Monthly Archives: March 2011

Backroom Deal Exposed: AARP Could Make $1 BILLION Off of Obamacare

Several Republicans on the Ways and Means Committee this afternoon issued a report regarding AARP and its business activities.  Among other topics, the report attempted to quantify the benefits AARP will receive as a result of the health care law.  Specifically, the report found that while AARP’s Medicare Advantage and Part D plans receive a flat licensing fee from UnitedHealth Group regardless of the enrollment in their plans, AARP receives 4.95% of each Medigap premium dollar paid by senior citizens (this percentage used to be 4% of Medigap revenues, but AARP negotiated an increase in its last contract, in 2007).  Because of these unique contractual arrangements, AARP has NO financial incentive to expand Medicare Advantage enrollment, but DOES have a financial incentive to expand Medigap enrollment – and Medigap enrollment will expand thanks to the Medicare Advantage cuts in the law.

Based on this information, and estimates of declines in Medicare Advantage enrollment thanks to the cuts in the health care law, the report estimates that AARP will receive between $55 million and $166 million in new revenue in 2014 alone – meaning the ten-year financial windfall received by AARP due to Obamacare could total over $1 billion.

The report also contains other information about the interlocking financial relationships between various AARP-related entities, as well as other practices – including spending on things like NASCAR sponsorship and meetings hosted at the Hotel del Coronado – that raise potential questions about the organizations’ non-profit tax status.

Last March, Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Today’s report reveals “what’s in it” for AARP, which might explain why the organization endorsed a piece of legislation that reduces choice and access for seniors.

Medicare Actuary Testifies: 24.7 Million New Medicaid Enrollees

Testifying before the House Energy and Commerce Committee this morning, Medicare actuary Rick Foster explained how the health care law may expand Medicaid BEYOND what the actuary’s office previously estimated.  The updated estimate indicates that the Medicare actuary believes 24.7 million individuals will be dumped into the Medicaid program – an increase of nearly five million from its earlier estimates, and more than 8 million than estimated by the Congressional Budget Office.

The actuary explained the reasons for this significant adjustment this issue in testimony to the House Budget Committee:

“In addition to the higher level of allowable income, the Affordable Care Act expands eligibility to people under age 65 who have no other qualifying factors that would have made them eligible for Medicaid under prior law, such as being under age 18, disabled, pregnant, or parents of eligible children.  The estimated increase in Medicaid enrollment is based on an assumption that Social Security benefits would continue to be included in the definition of income for determining Medicaid eligibility.  If a strict application of the modified adjusted gross income definition is instead applied, as may be intended by the Act, then an additional 5 million or more Social Security early retirees would be potentially eligible for Medicaid coverage.”

In other words, if the new definition of income introduced in the law excludes Social Security benefits – and the actuary believes it does – upwards of an additional 5 million early retirees (along with some Social Security disability recipients) would be forced on to the Medicaid rolls.  While officials at the Centers for Medicare and Medicaid Services have yet to opine on the official interpretation of “income” as defined by the law, it’s difficult to see how CMS could change in regulations definitions of income that are based in statute (i.e., the health care law and the Internal Revenue Code), meaning the actuary’s footnote is actually a possible, even likely, scenario.  A total of nearly 25 million individuals added to the Medicaid rolls exceeds by more than 50% CBO’s estimate of 16 million individuals covered under the Medicaid expansion.

States are already facing record budget deficits, and the health care law imposes unfunded mandates of at least $118 billionThe Medicare actuary’s comments this morning mean that states could well face unfunded mandates MUCH higher than that amount.

Democrat Congressman Argues Against Hearing on Obamacare’s Costs

At the House Energy and Commerce Committee hearing this morning, Democrat Congressman Charlie Gonzalez noted in his exchange with CBO Director Doug Elmendorf that “it doesn’t require a hearing” to find out the budgetary impact of the health care law.  That position is of course contrary to the position taken by candidate Obama, when he made repeated campaign promises claiming that health care negotiations would be televised on C-SPAN.

Later at the same hearing, the Medicare actuary testified that Speaker Pelosi did not make efforts to ascertain whether or not the Medicare actuary would complete his analysis of the legislation prior to a vote on final passage.  In other words, passing the bill by an arbitrary deadline set by the Democrat leadership was more important than finding out whether or not it would reduce national health care costs, as the President promised it would.  (It turns out the actuary concluded the law will INCREASE costs by $310,800,000,000.)

It’s not altogether surprising that Democrats would be so uninterested in learning Obamacare’s true costs.  Speaker Pelosi herself laughed at the concept of televising the negotiations on C-SPAN, publicly mocking the President’s campaign pledges.  And the former Speaker famously said we had to pass the bill to find out what’s in it.  But many may question how the “most transparent” Administration could pass a $2.6 trillion health care bill and have Democrats claim that a public hearing examining its budgetary impact was a mere trifling inconvenience.

Dems “Try to Have It Both Ways” on 1099 Repeal

Politico reported last night that Senate Democrats were looking to “have it both ways” when it comes to repealing the health care law’s 1099 reporting requirements, with “an amendment that could kill the proposal down the road.”  Specifically, Politico reported that Sen. Menendez would offer an amendment “that would require an Obama Administration study to see how the Republicans’ amendment would affect small businesses’ premium increases and access to coverage…if the study finds that the Republican amendment increases costs or reduces access, the Johanns amendment won’t go into effect.”

For the record, the outcome for amendment votes on the small business bill remains unclear.  But here are two simple examples of how such an amendment would show Democrats “having it both ways” when it comes to their positions on the health care law:

Democrats Voted AGAINST Keeping Premiums Low Last Year:  In March 2010, Democrats had an opportunity to vote on an amendment to the reconciliation bill containing similar provisions to the Menendez amendment being discussed.  That amendment, offered by Dr. Barrasso, conditioned implementation of the health care law “on the Secretary of Health and Human Services certifying to Congress that the implementation of such Act (and amendments) would not increase premiums more than the premium increases projected prior to the date of enactment of such Act.”  Every Senate Democrat now serving voted against this amendment to keep premiums low last year.  While it’s nice that the majority has finally decided to show concern about premium increases, it’s worth noting that Democrats voted to pass a law that will RAISE individual health premiums by an average of $2,100 per year – a direct violation of President Obama’s repeated statements that his bill would CUT costs by $2500 for the average American family.

Democrats Enacted a “Tax on Success” As Part of Obamacare:  During the House debate on a 1099 repeal measure (H.R. 4) earlier this month, Democrats complained that the repayment obligations in H.R. 4 (also in the pending Johanns amendment) represented a “tax on success” and a “tax trap” because it “would penalize people whose incomes had increased because of a raise, a bonus, or additional hours of work,” as individuals would have to repay insurance subsidies they received.  There’s only one problem with this allegation: It applies to the underlying bill Democrats passed.  As we previously noted, under the Democrat bill, in 2016 a family of four with income of $95,000 would lose nearly $5,000 in health insurance subsidies by receiving an extra $1,000 of income.  In fact, the Congressional Budget Office noted in August last year that Obamacare’s perverse incentives “will effectively increase marginal tax rates, which will also discourage work” – one of the main reasons CBO concluded the law will reduce the labor supply in the American economy by about 800,000 jobs.  While it’s nice that Democrats have finally objected to a “tax on success,” the majority should recognize that the legislation they enacted last year more accurately deserves that title. (Perhaps this is what Speaker Pelosi meant when she famously said we had to pass the bill to find out what’s in it, because Democrat Members of Congress apparently don’t understand the legislation they passed.)

Johanns Amendment 161 to S. 493 — 1099 Mandate Repeal

Senator Johanns has offered an amendment (#161) to the small business bill (S. 493) repealing 1099 paperwork mandates.  The Johanns amendment is a verbatim version of H.R. 4, as passed by the House of Representatives on March 3 – and differs slightly from the prior versions of 1099 repeal considered in the Senate (both earlier this year and last Congress).  In short, the Johanns amendment would also repeal an additional 1099 reporting requirement enacted by Congress last September, and would use recaptured insurance subsidies instead of unobligated appropriations as the pay-for.  A complete summary follows.

Timing on votes remains unclear, but votes on the 1099 issue MAY occur this afternoon.  While possible Democrat second-degree amendments on the 1099 issue may be introduced, none has been filed as of yet.  Staff may note however that Sen. Johanns recently gave a floor statement in which he criticized second degree amendments that “would be nothing but cover to keep the job-killing 1099 mandate in place while claiming to support its repeal;” a release from the Johanns office on this topic may be found here.
 

1099 Mandate Repeal:  The amendment repeals Section 9006 of the Patient Protection and Affordable Care Act (PPACA).  This Section 9006 information reporting provision requires vendors and small businesses to file Forms 1099 for any goods purchases that total over $600 in the aggregate over the course of a year—which will force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor, caterer, etc.  The Joint Committee on Taxation (JCT) estimates repealing this provision will result in a revenue loss of $21.9 billion.

According to a report issued by the National Taxpayer Advocate, the 1099 reporting requirements will affect 40 million businesses – ten times the number of firms the Administration asserts will benefit from small business tax credits.  The Taxpayer Advocate has also called the reporting requirement “disproportionate” and “burdensome” for small business.  For instance, the Taxpayer Advocate noted that small businesses “may lose customers” to larger chains more easily able to comply with the new requirements, and that “it is highly likely that the IRS will improperly assess penalties” for not filing forms.  Finally, the Taxpayer Advocate noted that “the IRS will face challenges making productive use of this new volume of information reports” required by the health care law, because “the amounts on the information reports and the tax returns” will not match for a variety of technical reasons.

Additional 1099 Mandate Repeal:  In addition to the above provision, the Johanns amendment ALSO repeals another 1099 mandate added in Section 2101 of last September’s Small Business Jobs Act (P.L. 111-240).  This 1099 mandate requires individuals receiving rental income to report payments to vendors related to that rental property (e.g., plumbers, electricians, lawn maintenance, etc.) in excess of $600 per year.

This provision was NOT included in the 1099 repeal bills the Senate considered last year, nor in the 1099-related amendments considered to the FAA reauthorization measure (S. 223) last month; those measures only focused on the 1099 mandates included in the health care law.  JCT estimates repealing this provision will result in a revenue loss of $2.8 billion.

Health Insurance Subsidy Recapture:  The amendment modifies the repayment levels for insurance subsidies provided under PPACA.  Under the health law, new health insurance subsidies are based on an individual’s (or family’s) most recent tax return – so that subsidy levels beginning in January 2014 will be based on reported income for 2012.  However, a family’s circumstances can change significantly during this time lag for a variety of reasons – a change in job, significant raise, divorce, birth, or death, to name just a few.

PPACA established a reconciliation process intended to recapture any subsidy over-payments – but the law capped the amount of such repayments at $250 for individuals and $400 for families for all families with incomes under 400 percent of the federal poverty level (FPL, $89,400 for a family of four); above 400% FPL, no limits applied.  The “doc fix” passed in December 2010 (P.L. 111-309) modified these levels to pay for a one-year adjustment to Medicare physician payment rates; the Johanns amendment would modify those levels still further.  The below spreadsheet shows the maximum repayment amounts (for individuals and families) under the original law, the current law (as modified in December), and the proposed Johanns amendment:

 

Percentage of Poverty PPACA as Enacted December 2010 “Doc Fix”           (P.L. 111-309) Johanns amendment
 

100-200% FPL

$250/$400

$300/$600

$300/$600

200-250% FPL

$250/$400

$500/$1,000

$750/$1,500

250-300% FPL

$250/$400

$750/$1,500

$750/$1,500

300-350% FPL

$250/$400

$1,000/$2,000

$1,250/$2,500

350-400% FPL

$250/$400

$1,250/$2,500

$1,250/$2,500

400-450% FPL*

Full subsidy

$1,500/$3,000

Full subsidy

450-500% FPL*

Full subsidy

$1,750/$3,500

Full subsidy

Above 500% FPL*

Full subsidy

Full subsidy

Full subsidy

 

(*While subsidies are only available to individuals and families with incomes below 400% FPL, the recapture penalties would apply to individuals who received subsidies, yet were not eligible for ANY subsidies based on their income.)

CBO and the Joint Committee on Taxation score this provision as saving $24.8 billion over ten years.

Tax Increase Allegations:  Democrat claims notwithstanding, many may argue that the subsidy recapture provision does NOT represent a tax increase, on the grounds that individuals will be repaying a subsidy they received in error.  In addition, most of the subsidies provided under PPACA are refundable in nature, and some would argue that limiting refundable subsidies reduces government spending, rather than increasing taxes.  Americans for Tax Reform has issued a letter outlining this position, stating that the language outlined above “is a net tax cut, and is therefore NOT a violation of the Taxpayer Protection Pledge.”

While some Democrats in the House expressed concern about the higher repayment requirements in the Johanns amendment, it is worth noting that December’s increase in subsidy repayments passed the Senate by voice vote, and passed the House by the overwhelming margin of 409-2, with 243 House Democrats supporting what they have now criticized as a “tax increase.”  Moreover, the provisions of the Johanns amendment requiring full subsidy repayment for all individuals and families with incomes above 400% FPL merely echoes a provision in PPACA itself – meaning Democrats would now oppose this provision in the Johanns amendment after having supported it during the health care debate last year.

Senior HHS Official Talks of Employers “Dumping” Health Coverage

In case you hadn’t seen it, The Hill reported on comments made by Joel Ario, head of the health insurance Exchange office within HHS, about the idea of employers dropping coverage once the Exchanges come online in 2014.  While Mr. Ario argued that employers would not drop coverage initially, he stated that if “the Exchanges work pretty well, then the employer can say ‘This is a great thing.  I can now dump my people into the Exchange and it would be good for them, good for me.’”

Losing their current coverage may not be good for employees – it definitely wasn’t what the President promised when he promised that “you will not have to change plans.”  Just as important, however, the law’s supposed deficit reduction stems entirely from the premise that most employers will NOT drop their current plans – so if companies follow Mr. Ario’s advice and “dump [their] people into the Exchange,” it would assuredly NOT be good for taxpayers.  As former Congressional Budget Office Director Doug Holtz-Eakin’s analysis confirms, should employers decide to drop coverage, the cost of federal insurance subsidies will explode as employers shed their plans – making any promise of deficit reduction as a result of the law little more than a mirage.  (For what it’s worth, the HR Policy Association, where Mr. Ario spoke this morning, submitted comments indicating “we believe…Congress may have significantly underestimated the shift to Exchange-based care that will result from the new law.”)

Last March, Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Mr. Ario’s comments – implying individuals could lose their current coverage, AND taxpayers will have to finance trillions of dollars in additional subsidy payments – provide yet another example of why the former Speaker’s comments continue to ring true.

Health “Reform” = Empowering Bureaucrats

In case you hadn’t seen it, this week’s National Journal has an interesting column, entitled “The Interpreters,” about how unelected federal bureaucrats are implementing the health care law – creating an environment where President Obama “could deepen his imprimatur on reform.” The article notes that “the Administration clearly doesn’t mind using the rule-making process to expand the scope of the law,” and discusses the controversy whereby federal officials tried to “sneak” regulations on end-of-life care into part of a massive, 692-page physician payment regulation released in late November – an event punctuated by e-mails from Congressional staff indicating they should “not broadcast this accomplishment” by publicly advertising the existence of this secret rule.

As we’ve previously noted, the Administration has released 6,578 pages of Federal Register regulations and notices in Obamacare’s first year – with thousands (and likely tens of thousands) more yet to come. Unfortunately, the impact on American businesses has already been felt; one owner of a chain of bowling alleys recently testified that the new regulations and mandates in the law will cost his firm over $26 million – meaning more than 500 jobs will NOT be created as a result of the law’s costs. Moreover, the law creates 159 new bureaucracies, boards, and programs – which will produce more mandates for businesses to follow, and intrude on Americans’ personal relationships with their physicians.

Just as the American people took it none too kindly when the Democrat Congress rammed through their unpopular 2700-page bill, many may be concerned by the prospect of federal bureaucrats releasing tens of thousands of pages of regulations regarding the law – both due to the economic damage that many of these regulations will inflict on struggling businesses, and because of the actions of unelected bureaucrats in avoiding transparency and public scrutiny when implementing these damaging new mandates.

Expensive “Weasel Words”

This morning’s Wall Street Journal featured an editorial regarding the recently released documents indicating the federal government spent more than $3 million on its Andy Griffith ad campaign last year (i.e., just before the midterm election).  HHS spent $754,000 (plus production costs) promoting the first ad, entitled “1965,” which the non-partisan factcheck.org said used “weasel words” regarding Medicare’s “guaranteed benefits” because “for millions of seniors, benefits won’t remain the same.”  At more than three quarters of a million dollars for a 59-word advertisement, that amounts to nearly $12,800 for each “weasel word” – at a time when the federal government is running trillion-dollar deficits.

On a related note, the Ways and Means Committee just announced a hearing on AARP’s insurance practices for next Friday.  Even as AARP recently wrote to its members telling them “what’s at stake” in the debate over repealing the health care law, the hearing should examine the organization’s own financial stake in preventing its repeal – and precisely whether, what, and how the “most transparent” Administration cut backroom deals harming seniors (while advantaging the White House’s political allies in the process).

One Year Later: STILL Bad for Young People

Today the Administration continues to sell its unpopular health care law to younger Americans, hoping they will see its benefits. In reality however, young people stand to lose, not gain, from the 2700-page measure:

Higher Health Insurance Premiums. The law states that insurance carriers cannot charge older individuals more than three times the premiums paid by younger applicants – meaning premiums for the young will likely rise so premiums for older populations can fall. A Rand Corporation analysis found that premiums for individuals under age 35 could rise by 17% due to this one mandate, while other analyses have even higher estimated premium impacts. 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 them from buying insurance at all.

Penalties for Those Who Cannot Afford Coverage. The law imposes penalties on individuals who cannot afford to purchase a “government-approved” policy – one that meets all the new federal mandates and regulations imposed in the legislation. As candidate Obama pointed out during his presidential campaign, 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.”

Employer Mandate Will Hurt Women and Young Workers. The law penalizes employers who do not provide “acceptable” coverage, forcing them to pay a “fair share” penalty of $2,000 per full-time employee. 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. 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 lead to wage stagnation as compensation is diverted to comply with new federal mandates. At a time when nearly one in four teens is unemployed, these harmful tax increases will hurt exactly the workers that the law intends to help.

Marriage Penalty. The law bases health insurance subsidy thresholds on multiples of the federal poverty level, and because the poverty level for a two-person couple ($14,710) is less than twice the poverty standard for a single person ($10,890), 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. At a time of record budget deficits, the health law spends $2.6 trillion in its first 10 years of full implementation. Growing the debt problem by adding trillions more of federal spending will only increase the debt burden to be faced by future generations.

One Year Later: Obamacare STILL Bad for Women and Families

While Democrats attempt today to sell their unpopular health care law to women, its provisions provide many specific reasons why women and families should oppose both the law and its harmful effects:

Marriage Penalty: The law bases health insurance subsidy thresholds on multiples of the federal poverty level, and because the poverty level for a two-person couple ($14,710) is less than twice the poverty standard for a single person ($10,890), 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: Among its more than half-trillion dollars in new taxes, the measure raises the payroll tax by a total of $210.2 billion – and the higher taxes apply to incomes of $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 $5,320 more in taxes than two single persons with the same salary.

Employer Mandate Will Hurt Women and Young Workers: The law penalizes employers who do not provide “acceptable” coverage, forcing them to pay a “fair share” penalty of $2,000 per full-time employee. 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. What’s more, women and young adults “face the highest risk of losing their jobs under employer mandates.”

Federal Funds for Abortion: The law 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: At a time of record budget deficits, the health law spends $2.6 trillion in its first 10 years of full implementation. Growing the debt problem by adding trillions more of federal spending will only increase the debt burden to be faced by future generations.