The Final House ObamaKennedyDeathCare Bill: Costs And Taxes

The House has now put out its final version of the government takeover of the American health care system.  No word on the Senate's version yet, but we can rest assured that they're diligently working on it (behind closed doors).  While things will still change a bit before the final overall bill that gets voted on, you can bet that much of the House bill will end up in the final bill.


For now, let's look at this thing.  The analysis is now starting to come out, there are a ton of details to look at.  First and foremost: yes, there is a 'public option', and it was unveiled in an incredibly unpublic way.

This particular post will focus on the monetary costs and tax hikes associated with it; other information will be covered in future posts.

The target was to keep the price tag below $900 billion.  They failed:

The Congressional Budget Office is out with its analysis of the House Democrats' health care bill. The headline number -- likely to be widely cited in media accounts -- is that the bill costs $894 billion over 10 years. But in reality, the CBO says that the gross cost of the bill will be $1.055 trillion. The $894 billion number reflects the taxes being paid by individuals who don't have insurance and employers who don't provide insurance.

In addition, the bill relies on some of the same budgetary gimmicks as the Senate Finance Committee's bill. Once again, we see that the Democrats backload the spending provisions into the final six years of the CBO's 10 year budget window to make it appear cheaper. Specifically, the CBO says the bill's gross spending will be $60 billion in the first four years, and $995 billion in the next six years (or 94 percent of the total).

Also, while the CBO says that the bill will reduce deficits by $104 billion over 10 years and keep reducing the deficit (albiet slightly) beyond that, it cautions that these estimates assume that proposed budget cuts will actually get enacted by future members of Congress. "These longer-term projections assume that the provisions of H.R. 3962 are enacted and remain unchanged throughout the next two decades, which is  often not the case for major legislation," the CBO director Douglas Elmendorf wrote. "The long-term budgetary impact of H.R. 3962 could be quite different if those provisions generating savings were ultimately changed or not fully implemented."

The CBO estimate doesn't include the more than $200 billion it will cost to prevent scheduled cuts to doctors' payments under Medicare, which Democrats intend to pass through separate legislation.

The bill would also add 15 million people to the Medicaid rolls, costing states an additional $34 billion over 10 years. 

And just how are the Democrats planning to pay for this massive trillion dollar takeover of American health care?  Taxes, taxes, taxes!  Thirteen of them, actually:

Just in time for Halloween, Speaker Nancy Pelosi (D-CA) and House Democrats gave birth to a giant, 1,990-page spawn of health care reform, lovingly titled the Affordable Health Care for America Act. Lurking within, though, are 13 new tax hikes (yes, 13) that will strike at the heart of the American people.

Americans for Tax Reform laid them out in detail; The Foundry includes them below:

Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single employee’s health premium (65 percent of a family employee), the employer must pay an excise tax equal to 8 percent of average wages. Small employers (measured by payroll size) have smaller payroll tax rates of 0 percent (<$500,000), 2 percent ($500,000-$585,000), 4 percent ($585,000-$670,000), and 6 percent ($670,000-$750,000).

Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay an income surtax equal to the lesser of 2.5 percent of modified adjusted gross income (MAGI) or the average premium. MAGI adds back in the foreign earned income exclusion and municipal bond interest.

Medicine Cabinet Tax (Page 324): Non-prescription medications would no longer be able to be purchased from health savings accounts (HSAs), flexible spending accounts (FSAs), or health reimbursement arrangements (HRAs). Insulin excepted.

Cap on FSAs (Page 325): FSAs would face an annual cap of $2500 (currently uncapped).

Increased Additional Tax on Non-Qualified HSA Distributions (Page 326): Non-qualified distributions from HSAs would face an additional tax of 20 percent (current law is 10 percent). This disadvantages HSAs relative to other tax-free accounts (e.g. IRAs, 401(k)s, 529 plans, etc.)

Denial of Tax Deduction for Employer Health Plans Coordinating with Medicare Part D (Page 327): This would further erode private sector participation in delivery of Medicare services.

Surtax on Individuals and Small Businesses (Page 336): Imposes an income surtax of 5.4 percent on MAGI over $500,000 ($1 million married filing jointly). MAGI adds back in the itemized deduction for margin loan interest. This would raise the top marginal tax rate in 2011 from 39.6 percent under current law to 45 percent—a new effective top rate.

Excise Tax on Medical Devices (Page 339): Imposes a new excise tax on medical device manufacturers equal to 2.5 percent of the wholesale price. It excludes retail sales and unspecified medical devices sold to the general public.

Corporate 1099-MISC Information Reporting (Page 344): Requires that 1099-MISC forms be issued to corporations as well as persons for trade or business payments. Current law limits to just persons for small business compliance complexity reasons. Also expands reporting to exchanges of property.

Delay in Worldwide Allocation of Interest (Page 345): Delays for nine years the worldwide allocation of interest, a corporate tax relief provision from the American Jobs Creation Act

Limitation on Tax Treaty Benefits for Certain Payments (Page 346): Increases taxes on U.S. employers with overseas operations looking to avoid double taxation of earnings.

Codification of the “Economic Substance Doctrine” (Page 349): Empowers the IRS to disallow a perfectly legal tax deduction or other tax relief merely because the IRS deems that the motive of the taxpayer was not primarily business-related.

Application of “More Likely Than Not” Rule (Page 357): Publicly-traded partnerships and corporations with annual gross receipts in excess of $100 million have raised standards on penalties. If there is a tax underpayment by these taxpayers, they must be able to prove that the estimated tax paid would have more likely than not been sufficient to cover final tax liability.

More details can be found here.


One might expect that, for that new tax burden, the American public can at least expect to see some additional health care options, right?  Nope:

The President promised that health care “reform” would expand coverage and choices for American families. Unfortunately, after a preliminary review of the “affordability credits” in the newly unveiled House bill (HR 3962), the opposite will occur. These credits limit access, limit choice and are administratively bound to fail.

Limits Access. The House bill would limit who is eligible for the “affordability credit.” First, all people below 400% FPL are technically eligible for the credit, but the bill also expands Medicaid eligibility to 150% FPL and appears to deny access to the credit to those who are “eligible” for Medicaid. This simply gives the false impression that poor people will get a choice of better care under this bill. The reality is all they get is a chance to join the substandard government-run Medicaid plan. Second, while there are some minor exceptions for those whose employer coverage exceeds 12 percent of income (an increase from the earlier bill), individuals with an offer of employer-based coverage would not be eligible. As more and more employers dump coverage (“not offering”), the price tag of the credit will skyrocket as more workers would qualify for the credit.

Fewer Choices. The House bill would only allow individuals to use these “affordability credits” to purchase coverage through the Health Insurance Exchange, including the new public plan option. Moreover, individuals could only enroll in the cheapest (“basic”) plans for the first two years. This results in the government manipulating behavior and further distorting the marketplace.

Administrative Nightmare. The credit itself is complex and filled with unintended consequences. The credit is designed to limit the annual premium, but also cost sharing and annual out of pocket costs. The administrative bureaucracy needed to implement and such a credit is mind numbing. Determining and calculating premiums, cost sharing and total out of pocket will undoubtedly lead to inefficiencies and costly mistakes.

And, of course, when the government controls things, there will be no shortage of mandates that are anything but optional:

The Individual Mandate. Like the earlier version, this bill requires the uninsured to pay an extra income tax — 2.5% of adjusted gross income above the filing threshold, capped at the national average premium. Paying that tax wouldn’t “buy” anything; those paying this tax would remain uninsured. However, in a bid to decrease the government’s costs, this bill contains higher premiums that low- and moderate-income individuals and families would have to pay for health coverage to avoid the tax. Those premiums would increase rapidly with income, amounting to an additional tax on those with incomes below 4 times the federal poverty level (equivalent to about $88,000 per year for a family of four) ranging from 1.5% to 12%. This tax on low and moderate income Americans would be in addition to a “surtax” on higher incomes ranging up to 5.4%.

The Employer Mandate. The bill imposes a new 8% payroll tax on employers who don’t cover specified percentages of their employees’ health insurance. Employers would have to get the money to pay the tax from someplace, and much of it would come from cutting wages or other benefits. This tax would also not go to pay for any coverage; the bill specifically says that the tax paid by the employer “shall not be applied against the premium of the employee.” Furthermore, since this tax would be lower than the cost of providing health care, especially for low-income workers, this would reduce the incomes of those most likely to be uninsured, or cause them to lose their coverage.

Furthermore, health plans would have to meet new requirements to be specified later by the new “Health Choices Commissioner.” If your employer’s health plan doesn’t meet those requirements, you couldn’t keep it – employers would have five years to bring their plans into compliance. The Commissioner could require coverage of services people don’t want (increasing premiums), and then in the name of “cost containment” prohibit plans from covering services people want but that the Commissioner doesn’t want.

The bottom line is: Almost everybody will pay more, and a new appointed bureaucrat will make your health care choices for you.

This thing is going to cost you dearly, both in your pocketbook and in your health care.



There's my two cents.