Monthly Archives: March 2010

About That Other Government Takeover…

Amidst all the controversy surrounding Democrats’ government takeover of health care, it’s worth pointing out that President Obama just enacted a second government takeover.  The reconciliation bill signed yesterday included a complete government takeover of the student loan industry, the “savings” from which were used to finance the health care takeover.

For these reasons it’s worth noting today’s article from the Washington Times, which points out that the federal student loan website was down for much of yesterday, even as the President signed into law the measure securing the federal government’s role as the sole student loan provider.  This failure raises obvious questions about how the Department of Education will manage to transition thousands of schools and millions of students on to the government-run loan plan between now and July 1, when the loan changes take effect.  More importantly, if the federal government can’t run an informational website for the government takeover of student loans, how on earth can it manage the transformation of a $2.2 trillion segment of our economy as part of the government takeover of health care?

AP Analysis of Health “Reform:” Higher Premiums

The Associated Press is out with a new analysis this morning showing how the health legislation signed last week will raise premiums for young adults.  Specifically, the AP’s analysis, conducted by a subsidiary of the Rand Institute, found that the narrower community rating provisions will raise premiums for individuals under age 35 by 17%, or nearly $500 per year.  Moreover, the analysis only examined the impact of community rating, and did NOT analyze the impact of the richer benefits package required under the law; the Congressional Budget Office found that those mandates would raise premium costs by as much as 30%, over and above the impact of the rating requirements discussed below.

These new findings will only strengthen the concern that young, healthy people will have a strong financial incentive to drop coverage and pay the tax penalty for violating the individual mandate, as many are currently doing under Massachusetts’ reform initiative.  In other words, a 17% premium increase could represent the lower bounds of what might happen if the new exchanges end up with a largely (if not exclusively) older, sicker population.  Regardless, after spending $2.6 trillion on a government takeover of health care, many may question how rising premiums – which violate the President’s campaign promise to lower insurance costs by $2,500 “by the end of my first term as President” – constitute “reform” in the first place.

Policy Brief: Obamacare’s First Week: Where’s the Reform?

One short week after President Obama signed his health care overhaul into law (P.L. 111-148), a string of press stories has already revealed the broken promises, double standards, and economic damage created by Democrats’ government takeover of health care:

Broken Promises:  On the very day the President signed the health care bill into law, an Associated Press article highlighted that one of Democrats’ immediate “deliverables”—a ban on pre-existing condition exclusions for children—“provided a less-than-complete guarantee that kids with health problems would not be shut out of coverage.”[i]  Specifically, while the law requires insurance companies to cover all pre-existing conditions for children enrolled in their policies, it permits carriers to deny new applications outright.  Thus this “reform” could have the perverse incentive of encouraging insurance companies not to accept children with pre-existing conditions at all, rather than imposing some limitations on their coverage.

Likewise, news articles have pointed out that the funding for a national high-risk pool may be insufficient to meet the coverage needs of all individuals with pre-existing conditions.[ii]  The pool, which the law requires be established within 90 days, received only $5 billion in funding to last through 2014.[iii]  As states’ risk pools spend a total of $2 billion annually, it seems unlikely that $5 billion could meet both existing and expected demand—raising the prospect of yet more federal spending on health care to meet the new influx, or no coverage options for individuals with pre-existing conditions.[iv]

Double Standards:  While the Senate was debating a reconciliation bill designed to “fix” problems in the original health care law, press reports focused on another loophole that exempted some from the law’s requirement that Congressional staff obtain their health benefits in the new exchanges, beginning in 2014.[v]  Many considered it an “inequity” and an “outrage” that staff in leadership and committee offices—including the staff for the Democrat leaders who wrote the health bill—would be exempted from the law’s new regime.[vi]  Yet when Republicans offered an amendment to close this loophole, and to make sure that executive branch political appointees—including officials in the Departments of Health and Human Services and Treasury charged with implementing the law—would also receive their health benefits through the new exchanges, 56 Democrats voted to kill this common-sense reform.[vii]

Economic Damage:  Within days of the bill being signed into law, companies came forward to revise their balance sheets, reflecting the damage that the law’s new taxes would have on their earnings.  Caterpillar went first, taking a $100 million hit due to loss of a tax subsidy for providing retiree prescription drug coverage;[viii] John Deere[ix] and AT&T[x] followed, reporting impacts of $150 million and $1 billion, respectively.  The actions by these three companies represented the leading edge of an expected $14 billion drop in corporate earnings as a result of the law’s enactment—losses that will harm businesses’ ability to grow and re-hire workers in the middle of a struggling economy.[xi]  Perhaps most ominously, AT&T noted that it “will be evaluating prospective changes to the active and retiree health care benefits offered by the company” as a result of the bill’s passage, proving the falsehood of President Obama’s claim that “If you like your current plan, you can keep it.”[xii]

Just as worrisome, the market for Treasury bonds suffered a drop-off in demand last week, as “passage of [the] health bill rekindle[d] worries about rising deficits.”[xiii]  If the health law results in a rapid spike in interest rates as investors lose confidence in America’s ability to curb skyrocketing federal spending, mortgage buyers and businesses large and small will suffer.

In addition, states must work to calculate the cost of the law’s many unfunded mandates on their Medicaid programs.  California’s department of health estimated that raising physician reimbursements in Medicaid will alone cost $2 billion per year, which may be passed on in the form of additional job-killing taxes at the state level on top of the more than $500 billion in new federal taxes already enacted into law.[xiv]

Unfortunately, rather than re-evaluating the scope and breadth of their health care takeover in a way that would not wreak havoc on the nation’s struggling economy, Democrats seem intent on “shooting the messenger” by extracting retribution for companies that dare speak politically inconvenient truths.  The House Energy and Commerce Committee scheduled an April 21 hearing to examine the claims made by Caterpillar and others that the law will increase their taxes and health care costs.  Committee Chairman Henry Waxman wrote a threatening letter to the companies demanding a rash of information, and calling the companies’ assertions about rising costs “a matter of concern”—leading some to question whether the entire hearing stands as an attempt to intimidate companies who have the temerity to challenge Democrats’ rosy view of health care “reform.”[xv]

With losses for companies already piling up, promises broken, and Democrats voting to exempt the officials charged with implementing the new law from most of its direct effects, many may wonder how the first week of Democrats’ brave new health care world in any way resembles the “reform” promised by President Obama and the majority.



[i] Ricardo Alonso-Zaldivar, “Gap in Health Care Law’s Protection for Children,” Associated Press March 24, 2010, http://finance.yahoo.com/news/Gap-in-health-care-laws-apf-4272209396.html/print?x=0

[ii] Anna Wilde Mathews, “High-Risk Health Pool Faces Start-Up Hurdles,” Wall Street Journal March 27, 2010, http://online.wsj.com/article/SB10001424052748703409804575144161178237490.html.

[iii] Ibid.

[iv] Ibid.

[v] Erika Lovley and Patrick O’Connor, “Health Bill May Exempt Top Hill Staff,” Politico March 24, 2010, http://dyn.politico.com/printstory.cfm?uuid=8D6D0626-18FE-70B2-A84ECBF02A169921.

[vi] Ibid.

[viii] Bob Tita, “Caterpillar Takes Hit on Health Care,” Wall Street Journal March 25, 2010, http://online.wsj.com/article/SB10001424052748703312504575142313494421460.html.

[ix] “Deere Sees $150 Million Hit from Health Care Reform,” Reuters March 25, 2010, http://www.reuters.com/article/idUSN2521686220100325.

[x] “AT&T to Book $1 Billion Cost on Reform,” Bloomberg March 26, 2010, http://www.businessweek.com/news/2010-03-26/at-t-to-take-1-billion-charge-on-health-care-reform-update1-.html.

[xi] “Obama Tax’s $14 Billion Charge Starts at Caterpillar,” Bloomberg March 25, 2010, http://www.businessweek.com/news/2010-03-25/obama-drug-tax-s-14-billion-profit-cut-starts-with-caterpillar.html.

[xii] “AT&T to Book $1 Billion Cost.”

[xiii] Tom Lauricella, “Debt Fears Send Rates Up,” Wall Street Journal March 26, 2010, http://online.wsj.com/article/SB10001424052748704094104575144244213486742.html.

[xiv] Michael Luo, “Some States Find Burdens in Health Law,” New York Times March 27, 2010, http://www.nytimes.com/2010/03/27/health/policy/27impact.html?hp.

[xv] Byron York, “Democrats Threaten Companies Hit Hard by Health Care Bill,” Washington Examiner March 29, 2010, http://www.washingtonexaminer.com/politics/Democrats-threaten-companies-hit-hard-by-health-care-bill-89347127.html.

Policy Brief: A Reading Guide to the Senate Bill’s Backroom Deals

“I think the health care debate as it unfolded legitimately raised concerns not just among my opponents, but also amongst supporters that we just don’t know what’s going on.  And it’s an ugly process and it looks like there are a bunch of back room deals.”

 — President Obama, interview with ABC’s Diane Sawyer, January 25, 2010[i]

The White House recently enacted its health “reform” agenda by signing the 2,733 page legislation (H.R. 3590) that passed the Senate in December.[i]  While the Administration touts its removal of the “Nebraska FMAP provision” that saw 49 other states funding Nebraska’s Medicaid largesse (known as the “Cornhusker Kickback”), it did not address other deals negotiated by Democrats in the Senate legislation.  Many other backroom agreements are included in the legislation the President has now enacted into law:

Page 428—Section 2006, known as the “Louisiana Purchase,” provides an extra $300 million in Medicaid funding to Louisiana.[ii]

Page 2132—Section 10201(e)(1) provides an increase in Medicaid Disproportionate Share Hospital (DSH) payments for Hawaii, meaning 49 other states will pay more in taxes so that Hawaii can receive this special benefit.

Page 2203—Section 10317 amends provisions in Medicare so that hospitals in Michigan and Connecticut can receive higher payments.

Page 2222—Section 10323 makes certain individuals exposed to environmental hazards eligible for Medicare coverage.  The definition used in the bill ensures the only individuals eligible will be those living in Libby, Montana.

Page 2237—Section 10324 increases Medicare payments by $2 billion in “frontier states.”[iii]

Page 2354— Section 10502 spends $100 million on “debt service of, or direct construction of, a health care facility,” language which the sponsors intended to benefit Connecticut.[iv]

Page 2395—Section 10905(d) exempts Medigap supplemental insurance plans from the new tax on health insurance companies; press reports indicate this provision was inserted to benefit an insurer headquartered in Nebraska.[v]

Even after the public outrage from the “Cornhusker Kickback,” Democrats used separate legislation designed to “fix” this particular provision (H.R. 4872) to add yet more deals behind closed doors.[vi]  For instance, page 71 (Section 1203(b)) of the “fixer” bill provided an increase in Medicaid disproportionate share hospital payments just for Tennessee.  And Section 2213 (page 145) of the original version of the “fixer” bill[vii] included a sweetheart deal making the Bank of North Dakota the only financial facility in the country exempted from Democrats’ government takeover of student loans—a backroom deal so egregious that it was removed within hours once the bill was finally revealed to the American public.[viii]

These specific agreements and provisions also do not display the full scope of the White House’s legislative deal-making.  For instance, the head of the pharmaceutical industry said the Administration approached him to negotiate a deal with his industry: “We were assured, ‘We need somebody to come in first.  If you come in first, you will have a rock-solid deal.’”[ix]  And former Democratic National Committee Chairman Howard Dean publicly admitted at a town hall forum that “The reason that tort reform is not in the [health care] bill is because the [Democrat Members] who wrote it did not want to take on the trial lawyers.”[x]

The many pages of backroom deals included in the health care takeover legislation raise several questions: If the bill itself was so compelling, why did Democrats need billions of dollars in “sweeteners” negotiated in secret in order to vote for it?  If President Obama was so concerned about the public perceptions created by the backroom dealing, why did he not propose to strike all the special agreements?  Does he believe that this pork-barrel spending is the only reason why Democrats voted to pass his government takeover of health care in the first place?



[i] Senate-passed bill text available at http://www.opencongress.org/bill/111-h3590/text.

[ii] “Dems Protect Backroom Deals,” Politico February 4, 2010, http://www.politico.com/news/stories/0210/32499.html.

[iii] Congressional Budget Office, score of H.R. 3590 including Manager’s Amendment, December 19, 2009, http://cbo.gov/ftpdocs/108xx/doc10868/12-19-Reid_Letter_Managers_Correction_Noted.pdf.

[iv] “Dodd Primes Pump in Bid to Survive,” Politico December 22, 2009, http://www.politico.com/news/stories/1209/30881.html.

[v] “How Nebraska’s Insurance Companies Stand to Profit from Ben Nelson’s Compromises in Health Care Bill,” Huffington Post 21 December 2009, http://www.huffingtonpost.com/2009/12/21/how-nebraskas-insurance-c_n_400080.html.

[vi] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[vii] House Rules Committee amendment in the nature of a substitute, http://docs.house.gov/rules/hr4872/111_hr4872_amndsub.pdf.

[viii] “Conrad Wants Controversial Carve-Out Axed,” Roll Call March 18, 2010, http://www.rollcall.com/news/44368-1.html.  The provision was stripped by the Rules Committee prior to full House consideration of H.R. 4872.

[ix] Quoted in “White House Affirms Deal on Drug Cost,” New York Times August 5, 2009, http://www.nytimes.com/2009/08/06/health/policy/06insure.html?_r=3&scp=8&sq=kirkpatrick&st=cse.

[x] Exchange at Town Hall forum in Reston, VA, August 25, 2009, available online at http://www.youtube.com/watch?v=IdpVY-cONnM.

The Face of Health “Reform:” Higher Interest Rates

Wanted to pass along this Wall Street Journal article from this morning highlighting the spike in interest rates this week, as Democrats enacted their government takeover of health care.  The article notes that “weekend passage of health care rekindle[d] fears of rising deficits.”  The piece suggests that investors do not believe the President’s pronouncements that spending $2.6 trillion to create a new entitlement will reduce federal deficits, and are instead looking for Congress and the White House to re-establish fiscal discipline.

While the impact of these gyrations may seem abstract to most Americans, the article also notes that most mortgage rates are tied to Treasury rates; thus, if Treasury rates rise, millions of Americans already struggling to afford their mortgages will face new financial hardships – putting any potential rebound in the housing market in significant doubt.  Thus the long-term cost of Democrats’ government takeover of health care will extend far beyond the $500 billion in job-crushing tax increases, and pervade every area of the American economy through skyrocketing federal debt and rising interest rates.

Policy Brief: Obamacare — Bad for Young Americans

Higher Health Insurance Premiums.  The health care takeover[i] states that insurance carriers cannot vary premiums solely based upon family structure, geography, and age; insurance companies also cannot vary premiums by age by more than 3 to 1 (i.e., charge older individuals more than three times the premiums paid by younger applicants).  Average premiums for individuals aged 18-24 are nearly one-quarter the average premiums paid by individuals aged 60-64.[ii]  While supporting initiatives (such as state-based high-risk pools) that would provide affordable coverage to those with pre-existing conditions, the very narrow age variations allowed function as a significant transfer of wealth from younger to older Americans—and by raising premiums for young and healthy individuals, may discourage their purchase of insurance.

Higher Taxes for Those Who Cannot Afford Coverage.  The health care takeover imposes a 2.5 percent tax on the income of all individuals who cannot afford to purchase a “government-approved” policy—that is, one that meets all the new federal mandates and regulations imposed in the legislation.  Particularly given the higher premiums that will be imposed on young people for the reasons described above, some may agree with then-Senator Obama when he pointed out that 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.”[iii]

Tax on Jobs Will Hurt Young Workers.  The health care takeover imposes a new tax on jobs by forcing employers who do not provide “acceptable” coverage to pay a “fair share” tax of $2,000 per full-time employee—nearly triple the $750 tax initially proposed.  Harvard Professor Kate Baicker’s analysis demonstrates that at least 5.5 million low-wage workers will be “at substantial risk of unemployment” due to new mandates on employers.[iv]  The Congressional Budget Office has also confirmed that such mandates “could reduce the hiring of low-wage workers,” and could lead to wage stagnation as compensation is diverted to comply with new federal mandates.[v]  At a time when more than one in four teens is unemployed,[vi] these harmful tax increases will hurt exactly the workers that a health care bill is intended to help.

Marriage Penalty.  The health care takeover bases health insurance subsidy thresholds on multiples of the federal poverty level, and because the poverty level for a two-person couple ($14,570) is less than twice the poverty standard for a single person ($10,830),[vii] couples who marry will see their eligibility for subsidies automatically decline when compared to two cohabiting individuals.  Many may view this policy as providing perverse incentives for couples not to marry.

Rising Debt a Fiscal Time Bomb for Future Generations.  The health care takeover spends $2.6 trillion in its first 10 years of full implementation—and the President’s budget proposes to address Medicare physician reimbursements through an additional $371 billion in new deficit spending not included in the legislation.[viii]  Growing the problem by adding trillions more of federal spending will only increase the debt burden to be faced by future generations.



[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] America’s Health Insurance Plans, survey of individual health insurance products, December 2007, http://www.ahipresearch.org/pdfs/Individual_Market_Survey_December_2007.pdf, Table 2, p. 7.

[iii] Democratic presidential debate in Austin, Texas, February 21, 2008, transcript available at http://www.cnn.com/2008/POLITICS/02/21/debate.transcript/index.html.

[iv] Kate Baicker and Helen Levy, “Employer Health Insurance Mandates and the Risk of Unemployment,” NBER Working Paper 13528, October 2007, http://www.nber.org/papers/w13528.pdf.

[v] Congressional Budget Office, “Effects of Changes to the Health Insurance System on Labor Markets,” July 13, 2009, http://www.cbo.gov/ftpdocs/104xx/doc10435/07-13-HealthCareAndLaborMarkets.pdf

[vi] Bureau of Labor Statistics, “The Employment Situation – February 2010,” http://www.bls.gov/news.release/pdf/empsit.pdf

[vii] Department of Health and Human Services 2009 Federal Poverty Level guidelines, http://aspe.hhs.gov/poverty/09poverty.shtml.

[viii] President’s Fiscal Year 2011 Budget Submission to Congress, February 2010, http://www.whitehouse.gov/omb/budget/fy2011/assets/budget.pdf, Table S-7, p. 162.

Policy Brief: Obamacare — Bad for Women and Families

Marriage Penalty.  The health care takeover[i] bases health insurance subsidy thresholds on multiples of the federal poverty level, and because the poverty level for a two-person couple ($14,570) is less than twice the poverty standard for a single person ($10,830),[ii] couples who marry will see their eligibility for subsidies automatically decline when compared to two cohabiting individuals.  Many may view this policy as providing perverse incentives for couples not to marry.

Another Marriage Penalty.  The health care takeover raises the Medicare payroll tax by a total of $210.2 billion.[iii]  However, the threshold for the higher tax stands at $200,000 for a single individual, but $250,000 for a family.  Thus a married couple with wage earnings of $195,000 each will pay $1,260 more in taxes than a single person with the same salary.

Tax on Jobs Will Hurt Women and Young Workers.  The health care takeover creates a new tax on jobs by forcing employers who do not provide “acceptable” coverage to pay a “fair share” tax of $2,000 per full-time employee—nearly triple the $750 tax initially proposed.  Harvard Professor Kate Baicker’s analysis demonstrates that at least 5.5 million low-wage workers would be “at substantial risk of unemployment” due to new mandates on employers.[iv]  What’s more, women and young adults “face the highest risk of losing their jobs under employer mandates.”

The Congressional Budget Office has also confirmed that such mandates “could reduce the hiring of low-wage workers,” and could also lead to wage stagnation as wage compensation is diverted to comply with new federal taxes and mandates.[v]  At a time when unemployment stands near 26-year highs, these harmful tax increases will hurt exactly the low-wage workers that health care bill is intended to help.

Federal Funds for Abortion.  The health care takeover permits federal funds to subsidize plans covering abortion, permits a multi-state health plan to offer abortion coverage, and requires citizens in states that have opted-out of elective abortion coverage in their own exchange to fund federal subsidies for plans that cover elective abortion in other states.  These provisions will result in the federal government funding actions that violate decades-long precedents for federal health coverage—including that provided to Members of Congress—and that many find morally objectionable.

Rising Debt a Fiscal Time Bomb for Future Generations.  The health care takeover spends $2.6 trillion in its first 10 years of full implementation—and the President’s budget proposes to address Medicare physician reimbursements through an additional $371 billion in new deficit spending not included in the legislation.[vi]  Growing the problem by adding trillions more of federal spending will only increase the debt burden to be faced by future generations.



[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] Department of Health and Human Services 2009 Federal Poverty Level guidelines, http://aspe.hhs.gov/poverty/09poverty.shtml.

[iii] Joint Committee on Taxation analysis of substitute amendment to H.R. 4872 in concert with H.R. 3590, March 20, 2010, http://jct.gov/publications.html?func=startdown&id=3672.

[iv] Kate Baicker and Helen Levy, “Employer Health Insurance Mandates and the Risk of Unemployment,” NBER Working Paper 13528, October 2007, http://www.nber.org/papers/w13528.pdf.

[v] Congressional Budget Office, “Effects of Changes to the Health Insurance System on Labor Markets,” July 13, 2009, http://www.cbo.gov/ftpdocs/104xx/doc10435/07-13-HealthCareAndLaborMarkets.pdf

[vi] President’s Fiscal Year 2011 Budget Submission to Congress, February 2010, http://www.whitehouse.gov/omb/budget/fy2011/assets/budget.pdf, Table S-7, p. 162.

Policy Brief: Obamacare — Bad for States

Would Make States’ Tough Fiscal Situations Worse.  The health care takeover[i] requires all states to pay a portion of the proposed Medicaid expansion beginning in 2017—tens of billions in new state spending imposed by federal requirements.  However, states cannot afford their existing Medicaid programs, which is why Congress included a $90 billion Medicaid bailout in the 2009 “stimulus” package.  To make things worse, the cost of the Medicaid expansion borne by states will rise appreciably in years 2019 and beyond—further pinching state budgets.

Forces Higher State Medicaid Spending.  The health care takeover gives states a higher federal match to expand the Medicaid program to all individuals earning up to 133 percent of the federal poverty level ($29,327 for a family of four).  However, such an expansion—when coupled with an individual mandate to purchase insurance—is likely to increase Medicaid enrollment among individuals who are already eligible for the program—and for whom a full federal match will not be available.

Encourages States to Drop Medicaid Entirely.  The health care takeover prohibits states from reducing their Medicaid eligibility standards or procedures at any point in the future.  Governors in both parties have already voiced significant concerns about what Tennessee Democratic Gov. Phil Bredesen termed “the mother of all unfunded mandates” being imposed upon states.[ii]   As a result of the added restrictions in Democrats’ proposals, the head of Washington state’s Medicaid program believes that states facing severe financial distress may say, “I have to get out of the Medicaid program altogether.”[iii]

Undermines State Flexibility.  Provisions in the legislation significantly erode states’ independence in managing their Medicaid programs.  For instance, the health care takeover requires states to include family planning services for individuals with incomes up to the highest Medicaid income threshold in each state—undermining flexibility established by Republicans in the Deficit Reduction Act of 2005.

Supersedes State Authority.  The health care takeover provides that states that do not establish health insurance exchanges will see the federal government create them on states’ behalf.  Furthermore, the legislation also provides that states that prohibit abortion coverage in their insurance exchanges will see their citizens’ federal tax dollars used to subsidize insurance plans that cover elective abortions in other states.

Backroom Deals Create State Inequities.  The public focus on the “Cornhusker Kickback” regarding Nebraska’s Medicaid funding omits the other backroom deals included in the legislation—most of which remain, creating additional inequities among states.  The health care takeover includes provisions known as the “Louisiana Purchase,” providing an extra $300 million in Medicaid funding to Louisiana.[iv]  And the legislation also provides an additional $100 million in Medicaid hospital funding solely to Tennessee.  Many may wonder why citizens in other states should see their taxpayer dollars fund special deals for places like Tennessee and Louisiana.



[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] Kevin Sack and Robert Pear, “Governors Fear Medicaid Costs in Health Plan,” New York Times July 19, 2009, http://www.nytimes.com/2009/07/20/health/policy/20health.html.

[iii] Clifford Krauss, “Governors Fear Added Costs in Health Care Overhaul,” New York Times August 6, 2009, http://www.nytimes.com/2009/08/07/business/07medicaid.html.

[iv] “Dems Protect Backroom Deals,” Politico February 4, 2010, http://www.politico.com/news/stories/0210/32499.html.

Policy Brief: Obamacare — Bad for Seniors

Millions Lose Their Current Coverage.  The Congressional Budget Office (CBO) estimated that the health care takeover[i] will cut a total of $202.3 billion from Medicare Advantage (MA) plans.[ii]  These plans deliver a range of health care options to nearly 11 million seniors,[iii] almost one-quarter of those enrolled in the Medicare program.  According to the non-partisan Medicare actuaries, these cuts will “reduce MA rebates to plans and thereby result in less generous benefit packages;” enrollment is also projected to decline at least 33 percent by 2015.[iv]

According to former Clinton Administration official Ken Thorpe, while every senior had access to a Medicare Advantage plan in 2007, millions of seniors did not have a choice of plans in 1999[v]—and the significant cuts mean that the President’s promise of “if you like your current plan, you can keep it” will ring hollow for many Medicare Advantage beneficiaries.

Reduced Access—Or Higher Premiums.  In order to keep to the President’s promise of a deficit-neutral bill, the health care takeover excludes language providing adjustments to the Medicare formula that governs physician reimbursement levels.  As a result, physicians will receive a 21 percent cut in payment levels beginning in April 2010 and further reductions thereafter.  While the President’s budget proposes to address the payment issue, it does not propose to pay for the $371 billion cost for these changes.[vi]  As a result, if the President’s proposals become law, seniors would pay one-quarter of the corresponding increase in physician spending through higher Part B premiums—nearly $100 billion worth.

Medicare Part D Premium Increases.  The health care takeover would eventually eliminate the Part D coverage gap, or “doughnut hole.”  However, CBO has previously stated that filling in the “doughnut hole” immediately would cause a 50 percent spike in average Part D premiums when compared to current law projections.[vii]  These higher costs will be passed on to American seniors.

Does Not Address Medicare’s Long-Term Solvency.  Although the legislation includes more than $500 billion in Medicare savings provisions, the Administration’s own actuaries have confirmed that the bill will increase overall health spending—exacerbating the long-term trends that have placed the Medicare program in financial peril.[viii]  Moreover, the bill contains an unprecedented expansion of the Medicare payroll tax—not to save Medicare, but to fund new entitlements—a measure that the CBO stated “would not enhance the ability of the government to pay for future Medicare benefits.”[ix]

Opens the Door to Government Rationing.  The health care takeover establishes a new board of unelected bureaucrats empowered to make binding recommendations on cost reductions within Medicare.  Patients may be concerned that the bill could insert bureaucrats between patients and doctors, particularly given President Obama’s comments that there needs to be a “difficult democratic conversation” about what the President views as excessive spending on end-of-life care.[x]



[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] Congressional Budget Office analysis of H.R. 4872 in concert with H.R. 3590, March 20, 2010, http://cbo.gov/ftpdocs/113xx/doc11379/Manager%27sAmendmenttoReconciliationProposal.pdf.

[iii] CMS Office of the Actuary, “Brief Summaries of Medicare and Medicaid,” November 2009, http://www.cms.hhs.gov/MedicareProgramRatesStats/downloads/MedicareMedicaidSummaries2009.pdf, p. 7.

[iv] CMS Office of the Actuary, Estimated Financial Effects of H.R. 3590 as passed the Senate, January 8, 2010, http://www.politico.com/static/PPM130_oact_memorandum_on_senate_bill_as_passed_01-08-09.html.

[v] Ken Thorpe and Adam Atherly, “The Impact of Reduced Medicare Advantage Funding on Beneficiaries,” April 2007, http://www.bcbs.com/issues/medicare/background/Medicare-Advantage.pdf.

[vi] President’s Fiscal Year 2011 Budget Submission to Congress, February 2010, http://www.whitehouse.gov/omb/budget/fy2011/assets/budget.pdf, Table S-7, p. 162.

[vii] Congressional Budget Office, Budget Options Volume 1: Health Care, December 2008, http://www.cbo.gov/ftpdocs/99xx/doc9925/12-18-HealthOptions.pdf, Option 89, pp. 176-77.

[viii] Last year, the Medicare trustees found that the program faces 75-year unfunded liabilities of $37.8 trillion.  See report at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.pdf.

[ix] Congressional Budget Office, Letter to Honorable Jeff Sessions, January 22, 2010, http://www.cbo.gov/ftpdocs/110xx/doc11005/01-22-HI_Fund.pdf.

[x] David Leonhardt, “After the Great Recession,” New York Times April 28, 2009, http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html.

Policy Brief: Obamacare — Bad for Rural America

Medicare Advantage Cuts.  The Congressional Budget Office (CBO) estimated[i] that provisions in the health care takeover[ii] will cut a total of $202.3 billion from Medicare Advantage plans that provide a range of health care options to seniors.  These harmful cuts could result in Medicare Advantage plans moving out of rural areas, limiting beneficiary choice and causing millions of seniors to lose their current coverage and the extra benefits Medicare Advantage plans provide.

According to former Clinton Administration official Ken Thorpe, while every senior in rural areas had access to a Medicare Advantage plan in 2007, only one in four rural beneficiaries had a choice of plans in 1999[iii]—and the significant cuts could return rural seniors to the days when the only option is a one-size-fits-all government plan.

Rural Hospitals Could Suffer.  CBO estimates that the health care takeover will result in $22.1 billion in cuts in Medicare disproportionate share hospital (DSH) payments and an additional $18.5 billion in Medicaid DSH reductions.[iv]  These reductions could inflict more significant harm on rural hospitals in States where Medicaid programs cover a low percentage of costs to care for the uninsured, as well as States where DSH payment levels are already below the national average.

Impact on Imaging Facilities.  According to CBO, the health care takeover will save $2.3 billion by increasing the presumed utilization rate for certain imaging equipment from 50 percent to 75 percent.[v]  Particularly for rural hospitals and clinics where imaging equipment might be used much less frequently than the legislation presumes, these savings could have a disproportionate impact on access to services.

Tax Increases.  The health care takeover raises the Medicare payroll tax by a total of $210.2 billion—leveling new taxes on many family farms and other small businesses that serve as the engine of new job creation.[vi]  Combined with additional taxes of up to $2,000 per full-time employee for firms that cannot afford to pay for their workers’ health plan premiums, these tax increases on small businesses represent a “double whammy” on American job growth in an already struggling economy.

Medicare Reductions.  The health care takeover establishes a new board of unelected bureaucrats empowered to make binding recommendations on cost reductions within Medicare.  There is nothing to prohibit this board of federal bureaucrats from reducing—or even eliminating entirely—any temporary payment increases for rural providers, given its authority to re-write Medicare law and regulations in a way that will curb federal costs.  For these reasons, CBO notes that these and other Medicare reductions “might be difficult to sustain over time,” and could “reduce access to care or diminish the quality of care” for patients.[vii]



[i] Congressional Budget Office analysis of H.R. 4872, March 20, 2010, http://cbo.gov/ftpdocs/113xx/doc11379/Manager%27sAmendmenttoReconciliationProposal.pdf.

[ii] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[iii] Ken Thorpe and Adam Atherly, “The Impact of Reduced Medicare Advantage Funding on Beneficiaries,” April 2007, http://www.bcbs.com/issues/medicare/background/Medicare-Advantage.pdf.

[iv] CBO analysis of H.R. 4872.

[v] Ibid.

[vi] Joint Committee on Taxation analysis of substitute amendment to H.R. 4872 in concert with H.R. 3590, March 18, 2010, http://jct.gov/publications.html?func=startdown&id=3671.

[vii] Congressional Budget Office analysis of H.R. 3590, December 19, 2009, http://cbo.gov/ftpdocs/108xx/doc10868/12-19-Reid_Letter_Managers_Correction_Noted.pdf.