Obamacare Consultant Admits: Over $800 Billion “Straight to Insurance Companies”
After House Republicans last week released a report outlining how Obamacare penalizes marriage, liberal professor Jonathan Gruber – a paid Obamacare consultant – responded yesterday in an interview posted on the New Republic’s website. He’s wrong on several key points*, but right on a very important one:
Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change. In most cases, credits will go straight to insurance companies, to pay for health benefits.
Democrats’ claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the arms of the insurance industry:
- Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
- Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges. The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”
The Congressional Budget Office’s most recent estimates regarding Obamacare’s insurance subsidies show that from 2014 through 2021, the federal government will spend a whopping $821.2 billion for subsidies that “will go straight to insurance companies,” according to Gruber’s own admission.
Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President, only to flip-flop on this issue when he signed Obamacare:
- An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit? McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”
- Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing? That wouldn’t go to you. It would go directly to your insurance company – not your bank account.”
Gruber was attempting to argue that taxpayers’ liability would not change under Obamacare – because the subsidies are paid directly to insurers, individuals who owed the IRS $1,000 would still owe the IRS $1,000 come April 15. But that misses the point – because someone who sends the IRS a $1,000 tax payment, and then has the IRS subsidize his health insurance to the tune of $5,000, is obviously a net winner when it comes to the Internal Revenue Code. (Who wouldn’t take that deal?) The issue is who are the net contributors to the federal budget, and the Joint Committee on Taxation admitted that under Obamacare, another 7-8 million more households will receive more from the federal government in benefits than they pay in taxes. Which raises the larger question: What will happen to Obamacare when Democrats run out of other people’s money to spend…?
* Some of the other nonsense claims made by Gruber include:
- He conflates (unwittingly or not) tax refunds at the end of the year with refundable tax credits as a “semantic choice.” It’s NOT a semantic argument: The former are for those who overpaid their taxes during the year; the latter are for those that do not pay income taxes at all.
- He conflates the subsidies under Obamacare to the “large tax refunds that were put in place by the Bush tax cuts,” as both represent spending, in his view. Again, this view is incorrect. According to CBO, $103.2 billion of the $140.1 billion – or nearly 75% – of the federal spending on Exchange subsidies in 2021 will be refundable subsidies to people who do not have income tax liability. Conversely, according to CBO, less than 10% of the cost of the 2001 tax relief act represented outlay effects – i.e., refundable federal spending on those who do not have income tax liability. In other words, the vast majority of the Bush tax relief was provided to individuals who paid income taxes – and the vast majority of Obamacare’s subsidies are to people who don’t. You can argue whether each is good or bad policy, but you can’t argue with those facts.
- Gruber also claims that “the committee’s analysis conveniently ignores the fact that all but the highest wage earners pay significant payroll taxes in the U.S.” But Democrats have told Republicans for years that those payroll taxes are used solely to fund Social Security benefits, meaning those workers will get their payroll taxes back in future benefits (and especially in the case of low-income workers, will get their payroll taxes back and then some, due to the way Social Security benefits are calculated). Or does Gruber now want to admit that the Social Security Trust Fund is effectively meaningless, and that those who pay only payroll taxes are funding general government obligations rather than their own retirement benefits…?