The other side of Obamacare: Bend over and take it.

The Obama Administration and the Democrats pumped the health deform legislation as a god-send. To do so they had to cook the books in way that would make Enron envious. They intentionally low-balled the costs, pretended it would create jobs (like their other fake job creation bills) and even went so far as to claim it would create revenue and bring down the deficit.

Let's look at some of the distortions about this bill. I say some, since no one really knows what is in this encyclopedic size piece of legislation. Certainly not a single Congressvermin who voted for the bill actually read it. These days bad politicians like Bush and Obama push through massive laws with intricate clauses, publish them at the last minute, push them through under "urgency" and pretty much guarantee that no one knows precisely what they are voting for. Obama promised transparency in legislation but then Obama made all sorts of promises that reneged on almost immediately.

First, consider the claim that 32 million uninsured Americans will get insurance. How will this be done? The government is making it illegal for you to not purchase insurance. This is not the old carrot and the stick routine—it is pure stick and the person being beaten up is anyone who makes the decision to not have health insurance. Government will fine individuals who do not have health care. People will be punished for not purchasing a product that they don't want, for one reason or another. Never before has the federal government forced people to directly buy a product against their will.

A second feature is that insurance companies will not be allowed to "discriminate" on the basis of pre-existing conditions. This basically destroys the fundamental nature of insurance. Insurance is risk based and Obama says risk can't be considered. So people who are already ill will be able to go buy hospital insurance covering their illness. It will be huge losses for insurance companies. They don't worry so much, for the time being, because those costs will be passed on to everyone else who is being forced to buy their product.

What will this mean? For most people it will mean much higher health insurance costs. The big lie from the Democrats was that their policies will reduce health care costs. That is bullshit. By bringing in 32 million people to the system, some of very expensive health care required, the Democrats are imposing huge costs on the insurance system. And that can only mean higher premiums for everyone.

The people most hurt by that will be the young. Young people tend to be poorer but much healthier than average. In a risk based system they would pay much smaller premiums. Older people, who tend to wealthier and less healthy, pay higher premiums. In the Obama system the young people, who often rationally decide to forgo health insurance due to their low risk and low wealth status, are forced to pay for it. Their premiums are used to help subsidize the risk of the older, wealthier, less healthy individuals. It is a transfer of income from poorer individuals to wealthier individuals.

Short term the insurance companies will have millions of extra, unwilling customers, who are coerced into buying policies they don't want. If they wanted the policies they were free to buy them already. And the costs of pre-existing conditions pushed into the system will be passed on to all individuals holding policies. So, in the short term it means higher profits for insurance companies. Who would be wise to take that money and invest it in non-insurance related businesses because long-term it is a destructive policy.

Why is that? Remember that the costs of health insurance for everyone will be forced up by Obamacare. The very poor will be given care by the government, as they are today. But with health insurance rates driven up artificially by the law it will be pushed out of reach of millions more Americans, who nonetheless, will be fined if they don't buy it. The political pressure will be to expand the definition of low-income to cover more and more Americans.

In other words, the increased costs will force more people out of the private insurance and onto the state roles. Politicians will heed the demands for expanding Obamacare to include wealthier people simply because Obamacare will push up health insurance costs so significantly that people who can afford insurance today won't be able to afford it tomorrow.

Over the long term the numbers who are privately insured will diminish and the numbers on state programs will increase. As that happens the risks will be spread over a smaller and smaller number of policy holders, pushing up private insurance rates even further. And the vicious cycle of Obamacare begins. Private rates are pushed up, which makes it unaffordable to more people who, being penalized for not buying it, demand an expanded state system to include them. The Democrats will continue scapegoating insurance companies and will pander to these demands in the name of compassion—compassion for career politicians who want to be reelected to cushy, overpaid positions. This double-blow forces more and more Americans to demand fully state-controlled health-care, but that is what it was intended to do. Obama has not hidden the fact that he wants state control of health care from cradle to grave.

Private businesses were told that their rates will go down. This is false and true depending on dynamics that no one can predict. Businesses that pay for health care for employees will be forced to pay for the pre-existing conditions of non-employees as well, via the increased rates for insurance. So for them, health insurance will be come more expensive. No worries to Obama, that is what he wants. It will force more and more business to line up behind state health care. Some business might see costs reduced as more of their workers end up with state provided health care instead. Of course the savings are illusionary: insurance premiums might go down to be replaced with taxes that will go up.

In the phase where they are paying high insurance costs it means the cost per employee has gone up. That will slow down any hoped-for recovery as employers will be less likely to expand the work force. Increased taxes will further reduce employment—the welfare state/tax system is one one reason Europe has been plagued by perpetually high unemployment rates.

Obama, appealing to the envy of many, said not to worry as some of these extra costs will be obtained by heavily taxing insurance companies. And how does Mr. Obama think the insurance companies will recoup those costs? Blank out. Of course, they will be recouped through higher premiums which will again push more people into the state-controlled system. The insurance companies will reap higher profits for as long as they can, before the system collapses because Obama intentionally made private insurance too expensive for the masses. Then everyone will be forced into the state-run system that was his original goal.

In addition to heavily taxing insurance companies Obama promised to impose heavier taxes on pharmaceutical companies. Again, how will those costs be recouped? By forcing up the prices of pharmaceuticals—that's how. Heavy taxation in many European companies forced pharmaceutical developers to the United States. Apparently Mr. Obama believes they will sit here and take what they wouldn't sit still for in Europe.

I spoke with a friend and regular reader of this blog who is working for a pharmaceutical company in Switzerland. She was thinking of coming out to spend a couple of weeks visiting me and we were looking at going up to the Bay Area because the company she works for has bought out a major research company in Silicon Valley. We talk every weekend and she told me that the company is already looking to move significant sections of their acquisition out of the United States completely. If I were advising pharmaceutical companies I would be urging them to move as much of their company outside the reach of Obama as possible.

Of course, they already know this, whether I had advised them or not. So in those fields jobs will be destroyed. No doubt the Obamacare will create jobs for government bureaucrats who will do half the work as their private counterparts at twice the pay. I imagine Obama will call that economic stimulus.

In a nutshell I predict the following:

• Higher health insurance rates for everyone, with the young hit by the steepest increases.
• With involuntary customers forced by Obama to buy insurance the insurance companies will see short term profit increases.
• Because they know they are short-term they will pump the customer for as much as possible to maximize profits before the long-term negative impact is felt.
• As insurance rates increase more and more individuals will be forced to abandon private insurance plans.
• Facing penalties for not having insurance these people will lobby to be included in the "low-income" category for government provided care.
• Politicians will heed those calls and expand the "low-income" category on a steady basis.
• As more people are forced into the state system fewer private policy holders are left paying the bills forcing even higher rates starting the cycle over again.