Monthly Archives: December 2009

Legislative Bulletin: H.R. 3590, Patient Protection and Affordable Care Act

Senate Democrat Health “Reform” Legislation:
Short Summary of the Government Takeover of Health Care

BACKGROUND AND EXECUTIVE SUMMARY

On November 18, 2009, Senator Harry Reid and the Senate Democrat leadership introduced the Patient Protection and Affordable Care Act as an amendment to a House-passed bill (H.R. 3590).  The full Senate began consideration of the legislation on November 21, 2009.  Backroom deals produced a manager’s amendment that was introduced early on the morning of December 19, and a vote on final passage of the bill as amended could come as early as December 24, 2009.

Buried within the contents of the more than 2,000 page bill—as well as the separate 383-page manager’s amendment, and a 276 page Indian Health Care reauthorization that would be enacted by reference—are details that would see a massive federal takeover of the health care system in America, including the following:

  • A new regime of government-run exchanges that would cause as many as 10 million Americans to lose their current employer-sponsored coverage—thus breaking the central promise of then-Senator Obama’s presidential campaign;
  • An increase in total national health spending, as well as an increase in premiums that could total $2,100 per year—a far cry from then-Senator Obama’s promise to lower costs for families by $2,500 annually;
  • Stifling insurance regulations that would raise premiums and encourage employers to drop coverage;
  • Trillions of dollars in new federal spending that would exacerbate the deficit and imperil the nation’s long-term fiscal solvency;
  • A board of unelected bureaucrats being empowered to re-write Medicare statutes in a way that could well lead to government rationing of health care;
  • Federal funding of insurance policies that cover elective abortion—and an unprecedented federally managed plan that would cover elective abortion procedures;
  • Tens of billions in unfunded mandates in the form of a massive Medicaid expansion that would compel all States—except Nebraska—to dedicate more scarce taxpayer resources to fund government-run health coverage in their States—or alternatively to drop Medicaid entirely;
  • Taxes on all Americans—individuals who purchase insurance, individuals who do not purchase insurance, and small and large businesses alike—that would kill jobs and raise premiums; and
  • Cuts to Medicare Advantage plans that would result in higher premiums and dropped coverage for more than 10 million seniors.

SUMMARY OF KEY PROVISIONS

The Government Takeover

Creation of Exchange:  The bill requires States to create their own Health Benefit Exchanges.  Uninsured individuals would be eligible to purchase an Exchange plan, as would those whose existing employer coverage is deemed “insufficient” by the federal government.  Employees with an “unaffordable” offer of group coverage would be able to take the value of their employer’s contribution in the form of a tax-free voucher to shop for plans on the Exchange.  The bill allows States to open Exchanges to all employers beginning in 2017, further expanding the scope and reach of the government-run Exchanges.

Benefit Standards:  The bill establishes a process for the Secretary of Health and Human Services to impose benefit standards for all plans.  Plans in the Exchange would fall into several tiers: bronze (covering 60 percent of anticipated expenses), silver (70 percent), gold (80 percent), and platinum (90 percent).  A young adult plan offering streamlined benefits would also be available, but only to individuals under aged 30.  Employer plans—including those with Health Savings Accounts—could impose maximum deductibles of $2,000 for an individual or $4,000 for a family.  These onerous standards would hinder the introduction of innovative models to improve enrollees’ health and wellness—and by insulating individuals from the cost of health services with restrictive cost-sharing, could raise health care costs.

“Low-Income” Subsidies:  The bill provides subsidies only through the Exchange, again putting private health plans at a disadvantage.  Individuals with access to employer-sponsored insurance whose group premium costs exceed 9.8 percent of modified gross income would be eligible for subsidies.  Some may note that the newly defined “modified gross income” (as opposed to adjusted gross income) excludes deductions for items like contributions to Individual Retirement Accounts (IRAs) or Health Savings Accounts (HSAs), thus imposing an effective tax on savings.

Premium subsidies provided would be determined on a sliding scale.  Individuals with incomes above 133 percent of the Federal Poverty Level (FPL, $29,327 for a family of four in 2009) and thus ineligible for the Medicaid expansion would be able to receive subsidies, which would phase out entirely for individuals with incomes at 400 percent FPL ($88,200 for a family of four), who would be expected to pay 9.8 percent of their income.  Many may also note that, because the definition of FPL for a couple is not twice the size of the poverty level for a single person, the bill creates a marriage penalty—meaning that married couples may lose hundreds, even thousands, of dollars in health insurance subsidies.

The bill further provides for cost-sharing subsidies, such that individuals with incomes under 100 percent FPL would have two-thirds of their cost-sharing covered for a platinum level plan, while individuals with incomes at 400 percent FPL would have one-third of their cost-sharing covered for a silver plan.  These rich benefit packages, in addition to raising subsidy costs for the federal government, would insulate plan participants from the effects of higher health spending, resulting in an increase in overall health costs—exactly the opposite of the bill’s purported purpose.

“Fannie Med” Co-Operatives and National Plan:  The bill as amended requires the Office of Personnel Management (OPM) to “offer at least two multi-State qualified plans through each Exchange in each State.”  The bill requires that at least one insurance plan option offered be a non-profit entity.

The bill establishes a Consumer Operated and Oriented Plan (CO-OP) program to provide grants or loans for the establishment of non-profit insurance cooperatives to be offered through the Exchange, but does not require States to establish such cooperatives.  The bill authorizes $6 billion in appropriations for start-up loans or grants to help meet state solvency requirements.

Many may be concerned that both the OPM federally sanctioned plans and cooperatives funded through federal start-up grants would in time require ongoing federal subsidies, and that a “Fannie Med” co-op would do for health care what Fannie Mae and Freddie Mac have done for the housing sector.  Some may also note that former OPM Director Linda Springer has publicly expressed concern that her former office lacks the capacity to oversee such a project in the manner that it currently oversees the Federal Employee Health Benefits Program (FEHBP).

Medicaid Expansion:  The bill would expand Medicaid to all individuals with incomes under 133 percent of the federal poverty level ($29,327 for a family of four).  Under the bill, the bill’s expansion of Medicaid to more than 10 million individuals would be fully paid for by the federal government only through 2016—thus imposing billions in unfunded mandates on 49 States.

However, as part of the “compromise” negotiated by Leader Reid, one State—Nebraska, home of Sen. Ben Nelson—would have 100 percent of its Medicaid costs paid in perpetuity.  Given public comments by Senate HELP Committee Chairman Tom Harkin (D-IA) that such a precedent could eventually lead to the federal government paying 100 percent of all Medicaid costs for all States, many may question whether this provision constitutes a special deal for Nebraska in exchange for Sen. Nelson’s vote, or a way to grow federal spending later by shifting unfunded State mandates back on to federal taxpayer rolls.

Federal Funding of Abortion Coverage:  The bill specifically permits taxpayer subsidies to flow to private health plans that include abortion, but creates 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.

The bill as amended by the manager’s amendment would modify the segregation regime slightly, requiring plans to follow “generally accepted accounting requirements” while establishing the regime.  The bill also allows States to “prohibit abortion coverage in qualified health plans” offered in their State’s Exchange.  However, these provisions would still result in federal funds flowing to plans that cover elective abortions—and would not prohibit citizens in States which have opted-out of elective abortion coverage in their own Exchange seeing their federal funds flow to plans that cover elective abortion in other States.  To that end, even pro-life Democrats like Rep. Bart Stupak (D-MI) have criticized the bill language as unacceptable, and a far cry from the standards established in the Stupak amendment—which extended the current law Hyde Amendment prohibitions on federal funding for abortion coverage–  that passed on a strong bipartisan vote in the House.

Further, the “Fannie Mae” model administered through OPM created by the manager’s amendment contains zero prohibition on coverage of elective abortion—an unprecedented federal sanctioning of plans that cover elective abortions.  To that end, many may note that insurance plans within the FEHBP—which Members of Congress themselves utilize—have been prohibited from offering abortion coverage since 1995, and federal employees have expressed strong satisfaction with their choice of plan options.

Medicare Payment Board:  The bill would create a new Independent Medicare Advisory Board established to make recommendations about the future growth of Medicare spending.  The appointed bureaucrats would be required to submit recommendations to Congress to keep Medicare spending below targeted levels—and such recommendations would be legally binding absent legislative action by Congress.

Particularly given the controversy surrounding the recent recommendations by the US Preventive Services Task Force with respect to mammogram coverage, many may be concerned that the Medicare Board contemplated by the legislation could result in additional coverage decisions being made by unelected bureaucrats largely or exclusively on cost grounds.  Moreover, many may be concerned that in time this provision could closely resemble a concept advocated by former Senator Tom Daschle—a board of unelected bureaucrats making health care decisions for all health plans nationwide, including decisions about which therapies and treatments the federal government will cover.  In his book Critical, Daschle wrote that, “We won’t be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost-effective.”

Funneling Patients into Government Care

Federal Insurance Restrictions:  The bill imposes new regulations on all health insurance offerings, with only limited exceptions.  The bill imposes price controls on insurance offerings, requiring insurers with a ratio of total medical expenses to overall costs (i.e. a medical loss ratio), of less than 80 percent in the individual and small group market, or 85 percent in the large group market, to offer rebates to beneficiaries.  Some Members may be concerned that government-imposed price controls, by requiring plans to pay out most of their premiums in medical claims, would give carriers a strong disincentive not to improve the health of their enrollees through prevention and wellness initiatives—as doing so would reduce the percentage of spending paid on actual claims below the bureaucrat-acceptable limits.  The bill would also “require health plans…to submit a justification for any premium increase” in advance, and permit Exchanges to reject bids by insurance companies with “excessive” (term undefined) price increases—thus permitting bureaucrats to exercise arbitrary controls over health insurance companies.

Existing policies could remain in effect—but only so long as an individual does not move, change jobs, or experience any other material change in life status.  Contrary to President Obama’s repeated promises that “You will not have to change [health insurance] plans,” CBO found that “relatively few non-group policies would remain grandfathered by 2016”—meaning millions of individuals would lose their current individual health insurance plans as a result of Democrats’ government takeover of health care.

Mandates on Employers; “Fair Share” Penalties:  The bill imposes a series of mandates related to  employers offering health insurance coverage.  Specifically, the bill taxes large employer plans (i.e. with more than 50 workers) that impose long “waiting periods” of over 30 days on coverage eligibility up to $600 per full-time employee.  The bill also taxes large employers who do not offer coverage, or who offer coverage that results in employees obtaining subsidies because that coverage costs more than 9.8 percent of modified gross income, to pay taxes.  The penalty in the first instance is $750 per employee, and in the second instance constitutes $3,000 per employee receiving subsidies, or $750 per worker, whichever is less.

Members may be concerned that the “fair share” penalties would most adversely affect those workers whom health “reform” is intended to help.  For instance, the taxes would discourage employers from hiring married individuals or parents raising children—as such individuals would be more likely to qualify for subsidies, thus triggering penalties.  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 previously notes that the provisions “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.”

Individual Mandate:  The bill places a tax on individuals who do not purchase “minimum essential coverage,” as defined by the bureaucratic standards in the bill.  The tax would constitute 2 percent of adjusted gross income, up to the amount of the national average premium for bronze plans offered through the Exchange.  The tax would not apply to non-resident aliens, those exempted on religious grounds, individuals for whom coverage is “unaffordable” (i.e. costing more than 8 percent of modified gross income), and those with short (i.e. fewer than three month) gaps in coverage.  “Acceptable coverage” includes qualified Exchange plans, “grandfathered” individual and group health plans, Medicare and Medicaid plans, and military and veterans’ benefits.

For individuals with incomes of under $100,000, the cost of complying with the mandate would be under $2,000—raising questions of how effective the mandate would be, as paying the tax would in many cases cost less than purchasing an insurance policy.  As then-Senator Barack Obama pointed out in a February 2008 debate, in Massachusetts, the one State with an individual mandate, “there are people who are paying fines and still can’t afford [health insurance], so now they’re worse off than they were.  They don’t have health insurance and they’re paying a fine.”

Medicare Advantage:  The bill would phase in a system of Medicare Advantage (MA) competitive bidding over a three-year period beginning in 2012.  The bill also imposes an arbitrary adjustment on MA payment benchmarks as part of the competitive bidding process.  Many may note that despite its title, traditional Medicare would not be required to compete head-to-head against private health plans in MA “competitive bidding”—thus giving government-run Medicare an advantage.  The Congressional Budget Office has stated that these provisions would collectively cut $120 billion from Medicare Advantage, and would result in millions of seniors losing access to their current plans, and/or having the extra benefits—reduced cost-sharing, dental and vision coverage, etc.—that MA plans provide curtailed or eliminated entirely.

The bill also gives the Secretary blanket authority to reject “any or every bid by an MA organization,” as well as any bid by a carrier offering private Part D Medicare prescription drug coverage, giving federal bureaucrats the power to eliminate the MA program entirely—by rejecting all plan bids for nothing more than the arbitrary reason that an Administration wishes to force the 10 million beneficiaries enrolled in MA back into traditional, government-run Medicare against their will.

Tax Increases

Government-Forced Insurance Penalties:  Offsetting payments to finance the government takeover of health care would include taxes on individuals not complying with the mandate to purchase coverage, as well as taxes by businesses associated with the “fair share” penalties, as outlined above.  The individual mandate as modified by the manager’s amendment would raise $15 billion and $28 billion respectively over ten years.

“Cadillac” Tax on High-Cost Plans:  The bill imposes a 40 percent excise tax on the excess cost of employer-sponsored plans above threshold amounts.  In 2013, the threshold amounts would be $8,500 for an individual policy and $23,000 for a family policy.  Individuals in certain “high-risk professions” would be subject to a higher threshold, and the 17 States with the highest costs (as determined by the average employer-sponsored insurance premium) would see the threshold amounts phased in during the years 2013-2015.  In future years the threshold amount would be raised for inflation at the rate of general price inflation (i.e. Consumer Price Index) plus one percent—which based on past trends would imply that the “Cadillac” tax would hit more plans over time.  According to the Joint Committee on Taxation, the provisions would raise $148.9 billion over ten years.

While some Members may support changing the current tax treatment of health insurance, many may oppose the bill’s model of raising taxes to finance a government takeover of health care.  Many may also note that the bill applies a standard 40 percent tax on all plans regardless of the purchaser’s income—potentially subjecting millions of low-income and middle-class families with employer-sponsored coverage to tax rates exceeding the highest marginal rate under current law.

Higher Payroll Taxes:  The bill imposes a 0.9 percent increase in Medicare payroll taxes on individuals with incomes over $200,000 and families with incomes over $250,000, raising $86.8 billion over ten years.  The tax is NOT indexed for inflation, meaning it would affect many more taxpayers over time.  In addition to being administratively burdensome—as individual employers would have to base tax withholding in part on the salary of an employee’s spouse—many may be concerned about the precedent set for diverting Medicare payroll taxes in a way that finances a $2.5 trillion new entitlement scheme for younger Americans.

Taxes on Health Plans:  The bill prohibits the reimbursement of over-the-counter pharmaceuticals from Health Savings Accounts (HSAs), Medical Savings Accounts, Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs), and increases the penalties for non-qualified HSA withdrawals from 10 percent to 20 percent, effective in 2011.  Because these savings vehicles are tax-preferred, adopting these provisions would raise taxes by $6.3 billion over ten years, according to the Joint Committee on Taxation.

The bill would place a cap on FSA contributions, beginning in 2012; contributions could only total $2,500 per year, subject to annual adjustments linked to the growth in general (not medical) inflation. Members may be concerned that these provisions would first raise taxes by $13.3 billion, and second—by imposing additional restrictions on health savings vehicles popular with tens of millions of Americans—undermine the promise that “If you like your current coverage, you can keep it.”  At least 8 million individuals hold insurance policies eligible for HSAs, and millions more participate in FSAs.  All these individuals would be subject to additional coverage restrictions—and tax increases—under this provision.

The bill raises the threshold to itemize health expenses from 7.5 percent to 10 percent of adjusted gross income, beginning in 2013; seniors over age 65 would receive a four-year extension of the 7.5 percent income threshold for four additional years (i.e. until 2017).  This provision would raise taxes by $15.2 billion.  The bill also repeals the current-law tax deductibility of subsidies provided to companies offering prescription drug coverage to retirees, raising taxes by $5.4 billion.  Many may be concerned that this provision would lead to companies dropping their current coverage as a result.

Taxes on Health Products:  The bill would impose several health-related excise taxes: A $2.3 billion tax on drug makers (raises $22.2 billion over ten years), an annual fee on medical device makers rising to $3 billion (raises $19.2 billion), and a tax on insurance companies that rises to $10 billion annually in  beginning in 2011, raising taxes by $59.6 billion. Many may echo the concerns of the Congressional Budget Office, and other independent experts, who have confirmed that these taxes would be passed on to consumers in the form of higher prices—and ultimately higher premiums.

Taxes on Insurance Industry Executives:  The bill would cap the deductibility of insurance industry executive salaries at $500,000 beginning in 2013, raising $600 million.  Many may question why the insurance industry—alone among health care industries, or indeed all industries—warrants such treatment, and whether or not this provision constitutes an attempt to extract political retribution on a particular industry out of favor with Democrats.

COST AND OTHER CONCERNS

Cost:  According to the Congressional Budget Office’s preliminary score of H.R. 3590 and the manager’s amendment to the bill, the legislation would spend nearly $1 trillion over its first ten years.  More specifically, CBO estimates that the bill would spend $871 billion to finance coverage expansions—$395 billion for the Medicaid expansions, $436 billion for “low-income” subsidies, and $40 billion for small business tax credits.  The spending on coverage expansions does not even include additional federal spending included in the legislation—including a new reinsurance program for retirees, $10 billion in mandatory spending on community health centers, closing the Medicare Part D “doughnut hole,” and a $13 billion trust fund for public health—that totals $95.5 billion.  When combined with the cost of the coverage expansions, total spending under the bill actually approaches $1 trillion.  Moreover, staff on the Senate Budget Committee have estimated that the bill’s total cost in its first ten years once coverage expansions take effect (i.e. 2014-2023) approaches $2.5 trillion.

In its score, CBO notes that “under the legislation, federal outlays for health care would increase during the 2010-2019 period, as would the federal budgetary commitment to health care”—by a total of $200 billion over that ten year period.  Many may be concerned that spending at least $1 trillion to finance a government takeover of health care would not only not help the growth in health costs, but—by creating massive and unsustainable new entitlements—would also make the federal budget situation much worse.

Savings would come from reductions within the Medicare program, of which the biggest are cuts to Medicare Advantage plans (net cut of $119.9 billion), reductions in adjustments to certain market-basket updates for hospitals and other providers (total of $147 billion), skilled nursing facility payment reductions (total of $23.9 billion), various reductions to home health providers (total of $39.4 billion), and reduction in imaging payments ($3 billion).  A further $35.7 billion in savings would come from reducing subsidies (i.e. means-testing) to Medicare Part D prescription drug plans for the first time, and from freezing the current annual adjustment to the Part B means test at its current level (i.e. $85,000 for a single retiree and $170,000 for a couple) until 2019.  A further $28.2 billion in savings is projected from the automatic reductions in Medicare spending expected to be triggered by the Independent Medicare Advisory Board during the years 2015-2019.

CBO has also confirmed that the legislation as introduced would raise health care premiums for struggling middle-class families, resulting in non-group premium increases of $300 per year for individuals and $2,100 for families.  While the Obama campaign promised that its plan would reduce premiums by $2,500 per year for families, CBO confirmed that premiums would still continue to rise—and for millions, premiums would rise higher than under current law.

In terms of overall spending on health care costs, many may note that the independent actuaries at the Centers for Medicare and Medicaid Services found that H.R. 3590 would raise total national health spending by more than $200 billion between 2010-2019.  Many may cite this data point to question the effectiveness of Democrats’ health “reform,” given that the legislation was originally intended to reduce costs, not raise them.

Tax Increases:  Offsetting payments include $15 billion in taxes on individuals not complying with the mandate to purchase coverage, $149 billion from the “Cadillac tax” on high-premium insurance plans, $28 billion in payments by businesses associated with the employer “free rider” penalty, and $65 billion in associated other revenue interactions.

The Joint Committee on Taxation notes that other bill provisions would increase federal revenues over and above the $257 billion in tax increases noted above.  JCT found that the increase in the Medicare payroll tax would raise $86.8 billion, corporate reporting would raise $17.1 billion, the worldwide interest implementation delay would raise $26.1 billion, the treaty withholding provisions would raise $7.5 billion, and the codification of the economic substance doctrine would raise $5.7 billion.  Taxes on Health Savings Accounts (HSAs) and other similar savings vehicles would raise $19.6 billion, while provisions relating to retiree drug subsidies would raise taxes by $5.4 billion.  Raising the threshold to itemize health expenses from 7.5 percent to 10 percent of adjusted gross income would generate $15.2 billion in revenue, limiting the deductibility of insurance industry executive salaries would raise $600 million, and a 10 percent tax on indoor tanning services would raise $2.7 billion.

The excise tax on medical devices would raise taxes by $19.2 billion.  Similar excise taxes on insurance companies and drug manufacturers would raise $59.6 billion and $22.2 billion respectively.  Finally, the tax on health benefits used to finance the Comparative Effectiveness Research Trust Fund would raise $2.6 billion over ten years.

Out-Year Spending:  The score indicates that of the $871 billion in spending for coverage expansions under the specifications examined by CBO, only $17 billion—or less than two percent—of such spending would occur during the first four years following implementation (i.e. 2010-2013).  Moreover, the bill in its final year would spend a total of nearly $200 billion to finance coverage expansions.  In other words, the Democrat bill spends so much, it needs its many of its tax increases to take effect immediately to finance spending beginning in 2014—and even then cannot come into proper balance without relying on budgetary gimmicks.

Budgetary Gimmicks:  While the CBO score claims H.R. 3590 as amended would reduce the deficit by $132 billion in its first ten years, Democrats achieved that “deficit-neutral” solely by excluding the cost of reforming 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—from this bill, and including it instead in separate legislation (H.R. 3961; S. 1776) that is not paid for.  While Members may support reform of the SGR mechanism paid for in a fiscally responsible manner, many may view any legislation that presumes a more than 21 percent cut in Medicare payments to physicians in 2010 as an inherent gimmick designed solely to hide the apparent cost of health “reform.”

The bill also relies on $72 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, even Democrats, such as Senate Budget Committee Chairman Kent Conrad (D-ND), have called the program a “Ponzi scheme,” and non-partisan actuaries at the Centers for Medicare and Medicaid Services found that the program faces “a significant risk of failure.”  Therefore, many may find any legislation that relies upon such a program to maintain “deficit-neutrality” fiscally irresponsible and not credible.

Policy Brief: Not a Moderate Compromise: Senate Bill Is Still a Government Takeover of Health Care

While Democrats’ latest back-room deal is being reported as a moderate compromise due to minor concessions being made to Sen. Ben Nelson (D-NE), legislation being considered in the Senate (H.R. 3590) would still represent a government takeover of health care, with all of its adverse effects on the American people:

Higher Premiums:  The Congressional Budget Office (CBO) has confirmed that the legislation would raise health care premiums for struggling middle-class families, resulting in non-group premium increases of $300 per year for individuals and $2,100 for families.  While the Obama campaign promised that its plan would reduce premiums by $2,500 per year for families, CBO confirmed that premiums will still continue to rise—and for millions, premiums will rise higher than under current law.

Job-Killing Taxes:  The bill still contains more than $400 billion in tax increases, many of which start in 2010—exactly the wrong solution for American families during a severe recession. The Congressional Budget Office previously noted that mandates on employers to offer insurance “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.”  Moreover, other taxes included in the bill—such as those on drugs, medical devices, and—would be passed on to individuals and families in the form of higher premiums.

Lost Coverage:  CBO has confirmed that up to 10 million people will lose their offer of employer-sponsored health coverage under the Senate bill—to say nothing of the millions of seniors who will lose access to Medicare Advantage plans.  Contrary to President Obama’s repeated promises that “You will not have to change [health insurance] plans,” CBO also found that “relatively few non-group policies would remain grandfathered by 2016”—meaning millions of individuals will lose their current individual health insurance plans as a result of Democrats’ government takeover of health care.

Higher Health Costs:  The Obama Administration’s own actuaries have confirmed that the Senate bill, like the Pelosi House bill, would raise, not lower, the growth of health care costs—raising serious questions about the sustainability of the massive new entitlements being created.

Trillions in New Spending:  While Democrats allege the Senate bill would spend “only” $848 billion, a more accurate picture of the bill’s spending provisions finds that in its first ten years of full implementation, this “moderate” legislation would spend $2.5 trillion—this at a time when the federal government is already suffering from record deficits and debt.

Government-Run Insurance:  The Senate bill maintains a “Fannie Med” program of government-run insurance spearheaded by the Office of Personnel Management (OPM)—an approach that would likely result in additional taxpayer liability and massive federal bailouts should this insurance program prove unsustainable.  Moreover, the bill places new restrictions on insurance plans, causing millions to lose their current coverage and funneling these individuals into government-run Exchanges.

Federal Funding of Abortions:  The manager’s amendment maintains the “segregation” regime regarding federal funding being spent on abortion coverage that pro-life groups have denounced as an accounting sham.  Moreover, the new national plans run by OPM would have zero restrictions on coverage of elective abortions—an unprecedented expansion of abortion coverage, when the coverage OPM currently provides to federal employees, including Members of Congress, prohibits coverage of elective abortions.

The American people remain greatly concerned about uncontrolled federal spending and record-high unemployment, yet the Democrat “compromise” in the Senate would exacerbate both problems.  Many may question: Is this the best “reform” Democrats can achieve—and what are the majority’s misplaced priorities that it remains so fixated on enacting a government takeover of health care?

Policy Brief: Will Senate Democrats Allow an Unelected Board to Ration Americans’ Health Care?

“The chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here….There is going to have to be a very difficult democratic conversation that takes place.”

 — President Obama, interview with The New York Times

Health “reform” legislation introduced by Senate Majority Leader Reid (H.R. 3590) would create a new bureaucracy to micro-manage Americans’ health care—and an amendment (#3240) offered by Sen. Jay Rockefeller (D-WV) would make these provisions worse.  Multiple press reports indicate that Sen. Reid has accepted such an amendment as part of his back-room negotiations to obtain 60 votes to pass the Democrats’ bill.  Not known to many Americans is the implications the bill, and the Rockefeller amendment, would have on their own personal health care:

  • The underlying bill would create a new Independent Medicare Advisory Board required to make binding recommendations for cost savings within the Medicare program.  The bill requires the Board to ensure Medicare spending grows no more than a specified percentage—in the years after 2019, the Board would be required to make cost saving recommendations if Medicare grows faster per capita than the health care system as a whole.  The bill makes the Board’s recommendations binding unless a majority of Congress disapproves.
  • The Rockefeller amendment would significantly increase the power of unelected bureaucrats on the Board to affect Americans’ health care in two ways.  First, the amendment would require the Board to hold per capita Medicare spending to the growth of GDP plus 1.5 percent.
  • Secondly, the Rockefeller amendment would expand the Board’s remit beyond Medicare spending to include other forms of health insurance.  Specifically, the amendment would require the Board to consider changes that should be made to the definition of a “qualified health plan” that, among other things, would “decrease health care spending.”  The amendment further gives the Health and Human Services Secretary the authority to require private health plans to adopt such cost-cutting measures in order to be considered “qualified” plans for purposes of the individual mandate.  In other words, federal bureaucrats would be empowered under the Rockefeller amendment to require private health plans to ration access to costly but effective services—and individuals would be required to purchase such coverage.
  • Many may believe that the Rockefeller amendment closely resembles a concept advocated by former Senator Tom Daschle—a board of unelected bureaucrats making health care decisions for all health plans nationwide, including decisions about which therapies and treatments the federal government will cover.  In his book Critical, Daschle wrote that, “We won’t be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost-effective.”
  • Many of President Obama’s key advisers have echoed his comments about questioning the need for the federal government to finance costly but effective health treatments.  In addition to Sen. Daschle’s long-time advocacy of a federal health board to regulate treatments’ cost-effectiveness, a report released by the liberal Commonwealth Fund earlier this year argued that up to $634 billion could be saved by denying individuals access to treatments that are not “cost-effective.”

“In health care, waiting lines…can reduce the average cost of health capital, even while raising patient costs in terms of time and inconvenience.  Health care waiting lines represent a trade-off between patient costs and capital costs.”

— Senior Obama Administration Official Sherry Glied,
writing in Critical Condition: Why Health Reform Fails

Given comments by many key liberal groups—as well as the President himself—many may be concerned that Democrats’ trillions in spending on a government takeover of health care will increase federal bureaucrats’ role in making patients’ personal health decisions—and lead to unacceptable delays in life-saving treatments for many Americans.

Policy Brief: Democrats’ Fiscal Responsibility Sham

“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 their health “reform” bill costs under $900 billion and will reduce the federal deficit, such statements are based solely upon a “shell game” that attempts to hide the true budgetary effects of the majority’s trillions in federal government spending:

  • This week, the House is expected to consider a “jobs bill” (H.R. 2847) that would among other things extend for six months an increase in Medicaid matching rates to States and subsidies to unemployed workers electing COBRA continuation health coverage from their former employers.  While Members may support extending benefits for unemployed workers, these six month extensions would collectively spend $35.8 billion—the cost of which is not offset, thus increasing federal deficits.
  • Given that Section 1749 of the Pelosi health care bill (H.R. 3962) already included two additional quarters of an extended Medicaid bailout, and given that the current Medicaid bailout enacted in the “stimulus” does not expire until December 2010, many may view these provisions as a patently transparent attempt to reduce the size of Democrats’ government takeover of health care by siphoning portions of it into other legislation—while simultaneously breaking President Obama’s promise that such legislation will not increase the deficit.
  • If Democrats hope to extend provisions like the COBRA subsidies and Medicaid bailout piecemeal through 2013 or 2014—when the major provisions of their “reform” bills will finally take effect—such efforts would cost much more than the $35.8 billion total in the “jobs bill.”  The Congressional Budget Office previously estimated that extending the COBRA subsidies and Medicaid bailouts to 2013 would cost an additional $111 billion over and above the spending included in the “stimulus” itself.  However, the majority has made no attempt to offset the costs of such a federal spending binge.
  • The extension of the “stimulus” provisions follows the impact of the “stimulus” itself, which included more than $150 billion in new mandatory spending on federal health care programs—while adding more than $1 trillion in spending and new interest on to the federal budget deficit.
  • Although President Obama claimed his health “reform” plan would cost $900 billion, Speaker Pelosi’s bill (H.R. 3962) cost far more than that—not counting the impact of all the “separate” health spending in other bills.  The CBO score revealed total costs of the coverage expansion total $1.055 trillion; total federal spending under the bill approaches $1.3 trillion.
  • Democrats further claimed the Pelosi bill was “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, Democrats attempted 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.
  • Adding in the $150 billion already spent on health care in the “stimulus,” the $111 billion cost of extending “stimulus” provisions, the more than $200 billion cost of Democrats’ stand-alone SGR legislation, and the nearly $1.3 trillion cost of the Pelosi bill itself, the health “reform” agenda propounded by Speaker Pelosi totals more than $1.7 trillion—nearly double President Obama’s targeted figureJust as important, this big-spending legislation would further break the President’s promise by increasing the deficit to the tune of hundreds of billions of dollars—as Democrats are making no attempt to offset the costs of nearly half a trillion dollars in increased federal spending.

Democrats’ spending binge has not gone unnoticed by America’s largest federal creditor.  Treasury Secretary Geithner’s claims of the United States’ fiscal rectitude were publicly mocked by an audience during his visit to China earlier this year, and the New York Times recently ran a front-page article noting significant Chinese skepticism about Democrats’ health “reform” agenda, as “Chinese officials expect that they will help finance whatever Congress and the White House settle on.”  At a time of record deficits, when will Democrats stop playing shell games to mask the full cost of their government takeover of health care and start restoring fiscal discipline to Washington?

Policy Brief: Tallying the Pelosi Bill’s Effects on Job Destruction

President Obama’s recent “jobs summit,” and Speaker Pelosi’s renewed focus on yet another “jobs bill” full of additional government spending, highlights the majority’s ineffectual attempts to combat record-high unemployment levels.  For much of the past year, Democrats have focused on a government takeover of health care whose hundreds of billions of dollars in tax increases will destroy jobs, not create them:

  • In order to pass her government takeover of health care (H.R. 3962), Speaker Pelosi forced her House Democrats to pass a whopping $729.5 billion in job-killing tax increases over the next ten years.  According to a model developed by Christina Romer, President Obama’s chief economic advisor, such a level of increased taxation will demolish or destroy up to 5 million jobs.
  • Based on a total job loss of 5 million employees over the ten-year budget window, H.R. 3962 would demolish or destroy more than 1,300 American jobs per day—at a time when unemployment remains at 10 percent.
  • According to the Romer model, the daily job losses included in H.R. 3962 would result in a loss of more than 41,000 jobs every month.  Had such activity occurred last month, the 11,000 job loss figure for the month of November would have been nearly four times higher.
  • While the Pelosi bill’s tax increases would begin in 2011—a year when the White House’s own budget projects unemployment would average 8.6 percent—its coverage expansions would not occur until 2013.  Thus, using the extrapolated Romer model, H.R. 3962 could demolish or destroy nearly 1.5 million jobs before any of the major coverage expansions even take effect.

The American economy remains in the midst of record-high unemployment, and voters want their elected leaders to focus first and foremost on returning the economy to prosperity.  Yet the Democrat leadership in both chambers insists on pushing forward their government takeover of health care that would only increase job losses, while causing millions to lose their current health coverage in the process.

Many may question: What are the majority’s misplaced priorities that would see them jeopardize American jobs as part of their single-minded fixation with creating a new government-run health care system?

Policy Brief: Senate Democrats’ Moderate Compromise: Single-Payer Health Care

“The irony of this late-breaking Medicare proposal is that it could be a bigger step toward a single-payer system than the milquetoast public option plans rejected by Senate moderates as too disruptive of the private market.”

Washington Post editorial, December 10, 2009

While Democrats’ latest back-room deal is being reported as a moderate compromise, the amendment to  legislation being considered in the Senate (H.R. 3590) would in reality represent a government takeover of health care of a larger magnitude than even most Democrats have previously contemplated:

  • Although details of the secret agreement remain sketchy as Democrats continue their behind-the-scenes dealing, most press reports indicate that the “compromise” would allow individuals aged 55 to 64 to participate in the Medicare program.  (Subsidy levels for such coverage, if any, have yet to be publicly disclosed.)
  • First suggested by Howard Dean—a notable and early supporter of a European-style single-payer health plan—the Medicare buy-in has energized liberal advocates.  For instance, Rep. Anthony Weiner observed the buy-in proposal “would be the largest expansion of Medicare in 44 years and would perhaps get us on the path to a single-payer model.”  Brookings Institution analyst Henry Aaron noted that the proposal “changes the game completely…it would be far more significant, potentially, than the kinds of [government-run] public options that the two houses have been reduced to.”
  • Conversely, organizations like the American Medical Association and American Hospital Association—which heretofore have demonstrated their fervent desire to enact Democrats’ government takeover of health care—oppose the buy-in proposal, on the grounds that Medicare already reimburses doctors and hospitals at below-market rates, and increasing its scope will exacerbate providers’ financial difficulties.  For instance, an executive at the Mayo Clinic warned that the buy-in proposal would “push the best providers, hospitals, and physicians closer to the brink of financial ruin.”
  • The Medicare buy-in language would resemble a “robust” government-run plan—which even House Democrats rejected before passing Speaker Pelosi’s government takeover of health care (H.R. 3962).  The non-partisan Lewin Group found that a “robust” government-run plan would result in up to 114 million individuals losing their current insurance.  The Lewin Group also found that such provisions—which link reimbursement to Medicare payment rates that are 20 percent below private payment levels—would result in a net decrease in physician reimbursement levels of $16,207 annually—even after accounting for additional revenue from the newly insured.

“The real problem with our long-term deficit actually has to do with our entitlement obligations…The big problem is Medicare, which is unsustainable.”

—President Obama, Interview with Washington Post editorial board, January 15, 2009

  • The Democrat ideological fixation on expanding government-run health plans like Medicare overlooks the fact that according to the latest report issued by the program’s trustees, Medicare itself faces deficits of $37.8 trillion—nearly three times current GDP—over 75 years, and unfunded obligations of $88.9 trillion over the infinite horizon.

Given that numerous leading Democrats have claimed that the so-called “public option” would lead to single-payer health coverage—a system which President Obama himself has endorsed—is there any doubt that a Medicare buy-in mechanism would be used by liberals to ensure the creation of a government-run health plan?  If President Obama is willing to ignore his previous comments about the “unsustainable” nature of the Medicare entitlement in order to support a Senate “compromise” that expands the program, is there any action Democrats will not take to expand government so that it consumes the entire health care sector?

Policy Brief: Democrats’ Health “Reform” Picks Winners and Losers

While Democrats allege that their government takeover of health care will create a fairer and more equal society, provisions in Speaker Pelosi’s government takeover of health care (H.R. 3962) and Sen. Reid’s version (H.R. 3590) provide perverse incentives that will only increase inequity among Americans:

The Many Pay for the Few:  Over and above significant concern that enacting their legislation will exacerbate out-of-control federal spending, many may question the entire premise of Democrats’ government takeover of health care.  According to the CBO score of the Pelosi bill, in 2019, the federal government will spend $207 billion—approximately $612 for each of the country’s projected 338 million residents—in order to only partially subsidize health coverage for 30 million (15 million through Medicaid, and the same amount through subsidies in the Exchange).  Many may question such a strategy for both its added burden on the federal government’s already looming fiscal crisis—and its effectiveness in following President Obama’s stated goal for the federal government to “spread the wealth around.”

People with Employer Coverage Pay More:  While the Pelosi bill provides affordability credits to subsidize some individuals’ health insurance coverage, “firewall” language included in Section 342(b) of the bill prohibits individuals with an offer of employer-sponsored coverage from obtaining these subsidies unless “the cost of the employee premium…would exceed 12 percent” of income.  Thus, while a low-income family of four making $35,000 would receive subsidies capping their premium at about $1,050 if their employer did NOT offer a group policy, the same family would be forced to pay up to $4,200 for an employer policy if offered before it would be considered “unaffordable,” making the family subject for federal subsidies.  Many may view this inequity as encouraging employers with large numbers of low-wage workers to drop their current coverage and instead obtain greater subsidies for their employees on federal taxpayers’ dime.

Poor People Denied Choice of Plan:  Section 342(a)(1)(C) of the Pelosi bill prohibits individuals eligible for Medicaid—including the 15 million new enrollees projected under the legislation—from receiving affordability credits to purchase a private plan on the Exchange.  Under this policy, a family of four with income of $33,000—just below 150 percent of the poverty level in 2009—would be forced on to government-run Medicaid, while a family with just $1,000 more income would receive a choice of plans on the Exchange.  Many may question whether and why Democrats believe poor individuals are incapable of choosing the health insurance plan that best meets their needs.

Non-Citizens Granted Choice of Plan Options:  While the Pelosi bill maintains the current law provision requiring most legal aliens to wait five years before becoming eligible for Medicaid, Section 342(d) exempts the new affordability credits from the waiting period requirement.  Thus, while American citizens eligible for Medicaid will be forced into the government-run program and not permitted a choice of plans on the Exchange, legal aliens will be able to choose their own Exchange plan through affordability credits.  Many may question the fairness of a health care plan that provides a better choice of health insurance options to non-citizens (even if legal permanent residents) than to sworn American citizens.

Tax on Savings:  Rather than using the traditional measure of adjusted gross income, the Reid bill uses “modified gross income” to calculate eligibility for health insurance subsidies.  While contributions to Individual Retirement Accounts (IRAs), Health Savings Accounts (HSAs) and other similar savings vehicles would be exempt from the calculation of adjusted gross income under current law, they will be included in the determination for health insurance subsidies under the Reid bill.  At a time when the United States faces both an entitlement crisis and a personal savings deficit, many may question the wisdom of an unprecedented policy that would effectively tax retirement savings by including that money when determining the percentage of income individuals must spend on health care.

Federal Funds Subsidize the Undocumented:  The Pelosi bill contains no prohibition on undocumented immigrants purchasing coverage on the Exchange.  While a notional prohibition (coupled with a weak enforcement mechanism) may theoretically prevent some undocumented from obtaining taxpayer subsidies to purchase health insurance, many may find these provisions insufficient.  Moreover, any outlay by a government-run plan would by definition spend federal funds—so any government-run health plan open to the undocumented would result in federal funds being spent to cover those illegally present.

Given all the inequities present in the Democrat bills, one must ask the true motivation behind their government takeover of health care: To make America a more just and equal society, or to increase dependence on government for special favors and privileges?

Policy Brief: What Do the American People Need? Jobs What Do Democrats Want to Give Them? Government-Run Health Care

President Obama’s “jobs summit,” coupled with Friday’s release of November jobs numbers, once again raise serious questions about the majority’s ineffectual attempts to combat record-high unemployment levels.  For much of the past year, Democrats have focused on spending trillions on a government takeover of health care—funded by hundreds of billions of dollars in tax increases that will destroy jobs, not create them:

  • November 12, 2008:  Senate Finance Committee Chairman Baucus releases his “Call to Action” white paper on health reform—which proposes taxing businesses that cannot afford to provide coverage to their workers.  The previous Friday, government statistics revealed the number of long-term unemployed had risen by 10 percent in the past month alone.
  • February 26, 2009:  The White House releases its budget outline with a $634 billion “reserve fund” for the uninsured.  The reserve fund would receive most of its revenue from tax increases on individuals with incomes over $250,000—including small business owners.  The following week, the Labor Department reported that the economy shed 651,000 jobs in February—and 2.6 million over the previous four months.
  • April 29:  House and Senate Democrats approve Obama budget, including a “reserve fund” that allows Democrats to raise taxes to fund a government takeover of health care.  The move came in a month where private-sector employment fell by 611,000 jobs.
  • May 12:  Senate Finance Committee holds roundtable on financing health reform, where witnesses advocate raising taxes on small businesses to finance a government takeover of health care.  The previous Friday, the Bureau of Labor Statistics reported the total number of unemployed workers reached 13.7 million.
  • June 7Press reports indicate that a bill offered by the late Senate HELP Committee Chairman Ted Kennedy would raise taxes on businesses by as much as $300 billion to fund health “reform.”  According to a model developed by Council of Economic Advisors Chair Christina Romer, such a proposal would destroy 4.7 million jobs.  Two days earlier, the unemployment rate jumped half a percent to reach a 26-year high of 9.4 percent.
  • June 19:  The House Democrat leadership unveils legislation imposing an 8 percent tax on businesses that cannot afford to fund their workers’ health coverage.  The Democrat proposal for a tax on jobs was released during a month when businesses shed an additional 467,000 jobs.
  • July 17:  Two House Committees approve legislation that would raise taxes on businesses that cannot afford to offer health coverage by $208 billion—along with more than half a trillion dollars in a “surtax” that would hit many small business owners.  That month, the average period of workers’ unemployment exceeded 25 weeks—an all-time high.
  • September 9:  President Obama’s message to a joint session of Congress criticizes companies who cannot afford to buy health coverage for their employees as “gam[ing] the system by avoiding responsibility to themselves or their employees.”  That same month, the number of long-term unemployed—those out of work for at least six months—exceeded 5 million—an all-time high, and more than double the number in January 2009.
  • October 13:  Senate Finance Committee Democrats approve legislation (S. 1796) imposing “fair share” taxes on employers who cannot afford to offer coverage, which the liberal Center for Budget and Policy Priorities criticized as a “tax [on firms] for hiring people from low- or moderate-income families.”  That same month, the unemployment rate among youth, who are most likely to be affected by such mandates, reached 27.6 percent—also an all-time high.
  • November 7:  The House passes Speaker Pelosi’s government takeover of health care (H.R. 3962), complete with more than $700 billion in job-killing tax increases that would according to an Obama Administration model demolish or destroy up to 5 million jobs.  The vote took place one day after the unemployment rate jumped above 10 percent for the first time in a generation—and on the same day that the front-page of the New York Times asserted that unemployment and under-employment had reached levels not seen since the Great Depression.

The American economy remains in the midst of record-high unemployment.  Yet the Democrat leadership in both chambers insists on pushing forward their government takeover of health care that would only increase job losses, while causing millions to lose their current health coverage in the process.  Many may question: What are the majority’s misplaced priorities that would see them dither on stemming job losses in order to pursue a single-minded fixation with creating a new government-run health care system?

Policy Brief: Government-Run Health Care Hazardous to Patients’ Health

“These delays in the patient presenting with symptoms and cancer being diagnosed at a late stage inevitably costs lives.  This situation is unacceptable…”

— Britain’s National Cancer Director Professor Mike Richards,
quoted in BBC News article discussing government-run health care in the U.K.

While Democrats claim their government takeover of health care would improve care and lower costs, recent reports from both sides of the Atlantic have reinforced the message that government-run health care results in delays in both screening and treatment that can prove costly—even deadly:

  • The “cancer czar” for Britain’s National Health Service (NHS) recently admitted that failure to detect early-stage cancers costs up to 10,000 lives per year in Britain.  This “unacceptable” situation stems largely from the fact that over 90 percent of patients are diagnosed with cancer due to the onset of symptoms, rather than early detection and screening.
  • An official NHS analysis of cancer outcomes demonstrates that of the “big four” cancers—breast, colon, lung, and prostate—England’s government-run health plan significantly lags behind other European nations.  And those European outcomes themselves significantly lag American standards: A Lancet Oncology article published in September 2007 revealed that for 10 of 16 specific cancers, American patients had statistically better outcomes than their European counterparts.
  • This week’s NHS reports follow on a June study outlining how up to 15,000 lives could be saved every year if patients in Britain’s National Health Service received the same quality care that patients in the United States obtain.  For instance, one woman noted that her 74-year-old mother had to travel overseas to receive a proper diagnosis: “It was only when she went back to visit family in Iran and saw a doctor there that she was diagnosed.  They did a scan and found a large lump in her fallopian tube.  When she came back to the UK, doctors found the cancer had spread to one of her lymph glands.  It was the size of a tennis ball.  She then had a six-week wait before having a hysterectomy and then chemo.

Given the dynamic in Britain—where even a country famous for its “rationing watchdog” the National Institute for Health and Clinical Excellence (NICE) has published a report advocating for more cancer screening—many may question why American bureaucrats on the United States Preventive Services Task Force have publicly advocated for a less aggressive approach to breast cancer screening.  Some may ask questions about whether this strategy will lead to the kind of cancer outcomes currently plaguing government-run health care in Great Britain—and why Democrats want to empower this board of unaccountable bureaucrats with the ability to determine what “acceptable” treatments should be covered by health insurance.

Policy Brief: CBO Confirms the Result of Democrats’ Health “Reform:” Higher Premiums

“Obama’s plan will save a typical family up to $2,500 on premiums…”

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

While Democrats have alleged that their government takeover of health care will lower costs, the Congressional Budget Office (CBO) confirmed that legislation being considered in the Senate (H.R. 3590) would raise health care premiums for struggling middle-class families:

  • The CBO analysis found that in the non-group market, average premiums would be “about 10 to 13 percent higher in 2016…than under current law.”  The result would be a premium increase of $300 per year for individuals and $2,100 for families.
  • CBO also found that the “user fees”—i.e., taxes—imposed in the Senate bill “would be largely passed through to customers in the form of higher premiums for private coverage.”
  • Contrary to President Obama’s repeated promises that “You will not have to change [health insurance] plans,” CBO also found that “relatively few non-group policies would remain grandfathered by 2016”—meaning millions of individuals will lose their current individual health insurance plans as a result of Democrats’ government takeover of health care.
  • While then-Senator Obama promised during his campaign that reform would lower health care costs by up to $2,500 per family annually, CBO’s analysis confirmed that provisions in the legislation would raise health care costs.  Specifically, CBO found that raising the required level of coverage for the individual market would raise premiums on its own—and “reduced cost sharing” from the new, richer benefit policies “would lead to greater use of medical services, which would tend to push premiums up further.”
  • While Democrats may claim that some individuals will pay lower premiums due to federal subsidies, those subsidies will help impose a new cost to the taxpayers of $2.5 trillion in the bill’s first ten years of implementation alone.  Furthermore, because the Reid bill does not link subsidy levels to rising medical inflation levels, even trillions of dollars in federal subsidies will be insufficient for families to afford insurance if health care costs continue to rise faster than incomes.  Given CBO’s analysis of health care cost growth as a result of provisions in the Senate bill, many may question the legislation’s ability to deliver on this critical goal.
  • Although CBO stated that premiums in the employer-based markets may remain constant, that judgment is based in part on an assumption that an individual mandate will increase participation in group coverage by encouraging young and healthy people to take up their employer’s plan.  However, some may find such a conclusion counter-intuitive, as many individuals may find it more affordable to circumvent the mandate and instead pay the tax penalty.  For instance, the $2,250 maximum tax for a family not purchasing coverage in 2016 would be dwarfed by the $3,515 average family contribution for an employer-sponsored policy in 2009 alone.

The analysis from the non-partisan Congressional Budget Office raises further questions about the reasoning behind Democrats’ efforts.  While Republicans offered a bill that would reduce health care premiums by up to 10 percent according to CBO, the Democrat legislation would raise costs by at least that much—imposing new costs of up to $2,100 per family for non-group coverage.  How much more evidence do Democrats need to desist their harmful government takeover of health care that will lead to higher premiums and lost coverage for millions of Americans?