Obama Offers Flexibility to Implement Single Payer Faster

Obamacare remains tremendously unpopular with the American people. According to the latest Kaiser Family Foundation poll, only 14 percent of Americans believe they have benefited from the law, compared to 17 percent who say the law has already harmed them. Only 28 percent of Americans believe Obamacare will help the nation’s economy, compared to 45 percent who believe it will make it worse. Overall, 48 percent of Americans oppose Obamacare while only 43 percent favor it. Some provisions, like the individual mandate, are particularly unpopular, with a full 67 percent of Americans favoring its repeal.

President Barack Obama knows all of this, which is why he told the visiting National Governors Association at the White House yesterday that he supports changing the date that states can begin applying for waivers from some Obamacare mandates from 2017 up to 2014. Specifically, the President endorsed legislation by Senators Ron Wyden (D–OR) and Scott Brown (R–MA), claiming: “It will give you flexibility more quickly while still guaranteeing the American people reform.” President Obama is at least half right here. Wyden–Brown would give states some flexibility—but only the flexibility to implement a government take over of health care faster. Heritage Foundation Center for Policy Innovation Director Stuart Butler explained in the New England Journal of Medicine:
One [problem] is that [Wyden-Brown] still locks the states into guaranteeing a generous and costly level of benefits. True, a state could propose alternative benefit requirements if they had the same actuarial value as those in the [health care bill]. But the requirements go well beyond basic coverage, and the HHS secretary is the one who defines “at least as comprehensive” benefits. …

Another major problem with the bill is that since ultimate waiver authority rests with the HHS secretary, the waivers granted would probably reflect the administration’s preferences. Senator Wyden claims that his legislation would allow conservative states to opt out of much of the [bill] and implement consumer-driven coverage. But he admits that the secretary, not the state, has the final word over what is permitted.

In essence Wyden–Brown is simply a vehicle for giving deep-blue progressive states the power to institute a single-payer government takeover of health care faster. Politico even confirmed this later in the day when it reported on a White House conference call with liberal allies:
Health care advisers Nancy-Ann DeParle and Stephanie Cutter stressed on the off-record call that the rule change would allow states to implement single-payer health care plans—as Vermont seeks to—and true government-run plans, like Connecticut’s Sustinet.

The source on the call summarizes the officials’ point—which is not one the Administration has sought to make publicly—as casting the new “flexibility” language as an opportunity to try more progressive, not less expansive, approaches on the state level.

“They are trying to split the baby here: on one hand tell supporters this is good for their pet issues, versus a message for the general public that the [President] is responding to what he is hearing and that he is being sensible,” the source emails.

That is exactly what is going on here. The President knows his signature accomplishment, Obamacare, is fundamentally unpopular with the American people. So he is trying to appear “flexible” on the issue, while in reality all he is doing is enabling his progressive allies to expand the reach of government even faster.

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The Massachusetts Health-Reform Mess The Bay State has shown the risks of ObamaCare.

By JOHN E. CALFEE

The biggest problem with ObamaCare is that it is bereft of proven ways to curtail increases in health-care costs. This has given rise to unending speculation about what will happen to these costs when the law’s main provisions go into effect in 2014.

To get a glimpse of the future, take a look at Massachusetts, whose 2006 health-care overhaul was by all accounts the model for the federal Patient Protection and Affordable Care Act passed last year. It was launched in promising circumstances: The Bay State already had the lowest percentage of uninsured people in the nation, and some of ObamaCare’s provisions such as community rating (everyone can buy insurance at the same price, regardless of health) were already in place.

So, how are things going in Massachusetts? The easy part was getting more people insured. Coverage increased from about 88% to 96%. But the number of emergency room visits, which everyone expected to drop once people had to purchase insurance, is still going up. Surveys show roughly half the visits are unnecessary. Surveys also indicate that finding a primary care physician is becoming more difficult.

There are other troubling signs. Cities and townships were expected to move their employees into cheaper health policies through the new state-sponsored insurance exchange, the Health Care Connector. None have—because unions fear the very tools that keep costs competitive in the private sector, such as co-pays. (Gov. Deval Patrick wants a new law to force the unions into the Connector.) Despite an individual insurance mandate, thousands of consumers wait to purchase coverage until they require costly procedures and then exit after paying a modest penalty. That makes insurance more expensive for everyone else.

Massachusetts reformers deferred cost control to the vague prospect of a “Round 2” of reform—much as congressional Democrats did a year ago when they passed ObamaCare. Meanwhile, economists John Cogan, Glenn Hubbard and Daniel Kessler reported in the Forum for Health Economics & Policy (2010) that insurance premiums for individuals (alone or in employer-sponsored group plans) increased 6% to 7% beyond what they would have without the reform. For small employers, the increases are about 14% beyond those in the rest of the nation. Four years after reform, Massachusetts still has the highest insurance premiums in the nation, and the gap is getting wider.

In 2010, insurance firms announced premium increases of 10% to 30% in the individual and small-group market. Gov. Patrick, on the verge of a tough re-election race, had the state insurance commissioner deny the higher rates.

Insurance firms protested that they increased premiums because they had to deal with entrenched providers, especially hospitals, most notably the academic giants of Boston and Cambridge. Then the state prepared to introduce highly intrusive price controls over those providers—only to discover that this would provoke formidable political opposition while encountering myriad practical difficulties.

Last month Round 2 arrived. Gov. Patrick introduced a bill that will impose de facto price controls on everyone from solo primary care doctors to prestigious academic hospital systems. An 18-member board will decide how and how much providers should be paid, and the bill gives regulators the power to force private insurers to accept these fiats. Some 30 states experimented with such rate-setting in the 1970s and ’80s. Except for Maryland, all of them—including Massachusetts—deregulated in the 1990s because costs rose even as quality and choice declined.

In a mere four years, Massachusetts has demonstrated that the most important effects of its reform arise not from the letter of the law but from the law’s unintended and unpredictable consequences. The state is lurching from one crisis to another as it attempts to construct a system vastly different from any seen before or anything contemplated when reform was first passed. Health care in the state is evolving toward a state-run version of Medicare combined with government reorganization of the delivery of medical care.

The cost problem in Massachusetts is not going to be solved anytime soon. The question to be asked is why we should plunge ahead with a national version of this model before we learn whether Masssachusetts’s brave new world is one in which we want to live?

Mr. Calfee, a fellow at the American Enterprise Institute and frequent contributor to the Journal, died last month. His daughter Jessica Stahl, an economist, helped finalize the piece.

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Death Panels And Job Losses

CBO Director Elmendorf and former Speaker Pelosi seem to be about 4.8 million jobs apart. AP

Reform: As the head of Medicaid and Medicare services testifies in favor of ObamaCare, the CBO director says it will destroy 800,000 jobs. Talk about killing two birds with one stone.

Former House Speaker Nancy Pelosi once famously said that we’d have to pass ObamaCare to see what was in it. She also boasted that the health care bill would create 4 million jobs — “400,000 of them almost immediately.”

Now that we’ve seen what’s in it, we realize the possible consequences for our physical and economic health. And congressional testimony before GOP-led committees has given us fresh reasons for repeal.

Contradicting Mrs. Pelosi, CBO director Douglas Elmendorf told the House Budget Committee on Thursday that one of the unintended consequences of ObamaCare would be a reduction in employment by half a percent by 2021.

In an exchange with Rep. John Campbell, R-Calif., Elmendorf confirmed the analysis contained in a CBO report issued last August. “That net effect reflects changes in incentives in the labor market that operate in both directions,” he said.

“The way I would put it,” Elmendorf said, “is that we do estimate … that employment will be about 160 million by the end of the decade. Half a percent of that is 800,000.” That number is 50% more than all the people who work for GM, Ford, and Chrysler combined.

ObamaCare mandates and costs will reduce hiring while some workers will have less incentive to enter the work force. In fact, Elmendorf’s number may be quite low, considering it’s been estimated that ObamaCare will impose $500 billion in new taxes and will actually cost more than $2.3 trillion in 10 years.

“Since day one,” said John Murray, deputy chief of staff for Majority Leader Eric Cantor, “Republicans have opposed ObamaCare for a simple reason: It would destroy jobs. (House) Minority Leader Pelosi, (Senate Majority) Leader Reid and others said we were wrong. Guess not.”

Meanwhile Dr. Donald Berwick, President Obama’s choice to head the Centers for Medicare and Medicaid Services, was testifying before the House Ways and Means Committee on ObamaCare’s implications for those two programs and the seniors they serve. He also testified on his past admiration for the rationing and cost-effectiveness standards applied at Britain’s National Health Service (NHS).

In questioning Berwick, committee chairman Dave Camp, R-Mich., noted that “Medicare actuaries predict that because of the cuts in the Democrats’ health care law, 725 hospitals, 2,352 nursing homes and 1,587 home-health agencies will become unprofitable.” Rep. Sam Johnson, R-Texas, said 300 doctors in his state have already dropped Medicare.

GOP members expressed concern about what would happen after the $575 billion in Medicare cuts that ObamaCare requires were made. Testifying later, Richard Foster, nonpartisan chief actuary of Medicare, said he worried that cuts in Medicare would eventually hurt seniors as they are joined by 80 million baby boomers.

To these questions and others Berwick whistled past the actuarial graveyard, talking only about how he was “really excited about the promise the affordable care act offers.” That promise is rapidly degenerating into self-fulfilling prophecies of doom.

Camp asked Berwick point-blank about the statement he once made about Britain’s system: “I fell in love with the NHS … to an American observer, the NHS is such a seductress.” “Are you still in love with the NHS?” Camp asked. “There are strengths and weaknesses for every health care system around the world,” Berwick responded lamely.

We’ve documented how socialized medicine around the world makes decisions based on cost-effectiveness rather than medical need and has led to rationing and even denial of service, with people literally dying on waiting lists. The death panels are real, and they are coming here to place our lives and livelihoods in grave danger.

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CALIFORNIA TAXES PARENTS WHO ADD ADULT CHILDREN TO WORKPLACE HEALTH POLICIES

The Sacramento Bee –

Feb. 7: Thousands of California parents leaped at the chance to provide health coverage to their grown and uninsured children when a provision in the federal health care law took effect last fall.

Now some of those parents, such as Barry Demant of Folsom, are finding a hidden cost to the new benefit: a bigger tax bill. A loophole in California’s tax law requires the state to levy income taxes on the premiums employers pay to provide health insurance to the non-dependent children of their workers.

Last fall, Demant added his unemployed 25-year-old daughter to his company’s group health plan. That meant he no longer had to pay $180 a month to insure her through a separate individual health policy.

As part of the federal health care law, insurers are required to allow parents to enroll children up to age 26 on their health plans. “I wanted to give the health care law a chance, and I thought it would be a great opportunity, even if only selfishly, to reduce the amount I pay for her premiums,” Demant said.

He found out about the tax when his human resources department told him that a bump in income and taxes would soon appear in his paycheck. In the end, he said, some of the money he thought he was saving could evaporate in the form of increased state tax payments. Demant would not say exactly how much more he’ll be paying in taxes.

As Californians begin preparing personal income tax returns, some lawmakers are pushing to pass a law that would exempt those contributions from being subject to state personal income taxes, as was done on the federal level.

“The federal health care law dramatically changed things, and not all states have kept up with the pace of those changes. And we’re trying to make sure that we’re doing what’s right for our working families,” said Assemblyman Henry Perea, D-Fresno, who chairs the chamber’s Revenue and Taxation Committee.

Perea is a co-author of legislation, AB 36, that would conform the state tax code to federal rules that exempt the benefit from taxable income. A similar effort last year died when it was included in broader tax legislation that never made it to the governor’s desk. This time, proponents are hoping stand-alone legislation will get the necessary support.

By changing the tax code, budget-strapped California would lose a $92 million tax windfall, according to estimates by the Franchise Tax Board. “We shouldn’t consider it as a loss,” Perea said. “The benefit of making sure young adults have health insurance outweighs this new source of revenue.”

Millions affected

The new federal health care law was hailed as an answer to the millions of 20-somethings who go uninsured after falling off parents’ health plans.

Typically, dependents who aren’t bound for college have been pushed off their parents’ policies soon after graduating from high school. As many as 8.8 million young adults between the ages of 19 and 25 were uninsured in 2008, according to the Kaiser Family Foundation.

In California, about 1.3 million in that age group could benefit from the new rule, according to Young Invincibles, an advocacy group pushing to expand health coverage among the country’s young.

The new law went into effect Sept. 23 and required insurers and companies to offer the coverage. Because adult children typically don’t qualify as dependents under the tax code, employer contributions on their behalf are being counted as income by the state. The federal government exempted those contributions.

Dolores Duran-Flores, a lobbyist for the California School Employees Association, said she was surprised when she learned last month that the state would be taxing the health benefits.

Health care is an important issue for the 219,000 members of the union, mostly school support staff, already beset with layoffs and furloughs.

“It just makes sense to close this loophole,” she said. “There’s a glitch in the law, and we need to do something about it.”

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The Whole Foods Alternative to ObamaCare

Eight things we can do to improve health care without adding to the deficit


by John Mackey

“The problem with socialism is that eventually you run out of other people’s money.”

— Margaret Thatcher

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people’s money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction–toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.

Many promoters of health-care reform believe that people have an intrinsic ethical right to health care–to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That’s because there isn’t any. This “right” has never existed in America

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.

Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor’s Business Daily. In England, the waiting list is 1.8 million.

At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly–they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an “intrinsic right to health care”? The answer is clear–no such right truly exists in either Canada or the U.K.–or in any other country.

Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending–heart disease, cancer, stroke, diabetes and obesity–are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.

Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.

Mr. Mackey is co-founder and CEO of Whole Foods Market Inc.

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Stealth-Taxing Non-Wealthy Medicare Beneficiaries

Christopher Conover, PhD

Remember how candidate Barack Obama made a “firm pledge” to Americans in families under $250,000 income that “you will not see any of your taxes increase one single dime?” This pledge was repeated again, again, and again. Tell that to elderly and disabled Medicare beneficiaries with incomes well below that amount who will be paying a total of $36 billion more into Medicare thanks to the new health law.

Starting this year, the health law made two important changes to Medicare. The first provision increases over time the number of beneficiaries subject to income-related Part B premiums, by eliminating the index on income. Part B covers doctors’ services, outpatient care, home health services, and other non-hospital medical services, including preventive care.

Although it is voluntary, 94 percent of Medicare beneficiaries opt to have it since the premiums charged to participate are set by law to cover only 25 percent of the actual cost of Part B benefits. However, higher-income beneficiaries must pay a premium that covers anywhere from 35 to 80 percent of Part B costs, depending on income. This year, beneficiaries must pay higher Part B premiums once their income reaches $85,000 for an individual or $170,000 for a couple. Since 2007, these income thresholds have been inflation-indexed so that only about 5 percent of beneficiaries are subject to higher Part B premiums. But since the new health law no longer permits these thresholds to rise with inflation, the number of beneficiaries subject to higher premiums will grow to 14 percent by 2019 (and will keep rising indefinitely thereafter).

The second change is that for the first time, beneficiaries with Part D coverage also must pay income-related premiums using the identical Part B income thresholds. Part D covers prescription drugs. Again, because premiums are set to cover only about one fourth of the actual cost of standard Part D benefits, 90 percent of beneficiaries elect some sort of prescription drug plan. This change will affect about 3 percent of Part D beneficiaries in 2011, but this will rise to 9 percent by 2019.

All told, by 2019, unless the health plan is repealed, these changes will require higher premium payments for 3.5 million Part B beneficiaries and 4.2 million Part D beneficiaries. The vast majority of these individuals have incomes far below the $200,000 (individual)/$250,000 (family) threshold that was repeatedly used by President Obama as the dividing line between those whose taxes should increase and everyone else.

Some might argue these are premiums, not taxes. But those with the highest incomes must pay premiums more than three times as large as those not classified “higher-income.” Actuarial considerations play no role in determining where such premiums are set. These individuals are paying higher premiums simply because their income is higher, not because their expected medical expenditures are higher. Indeed, the empirical evidence suggests that Medicare spending is higher among those who are poor rather than those who have high incomes. Thus, it is difficult conceptually to distinguish between an income-related premium and a tax on income.

Perhaps higher-income people should pay more for Medicare. But candidate Obama never ran on such a platform. And the higher taxes (euphemistically called “premiums”) on Medicare beneficiaries are flagrantly inconsistent with the president’s assurances about which individuals would face higher taxes under his administration.

Moreover, if income-related premiums are warranted, their justification should be to save Medicare, which currently faces unfunded liabilities that in today’s terms exceed the nation’s entire net worth. Instead, however, the $36 billion in higher taxes imposed on Medicare beneficiaries was used to mask the size of a massive new entitlement–one that we might have decided was not affordable had Democrats allowed rational discussion of the matter. These taxes were part of the now well-known “smoke and mirrors” used to make it appear as if health reform would reduce the deficit, even though any honest scoring of the plan shows quite the opposite. This is just one more example of the stealth taxes and broken promises that permeate Obamacare.

Conover is a research scholar in the Center for Health Policy and Inequalities Research at Duke University.

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Opinion: Obamacare Is Already Falling Apart

Sally C. Pipes
Special to AOL News

Last week, the House of Representatives voted by a wide margin — 245 to 189 — to repeal the president’s landmark health reform package. It’s unclear whether Senate Majority Leader Harry Reid, D-Nev., will bring the measure up in the upper body.

But even he doesn’t, the law is already showing signs of serious trouble.

In recent weeks, some Democrats who supported the law have called for scrapping portions of it.

Take the so-called 1099 provision, which will require businesses to submit a tax form to the IRS for each vendor with whom they do more than $600 in annual business starting in 2012. Following the midterm elections, President Obama signaled a willingness to repeal the rule, calling the hidden tax “burdensome for small businesses.” He went on to say that “it requires too much paperwork, too much filing. It’s probably counterproductive.”

Sen. Max Baucus, D-Mont., one of the principal authors of the health care law, and former House Speaker Nancy Pelosi, D-Calif., have also expressed support for repealing the provision.

What’s taken them so long? The rule would saddle some 40 million businesses with huge new compliance costs. Instead of devoting resources to job creation and business development, entrepreneurs would be forced to waste time and money filing new paperwork.

The Obama administration is also regularly choosing to exempt many firms from some of the health care bill’s new rules, rather than admit that the bill will negatively impact workers or cause them to lose coverage. For instance, McDonald’s received a waiver after announcing that its low-cost, bare-bones “mini-med” health plans would run afoul of the medical-loss rules, which require insurers to spend at least 80-85 percent of premium dollars on claims.

In just eight months since the legislation passed, the feds have handed out more than 200 other exemptions to employers, insurers, and labor unions that together cover more than 1.5 million people.

The Obama administration is also coming to grips with the looming failure of one of the most highly touted aspects of the law — a program to provide health insurance to those denied coverage because of preexisting conditions.

The Department of Health and Human Services estimated in July that it would now be insuring 375,000 people who had been previously shut out of the insurance market. But the administration recently admitted that only about 8,000 people with preexisting conditions had actually signed up.

That’s about 2 percent of the projected enrollment.

The next component of the bill to fail may be the most important one — the deeply detested individual mandate, which requires the uninsured to either get health coverage or pay a fine.

In both Arizona and Oklahoma, voters have approved state constitutional amendments aimed at outlawing the mandated purchase of health insurance.

Nearly three-quarters of voters in Missouri signed off on a similar ballot initiative earlier this year. Twenty-six state attorneys general and the National Federation of Independent Business are currently pursuing a lawsuit challenging the constitutionality of the mandate. Virginia’s attorney general has mounted a separate lawsuit, as has a group of citizens in Ohio.

The Congressional Budget Office (CBO) predicted the failure of the individual mandate well before the reform law passed. A July report from the nonpartisan agency predicted that by 2016, four million people would defy the mandate and pay the fine for remaining uninsured. All told, according to CBO, about 21 million people will be uninsured in 2016 — most of whom will be exempt from the fines altogether.

So despite committing more than a trillion taxpayer dollars over the next decade to health reform, Obamacare will leave tens of millions uninsured, drive the cost of care up for virtually all Americans, and put the federal government in charge of ever more of our health care decisions.

As the Obama administration grapples with implementing its signature piece of legislation, the case for repealing it is becoming self-evident. Public support for the law continues to erode. Lawmakers should follow the House’s lead and repeal this monstrosity.

Sally C. Pipes is president, CEO and Taube fellow in health care studies at the Pacific Research Institute. Her latest book, “The Truth About Obamacare,” was published in 2010.

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Medicare actuary more confident in Paul Ryan’s ‘Road Map’ cost controls than Obama’s health law

By Jon Ward – The Daily Caller

The government’s chief actuary for Medicare spending on Wednesday said he had more confidence that Republican Paul Ryan’s plan to reform entitlements would drive down health-care costs than President Obama’s recently passed overhaul.

Richard S. Foster, the chief actuary of the Centers for Medicare and Medicaid Services, made the comment in response to questions from lawmakers during House Budget Committee hearing.

Rep. Chris Van Hollen, the ranking Democrat from Maryland, went on the attack against committee chairman Paul Ryan’s “Road Map” plan, which is a long-term proposal to make entitlement spending solvent.

Van Hollen pressed Foster on whether Ryan’s plan would work, prompting Foster to point out that one of the biggest problems in health care now is that most new technology that is developed increases costs rather than decreasing it.

“If there’s a way to turn around the mindset for the people who do the research and development … to get them to focus more on cost-reducing tech and less on cost increasing technology, if you can do that then one of biggest components of [increasing costs] turns to your side,” Foster said. “If you can put that pressure on the research and development community, you might have fighting chance of changing the nature of new medical technology in a way that makes lower cost levels possible.”

Foster said: “The Road Map has that potential. There is some potential for the Affordable Care Act price reductions, though I’m a little less confident about that.”

The thinking behind Foster’s comment is that a voucher system would reduce the amount of government money available for health care over time, causing consumers to shop around and creating an incentive in the health-care sector to compete for those dollars.

In a brief interview outside the House chamber later in the day, Ryan explained it this way: “There’s only going to be so much money for health care because the economy can only support so much … So is it better spent through the person in a competitive marketplace or through the government under increasing price controls and pressure?”

“If you go through the century, these entitlements consume all money. The GAO calculation assumes Congress is going to wise up and cut back on these programs because people will decide they don’t want 100 percent of their discretionary income going to health care. They want some for food and some for shelter and some for other things. So there will be a curtailment of health care spending in the future,” Ryan said. “The question is which curtailment gets you the better results at going after the cause of health inflation: consumer pressure or government price controls.”

During the hearing, Ryan, chairing the first meeting of the full Budget Committee for the first time since Republicans took control of the House in November, followed Van Hollen’s questions by implying the ranking member was trying to change the subject from the topic of the hearing, which was the fiscal consequences of Obama’s health overhaul.

“I find it interesting that ranking member spent most of his time not talking about the health-care law we’re having the hearing on today, but about an individual member’s proposal,” Ryan said.

Much of the discussion in the hearing, especially during the question-and-answer period with Ryan and Van Hollen, involved the impact of the payment rates from the government to physicians and health-care providers for Medicare recipients.

Congress has for years passed what is known as the “Doc Fix” to avoid cutting payment rates to providers. It would cost more than $200 billion to lower payments for the next 10 years to the rates recommended under the Medicare Sustainable Growth Rate.

Ryan has charged for more than a year that the $575 billion in cuts to Medicare included in Obama’s health law cannot be counted as both going into the Medicare trust fund and helping to pay for the expansion of Medicaid – which covers health care for low-income recipients – to 20 million more Americans.

Foster’s response to Ryan’s question of whether this is double counting went deep into the weeds of how the government often lends itself money from the trust funds for Medicare and Social Security.

“My answer is a definitive yes and no,” Foster said when asked if Obama’s health law double-counted.

The funds go from the Medicare trust fund to the Treasury general fund, and then can be used to pay for Medicaid. But at some point, the trust fund will need the money it lent out, perhaps when it comes time to pay recipients out of the fund.

“[A] hundred dollars can’t be spent as $100 toward health-care reform and as $100 toward health-care expenditures. That takes $200,” Foster said. “The key thing is when you go back to pay that $100, then Treasury has to find that $100 some other place.”

Rep. Mick Mulvaney, a newly elected congressman from South Carolina, honed in on whether this loaning of money out of the trust fund adds to the national debt.

“The $100 bond does increase the total gross of the total debt,” Foster said.

Such debt does count against the federal debt ceiling.

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Looking to the Affordable Care Act For Help

By PAUL DOWNS

Now that 2010 is complete, I can see what kind of help Obamacare — sorry, the Patient Protection and Affordable Care Act — will give me with my health insurance bills. I mentioned in a previous post that my insurance rates for 2011 were a little lower than they had been in 2010 (although I expect them to resume their regular upward march next year). I own a small, struggling manufacturing company that has been providing health care to my people even though it’s a stretch. Surely the Affordable Care Act will come to my rescue! But the devil is always in the details, particularly when Congress decides to “help.” So the first thing to check: Am I eligible for the tax credit? Here’s what I found in the guidelines issued by the Internal Revenue Service:

“In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (‘F.T.E.’s) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per F.T.E., and (3) the employer must pay the premiums under a ‘qualifying arrangement’ described in Q/A-7.”

Hmmm. This might not be so simple. Let’s take these one step at a time:

How many full time employees do I have? I ended the year with 12 on the payroll, including myself, but I started the year with eight. So here’s the guideline: “The number of an employer’s F.T.E.’s is determined by dividing (1) the total hours of service for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080.” This raises a question: Do I include myself? The answer is no:

“A sole proprietor, a partner in a partnership, a shareholder owning more than 2 percent of an S corporation, and any owner of more than 5 percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of F.T.E.’s or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.”

O.K., that’s clear. I don’t count. And if I had any family on the payroll, they wouldn’t either. As usual, the guy who pays the bills is excluded from any tax break for health insurance.

On to the employees. They get personal days and holidays and overtime, and the guys who have been working all year have well more than 2,080 hours each. But the hours exceeding 2,080 won’t count toward the total, as we saw. What about the others? There’s a large clump of verbiage in section 16 of the I.R.S. document that  boils down to this: If the employee worked or was paid for less than 2,080 hours a year (including vacation and holidays), add the actual hours to the total. If salaried, add 40 hours for each week worked or paid for. If it’s an hourly worker, and you paid for more than 2,080 hours, just add 2,080. Then divide all of that by 2,080 to get your F.T.E.’s. And don’t forget to round down to the next whole number. That’s right: 4.99 F.T.E.’s is rounded down to 4. Which might help you if you are trying to scrape under the 25 F.T.E. limit, and might hurt you when you calculate average wages.

I paid for 21,168 hours of work in 2010, including overtime, personal days and holidays. When I subtract hours in excess of 2,080 per employee, that leaves me with a total of 19,008. Dividing by 2,080, I get 9.13 F.T.E.’s. Round that down to 9. Looks like I’m under the 25 limit. So far, so good.

On to the average wage calculation. What’s included? The I.R.S. says:

“The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer during the employer’s tax year to employees who perform services for the employer during the tax year by (2) the number of the employer’s F.T.E.’s for the year, as calculated under Q/A-16.”

Uh oh. The total wages will include what I paid for all of the overtime, holidays and personal days, even if that exceeds 2,080 hours. Since many of my highest-paid shop guys work the most hours, that means the average is going to be bumped way, way up. I paid $451,662.50 in wages and salaries. Divide that by 9 F.T.E.’s and I get $50,184.72 per employee, which is just over the $50,000 per F.T.E. limit to qualify for the tax credit. I’m cooked.

The Affordable Care Act will not help me. I will have to deal with the burden of health insurance costs on my own. Some further thoughts:

  • I understand the concept of means testing for government benefits. However, the means being tested by the Act are probably the wrong ones. The ability of the employer to pay for health insurance isn’t considered at all. After going through the calculation I have to conclude that I would be a heck of a lot better off if I cut my people’s pay dramatically. Not only would I save on the wages, but also I would get some help with the costs of insurance. Was the Affordable Care Act intended to be an assault on middle class wages? It does incentivize the hiring of more lower paid workers instead of increasing the productivity and pay of a smaller work force. But how does that work if you have high pay, high skill workers? Of course, I could sidestep all of this by shipping production to China.
  • I now have every reason to dramatically increase the amount that my employees contribute to their insurance costs. The Affordable Care Act pegs the tax credits available to the amount of employee co-pays — but since I don’t qualify anyway, there’s no reason to hold back. I don’t see why I shouldn’t raise their portion from the current 33 percent contribution to 50 percent or more, with the eventual goal of getting rid of the health insurance benefit entirely. Every dollar they contribute would increase the profit of the company and by extension my own pay. After 25 years of being a generous boss, my willingness to insulate my workers from the broader shifts in the economy is almost gone. Maybe if we’d been profitable for years I would feel differently, but I’m ready to put the financial health of my company before the rewards of being Mr. Nice Guy.
  • If health insurance costs were falling, rather than rising, we wouldn’t be having this discussion. Even though the Affordable Care Act will not help me immediately, I support it. As far as I know, it has provisions that are intended to rein in the continuing growth of medical spending. The existing system, if unmodified, will put me in the same bind, probably faster. Keep in mind that my insurance costs have risen an average of 10 percent a year for every year I have offered insurance. The Act also promises to create a market for individuals and families to purchase their insurance themselves, at reasonable cost to them, so I can get out of the health insurance business entirely. I look forward to that day.

I’m curious if anyone else has done this calculation — and what you found for your own company.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

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Comprehensive List of Tax Hikes in Obamacare

From Ryan Ellis on Friday, January 14, 2011 6:00 AM

Next week, the U.S. House of Representatives will be voting on an historic repeal of the Obamacare law.  While there are many reasons to oppose this flawed government health insurance law, it is important to remember that Obamacare is also one of the largest tax increases in American history.  Below is a comprehensive list of the two dozen new or higher taxes that pay for Obamcare’s expansion of government spending and interference between doctors and patients.

Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

1 Adult 2 Adults 3+ Adults
2014 1% AGI/$95 1% AGI/$190 1% AGI/$285
2015 2% AGI/$325 2% AGI/$650 2% AGI/$975
2016 + 2.5% AGI/$695 2.5% AGI/$1390 2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)

Employer Mandate Tax(Jan 2014):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

Surtax on Investment Income ($123 billion/Jan. 2013):  This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income

Capital Gains Dividends Other*
2010-2012 15% 15% 35%
2013+ (current law) 23.8% 43.4% 43.4%
2013+ (Obama budget) 23.8% 23.8% 43.4%
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.  It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income.  It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans.  The 3.8% surtax does not apply to non-resident aliens.

Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family).  CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:

First $200,000
($250,000 Married)
Employer/Employee
All Remaining Wages
Employer/Employee
Current Law 1.45%/1.45%
2.9% self-employed
1.45%/1.45%
2.9% self-employed
Obamacare Tax Hike 1.45%/1.45%
2.9% self-employed
1.45%/2.35%
3.8% self-employed

Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.

Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exemptions include items retailing for less than $100.

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS

Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

“Black liquor” tax hike(Tax hike of $23.6 billion).  This is a tax increase on a type of bio-fuel.

Codification of the “economic substance doctrine”(Tax hike of $4.5 billion).  This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.

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