Monthly Archives: October 2009

Policy Brief: For Halloween, A Real-Life Fright Show — Nancy Pelosi’s Government Takeover of Health Care

Many may find the release of House Democrats’ health “reform” legislation the week of Halloween particularly apt, as the legislation includes several “monstrous” provisions likely to wreak havoc on the American people, their jobs, and their health care:

Werewolf of Government-Run Insurance:  Experts agree that this monster would quickly devour the health coverage of millions of Americans—the Congressional Budget Office believes several million, the Urban Institute up to 47 million, and the Lewin Group as many as 114 million will lose their current coverage.

“Count Tax-YOU-la:”  This creature would suck the life out of the American economy, by imposing $729.5 billion in job-killing tax increases on all Americans—taxing people who can’t afford to purchase government-forced insurance, taxing businesses who want to hire new workers, taxing small businesses, even taxing health benefits.  According to a model developed by President Obama’s chief economic advisor, these new taxes would demolish or destroy up to 5.5 million jobs—and other studies confirm that minority workers would be disproportionately affected.

Weird Scientists:  These bureaucrats working for a new a comparative effectiveness institute funded by a tax on health benefits, could publish the protocols needed to deny patients access to life-saving treatments on cost grounds.  When Republicans offered an amendment to prevent these scientists from conducting their experiments on the American people, Democrats rejected the idea on a party-line vote.

Frankenstein:  Refers to the dozens of bureaucracies created by the legislation—to say nothing of the difficulties for patients to receive actual treatment—all in the name of health care “reform.”

A Ghoulish Czar:  The “Health Choices Commissioner” created in the legislation could forcibly enroll individuals in government-run insurance, and would be required to conduct random compliance audits on health benefits plans—allowing the federal government to intervene in the business practices of all employers who offer coverage to their workers.

However, while creating new and frightful government bureaucracies for the American people, Democrats have managed to include sweet treats for their liberal allies:

  • ACORN and Planned Parenthood could be eligible for enrollment and outreach grants administered by the Health Choices Commissioner;
  • Trial lawyers would receive new “whistleblower” provisions allowing them to bring suit against employers of all kinds—even as Democrats refuse to fund liability reforms that would place any caps on attorneys’ fees; and
  • AARP’s popular Medigap policies would not be subject to the same pre-existing condition restrictions or price controls placed on all other private insurance plans—thus allowing the organization to continue to receive hundreds of millions of dollars in “kickbacks” by overcharging seniors for coverage.

While Halloween may come and go, many may be concerned that the monsters created in the bill will stay—causing permanent fright for all Americans forced to live under Democrats’ government takeover of health care.

Policy Brief: Pelosi Bill Still a Fiscal Train Wreck

“I will not sign [health care legislation] if it adds one dime to the deficit—now or in the future.  Period….The plan I’m proposing will cost around $900 billion over ten years.”

 — President Obama, address to Joint Session of Congress

While the Democrat majority may attempt to assert that Speaker Pelosi’s health “reform” bill costs under $900 billion and will reduce the federal deficit, the CBO score of H.R. 3962 reveals that such claims amount to nothing more than a budgetary mirage:

  • While Democrats claim their the coverage expansions total $894 billion, this figure represents the net costs of expanded coverage.  The CBO score reveals total costs of the coverage expansion total $1.055 trillion—$425 billion in Medicaid costs, $605 billion in “low-income” subsidies for individuals to purchase coverage through government-run Exchanges, and $25 billion for small business tax credits.  Democrats’ lower $894 billion number conveniently includes offsetting revenue from more than $150 billion in tax increases (only a portion of the $729.5 billion in total tax increases)—$33 billion from individuals who do not purchase, and $135 billion from employers that do not offer, government-forced insurance.
  • The more than $1 trillion in spending on coverage expansions does not even include additional federal spending included in the legislation—including extension of Medicaid “stimulus” funding to the States, a new reinsurance program for retirees, and a $34 billion trust fund for public health—that totals $224.5 billion.  When combined with the cost of the coverage expansions, total spending under the bill actually approaches $1.3 trillion.
  • CBO estimated that the bill would increase State Medicaid spending by $34 billion over the next ten years—unlike prior versions of the legislation (H.R. 3200), which featured Medicaid expansions fully paid for by the federal government.  Many may agree with what Tennessee Democrat Gov. Phil Bredesen termed “the mother of all unfunded mandates” being imposed upon States—and view such mandates as a further budgetary gimmick designed to mask the true cost of a government takeover of health care.
  • The Pelosi bill also relies on more than $70 billion in revenue from a new program for long-term care services.  As the long-term care program requires individuals to contribute five years’ worth of premiums before becoming eligible for benefits, the program would find its revenue over the first ten years diverted to finance other spending in Democrats’ health care “reform.”  However, as even Democrats, such as Senate Budget Committee Chairman Kent Conrad (D-ND), have called the program a “Ponzi scheme,” many may find any legislation that relies upon such a program to maintain “deficit-neutrality” fiscally irresponsible and not credible.
  • Democrats claim their legislation is “deficit-neutral” by including in a separate bill (H.R. 3961) reforms to the Sustainable Growth Rate (SGR) mechanism for Medicare physician payments—the total cost of which stands at $285 billion over ten years, according to CBO.  While Members may support reform of the SGR mechanism, many Members may oppose what amounts to an obvious attempt to hide the apparent cost of health “reform” by introducing separate legislation to repeal the SGR mechanism without paying for this more than $200 billion increase in federal spending.
  • Because the Democrat SGR reform bill provides a permanent repeal to the SGR cost-containment mechanism, physician spending will rise compared to current law not only in bill’s first ten years, but in the years after 2019 as well.  Thus any claim that the Pelosi bill decreases the long-term budget deficit must be viewed as highly suspect in light of the exclusion of hundreds of billions of dollars in new federal spending contained in H.R. 3961.
  • In its rollout of the Pelosi bill, the Democrat majority released a one-page document claiming that “a previous Congress established the policy for paying Medicare doctors, so the update for 2010 is not a new policy to be paid for.”  By this logic, future Congresses will not have to pay for any increases in federal deficits and spending associated with the Pelosi health “reform” bill—directly contradicting President Obama’s pledge that his bill would not increase the federal deficit by one dime.  Regardless, many may note that adding hundreds of billions in new spending will be paid for—by America’s children and grandchildren, through mountains of new federal debt.

Adding in the more than $200 billion cost of Democrats’ stand-alone SGR legislation, the health “reform” agenda propounded by Speaker Pelosi totals more than $1.5 trillion—nearly double President Obama’s targeted figure—and would further break the President’s promise by increasing the deficit to the tune of hundreds of billions of dollars.  At a time of record deficits, the multiple multi-billion dollar budgetary gimmicks in H.R. 3962 are designed solely to mask the full cost of Democrats’ government takeover of health care.

Policy Brief: A Reading Guide to the Pelosi Health Care Bill

In order to assist Members, staff, and interested parties seeking to read and review Speaker Pelosi’s government takeover of health care (H.R. 3962), we have compiled a list of important page numbers and provisions in the 1,990-page “Affordable Health Care for America Act:”

Page 94—Section 202(c) prohibits the sale of private individual health insurance policies, beginning in 2013, forcing individuals to purchase coverage through the federal government

Page 110—Section 222(e) requires the use of federal dollars to fund abortions through the government-run health plan—and, if the Hyde Amendment were ever not renewed, would require the plan to fund elective abortions

Page 111—Section 223 establishes a new board of federal bureaucrats (the “Health Benefits Advisory Committee”) to dictate the health plans that all individuals must purchase

Page 211—Section 321 establishes a new government-run health plan that, according to non-partisan actuaries at the Lewin Group, would cause as many as 114 million Americans to lose their existing coverage

Page 225—Section 330 permits—but does not require—Members of Congress to enroll in government-run health care

Page 255—Section 345 includes language requiring verification of income for individuals wishing to receive federal health care subsidies under the bill—while the bill includes a requirement for applicants to verify their citizenship, it does not include a similar requirement to verify applicants’ identity, thus encouraging identity fraud for undocumented immigrants and others wishing to receive taxpayer-subsidized health benefits

Page 297—Section 501 imposes a 2.5 percent tax on all individuals who do not purchase “bureaucrat-approved” health insurance—the tax would apply on individuals with incomes under $250,000, thus breaking a central promise of then-Senator Obama’s presidential campaign

Page 313—Section 512 imposes an 8 percent “tax on jobs” for firms that cannot afford to purchase “bureaucrat-approved” health coverage; according to an analysis by Harvard Professor Kate Baicker, such a tax would place millions “at substantial risk of unemployment”—with minority workers losing their jobs at twice the rate of their white counterparts

Page 336—Section 551 imposes additional job-killing taxes, in the form of a half-trillion dollar “surcharge,” more than half of which will hit small businesses; according to a model developed by President Obama’s senior economic advisor, such taxes could cost up to 5.5 million jobs

Page 520—Section 1161 cuts more than $150 billion from Medicare Advantage plans, potentially jeopardizing millions of seniors’ existing coverage

Page 733—Section 1401 establishes a new Center for Comparative Effectiveness Research; the bill includes no provisions preventing the government-run health plan from using such research to deny access to life-saving treatments on cost grounds, similar to Britain’s National Health Service, which denies patient treatments costing more than £35,000

Page 1174—Section 1802(b) includes provisions entitled “TAXES ON CERTAIN INSURANCE POLICIES” to fund comparative effectiveness research, breaking Speaker Pelosi’s promise that “We will not be taxing [health] benefits in any bill that passes the House,” and the President’s promise not to raise taxes on families with incomes under $250,000

Policy Brief: Democrats Cut Backroom Deals Benefiting AARP

“There’s an inherent conflict of interest….They’re ending up becoming very dependent on sources of income.”

 — Former AARP Executive Marilyn Moon, quoted in Bloomberg article

Speaker Pelosi recently called insurance companies “immoral villains,” and Sen. Jay Rockefeller derided their tactics as “rapacious,” yet the majority has simultaneously relied on an organization that has received billions of dollars in windfall profits from those same insurers as an “independent” source to support their government takeover of health care—AARP.  The Democrat majority has even relied on AARP’s support for legislation (S. 1776) that would increase the federal debt by nearly $250 billion to fund physician reimbursements, even though the bill would raise seniors’ Medicare premiums by over $60 billion.  AARP opposed unpaid-for legislation as recently as December for that very same reason.  An analysis of Democrats’ rhetoric and actions provides evidence why AARP may have changed its position—in exchange for its support of a government takeover of health care, AARP has received special considerations regarding several provisions in health “reform” legislation that could benefit the organization quite handsomely:

  • While the AARP website claims that the organization supports “guaranteeing that all individuals and groups wishing to purchase or renew coverage can do so regardless of age or pre-existing conditions,” a review of the New York State Insurance Commissioner’s website finds that AARP-branded Medigap coverage imposes a six-month waiting period for individuals with pre-existing conditions.  Yet Section 111 of H.R. 3200 would exempt Medigap policies from new limits on pre-existing condition restrictions—thus allowing AARP to continue to deny Medigap claims of individuals with serious health conditions.
  • The health “reform” bill approved by the Senate Finance Committee would eliminate the tax deductibility for all insurance company executive salaries over $500,000.  However, as drafted by the Committee, the legislation would exempt AARP from this requirement, even though fully 38 percent of its $1.1 billion in 2008 revenue came directly from “royalty fees” paid by United Healthcare—more than AARP received in membership dues, grant revenue, and private contributions combined.  But for Chairman Baucus’ exemption, AARP salaries would in fact be subject to the penalties in the Finance bill—in 2008, then-CEO William Novelli received total compensation of $1,005,830—more than 78 times the average annual Social Security benefit of $12,738.
  • Speaker Pelosi has recently discussed the imposition of a new “windfall profits” tax on insurance companies as a potential addition to the House’s health “reform” bill.  However, she has made no comments indicating that she would apply a similar tax to AARP—even though the organization by its own admission has received nearly $3.4 billion in profits from selling health insurance and other similar products.  Thus it is entirely possible that Democrats could exempt AARP from the insurance windfall profits tax, in the same way that Chairman Baucus created a loophole to allow AARP to continue paying its CEO more than $1 million per year without penalty.
  • White House senior advisor David Axelrod recently offered Administration support for price control provisions included in H.R. 3200 that would require insurance companies to pay out a minimum percentage of their premiums in medical claims.  However, while H.R. 3200 would place strict price controls on Medicare Advantage plans—requiring them to pay out 85 percent of premium revenues in medical claims—Medigap policies face a far less strict 65 percent requirement.  In other words, under the Democrat bill, seniors could pay as much as 20 cents more out of every premium dollar to fund “kickbacks” to AARP-sponsored Medigap plans.
  • A Bloomberg news analysis published in December highlighted what one observer called AARP’s “dirty little secret”—overcharging its senior members, many of whom who felt betrayed after paying hundreds of dollars above market price for AARP-branded coverage.  One noted that “AARP has great buying power, and people should be able to get the best deal….This is unconscionable, what AARP has allowed to happen.”  Another disillusioned senior wrote to the organization’s leadership asking whether AARP had a “‘special relationship’ with [insurance carriers] by which it receives commissions, incentives, rebates, or dare I say ‘kickbacks?’”
  • In November, news sources reported that AARP suspended the sale of “limited-benefit” health insurance policies, largely as a result of pressure from Republicans in Congress concerned that the organization was selling policies advertised as a “smart option for the health care insurance you need,” even though the policies would only pay up to $10,000 for surgery costs.  However, the fate of the more than 1 million policy-holders who purchased limited-benefit coverage from AARP remains unclear—and the organization has made no public offers to return the “royalty fees” on the “bare bones” policies it sold under questionable pretenses.

The special deals provided to AARP in the House and Senate health care bills raise questions about whether and why the Democrats are ignoring a de facto insurance conglomerate in their midst:

  • Why did Finance Committee Chairman Baucus exempt AARP from the salary requirements imposed on all other insurance carriers in his health “reform” legislation?  Did Chairman Baucus cut another “rock-solid deal” with AARP behind closed doors so that its executives’ ability to earn million-dollar compensation packages would not be impaired?
  • Will Speaker Pelosi exempt an organization that earns more than 60 percent of its revenue from “royalty fees”—and obtains more of its revenue from United Health Group than from membership dues, grants, and private contributions combined—from the windfall profits tax she proposes to levy on insurance companies?
  • If Energy and Commerce Committee Chairman Waxman wants to investigate the compensation levels and corporate practices of insurance companies, why did he not submit requests for information to AARP, which makes 60 percent of its income by selling health insurance and related products to seniors?  More to the point, why has the Committee not focused any of its investigative efforts on the widely-reported instances of abuses related to AARP-branded products to ensure executives are held to account and seniors adequately protected?
  • Do the Administration and Democrats in Congress support exempting AARP and its Medigap policies from the same regulations they propose to place on other insurance companies?  In other words, do Democrats want seniors to be less protected from inflated profits and denied coverage due to pre-existing conditions than the rest of the American population?

Beneath these questions lie two broader issues: Is AARP a seniors’ advocacy group, or a billion-dollar insurance company masquerading as a “charity” organization?  And are Democrats so intent on enacting a government takeover of health care that they would knowingly ignore seniors being exploited in “unconscionable” ways to maintain the support of an organization who will lobby for their efforts?

Policy Brief: Candidate Obama vs. President Obama

Even as he campaigned on a platform of change and transparency, an examination of Barack Obama’s comments during the election—and his actions since taking office—indicates that on both politics and policy, the President has changed his tune on numerous issues of relevance to the proposed government takeover of health care, which may lead many to wonder where exactly he stands:

Then:  “Senator McCain wants to pay for his plan by taxing your health care benefits for the first time in history.”

— Barack Obama, speech in Roanoke, Virginia, October 17, 2008

Now:  “This reform will charge insurance plans a fee for their most expensive policies…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then:  “You will not have to change [health insurance] plans.  For those who have insurance now, nothing will change under the Obama plan—except that you will pay less.”

— Obama campaign handout, “Questions and Answers on Health Care Plan”

Now:  “I mean—when I say if you have your plan and you like it and your doctor has a plan, or you have a doctor and you like your doctor that you don’t have to change plans, what I’m saying is the government is not going to make you change plans under health reform.”

— Barack Obama, White House press conference, June 23, 2009

Then:  “Massachusetts has a mandate right now. They have exempted 20 percent of the uninsured because they have concluded that that 20 percent can’t afford it.  In some cases, there are people who are paying fines and still can’t afford it, so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine.”

— Barack Obama, Democratic primary debate, February 21, 2008

Now:  “Under my plan, individuals will be required to carry basic health insurance…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then:  “If they cannot afford [health insurance]…what are you going to do about it?  Are you going to fine them?  Are you going to garnish people’s wages?”

— Barack Obama, Democratic primary debate, January 31, 2008

Now:  “For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.”

— Barack Obama, trying to explain tax penalties for refusing to purchase
government-forced health insurance, interview with George Stephanopoulos, September 20, 2009

Then:  “I can make a firm pledge.  Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

— Barack Obama, Rally in Dover, New Hampshire, September 12, 2008

Now:  “The one commitment that I’ve been clear about is I don’t want that final one-third of the cost of health care to be completely shouldered on the backs of middle-class families who are already struggling in a difficult economy.  And so if I see a proposal that is primarily funded through taxing middle-class families, I’m going to be opposed to that because I think there are better ideas to do it.”

— Barack Obama, White House press conference, July 22, 2009

Then:  “It turns out that Senator McCain would pay for part of his [health care] plan by making drastic cuts in Medicare…even though Medicare is already facing a looming shortfall.”

— Barack Obama, speech in Roanoke, Virginia, October 17, 2008

Now:  “The only thing this plan would eliminate is the hundreds of billions of dollars in waste and fraud [in Medicare]…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then:  “The Obama [health care] plan will cost between $50-65 billion a year when fully phased in.”

— Obama campaign handout, “Questions and Answers on Health Care Plan”

Now:  “Add it all up, and the plan I’m proposing will cost around $900 billion over 10 years…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then:  “What we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

— Barack Obama, town hall meeting in Chester, Virginia, July 21, 2008

Now:  “At a certain point you start getting into all kinds of different meetings—Senate Finance is having a meeting, the House is having a meeting….I don’t think there are a lot of secrets going on in there.”

— Barack Obama, trying to explain closed-door health care negotiations,
White House press conference, July 22, 2009

At best, the significant changes in position show the differences between lofty campaign rhetoric and the realities of governing; at worst, they reveal an Administration willing to abandon many of its key campaign promises in order to pass its government takeover of health care.  Regardless of whether or not one agrees with the President’s policy positions—either those outlined “then” or “now”—many may wonder what exactly the President believes in—and, given his repeated reversals, why the American people should believe in him.

Policy Brief: Speaker Pelosi Advocates for Higher, European-Style Taxes

“I can make a firm pledge.  Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” 

   —President Barack Obama, Rally in Dover, New Hampshire, September 12, 2008

“There is no way to restore this nation to fiscal health without higher taxes—for the middle class as well as for the rich.  The only question is when.”

—Brookings Institution fellows Henry Aaron and Isabel Sawhill, Washington Post op-ed, October 13, 2009

Appearing last week on The Charlie Rose Show, House Speaker Nancy Pelosi demonstrated her openness—and desire—for new taxes to pay for health “reform” and other skyrocketing entitlement spending.  Worse yet, the form of the tax she proposed would hurt the same struggling middle-class families that Democrats allege health “reform” would assist:

  • Asked whether or not a value-added tax (VAT)—a European-style sales tax applied at every level in the manufacturing process, and paid by end users—had “any appeal” to her, the Speaker replied that, “I would say put everything on the table and subject it to the scrutiny that it deserves.”
  • Talking about an alleged “competitive advantage” that foreign car manufacturers subject to a VAT in Europe hold over their American counterparts, Speaker Pelosi said that, “Somewhere along the way, [imposing an American] value-added tax plays into this….In the scheme of things, I think it’s fair [to] look at a value-added tax as well.”
  • Many economists have noted that, by taxing consumption more heavily, a VAT would place a disproportionate burden on low- and middle-income families.  Other experts have noted that a value-added tax could reduce long-term economic growth by more than one percent annually; even a relatively small VAT of 3 percent would demolish or destroy up to 2.1 million jobs by its fifth year.
  • The Speaker’s comments come on the heels of a summit hosted by the liberal Center for American Progress—key allies of the Administration—where speakers discussed the organization’s recent paper calling for tax increases to combat high federal deficits: “We have the fifth lowest taxes as a share of GDP among economically developed nations…If we raised taxes in aggregate to a level that would safely balance the budget, the United States would still be in the bottom 10 out of 30.”  While the paper notes that such higher taxes—a 22 percent across-the-board increase in every tax rate—would raise trillions, it fails to mention that many of the European developed nations with higher tax rates also have exhibited lower economic growth precisely because of those higher tax policies.
  • In addition, two researchers from the liberal Brookings Institution wrote an op-ed in Monday’s Washington Post noting that, “There is no way to restore this nation to fiscal health without higher taxes—for the middle class as well as for the rich.  The only question is when.”  The analysts also call for a value added tax to “solve America’s long-term fiscal problems”—and despite the evidence noted above, assert that a VAT “would also support and sustain the economic recovery.”  Many may question how imposing trillions of dollars in job-killing tax hikes would ever grow the American economy.

Given her comments, many may question whether Speaker Pelosi believes that the more than $800 billion in tax increases in the House’s health “reform” legislation (H.R. 3200) are insufficient to finance the full measure of Democrats’ appetite for government spending.  Moreover, with multiple liberal organizations calling for future tax rises to pay for skyrocketing federal spending, many may question whether the majority is engaging in a “bait and switch” with the American people—by failing to disclose exactly how many trillions in new, job-killing taxes will be needed to finance their government takeover of health care.

Policy Brief: Another “Rock-Solid Deal” That Harms Seniors

“But what we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

 — Senator Barack Obama, Town Hall Meeting in Chester, Virginia, July 21, 2008

Even as Democrats campaigned on a platform of change and transparency, recent back-room dealings between health care industries, the Administration, and Finance Committee Chairman Max Baucus would raise Medicare premiums for seniors:

  • Both the Administration and Democrats in Congress have proposed the idea of creating a board of federal bureaucrats to recommend additional changes to, and generate savings from, the Medicare program.  In particular, Sen. Jay Rockefeller (D-WV) has advocated such a commission as a way to de-politicize the process of adjusting Medicare payments.
  • While Chairman Baucus’ mark included such a commission, it exempted “providers scheduled to receive a reduction to their inflationary payment updates” from additional reductions by the Commission.  In practical terms, this language exempted hospitals—who reached their own independent “agreement” to provide $155 billion in savings toward health “reform”—from having to contribute additional savings.
  • Unfortunately, neither Sen. Rockefeller nor the Congressional Budget Office (CBO) understood the hospitals’ exemption from additional cuts proposed by the Medicare Commission at the time the legislation was first unveiled.  Because hospital payments comprise a large portion of total Medicare spending, exempting hospitals from the Commission’s purview effectively lowered the $23 billion in savings CBO originally assumed from the provision by at least half.
  • As a result of this lower score—and in his desire to preserve his “agreement” with the hospital sector—Chairman Baucus found a better target to achieve savings: seniors themselves.  An amendment to the Chairman’s mark authorized the Medicare Commission to propose “reductions in federal premium subsidies” to Medicare Advantage and prescription drug plans—even though Medicare Advantage plans would already face a $123 billion cut in the underlying Baucus bill.
  • When pressed during the markup to explain the consequences of this amendment, Committee staff repeatedly refused to admit that a “reduction in federal premium subsidies” would be tantamount to  premium increases for seniors’ Medicare Advantage and prescription drug plans.  However, CBO Director Doug Elmendorf previously testified that fully half of the benefits currently provided to seniors under Medicare Advantage would disappear due to the existing cuts in the Baucus bill—and the scope of the premium increases and benefit cuts would likely be magnified if the Medicare Commission enacted additional savings.
  • Chairman Baucus’ actions during the Finance Committee markup do not represent the first time his agreements with the health care industry have been proven to harm seniors.  In August, the head of the Pharmaceutical Research and Manufacturers of America (PhRMA) affirmed that drug manufacturers had negotiated a “rock-solid deal” with Chairman Baucus and the Administration.  Previous analyses from the Congressional Budget Office have confirmed that portions of the “rock-solid deal” would significantly raise seniors’ Medicare prescription drug premiums.

Many may find the irony in an entity established to “de-politicize” the process of Medicare reform being modified in arbitrary—and harmful—ways in order to cement Chairman Baucus’ “rock-solid deals” with the health care industry.  Moreover, if Democrats are willing to break yet another campaign promise on transparency in order to cut another back-room deal—and raise premiums for seniors in the process—what promises will they keep?

Policy Brief: House Democrat Bill Nearly Twice Obama’s $900 Billion Spending Cap

“I will not sign [health care legislation] if it adds one dime to the deficit—now or in the future.  Period….The plan I’m proposing will cost around $900 billion over ten years.”

 — President Obama, address to Joint Session of Congress

While President Obama has promised that health “reform” legislation will cost fewer than $900 billion, Congressional Budget Office (CBO) estimates reveal that House Democrats’ government takeover of health care (H.R. 3200) would cost far more than that.  A comparison of the CBO scores of H.R. 3200 and Senate Finance Committee Chairman Baucus’ bill as amended reveals that the House bill spends far more than Obama’s promised threshold, and the Senate bill breaks President Obama’s tax pledge:

  • CBO estimates that the House bill would spend nearly $1.3 trillion on new entitlements for health coverage expansions—including $438 billion for the Medicaid expansions, $773 billion for “low-income” subsidies, and $53 billion for small business tax credits.  By comparison, the Baucus bill spends $829 billion on all three provisions combined—$345 billion for the Medicaid expansion, $461 for insurance subsidies through the Exchange, and $23 billion for small business tax credits.
  • The significantly lower subsidy levels in the Baucus package have caused many to complain that under his plan, families with incomes of approximately $70,000 could be required to spend up to 30 percent of their income—more than many families pay for their mortgage—on government-mandated health insurance premiums and co-payments.  Despite the President’s recent insistence that a mandate to purchase health insurance is not a tax increase, the non-partisan Joint Committee on Taxation has confirmed that the penalties for not purchasing “government-approved” coverage do represent higher taxes on middle-class families.
  • Although the CBO recently estimated that the Baucus bill as amended would lower the deficit by $81 billion in its first ten years, this “deficit reduction” comes solely from an increase in payroll tax revenues on the middle class.  Moreover, most of the new payroll tax revenues will eventually be paid out in the form of additional Social Security benefits, raising further questions about the Baucus bill’s “deficit reduction” potential.
  • While the Baucus bill defers a long-term reform for the Sustainable Growth Rate (SGR) mechanism for Medicare physician payments—the total cost of which stands at $285 billion over ten years, according to CBO—H.R. 3200 includes a long-term fix—but makes no attempt to pay for it.
  • If Democrats decide not to spend more than one-quarter of the President’s overall $900 billion spending cap on an SGR fix, Members may also question where future funding for a permanent solution to the SGR will come from.  Will additional savings be taken out of Medicare over and above the $400-500 billion being contemplated in this round of “reform?”  Will taxes be raised to increase Medicare reimbursements to doctors?  Or will Democrats choose additional deficit spending in the future even though President Obama has pledged that his plan will not add “one dime” to the nation’s budget deficits?
  • H.R. 3200, unlike the Baucus bill, also includes nearly $100 billion in spending CBO would be ordered to ignore.  Section 164(d)(1)(C)(ii) of the bill directs that a new $10 billion reinsurance program “shall not be taken into account” for budgetary scoring purposes.  Likewise, Section 2002(b)(3) of the bill directs that nearly $90 billion in mandatory spending on a new Public Health Investment Fund should not be counted at all for budgetary purposes.
  • Between the $285 billion unpaid-for cost of reforming physician reimbursements, the nearly $100 billion in “phantom” new entitlements created, and the collective debt interest necessary to finance these unfunded obligations, the House Democrat legislation contains approximately a half-trillion dollars in additional deficit spending within the ten-year budget window—and CBO has already admitted that the long-term outlook for federal spending under the bill would be even worse.

Thus President Obama’s parameters could yield deep fissures among Democrats by exposing their chief budgetary dilemma.  Will Democrats use the multiple hundred-billion dollar budgetary gimmicks in H.R. 3200 in an attempt to mask the full cost of their government takeover of health care—and break the President’s promises of budget neutrality and “only” $900 billion in new government spending?  Or will they follow Chairman Baucus’ framework, and force middle-income families to buy coverage they may not want and cannot afford—thus further breaking the President’s “firm pledge” that no one with an income under $250,000 would face tax increases?  Given these equally unpleasant choices, many may call for a long-overdue effort to find a new approach.

Policy Brief: Baucus “Tax on Jobs” Is Anti-Family

While the bill produced by Finance Committee Chairman Baucus is being portrayed by some media outlets as a “moderate compromise,” in reality the legislation provides a significant disincentive for employers to hire low-income parents—an anti-family provision penalizing couples, single mothers, and middle-class children nationwide:

  • The Baucus bill requires firms with more than 50 employees that do not offer coverage to pay for the cost of any “low-income” health insurance subsidies provided to their workers.  Under the bill, families with income up to four times the federal poverty level ($88,200 for a family of four) could qualify for partial subsidies.  The tax imposed on businesses would equal the cost of the subsidies or $400 multiplied by the total number of employees at the firm, whichever is less.
  • Because the amount of the “fair share” contribution required by employers depends on the type of coverage being subsidized—individual or family coverage—the liberal Center for Budget and Policy Priorities notes that the Baucus bill, by increasing the “fair share” taxes paid by firms for family coverage, would discourage employers from hiring married individuals or parents raising children.  In particular, single parents would be much more likely to qualify for insurance subsidies based upon their income, making it much less likely that such workers would be hired.
  • The liberal Center for Budget and Policy Priorities also notes that the Baucus bill “likely would have discriminatory racial effects on hiring and firing.  Because minorities are much more likely to have low family incomes than non-minorities, a larger share of prospective minority workers would likely be harmed.”
  • Amendments adopted in the Committee markup—which lowered the affordability threshold allowing individuals to opt-out of employer plans and obtain subsidized coverage in the Exchange—would exacerbate the underlying problem, by raising the likelihood that middle-income families would rely on federal subsidies—thus triggering “fair share” penalties against their employers.
  • Other independent studies have also confirmed the impact of new taxes on jobs—i.e., employer mandates—on low-wage workers.  For instance, the Congressional Budget Office noted that, “a pay-or-play provision could reduce the hiring of low-wage workers, whose wages could not fall by the full cost of…a substantial pay-or-play fee if they were close to the minimum wage.”  Harvard Professor Kate Baicker has also published an analysis demonstrating that at least 5.5 million low-wage workers would be “at substantial risk of unemployment” due to new mandates on employers—and that minority workers were twice as likely to lose their jobs as their white counterparts as a result.

Many may be concerned by the unfair implications of the Baucus bill’s “fair share” contribution.  At a time when unemployment stands at 26-year highs—and with job losses still rising—this Democrat proposal would serve as not only a tax on jobs, but another “marriage penalty” against families that will provide a significant obstacle for working parents seeking to improve the lives of themselves and their children.

Policy Brief: Democrat “Compromises” Would Expand Federal Funding of Abortions

“And one more misunderstanding I want to clear up—under our plan, no federal dollars will be used to fund abortions.”

 — President Obama, address to Joint Session of Congress

The government takeover of health care contemplated by Senate Finance Committee Chairman Baucus’ legislation contains expansions of federally-funded abortions that exceed even the White House’s purported intent.  The Finance Committee mark borrows provisions from an amendment to H.R. 3200 offered in the House Energy and Commerce Committee by Rep. Lois Capps (D-CA).  Background on both the Baucus and the Capps provisions reveals the ways in which they could increase access to abortion and provide federal funds for same.

Access to Insurance Policies Covering Abortion:  Both the Capps amendment and the Baucus bill would require coverage for abortion by at least one insurance plan offered in the Exchange.  (The Baucus bill provides for State-based Exchanges, while H.R. 3200 would create a national Exchange.)  This mandate would be a significant expansion from current federal regulations on insurance coverage, which state that, “Health insurance benefits for abortion, except where the life of the mother would be endangered if the fetus were carried to term or where medical complications have arisen from an abortion, are not required to be paid by an employer.”  While both the Capps amendment and the Baucus bill would also require one plan that does not cover abortions to be offered in the Exchanges, some Members may be concerned that the new mandate to abortion access could in turn lead to federal actions to “protect” access to abortions—such as mandates for abortion clinics, drugs, etc.

Federal Subsidies and Abortion Coverage:  The Baucus bill and the Capps amendment specifically permit taxpayer subsidies to flow to private health plans that include abortion, but create an accounting scheme designed to designate private dollars as abortion dollars and public dollars as non-abortion dollars.  Specifically, the provisions claim to segregate public funds from abortion coverage and would allegedly prevent funds used on abortion from being considered when determining whether plans meet federal actuarial standards.

However, press reports have been skeptical about whether and how this accounting mechanism would prevent federal funding of abortions.  The accounting scheme has likewise been rejected by pro-life organizations, which recognize it as a clear departure from long-standing federal policy against funding  plans covering abortion (e.g., Federal Employee Health Benefits Program, Medicaid, SCHIP, etc.).

Unlike government-run programs like Medicare and Medicaid, which can specifically prohibit coverage of a particular service, funds provided to a third-party insurance company to subsidize an individual’s coverage would by definition make that individual’s “supplemental” abortion coverage more affordable.  Therefore many Members may believe that the only way to prevent federal funds from subsidizing abortion coverage is to prevent plans whose beneficiaries receive federal subsidies from covering abortions.  To that end, many may note that insurance plans within the FEHBP have been prohibited from offering abortion coverage since 1995, and federal employees have expressed strong satisfaction with their choice of plan options.

Government-Run Plan; Co-Ops:  The Capps amendment to H.R. 3200 explicitly permits the Secretary to include abortion in the services offered by a government-run plan, and requires that the government-run plan cover abortions unless the “Hyde amendment” restrictions on federal funding for abortion coverage are renewed every year in the Labor-HHS appropriations bill.

While some Democrats have claimed that the government-run plan will self-sustain on premium revenue, meaning abortion coverage should be permitted, several facts undermine that rhetoric.  First, any outlay by a government-run plan would by definition spend federal funds—so any government-run health plan offering abortion coverage would not meet the conditions set out by the President in his address to Congress.  Second, Section 222(b)(2) of H.R. 3200 as introduced spends $2 billion—as well as 90 days of claims reserves based on projected enrollment—in federal taxpayer dollars in start-up funds—and these taxpayer dollars would fund a plan that covers abortion.  Third, taxpayer subsidies would be provided to low-income individuals to purchase coverage in the government-run plan, leading to the same potential difficulties and objections as those discussed above.  Fourth, future taxpayers could be asked to provide bailout funds to the government-run health plan—requiring a further unprecedented amount of federal taxpayer funding for abortion coverage.

While the Baucus bill does not create a government-run health plan, it does provide $6 billion in taxpayer funding for a series of State-based health insurance co-operatives—and these co-operatives could choose to cover abortions.  Thus this provision of the Baucus bill also could lead to federal taxpayer funding for abortions—a sharp deviation from current law and practice.

Mandatory Abortion Coverage:  The Baucus bill as introduced placed limited restrictions on whether government bureaucrats on state insurance Exchanges can include abortion coverage as part of the minimum benefits package all individuals must purchase.  The provision prohibited bureaucrats from requiring individuals to obtain abortion coverage if such abortions are prohibited under the annual Department of Health and Human Services appropriations bill (even though the bill’s spending would not be governed by that bill’s “Hyde Amendment” protections).  Under current law, the “Hyde Amendment” prohibits federal funding of abortions, except in cases of rape, incest, or to save the life of the mother.  However, the “Hyde Amendment” provisions must be renewed annually in the Labor-HHS appropriations bill.  While an amendment adopted in the Senate Finance Committee markup prohibited mandatory coverage of any abortion procedures, if the original Baucus language was reinserted by Senate leaders and the “Hyde Amendment” provisions were not renewed, government bureaucrats could require all individuals to obtain abortion coverage or face tax penalties.

Network Adequacy Provisions:  Section 115 of H.R. 3200 as introduced gives the Health Choices Commissioner the power to regulate provider networks of qualified health benefits plans. (The Baucus bill includes no similar provision.)  Many may be concerned that, when coupled with language in the Capps amendment requiring that a plan that includes abortion be made available in every region, could lead to mandates to “protect” access to abortion services (such as the establishment of abortion clinics)—or that all private employers include abortion clinics in their networks for them to be considered “adequate.”

Related Provisions:  Language in both the Baucus bill and Capps amendment appears to prevent State laws from being overturned and benefits plans from discriminating against health care providers because of their willingness or unwillingness to “provide, pay for, provide coverage of, or refer for abortions.”  However it is unclear how federal bureaucrats might interpret these provisions.

Conclusion:  When asked whether the White House “will go beyond what we have seen in the House [i.e., the Capps amendment] and explicitly rule out any public funding for abortion,” HHS Secretary Sebelius responded that the Administration would do just that.  However, as currently drafted, neither the Capps amendment—adopted on a party-line 30-28 vote, with six pro-life Democrats opposing—nor the Baucus bill would prevent an expansion of abortion coverage and federal subsidies for same.