Tag Archives: John McCain

A Status Update on the Senate Health Care Bill

The past week’s debate on health care has seen more twists and turns than a dime-store movie novel. “Repeal-and-replace” is dead—then alive again. President Trump calls for outright repeal, then letting the law fail, then “repeal-and-replace” again.

As Vince Lombardi might ask, “What the h— is going on out here???”

Never fear. Three simple facts will put the debate in context.

Leadership Is Buying Moderates for ‘Repeal-and-Replace’

Whether in the form of “candy,” “making it rain,” or old-fashioned carve-outs that help states with reluctant senators, Senate leaders are trying to figure out the amount and type of money and incentives that will win enough moderate votes to pass a “repeal-and-replace” bill. Details remain sketchy, but the broader outline is clear: senators don’t want to vote for provisions they approved 18 months ago—when they knew President Obama would veto a repeal measure. And Senate leadership hopes to “solve” this problem essentially by throwing money at it—through new funding for Medicaid expansion states, opioid funding, bailout funds for insurers, programmatic carve-outs for some states, or all of the above (likely all of the above).

Leadership Isn’t Serious about Repeal-Only

Some observers (not to mention some senators) are confused about whether the Senate will vote on a repeal-only measure, or a “repeal-and-replace” bill. But Senate Majority Whip John Cornyn (R-TX) explained leadership’s strategy to Bloomberg Wednesday: “There’s more optimism that we could vote on a repeal-and-replace bill, rather than just a repeal bill….But if there’s no agreement then we’ll still vote on the motion to proceed” to a repeal-only measure” (emphasis mine).

Translation: Senate leadership will only move to a vote on the 2015 repeal bill—which some conservative groups have argued for—if it knows it will fail. In fact, some observers have gone so far as to suggest Majority Leader Mitch McConnell’s Monday announcement that the Senate would vote on a repeal-only bill amounted to an attempt to bait-and-switch conservatives—convincing them to support starting debate on the bill by dangling repeal-only in front of them, only to pivot back to “repeal-and-replace” once the debate began.

Regardless of McConnell’s intentions earlier in the week, Cornyn’s comments make clear the extent to which Senate leaders take a repeal-only bill seriously: They don’t.

McCain May Make It Moot

It may sound impolitic or callous to translate a war hero’s struggle against cancer into crass political terms, but if the recent cancer diagnosis of Sen. John McCain (R-AZ) means the senator will be unable to travel to Washington, Republican leaders’ desperate attempts to cobble together a legislative compromise may ultimately prove moot. At least two conservative senators oppose the current bill from the Right; adding more money to appease moderates won’t reduce those numbers, and may increase them. And at least two moderate senators oppose the current bill from the Left, hence the effort to increase funding.

If McCain is unable to vote on the legislation, Republican leaders will be able to withstand only one defection before putting the bill’s passage in jeopardy—yet at least two senators on either side of the Republican Conference oppose the current bill. That math just doesn’t add up, which means that barring some unforeseen development, the hue and cry of the past several days may ultimately amount to very little.

This post was originally published in The Federalist.

Liberals’ Agenda: Tax Health Benefits to Fund Corporate Welfare

A feature article in Sunday’s Washington Post provided the latest summary of Obamacare’s woes: Premiums set to spike dramatically, insurers leaving in droves, and millions of Americans held hostage to a lengthening comedy of errors. But liberals stand ready with their answer: More of the same government taxes and spending that created the problem in the first place. To wit, the Left would tax Americans’ employer-provided health benefits to fund a permanent bailout fund for insurance companies.

In a brief released earlier this month, the liberal Robert Wood Johnson Foundation had several possible “solutions” to solve the problem of low enrollment, and low insurer participation, in Obamacare’s health insurance exchanges. In the document, the foundation suggested making program of reinsurance now scheduled to expire at year’s end permanent:

Extending [Obamacare’s] reinsurance program and its mechanism of financing would more likely have a stabilizing influence [on insurers]. The program could be authorized permanently…or for a set period of time, with authority for CMS [the Centers for Medicare and Medicaid Services] to continue it if needed….Funds for the reinsurance pool would need to be, as they are currently, collected from individual market insurers, group market insurers, and self-funded plans.

In other words, individuals who do not purchase coverage from an exchange should have their benefits taxed, to fund more corporate welfare subsidies to health insurers, in the hopes that they will continue to offer exchange coverage.

That was the basic premise of the law’s reinsurance mechanism. Put slightly more charitably, Section 1341 of Obamacare imposed an assessment on Americans with employer-provided coverage, or those who purchase health coverage directly from an insurance carrier rather than through a government-run exchange, to help subsidize exchange insurers with high-cost patients.

The assessments were set to last three years—from 2014 through 2016—serving as a transition while the new marketplaces developed. But after three years, the exchanges are in worse shape than ever. Healthy and wealthy individuals have not purchased coverage, making the exchange population sicker than the average employer plan.

Rather than fixing a problem that onerous government regulations—a mandated package of benefits, and rating requirements that have raised premiums so substantially for healthy individuals that many have chosen to forgo coverage—the Left just wants more of the same. The Robert Wood Johnson Foundation paper included numerous “solutions” straight out of the liberal playbook: Requiring insurers to participate on exchanges; a government-run “public option” intended to destroy private coverage, richer subsidies; and new penalties for late enrollment. In other words, more of the taxes, spending, and regulations that brought us this mess in the first place—not to mention the permanent insurer bailout fund.

Two clear ironies stand out when it comes to the reinsurance proposal. First, the Obama administration has already given insurers far more than they expected—or the law allows—on the reinsurance front. Government officials have repeatedly increased reinsurance reimbursement levels, giving insurers nearly 50% more support from the program in 2014 than they originally expected. And the non-partisan Congressional Research Service believes that the Administration has violated the law by prioritizing payments to insurers over payments to the Treasury—giving insurers billions of dollars in extra funding that legally should be returned to taxpayers.

Second, Barack Obama himself campaigned vigorously against “taxing health benefits” in 2008. He ran ads attacking John McCain for making health insurance subject to income tax, saying the tax would fund subsidies that would go straight to insurance companies. Yet Obamacare contained not one, but two, separate “assessments” (read: taxes) on health plans—the first to fund comparative effectiveness research that could be utilized by health plans reimbursement and coverage decisions, and the second for the “temporary” reinsurance program. After violating his campaign pledge not once, but twice, in Obamacare itself, the president’s allies want Congress to make permanent the tax on health benefits—to finance a bailout fund that will go—you guessed it!—straight to the insurance companies.

With labor force participation still historically low, and Americans struggling with high health costs, now is certainly not the time to tax the health coverage that businesses provide to working families so that insurers can receive billions more dollars in bailout funds. Congress should not even think about throwing good money after bad in a vain attempt to keep the sinking Obamacare ship afloat.

The Republican Party Split That Donald Trump’s Nomination Won’t Resolve

The general election campaign has not begun, but preliminary polling suggests that Donald Trump is a decided underdog against Hillary Clinton. For the Republican Party, there is an issue beyond the Election Day outcome–and one that, at least right now, looks unlikely to be resolved no matter who wins in November.

More so than reports of John Kasich suspending his campaign, it was Sen. Ted Cruz‘s withdrawal from the Republican primary race Tuesday night that sparked reactions from Republicans ranging from begrudging acceptance to continued hostility. Mr. Trump’s ascendance illustrates a split within the Republican Party, between the “establishment” and the “tea party” lanes, that has been widening for years. It is likely to persist, as both factions disagree on the elements that led to Mr. Trump’s meteoric rise.

A core point in the internal GOP dispute is whether political confrontation or ideological conservatism most motivates voters, including the party’s base. Steve Schmidt, a consultant to John McCain‘s presidential campaign in 2008, said on MSNBC Tuesday night that Mr. Trump’s rise was fueled by voter frustration stoked by the tea-party wing. He and other establishment figures view anger as a poor substitute for substantive policy solutions and a dead-end political strategy in general.

On the other hand, those aligned with tea-partyers view the Trump phenomenon as rising from discontent with an insufficiently conservative leadership. They see voters’ frustration and anger rooted in an establishment that overpromised and underdelivered, for example by promising to fight President Barack Obama’s executive orders on immigration “tooth and nail” in November 2014 but, just a few months later, ruling out a partial government shutdown over the issue as “not an option.”

A Cruz nomination would have left little doubt about the party’s ideological direction. Mr. Cruz often echoed Ronald Reagan’s desire to speak “in bold colors, not pale pastels,” and relying on motivated conservatives to help drive general election turnout. A Cruz-Clinton match-up would have made clear the potential, and potential limits, of a “base strategy.”

Conversely, Trump’s ideological heterodoxies—on health careabortion and even about Hillary Clinton herself—reshuffle the political landscape. Mr. Trump falls outside the “establishment” and “tea party” labels, as neither side fully embraced his ascent. Mr. Trump said Wednesday that “As far as the Republican Party coming together, it will, maybe not 100%, but it’ll come together 99% and the 1% I don’t want and it won’t have any impact.” What shape the GOP takes as some elements rally behind him and others consider different directions will definitely have an impact on the Republican Party as we have known it.

This post was originally published at the Wall Street Journal’s Think Tank blog.

How the “Cadillac Tax” Could Drive Obamacare Over a Political Cliff

In its economic forecast last week, the Congressional Budget Office revealed a quandary about Obamacare’s “Cadillac tax”: To make the underlying law fiscally sustainable, the tax may end up increasing at a rate that becomes politically unsustainable.

The nugget about the tax, formally known as a high-premium excise tax and set to take effect in 2018, came in CBO’s updated estimates for the law as a whole, which noted:

CBO and [the Joint Committee on Taxation] expect that premiums for health insurance will tend to increase more rapidly than the threshold for determining liability for the high-premium excise tax, so the tax will affect an increasing share of coverage offered through employers and thus generate rising revenues. In response, many employers are expected to avoid the tax by holding premiums below the threshold, but the resulting shift in compensation from nontaxable insurance benefits to taxable wages and salaries would subject an increasing share of employees’ compensation to taxes. Those trends in exchange subsidies and in revenues related to the high-premium excise tax will continue beyond 2025, CBO and JCT anticipate, causing the net costs of the ACA’s coverage provisions to decline in subsequent years.

In other words, under current projections the tax will grow so quickly that it will exceed the annual rising costs of the law’s new entitlements, causing net spending on Obamacare actually to decline.

The Cadillac tax has always caused the administration political heartburn. In 2008, then-Sen. Barack Obama broadcast the most-aired political ad in a decadeattacking Sen. John McCain for wanting to tax health benefits. The Cadillac tax technically targets insurers, not individuals, but videos of remarks by MIT economist Jonathan Gruber, who advised the administration when the health-care law was being developed, show Mr. Gruber saying that Democrats engaged in semantics about the tax and even “mislabeling” to provide political cover for the president to change his position.

When Obamacare was passed, Mr. Gruber wrote articles—promoted at the time by the administration—saying that the Cadillac tax wasn’t a tax. He argued that, in response to the law’s pressures, firms would reduce their health benefits but increase taxable wages—and that paying taxes on these higher wages amounted to a net plus for individuals rather than a tax increase. But in the face of pressure from labor unions, which remain opposed to the tax, Democrats ultimately decided to delay its implementation until 2018, after President Obama leaves office.

In its analysis last week, CBO made clear that the Cadillac tax, coupled with provisions slowing the growth of insurance exchange subsidies (provisions that some liberal groups want to overturn) is central to making the law fiscally sustainable. The question is whether the effects of the Cadillac tax would be any more politically sustainable in 2018 and beyond than they were in 2009—and what supporters of the law will do if they aren’t.

This post was originally published at the Wall Street Journal’s Think Tank blog.

Barack Obama’s Tax Cuts — For Insurance Companies

The President’s campaign flyer includes some interesting claims on health care. It also includes some curious language on taxes: “The President has provided new tax cuts to help the middle class afford higher education and health care.” We’ve previously debunked this myth here. But it’s worth reiterating the key point: The President’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets 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.”

Even liberal professor Jonathan Gruber — a paid Obamacare consultantadmitted in an interview that “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.” And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

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.”

Presidential flip-flops and insurance company giveaways are real signs of change — but they’re certainly not hope and change, and they’re not the true reform our health sector needs.

Neera Tanden and Obamacare’s $1 Trillion Tax Cut for Insurers

Speaking on Face the Nation yesterday, Center for American Progress CEO Neera Tanden claimed that Obamacare “is a massive tax cut for — in health care.  It’s a six-hundred-billion-dollar tax cut for health care.  It’s a tax cut to middle-class families.”  Tanden’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets 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.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultant – admitted in an interview that “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.”  And according to CBO’s updated estimatesObamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President.  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.”

In making her false claims that middle class families — as opposed to insurance companies — would actually receive these tax cuts, Tanden contradicted both the words of candidate Obama — on whose 2008 campaign she worked — and someone who has written multiple papers for the organization she leads.  It’s unfortunate that Obamacare supporters feel the need to twist the facts in such a blatantly obvious manner to try to gin up support for their unpopular health care law.

Obamacare’s Trillion-Dollar Gift to Big Insurance

The House Oversight Committee is holding a hearing this morning on the IRS’ massive role in implementing Obamacare — and the hearing already includes a devastating admission from the Administration.  In his prepared testimony to the Committee discussing the law’s subsidies for health insurance, IRS Commissioner Doug Shulman admits that “the advance payments of the credit [i.e., subsidy] will be paid directly to the insurer, and cannot be accessed directly by the taxpayer.”  In its updated analysis of Obamacare last week, the Congressional Budget Office indicated that these subsidies will exceed $1 trillion — meaning Obamacare provides a whopping thirteen-figure gift directly to insurers.

Not only do these developments provide a big wet kiss to Big Insurance, but they also violate candidate Obama’s campaign promises made four years ago.  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.”

During his campaign, then-Senator Obama sold himself as a candidate full of hope and change.  Now, when it comes to Obamacare’s giveaways to Big Insurance, he has changed his position — and hopes you won’t notice.  It’s exactly the kind of “reform” Americans don’t need.

Why Obamacare is NOT a ‘Tax Cut’

By now you’ve heard claims from President Obama and others that Obamacare provides a massive middle-class tax cut – largely by funding coverage for health insurance through Exchanges.  We figured we would take this opportunity to summarize why that claim doesn’t hold water:

1. CBO Scores Most of the “Tax Cuts” as Government Spending

According to CBO’s March 2012 baseline, projected spending on insurance subsidies totaled $806 billion during FY2013-22.  As of March, $628 billion of that $806 billion was classified by CBO as government spending, NOT reduced tax revenues.  But since the Supreme Court’s ruling on Obamacare, those numbers have actually increased.  CBO now assumes more low-income people who previously would have enrolled in Medicaid will receive Exchange subsidies instead in light of the Court decision.  In its updated score of the repeal bill, CBO last week projected that $793 billion of the $1.017 trillion in subsidies represent government outlays, NOT revenue reductions.  That means that over 78% of Obamacare insurance subsidies are pure government spending to individuals who have no income tax liability.

Democrats are quick to cite CBO to claim that Obamacare will reduce the deficit — why aren’t they also quick to cite CBO when it states that the subsidies are NOT a tax cut, but instead largely comprise new government spending?

2. Democrat Claims on “Tax Cuts” Undermine the Social Security Trust Fund

When confronted with the fact that most of the Exchange subsidies constitute outlay spending by the federal government, President Obama and Democrats argue that these refundable tax credits — i.e., people receiving refunds even though they have zero income tax liability — offset payroll taxes paid by the low-income.  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).  Do Democrats 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…?

3. Low-Income Individuals Don’t Pay Enough Other Taxes to Offset this “Tax Cut”

Even if you disregard points #1 and #2 above, and believe that the subsidies will offset payroll and other taxes paid by individuals, the massive subsidies will still overwhelm many individuals’ total tax liability — federal, state, AND local.  In its analysis of the fiscal impacts of the Supreme Court ruling, CBO noted that in 2022, Exchange subsidies for low-income individuals — i.e., those persons who were originally projected to enroll in Medicaid, but who will now enroll in Exchanges instead due to the Court ruling — will average about $9,000 per year.  These low-income individuals have incomes under 138% of the federal poverty level ($15,414.60 for a single person, $31,809 for a family of four in 2012).

To put it into perspective: A single person with income of 138% FPL, or $15,414.60, would pay total federal payroll taxes of $2,358.44 (that includes employee AND employer shares).  Assume also for illustrative purposes that this person would pay $1,541.46 in state and local income taxes, given a combined 10% state and local tax rate.  As noted above, this person’s average insurance subsidy will total $9,000.  Given payroll and state/local income tax liability totaling $3899.90, that means the individual in question would have to pay an additional $5100.10 in sales taxes for the federal subsidy to offset existing tax liability.  And at a 6% local sales tax rate, an individual with income of $15,414.6 would have to spend just over $85,000 — enough to buy a Platinum Edition Cadillac Escalade – to pay enough sales tax to have a net tax liability.

All this is to say that there is virtually NO WAY some of the individuals receiving subsidies will pay enough in payroll taxes, state and local taxes, sales taxes, or any other kind of taxes for the subsidies to offset taxes they actually paid — as opposed to the government spending money to buy them health insurance.

4. Obamacare Subsidies are Paid Directly to Insurance Companies

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.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultant – admitted in an interview that “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.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the arms of insurance companies.

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.”

If this isn’t enough to convince you, consider a hypothetical example whereby Congress orders the IRS to send checks to Ferrari dealerships to pay for new sports cars for all Americans with incomes under $50,000 per year.  This is clearly NOT a tax cut — because the cost of the Ferrari obviously exceeds any and all taxes low- and middle-income families pay, and because the individuals in question don’t receive cash through the transaction.  It’s the same situation with health insurance.  And unfortunately for the shrinking number of Americans who DO pay taxes, giving $1 trillion in Exchange subsidies straight to insurance companies will prove to be a fiscal wreck that even loads of Ferraris couldn’t begin to match.

Obamacare’s Bait and Switch

The article in yesterday’s New York Times regarding the Obama Administration’s “evolution” on the individual mandate contained several paragraphs trying to explain how and why President Obama grew to embrace a mandate that candidate Obama opposed.  The piece claims that internal models within the Administration proved that without a mandate, any “reform” effort would cover many fewer individuals – and that these data prompted Obama to switch his position on the mandate.  (One related and worthwhile question very few have asked:  If 15-20 million individuals will obtain coverage only if they’re FORCED to by the federal government, is the uninsured problem really as large as Democrats claim?)

But that anecdote presents far from a complete – and some would argue inaccurate – picture.  After all, then-Senator Clinton made all the arguments for a mandate that candidate Obama rejected, and President Obama later accepted: namely, that you can’t cover all Americans unless tens of millions of them are forced by the federal government to buy coverage: “Clinton’s camp often cites experts who say Obama’s plan would leave out 15 million people of the 47 million who are uninsured.”  So why did Obama REALLY change positions on the mandate?

A better context can be found in all of candidate Obama’s other commitments related to health care.  Among other pledges, Obama promised that:

  • You will not have to change plans.  For those who have insurance now, nothing will change under the Obama plan – except that you will pay less.”
  • “We’re going to work with you to lower your premiums by $2,500 per family per year.  And we will not wait 20 years from now to do it or 10 years from now to do it.  We will do it by the end of my first term as President.”
  • “I can make a firm pledge.  Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”
  • “The Obama plan will cost $50-65 billion a year when fully phased in.”
  • “Senator McCain would pay for his plan, in part, by taxing your health care benefits for the first time in history.  And this tax would come out of your paycheck.”
  • We’ll have the negotiations televised, on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

The American people were promised a health care plan that would be negotiated on C-SPAN, in which all Americans would be covered, premiums would go down by $2,500 a year even after covering all the newly insured, no one would have to give up their existing coverage, and only “the rich” would pay for all this new government munificence. (For some reason, the Obama campaign didn’t promise to buy everyone a pony for good measure.)  In other words, at every single opportunity during his campaign, Obama took the easy way out – he ducked the hard choices, and said implementing a universal health care plan would be an entirely pain-free exercise.  And whenever his opponents implied some hard choices might actually be required – when Sen. Clinton suggested a mandate would be necessary to achieve universal coverage, and when Sen. McCain proposed a new (and surprisingly progressive) tax policy change to cover more Americans – Obama mercilessly attacked them for each.

Of course, all of candidate Obama’s pledges and commitments cited above have since been violated, in fairly obvious fashion.  But even though campaign plans evolve over time as they’re implemented into legislative form, many of the Obama promises were viewed as unrealistic even during the campaign itself.  Few people at the time thought Obama could implement a truly universal health care plan (his stated goal) for his stated price tag of $50-65 billion.  But that didn’t stop the Obama campaign from trumpeting that cost estimate, or the $2,500 in premium savings few thought his campaign could achieve.  (News flash: They haven’t.)

Yesterday’s Los Angeles Times profiled a lawsuit against Anthem Blue Cross for alleged “bait and switch” tactics.  But given the list above, some may wonder what legal action the American people should take for the Obama Administration’s “bait and switch” on health care.

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…?