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April 27, 2010

How will they respond?

The new health care law includes several new taxes, particularly on folks in the upper income ranges. It's estimated these new taxes will be more than enough to cover the additional expenses mandated by the health care changes. Is there anything that could prevent this from happening? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well certainly. ... These are estimates -- these are done by the Congressional Budget Office, a nonpartisan group. Any time you are dealing with, first of all, something as big as the health care bill, and then going out a number of years, you are going to have questions and you are going to have issues.

"In terms of highlighting some of the things that could go wrong, that is where the health care bill actually ends up costing more than the new revenues. One has to do with the cost side. Particularly, the health care bill is going to say that insurance companies have to cover people -- all people with pre-existing conditions, also no caps on insurance payouts. Well that's going to be a big expense increase in expense for insurance companies. We don't really have a good fix on how much that means their cost will go up.

"Then on the revenue side, one of the things the health care bill does of course is mandate that everyone buy insurance. If you don't, you pay a fine. Well the fine is not very big, and so there is some concern that young people in particular may feel like, well, they are just going to go without health insurance -- pay the modest fine (and) they will actually come out ahead there. Then when they do need health care, that is when they will sign up. Obviously you will take a loss on those folks.

"And then finally there are a lot of taxes that increase what high income people pay into the government. Concern there is, Will high income people change their behavior to avoid paying some of these taxes thereby causing the revenues coming in lower than expected?

"So there are plenty of variables here. We'll have to wait and see how this program unfolds over the next decade."

Posted by deeshore at April 27, 2010 11:25 AM