Who is going to end up making all the money in the end if Obamacare continues to be in place?” Republican National Committee chairman Reince Priebus growled Monday on Sean Hannity’s Fox News show. “It’s going to be the big corporations, right? And who gets screwed? The middle class.”
The Republican Party makeover is breathtaking. Now, suddenly, instead of accusing Democrats of being “redistributionists,” the GOP is posing as defender of the middle class against corporate America — and it’s doing so by proposing to do away with the most progressive piece of legislation in well over a decade.
Paul Ryan’s new budget purportedly gets about 40 percent of its $4.6 trillion in spending cuts over ten years by repealing Obamacare, but Ryan’s budget document doesn’t mention that such a repeal would also lower taxes on corporations and the wealthy that foot Obamacare’s bill.
If the devil is in the details, we got the motherlode this past week as to how the most incendiary part of President Obama’s health reform will actually work when it launches next January.
The Department of Health and Human Services issued lengthy rules on the controversial individual mandate requiring uninsured Americans to purchase a health plan. The IRS followed with nearly as lengthy a set of rules specifying who is eligible for subsidies for those purchases and who pays penalties when they refuse. In what critics will consider an Orwellian flourish, both federal agencies refer to these penalties as “shared responsibility payments” — even though the Supreme Court, in its upholding of the mandate, plainly referred to them as what they are: a tax.
The two sets of rulings represent a sort of good cop, bad cop routine from the Obama administration. The bulk of the HHS rules defines individual outs for the mandate, identifying 11 different types of uninsured Americans who will be exempt from the de facto tax, ranging from sudden financial impairment to genuine religious objection to medical care. The IRS rules are all bright hard lines about who has to pay, when, and how.
The major media, echoing criticism by Obamacare’s agitators from the Left, seized on the stinginess of the IRS rules regarding subsidies and penalties for family members of people covered by their employers, or what they call the “family glitch.” The glitch is technically real, but statistically remote, and will affect almost no one in the real world, but it does make for good inflammatory headlines.
Did you notice that in the standoff over the fiscal cliff, all the discussion was about the Bush tax cuts? Which ones would be made permanent? And for whom? There was no discussion about the ObamaCare tax increases. I think that was a huge tactical mistake on the part of the Republicans.
Over and over again, President Obama claimed he was trying to protect the middle class from higher taxes. It was a claim that went unchallenged ― by the Republicans and by the mainstream media.
Yet five of the tax increases Americans are facing this month are new taxes created under the Affordable Care Act (ObamaCare). Three of the five will hit people who are solidly middle class.
Next year, things will get worse. The new tax on health insurance is about as regressive as a tax can be. It will total $100 billion over the next 10 years and very little of that amount will be paid by anyone who can be called “rich.”
- The health insurance tax will fall on private sector Medicaid plans, which have about 70% of all Medicaid enrollees.
- The tax will fall on Medicare Advantage plans whose enrollees have below average incomes and are disproportionately minority.
- The tax will hit every small business and every individual who buys insurance in the commercial market place.
- The tax will not fall on self-insured plans whose enrollees include the highest paid workers and the highest paid CEOs.
With over a dozen conservative states leaning against expanding Medicaid to cover poor workers without health insurance, perhaps it is time to resuscitate an idea embraced by President Ronald Reagan. Let the federal government take over Medicaid lock, stock and barrel.
In 1982 the president who ushered in the modern conservative era offered to assume federal responsibility for the program that now consumes over 22 percent of state government budgets in exchange for states taking over welfare. His offer built on a series of recommendations going back to 1969 by the U.S. Advisory Commission on Intergovernmental Relations, which called for a federal takeover of all public assistance programs.
President Obama’s health care reform law, if it survives the final hurdle of next November’s election, could give that idea new life. Under the Affordable Care Act, states are responsible for creating insurance exchanges where individuals and businesses can buy individual or group health plans.
The Supreme Court’s decision upholding the ACA is deliciously ironic. The “individual mandate”–an idea promoted for everyone in the 90s and for Massachusettians (?) in the 2000s by the arm of the Republican party known as the Heritage Foundation–was found to be legal. But not as a mandate, instead as a tax.
Put aside for a minute the dreadful political contortions required to get this quasi-universal health insurance bill past Congress in the first place. Put aside the fact that the supposedly non-political Supreme Court hands down decisions time after time that are a pure reflection of the exceedingly public extreme political views of its justices. Put aside for a minute the fact that the ACA has undeniably kickstarted a round of changes in the health care delivery and insurance system that at least has the potential to lower costs and improve care, and that the luncay of politics meant we nearly lost that momentum.
Instead focus on what the Supremes have done. They’ve cut through decades of rhetoric about how we pay for health insurance and clarified it thus: we pay for health care via taxes–whether they are private taxes on employers and employees (and now individuals) or public ones on citizens.
The jobs-killing Obamacare law contains 20 new or higher taxes on American families and employers. Many of these tax increases fall on families making less than $250,000 — a direct violation of candidate Obama’s promise not to raise “any form” of taxes on these families. In less than a week, the second anniversary of Obamacare being signed into law will take place. The Supreme Court will be hearing oral arguments about the constitutionality of Obamacare next week.
Out of the 20 new or higher taxes in Obamacare, there are five that fall most directly on seniors.
The first is the excise tax penalty for failure to comply with Obamacare’s individual mandate. Many seniors face a coverage gap between retirement and Medicare eligibility. Obamacare raises taxes on these younger seniors by punishing them if they don’t purchase “qualifying health insurance.” Set to go into effect in 2014, the excise tax penalty for mandate non-compliance will in 2016 rise to 2.5% of adjusted gross income for a senior couple (or $1,390 for those making less than $55,600).
Why does Obamacare raise taxes on seniors just as they are entering retirement? Many of these seniors will face this “stick” but find themselves with too much income to qualify for the “carrot” of tax credits to purchase Obamacare health insurance plans in an exchange. Many will be forced to keep working just to avoid paying this tax.
The second tax hike on seniors is the so-called “Cadillac Plan” excise tax. Starting in 2018, Obamacare imposes a whopping 40% excise tax on high-cost (“Cadillac plan”) health insurance plans. This is defined for seniors as a plan whose premiums exceed $29,450 for a family plan, or $11,500 for a single senior. Seniors often face higher costs in health insurance premiums due to chronic health conditions and other risk factors. This tax will fall almost exclusively on the seniors with the greatest health insurance needs.
Enactment of ObamaCare will open the floodgates for new federal mandates that insurers cover expensive wellness and alternative care services and send health insurance premiums soaring. While the New England Journal of Medicine says 50% of physicians will leave medicine because of ObamaCare, it’s more likely that the number of practicing physicians will shrink by 10% to 15% over the next five years. This will force Congress to boost payments to physicians to keep them in Medicine and to get them to accept more Medicaid and Medicare benefiaries. So taxes and Medicare premiums will rise even faster. ObamaCare encourages more people and employers to drop health insurance and game the system. Therefore, we’ll see as many uninsured Americans citizens who aren’t covered by various government programs as we see now. But they may be the higher-income folks who are smart enough to game the system.
Meanwhile, the hospitals who think that they will be the biggest winners because there will be fewer uninsured and few patients whose bills won’t be covered by the government will wind up the big losers. State and federal legislators will tax the not-for-profits and cut margins for the investor-owned hospitals to the bone. Long-run, they’ll lose physicians and money. Same for drug companies. Now that politicians control health insurance companies and markets more than ever, they’ll use the insurers and various forms of price and utilization controls to make the pharmas unprofitable.
Democrats who lose their seats in November will become rich lobbyists until Republicans take power and put them out of business.
People Who Are Smart About Money Won’t Buy Health Insurance Until They Get Sick
ObamaCare will give working Americans who are smart about money strong financial incentives to become and stay uninsured until they need catastrophically expensive health care. If they recover and no longer need insurance, they’ll drop it until the next time. The number of people who can afford to buy health insurance today but don’t is about 15 million. In five years, it could be several multiples of that.
Economists are just figuring it out here and here. Even liberal bloggers are getting it.
Don Johnson blogs at The Business Word Inc. Between 1976 and 1986 he was editor of Modern Healthcare magazine. As its top editor, Don helped build Modern Healthcare, a Crain Communications Inc. publication, into the hospital industry’s leading business magazine and one of the top magazines in the country.
The Congress has investigated about every conceivable way to tax people to pay for the health care proposals—a millionaire’s tax, bigger taxes on home mortgages and charitable contributions, and a couple of dozen more ideas.
Now Congress looks to be the most interested in taxing insurance companies to pay for a big chunk of their health care proposals. The new taxes would come in two parts––a 35% excise tax on any health benefit cost above an $8,000 single and $21,000 family annual premium as well as a flat $6 billion annual tax on the industry to be allocated among the companies proportionate to their premium.
There is certain logic to this. Taxing high priced benefits could help deflate the health care economy. Taxing all of the health insurance companies that stand to get more than a $1 trillion in new business—most of it in the from new private insurance and Medicaid subsidies and the rest from the consumer’s share of those new private plan premiums—seems fair at one level.
Calling for a tax on that big rich insurance company also sounds a lot better to the politicians than looking voters straight in the eye and raising their taxes directly.Continue reading…
The debate over proposals to tax health insurance plans is confusing and frustrating. The proposals are usually described as a tax on “gold plated” or “Cadillac” health coverage. According to the media and many spokespeople on the Hill, these health plans with “overly generous benefits” supposedly encourage overuse of medical services and drive up the overall costs of health care. People express outrage that Wall Street executives have expensive tax-subsidized health benefits that include coverage for cosmetic surgery. Is this really a problem? If we fix this, will it raise lots of revenue and bend the cost curve? I don’t think so. The problem is not “Cadillac” coverage, whatever that is.
I know that some economists believe that people ought to have more “skin in the game” by paying a significant share of the costs of medical services they receive. I agree, but only up to a point. Health care services are not like other goods and services. If you give me more money, I might build a fancier house, buy a new car, go to more concerts, fly first class, etc., because I like all of these things. Frankly, I don’t particularly like going to the doctor, and I wouldn’t spend my extra income on more blood tests, CT scans, colonoscopies, or surgeries (ouch!). It’s fine to have modest copayments to discourage unnecessary doctor visits or to encourage use of generic instead of brand name drugs, but onerous cost sharing when someone is seeking medical care won’t solve our problem. A tax on “Cadillac” plans won’t raise much revenue, and it won’t bend the cost curve in any significant way.