By DOUGLAS HOLTZ-EAKIN; Wall Street Journal
http://online.wsj.com/article/SB10001424052748704107204574471292249934348.html
Remember when health-care reform was supposed to make life better for the middle class? That dream began to unravel this past summer when Congress proposed a bill that failed to include any competition-based reforms that would actually bend the curve of health-care costs. It fell apart completely when Democrats began papering over the gaping holes their plan would rip in the federal budget.
As it now stands, the plan proposed by Democrats and the Obama administration would not only fail to reduce the cost burden on middle-class families, it would make that burden significantly worse.
Consider the bill put forward by the Senate Finance Committee. From a budgetary perspective, it is straightforward. The bill creates a new health entitlement program that the Congressional Budget Office (CBO) estimates will grow over the longer term at a rate of 8% annually, which is much faster than the growth rate of the economy or tax revenues. This is the same growth rate as the House bill that Sen. Kent Conrad (D., N.D.) deep-sixed by asking the CBO to tell the truth about its impact on health-care costs.
To avoid the fate of the House bill and achieve a veneer of fiscal sensibility, the Senate did three things: It omitted inconvenient truths, it promised that future Congresses will make tough choices to slow entitlement spending, and it dropped the hammer on the middle class.
One inconvenient truth is the fact that Congress will not allow doctors to suffer a 24% cut in their Medicare reimbursements. Senate Democrats chose to ignore this reality and rely on the promise of a cut to make their bill add up. Taking note of this fact pushes the total cost of the bill well over $1 trillion and destroys any pretense of budget balance.
It is beyond fantastic to promise that future Congresses, for 10 straight years, will allow planned cuts in reimbursements to hospitals, other providers, and Medicare Advantage (thereby reducing the benefits of 25% of seniors in Medicare). The 1997 Balanced Budget Act pursued this strategy and successive Congresses steadily unwound its provisions. The very fact that this Congress is pursuing an expensive new entitlement belies the notion that members would be willing to cut existing ones.
Most astounding of all is what this Congress is willing to do to struggling middle-class families. The bill would impose nearly $400 billion in new taxes and fees. Nearly 90% of that burden will be shouldered by those making $200,000 or less.
It might not appear that way at first, because the dollars are collected via a 40% tax on sales by insurers of "Cadillac" policies, fees on health insurers, drug companies and device manufacturers, and an assortment of odds and ends.
But the economics are clear. These costs will be passed on to consumers by either directly raising insurance premiums, or by fueling higher health-care costs that inevitably lead to higher premiums. Consumers will pay the excise tax on high-cost plans. The Joint Committee on Taxation indicates that 87% of the burden would fall on Americans making less than $200,000, and more than half on those earning under $100,000.
Industry fees are even worse because Democrats chose to make these fees nondeductible. This means that insurance companies will have to raise premiums significantly just to break even. American families will bear a burden even greater than the $130 billion in fees that the bill intends to collect. According to my analysis, premiums will rise by as much as $200 billion over the next 10 years—and 90% will again fall on the middle class.
Senate Democrats are also erecting new barriers to middle-class ascent. A family of four making $54,000 would pay $4,800 for health insurance, with the remainder coming from subsidies. If they work harder and raise their income to $66,000, their cost of insurance rises by $2,800. In other words, earning another $12,000 raises their bill by $2,800—a marginal tax rate of 23%. Double-digit increases in effective tax rates will have detrimental effects on the incentives of millions of Americans.
Why does it make sense to double down on the kinds of entitlements already in crisis, instead of passing medical malpractice reform and allowing greater competition among insurers? Why should middle-class families pay more than $2,000 on average, by my estimate, in taxes in the process?
Middle-class families have it tough enough. There is little reason to believe that the pain of the current recession, housing downturn, and financial crisis will quickly fade away—especially with the administration planning to triple the national debt over the next decade.
The promise of real reform remains. But the reality of the Democrats' current effort is starkly less benign. It will create a dangerous new entitlement that will be paid for by the middle class and their children.
Mr. Holtz-Eakin is a former director of the Congressional Budget Office and a fellow at the Manhattan Institute.
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
Thursday, October 15, 2009
Wednesday, October 14, 2009
Obama Hasn't Closed the Health-Care Sale
http://online.wsj.com/article/SB10001424052748704107204574473372635087870.html
Wait until the voters figure out how Congress is proposing to pay for reform.
By KARL ROVE
Now that the Senate Finance Committee has voted for the health-care bill drafted by Montana Democratic Sen. Max Baucus, negotiations over the real bill can begin in Senate Majority Leader Harry Reid's cozy Capitol hideaway. It won't be easy.
Democrats now face a central problem for any governing party: How to pass a major piece of legislation when there are a lot of sharply different ideas about what should be in it. Trying to reconcile what Democrats in the House prefer with what Democrats in the Senate want is already opening up divisions among the party's supporters.
This week, for example, leaders of 30 labor unions called for Democrats to reject Mr. Baucus's bill because it doesn't include the government-run health insurance program better known as the public option. This only makes it more likely that Democrats will have a bloody fight over the public option.
Members of Congress have a tendency to take a hard stand on a particular portion of a controversial bill. That allows them to show a little independence and make a plausible claim to have influenced the eventual outcome.
The problem for Mr. Obama is that the Baucus bill is being sold on the strength of accounting tricks that make it appear that it won't add to the deficit. (This is true for the other health-reform bills, too). If fiscally conservative Democrats sign on to the bill now after publicly saying they are doing so because it doesn't add to the deficit, they may end up bailing once the tricks are revealed to the public.
One trick is easily explained. The bill imposes tax hikes and benefit cuts right away, including $121 billion of Medicare reductions between 2011 and 2015. But new spending really doesn't start until five years out (2015) and isn't fully operational until 2017. The bill uses 10 years worth of tax hikes and benefit cuts to fund a few years worth of benefits.
And that's just the start. For example, the Congressional Budget Office (CBO) released a report last week claiming the bill won't add to the deficit. But this assumes that employers who dump employee coverage under the Baucus bill will then increase worker paychecks by an amount equal to what they had spent on health care. This replaces a nontaxable event (providing health insurance) with a taxable one (increasing worker paychecks), magically producing $83 billion in revenues. Without this windfall, the Baucus bill adds billions of dollars to the federal deficit in the first decade.
Of course, why would a company drop employee coverage just so it could pay more (in fines, taxes and wages) than it did before?
The CBO report also estimates that receipts from the 40% excise tax the Baucus bill would levy on "Cadillac" insurance policies "would grow by roughly 10 percent to 15 percent" a year after 2019.
That's nonsense. If you tax something heavily you'll get less of it. If this tax is enacted, there will be fewer Cadillac plans—and hence less revenue.
Under questioning at a Senate hearing Tuesday, CBO Director Douglas Elmendorf admitted that the $500 billion in tax hikes in the Baucus bill would be passed onto consumers, jacking up insurance premiums. That undercuts the argument that Democratic reforms will make health care more affordable.
Some governors are also figuring out that the proposal in the Baucus bill to expand Medicaid will shift a big chunk of the federal health-care tab to states. States, after all, pick up an average of 47% of Medicaid's costs—and expanding it will force states to spend more.
Then there are $400 billion in benefit cuts that are frightening seniors. Jeffrey A. Anderson of the Pacific Research Institute has pointed out that the Baucus bill cuts Medicare payments to physicians by 25% within two years and keeps payments at that level forever, without adjusting for inflation. If this becomes law, doctors who take Medicare patients will see their real income decline each year.
Democrats who support any final bill are at risk. They'll be held responsible for the mess that quickly emerges as premiums rise, taxes balloon, deficits soar, mandates expand, and government power grows.
Mr. Obama's problem is that his Magic Kingdom Health Care World is colliding with reality. There is a big cost to any large government expansion—and the ways to cover the cost of Mr. Obama's plan are limited, unpopular, and sure to anger Americans once they are fully understood.
Ironically, the president who never stopped campaigning hasn't made the sale to Americans because he's forgotten a central rule of campaigning: Your arguments have to be clear and credible if voters are to believe them. His attempt to sell health care is neither. He still may win passage of a bill, but he's lost the public's enthusiastic backing.
Wait until the voters figure out how Congress is proposing to pay for reform.
By KARL ROVE
Now that the Senate Finance Committee has voted for the health-care bill drafted by Montana Democratic Sen. Max Baucus, negotiations over the real bill can begin in Senate Majority Leader Harry Reid's cozy Capitol hideaway. It won't be easy.
Democrats now face a central problem for any governing party: How to pass a major piece of legislation when there are a lot of sharply different ideas about what should be in it. Trying to reconcile what Democrats in the House prefer with what Democrats in the Senate want is already opening up divisions among the party's supporters.
This week, for example, leaders of 30 labor unions called for Democrats to reject Mr. Baucus's bill because it doesn't include the government-run health insurance program better known as the public option. This only makes it more likely that Democrats will have a bloody fight over the public option.
Members of Congress have a tendency to take a hard stand on a particular portion of a controversial bill. That allows them to show a little independence and make a plausible claim to have influenced the eventual outcome.
The problem for Mr. Obama is that the Baucus bill is being sold on the strength of accounting tricks that make it appear that it won't add to the deficit. (This is true for the other health-reform bills, too). If fiscally conservative Democrats sign on to the bill now after publicly saying they are doing so because it doesn't add to the deficit, they may end up bailing once the tricks are revealed to the public.
One trick is easily explained. The bill imposes tax hikes and benefit cuts right away, including $121 billion of Medicare reductions between 2011 and 2015. But new spending really doesn't start until five years out (2015) and isn't fully operational until 2017. The bill uses 10 years worth of tax hikes and benefit cuts to fund a few years worth of benefits.
And that's just the start. For example, the Congressional Budget Office (CBO) released a report last week claiming the bill won't add to the deficit. But this assumes that employers who dump employee coverage under the Baucus bill will then increase worker paychecks by an amount equal to what they had spent on health care. This replaces a nontaxable event (providing health insurance) with a taxable one (increasing worker paychecks), magically producing $83 billion in revenues. Without this windfall, the Baucus bill adds billions of dollars to the federal deficit in the first decade.
Of course, why would a company drop employee coverage just so it could pay more (in fines, taxes and wages) than it did before?
The CBO report also estimates that receipts from the 40% excise tax the Baucus bill would levy on "Cadillac" insurance policies "would grow by roughly 10 percent to 15 percent" a year after 2019.
That's nonsense. If you tax something heavily you'll get less of it. If this tax is enacted, there will be fewer Cadillac plans—and hence less revenue.
Under questioning at a Senate hearing Tuesday, CBO Director Douglas Elmendorf admitted that the $500 billion in tax hikes in the Baucus bill would be passed onto consumers, jacking up insurance premiums. That undercuts the argument that Democratic reforms will make health care more affordable.
Some governors are also figuring out that the proposal in the Baucus bill to expand Medicaid will shift a big chunk of the federal health-care tab to states. States, after all, pick up an average of 47% of Medicaid's costs—and expanding it will force states to spend more.
Then there are $400 billion in benefit cuts that are frightening seniors. Jeffrey A. Anderson of the Pacific Research Institute has pointed out that the Baucus bill cuts Medicare payments to physicians by 25% within two years and keeps payments at that level forever, without adjusting for inflation. If this becomes law, doctors who take Medicare patients will see their real income decline each year.
Democrats who support any final bill are at risk. They'll be held responsible for the mess that quickly emerges as premiums rise, taxes balloon, deficits soar, mandates expand, and government power grows.
Mr. Obama's problem is that his Magic Kingdom Health Care World is colliding with reality. There is a big cost to any large government expansion—and the ways to cover the cost of Mr. Obama's plan are limited, unpopular, and sure to anger Americans once they are fully understood.
Ironically, the president who never stopped campaigning hasn't made the sale to Americans because he's forgotten a central rule of campaigning: Your arguments have to be clear and credible if voters are to believe them. His attempt to sell health care is neither. He still may win passage of a bill, but he's lost the public's enthusiastic backing.
Wednesday, October 7, 2009
Will President Obama Veto Health Reform?
The following is an analysis by Newt Gingrich of the contradictions between the promises of President Obama and the realities of the new Health Care Bill
October 7, 2009
With the Senate Finance Committee poised to pass health care legislation, the final contours of the bill that could come out of Congress are starting to come into focus. The bill will contain new taxes on the middle class. It will add to the deficit. And it will put government bureaucrats between Americans and their doctors, among other things.
So it's not too early to ask the obvious question: Will President Obama veto health care reform?
It's worth asking because so many of the costs to taxpayers the President has repeatedly promised won't be in the legislation are, and so many of the benefits are not.
What follows is a list, in no particular order, of the contradictions between the President's promises and the reality of Democratic health care reform. Add them up and it's hard to see how President Obama doesn't reject the bill Congress seems likely to send him.
Contradiction #1: From a Promise Not to Raise Taxes on the Middle Class to $2 Billion in "Penalties"
As far back as the campaign, President Obama promised he wouldn't raise taxes on Americans making less than $250,000.
But an analysis by the Congressional Budget Office (CBO) found that at least 71 percent of the individual mandate penalties in Senate Finance Committee Chairman Max Baucus's (D-MT) bill would be paid by Americans earning less than $250,000. In fact, the nonpartisan analysis found that, of the $2.8 billion in penalties the bill imposes on those who do not purchase health insurance, a full $2 billion will be paid by taxpayers earning less than $120,000 for a family of four.
The Senate Finance bill also levies $215 billion in new taxes on employers and health insurers for offering high-value insurance benefits, which will surely be passed onto all consumers.
Republicans tried to ensure that President Obama's words would not ring hollow by offering an amendment that said: "This amendment provides that no tax, fee or penalty imposed by this legislation shall be applied to any individual earning less than $200,000 per year or any couple earning less than $250,000 per year." Democrats defeated it.
Contradiction #2: From a Promise to Reject a Bill That "Adds One Dime to the Deficit" to $239 Billion Added to the Deficit
In his speech to the Joint Session of Congress, the President was adamant: "I will not sign [a bill] if it adds one dime to the deficit, now or in the future, period."
And yet House bill H.R. 3200 will increase the deficit by an amazing $239 billion over the next decade.
The Baucus bill pretends to be deficit neutral but it's an accounting gimmick. "It pays for itself" by forcing a new $250-300 billion unfunded mandate on the states. And it doesn't include nearly $300 billion that will be spent to adjust physician payments in Medicare.
Contradiction #3: From a Promise That "If You Like Your Current Plan You Can Keep It" to Half of Medicare Advantage Benefits Being Cut
In his speech to the Joint Session of Congress last month and elsewhere, the President has reassured nervous Americans that if they like their current coverage, his reform will let them keep it.
Unless you happen to have Medicare Advantage, that is.
Or employer provided insurance.
The director of the nonpartisan CBO testified before the Senate that, under the Senate bill, the benefits of seniors under Medicare Advantage would be cut in half.
And an analysis of the House bill found that 88 million people will lose their current insurance under government health care.
What's more, both bills would disrupt vision care for more than 100 million Americans.
Contradiction #4: From "If You Like Your Current Doctor You Can Keep Your Doctor" to Squeezing Doctors and Hospitals Until They Reduce Patient Access
Here's what three doctors who are former chairmen of the American Medical Association (AMA) say about the cuts to Medicare in Democratic health reform bills:
"Now the government is saying that additional Medicare cuts are coming-thus forcing doctors to try and make up the difference in volume, by seeing more patients. If you ask patients about this, they understand that more volume means less time with the doctor. That's something that all patients and doctors should oppose. In time, it will be difficult to find a physician."
And here's what the executive director of the Mayo Clinic said: "We will have to violate our values in order to stay in business and reduce our access to government patients."
Contradiction #5: From a Promise that No Government Bureaucrat Will Stand Between Patients and Doctors to a Medicare Commission With the Power to Deny Treatment
Just this week, in a speech to doctors gathered in the White House Rose Garden, President Obama reiterated his pledge not to let a Washington bureaucrat get between a patient and their doctor.
But the Senate Baucus bill creates an "Independent Medicare Commission" with the ability to deny benefits to the elderly or the disabled based on a government calculation of the costs versus the benefits.
Contradiction #6: From a Promise to "Slow the Growth of Health Care Costs For Our Families" to a New Tax on Hearing Aids, Wheel Chairs and Breakthrough Drugs
In his speech to the Joint Session of Congress, the President pledged to "slow the growth of health care costs for our families, our businesses and our government."
But the Senate bill contains a tax on medical technology companies and drug makers that will raise the cost to American families for thousands of drugs and devices, including pacemakers, eyeglasses, hearing aids and powered wheelchairs.
Contradiction #7: From a Promise that Health Care Reform Will Fix the Economy to New Taxes on Small Businesses
One of President Obama's main rationales for health care reform is that it is necessary for economic recovery.
Working against this promise is the provision in the Senate bill that will tax small businesses - the engine of American economic growth and job creation - that can't afford to purchase health insurance for their employees. It's hard to see how the economy recovers when small businesses are prevented from hiring new workers by a new government tax.
Contradiction #8: From Insuring All Americans to Leaving 25 Million Uninsured
One of President Obama's three basic goals for health care reform is to provide insurance to those who don't currently have it.
That's the promise. The reality? The CBO has determined that the Senate bill will leave about 25 million nonelderly Americans uninsured.
I could go on, but I think the point is made. The differences between what Americans have been promised from health care reform and what they are getting go beyond the usual give and take of Washington.
A Congress controlled by the President's party is producing health care legislation that blatantly contradicts his most basic, often repeated, promises.
What will the President do? Will President Obama veto health care reform?
October 7, 2009
With the Senate Finance Committee poised to pass health care legislation, the final contours of the bill that could come out of Congress are starting to come into focus. The bill will contain new taxes on the middle class. It will add to the deficit. And it will put government bureaucrats between Americans and their doctors, among other things.
So it's not too early to ask the obvious question: Will President Obama veto health care reform?
It's worth asking because so many of the costs to taxpayers the President has repeatedly promised won't be in the legislation are, and so many of the benefits are not.
What follows is a list, in no particular order, of the contradictions between the President's promises and the reality of Democratic health care reform. Add them up and it's hard to see how President Obama doesn't reject the bill Congress seems likely to send him.
Contradiction #1: From a Promise Not to Raise Taxes on the Middle Class to $2 Billion in "Penalties"
As far back as the campaign, President Obama promised he wouldn't raise taxes on Americans making less than $250,000.
But an analysis by the Congressional Budget Office (CBO) found that at least 71 percent of the individual mandate penalties in Senate Finance Committee Chairman Max Baucus's (D-MT) bill would be paid by Americans earning less than $250,000. In fact, the nonpartisan analysis found that, of the $2.8 billion in penalties the bill imposes on those who do not purchase health insurance, a full $2 billion will be paid by taxpayers earning less than $120,000 for a family of four.
The Senate Finance bill also levies $215 billion in new taxes on employers and health insurers for offering high-value insurance benefits, which will surely be passed onto all consumers.
Republicans tried to ensure that President Obama's words would not ring hollow by offering an amendment that said: "This amendment provides that no tax, fee or penalty imposed by this legislation shall be applied to any individual earning less than $200,000 per year or any couple earning less than $250,000 per year." Democrats defeated it.
Contradiction #2: From a Promise to Reject a Bill That "Adds One Dime to the Deficit" to $239 Billion Added to the Deficit
In his speech to the Joint Session of Congress, the President was adamant: "I will not sign [a bill] if it adds one dime to the deficit, now or in the future, period."
And yet House bill H.R. 3200 will increase the deficit by an amazing $239 billion over the next decade.
The Baucus bill pretends to be deficit neutral but it's an accounting gimmick. "It pays for itself" by forcing a new $250-300 billion unfunded mandate on the states. And it doesn't include nearly $300 billion that will be spent to adjust physician payments in Medicare.
Contradiction #3: From a Promise That "If You Like Your Current Plan You Can Keep It" to Half of Medicare Advantage Benefits Being Cut
In his speech to the Joint Session of Congress last month and elsewhere, the President has reassured nervous Americans that if they like their current coverage, his reform will let them keep it.
Unless you happen to have Medicare Advantage, that is.
Or employer provided insurance.
The director of the nonpartisan CBO testified before the Senate that, under the Senate bill, the benefits of seniors under Medicare Advantage would be cut in half.
And an analysis of the House bill found that 88 million people will lose their current insurance under government health care.
What's more, both bills would disrupt vision care for more than 100 million Americans.
Contradiction #4: From "If You Like Your Current Doctor You Can Keep Your Doctor" to Squeezing Doctors and Hospitals Until They Reduce Patient Access
Here's what three doctors who are former chairmen of the American Medical Association (AMA) say about the cuts to Medicare in Democratic health reform bills:
"Now the government is saying that additional Medicare cuts are coming-thus forcing doctors to try and make up the difference in volume, by seeing more patients. If you ask patients about this, they understand that more volume means less time with the doctor. That's something that all patients and doctors should oppose. In time, it will be difficult to find a physician."
And here's what the executive director of the Mayo Clinic said: "We will have to violate our values in order to stay in business and reduce our access to government patients."
Contradiction #5: From a Promise that No Government Bureaucrat Will Stand Between Patients and Doctors to a Medicare Commission With the Power to Deny Treatment
Just this week, in a speech to doctors gathered in the White House Rose Garden, President Obama reiterated his pledge not to let a Washington bureaucrat get between a patient and their doctor.
But the Senate Baucus bill creates an "Independent Medicare Commission" with the ability to deny benefits to the elderly or the disabled based on a government calculation of the costs versus the benefits.
Contradiction #6: From a Promise to "Slow the Growth of Health Care Costs For Our Families" to a New Tax on Hearing Aids, Wheel Chairs and Breakthrough Drugs
In his speech to the Joint Session of Congress, the President pledged to "slow the growth of health care costs for our families, our businesses and our government."
But the Senate bill contains a tax on medical technology companies and drug makers that will raise the cost to American families for thousands of drugs and devices, including pacemakers, eyeglasses, hearing aids and powered wheelchairs.
Contradiction #7: From a Promise that Health Care Reform Will Fix the Economy to New Taxes on Small Businesses
One of President Obama's main rationales for health care reform is that it is necessary for economic recovery.
Working against this promise is the provision in the Senate bill that will tax small businesses - the engine of American economic growth and job creation - that can't afford to purchase health insurance for their employees. It's hard to see how the economy recovers when small businesses are prevented from hiring new workers by a new government tax.
Contradiction #8: From Insuring All Americans to Leaving 25 Million Uninsured
One of President Obama's three basic goals for health care reform is to provide insurance to those who don't currently have it.
That's the promise. The reality? The CBO has determined that the Senate bill will leave about 25 million nonelderly Americans uninsured.
I could go on, but I think the point is made. The differences between what Americans have been promised from health care reform and what they are getting go beyond the usual give and take of Washington.
A Congress controlled by the President's party is producing health care legislation that blatantly contradicts his most basic, often repeated, promises.
What will the President do? Will President Obama veto health care reform?
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