But that doesn't come close to measuring its true cost. The bill uses various accounting gimmicks to hide its true cost. For example the bill doesn't include more than $200 billion needed to prevent a 21 percent cut in Medicare next year. [The CBO "score" actually assumes Reid cuts Medicare 23 percent -- Ed.] That cost has been spun off into a separate bill, even though the Senate voted down that approach last month.

Moreover (as Jeffrey H. Anderson notes), much of the spending is back-loaded. The bill doesn't start spending until 2014, and only costs $9 billion that year. But by 2019, the annual cost hits $196 billion. The minority staff of the Senate Budget Committee reports that, if you factor out all the budget gimmicks and look at the 10 years of actual implementation, the cost is closer to $2.5 trillion.

And, while Reid brags that the bill will reduce the deficit by $127 billion over the next 10 years (which is about $50 billion less than the deficit the government ran last month alone), even that tiny savings depends on budget gimmicks and the willingness of future Congresses to make huge cuts in Medicare spending. Any wagers on the chances of that actually happening? In fact, even the CBO warns that it will be "difficult" to achieve the predicted savings.

Perhaps more important, much of the cost has simply been shifted from the federal budget onto the backs of workers, businesses and state governments. Judging by previous reforms, as much as 60 percent of the cost won't show up in government accounting.

To pay for all the new spending, Reid would enact at least 15 new or increased taxes totaling more than $493 billion.

But the cost alone doesn't begin to describe how intrusive this bill would be for the average American. For instance, it would require everyone to buy a government-designed insurance plan, even if it was more expensive than their current policy. Failure to comply brings a penalty of up to $6,750 for a family of four.

Another provision would mandate that employers provide insurance to their workers. If they fail to do so, and if even a single worker qualified for federal subsidies, the employer could be fined up to $750 per employee. The CBO estimates that those penalties will amount to more than $28 billion.

Unemployment is now 10.2 percent, and the Senate bill will make it more costly to hire workers. And because the penalty only applies in the case of subsidy-eligible workers, it is low-wage and unskilled workers that will suffer the most.

Of course, the plan contains the government-run "public option" that many experts believe will ultimately crowd out private insurers. And don't be misled by Reid's "opt-out" provision: It comes with so many restrictions that it will be nearly impossible for a state to actually opt out.

Besides, there won't be any opting out of the taxes that will ultimately be necessary to pay for it.

Finally, the bill sets the stage for government-imposed rationing. If you think the recent controversy over mammograms is something, just wait until the dozens of new boards, commissions and agencies created by this bill get to work. The "reform" also gives the secretary of Health and Human Services broad new powers to determine "quality," "efficiency" and "appropriate utilization."

At first, these restrictions would only apply to government programs like Medicare, but they'd create the framework for eventual extension to private insurance.

If Reid gets the 60 votes he needs to pass this, US taxpayers, businesses and patients can expect to pay a high price for this congressional feast.

The House of Representatives has now passed its version of health care reform — a gargantuan 2,000-page, 70-pound collection of mandates, regulations, and subsidies that may well be among the most expensive pieces of legislation in U.S. history.

When the bill was first introduced, the Congressional Budget Office estimated that it would cost $1.1 trillion over the next 10 years. However, as is the way with government programs, that cost has already begun to grow. By the time the "managers amendment" and certain provisions had been added to the bill, the final product was projected to cost more than $1.7 trillion.

In theory, this increase in spending would be partially offset by $628 billion in Medicare cuts, giving the bill a "net" cost of slightly more than $1 trillion. But how likely is it that those cuts will take place? After all, this is an administration that is paying seniors $250 to make up for the fact that they didn't get a Social Security cost-of-living increase this year (because the cost of living didn't increase). And Congress is in the process of repealing a scheduled increase in Medicare premiums.

To see how this may play out, look what Congress is doing about the so-called "doc fix."

Under current law, there is supposed to be a 21 percent cut in reimbursements to Medicare providers next year. But no one in Washington seriously believes that Congress will let that happen. In fact, those cuts have been supposed to take place every year since 2003. And every year Congress postpones them until the following year.

However, in order to pretend that their bill costs less than it actually does, the Democrats simply assume that this time Congress will let those cuts take effect. Then, in an unparalleled display of cynicism, they have introduced a separate bill repealing those cuts at a cost of $200 billion.

That means that the cost of the "doc fix" isn't technically part of health care reform. And your household budget would look so much better if you didn't have to pay your mortgage and car payment. (The Senate tried to do something similar, only to have the cynical ploy rejected 53-47, with 13 Democrats refusing to play along.)

Moreover, the CBO provides 10-year projections of a bill's cost, between 2010 and 2019 in this case. Yet, while the taxes and other revenue measures in the bill kick in immediately, most of the spending doesn't take effect until 2014.

So the "10-year" cost projection includes only six years of the bill. Wouldn't it be great if you could count a whole month's income, but only two weeks' expenditures in your household budget?

If we look at the bill more honestly over the first 10 years that the programs are actually in existence, say from 2014 to 2024, it would actually cost nearly $3 trillion.

There has been a lot of talk recently about "bending the curve" of health care spending, but as the actuaries at the Centers for Medicare and Medicaid Services (CMS) recently noted, the House bill bends the curve in the wrong direction — increasing government health care costs.

All this new spending will be accompanied by equally massive federal tax hikes, roughly $500 billion over the first 10 years — $770 billion if the penalties for failing to comply with the mandate are included.

Furthermore, much of the bill's cost is shifted off the federal books onto businesses, individuals, and state governments. These business and individual mandates are the equivalent of tax increases, but those costs aren't included in the bill's cost estimates.

Under the House bill, many small businesses that do not currently provide health insurance would have to do so, or they may face a new tax of up to 8 percent of payroll. Other businesses that do offer insurance, but whose benefits are not as comprehensive as the government mandates, will have to purchase new, more expensive policies. This cost may not be included in a CBO "score," but it is a very real cost for businesses — especially at a time of 10.2 percent unemployment.

Similarly, individuals will also have to buy insurance that meets the government's minimum benefit standards or pay up to 2.5 percent of their income as a penalty. That added burden is a cost, too.

So is the cost of increased insurance premiums — and nearly everyone agrees that insurance premiums will go up under reform, especially for younger and healthier people.

And state governments will have to pick up at least part of the cost for the bill's Medicaid expansion. In fact, already strapped states could have to come up with as much as $34 billion.

This is all taking place at a time when the government is facing an unprecedented budgetary crisis. The U.S. budget deficit hit $1.4 trillion in 2009, and we are expected to add as much as $9 trillion to the national debt over the next 10 years, a debt that is already in excess of $12 trillion and rising at a rate of nearly $4 billion per day.

Social Security will begin running deficits in 2016, and Medicare even sooner than that. Under current projections, government spending will rise from its traditional 20-21 percent of our gross domestic product to 40 percent by 2050. That would require a doubling of the tax burden just to keep up.

Add a multi-trillion-dollar health care bill on top of that, and we risk permanently damaging our economy and leaving our children and grandchildren an unconscionable burden of debt and taxes.

There is now widespread consensus that our health care system needs some kind of reform.

But surely it must be possible to control health care costs, improve quality, and extend coverage to more people without bankrupting the nation.

Health care reform now goes to the Senate. There are 3 trillion reasons to hope they are not as fiscally reckless as their counterparts in the House.

WARNINGS:

•This product will increase your health insurance premiums. Millions who are satisfied with their current, low-cost health plans would have to switch to more expensive plans, solely because Congress decided they weren't buying enough coverage.

The legislation would increase premiums even further over time, as drug companies, chiropractors, acupuncturists, fertility specialists and other special interests lobby Congress to force you to purchase coverage for their services too.

•This product will reduce the quality of your health care. America's health care sector is often inconvenient, poorly coordinated, and makes less use of information technology than your local supermarket. Research shows that medical errors kill as many as 100,000 Americans per year.

Markets would solve those problems, but government thwarts doctors and entrepreneurs who try to improve quality. Medicare — by far the largest purchaser of medical services in the world — actually penalizes doctors and hospitals that reduce medical errors.

The House bill would cement those deficiencies in place with yet another massive government program, and create new quality problems, like insurers skimping on care and customer service for the sickest patients.

•This product probably won't make you healthier. The House bill would expand coverage, but at a steep cost and with zero evidence that doing so is a cost-effective way of improving health.

Little research supports the notion that broadly expanding insurance coverage makes people healthier. Medicare established near-universal coverage for the elderly, yet research shows that program didn't save a single life in its first 10 years of operation. Whether it has had any subsequent impact on mortality rates — positive or negative — remains an open question.

•This product will make you poorer. The House bill contains at least $2 trillion in explicit and implicit taxes. Tax rates for wealthy Americans would rise to 45 percent, with an ever-expanding definition of "wealthy." For the middle class, effective tax rates would average 60 percent to 70 percent and exceed 100 percent in some cases.

•This product will make your children poorer. Since the bill would actually increase the federal budget deficit, the tax burden would grow over time.

The bill purports to cut Medicare spending, but those cuts are not likely to happen. Want proof? At the same time House Democrats promise future spending cuts, they are gutting $210 billion of spending cuts promised by past Congresses.

And like most government health care programs, this bill's actual costs will exceed current projections. In 1967, Congress predicted that Medicare would cost $12 billion in 1990. Medicare's actual cost that year was $110 billion. Oops.

When this bill causes the deficit to explode, Congress will come after your children's paychecks. Congress has increased Medicare taxes on average once every four years — and Medicare's still $90 trillion in the hole. House Speaker Nancy Pelosi, D-San Francisco, suggests that maybe Congress should impose a European-style value-added tax.

•This product will make you irrational. Spending other people's money has a way of making people nutty. Pelosi thinks that under her legislation, "There is a cap on what you pay in but there is no cap on the benefits that you receive." Limited costs, but unlimited benefits? Really?

After a few years of Pelosicare, you yourself may vote both to eliminate wasteful health care spending and to protect all existing hospitals and doctors' jobs. And you'll wonder why Congress can't do both!

But hey, why not be irrational? Socialized medicine socializes the cost of that, too.

•This product will make you resent immigrants. The House bill would offer hidden subsidies to undocumented immigrants in a new national health insurance "exchange." Turning America's health care sector into a welfare magnet for immigrants will fuel anti-immigrant sentiment. Pretty soon, we're France — in more ways than one.

•This product will make you feel like you're being watched. When taken in combination with its Senate counterpart, the bill would create a national identification system to monitor compliance with its mandates and determine eligibility for its subsidies. With the ability to collect data on every American, the government will always find new uses for any national ID system.

The Pelosi bill is neither safe nor effective. If it were medicine, the Food and Drug Administration would have to ban it.

First, Saturday's House vote was the first time that either chamber of Congress voted — albeit by a razor-thin, three-vote majority — to force all Americans to purchase health insurance.

Second, Speaker Nancy Pelosi, D-Calif., cajoled a majority to vote for the bill, even though a majority of the House does not support it.

Third, Pelosi did all this before the Congressional Budget Office could report that the bill costs far more than supporters claim.

Forcing Americans to purchase health insurance has been a goal of the American left since the Roosevelt administration — that's Teddy, not Franklin.

Despite Weak Support

Though Congress enacted Medicare in 1965, neither chamber had ever voted to force people under age 65 to buy health insurance.

The Clinton health plan would have done so, but it never even came up for a vote.

That makes Saturday's vote historic, especially since the House bill is more radical than the Clinton plan. It would not only make health insurance compulsory, but would also create a government program — the public option — that supporters hope will displace private health insurance.

One might expect such a radical bill to lack majority support — and indeed it does. According to public opinion polls, most of the public opposes it, as do most House members.

Pelosi got a majority of the House to vote for it anyway. Some moderate Democrats, like Rep. Jim Cooper of Tennessee, fear the enormous cost, but voted aye just to keep the process moving.

Unknown Cost

More important, some 40 pro-choice Democrats voted for the bill, and then immediately vowed to kill it. They object to an amendment offered by Rep. Bart Stupak, D-Mich., and inserted on the House floor that they say would restrict a woman's freedom to purchase private abortion coverage with her own money.

Rep. Diana DeGette, D-Colo., says, "We're not going to let this into law."

Very few of those 40 members would need to switch their votes to wipe out PelosiCare's three-vote margin of victory when the bill comes back to the House for final passage.

But if Democratic leaders alter the Stupak amendment, a similar number of pro-life Democrats (and the bill's lone Republican supporter) say they will kill the bill.

In other words, Pelosi assembled a three-vote majority for the idea of a health care overhaul, but there may be no bill that could command a majority for final passage.

If Saturday's vote had sent the bill to the president rather than the Senate, the outcome likely would have been different. And there's even more to come that could disrupt that narrow majority.

Pelosi brought the bill to a vote before the CBO could estimate the costs it would impose on the private sector.

The CBO has estimated only the on-budget costs to the federal government ($1.3 trillion) and state governments ($34 billion).

If Congress forces people to purchase health insurance, that mandate imposes further costs on individuals and employers.

Federal law requires the CBO to estimate the cost of any private-sector mandates that exceed $139 million per year, but the agency has yet to do so.

Its only statement on the issue, which came the day before the House vote, is that the bill's private-sector mandates "would greatly exceed" that threshold.

Reckless Lawmaking

Indeed, if history is any guide, the private-sector mandates will double the cost of the bill.

In both the Clinton health plan and the Massachusetts health plan, similar mandates accounted for 60% of total costs, according to the CBO and the Massachusetts Taxpayer's Foundation, respectively.

In the coming weeks, then, we can expect the CBO to report that the total cost of the House bill is not $1 trillion, but in the $2 trillion to $3 trillion range.

Holding the vote before that number becomes public was an impressive feat, though not exactly responsible governance.

"Nothing could be further from the truth," he has said.

Yet it's hard to see the 1,994-page bill that the House passed last night as anything else. After all, the bill uses the command "shall" -- as in "you shall do this," "businesses shall do that" and "government shall do some other thing" -- 3,345 times.

Not a great deal of choice or options there.

To make sure that we obey these "shalls," the bill would create 111 government agencies, boards, commissions and other bureaucracies -- all overseen by a new health-care czar bearing the Orwellian title "commissioner of health choices."

All this would come at a true cost of more than $1.3 trillion over 10 years. And virtually every aspect of health care would be subject to federal regulation.

For example, the government would force every American to buy health insurance and would control what benefits those policies must include. Even those who now have health plans and are happy with them would have to switch to policies that include the government-required benefits -- insurance that might well be more expensive, thanks to the new benefits you won't get to choose.

Another mandate would require that even small businesses provide their workers with a government-devised minimum package of insurance benefits. This could cost hundreds of thousands of jobs -- and force some workers to accept insurance benefits rather than higher wages.

Those insurance products that now give Americans the most choice and flexibility would be severely restricted. Health-savings accounts would be almost eliminated and Flexible Spending Accounts cut back.

Even if the final bill doesn't include the so-called public option, private insurance would be so regulated as to become little more than a public utility, operating much like the electric company, with the government regulating nearly every aspect of its operation.

And the public option itself holds the potential for driving most private insurance out of business, with millions of American workers dumped into the government-run program.

Programs like Medicaid, meanwhile, would be dramatically expanded, and federal subsidies would be extended to people earning as much as 400 percent above the poverty level (or $88,000 a year for a family of four), putting millions more Americans on a form of the dole.

Doctors, too, would find themselves micromanaged from Washington. For example, providers who perform too many tests or procedures would see their Medicare reimbursements cut.

That means every time a doctor decides on a treatment, he or she would have to ask: "Does the government think I'm doing this too much? Will I be penalized if I order this test?"

The government would also undertake comparative- and cost-effectiveness research and use the results to impose practice guidelines on providers.

Medicare would see even more micromanagement, as the government develops a "high value" reimbursement system by 2012. (Many "reform" supporters hope to see these guidelines extended to nongovernment insurance as well.)

Finally, Americans would have to pay nearly $730 billion in new taxes, fees and penalties over the next 10 years to fund this huge government expansion.

No doubt, we do need to fix the problems in our health-care system, but health care represents one-sixth of the US economy -- and some of the most important personal and private decisions in our lives.

Given that the government has mismanaged everything from "cash for clunkers" to the swine-flu vaccine (not to mention the Iraq war and the response to Hurricane Katrina), how much of our health-care system do we really want it to control?

When Democrats announced the bill, House Speaker Nancy Pelosi claimed the bill cost only-only!-$894 billion over the next ten years. But outside analysts, including the Congressional Budget Office, suggest that the real cost will be far, far higher.

The CBO, for example, points out that the bill would actually increase government spending by slightly more than $1 trillion. Democrats reported a lower "net" number by subtracting revenues from penalties paid by individuals and businesses that fail to comply with the bill's insurance mandate. But even that does not reflect the bill's true cost.

The Democratic leadership simply shifted some of the bill's cost to other bills. For example, for purposes of the health care bill, the Democrats assume that a currently scheduled 21 percent cut in Medicare reimbursements will take affect next year. However, at the same time, they have introduced a separate bill repealing those cuts at a cost of $250 billion, so that cost isn't technically part of health care reform. And your household budget would look so much better if you didn't have to pay your mortgage and car payment. (The Senate just tried to do something similar, only to have the cynical ploy rejected 53-47, with 13 Democrats refusing to play along.)

If you count that cost honestly, the bill's cost rises to nearly $1.3 trillion. And that still understates the bill's cost.

The CBO provides ten year projections of a bill's cost, between 2010 and 2019 in this case. But most provisions of the health bill don't take effect until 2014. So the "10-year" cost projection only includes six years of the bill. Again, consider your household budget. Wouldn't it be great if you could count a whole month's income, but only two weeks expenditures? If we look at the bill more honestly over the first 10 years that the programs are actually in existence, say from 2014 to 2024, it would actually cost more than $2.3 trillion. And, this doesn't include approximately $200 billion in additional spending for public health programs, a reinsurance program for retiree health care, and new preventive care programs that was added to the bill after it was submitted for official "scoring." So call the total cost somewhere in excess of $2.5 trillion.

There has been a lot of talk recently about "bending the curve" of health care spending, but as the actuaries at the Centers for Medicare and Medicaid Services (CMS) recently noted, the House bill bends the curve in the wrong direction — increasing government health care costs.

All this new spending will be accompanied by equally massive federal tax hikes, roughly $500 billion over the first 10 years, $700 billion if the penalties for failing to comply with the mandate are included.

Furthermore, much of the bill's cost is shifted off the federal books onto businesses, individuals, and state governments. These business and individual mandates are the equivalent of tax increases, but those costs aren't included in the bill's cost estimates. Nor is the cost of increased insurance premiums, though nearly everyone agrees that insurance premiums will go up under reform, especially for younger and healthier people. And state governments will have to pick up at least part of the cost for the bill's Medicaid expansion. In fact, already strapped states could have to come up with as much as $34 billion.

And, it could get worse. The bill promises to pay for part of the cost with $500 billion in cuts to Medicare over the next 10 years. But how likely is it that those cuts take place? After all, this is an administration that is paying seniors $250 to make up for the fact that they didn't get a Social Security cost of living increase this year (because the cost of living didn't increase). And, Congress is in the process of repealing a scheduled increase in Medicare premiums.

If those cuts don't happen, that just means more taxes or more debt passed on to our children and grandchildren.

So far much of the debate over health care reform has been focused on the details of the bill. But, eventually the public is going to notice the price tag. When they do, House Democrats, especially those who claim to be fiscally responsible Blue Dogs, may have a lot of explaining to do.

A billion dollars here, a trillion there, and pretty soon it adds up to real money.

Never mind the everyday budget gimmicks House Democrats have used, such as removing $250 billion of deficit spending to be voted on separately. Or claiming their bill would cost just $894 billion — around $400 billion less than the CBO actually projected. We've seen this kind of trickery plenty in recent years; to suppress an inconvenient cost estimate of its proposed Medicare drug entitlement, the Bush administration threatened to fire Medicare's chief actuary.

Deceptions on this scale are child's play, at least when compared to what has to be the biggest fiscal obfuscation in the history of American politics: The current leadership has rigged the legislation so that 60 percent of its total cost will not be made public by the CBO in advance of the House vote. Here's how they did it.

The centerpiece of the bills currently under consideration is not the "public option," but the "individual mandate" — a legal requirement that all U.S. residents purchase health insurance, on penalty of fines and/or imprisonment.

The CBO describes an individual mandate as "an unprecedented form of federal action" whose closest analogue in federal law is the draft. But as President Obama told a joint session of Congress, the rest of the legislation won't work unless the federal government forces Americans to purchase health insurance.

President Clinton's ill-fated health plan had an individual mandate, too. Back in 1994, the CBO decided that since "the mandatory premiums . . . would constitute an exercise of sovereign power," the agency would treat all premiums as federal revenues, including them in the federal budget.

That revealed to the public the full cost of Clinton's health plan. Clinton's secretary of health and human services, Donna Shalala, called the CBO's decision "devastating." Journalist Ezra Klein writes that it "helped kill the bill."

Rather than admit the individual mandate's unpopularity and move on, congressional Democrats simply ensured that its costs would not appear in the federal budget this time around by gaming the CBO's rule for what constitutes "federal revenues."

The CBO explains it will not count mandatory premiums as federal revenues if the individual mandate leaves consumers with what the CBO considers a "sufficient" or "meaningful" or "substantial" degree of choice among health plans. That rule is both amorphous and arbitrary. (For example, it presumes that the freedom not to purchase health insurance — which an individual mandate would eliminate — is not "meaningful." Millions of Americans would disagree.) More important, evading that rule doesn't make an individual mandate any less compulsory, or any less costly. It just hides those costs by pushing them off-budget.

Obama budget director Peter Orszag laid the groundwork for this feat. While director of the CBO in 2007 and 2008, he fostered a more collaborative relationship between the CBO and members of Congress, which enabled the agency to provide behind-the-scenes guidance to Democrats crafting their mandate. That's why the cost of the Democrats' individual mandates appears nowhere in the half-dozen or more "preliminary cost estimates" the CBO has completed on various Democratic health-care bills.

In Massachusetts, which has enacted what is essentially the Democrats' health plan, mandatory premiums account for about 60 percent of overall costs, according to the Massachusetts Taxpayers Foundation. On-budget government spending is just 40 percent. By my count, mandatory premiums accounted for a similar share of the Clinton health plan's projected cost.

So while the CBO estimates that the coverage expansions in the House Democrats' legislation would trigger about $1 trillion of new federal spending over ten years, the actual cost of those coverage expansions is more like $2.5 trillion.

The CBO exists to bring honest accounting to the federal government. House Democrats are gaming the CBO, subverting this purpose. Anyone who cares about honest accounting or transparency in government should put the brakes on this vote until the American people have all the facts.

Among the many Republican complaints about Democratic health reform plans, one – chiefly heard of late from Senate Minority Leader Mitch McConnell – is that it would "cut Medicare."

That McConnell can go home and sleep at night after uttering that charge is a grand testament to the jaded, disconnected, and often surreal nature of Washington politics.

What McConnell is doing is engaging in the time-honored tradition of "Mediscare": pandering to seniors – a crucial political constituency because they are well-organized and turn out to vote in high numbers – by suggesting that one of their pet entitlement programs is imperiled.

This effective tactic has most often been the bailiwick of Democrats, back when Republicans were the party of fiscal discipline and made pronouncements about getting federal deficits and entitlement spending under control (boy does that seem like a long time ago now). That McConnell and the GOP have now embraced it with gusto demonstrates how screwed we are as a country, because neither main political party is at all serious about facing fiscal reality.

Now, let's be clear. The Democrats do cut Medicare, by more than $500 billion under the bills now being considered. And, while the Democrats claim that all they are doing is eliminating "fraud, waste, and abuse," the reality is that under the Democratic bills, seniors will get less.

For example, roughly 10.2 million seniors currently receive their health care through the Medicare Advantage program. That program offers many seniors benefits not included in traditional Medicare, including preventive-care services, coordinated care for chronic conditions, routine physical examinations, additional hospitalization, skilled-nursing facility stays, routine eye and hearing examinations and glasses and hearing aids.

The bills currently making their way through Congress would cut payments to Medicare Advantage plans by $100 billion to $150 billion. In response, many insurers are expected to stop participating in the program, while others will probably increase premiums. Millions of seniors will likely be forced off their current plans and back into traditional Medicare. The Congressional Budget Office makes it clear that, at the very least, the cuts "would reduce the extra benefits that would be made available to beneficiaries through Medicare Advantage plans."

The Democratic cuts also hit traditional Medicare. For example, the bills would reduce reimbursements for diagnostic imaging – things like CT scans, MRIs and X-rays – by as much as 25 percent. And the Senate Finance Committee's bill would penalize doctors who perform too many procedures or tests. Providers whose utilization is in the 90th percentile or above, compared with national averages, will have their Medicare reimbursements cut.

The whole point of such provisions is to reduce services. But none of this justifies the Republican's hypocrisy on this issue.

For example, Republicans just finished voting unanimously against an attempt to block a Democratic proposal to stop a 21 percent reduction in Medicare provider payments scheduled to go in effect next year, the so-called "doc fix." And, earlier this year, Republicans released an alternative budget that contained even bigger reductions in Medicare spending than the Democrats now propose.

That was the fiscally responsible position to take. The "doc fix" was not paid for and would have added an additional $250 billion to the federal deficit. That's why 13 fiscally responsible Democrats joined Republicans in voting against this bill.

And, Medicare is already facing unfunded liabilities of $50 trillion to $100 trillion. As a percentage of GDP, Medicare costs are expected to rise from 2.7 percent today to 9.4 percent by 2050. Unless we are prepared to completely mortgage our children's future, Republicans were right to propose cuts in their budget proposal.

But now, sensing political advantage, Republicans are in danger of reverting to the fiscally irresponsible "big-government" conservatism that all but destroyed the Republican brand during the Bush years.

There are many good reasons for opposing the Democrat's health reform. It is government takeover of the health care system that would dramatically increase both taxes and insurance costs, while all forcing millions of Americans into a government-run system. There is no need for Mediscare – especially for a party that so desperately needs to return to its fiscally responsible, limited-government roots.

First, Congress should give Medicare enrollees a voucher and the freedom to choose any health plan on the market. Vouchers would be means-tested, would contain Medicare spending, and are the only way to protect seniors from government rationing.

Second, to give workers control over their health care dollars, Congress should reform the tax treatment of health care with "large" health savings accounts. Large HSAs would reduce the number of uninsured Americans, would free workers to purchase secure health coverage from any source, and would effectively give workers a $9.7 trillion tax cut without increasing the federal budget deficit.

Third, Congress should break up state monopolies on insurance and clinician licensing. Allowing consumers to purchase health insurance licensed by other states could cover one-third of the uninsured without any new taxes or government subsidies.

Finally, Congress should reform Medicaid and the State Children's Health Insurance Program the way it reformed welfare in 1996. Block-granting those programs would reduce the deficit and encourage states to target resources to the truly needy.

The great advantage of a free market is that innovation and more prudent decisionmaking means that fewer patients will fall through the cracks.

He was right.

Although Social Security has long been viewed as the third rail of American politics—touch it and die—it really is better seen as a symbol of America's entitlement culture. The United States lags behind Europe but nevertheless has constructed an expensive and expansive welfare state. Virtually all spending programs go up each year, regardless of which party controls Washington, and the most outlandish increases have been concentrated in the big three social-welfare systems: Social Security, Medicare, and Medicaid.

The challenge of paying for the welfare state has grown over the last year.

U.S. GDP is about $14 trillion. One year of economic output already is committed to paying off the national debt, which is now above $12 trillion and climbing fast.

Washington is running a deficit of some two trillion dollars this year and is expected to pile up another ten trillion in debt over the next decade. In fact, these estimates are low: Fannie Mae, Freddie Mac, the FDIC, the Pension Benefit Guaranty Corporation, the Federal Housing Administration, and who knows what else continue to run up big losses and will need more bailouts. So count another year's production toward the federal debt.

Then there is all of the funny money used to fund the estimated $13 trillion in bailouts doled out over the last year. Some of the cash, such as the so-called TARP money (the financial-institutions bailout that somehow was used to nationalize the auto industry), was appropriated by Congress. But between the Treasury Department and Federal Reserve there have also been loans, guarantees, and money creation. It is hard to know what it ultimately will mean in financial terms, but another year of America's economic life will certainly be lost.

Finally, there are Social Security and Medicare. Together, they have about $107 trillion in "unfunded liabilities." In real-people-speak, that is the difference between promised benefits and expected revenues. That amounts to about eight years of America's economic production and twice the world's annual GDP.

Social Security and Medicare are disastrously unbalanced for three reasons. First, "contributions" to Social Security and Medicare are insufficient to provide the promised benefits. Indeed, Social Security operates as a classic Ponzi scheme, with new contributions used to pay off earlier "investors."

Second, life expectancy is up, and fertility rates are down. The population is aging, with a larger number of elderly living longer. This is good news for people but bad news for Uncle Sam.

Third, medical outlays are increasing rapidly. In recent decades Medicare outlays have risen three percent annually above the increase in per capita GDP. Since the elderly consume far more healthcare services than younger Americans do, this factor compounds the impact of demography.

Even before last fall's financial crash, then-comptroller general David M. Walker warned, "The only thing the United States is able to do a little after 2040 is pay interest on massive and growing federal debt. The model blows up in the mid-2040s. What does that mean? Argentina."

Insolvency is not the only problem facing Social Security. The system is essentially stealing from those now entering the workforce.

The rate of return was good for early recipients because they had low payroll tax rates and paid in only for a few years. The very first recipient, Miss Ida May Fuller, contributed (herself and through her employer) just $49.50 in payroll taxes before she retired at age 65. She lived to 100 and collected $22,888.92 in benefits. Although not all early recipients made out so handsomely, many beneficiaries received back their lifetime Social Security "contribution" in months rather than years.

But as the number of workers per retiree has fallen—from 42-to-1 in 1940 to about 3-to-1 today, on the way to below 2-to-1—the tax rate has risen dramatically. Many people of modest means pay more in Social Security deductions than they pay in income taxes. Increasing numbers of young workers now will lose money, assuming there is money available to pay for their benefits when they retire.

Almost every proposed "reform" scheme would further drive down the system's return, increasing taxes while cutting benefits. The program has become the worst sort of fool's bargain—at least for everyone but the politicians who take credit for handing out money to a pliant population.

Last fall's stock-market collapse demonstrates that private markets offer no guarantees. But that uncertainty should be contrasted with the certain bad deal from the federal government. Moreover, the return on private investment has remained well above the levels for Social Security even when measured against major stock-market downturns. The rate of return was over three percent annually, handily beating Social Security's return these days, for even the worst 20-year period in American history, which encompasses the Great Depression.

Furthermore, Social Security's nominal rate of return needs to be discounted by its negative impact on the economy. The program reduces both the amount of money available for workers to save and their incentive to save. By diminishing the resources available for economic investment, Social Security reduces both GDP and real wages in future years. Estimates of that loss range from five to ten percent. Integrating that impact into current rates of return makes today's average return negative.

Advocates of Social Security claim that it benefits lowincome recipients, but Social Security actually discriminates against women, minorities, and anyone else with a shorter life expectancy. Moreover, the program was developed for two-parent, single-earner households. Under the current rules, two-earner couples, singles, and young divorcées—an ever-larger share of the population—are at a disadvantage.

Social Security is more than just a financial bad deal. The program undermines personal responsibility by discouraging saving and encouraging early retirement. Equally damaging, Social Security shifts the duty of caring for our elders to the government. As a result, many Americans end up dependent—a substantial number almost wholly dependent—on government.

Social Security discourages private saving in two ways. First, it takes money that otherwise would be invested in economically productive private activities and dumps it into the Treasury (the "trust fund" is a political fraud) for redistribution by Washington. This year about $560 billion is disappearing into Uncle Sam's porous pocket.

Second, creating a government retirement system makes private saving less necessary. Social Security reduces investment, economic productivity, job creation, and overall growth. Harvard's Martin Feldstein figures that Social Security "benefits replace more than 80 percent of peak preretirement after-tax income. Common sense and casual observation suggest that individuals who can expect such a high replacement rate will do little saving for their retirement." The financial crisis has exacerbated this tendency: More than one third of those between 45 and 54 have stopped contributing to private retirement accounts.

Social Security almost certainly has had a deeper social impact. The program creates a powerful incentive for earlier retirement. Obviously, people may retire whenever they desire and can afford to do so. But it is foolish for Washington to push people into retirement. The National Center for Policy Analysis reports that since the program's beginning the percentage of men over 65 who work has dropped by half. The work-participation rate fell as Social Security covered more men and delivered greater benefits.

The program also has transformed the workplace. The payroll tax directly penalizes employment, discouraging job creation. For the average family, writes Feldstein, Social Security "raises the total marginal tax rate to more than 40 percent and substantially exacerbates the distortions and waste caused by the income tax." The levy also influences choices on how many hours to work and how to structure compensation—emphasizing untaxed fringe and nonpecuniary benefits. This is a particularly perverse incentive for a government pension system funded through employment. Penalizing workers means that people will work and save less, and retire sooner. In turn, there will be fewer workers to support each retiree. This reduction in the number of workers per beneficiary is the principal reason Social Security is rapidly approaching collapse.

The change wrought by Social Security is not just economic but philosophical. Children now see the government rather than the family as having primary responsibility for providing retirement security. And retirees believe the government "owes" them their Social Security benefits. (In fact, the Supreme Court has ruled that Uncle Sam has no legal obligation to pay.)

Intergenerational ties are often difficult to maintain, but they are among the strongest bonds of community. The ultimate result of social welfare is, as Chancellor Bismarck intended, to encourage widespread dependency on the state. America's Founding Fathers feared this possibility. As Thomas Jefferson put it, "Dependence begets subservience and venality."

The imminent collapse of Social Security adds another element to the studied campaign to make people dependent. Never mind that successive presidents and Congresses have promised to protect the elderly. Never mind that policymakers have discouraged Americans from preparing for their own retirement. Never mind traditional notions of commitment, trust, and honor. Uncle Sam will leave everyone high and dry without even a glance backward.

We must confront the welfare state and the entitlement mentality that underlies it. To do that, we must transform Social Security.

The longer we wait, the more difficult it becomes to close the gap. Last year was particularly bad because of the economic crunch; the total unfunded liability for Social Security and Medicare grew by nearly six billion dollars. Reforms are hardest to apply to those who have already retired: "Delaying action until the baby boom is in full retirement insures that the next generation will bear the burden of current inaction," argue Andrew J. Rettenmaier and Thomas R. Saving of the Private Enterprise Research Center at Texas A&M University.

And that cost will be huge. David M. Walker observes that

Failure to take steps to address our large and structural long-range fiscal imbalance, which is driven in large part by projected increases in Medicare, Medicaid, and Social Security spending, will ultimately have significant adverse consequences for our future economy and the quality of life of our children, grandchildren, and future generations of Americans. As a result, the federal government needs to engage in a fundamental review, reassessment, and reprioritization that will ultimately have to span all major spending programs and tax policies.

Perhaps economic reality will finally force Congress to act. For Social Security has become the reverse third rail of government finance: Don't touch it, and America's economy dies.

That seems to be the case with the American public, with a new poll showing rising support for a so-called public option in health care, even as the public continues to oppose greater government control over the health care system.

Most likely that is because supporters of a public option have successfully framed it as just that: an option. That seems entirely reasonable. The American people believe in "choice" and "competition." So why not allow another choice? Most Americans would keep the insurance they have today (and are happy with), but those who wanted to join the government plan could do so.

But that's not the way it would actually work.

A government-run plan would have an inherent advantage in the marketplace, because it ultimately would be subsidized by taxpayers. The government plan could keep its premiums artificially low or offer extra benefits, because it could turn to taxpayers to cover any shortfalls. At the very least, the program carries with it an implicit guarantee against future losses. Would a Congress that has bailed out banks and automobile companies because they are "too big to fail" resist subsidizing the government's insurance plan if it began to lose money?

Even without direct subsidies, the government could prevent the true cost of the program from showing up in premium prices in myriad ways. For example, the government-run plan will not have to pay state or federal taxes, and unlike private insurance plans, who can be sued in state courts, the government-run plan could only be sued in federal court.

Government plans such as Medicare and Medicaid traditionally reimburse providers at rates considerably lower than those of private insurance. Providers recoup the lost income by shifting costs onto those with private insurance. Indeed, it is estimated that privately insured patients pay $89 billion annually in additional insurance costs because of cost-shifting from government programs. If one assumes that the new public option has similar reimbursement policies, it would both allow the public plan to keep its own premiums artificially low while simultaneously increasing costs and, therefore, premium prices for private insurance.

All of this means that the government-run plan would be significantly cheaper than private insurance, not because it would out-compete private insurance or because it was more efficient, but because it had unfair advantages. Businesses, in particular, would have every incentive to dump their workers into the government plan.

Estimates of how many people would ultimately be forced out of their current insurance and into the government plan vary widely. At the low end, the Congressional Budget Office suggests that about three million people would be involuntarily shifted to the government plan under the House bill. It bases this estimate on a premise that that the plan would only be open to the currently uninsured and employers with fewer than 50 employees. On the other hand, the actuarial firm Lewin Associates assumes that the government plan would be open to everyone. Under that scenario, they suggest, 89.5 million workers would be forced into the government plan.

In the end, the private insurance market would be eviscerated, leaving millions of Americans with no choice but the government-run program. No choice. No competition. We would effectively be on the road to a single-payer health care system, with the government in complete control of one-sixth of the U.S. health care system and some of the most important, personal, and private decisions in our lives. Down that road lie massive new taxes, huge budget deficits, and ultimately government rationing of care.

That is not what the American people are telling pollsters they support.

Take Medicare, for example. The Democrats would have us believe that they can cut $500 billion from Medicare spending over the next 10 years without anyone getting less of anything. They are going to save that money, the president says, by eliminating "fraud, waste, and abuse." Undoubtedly that would be the same fraud, waste and abuse that presidents have been eliminating since at least, say, Ronald Reagan.

But, contrary to the president's rhetoric, the bills that Congress is currently debating do cut Medicare.

For example, roughly 10.2 million seniors currently receive their health care through the Medicare Advantage program. That program offers many seniors benefits not included in traditional Medicare, including preventive-care services, coordinated care for chronic conditions, routine physical examinations, additional hospitalization, skilled nursing facility stays, routine eye and hearing examinations, and glasses and hearing aids. The bills currently making their way through Congress would cut payments to Medicare Advantage plans by $100 billion to $150 billion. In response, many insurers are expected to stop participating in the program, while others will probably increase the premiums they charge seniors. Millions of seniors will likely be forced off their current plans and back into traditional Medicare. The Congressional Budget Office makes it clear that, at the very least, the cuts "would reduce the extra benefits that would be made available to beneficiaries through Medicare Advantage plans."

The Democratic cuts also hit traditional Medicare. For example, the bills would reduce reimbursements for diagnostic imaging — things like CT scans, MRIs and X-rays — by as much as 25 percent. And the Senate Finance Committee's bill would penalize doctors who perform too many procedures or tests. Providers whose utilization is in the 90th percentile or above, compared to national averages, will have their Medicare reimbursements cut. The whole point of such provisions is to reduce services.

On top of that, the Senate Finance Committee assumes that there will be a 21 percent across-the-board reduction in what Medicare pays providers. This cut is scheduled under current law and is not technically part of the health care bill, but most observers had expected Congress to defer those cuts, as they have every year since 2001.

And the Republicans? They've reacted with the least-convincing outage since Inspector Renault discovered there was gambling going on at Rick's. Republican Party chairman Michael Steele issued a Seniors' Health Care Bill of Rights promising to "protect Medicare and not cut it." Hardly a day seems to pass without some House or Senate Republican vowing to save Medicare from the Democratic axe.

Having been on the receiving end of "Mediscare" politics so many times, it is probably comforting for Republicans to try turning the table for a change. But their outrage ignores the fact that back in February, these same Republicans proposed even bigger Medicare cuts as part of their alternative budget.

So who is really going to cut Medicare benefits?

The truth is that, depending on which set of accounting measures is used, Medicare is facing unfunded liabilities of $50 trillion to $100 trillion. Yes, that's trillion, with a "T." As a percentage of GDP, Medicare costs are expected to rise from 2.7 percent today to 9.4 percent by 2050. We cannot and will not continue to pay all promised future Medicare benefits.

Of course, there are differences about how future cuts would be made and what we should do with the money. Democratic plans to simply plow the money back into a new government health care program, for example, would do nothing to help our long-term fiscal problems.

The fact is, no matter what they say, Democrats are going to cut Medicare and so are Republicans.

Wouldn't it be nice if we had a politician, from either party, with the courage to tell us the truth?

The widely reported numbers are wrong: This bill would increase the deficit and cost more than $2 trillion over 10 years.

Yes, the headlines on the Congressional Budget Office's preliminary cost estimate were that the bill could cost $829 billion over 10 years and trim the federal deficit by $81 billion. But those numbers are pure fantasy — as CBO plainly, if gently, indicated.

First off, Baucus relies on some cuts that we know won't actually get made.

Long ago, Congress enacted a series of annual cuts to Medicare physician payments that were supposed to begin in 2003. Starting that very year, however, Congress has repeatedly blocked those cuts.

Yet Baucus — contrary to all experience — assumes Congress will let those cuts take place starting in 2012. That implausible assumption creates some $234 billion in "savings" that will never materialize. Factor them out, and the supposed $81 billion in deficit reduction becomes $153 billion in fresh deficit spending.

The CBO's language pooh-poohing Baucus on this was pure bureaucratese — but the agency essentially told Baucus: If the sun rises in the west from 2012 through 2019, then yes, this bill would reduce the deficit.

What of that $829 billion cost figure? It's only CBO's estimate of new federal spending on expanded insurance coverage. On his blog, ex-CBO Director Donald Marron suggests that the bill's other new spending on health-related items boosts the total to $904 billion.

Plus, Baucus mandates new state spending on Medicaid — $33 billion, the CBO estimates. New total: $937 billion.

But Baucus' most audacious gimmick is to push half the cost off the federal budget and onto the private sector — while persuading the CBO to ignore those costs.

The Baucus bill, like every other bill Congress has produced and the overhaul recently enacted in Massachusetts, would expand coverage by forcing Americans to buy insurance. Maybe you don't want to call it a tax, but it's still plainly a cost.

How large a cost? The Massachusetts Taxpayers Foundation found that new federal and state spending accounts for just 40 percent of the Bay State's reforms' cost — and the private-sector mandates for 60 percent.

Apply that ratio to the Baucus bill, and its actual cost exceeds $2 trillion.

In 1994, the CBO effectively killed the Clinton health plan by counting its private-sector mandates as part of the cost. This time around, congressional leaders wrote their bills so that CBO wouldn't count them. But it's just a gimmick — the mandates are still part of this bill's cost.

Baucus & Co. have done a good job of fooling most people about the cost of their legislation. But as Abraham Lincoln admonished, that only works some of the time.

The CBO's formal "score" of the bill should include a cost estimate of the private-sector mandates. Then we can debate the full scope of the legislation and not just the parts Sen. Baucus wants us to see.

If you're going the wrong way down a road, the answer isn't to step on the gas, but to turn around.

It is not that the U.S. doesn't need health care reform, but it needs the right type of reform. Problematic as our system often is, it is possible to make things worse.

All the bills making their way through Congress start from the same failed premise: They would put the government in charge of one-sixth of our economy and some of the important personal and private decisions in our lives.

They would force people to buy a government-designed insurance package or face a penalty. They would establish incentives and structures that could eventually lead to the rationing of care. Some versions would force millions of workers into a government-run plan.

And they would do so at enormous cost to the American people in terms of higher taxes, greater debt and increased insurance premiums. Even the cheapest bill costs more than $800 billion ($2 trillion if off-budget costs are included) over the next decade. Americans would end up paying more, but getting less.

But the problems facing our health care system stem not from too little government control, but too much. Government regulations add more than $169 billion annually to the cost of health care. Other regulations limit competition between insurers and providers by, for instance, prohibiting people from buying insurance across state lines. Government programs such as Medicare and Medicaid are trillions of dollars in debt and are models of waste, fraud and inefficiency.

And our current tax laws penalize people who don't receive insurance through their work, meaning that if you lose your job, you lose your insurance.

The bills now before Congress don't fix these problems. They simply pile on new mandates, regulations, taxes and subsidies. No amount of tinkering, or budgetary sleight of hand, can make them better.

It's time for Congress to scrap its current flawed government-centered approach and start over with a focus on creating a consumer-oriented free market in health care.

After all, isn't it better to get it done right than to just get it done?

Health-care "reform," that is, aims to shift costs and benefits of health insurance from some groups to others. And the losers are turning out to be less docile than politicians had hoped.

All the leading proposals involve massive redistribution from people with healthy lifestyles to those who take more risks. As the Congressional Budget Office explained, "Premiums in the new insurance exchanges would tend to be higher than the average premiums in the current-law individual market... because the new policies would have to cover pre-existing medical conditions and could not deny coverage to people with high expected costs for health care."

That is, because the politicians want people who've already fallen ill to be able to buy insurance at the same rates as the healthy, rates would rise for everyone who has insurance now. That's why the bills would all force healthy people to buy this overpriced insurance, under threat of fines or prison.

There would also be redistribution from people with employer-paid insurance (particularly in risky jobs with high premiums) to those who would be induced to shun such benefits in order to qualify for taxpayer subsidies.

By far the largest redistribution, however, is from those on Medicare to those who'd become newly eligible for Medicaid or federal subsidies.

The major proposals, the AARP Bulletin explains, "include around $500 billion in savings carved from future growth in Medicare spending over a 10-year period."

Even in the Obama era, $500 billion is a lot. Yet we're supposed to believe that less is somehow more — that seniors will benefit from these spending cuts. "The Obama administration and congressional leaders," intones a recent New York Times editorial, "are hoping to save hundreds of billions of dollars by slowing the growth of spending in the vast and inefficient Medicare system that serves 45 million older and disabled Americans. The savings would be used to help offset the costs of covering tens of millions of uninsured people."

President Obama, in an Aug. 16 Times op ed, made such redistribution seem easy and painless: "We'll cut hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid," he said.

Such efforts to appease seniors are not working because they are transparently dishonest.

First of all, the Congressional Budget Office figures that cutting "waste, fraud and abuse" might save $200 million a year — that's millions, not billions.

Second, the hundreds of billions in "savings" are to be carved out of the hides of Medicare providers and Medicare Advantage benefits, not Medicaid. In the Senate Finance Committee proposal, Medicaid gets $345 billion more money from 2014 to 2019.

Third, Medicare is already headed to insolvency. As its trustees openly warn, the program's trust fund will be empty in six to nine years, because its spending continues to grow far faster than the taxes that support it.

That is, Medicare will undoubtedly be slashed again and again in the years ahead, and fees increased — simply to keep the program from eating into the general budget (which is already groaning under unprecedented deficits).

This harsh reality does not turn the insolvent Medicare mess into a congressional piggybank, so that cutting Medicare payments to doctors can be magically transformed into a newfound source of free money to lavish on Medicaid and health-insurance subsidies.

The Times claims the cuts should actually make Medicare better "for most beneficiaries," partly by "helping keep Medicare solvent." That is either a hoax or fraud. If "the savings would be used to help offset the costs of covering tens of millions of uninsured people," as the Times says, then the same savings can't also be used to shore up the Medicare trust fund.

In any case, the proposed Medicare cuts are unbelievably huge. As the CBO explains, the Senate Finance proposal "would increase payment rates for physicians' services for 2010, but those rates would be reduced by about 25 percent for 2011 and then remain at current-law levels... Under the proposal, increases in payment rates for many other providers would be held below the rate of inflation."

Amazingly, the AARP Bulletin describes these draconian cuts as "paying doctors more for practices that improve quality of care and save money; and paying providers (notably hospitals and home health agencies) a little less of an increase each year."

Sorry: Slashing physician payments by about 25 percent in a single year (and 5.5 percent in later years) is not "a little less." And holding other fees below inflation translates to a perpetual drop in real wages for health-care employees.

Proponents of raiding Medicare to finance "reform" (redistribution) pretend that cutting Medicare payments for services, procedures, tests, devices and drugs is not at all the same as cutting benefits. Nonsense. If we pay health-care providers far less, then they will provide fewer services to Medicare patients. As President Obama suggested, just tell grandma to skip the hip surgery and pop pain pills instead.

The president and his allies in Congress believe they can use deep cuts in Medicare — plus steep new taxes on health insurance, drug and medical device companies — to pay for a vast expansion of Medicaid and new health-insurance subsidies.

These grandiose redistribution schemes are grounded in lethal economics and suicidal politics. Because bad ideas are hard to sell, politicians and journalists have been peddling health redistribution with the rhetorical and statistical equivalent of waste, fraud and abuse.

American voters, particularly seniors, don't like to be lied to. They are just as leery of the political redistribution of health as they are of the redistribution of wealth.

The CBO's instant analysis of the latest Senate Finance Committee proposals claims the number of uninsured would fall by 29 million, and implies (with critical caveats) that revenues from slashing Medicare and imposing a 40% tax on Cadillac insurance plans might suffice to pay the bills.

Nearly half the alleged reduction in the number of uninsured (14 million) is attributed to a vast expansion in the number of non-poor people made eligible for Medicaid, at a cost of $80 billion a year by 2019.

But that 14 million figure is exaggerated by at least half, because such "public options" are commonly substituted for private options. As the 2009 Medicare trustees report points out, for example, "many Medicare beneficiaries who had private drug insurance coverage (such as Medigap policies) switched to the subsidized Part D coverage in 2006." The same thing will happen if subsidized Medicaid coverage crowds out private plans.

Investigating a previous expansion of Medicaid in 1987-92, Harvard economist David Cutler and Jonathan Gruber of MIT found that "between 47% and 74% of the increases in Medicaid coverage due to these expansions were offset by lower private insurance coverage."

Using the low end of that 47% to 74% range, suppose only half of the CBO's 14 million new Medicaid beneficiaries would otherwise have been insured privately. That means pulling the other 7 million out of the ranks of the uninsured would cost taxpayers $11,429 per person by 2019--a Cadillac plan with the quality of a Yugo. It also means the net reduction in the number of uninsured would be 22 million, not 29 million. But that 22 million figure is also much too high.

Just as millions would gladly replace insurance they now pay for with Medicaid that someone else pays for, millions would likewise replace their employee contributions to employer-provided plans with subsidized plans on federal exchanges.

Subsidies are much more attractive than tax-exempt perks to the 47% of Americans who don't pay income tax. Yet the CBO estimates that the number of Americans sticking with employer-provided plans will fall by only 3 million after 2015--less than 1.9%. A July 14 CBO analysis of the House plan, by contrast, had the number on employer plans falling by 9 million, and the Lewin Group estimated a larger decline.

If 9 million lose their employer plans, rather than the CBO's rosy new estimate of 3 million, some of those 9 million may well be added to the ranks of the uninsured. Most would probably move into subsidized plans. But that means the number qualifying for subsidies would be several millions larger, so the cost of this proposed entitlement program would be much higher than the CBO imagines.

Firms with more than 50 workers would be subject to a fine (tax) if they let their employees grab the subsidies offered in the federal exchange. But many employers are paying more than the fine for health benefits, and premiums would soar if insurance companies are compelled to ignore preexisting conditions and charge similar rates regardless of health risks. Wages might rise if employer health benefits were cut, but that effect would be muted because subsidies to plans bought on the exchange would largely offset the loss of employer contributions.

Even if a greater than estimated exodus from corporate plans to subsidized plans did not add many billions to the CBO's estimated cost of subsidies, the agency would still be mistaken about the plan's supposedly benign effect on budget deficits.

The proposal to slash Medicare payments to physicians by more than a third would cause such trauma for Medicare patients that those cuts are as unlikely to materialize as other cuts Congress previously put down on paper (as a budget trick), then promptly repealed. The CBO said as much but did so too politely for most reporters to get the point.

The revenue predicted from taxing the stuffing out of Cadillac health plans is equally unlikely. It assumes nobody would bother doing anything to avoid paying a 40% penalty tax. According to the CBO, the Joint Committee on Taxation "estimates that the [40% tax] would generate about $46 billion in additional revenues in 2019 and that receipts would grow by roughly 10% to 15% per year in the following decade." The more you tax previously tax-free perks, the faster they grow?

In reality, Congress would be lucky to collect $10 billion a year from this punitive tax, and growth of revenues beyond 2019 would be negligible or negative. If the government slaps a 40% tax on high-premium health plans, affected employees would quickly demand to be compensated in some way that is not so brutally taxed. Substituting more salary for a cheaper health plan would be a win-win deal for all employees who are in a tax bracket lower than 40%.

In short, the CBO estimate of the number of people who would stop being uninsured under the Senate Finance Committee proposal is exaggerated by at least 7 million to 10 million. And any notion that vastly expanding Medicaid and insurance subsidies would not add enormously to future budget deficits is entirely fanciful.

By our count, the president made more than 20 inaccurate claims in his speech to Congress. We have excluded several comments that are deeply misleading but not outright false. (For example: Obama pledged not to tap the Medicare trust fund to pay for reform. But there is no money in that "trust fund," anyway, so the pledge is meaningless.) Even so, we may have missed one or more false statements by the president. Our failure to include one of his comments in the following list should not be taken to constitute an endorsement of its accuracy, let alone wisdom.

1. "Buying insurance on your own costs you three times as much as the coverage you get from your employer." The Congressional Budget Office writes, "Premiums for policies purchased in the individual insurance market are, on average, much lower — about one-third lower for single coverage and one-half lower for family policies." It is true that individual insurance policies are generally 30 percent less comprehensive than employer-provided insurance, and comparable individual policies are about twice as expensive. But much of the extra cost is a function of the tax penalty on purchasing such insurance and the stunted market that penalty has yielded.

2. "There are now more than 30 million American citizens who cannot get coverage." An outright falsehood, whether you use the president's noncitizen-free estimate or the standard, questionable estimate of 46 million uninsured residents.

A study prepared for the federal government estimates that 9 million people counted as "uninsured" in the standard estimate are in fact enrolled in Medicaid. The left-leaning Urban Institute estimates that 12 million are eligible but not enrolled, meaning they could get coverage at any time. Health economists Mark Pauly of the University of Pennsylvania and Kate Bundorf of Stanford estimate that one quarter to three quarters of the uninsured can afford to purchase coverage, but choose not to do so.

3."And every day, 14,000 Americans lose their coverage." The paper that generated this estimate assumed that two months of severe job losses would continue forever. Applying that paper's methodology to a broader period of rising unemployment (January 2008 through August 2009) produces a figure below 9,000.

It also assumes those coverage losses are permanent. Like many of the 46 million Americans we label "uninsured," many of those 9,000 will regain coverage after a number of months. (David Freddoso illustrates the absurdity of assuming that all coverage losses are permanent.)

4. "One man from Illinois lost his coverage in the middle of chemotherapy... They delayed his treatment, and he died because of it." He didn't die because of it. The originator of this false claim, a writer for Slate named Timothy Noah, has admitted he got it wrong.

5. "Another woman from Texas was about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." Scott Harrington supplied more facts in the Wall Street Journal: "The woman's testimony at the June 16 hearing confirms that her surgery was delayed several months. It also suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application." The woman deserves sympathy, but Obama has stretched the truth here.

6. Rising costs are "why so many employers . . . are forcing their employees to pay more for insurance." Perhaps no other issue generates as much of a consensus among health-care economists as this one: The "employer's share" of employees' health-care costs comes out of those employees' wages, not out of profits. In this comment and in five others in his speech, Obama contradicts that basic truth. Employers aren't forcing their employees to pick up a larger share of the bill because they can't. Workers are already paying the entire bill.

7. Rising costs are "why American business that compete internationally... are at a huge disadvantage." False. The rising cost of health benefits does not increase employers' labor costs because, again, wages adjust downward to compensate. The Congressional Budget Office, under the leadership of Obama's OMB director, Peter Orszag, confirmed that health-care costs do not hinder competitiveness. Obama economic aide Christina Romer has called this competitiveness argument "schlocky."

8. "Those of us with health insurance are also paying a hidden and growing tax for those without it — about $1,000 per year that pays for somebody else's emergency room and charitable care." That number comes from a left-wing advocacy group. A Kaiser Family Foundation study debunked the group's analysis, reaching an estimate closer to $200 per year for a family. The CBO report mentioned above reached the same conclusion.

9. At this point, Obama said, "These are the facts. Nobody disputes them." This comment continues Obama's already long tradition of trying to curtail debate by denying that anyone disagrees with him.

10. "[Reform] will slow the growth of health-care costs for our families, our businesses, and our government." In July, CBO director Douglas Elmendorf said, "In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs." The CBO projects that the legislation that Sen. Max Baucus (D., Mont.) has since introduced "would reduce the federal budgetary commitment to health care, relative to that under current law, during the decade following the 10-year budget window," but hints that the 40 percent cut in Medicare's reimbursement rates, which helps Baucus achieve that feat, is politically unrealistic. (More on that below.) Health economist Victor Fuchs writes that the proposals before Congress "aim at cost shifting rather than cost reduction." Obama and his allies have yet to demonstrate anything to the contrary.

11. "Nothing in this plan will require you or your employer to change the coverage or the doctor you have. Let me repeat this: Nothing in our plan requires you to change what you have." Obama's wording is lawyerly: While not denying that his plan would cause people to lose existing coverage with which they are satisfied, he leads us to believe that he is denying it. But even on its own terms, Obama's claim is false. The CBO estimates that slashing payments to Medicare Advantage, as Obama advocates, "would reduce the extra benefits that would be made available to beneficiaries through Medicare Advantage plans." It would also cause some people to lose their coverage.

12. Requiring insurers to cover preventive care "saves money." Nope. According to a review in the New England Journal of Medicine, "Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not."

13. "The [bogus] claim... that we plan to set up panels of bureaucrats with the power to kill off senior citizens... is a lie, plain and simple." Sarah Palin claimed that Obama's "death panels" would deny people medical care, not actively kill them. If Palin believes her claim, it is not "a lie, plain and simple." Most important, the substance of Palin's claim is, in fact, true. Obama himself proposed a new Independent Medicare Advisory Council with the authority to deny life-extending care to the elderly and disabled.

14. "There are also those who claim that our reform efforts would insure illegal immigrants. This, too, is false. The reforms I'm proposing would not apply to those who are here illegally." For better or worse, the president's plan would, in his words, insure illegal immigrants. Various federal agencies, immigration critics, and the media all acknowledge that a small number of undocumented aliens obtain Medicaid benefits despite being ineligible. The president seeks to expand Medicaid, which would create greater opportunities for ineligible aliens to enroll.

The House Democrats' health-insurance exchange, which Obama supports, would "apply to" undocumented aliens. The CRS writes that the House legislation "does not contain any restrictions on noncitizens participating in the Exchange — whether the noncitizens are legally or illegally present." Nor does it require that the legal status of people receiving subsidies be verified.

Finally, Obama supports granting legal status to millions of illegal immigrants, which would make them eligible for government benefits under his health plan.

15. "Under our plan, no federal dollars will be used to fund abortions." Unless Obama refers to some draft legislation inside his head, this claim is false. The House bill allows the "government option" to pay for abortions directly from the U.S. Treasury. Both the House and Baucus bills would subsidize private insurance that cover abortions. (See Douglas Johnson's comment on this article.)

16. Critics of the public option would "be right if taxpayers were subsidizing this public insurance option. But they won't be. I've insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects." How quickly we forget the example of Fannie Mae and Freddie Mac. Like those institutions, the public option would benefit from an implicit subsidy: Everyone would know that Washington would not allow the program to fail, and financial institutions would therefore offer it better rates. (During the Clinton administration, Obama adviser Larry Summers reported that a similar implicit guarantee was worth $6 billion per year to Fannie and Freddie.) The public option would thus be able to undercut its less-subsidized competitors.

17. "And I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need." Unless the president proposes to abolish insurance, or abolish all care management, there will always be tension between patients, doctors, and public/private insurers over what patients "need." Such tensions are sure to arise under the president's IMAC proposal.

But even if a new program would be "administered by the government, just like Medicaid or Medicare," it would interfere in those decisions. As an administrative-law judge wrote to one of us after Obama's address: "I am a government bureaucrat . . . and I just happen to be reviewing [six] cases, albeit involving Medicare and Medicaid, where the government has inserted itself between the patient and the care prescribed by the physician."

18. "I will not sign a plan that adds one dime to our deficits — either now or in the future." "The plan will not add to our deficit." None of the bills before Congress can credibly claim to keep the deficit from rising. The one that comes closest, the Baucus bill, does so by making the wildly implausible assumption that Congress will allow 40 percent cuts in physician payments under Medicare to take place in 2012. Congress has routinely refused to support much smaller cuts.

19. "Now, add it all up, and the plan I'm proposing will cost around $900 billion over ten years." Even the supposedly parsimonious Baucus bill would cost closer to $2 trillion than $1 trillion once we "add it all up." The CBO says that bill would spend a mere $774 billion over ten years, in part because the spending begins late in that ten-year window. Republican staffers on the Senate Budget Committee estimate that the Baucus bill would cost $1.7 trillion over the first ten years of full implementation.

Moreover, the preliminary CBO score does not measure the full cost of the bill because it does not include the mandates Baucus would impose on states (about $37 billion) and the private sector (not yet estimated, but 60 percent of total costs in Massachusetts). The other bills would cost even more.

20. "The middle class will realize greater security, not higher taxes." Obama would make health insurance compulsory for the middle class (and everyone else). If he thinks that isn't a tax, he should listen to his economic adviser Larry Summers, or his nominee for assistant secretary for planning and evaluation at HHS, Sherry Glied. Both liken the "individual mandate" to a tax, as do other prominent health economists like Uwe Reinhardt (Princeton) and Jonathan Gruber (MIT). The CBO affirms that the penalties for non-compliance "would be equivalent to a tax or fine."

If Obama thinks the middle class wouldn't pay the taxes he wants to impose on the "drug and insurance companies," he should read this CBO report or talk to the junior senator from West Virginia, who accurately describes those levies as a "big, big tax" on middle-class coalminers.

21. "I won't stand by while the special interests use the same old tactics to keep things exactly the way they are." Who are these special interests? In case Obama hadn't noticed, everyone from the drug-makers to the unions to the insurance companies he demonizes are spending millions to build momentum for his version of reform — in no small part because Obama has promised to buy them off with middle-class tax dollars.

When President Obama makes a factual claim about health-care policy, he does not deserve the benefit of the doubt about its accuracy. We do not know whether he has been badly misinformed or is deliberately trying to mislead. Either way, he cannot be trusted to reform American health care.

This is the much-publicized and debated Baucus bill, named for Senate Finance Committee Chairman Max Baucus. In its news section, the Wall Street Journal reported Sept. 17 that this bill "breaks a logjam and is likely to form the core of a bill in the full Senate."

During the continuous, extensive coverage of this proposed legislation, there has been only very limited mention – and none I've seen in the mainstream press – of a section that penalizes doctors for Medicare patients who, for at least five years (from 2015-20), authorize total treatments that wind up in the top 10 percent of national annual Medicare costs per patient.

The 1 in 10 Medicare doctors who spend beyond this limit will themselves lose 5 percent of their own total Medicare reimbursements. Considering the already low rates Medicare doctors get – and the president pledges they will get lower – this could be a heavy penalty.

As Burke Balch, director of the National Right to Life's Center for Medical Ethics, says: "This (part of the Baucus bill) means that all doctors treating older people will constantly be driven to try to order the least-expensive tests and treatments for fear they will be caught in that top 10 percent. Note that this feature operates independently of any considerations of quality, efficiency or waste. If you authorize enough treatment for your patients, however necessary and appropriate it may be, you are in danger of being one of the 1 in 10 doctors who will be penalized each year."

There is, however, in the Baucus bill what seems to be an exception to this iron mandate for reducing medical care costs that indeed is not related to quality of care, while aiming solely at reducing the national debt. There is a section (page 80, the Chairman's Mark) that gives Kathleen Sebelius, secretary of Health and Human Services, permission to adjust these strictures for "those physicians who tend to serve less-healthy individuals who may require more intensive interventions."

But what is submerged in here is the cold fact that even if a Medicare doctor does apply this permission in treating certain patients, as he considers necessary, the pressures will continue – with regard to his entire cumulative roster of other Medicare patients – to keep very much in mind that he or she may still be in peril of winding up at the end of a year in the punishable top 10 percent of annual Medicare costs per patient.

To bring Balch back into the conversation concerning the actual effects of the 10 percent health penalty on real-life patients, as well as doctors, he points out that this penalty for Medicare doctors "creates a moving target."

"By definition," Balch said, "there will always be top 10 percent, no matter how far down the total amount of money spent on Medicare is driven." Say that 2015, the top 10 percent is anything over $10,000 per patient. In 2016, most doctors will scramble to hold down the treatments they authorize to avoid breaking that limit."

But the real possibility, as a result, is that the total annual amount of that limit will drop. So next year, doctors will try to avoid being in the penalty box for anything they authorize over $9,500. Burke Balch adds:

"As the process repeats, the next year might be anything over $9,000; the year after that, anything over $8,000, and so on. It's a game of musical chairs, in which there is always one chair less than the number of players. No matter how fast the contestants run, someone will always be the loser when the music stops."

But Medicare doctors will not be the only losers. As the doctors struggle to keep abreast of the continually falling limit of the money they can authorize for their contingent of patients, consider what those patients will lose in the quality of their treatment.

The bluntest assessment of this approach to health care "reform" is by National Right to Life Executive Director David N. O'Steen:

"It takes the telltale fingerprints from the government: Instead of bureaucrats directly specifying the treatment denials that will mean death and poorer health for older people; it compels individual doctors to do the dirty work."

Even if this insidious provision does not survive in the eventual Senate bill, or is excluded from the subsequent House-Senate Conference Committee report on what President Barack Obama will eventually enact into law, its actual existence is a further warning to all of us to pay very close attention to all the health care "reform" bills before any of them becomes law. For some of us, our very lives may depend on the ultimate statute – not only because of the quality of care we will get, but, rather, for the nature of our final exit.

An adage that took me many years to understand is that "what the government gives, it can take away." That's why an essential individual responsibility of American citizenship is to keep a close eye on your government at all times.

The dirty little secret is that "Obama-care" isn't about reducing healthcare costs or making coverage more secure. It's about robbing Peter to pay Paul.

How many young and elderly people can we rob to subsidize coverage for the uninsured? How can we leverage the 50% of health spending that government already controls to push payments below costs among the other 50%? How many special interests should we bribe along the way? (Answer: all of them.)

Supporters from President Obama right down to you assure us that consumers will come out ahead. The only losers, you assure us, will be the insurance industry.

The opposite is true: Democrats in Congress are taxing workers to pay off insurance companies. Democratic Sen. Max Baucus (D-Mont.) just proposed $774 billion in subsidies for private insurers. (Somehow, that's supposed to be more moderate than House Democrats' $773 billion in subsidies.)

The outrage at the August town halls came from voters realizing that under Obama-care, they're not Paul -- they're Peter.

"Almost every political pronouncement now emphasizes cost reduction as a central object of healthcare reform," writes Stanford health economist Victor Fuchs. "The policy recommendations that follow, however, frequently aim at cost shifting rather than cost reduction." Cost shifting, Fuchs reminds us, "does nothing to reduce the real cost of care."

Real reform would reduce costs by letting individual consumers control their healthcare dollars and choose their health plans.

Eliminating the tax preference for job-based coverage would let workers control the $4,000 to $10,000 of their earnings that employers now control and choose secure coverage that stays with them between jobs. Converting Medicare to a voucher program, with larger vouchers for the poor and the sick, would protect seniors from government rationing.

Consumers will spend that money more wisely than employers or government ever could. They will drive costs down because they will personally reap the rewards.

Real reform would further reduce the cost of coverage by letting workers purchase coverage from other states. As Cal State Northridge economist Shirley Svorny suggests, real reform would also make medical services more affordable by eliminating barriers to competition by nurse practitioners and other mid-level clinicians.

Those two steps would not only increase competition and reduce costs. They would improve many dimensions of quality by helping the Kaiser Permanente model spread to other states. That sounds better than summarily kicking Kaiser out of Medicare Advantage, doesn't it?

Our healthcare sector is a mess. Countless Americans are suffering and dying -- yes, dying -- because well-intentioned government interventions are driving costs higher, blocking innovation and leaving us with insecure coverage.

Yet the greatest strength of America's healthcare sector is that it shows what competition can do when market forces are given room to breathe. What do you say we give market forces a little more breathing room?

But first, let's stop the kleptocrats and kill this insurance-company bailout.

For the past six months, six members of the Senate Finance Committee, led by Chairman Max Baucus, have been laboring mightily to design a health-care bill. Yesterday they finally brought forth their product — and it leaves us with more questions than answers.

Despite months of work, Baucus hasn't really produced a bill yet, only a 223-page summary of what he hopes a bill will contain.

Here is some of what we know and don't know:

First, he claims the bill would cost only $856 billion. (Remember when that sounded like a lot of money?) In fact, that likely understates the true cost. The Congressional Budget Office only looks at a 10-year budget window, that is, 2010 to 2019. But most of the bill wouldn't even start until 2014. Thus, the "10-year cost" covers only five years of actual spending. Future costs are expected to increase dramatically.

The proposal isn't all bad. Most significantly, it drops the idea of a government-run "public option" in favor of co-ops. Government involvement with these co-ops would essentially be limited to providing start-up grants. The co-ops are unlikely to have much, if any, impact on the cost or availability of health insurance, but are far preferable to a government-run plan.

Baucus would also take the first tentative steps toward letting people buy health insurance across state lines. He'd allow states to establish interstate compacts for insurance purchases starting in 2015, and also let insurers develop national products that could be sold in any state. National plans would be exempt from state-mandated benefits.

This doesn't go far enough, and risks simply transferring regulation and mandates from the state to the regional or national level. Still, it looks like a tiny step in the right direction.

But in the end, this is still a plan that will make Americans pay more and get less.

Its centerpiece is a heavily punitive individual mandate — a requirement that every American buy a government-designed minimum-insurance package. Failure to comply would result in a fine that could run as high as $3,800 for a family of four.

Moreover, the mandate may not apply just to those without insurance today. While Baucus' summary says that those with "grandfathered" plans wouldn't have to change their current policies to satisfy the mandate, it's vague about what qualifies as "grandfathered."

Plus, employer-provided plans — that is, the policies of the vast majority of us — would have just five years to comply with the new insurance regulations, and "grandfathered" plans wouldn't be eligible for any subsidies. There's thus an excellent chance that most people wouldn't actually be able to keep their current plans.

Some seniors would also be forced out of their current arrangements. Baucus would cut payments to Medicare Advantage — which is likely to push many insurers out of the program, while others would raise the premiums they charge seniors. Millions would likely be forced back into traditional Medicare.

(The plan also targets two other GOP health-care reforms of recent years: It would impose new restrictions on Health Savings Accounts and limit the ability of workers to take advantage of tax-free Flexible Spending Accounts.)

Baucus also wants a mandate for employers to provide insurance to workers, though it's less severe than the mandate in the House bills. He has no specific requirement for employers to provide insurance — but any employer who failed to do so would have to pay the cost of all subsidies that the government provides his or her workers to help them pay for insurance on their own, up to $400 a worker.

But it's not really employers who'll pay in the end: They'll respond by making offsetting cuts to their payrolls, by reducing compensation and/or staff. In other words, the government will be giving the worker a subsidy with one hand, and taking it back with the other.

Baucus also wants insurance regulations similar to the guaranteed-issue and community-rating provisions that failed so spectacularly in New York in the 1970s. Those provisions would drive up premiums for younger and healthier workers in order to subsidize premiums for those who are older and sicker.

Finally, the Baucus plan imposes heavy new taxes, mainly on the middle class. Chief among these is a 35 percent excise tax on health-insurance plans that offer benefits in excess of $8,000 for an individual plan and $21,000 for a family plan. Insurers would almost certainly pass this tax on to consumers via higher premiums. And there are a host of taxes, fees and assessments on health-care providers that will almost certainly result in higher health-care costs.

And it's not just federal taxes that would go up. The plan would force states to raise Medicaid eligibility to 133 percent of the poverty level, and to enroll single, childless adults. The federal government would pick up only part of the higher cost — obliging states to come up with more cash. Indeed, wealthier states such as New York and Connecticut could have to foot as much as 20 percent of the bill. Given the budget strains already facing states like New York, state tax hikes are likely.

Somehow, "it could be worse," isn't really the answer to health-care reform.

Here is some of what we know and don't know:

The Good:

— The plan drops the idea of a government-run "public option" in favor of co-ops. Government involvement with these co-ops would essentially be limited to providing start-up grants. The co-ops are unlikely to have much, if any, impact on the cost or availability of health insurance, but are far preferable to a government run plan.

— The plan takes the first tentative steps toward allowing people to purchase health insurance across state lines. It would allow states to establish interstate compacts for insurance purchasing beginning in 2015. It would also allow insurers to develop national products that could be sold in any state. National plans would be exempt from state mandated benefits. This doesn't go far enough, and risks simply transferring regulation and mandates from the state to the regional or national level, but a first read suggests it is a step in the right direction.

The Bad:

— The plan would force states to increase Medicaid eligibility to individuals at 133 percent of the poverty level, and to enroll single, childless adults. While the federal government would pick up some of the increased cost, states would be responsible for at least some of the increase, a provision that will undoubtedly strain already tight state budgets.

— While the employer mandate is much watered-down, it is still there. The Baucus plan has no specific requirement for employers to provide insurance. But any employer who fails to do so would have to pay the cost of all subsidies that the government provides his or her workers to help them pay for insurance on their own, up to $400 per worker. Since it will ultimately be the worker who pays the mandate's cost, through reduced compensation or reduced employment, the government will be giving the worker a subsidy with one hand, and taking it back with the other.

— The bill would cut payments to the Medicare Advantage program. In response, many insurers may stop participating in the program, while others could increase the premiums they charge seniors. Millions of seniors will likely be forced off their current plan and back into traditional Medicare.

The Ugly:

—The Baucus plan contains a heavily punitive individual mandate, a requirement that every American purchase a government-designed minimum insurance package. Failure to comply would result in a fine that could run as high as $3,800 for a family of four. Moreover, the mandate may not apply just to those without insurance today. While the summary says that those with "grandfathered" plans would not have to change their current plan to satisfy the mandate, it is vague about what qualifies as "grandfathered." The summary also says that employer-provided plans would have to be changed within five years to comply with new insurance regulations, and that "grandfathered" plans would not be eligible for any subsidies. It is unclear, therefore, whether people will be able to keep their current plans.

— The Baucus plan imposes a 35 percent excise tax on health insurance plans that offer benefits in excess of $8,000. Insurers would almost certainly pass this tax on to consumers in the form of higher premiums. Roughly half of Americans, mostly middle-class, would be affected. There are also "fees" on prescription drug companies, medical device manufacturers, and clinical laboratories. This is simply a way of hiding taxes, and will result in higher health care costs that will be passed on to consumers.

The political process on health-care reform is stymied. Despite enjoying sizable Democratic majorities in Congress, President Obama has not yet devised a health-care reform that would attract sufficient votes. To be politically viable, a bill will need at least 70 percent support to provide Democratic leaders plausible political evidence of the bill's bipartisan nature. But this is extremely difficult when the legislation must achieve multiple and conflicting goals — extending health insurance to all, yet reducing health-care cost growth.

Powerful forces are arrayed in opposition to the president's approach to health-care reform. Although Obama's approach holds potential for strengthening Medicare's finances over the medium term, some of the strongest opposition has emerged from retirees who perceive a risk of losing the generous coverage they currently enjoy.

Will seniors ever acquiesce to what Sarah Palin referred to as "death panels"? As our Cato colleague Will Wilkinson points out, that pejorative term is an inappropriate description of a necessary mechanism.

Medicare's funding is drying up. According to Medicare's trustees, the Medicare Part A (Hospital Insurance) trust fund will be exhausted by 2017. And Medicare Parts B and D (supplementary medical insurance and the Medicare prescription-drug plans) are growing at breakneck speeds and imposing a heavy drain on federal general revenues — which provide more than three-quarters of their funding. A key part of the solution is to rationalize the U.S. health-care system to reduce cost growth. But that would mean tighter funding constraints on Medicare.

Before Medicare was introduced, medicial decisions during seniors' last few months were made in the context of family finances. Perceiving the financial burden on their offspring, many parents and grandparents chose to forgo expensive life-extending procedures and treatments. Public funding has changed that calculus; the costs are no longer a burden on "my children and grandchildren," but on more nebulous and distant "taxpayers and younger generations." But we cannot expect the government to avoid making difficult decisions.

The adoption of more stringent Medicare funding rules need not put end-of-life medical-care decisions in the hands of bureaucrats. Doctor-patient counseling and the preparation of living wills earlier in life are ways to choose among available health-care alternatives during one's final months. But those choices must be subject to tighter constraints on public funding to restore sustainability to the federal budget.

Imposing tighter Medicare spending rules will involve establishing funding criteria on a wide variety of treatments and procedures. In each case, the decision must account for the cost and the potential for delivering real health benefits. Is a $30,000 procedure that purchases a 20 percent chance of extending by three months the lifespan of a diabetic 80-year-old worthwhile? Perhaps not. If the same procedure increases survival by two years on average for an otherwise healthy 60-year-old, does it justify public funding? Most Americans would say yes. Even Ted Kennedy's ideal of "a uniform health-care system for all" cannot escape these sorts of discriminatory choices.

The mechanism for reducing Medicare costs proposed by the Obama administration — an advisory panel that would recommend Medicare funding criteria — won't work, according to the Congressional Budget Office. So if cost-cutting is the goal, and we fail to introduce an appropriate mechanism to achieve it, more severe cuts in public funding of treatments will follow. Patients will be arbitrarily denied care. That is, a real "death panel" will become unavoidable.

So, having committed to not explicitly increasing taxes on the middle class, President Obama has opted for a health-care reform that would impose a stealth tax on the young. Here's how it would work: Under an individual health-insurance mandate, all premiums would be based on average health-care costs — not on the health of the actual applicant. That is, a healthy 25-year-old pays the same premium as a middle-aged Big Mac addict, and the former's payments subsidize the latter's treatment. Not only is this unfair, but it would sustain today's overly generous health-care coverage for seniors only for a little while longer.

The Congressional Budget Office already projects that, failing effective adjustments to reduce health-care costs, tax rates will have to double by 2050 to pay for the government's existing spending commitments. Rather than work to shrink those commitments, the Obama health reform proposal would expand them—which would break the economy sooner.

The key to making effective health care policies is to get the economics right: Unfortunately, several areas of the president's approach get the economics wrong.

Insurance companies are in the health-insurance business to make a profit. Kill their profitability and the capital they employ will migrate elsewhere, creating exactly the opposite outcome: higher insurance costs and even more uninsured individuals.

But under the mantle of "greater stability" for the already insured, the president rattled off a series of stricter regulatory measures concerning coverage for pre-existing health conditions, preventive treatments, the use of health ratings, continuation of coverage upon losing or changing jobs, limits on out of pocket expenses and so on.

Sure, insurance companies attempt to improve their risk pools by basing premiums and coverage on health conditions. But this encourages people to live healthier lives for lower premiums, costing the system less. Imposing more stringent regulations will only induce higher premiums and fewer people will be able to afford private coverage, whether individually or through their employers.

For the uninsured, the president offers insurance coverage at competitive prices through new health-insurance exchanges — including a publicly funded option. According to the Congressional Budget Office, the per-capita subsidy for this would equal $4,600 in 2014, rising to $6,000 by 2019. Multiply those numbers by the 30 million or so uninsured citizens and we're talking about rather massive increases in annual deficits.

The president claimed that the subsidies and the public plan option offered to the uninsured would be paid for out of premiums, cost savings from eliminating fraud and abuse and new taxes on insurance and drug companies and expensive health plans. New taxes on individuals would not be used. However, the president offered no concrete solution or mechanism to achieve cost savings. Moreover, the public insurance agency's "not-for-profit" operation will render private insurance companies uncompetitive — with the (un)intended consequence of driving them out of business rather than increasing competition. Indeed, evidence from expansions of Medicaid coverage shows that take-up by the uninsured — those whom the expansion targets — is small, but the shift by those already insured from private to public insurance is very large.

Then there's the canard that the young impose costs on others by opting out of health insurance. In fact, the likelihood of requiring health insurance is extremely low for those younger than age 45. Their choice to forgo health insurance reflects a reasonable assumption of risk. If they fall sick, they can access the emergency room at a cost to others. But this cost source is small, contrary to the president's claim. A recent study by Jonathan Gruber of MIT shows that for physicians' services, about two-thirds of the uninsured pay list prices whereas the insured pay much lower prices. Indeed, even accounting for those uninsured people who don't pay, the uninsured as a whole do not impose net costs on the rest.

If the young were forced to purchase insurance, they would be charged a premium based on the population's average probability of falling sick, and the average cost of treatment (given sickness) for the general population — both of which are much larger than the average likelihood and cost for the young alone. Thus, the premiums that young uninsured people would have to pay would be much larger than those reflecting their actuarially fair costs of coverage. In effect, they would be paying the fair premium plus a hidden tax. Meaning the young would be taxed to pay for care services to the old, the nonsmokers for the smokers, the salad-eaters for the Big Mac eaters and so on.

The president strongly and correctly criticized the use of the term "death panels." We believe that term to be a misnomer for a necessary mechanism — to make choices about public funding for treatments under specific conditions, rationally considering the health benefits that would result from the costs incurred. But the president trotted out the same mechanism to achieve this goal — a medical advisory panel — that the Congressional Budget Office has declared would be ineffective.

The one item we agree about with the president is that Medicare and Medicaid costs are rising too rapidly. Unchecked soon, they could drive out other public services or cause taxes to rise to economically destructive levels. Without an effective mechanism to reduce health care cost growth — especially in the government's large entitlement programs — we will eventually be forced to adopt what really would be appropriately named "death panels": Limits on public coverage and treatment determined not rationally, but arbitrarily.

It's clear that reining in "auto-pilot" entitlement expenditures is the key to sustaining balanced future provision of public services and ensuring a robust economy. Unfortunately, the president's speech provides yet another example of politicians adopting soaring rhetoric designed to soothe us into accepting half measures, hidden taxes and un-needed programs. Rather than cutting existing and overextended budget commitments, the president's approach would dig a deeper fiscal hole.

And that is what we saw last night. In President Obama's first national address on health care in, oh, 49 days, he gave us lots of showmanship. The rhetoric was as usual carefully crafted and persuasive. He threw a couple of bones to Republicans, such as demonstration projects for tort reform, and mollified liberals by defending the public option. He effectively countered some of the more hyperbolic opposition claims about things like "death panels." He even played the Ted Kennedy card. The speech was interrupted dozens and dozens of times by applause.

But, beneath all the sizzle, there remains the same bad bill.

For example, as he has in virtually every appearance he makes, the president repeated "Nothing in this plan will require you or your employer to change the coverage or the doctor you have." He even repeated it. "Nothing in our plan requires you to change what you have."

That of course is quite simply untrue. The president favors a requirement that everyone must carry basic health insurance. But the individual mandate that he favors and included in the bills before Congress doesn't just say you have to have insurance: It specifies what benefits your insurance must have, even if you don't want those benefits or they boost the cost of your policy.

Obama also claimed about the new public option, more properly called a government-run insurance program, "No one would be forced to choose it, and it would not impact those of you who already have insurance." But the reality is that, because a taxpayer-subsidized government plan could undercut private insurance premiums, employers would have every incentive to dump their employees into the government plan.

The president said that he won't sign a bill that adds "one dime to the deficit now or in the future." But the Congressional Budget Office says the current health-care bills will increase the budget deficit by at least $239 billion over the next 10 years, and far more in the years beyond that. If the new health-care entitlement were subject to the same 75-year actuarial standards as Social Security or Medicare, its unfunded liabilities would exceed $9.2 trillion.

True, the president did promise a "trigger" that would require the government to make future cuts if spending spiraled out of control. But we've heard that before: Spend more money now and someday, way, way, down the road, we'll change our ways. Somehow tomorrow, and the promised cuts, never comes.

He also promised that the $500 billion in Medicare cuts would not mean any reduction in services. Not to be cynical, but presidents have been promising to eliminate "waste, fraud, and abuse" since at least, oh, Ronald Reagan. And, by eliminating those "unwarranted subsidies" to insurers in the Medicare Advantage program, he'll effectively end that program — forcing roughly one in five seniors out of their private insurance option and back into traditional Medicare.

On the other hand, he did endorse a new tax on insurance plans, a tax that would almost certainly be passed along in the form of higher premiums. And he called for businesses to "chip in" to help pay for insurance — a phrase that sounds so much nicer than "8 percent payroll tax," which is what the House bill calls for.

Finally, of course, the president once again took aim at the straw man that those who oppose his plan want to "keep things exactly as they are." He said he wouldn't accept the "status quo." That conveniently ignores the alternative bills introduced by Reps. Paul Ryan (R-Wisc.), John Shadegg (R-Ariz.) and Tom Price (R-Ga.) and Sens. Tom Coburn (R-Okla.) and Jim DeMint (R-SC).

In the end, there were surprisingly few specifics and little new — especially for a speech that was supposed to set out his "plan."

How exactly will he pay for it all? What will the subsidies be? What will happen to premiums? How will the mandates be enforced? What exactly will be the new "efficiencies" imposed on the health-care system?

For that matter, does he or doesn't he support the public option?

All those questions and more stayed unanswered.

It sounded good, but we really have heard it before.

But then, maybe this wasn't about substance after all. As Billy Flynn knew: "Long as you keep 'em way off balance / How can they spot you've got no talent?"

• Contrary to the Obama administration's repeated assurances, millions of Americans who are happy with their current health insurance will not be able to keep it. As many as 89.5 million people may be dumped into a government-run plan.
• Some Americans may find themselves forced into a new insurance plan that no longer includes their current doctor.
• Americans will pay more than $820 billion in additional taxes over the next 10 years, and could see their insurance premiums rise as much as 95 percent.
• The current health care bills will increase the budget deficit by at least $239 billion over the next 10 years, and far more in the years beyond that. If the new health care entitlement were subject to the same 75-year actuarial standards as Social Security or Medicare, its unfunded liabilities would exceed $9.2 trillion.
• While the bills contain no direct provisions for rationing care, they nonetheless increase the likelihood of government rationing and interference with how doctors practice medicine.
• Contrary to assertions of some opponents, the bills contain no provision for euthanasia or mandatory end-of-life counseling. The bills' provisions on abortion coverage are far murkier.

In short, Americans will pay more and get less. Whatever the variation, however these bills are merged or compromised, this would be bad news for Americans.