “Ratio of Covered Workers to Beneficiaries.” 2009.
Sengenberger 18
1975 through 2005, the ratio generally remained stagnant at approximately 3.2 workers to
beneficiaries. Despite this consistency through the year 2005, there is a direct correlation
between the seemingly-organic extension of Social Security benefits and a decrease in the
proportion of workers paying into the system to beneficiaries taking out from the system. These
developments would eventually wage a significant impact on the system today.
Broken Promises, Dire Straits
By 1977, as time passed and the number of retirees increased and workers contributing
into the system decreased, Social Security’s solvency was already in question. The reform
attempts since then have been unsuccessful either in substantially postponing the dangers or
eliminating them altogether. Social Security is expected to begin experiencing a permanent
deficit in the year 2015. “From that point on, Social Security will require large and growing
amounts of general revenue money [from non-payroll taxes] in order to pay all of its promised
benefits.” Cashing in the bonds presently held by the program’s trust funds will permit benefit
payments up to the year 2037; however, “the money to repay those bonds will come from other
tax collections or borrowing.”28 Once the Trust Fund is expunged by 2040, the payroll tax will
be the single source of revenue and unable to cover the programs trillions of dollars in unfunded
liabilities29, or “the difference between the benefits that have been promised to current and future
retirees and what will be collected in dedicated taxes.”30 Estimates for the unfunded liabilities of
Social Security alone range from the Social Security Trustee’s $8.5 trillion estimate in 2005 to
the National Center for Policy Analysis’s risk-adjusted $10.4 trillion31 to the Cato Institute’s
David C. John. “2010 Social Security Trustees Report: Reform Needed Now.” Page 3.
Tanner, Michael D. "Social Security's Problems Haven't Gone Away." March 11, 2008.
30
Pamela Villarreal. “Social Security and Medicare Projections: 2009.” June 11, 2009.
31
Laurence J. Kotlikoff. “Measuring Social Security’s True Liability.” May 12, 2009.
28
29
Sengenberger 19
$15.3 trillion estimate32. No matter what the number, the unfunded liabilities are staggering, and
they present tremendous implications upon younger workers born after the year 1970. “Any
worker born after 1970 will reach full retirement age after the trust fund is exhausted. Unless
Congress acts soon, younger workers can look forward to paying full Social Security taxes
throughout their careers only to receive 78 percent or less of the benefits that have been promised
to them. In addition, younger workers will have to pay to re-fund the surpluses that have been
borrowed from the Social Security trust fund [by the Treasury Department], an expense that will
total almost $6 trillion by the time the trust fund is exhausted in 2037.” 33
When the Social Security numbers are combined with Medicare, its massive subsidiary
sister program, the entitlement leviathan is even more staggering. Medicare’s future liabilities
are estimated at a menacing $89 trillion—more than five times as large as Social Security—with
President Bush’s misguided 2003 expansion contributing a whopping $17 trillion to the projected
number; combining the two numbers indicates a $107 trillion shortfall in current U.S. dollars.34
Thus, as illustrated in Figure I35, the percentage of general revenues to the federal government
that will be designated for the Social Security and Medicare programs will become increasingly
astronomical with each passing decade, ultimately rising from 13 percent last year to an
estimated 61 percent in 2040, when the Trust Funds run out, and 89 percent in 2080.
32
Tanner, Michael D. "Social Security's Problems Haven't Gone Away." March 11, 2008.
David C. John. “2010 Social Security Trustees Report: Reform Needed Now.” Page 4.
34
Pamela Villarreal. “Social Security and Medicare Projections: 2009.” June 11, 2009.
35
Retrieved from “Social Security and Medicare Projections: 2009” by Pamela Villarreal, National Center for
Policy Analysis.
33
Sengenberger 20
Given the striking numbers reported above, there is no doubt that Social Security’s
promises can no longer be fulfilled and that the program has solvency issues that must be
addressed; this is especially so when Medicare is added into the mix. The daunting data
unequivocally demonstrate the significant budgetary impact that entitlements will inevitably
generate. Unfortunately, the pressing fiscal lessons illustrated by the history of Social Security
and Medicare went on deaf ears when, in the year 2010, President Barack Obama rammed the
Affordable Care Act, yet another entitlement program, through the United States Congress.
Problems with the U.S. Healthcare System and the Need for Reform
Though his proposed prescription was unsound, as President Obama began to sell his
overhaul to the nation’s healthcare system, he was correct in articulating the problems that
mandated change. With more than 30 million people lacking health insurance, healthcare costs
skyrocketing well beyond inflation, access to care tight, and the system firmly entrenched in a
Sengenberger 21
third party-payer structure, there can be no doubt that the U.S. healthcare system is in jeopardy
and in dire need of reform. The nation’s healthcare crisis embodies skyrocketing costs and
limited access to care—both stemming largely from a foundational series of policy conundrums.
The Kaiser Family Foundation and Centers for Medicare and Medicaid Services report
that in 2007, the nation spent $2.2 trillion, or approximately $7,421 per person—the equivalent
of 16.2 percent of the U.S. economy. As Figure II demonstrates, the percentage of gross
domestic product allocated to healthcare spending has risen at an increasing trend because it
grows at a faster rate than most other economic sectors.
For example, whereas the education, transportation, and agriculture industries may, on average and over
time, grow at rates close to the economy as a whole, health care does not. In 1970, total health care
spending was about $75 billion, or only $356 per person. In less than 40 years these costs have grown to
$2.2 trillion, or $7,421 per person. As a result, the share of economic activity devoted to health care has
grown from 7.2 percent in 1970 to 16.2 percent in 2007. By the year 2018, the Centers for Medicare and
Medicaid Services (CMS) projects that health spending will be one-fifth of GDP (20.3 percent).
Figure II: National Health Expenditures per Capita and Their
Share of Gross Domestic Product, 1960-2007
Sengenberger 22
The continued growth in the cost of healthcare is unsustainable and is the principle driver for
individual and familial difficulties in obtaining access to medical care and treatment. Moreover,
as a consequence of the rise in healthcare costs, employers which provide health insurance for
their workers must necessarily resist hiring new workers or cut back on other benefits, such as
pension programs, because of the increased slice of the compensation pie that must be directed
toward health expenditures.
One of the most fundamental reasons healthcare costs continue to skyrocket and access to
care is thus limited for individuals relates directly to the institution of a third party-payer system
by the federal government. That is to say, government regulation and policies have essentially
mandated a third party-based system that forces the consumer to work through health insurance
companies, HMO's, employers and other middlemen that pay the supplier. Eighty-four cents of
every dollar of personal healthcare spending is made through private health insurance,
government or other private expenditures that are not directly from the patient. Encouraging the
third-party system are tax exemptions for employer-provided health insurance that the millions
of self-employed and small business owners and workers who pay on their own do not receive.
Whereas large enterprises are eligible to receive a sizable tax exemption for providing health
insurance for their employees, small firms and individuals lack such benefits. The Cato
Institute’s Handbook for Policymakers explains:
Workers who obtain health insurance through an employer pay no taxes on the ‘‘employer contribution’’ to
the premium, and…many workers pay no taxes on the ‘‘employee contribution’’ either. The tax exclusion
for employer-sponsored health insurance is the largest tax break in the federal tax code…On an individual
level, a worker’s health insurance premiums and marginal tax rate determine the value of the tax break.
Both factors vary across workers. In 2007, the average family premium for job-based coverage was roughly
$12,000, to which employers ‘‘contributed’’ an average of roughly $9,000…Workers who do not obtain
health insurance in an employment setting face a concomitant tax penalty when purchasing coverage. They
Sengenberger 23
must purchase insurance with income that has already been taxed at marginal rates as high as 50 percent.
As a result of the tax break for employer sponsored insurance, consumers who seek to choose their own
health insurance plan must often pay twice as much for less coverage. That hefty tax penalty discourages
many workers from seeking insurance on the ‘‘individual’’ market. 36
The government incentives, policies and regulations put in place to benefit big business
over small business, in large part by the federal tax code, do nothing more than exacerbate the
problem. Because of the third-party-payer system, health providers do not compete for
individual consumers; instead, they are contending for large corporations like Target and Cisco.
Human nature demonstrates that when someone other than the consumer is doing the paying,
demand will rise. When someone else bears the cost burden on a customer’s behalf, consumers
are encouraged to use the service more as the incentive for individuals to save for themselves
diminishes. Likewise, basic economics tells us that as demand rises and supply remains
stagnant, prices (premiums) will inevitably go up, which in turn disadvantages those who pay
directly, such as the self-employed. Thus, as a result of the government-orchestrated third partypayer system, individuals are separated from the cost, driving up prices (premiums), decreasing
access to care, and taking away decision-making authority of the patient.
In addition to the inherent problems which result from perpetuation of the third partypayer system, excessively burdensome regulations, the lack of a free market in healthcare, rising
prescription drug costs, and outrageous Medicare and Medicaid expenditures each put further
upward pressure on prices. The statistical date and support for these additional problems will be
addressed further in “Alternative, Market-Based Health Reforms.”
The Cato Institute. Cato Handbook for Policymakers 7th Edition. “The Tax Treatment of Health Care.” Page
142.
36
Sengenberger 24
The Affordable Care Act of 2010: ‘Obamacare’
Signed into law on March 30, 2010, the so-called “Patient Protection and Affordable
Care Act,” derisively labeled “Obamacare” by its opponents, vastly expanded government
involvement in the nation’s healthcare system while failing to address the problems inherent to
it, at the expense of higher costs and other deepening dilemmas that will inevitably result lest the
law remain in effect.
Key Provisions of the Law
The Patient Protection and Affordable Care Act contains a number of critical provisions
within the law. Among them are several specific provisions that are most crucial in terms of
their considerable, systemic effects.

Increased Regulations: There can be no denial of coverage based on an
individual’s preexisting conditions and insurance companies must cover children
on their parents’ plan through age 26.

Universal Insurance Mandate: Individuals must purchase a private health
insurance plan or face a fine, theoretically guaranteeing universal coverage and
thus providing for cost-sharing due to the inclusion of newly-insured individuals
with preexisting conditions.

Employer Mandate: Firms employing 50 or more workers must provide health
insurance coverage for their employees or face a fine so that the government may
subsidize their employees. Moreover, if one employee for a qualifying firm
applies for federal subsidies, the enterprise is required to pay the fine as though no
employees were receiving insurance coverage from the company.
Sengenberger 25

Medicaid Eligibility Expansion: Eligibility for the Medicaid program will be up
to 133% of the poverty line. Moreover, “all non-elderly individuals with family
incomes below 133 percent of the federal poverty level” will be eligible.37

State Health Insurance Exchanges: Each state will establish a governmentmanaged competitive marketplace for insurance coverage, known as an
“exchange.”

Government Subsidies: The government will provide partial subsidization along
a sliding scale for individuals up to 400% of the poverty line who participate in
the government-supervised exchanges.
Each of the above measures is intended to increase access to care for the poor, the
indigent, and those with preexisting conditions. Yet in this short-sighted attempt to increase
access, the law does so at the expense of the majority of Americans. Obamacare fundamentally
fails to address the core problems with the nation’s healthcare system, and its provisions will
actually serve to deepen the dilemmas by exacerbating the problems.
Failure to Fix a Broken System
The components of the PPACA fail to fix an already broken system; the law, taken
together, does not address the two fundamental issues of costs and access to care. The law’s
employer mandate, Medicaid expansion, government subsidies, and government-sponsored
health insurance exchanges will do nothing to stem the growth of third party payers. In effect,
Obamacare mandates that every individual much purchase a private health insurance plan, under
penalty of law, using public or private funds. Therefore, though the reverse should be true in
order to bring downward pressure on skyrocketing costs, healthcare for an even more sizable
Blasé, Brian. “Obamacare and Medicaid: Expanding a Broken Entitlement and Busting State Budgets.” 2011.
Page 1.
37
Sengenberger 26
majority of Americans will be paid for by a middleman. Furthermore, the additional regulations
and fines and unwillingness to address prescription drug costs will only continue to push up the
cost of healthcare under the law, not to bring it down.
In addition, because more individuals are added to the government healthcare rolls, an
increasing number of medical providers are denying beneficiaries of certain programs due to
reimbursement rates from the government. Organizations like the Mayo Clinic are beginning to
decline many patients covered under Medicare and Medicaid, a problem which can only be
expected to worsen as a result of the law.
“According to Mayo, Medicare was reimbursing doctors at the Mayo Clinic in Arizona for only about 50
percent of the cost of the primary care treatment they were providing, leading Mayo to make the decision to
opt out of Medicare….’President Obama’s recently adopted healthcare law increases the caseload borne by
Medicaid…States were struggling to meet the burden of paying for Medicaid even before the recent
economic downturn…Under Medicare, government sets the rates it will pay providers for services. It often
does so below market rates and, at times, below cost. When the latter happens, providers either must
subsidize the care themselves or overbill other patients to make up the difference [thus forcing a rise in
consumer prices]. Instead, Mayo has decided to change the market rate.’…The health care law presumed
that physician reimbursement could be cut by 21 percent, then frozen in real terms. The law also expands
Medicaid to cover 16 million people not previously considered poor enough to qualify. From past
expansions of Medicaid, economists have found that most of the new enrollees were not uninsured, but
instead switched from employer-provided plans.”38
In fact, under Medicaid presently, “half of Medicaid users are forced into HMOs because half of
private physicians, even more in many areas, will not treat them.” Moreover, “It is so difficult
for Medicaid recipients to find doctors that Medicaid enrollees already have been utilizing
emergency room care at twice the rate of uninsured patients. We can expect it to be increasingly
38
McIntosh, Sarah. "Mayo Clinic Makes Medicare, Medicaid Cuts." The Heartland Institute. 2010.
Sengenberger 27
difficult for Medicaid and Medicare patients to find doctors and other providers.” 39 By
expanding Medicaid and establishing additional forms of guaranteed, subsidized government
assistance, demand will continue to rise while supply will remain stagnant, consequently
deepening the shortages in the system already and thereby constricting access to care. Therefore,
the Obamacare law fails to lower costs and increase access as promised.
Deepening Crisis
The Affordable Care Act not only fails to address the faults inherent in the nation’s
healthcare system, but its provisions will actually serve to deepen the dilemmas by exacerbating
the problems and putting states in complicated positions beyond the aforementioned difficulties
of access to Medicare and Medicaid. The 2010 health reform law is virtually identical to the law
instituted by Governor Mitt Romney in Massachusetts, a micro version of the PPACA. The
principle components of both include an individual insurance mandate, an employer mandate,
and expansion subsidies, as well as increased regulation of private health insurance markets.
Thus, “Massachusetts’ individual mandate induces uninsured residents to conceal their true
insurance status,” there is “substantial crowding out of private coverage among low-income
children,” and costs continue to rise.40 “[P]rivate coverage fell by 4.4 percentage points among
children, perhaps driven by a 14.6-percentage point drop among children below 150 percent of
the federal poverty level. Private coverage rose for adults overall, but fell by 6.2 percentage
points among adults below 150 percent of the poverty level…We consider this to be evidence of
substantial crowd-out among the poor.” 41 “Gains in coverage have been overstated by nearly 50
39
McIntosh, Sarah. "Mayo Clinic Makes Medicare, Medicaid Cuts." The Heartland Institute. 2010.
Cannon, Michael F., and Yelowitz, Aaron. “The Massachusetts Health Plan: Much Pain, Little Gain.” 2010.
41
Cannon, Michael F., and Yelowitz, Aaron. “The Massachusetts Health Plan: Much Pain, Little Gain.” 2010.
Page 9.
40
Sengenberger 28
percent, while costs have been understated by at least one-third, and likely more.42 In addition,
Romneycare contains a provision which establishes a sort-of “exchange” not unlike the one set
up in Obamacare, called the “Connector.” Prior to passage its supporters “claimed that it would
reduce premiums for individual insurance policies by 25 to 40 percent. Instead, premiums for
policies sold through the Connector have been rising, up 11 percent for the lowest cost plans
since the program began.” 43 Given the applicability of the Massachusetts law’s components—
specifically its mandates and subsidies—to the federal legislation, one can reasonably surmise
that the latter will face similar consequences.
For example, the law “will impose significant new costs on state government budgets”
and states will lose more control over their ability to rein in Medicaid costs.44 In effect, the
Medicaid expansion establishes a new entitlement for those with income levels below 133
percent of the federal poverty line. The provision renders the federal government responsible for
picking up the entire expansion tab from 2014 to 2016 and subsequently mandates that states
share in the burden afterward.
Until now, Medicaid coverage could only be extended to able-bodied adults without dependent children as
part of a demonstration waiver program. The new health care law not only permits states to extend
Medicaid coverage to such individuals beginning immediately, but also requires states to cover them
starting in 2014…The Centers for Medicare and Medicaid Services [Actuary] projects that national
Medicaid enrollment in 2014 will be 30.4 percent higher as a result of the required coverage expansion than
it otherwise would be absent those provisions. At the state level, Heritage estimates that the growth in
Cannon, Michael F., and Yelowitz, Aaron. “The Massachusetts Health Plan: Much Pain, Little Gain.” 2010.
Tanner, Michael D. "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law."
2011. Page 12.
44
Blasé, Brian. “Obamacare and Medicaid: Expanding a Broken Entitlement and Busting State Budgets.” 2011.
Page 1.
42
43
Sengenberger 29
Medicaid caseloads will range from an 8.7 percent increase in Massachusetts to a 65.6 percent increase in
Nevada. 45
The new Medicaid entitlement will also “increase state tax obligations by just under
$33.5 billion from federal fiscal years 2014 through 2020. Of that amount, $21.5 billion will be
the states’ share of the benefit costs, and just under $12 billion will be the states’ share of the
added administrative costs. Moreover, the entitlement will likely cost between $400 billion and
$500 billion in its first seven years alone, and it is likely to crowd out private insurance as many
current subscribers to employer-provided plans are eligible to switch over the cheaper
government service.46 The effects of Medicaid’s expansion alone, and its transformation to an
all-encompassing entitlement, will be drastic in terms of its impact on federal and state budgets
and private insurance. Furthermore, if Medicaid can be transformed into a more substantive
entitlement after nearly five decades of its current model, there can be no doubt that future
Congresses may see fit to expand that program even more—concretely establishing a paradox
identical to that of Medicare and Social Security.
The Patient Protection and Affordable Care Act has already proven itself incapable of
fulfilling its name. The restrictions on preexisting conditions have resulted in unintended
consequences. “Several large insurers have stopped offering ‘child only’ insurance plans,
thereby depriving thousands of parents of a low-cost insurance option,47 as has been the case
here in the state of Colorado. The establishing of entitlement subsidies for individuals between
133 and 400 percent of the poverty line also presents significant difficulties. Because the
subsidies are disbursed on a sliding scale, with decreasing tax credits as one’s distance from the
Blasé, Brian. “Obamacare and Medicaid: Expanding a Broken Entitlement and Busting State Budgets.” 2011.
Page 2.
46
Blasé, Brian. “Obamacare and Medicaid: Expanding a Broken Entitlement and Busting State Budgets.” 2011.
Page 1.
47
Tanner, Michael D. "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law."
2011. Page 9-10.
45
Sengenberger 30
poverty line expands, “the phase-out of these benefits creates a high marginal tax penalty as
wages increase. In some cases, workers who increase their wages could actually see their aftertax income decline as the subsidies are reduced.” Consequently, workers are incentivized to
maintain their income level within the 400 percent threshold, discouraging work and serving as a
“poverty trap” for low-wage workers. 48
Additionally, when employers provide workers with compensation, they take into
account all aspects of a compensation pie: wages/salaries, health insurance costs, pensions,
workers comp, payroll taxes, and other costs associated with each employee. As costs continue
to rise due to the failure to address the reasons for such increases, the percentage of
compensation that must be allocated for health insurance will increase; therefore, workers will
likely see wages remain stagnant or fewer new hirees added to a company’s rolls because of the
excessive burden of costs. This is especially so given the employer mandate, which requires that
businesses take on the added burden. Many large corporations may, in fact, decline to abide by
the provision and instead elect to pay the penalty. As a result, more eligible individuals will
switch from private, employer-based plans to government-subsidized entitlements, furthering the
crowding out effect previously discussed.
Fiscal Chaos Exacerbated
The Patient Protection and Affordable Care Act purports to lower costs and increase
access to quality care, yet it both fails to address the core reasons for these problems and, in fact,
worsens the systemic problems already in place. It also, however, exacerbates the national fiscal
crisis we are already facing by adding substantially to the deficit. In his letter to then-Speaker of
the House Nancy Pelosi assessing the fiscal impact of the Obamacare law on March 20, 201,
48
Tanner, Michael D. "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law."
2011. Page 11.
Sengenberger 31
Congressional Budget Office Director Douglas Elmendorf reported, “CBO and JCT estimate that
enacting both pieces of legislation…would produce a net reduction in federal deficits of $143
billion over the 2010-2019 period as result of changes in direct spending and revenues.”49
However, recent data clearly indicates that these estimates were based on faulty assumptions
presented to the CBO by Congress. In the summer of 2010, Douglas Holtz-Eakin, a former
Director of the CBO, assessed the claims perpetuated by Obamacare’s proponents. Holtz-Eakin
acknowledged that the CBO bases its assumptions on estimates and data given to it by Congress;
the agency is not permitted to make its own judgments or assessments based on conditions that
may or may not arise. Thus, the CBO’s estimates considers nearly $500 billion in reductions to
Medicare’s fee-for-service payment rates, Medicare Advantage rates, and Medicare and
Medicaid disproportionate-share hospital payments; $700 billion in taxes on various items; and
other budgetary gimmicks which presented the impression that the law would reduce the deficit
by an additional $681 billion by 2029.50 Holtz-Eakin concludes:
The act would raise, not lower, federal deficits, by $554 billion in the first ten years and $1.4 trillion over
the succeeding ten years. The list of budgetary features begins with the fact that the act front-loads
revenues and back-loads spending. That is to say, the taxes and fees it calls for are set to begin
immediately in 2010, but its new subsidies are largely deferred until 2014. This contributes to the illusion
that the act reduces the deficit. Note that if revenues were delayed to start in 2014, the act’s 2010-19 net
deficit impact would be $66 billion lower. Other dubious budgetary provisions fall into four scenarios:
unachievable savings, unscored budget effects, uncollectible revenue, and already reserved premiums. 51
49
Elmendorf, Douglas W. "Estimates on the Reconciliation Act of 2010." Letter to Honorable Nancy Pelosi. 20
Mar. 2011. Selected CBO Publications Related to Health Care Legislation, 2009-2010. Washington, D.C.:
Congressional Budget Office, 2010.
50
Holtz-Eakin, Douglas, and Michael J. Ramlet. "Health Care Reform Is Likely To Widen Federal Budget Deficits,
Not Reduce Them." Health Affairs 29.6 (2010): 1136-141. National Center for Policy Analysis. National Center for
Policy Analysis, June 2010. Page 1138.
51
Holtz-Eakin, Douglas, and Michael J. Ramlet. "Health Care Reform Is Likely To Widen Federal Budget Deficits,
Not Reduce Them." Health Affairs 29.6 (2010): 1136-141. National Center for Policy Analysis. National Center for
Policy Analysis, June 2010. Page 1138.
Sengenberger 32
The former CBO Director’s conclusions make rational sense: how can so much money be spent
to expand coverage to 30 million people without increasing the national debt, which already
stands at more than $14 trillion—an unsustainable level which cannot be allowed to continue?
The consequences that the Patient Protection and Affordable Care Act presents for the nation’s
fiscal health would result in significant harm to future generations.
Lessons from History: Obamacare’s Threat
If Social Security and Medicare have taught us anything of substantive value, it is that
government is notoriously inaccurate in and incapable of correctly predicting the sustainability of
an entitlement. Once such a program becomes law, it stays law—and grows evermore.
Likewise, once the Patient Protection and Affordable Care Act becomes cemented into the
system in 2014, it will be irrevocable. We can also be certain that more special interest groups
will soon seek out and begin sucking on the teat of government yet again, advocating further
expansion of the law’s components to suit its own purposes, as with Medicare, Medicare Part D,
and the initial passage of the PPACA. History tells us that once this begins, Congress will be alltoo-inclined to follow suit. In fact, the law’s provisions concerning the Exchange already
includes a rider which states that “beginning in 2017, states have the option of opening the
exchange [which is currently open to businesses with fewer than 50 employees, uninsured
individuals, or the self-employed] to large employers.” This is simply one component of the law
which opens the door to a potential expansion of the Exchange component of the nation’s new,
massive healthcare entitlement.
Therefore, Obamacare can be said to possess that “eternal life” quality of which President
Reagan spoke. Moreover, the United States currently owes more than $14 trillion in total debt
Sengenberger 33
incurred. As previously noted, the national debt will undoubtedly increase even more under this
new law, thereby exacerbating the nation’s fiscal crisis. Financial viability of the United States
in the long-term and the security of future generations will rely upon thorough considerations of
the lessons from Social Security and the similar threat the Affordable Care Act now poses with
its establishment of a new wave of unfunded liabilities. Congress must rescind the law and
replace it with more sensible, sustainable reforms to the nation’s healthcare system.
Alternative, Market-Based Health Reforms
Given the gravity of the dangers facing the nation’s healthcare system and the necessity
for reform, as previously discussed, repeal of the Affordable Care Act will not be remotely
sufficient to fix the problems. Any repeal of the law must be replaced with an expansive array of
market-based initiatives specifically tailored to remedy the genuine flaws within the system. In
particular, any replacement effort must boost competition, both across state lines and for
individuals in the private market; expand and retool health savings accounts as a method of
increasing access to affordable care; deregulate the market in targeted ways; alter Medicare and
Medicaid; and reform prescription drugs to reduce costs. In so doing, the cost of healthcare will
decrease, quality will remain consistent or rise, deficits will be reduced, and access to care will
be increased. Note that the succeeding policy proposals presume that the Obamacare law has
been repealed, as previously suggested.
Boost Competition
As discussed previously, one of the most significant stimulants for high healthcare costs
is the fact that 84 percent of all personal healthcare spending is paid for by third-party payers.
Encouraging the third-party system are tax exemptions for employer-provided health insurance
Sengenberger 34
that the millions of self-employed and small business owners and workers who pay on their own
do not receive. The government incentives, policies and regulations put in place, in large part by
the federal tax code, serve to do nothing more than exacerbate the problem. The most
fundamental prescription for health reform is to increase competition and market freedom by
emphasizing the importance of individual healthcare consumers. Each day on the television
screen, consumers are entertained by persuasive commercials for Geico, AllState and other car
insurance companies, all of which are competing over who provides the best service at the lowest
price—competition absent from healthcare because of the third-party system. Insurance
companies aren’t competing for individual consumers—they’re contending for large
corporations. To fix this, the government must equalize the healthcare tax exemption across the
board so that everyone, not just middlemen and large corporations, will benefit from it. That
means small businesses as well as individuals. As will be discussed shortly, tax-free health
savings accounts need to be expanded, thereby helping individuals to purchase their own health
insurance or pull from a pool of money when they need to. Adjusting the policies and
regulations perpetuating the third-party system, like the tax exclusion, would increase
competition by allowing consumers to shop around on their own, decreasing costs substantially
while maintaining high quality and forcing healthcare providers and insurance companies to
focus on individual consumers, not just large corporations.
In his address to Congress on healthcare in September 2009, President Barack Obama
acknowledged the extensive concentration of business in the health insurance industry. As he
pointed out, “75 percent of the insurance market is controlled by five or fewer companies. In
Alabama, almost 90 percent is controlled by just one company.”52 Though there is dispute over
52
Obama, Barack. "Obama Offers Health Care Details in Speech to Congress - Page 7 - CNN." CNN.com.
CNN.com, 09 Sept. 2009. Web. 03 May 2011.
Sengenberger 35
the veracity of these specific numbers, he is generally correct—the market is highly centralized
and void of real competition. Another fundamental reason for this problem is again governmentgenerated: the inability to purchase health insurance plans across state lines.
Due to the 1945 McCarran-Ferguson Act, which granted states the ability to use licensing
laws to prevent trade with insurers in other states, an individual residing in the state of Colorado
cannot purchase a health insurance plan from a company licensed in Arizona; instead, he must
buy a plan from a firm in his state. Health insurance is largely regulated by the states, which
require that any plan an individual insurance purchaser wishes to buy must comply with all of
that state’s regulations. This advantages both insurers and regulators in maintaining pseudomonopolies in their respective states, in turn hurting consumers, who have few lower-cost
options available to them. Congress should do what it is granted by the Constitution and
mandate that every state recognize insurance licenses of other states. “Letting individuals and
employers purchase health insurance from out of state could reduce the number of uninsured
Americans by as many as 17 million, or one-third of the most-cited estimate of the number of
uninsured.”53 An individual state’s regulations need not be changed and can be enforced in the
other states. 54 Opponents may protest that such a shift would violate the doctrine of state’s
rights. However, the Commerce Clause in Article I, Section 8 of the Constitution explicitly
grants Congress the authority to regulate interstate commerce. The objective was to put an end
to the tariff barriers that existed among states under the preceding Articles of Confederation,
something very similar to these obstructionist regulations. By asserting its rightful authority to
break down barriers to insurance purchasing across state lines via repealing McCarran-Ferguson,
Congress and the President will strike a considerable blow to insurance market concentration,
53
54
The Cato Institute. Cato Handbook for Policymakers 7th Edition. “Health Insurance Regulation.” Page 176.
The Cato Institute. Cato Handbook for Policymakers 7th Edition. “Health Insurance Regulation.” Page 176.
Sengenberger 36
truly boost “choice and competition.” If done alongside dismantling the third-party system, we
will see costs begin to lower for everyone.
Deregulation
During the 2008 presidential election, the term “deregulation” became a so-called “dirty
word,” as it was blamed for the financial meltdown that same year. This may or may not be so.
As economist Jeffrey Friedman has concluded, “The financial crisis was caused by the complex,
constantly growing web of regulations designed to constrain and redirect modern capitalism.
This complexity made investors, bankers and perhaps regulators themselves ignorant of
regulations previously promulgated across decades and in different ‘fields’ of regulation.”55
Irrespective of whether the financial crisis was caused by deregulation or regulation, it is quite
clear that deregulation is essential to opening up the health insurance market to increased
competition and lower costs.
Healthcare is indisputably one of the most heavily regulated industries in the country.
According to Duke University’s Chris Conover, the net cost of health regulation is $169 billion a
year, after subtracting beneficial regulatory costs. As with any industry, in order to pay for the
dictates of the government, institutions of health are forced to raise costs, which extends to
consumers in the form of higher prices—a whopping $1,500 per household in this case,
according to Conover.56 The regulations in question are not essential safety regulations, but
$169 billion in excessive, burdensome regulation, like FDA regulations on pharmaceutical
efficacy and regulation of health facilities. In fact, Conover’s research indicates that while
roughly 18,000 Americans die from lack of health insurance, 22,000 die due to health services
55
Friedman, Jeffrey. "Introduction: A Crisis of Politics, Not Economics: Complexity, Ignorance, and Policy
Failure." Critical Review: Causes of the Financial Crisis 21.2-3 (2009): 127-82. Print.
56
Conover, Christopher J. "Health Care Regulation: A $169 Billion Hidden Tax." The Cato Institute. October 4,
2004. 4 May 2011. Page 15.
Sengenberger 37
regulation, and seven million uninsured owe their state to excessive regulation.57 Cutting back
on those unnecessary and cumbersome, but targeted and non-essential, requirements/restrictions
at both the federal and state levels would free up the market and enable health providers to
identify cost savings.
Reforming Medicare and Medicaid
Medicare and Medicaid comprise the two most prominent government-run healthcare
programs in the United States. Medicare provides medical insurance for the elderly, and
Medicaid is a massive federal-state partnership affording healthcare to eligible poor and indigent.
While both of these programs are well-intentioned, they are financially unsustainable and require
updates for application in a 21st century world, as with the Social Security program. Medicaid is
a drain on federal and state budgets. To help control costs, states should be given near-absolute
flexibility in determining how Medicaid is to be doled out in the form of block grants without
increases in funding. The present system through which Medicaid funding is disbursed to the
states encourages fraud and waste, which states would catch if the program were reformed.
Furthermore, both Medicaid and Medicare reimburse doctors at as much as 30 percent below the
normal rate—meaning costs are redistributed to others. Fraud, abuse, waste and inefficiency
need to be identified and eliminated from both of these programs. Fund allocation methods must
be altered, and we must reexamine who is allowed to benefit from them, particularly from
Medicare. Moreover, if any expansion of the Medicaid rolls is to be undertaken, it should be
directed toward extending eligibility for those who are underneath the poverty line as opposed to
increasing the income requirements, as Obamacare does.
57
Conover, Christopher J. "Health Care Regulation: A $169 Billion Hidden Tax." The Cato Institute. October 4,
2004. 4 May 2011. Page 23.
Sengenberger 38
Congress must also begin taming the Medicare leviathan, which has $89.3 trillion in
unfunded liabilities. The government should allow participants to opt out of the program
penalty-free; institute a grandfather clause on the 2003 Medicare prescription drug benefit, so
that those who are not currently on the program will not receive expansionist Part D benefits; and
make Medicare means-tested so that individuals who do not require retirement supplements will
be ineligible for benefits. Whether or not a person qualifies for Medicare benefits should rely on
several factors, principally income level but also including yearly expenses, savings, the number
of dependents, and local cost of living. The switch to a means-tested structure should pertain
solely to those who postdate the Baby Boom; that way, everyone who is anticipating on entering
Medicare in the near future will still be able to. The entitlement will slowly work its way down,
causing the increased cost burden it currently shifts to the private sector to shrink.
Prescription Drug Reform
In addition to the above, prescription drug costs often contribute greatly to higher
healthcare costs. The number of prescriptions purchased in the U.S. between 1994 and 2004 was
a whopping 68 percent, with prices averaging increases of 8.3 percent yearly during that period.
“Although still only a modest part of total health care spending in the U.S (11 percent), with so
many people relying on prescriptions, the cost implications loom large for the American public,
health insurers, and government payers.”58 The problems lie in Research and Development
spending—specifically, patents and FDA regulations—and the fact that importing prescription
drugs is illegal under current U.S. law.
Patents: Both patents and FDA regulations are significant contributors to $800 million in
costs to launch a single new pharmaceutical product—costs which result in higher prices for
consumers. First, patents are designed to give a company temporary monopoly on the product so
58
“Prescription Drug Costs: Background Brief.” Kaiser Family Foundation. February 2010.
Sengenberger 39
that they can recover their R&D spending. A patent lasts 20 years, yet “the effective life for drug
patents is about nine years.”59 Logically, the shorter the time, the higher companies must charge
per unit during that time to make up for the costs. This process must be changed to permit the
equivalent amount of patent time that other products have so as to better enable manufacturers to
recoup their R&D costs.
FDA Regulations: The process for drug discovery to FDA approval takes an average of
12 to 15 years in a process which involves as many as a thousand people and at least three
clinical trial phases.60 As such, many people who would accept the risks involved suffer during
this extensive wait time. As economist Milton Friedman suggested, the FDA should test only for
safety and allow doctors and consumers to judge efficacy, which would decrease costs
substantially and thus allow for cheaper medications. By altering the regulatory process, more
innovation and development will result in addition to lower prices.
Prescription Drug Importation: Finally, current law makes it illegal for prescription
drugs to come to the U.S. from anyone other than the American producer. As of now, al drugs
must be approved by the Food and Drug Administration (FDA) for importation. Consequently,
competition between prescription drug providers is stifled, as U.S. manufacturers lack the
incentive to cut prices to beat out lower-priced contenders. But individuals, states and cities are
already beginning to avoid these laws and import drugs from other countries. This should be
made official: by permitting the importation of lower-cost prescription drugs from countries like
Canada, consumers will have a larger list of affordable, cheaper medications to choose from. If
such permission were to be gained for outside importers, citizens would retain the right to know
Roger Pilon. “Prescription Drug Reimportation: The Free Market Solution.” Page 3.
Innovation.org. Drug Discovery and Development: Understanding the R&D Process. Brochure. PhRMA, Feb.
2007. Web. 3 May 2011.
59
60
Sengenberger 40
if what we’re buying hasn’t been FDA. Thus, a regulation could be put into place requiring that
unapproved products make clear that they have not been approved by the FDA. Consumers and
their doctors, not the government, would then be empowered to decide whether or not they want
to buy a cheaper drug from Canada, which will have been approved by their version of the FDA,
instead of the more expensive product from an American manufacturer.
There are other concerns as well. Prescription drugs in other, Westernized countries are
fixed in accordance with price controls, which would distort the international market and
advantage foreign manufacturers. However, we must recognize that the vast majority of R&D
costs are being paid for by the Americans, with other countries essentially getting a free pass.
The U.S. is the only nation where market dynamics of supply and demand largely play out in
pharmaceuticals—and with good reason. Price controls in other countries reduce R&D spending
(not costs) for new drugs by as much as $5 to $8 billion each year and trials for new medical
compounds by as much as 50-60 percent.61 But as long as the ban on importation is in effect,
American drug manufacturers are going to recoup their R&D costs here instead of pushing
supply and demand principles on other countries—meaning higher prices for us. Essentially,
prices are set differently in the United States from other countries, meaning the U.S. shoulders
the cost burden.
By eliminating the importation ban, market principles will be more or less forced upon
other countries, as American manufacturers will find it necessary to cut prices at home and raise
them abroad. Thus, other countries will have to share in R&D costs, which is long overdue.
Pharmaceuticals can use contractual agreements (to do such things as restrict drug resale), limits
on supply, and export pressures, among other things, to help ensure that foreign countries are not
61
Hunter, Derek. "Guaranteed Pain and Suffering: The Recent Research on Drug Price Controls." The Heritage
Foundation. 3 Nov. 2005.
Sengenberger 41
undercutting the company.62 In effect, American manufacturers will be encouraged to do
whatever they can to discourage importation in order to maintain their market share, which can
be done by lowering prices here and raising prices elsewhere. Should the U.S. government
repair the patent process, refocus FDA regulations, and permit the importation of prescription
drugs, Americans of all stripes will surely benefit from a noticeable reduction of healthcare
expenses.
Expand Health Savings Accounts to Insure the Uninsured
If each of the above reforms were to be taken on, a fundamental question would still
remain in the minds of many skeptics of a free market: how will coverage be made more
accessible for those who are lower-class, uninsured and/or struggling to keep coverage they
already have? The answer lies in Health Savings Accounts (HSAs), which currently cover
roughly 10 million Americans. Many Americans cannot afford the monthly premium for a
standard health insurance policy, in which subscribers pay a high monthly premium in exchange
for low co-pays, no deductible and the rest of his/her healthcare costs covered up to the full
amount of their insurance plan. Individuals in this situation are, at present, not empowered with
many options of their own.
HSAs are one way to make health insurance more affordable and accessible for
individuals of all income levels. An HSA is a tax-advantaged personal savings account into
which individuals, families and employers may place a certain amount of money each year.
These accounts then build up, with interest, tax-free. Contributions are also tax-deductible.
Under current U.S. law, an HSA must come alongside a High-Deductible Health Plan (HDHP),
under which you have to pay a higher deductible before insurance kicks in. Taken together,
62
Roger Pilon. “Drug Reimportation: The Free Market Solution.” Page 7.
Sengenberger 42
HDHPs and HSAs reduce monthly premiums and discourage abusive over-use of healthcare. In
order for one to set up an account, such a plan must have “a minimum deductible of $1,000 for
an individual policy and $2,000 for a family policy.” 63 Furthermore, one cannot be required to
pay more than $5,000 for individuals and $10,000 for families in out-of-pocket spending, which
includes both deductibles and co-pays. Additionally, under the law, “The maximum that can be
contributed is the lesser of (1) the amount of the high deductible or (2)…$2,600 for an individual
and $5,150 for a family.” Moreover, the use of funds from the account can only be tax-free if it
fits what the government deems “qualified medical expenses.” 64 For instance, HSAs can’t be
used to purchase a health insurance plan barring certain circumstances. In addition, HSAs
automatically roll over year to year for future medical costs or can even be used to pay off
expenses from previous years if they qualify for HSA funds—meaning lower-income individuals
and families can obtain assistance paying their medical bills. Alternatively, if one keeps one’s
health costs down and frequently contributes to the account, the funds will build up considerably.
Creating a market for healthcare centered more on the individual would help to lower
healthcare costs and maintain high quality by putting consumers in charge of their own
healthcare spending instead of permitting middlemen, such a large health insurance company or
HMO, to make the decisions and do most of the paying. To develop such a market, true
individual choice means that consumers have a variety of options to choose from. Enabling the
uninsured to purchase insurance is a staple concept behind President Obama’s plan. HSAs
would accomplish this without a massive new government program. Under a high-deductible
Owcharenko, Nina. “Health Savings Accounts: How to Broaden Health Coverage for Working Families.”
WebMemo no. 481. The Heritage Foundation, 16 Apr. 2004.
63
Owcharenko, Nina. “Health Savings Accounts: How to Broaden Health Coverage for Working Families.”
WebMemo no. 481. The Heritage Foundation, 16 Apr. 2004.
64
Sengenberger 43
plan, the monthly premiums they will have to pay will be far less than a typical health insurance
plan. Given one must pay more out-of-pocket, up to the total amount of the deductible, but if
one starts saving up money in the HSA and take into account the absence of high monthly
premiums, expanding access to care and coverage against catastrophic illnesses and accidents is
greatly enhanced.
Expanding HSA Opportunities: To insure the uninsured and provide a more costeffective option for the already insured, HSAs must be expanded. Unfortunately, the Affordable
Care Act diminishes the potential of HSAs, weakening access to quality care. For example,
presently HSAs can be used to cover over-the-counter drugs and other household health care
items tax-free without a prescription, and the penalty for non-qualified withdrawals from HSAs
is limited. Under the new law, HSAs cannot be used for OTC drugs without prescriptions and
the penalty for non-qualified withdrawals will go from 10 percent to 20 percent with no
“hardship” exception. In addition, among other problems,
“Obamacare requires health plans to cover “essential benefits,” which are supposed to follow “typical”
employer plans. These plans usually have rich benefits, such as first-dollar coverage for preventive
care…Obamacare requires health plans to cover a comprehensive list of preventive services with no cost
sharing. After HSAs were enacted in 2003, the United States Department of Treasury issued regulations
which allow (but [do] not require) HSA/high-deductible health plans to cover certain preventive
services…[R]equiring HSA/high-deductible health plans to cover all preventive services on a first-dollar
basis will force people to send more money to the insurance company and leave less money for their HSA.
Given the inherent benefits which result from health savings accounts, the only way in which the
aforementioned expansion of HSAs can take place is either if the Affordable Care Act is
repealed altogether or, at the very least, if the restrictions placed on the tax-free accounts are
revoked.
Sengenberger 44
Assuming either method is the case, the federal government should eliminate virtually all
limits on what services account funds can be used for—including dental, vision, and nonprescription medication—and states should remove legislative and regulatory barriers that
restrain owners of HSAs, including state taxes.65 In addition, though tax credits are generally
unwise policy, there arguably is value in compromise by utilizing this tool to help expand access
to coverage by increasing HSA use and high-deductible policies. To help make it feasible for
uninsured and lower-income Americans to launch such a package, Congress should provide up to
$1,500 for individuals or $2,500 for families in one-time tax credits with the purchase of a highdeductible plan accompanied by an HSA. This would provide each with $500 more than is
necessary to cover the minimum deductable required under current law. Eligibility for the credit
should be restricted to individuals who are not qualified for Medicaid and are ideally at 133
percent of the poverty line, effectively replacing Obamacare’s Medicaid expansion. It may also
be justified to adjust that number to 400 percent of the poverty line as a compromise measure to
replace the current subsidization sliding scale provided for by the PPACA. Also, the law should
be amended to permit HSA funds to be used for the purchase of a HDHP, and purchasers of an
HSA-HDHP combination plan should receive the very same tax exemption on that purchase as
that from which large businesses benefit.
To prevent misappropriation of the tax credits, they should be earmarked specifically for
an HSA and not included in the $2,600 contribution limit. That would then help to provide
lower-income and middle-class families with the funds they need to get a savings account well
on its way and have money available for those out-of-pocket expenses when the time comes.
Government costs would be incurred in such a program, but because of existing employerOwcharenko, Nina. “Health Savings Accounts: How to Broaden Health Coverage for Working Families.”
WebMemo no. 481. The Heritage Foundation, 16 Apr. 2004.
65
Sengenberger 45
provided coverage and government programs, they would at most be in the tens of billions of
dollars and could be paid for primarily by cleaning up Medicare and Medicaid waste and cutting
back on fraud and abuse of those programs. Furthermore, the program is not an entitlement
because the proposed tax credit is a one-time subsidy to initiate a plan which cannot be repeated
for any singular individual. In addition, one of the inherent problems with Obamacare’s sliding
scale subsidies is that once an individual surpasses 400 percent of the poverty line, his or her
continuous government subsidy is immediately cut off. Thus, workers face a disincentive to
work harder for fear of having to pay for their own healthcare costs; unlike under Obamacare,
participants in the proposed HSA-HDHP plan would not experience this adverse effect because
the subsidy will only be disbursed once in a lifetime.
The current system promotes over-use of medical care, lacking vigilance against fraud
and an increased willingness to utilize high-cost, often unnecessary services. In a situation
where the third-party payer system dominates and someone else is paying 84 cents of every
healthcare dollar, consumers are given the incentive to use the service more. As such, when
demand rises and supply remains stagnant, prices go up. The value of finally having consumers
themselves bear a more direct cost—the natural result of each of the above policy proposals—
cannot be overstated. Moreover, in addition to addressing the problems inherent in the thirdparty system, an HSA-HDHP combination plan, supported by new tax credits, equalizing the tax
exemption, and reducing prescription drug costs, will enable individuals and families to purchase
an affordable health insurance plan or pull from a pool of money when they need to. Thus, the
real objectives of healthcare reform will be achieved.
Conclusion: The Essentiality for Repeal of Obamacare
Sengenberger 46
Since its inception in 1935, Social Security has undergone a number of changes, typically
to expand benefits to new groups of people. This included the expansion of the “social
insurance” components of the program in the 1950s, setting the stage for near-universal coverage
and massive unfunded liabilities; the institution of Medicare in Title 18 of the law in 1965; and
the inclusion of numerous additions to the latter program, especially with the Part D Prescription
Drug Benefit in 2003-2006. As a result of Congress’s continuous efforts to add more
components to existing entitlements and failures to tame the leviathan, the nation now faces as
much as $107 trillion in unfunded liabilities. If the lessons of entitlements and their peril
demonstrate anything, it is that the American people can expect their representatives to institute a
new government program or expand an existing one, even without the support of the public, yet
citizens cannot espouse the same expectations that Congress will take steps to tame the
skyrocketing costs inherent to entitlement programs. Regrettably, in 2010, President Barack
Obama’s “Patient Protection and Affordable Care Act” ignored this fundamental lesson, yet
another entitlement program which will undoubtedly add considerable strain on the nation’s
financial resources. As with Social Security and Medicare, if Obamacare is not repealed today,
we can anticipate a flow of additions to that program that, if the waivers and exemptions granted
to certain states and businesses are any indication, will never terminate, adding perpetually more
unfunded liabilities to the nation’s budgetary tab. Thus, future generations will again be forced
to pay for the short-term wishes of previous generations, violating all semblance of morality as
coercion is used to take from one group to redistribute to another.
If the Obama healthcare law is repealed, though, the new entitlement leviathan can be
stopped in its tracks before it overwhelms an already-fiscally unsound nation. Given the drastic
problems with the nation’s healthcare system, however, it will be necessary to replace the
Sengenberger 47
repealed law with an array of effective, market-based initiatives. If Congress boosts competition
for individual consumers and across state lines, reforms Medicare and Medicaid, reduces the
excessive regulatory burden on private insurance and healthcare providers, and expands Health
Savings Accounts accompanied by High-Deductible Health Plans, not only will a decline in the
epidemic of skyrocketing costs be remedied, but we will see an increase in access to quality care.
It has been said that he who does not learn from the past is doomed to repeat it; likewise, insanity
has been defined as trying the same thing over and over again and expecting different results. If
the United States of America can expect social and economic problems to be repaired without
inflicting undue harm with more entitlement programs, the nation will finally demonstrate that it
is no longer willing to perpetuate insanity. The United States Congress must be willing instead
to learn from the mistakes of history, for the good of the country and our posterity.
Sengenberger 48
Bibliography
Bastiat, Frédéric. The Law. Trans. Dean Russell. Irvington-on-Hudson, NY: Foundation for
Economic Education, 2007. Print.
Blase, Brian. "Obamacare and Medicaid: Expanding a Broken Entitlement and Busting State
Budgets." Heritage WebMemo 3107 (2011): 1-4. Web. 22 Feb. 2011.
<http://thf_media.s3.amazonaws.com/2011/pdf/wm3107.pdf>.
Borzutzky, Silvia. "From Chicago to Santiago: Neoliberalism and Social Security Privatization
in Chile." Governance 18.4 (2005): 655-674. Academic Search Premier. EBSCO. Web.
23 Feb. 2011.
Cannon, Michael F., and Aaron Yelowitz. "The Massachusetts Health Plan: Much Pain, Little
Gain." Cato Policy Analysis 657 (2010): 1-16. Web. 22 Feb. 2011.
<http://www.cato.org/pubs/pas/pa657.pdf>.
Conover, Christopher J. "Health Care Regulation: A $169 Billion Hidden Tax." The Cato
Institute. October 4, 2004. 4 May 2011
<http://www.cato.org/pub_display.php?pub_id=2466>
Cooper, Mary H. "Social Security Reform." CQ Public Affairs Collection. CQ Press Electronic
Library, 24 Sept. 2004. Web. 5 Nov. 2009.
<http://library.cqpress.com.dml.regis.edu/cqpac/document.php?id=cqresrre2004092400
&type=hitlist&num=0&>.
Crane, Edward H. "Social Security Reform Can't Wait." The Cato Institute. 2 Dec. 2004. Web. 5
Nov. 2009. <http://www.cato.org/pub_display.php?pub_id=2903>.
Elmendorf, Douglas W. "Estimates on the Reconciliation Act of 2010." Letter to Honorable
Nancy Pelosi. 20 Mar. 2011. Selected CBO Publications Related to Health Care
Sengenberger 49
Legislation, 2009-2010. Washington, D.C.: Congressional Budget Office, 2010. 3-49.
Congressional Budget Office. Congressional Budget Office, Dec. 2010. Web. 22 Feb.
2011. <http://www.cbo.gov/ftpdocs/120xx/doc12033/12-23SelectedHealthcarePublications.pdf>.
Elmendorf, Douglas W. Letter to Honorable John Boehner. 6 Jan. 2011. Letter to Speaker John
Boehner Concerning H.R. 2, the Repealing the Job-Killing Health Care Law Act.
Washington, D.C.: Congressional Budget Office, 2011. 1-10. Congressional Budget
Office. Congressional Budget Office, 6 Jan. 2011. Web. 22 Feb. 2011.
<http://www.cbo.gov/ftpdocs/120xx/doc12040/01-06-PPACA_Repeal.pdf>.
Friedland, Robert B. "How Medicare Works." Generations 29.1 (2005): 30-34. Academic Search
Premier. EBSCO. Web. 6 Apr. 2011.
Friedman, Jeffrey. "Introduction: A Crisis of Politics, Not Economics: Complexity, Ignorance,
and Policy Failure." Critical Review: Causes of the Financial Crisis 21.2-3 (2009): 12782. Print.
Friedman, Milton, and Rose D. Friedman. "Cradle to Grave." Free to Choose: a Personal
Statement. New York: Harcourt Brace Jovanovich, 1980. 102-07. Print.
"George W. Bush Statements on Social Security - 2001." Social Security Online - The Official
Website of the U.S. Social Security Administration. Social Security Administration. Web.
5 Nov. 2009. <http://www.ssa.gov/history/gwbushstmts.html#05022001>.
Glazer, Sarah. "Overhauling Social Security." CQ Researcher. CQ Researcher Online, 12 May
1995. Web. 5 Nov. 2009.
<http://library.cqpress.com.dml.regis.edu/cqresearcher/document.php?id=cqresrre19950
51200&type=query&num=Social+Security+Ronald+Reagan&>.
Sengenberger 50
Gokhale, Jagadeesh. "Estimating ObamaCare's Effect on State Medicaid Expenditure Growth."
Cato Working Paper 4 (2011): 1-57. Web. 22 Feb. 2011.
<http://www.cato.org/pubs/researchnotes/WorkingPaper-4.pdf>.
Goldwater, Barry M. The Conscience of a Conservative. Shepherdsville, KY: Victor Pub., 1960.
Print.
Haislmaier, Edmund, and Brian Blase. "Obamacare: Impact on States." Heritage Foundation
Backgrounder 2433 (2010): 1-19. Web. 22 Feb. 2011.
<http://thf_media.s3.amazonaws.com/2010/pdf/bg2433.pdf>.
Holtz-Eakin, Douglas, and Michael J. Ramlet. "Health Care Reform Is Likely To Widen Federal
Budget Deficits, Not Reduce Them." Health Affairs 29.6 (2010): 1136-141. National
Center for Policy Analysis. National Center for Policy Analysis, June 2010. Web. 22
Feb. 2011. <http://www.ncpa.org/pdfs/health-care-reform-likely-to-add-billions-todeficit.pdf>.
Hunter, Derek. "Guaranteed Pain and Suffering: The Recent Research on Drug Price Controls |
The Heritage Foundation." The Heritage Foundation. The Heritage Foundation, 3 Nov.
2005. Web. 05 Apr. 2011.
<http://origin.heritage.org/Research/Reports/2005/11/Guaranteed-Pain-and-SufferingThe-Recent-Research-on-Drug-Price-Controls>.
Innovation.org. Drug Discovery and Development: Understanding the R&D Process. Brochure.
PhRMA, Feb. 2007. Web. 3 May 2011.
<http://www.innovation.org/drug_discovery/objects/pdf/RD_Brochure.pdf>.
John, David C. "2010 Social Security Trustees Report: Reform Needed Now." Heritage
Foundation Backgrounder 2451 (2010): 1-6. Web. 22 Feb. 2011.
Sengenberger 51
<http://heritage.org/Research/Reports/2010/08/2010-Social-Security-Trustees-ReportReform-Needed-Now>.
Kingson, Eric R. "Financing Social Security: Agenda-Setting and the Enactment of the 1983
Amendments to the Social Security Act." Policy Studies Journal 13.1 (1984): 131-155.
Academic Search Premier. EBSCO. Web. 23 Feb. 2011.
Kotlikoff, Laurence J. Measuring Social Security's True Liability. Issue brief no. 658. National
Center for Policy Analysis, 12 May 2009. Web. 4 Apr. 2011.
<http://www.ncpa.org/pub/ba658>.
"Legislative History: 1935 Social Security Act." Social Security Online - The Official Website of
the U.S. Social Security Administration. Social Security Administration. Web. 7 Nov.
2009. <http://www.socialsecurity.gov/history/35actinx.html>.
Martin, Patricia P., and David A. Weaver. "Social Security: A Program and Policy History."
Social Security Bulletin 66.1 (2005): 1-15. Academic Search Premier. EBSCO. Web. 23
Feb. 2011.
McDevitt, Roland D., and Jay Savan. "Prospects for Account-Based Health Plans Under the
Patient Protection and Affordable Care Act." Benefits Quarterly 27.1 (2011): 21-25.
Academic Search Premier. EBSCO. Web. 23 Feb. 2011.
McIntosh, Sarah. "Mayo Clinic Makes Medicare, Medicaid Cuts." The Heartland Institute. The
Heartland Institute, 29 June 2010. Web. 03 May 2011.
<http://www.heartland.org/healthpolicynews.org/article/27913/Mayo_Clinic_Makes_Medicare_Medicaid_Cuts.html>.
Sengenberger 52
Myers, Robert J. "Too Many Promises: The Uncertain Future of Social Security (A Twentieth
Century Fund Report) (Book)." Benefits Quarterly 3.1 (1987): 60-64. Academic Search
Premier. EBSCO. Web. 23 Feb. 2011.
Obama, Barack. "Obama Offers Health Care Details in Speech to Congress - Page 7 - CNN."
CNN.com. CNN.com, 09 Sept. 2009. Web. 03 May 2011. <http://articles.cnn.com/200909-09/politics/obama.health.care.transcript_1_health-care-congress-on-wednesday-nightamerican-people/7?_s=PM:POLITICS>.
Oliver, Thomas R., Philip R. Lee, and Helene L. Lipton. "A Political History of Medicare and
Prescription Drug Coverage." Milbank Quarterly 82.2 (2004): 283-354. Academic
Search Premier. EBSCO. Web. 6 Apr. 2011.
Ortiz, Héctor L. "The Battle for Social Security: Four Historical and Institutional Explanations of
Bush's Social Security Reform." Conference Papers -- Midwestern Political Science
Association (2007 Annual Meeting 2007): 1-22. Academic Search Premier, EBSCOhost
(accessed September 24, 2009).
Owcharenko, Nina. “Health Savings Accounts: How to Broaden Health Coverage for Working
Families.” WebMemo no. 481. The Heritage Foundation, 16 Apr. 2004. Web. 5 Apr.
2011. <http://www.heritage.org>.
Pilon, Roger. “Drug Reimportation: The Free Market Solution.” Policy Analysis no. 521. The
Cato Institute, 24 Aug. 2004. Web. 5 Apr. 2011.
<http://www.cato.org/pubs/pas/pa521.pdf>.
Pika, Joseph A., and John A. Maltese. The Politics of the Presidency. 7th ed. Washington, D.C.:
CQ, 2009. Print.
Sengenberger 53
Ponnuru, Ramesh. "Doomed Like ClintonCare?." National Review 57, no. 3 (February 28, 2005):
22-24. Academic Search Premier, EBSCOhost (accessed September 24, 2009)."Corn
laws." Columbia Electronic Encyclopedia, 6th Edition (Jan. 2009): 1-1. Academic Search
Premier. EBSCO. 25 Sep 2009.
"Prescription Drug Costs: Background Brief." KaiserEDU.org, Health Policy Education from
the Henry J. Kaiser Family Foundation. Kaiser Family Foundation, Feb. 2010. Web. 05
Apr. 2011. <http://www.kaiseredu.org/Issue-Modules/Prescription-DrugCosts/Background-Brief.aspx>.
"President Bush on Social Security." CQ Public Affairs Collection. CQ Press Electronic Library,
8 Feb. 2005. Web. 5 Nov. 2009.
<http://library.cqpress.com.dml.regis.edu/cqpac/document.php?id=hsdc05-429-186551003703&type=hitlist&num=13&>.
Rappaport, Anna M., Steven Wojcik, and Michael Baxter. "The Impact of Health Care Reform
on Older Workers, Retirees and Employers." Benefits Quarterly 27.1 (2011): 26-33.
Academic Search Premier. EBSCO. Web. 23 Feb. 2011.
Roosevelt, Franklin D. "Franklin D. Roosevelt: 'The Continuing Struggle for Liberalism'
(1941)." Ed. Nancy Sue Love. Dogmas and Dreams: A Reader in Modern Political
Ideologies. 4th ed. Washington, D.C.: CQ, 2011. 79-88. Print.
Sandalow, Marc. "Bush claims mandate, sets 2nd-term goals / 'I earned capital in this campaign,
political capital, and now I intend to spend it'" SFGate. San Francisco Chronicle, 5 Nov.
2004. Web. 5 Nov. 2009. <http://www.sfgate.com/cgibin/article.cgi?f=/c/a/2004/11/05/MNGOF9MKHV1.DTL>.
Sengenberger 54
Silva, Mark. "Bush urges major changes for Social Security." Newsmine.org. NewsMine.org, 3
Feb. 2005. Web. 5 Nov. 2009. <http://newsmine.org/content.php?ol=cabal-elite/wadministration/big-money/social-security/dems-jeer-bush-threat-to-social-security.txt>.
"Social Security Act." Social Security Act of 1935 (2009): 1. Academic Search Premier. EBSCO.
Web. 23 Feb. 2011.
"Social Security Financing, 2008." World Almanac & Book of Facts (2009): 1168. Academic
Search Premier. EBSCO. Web. 23 Feb. 2011.
Sowell, Thomas. Basic Economics: A Common Sense Guide to the Economy. 3rd ed. New York:
Basic, 2007. Print.
Tanner, Michael D. "Social Security's Problems Haven't Gone Away." The Cato Institute. 11
Mar. 2008. Web. 5 Nov. 2009. <http://www.cato.org/pub_display.php?pub_id=9267>.
Tanner, Michael D. "Bad Medicine: A Guide to the Real Costs and Consequences of the New
Health Care Law." Cato Institute White Paper (2011): 1-71. Web. 22 Feb. 2011.
<http://www.cato.org/pubs/wtpapers/BadMedicineWP.pdf>.
"The Social Security Revolution, 1935-1964." CQ Pubic Affairs Collection. CQ Press Electronic
Library. Web. 5 Nov. 2009.
<http://library.cqpress.com.dml.regis.edu/cqpac/document.php?id=catn450000062023&type=hitlist&num=10&>.
Thomas Jefferson Quotes." Famous Quotes and Quotations at BrainyQuote. Web. 01 Mar. 2010.
<http://www.brainyquote.com/quotes/quotes/t/thomasjeff130495.html>.
United States. Social Security Administration. FAQ: Ratio of Covered Workers to Beneficiaries.
Social Security Administration, 2009. Web. 5 Apr. 2011.
<http://www.ssa.gov/history/ratios.html>.
Sengenberger 55
Villarreal, Pamela. Social Security and Medicare Projections: 2009. Issue brief no. 662. National
Center for Policy Analysis, 11 June 2009. Web. 4 Apr. 2011.
<http://www.ncpa.org/pub/ba662>.