In the much ballyhooed debt-reduction “framework” President Obama revealed this week in a speech at George Washington University, the President proposed a dramatically graver limit on what Americans will be allowed to spend for our own healthcare than that which will be imposed by the Obama Health Care Law if it is not repealed before 2015.
As now enacted, the Obama Health Care Law directs an unelected 18-member panel called the “Independent Payment Advisory Board” to limit what Americans are permitted to spend on health care out of their own, nongovernment, funds to less than enough to keep up with medical inflation. However, Obama is now proposing what the White House framework calls “a more ambitious target of holding . . . cost growth . . . to GDP [gross domestic product] plus 0.5 percent beginning in 2018, through strengthening the Independent Payment Advisory Board (IPAB).”
Suppose this proposal had been in effect in 2009, the most recent year for which statistics are available. In 2009, because of the recession the overall real GDP per capita, as reported by the Bureau of Labor and Statistics, actually shrank by 2.1 percent. If you use President Obama’s formula for that period of time, after adding .5% , Americans would have been forced to decrease what we would be allowed to spend to save our lives and preserve our health by 1.6 percent.
In 2009, the actual rate of medical inflation was 2.7%. Had the Obama Health Care Law (ObamaCare) been in effect, Americans would have been able to increase their medical spending, but not enough to keep up with the 2.7% medical inflation rate.
But under the Obama proposal announced this week, what Americans of all ages would be permitted to spend for health care, taking into account the increased cost of medical goods and services, would in real terms be 3.3% less than in the previous year.
While there has been increasingly widespread opposition to the Independent Medical Payment Advisory Board from physician groups, Republicans, and an increasing number of Democrats, the public focus has been on its mission to make cuts in government Medicare spending. Far too little attention has been given to the rationing it would impose through limits on the resources Americans will be allowed to devote to our own health care.
Under the Obama Health Care Law, these limits will be subject to enforcement by the federal Department of Health and Human Services, which will be empowered to impose so-called “quality” and “efficiency” measures on health care providers. Any doctor who dares to provide life-saving treatment in excess of these limits will be disqualified from contracting with any of the insurance plans which, under the individual mandate, Americans will be required to purchase.
The Obama Health Care Law must be repealed, and his still more draconian proposals defeated. If not, as is now true of Canadians who must often come to the United States to obtain life-saving health care, Americans will increasingly have to find locations abroad if we want to be able to use our own money effectively to save their own lives.
Showing posts with label Inflation. Show all posts
Showing posts with label Inflation. Show all posts
Saturday, April 16, 2011
Friday, March 4, 2011
PRESIDENT’S SUPPORT FOR STATE “FLEXIBILITY” IN IMPLEMENTING OBAMA HEALTH CARE LAW WON’T AVOID RATIONING
President Obama made headlines in a speech before the National Governors Association, when he endorsed a Senate bill described as allowing states to seek “waivers” of certain requirements in the Obama Healthcare Law. However, the offer comes with strings, and would do nothing to change the elements of the federal law that will impose rationing of medical treatment if it is not repealed.
There would be no “waiver” from the duty of the Independent Payment Advisory Board to recommend, or the authority of the federal Department of Health and Human Services to impose, so-called “quality” and “efficiency” standards on health care providers designed to limit what Americans will be permitted to spend on life-saving medical care for themselves and their families, forcing it below the rate of medical inflation.
Senate Bill 248, for which the President expressed support, would move from 2017 to 2014 the date when states would be allowed to seek exemptions from certain Obama Health Care Law requirements, such as state insurance exchanges, and the individual and employer mandates. Such a waiver would be granted, however, only if the Administration is convinced that the state’s alternative would 1) make insurance just as "affordable" as under Obamacare (translation: limit what resources people are allowed to devote to their own health care); 2) Cover as many people as Obamacare with health insurance which is as “comprehensive” as Obamacare; and 3) Not increase the federal budget deficit.
Most States are struggling with their health care budgets, and many expect the situation to become worse under the requirements of the Obama health care law. Politico reported, “The move comes as governors, particularly Republican state leaders, say the law is overly burdensome on the already stretched states. Much of the expansive legislation has to be implemented at the state level.”
Were the bill to be enacted, the most likely result would be that proposals threatening the most dangerous rationing would see new life in the states. For example, Vermont officials are pushing hard to secure a waiver to implement their proposed “single-payer” system – under which all Vermont citizens would be forced into a single state government health plan, subject to state budgetary limits, with no opportunity to choose other insurance less likely to ration. Said Senator Bernard Sanders (Socialist-VT), “At a time when 50 million Americans lack health insurance and when the cost of health care continues to soar, it is my strong hope that Vermont will lead the nation in a new direction through a Medicare-for-all, single-payer approach.”
While it is, in theory, possible for states to craft any sort of plan they wish within the requirements, it is difficult to see how the Obama administration might approve ones that did not dramatically curtail what people are allowed to spend for their health care. It is precisely the policy of preventing people from being allowed, if they choose, to use their own funds to keep up with health care inflation that creates the gravest threat of rationing.
The Senate proposal may have a difficult time in the House, where congressional Republicans want states to have much more flexibility. Inside Health Policy wrote that the plan to bump up the waiver dates, “was met with disdain from GOP lawmakers, who said the opt-out criteria are too stringent and called the move a confession that the bill is unworkable in its current form.”
Politico reported, “Mandating many of the same requirements, this plan would treat states as agents of the very law these governors are running away from,” said Michael Steel, spokesman for Speaker John Boehner. “A better approach would be working with reform-minded governors to give states more flexibility . . . . Now that the administration has conceded that Obamacare is unworkable, we hope they will work with us to repeal the law and replace it with common-sense reforms . . . .”
There would be no “waiver” from the duty of the Independent Payment Advisory Board to recommend, or the authority of the federal Department of Health and Human Services to impose, so-called “quality” and “efficiency” standards on health care providers designed to limit what Americans will be permitted to spend on life-saving medical care for themselves and their families, forcing it below the rate of medical inflation.
Senate Bill 248, for which the President expressed support, would move from 2017 to 2014 the date when states would be allowed to seek exemptions from certain Obama Health Care Law requirements, such as state insurance exchanges, and the individual and employer mandates. Such a waiver would be granted, however, only if the Administration is convinced that the state’s alternative would 1) make insurance just as "affordable" as under Obamacare (translation: limit what resources people are allowed to devote to their own health care); 2) Cover as many people as Obamacare with health insurance which is as “comprehensive” as Obamacare; and 3) Not increase the federal budget deficit.
Most States are struggling with their health care budgets, and many expect the situation to become worse under the requirements of the Obama health care law. Politico reported, “The move comes as governors, particularly Republican state leaders, say the law is overly burdensome on the already stretched states. Much of the expansive legislation has to be implemented at the state level.”
Were the bill to be enacted, the most likely result would be that proposals threatening the most dangerous rationing would see new life in the states. For example, Vermont officials are pushing hard to secure a waiver to implement their proposed “single-payer” system – under which all Vermont citizens would be forced into a single state government health plan, subject to state budgetary limits, with no opportunity to choose other insurance less likely to ration. Said Senator Bernard Sanders (Socialist-VT), “At a time when 50 million Americans lack health insurance and when the cost of health care continues to soar, it is my strong hope that Vermont will lead the nation in a new direction through a Medicare-for-all, single-payer approach.”
While it is, in theory, possible for states to craft any sort of plan they wish within the requirements, it is difficult to see how the Obama administration might approve ones that did not dramatically curtail what people are allowed to spend for their health care. It is precisely the policy of preventing people from being allowed, if they choose, to use their own funds to keep up with health care inflation that creates the gravest threat of rationing.
The Senate proposal may have a difficult time in the House, where congressional Republicans want states to have much more flexibility. Inside Health Policy wrote that the plan to bump up the waiver dates, “was met with disdain from GOP lawmakers, who said the opt-out criteria are too stringent and called the move a confession that the bill is unworkable in its current form.”
Politico reported, “Mandating many of the same requirements, this plan would treat states as agents of the very law these governors are running away from,” said Michael Steel, spokesman for Speaker John Boehner. “A better approach would be working with reform-minded governors to give states more flexibility . . . . Now that the administration has conceded that Obamacare is unworkable, we hope they will work with us to repeal the law and replace it with common-sense reforms . . . .”
Thursday, March 25, 2010
How the new Health Care Law Limits Senior Citizens’ Right to Use Their Own Money to Save Their Own Lives
Section 3209 of the health care bill signed into law on March 23, 2010 effectively allows federal bureaucrats at the Centers for Medicaid and Medicare Services (CMS) of the federal Department of Health and Human Services (HHS) to bar senior citizens from adding their own money, if they choose, to the government contribution in order to get private-fee-for-service Medicare Advantage (MA) plans less likely to ration life-saving treatment.
Medicare—the government program that provides health insurance to older people in the United States—faces grave fiscal problems as the baby boom generation ages. Medicare is financed by payroll taxes, which means that those now working are paying for the health care of those now retired. As the baby boom generation moves from middle into old age, the proportion of the retired population will increase, while the proportion of the working population will decrease. The consequence is that the amount of money available for each Medicare beneficiary, when adjusted for health care inflation, will shrink.
In theory, taxes could be increased dramatically to make up the shortfall – an unlikely and politically difficult proposition. The second alternative—to put it bluntly but accurately—is rationing. Less money available per senior citizen would mean less treatment, including less of the treatments necessary to prevent death. For want of treatment, many people whose lives could have been saved by medical treatment would perish against their will. The third alternative is that, as the government contribution decreases, the shortfall could be made up by payments from older people themselves, so that their Medicare health insurance premium could voluntarily be financed partly by the government and partly from their own income and savings.
It is not widely understood that, as a result of legislative changes in 1997 and 2003 undertaken at the behest of the National Right to Life Committee, this third alternative had become law. Under the title of “private fee-for-service plans,” there is an option in Medicare under which senior citizens can choose health insurance whose value, under the law in effect through 2010 [endnote 1], was not limited by what the government may pay toward it. These plans could set premiums and reimbursement rates for providers without upward limits imposed by government regulation.
This means that such plans would not have been forced to limit treatment, as long as senior citizens were left free to choose to pay more for them. Medicare covers everyone of retirement age, regardless of income or assets. Yet, because of budget constraints, the Medicare reimbursement rates for health care providers tend to be below the cost of giving the care—a deficit that can only accelerate as cost pressures on Medicare increase with the retirement of the baby boomers. To cope with this, providers engage in “cost shifting” by using funds they receive in payment for treating privately insured working people to help make up for what the providers lose when treating retirees under Medicare. Thus, comparatively low-income workers often effectively subsidize higher-income retirees.
However, when middle-income retirees are free voluntarily to add their own money on top of the government contribution, through a private fee-for-service plan, they stop being the beneficiaries of cost-shifting and become contributors to it. Thus, preserving this option without premium price controls would not only have allowed retirees who could afford it to reduce the danger of being denied treatment; it also would have resulted in the ability of providers to provide more treatment to those who cannot afford to add additional funds on top of the government contribution. See generally the Powell Center's webinar on affording health care without rationing.
Section 3209 of the new law indirectly amends the section in the Medicare law as it previously existed that allowed private fee-for-service plans to set their premiums without approval by the Center for Medicare and Medicaid Services (CMS) by adding, “Nothing in this section shall be construed as requiring the Secretary to accept any or every bid submitted by an MA organization under this subsection.”[endnote 2] This gives statutorily unlimited discretion to refuse to permit private-fee-for-service plans to charge premiums sufficient to offset the reductions in the Medicare government contribution.
Theoretically, of course, the federal bureaucrats given this new authority could choose not to exercise it. That seems highly unlikely during the Obama Administration, however, since on February 22, 2010 the President specifically proposed that the health bill include a provision under which Medicare Advantage plans (which, as noted, include the private-fee-for-service plans) would explicitly "be prohibited from charging seniors more than they would pay for services delivered under the traditional Medicare program."[endnote 3] While this explicit prohibition was not included in the final law (presumably because rules governing the “reconciliation” procedure did not permit it), it clearly demonstrates the policy stance of the Administration, which under Section 3209 it will now have authority to implement.
TECHNICAL EXPLANATION
Understanding how the health care bill that became law on March 23, 2010 gave power to the federal Department of Health and Human Services (HHS) to limit senior citizens' right to add their own money requires following a complex trail within the bill and existing law to understand the effect of Section 3209. Under pre-existing law [42 U.S.C. § 1395w-24 (a)(6)(B)(i) & (ii)] [endnote 4], the Secretary of Health and Human Services has authority to “negotiate” the premiums to be charged by private Medicare plans (“Medicare Advantage” health insurance plans) – meaning that the Centers for Medicare and Medicaid Services (CMS) in HHS can keep a Medicare Advantage plan from participating unless it agrees to charge a premium acceptable to CMS– , but this authority did not apply to private fee-for-service plans [42 U.S.C. § 1395w-24 (a)(6)(B)(iv)] [endnote 5] – meaning that CMS had no power to impose a premium price control as a condition of participation for private fee-for-service plans, which could be excluded only if they failed to meet other applicable standards.
Section 3209 effectively trumps this crucial exemption by giving CMS the absolute and standardless discretion to reject premium “bids” by any Medicare Advantage plan, including a private fee-for-service plan. Specifically, it would add this subparagraph:
ENDNOTES
[1] Section 3209 takes effect with regard to plans that will be in operation in 2011. See Section 3209( c).
[2] Section 3209 is found on page 904-905 of the engrossed Senate-passed bill.
[3] The proposal appears under the heading, "Title III . . . Guaranteeing Benefits for Seniors by Ending Overpayments to Insurance Companies."
[4] 42 U.S.C. § 1395w-24 (a)(6)(B) reads, in relevant part (emphasis supplied):
[6] The new subparagraph ( C ) has been added to 42 U.S.C. § 1395w-24 (a)(5). Since the language of subparagraph (a)(6)(B) that prevents the Secretary from “negotiating” private fee-for-service plan premiums is based on incorporating by reference subparagraph (a)( 5)(B), as explained in the previous note, and because clause ( i ) of (a)(5)’s new subparagraph ( C ) prevents subparagraph (B) from being construed to limit the Secretary’s authority to reject bids, it effectively makes meaningless the premium negotiation prohibition of subparagraph (a)(6)(B).
Medicare—the government program that provides health insurance to older people in the United States—faces grave fiscal problems as the baby boom generation ages. Medicare is financed by payroll taxes, which means that those now working are paying for the health care of those now retired. As the baby boom generation moves from middle into old age, the proportion of the retired population will increase, while the proportion of the working population will decrease. The consequence is that the amount of money available for each Medicare beneficiary, when adjusted for health care inflation, will shrink.
In theory, taxes could be increased dramatically to make up the shortfall – an unlikely and politically difficult proposition. The second alternative—to put it bluntly but accurately—is rationing. Less money available per senior citizen would mean less treatment, including less of the treatments necessary to prevent death. For want of treatment, many people whose lives could have been saved by medical treatment would perish against their will. The third alternative is that, as the government contribution decreases, the shortfall could be made up by payments from older people themselves, so that their Medicare health insurance premium could voluntarily be financed partly by the government and partly from their own income and savings.
It is not widely understood that, as a result of legislative changes in 1997 and 2003 undertaken at the behest of the National Right to Life Committee, this third alternative had become law. Under the title of “private fee-for-service plans,” there is an option in Medicare under which senior citizens can choose health insurance whose value, under the law in effect through 2010 [endnote 1], was not limited by what the government may pay toward it. These plans could set premiums and reimbursement rates for providers without upward limits imposed by government regulation.
This means that such plans would not have been forced to limit treatment, as long as senior citizens were left free to choose to pay more for them. Medicare covers everyone of retirement age, regardless of income or assets. Yet, because of budget constraints, the Medicare reimbursement rates for health care providers tend to be below the cost of giving the care—a deficit that can only accelerate as cost pressures on Medicare increase with the retirement of the baby boomers. To cope with this, providers engage in “cost shifting” by using funds they receive in payment for treating privately insured working people to help make up for what the providers lose when treating retirees under Medicare. Thus, comparatively low-income workers often effectively subsidize higher-income retirees.
However, when middle-income retirees are free voluntarily to add their own money on top of the government contribution, through a private fee-for-service plan, they stop being the beneficiaries of cost-shifting and become contributors to it. Thus, preserving this option without premium price controls would not only have allowed retirees who could afford it to reduce the danger of being denied treatment; it also would have resulted in the ability of providers to provide more treatment to those who cannot afford to add additional funds on top of the government contribution. See generally the Powell Center's webinar on affording health care without rationing.
Section 3209 of the new law indirectly amends the section in the Medicare law as it previously existed that allowed private fee-for-service plans to set their premiums without approval by the Center for Medicare and Medicaid Services (CMS) by adding, “Nothing in this section shall be construed as requiring the Secretary to accept any or every bid submitted by an MA organization under this subsection.”[endnote 2] This gives statutorily unlimited discretion to refuse to permit private-fee-for-service plans to charge premiums sufficient to offset the reductions in the Medicare government contribution.
Theoretically, of course, the federal bureaucrats given this new authority could choose not to exercise it. That seems highly unlikely during the Obama Administration, however, since on February 22, 2010 the President specifically proposed that the health bill include a provision under which Medicare Advantage plans (which, as noted, include the private-fee-for-service plans) would explicitly "be prohibited from charging seniors more than they would pay for services delivered under the traditional Medicare program."[endnote 3] While this explicit prohibition was not included in the final law (presumably because rules governing the “reconciliation” procedure did not permit it), it clearly demonstrates the policy stance of the Administration, which under Section 3209 it will now have authority to implement.
TECHNICAL EXPLANATION
Understanding how the health care bill that became law on March 23, 2010 gave power to the federal Department of Health and Human Services (HHS) to limit senior citizens' right to add their own money requires following a complex trail within the bill and existing law to understand the effect of Section 3209. Under pre-existing law [42 U.S.C. § 1395w-24 (a)(6)(B)(i) & (ii)] [endnote 4], the Secretary of Health and Human Services has authority to “negotiate” the premiums to be charged by private Medicare plans (“Medicare Advantage” health insurance plans) – meaning that the Centers for Medicare and Medicaid Services (CMS) in HHS can keep a Medicare Advantage plan from participating unless it agrees to charge a premium acceptable to CMS– , but this authority did not apply to private fee-for-service plans [42 U.S.C. § 1395w-24 (a)(6)(B)(iv)] [endnote 5] – meaning that CMS had no power to impose a premium price control as a condition of participation for private fee-for-service plans, which could be excluded only if they failed to meet other applicable standards.
Section 3209 effectively trumps this crucial exemption by giving CMS the absolute and standardless discretion to reject premium “bids” by any Medicare Advantage plan, including a private fee-for-service plan. Specifically, it would add this subparagraph:
( c) Rejection of Bids.–This means that the previous law that effectively forbade the Secretary to exclude a private fee-for-service plan on the basis that CMS considered its premiums to be too high has been trumped by the new ability of the Secretary to reject “any or every” premium bid submitted by a private fee-for-service plan.
( i ) In general.–Nothing in this section shall be construed as requiring the Secretary to accept any or every bid submitted by an MA organization under this subsection.[endnote 6]
ENDNOTES
[1] Section 3209 takes effect with regard to plans that will be in operation in 2011. See Section 3209( c).
[2] Section 3209 is found on page 904-905 of the engrossed Senate-passed bill.
[3] The proposal appears under the heading, "Title III . . . Guaranteeing Benefits for Seniors by Ending Overpayments to Insurance Companies."
[4] 42 U.S.C. § 1395w-24 (a)(6)(B) reads, in relevant part (emphasis supplied):
(B) Acceptance and negotiation of bid amounts.[5] 42 U.S.C. § 1395w-24 (a)(6)(B)(iv) provides:
(i) Authority. Subject to clauses (iii) and (iv), the Secretary has the authority to negotiate regarding monthly bid amounts submitted under subparagraph (A) . . . in exercising such authority the Secretary shall have authority similar to the authority of the Director of the Office of Personnel Management with respect to health benefits plans under chapter 89 of title 5, United States Code [5 USCS §§ 8901 et seq.].
(ii) Application of FEHBP standard. Subject to clause (iv), the Secretary may only accept such a bid amount or proportion if the Secretary determines that such amount and proportions are supported by the actuarial bases provided under subparagraph (A) and reasonably and equitably reflects the revenue requirements (as used for purposes of section 1302(8) of the Public Health Service Act [42 USCS § 300e-1(8)] [relating to the standards for setting different rates for individuals and families and for individuals, small groups, and large groups]) of benefits provided under that plan.
(iv) Exception. In the case of a [private fee-for-service] plan described in section 1851(a)(2)(C) [42 USCS § 1395w-21(a)(2)(C)], the provisions of clauses (i) and (ii) shall not apply and the provisions of paragraph (5)(B), prohibiting the review, approval, or disapproval of amounts described in such paragraph, shall apply to the negotiation and rejection of the monthly bid amounts and the proportions referred to in subparagraph (A).The “provisions of paragraph (5)(B)” incorporated by reference are:
(B) Exception. The Secretary shall not review, approve, or disapprove the amounts submitted under paragraph (3) or, in the case of an MA private fee-for-service plan, subparagraphs (A)(ii) and (B) of paragraph (4).Paragraph (4), subparagraph (A)(ii) reads "the amount of the Medicare + Choice [now called Medicare Advantage] monthly basic beneficiary premium”; paragraph (4), subparagraph (B) reads “Supplemental benefits. For benefits described in section 1852(a)(3) [42 USCS § 1395w-22(a)(3)], the amount of the Medicare + Choice monthly supplemental beneficiary premium (as defined in subsection (b)(2)(B)). "
[6] The new subparagraph ( C ) has been added to 42 U.S.C. § 1395w-24 (a)(5). Since the language of subparagraph (a)(6)(B) that prevents the Secretary from “negotiating” private fee-for-service plan premiums is based on incorporating by reference subparagraph (a)( 5)(B), as explained in the previous note, and because clause ( i ) of (a)(5)’s new subparagraph ( C ) prevents subparagraph (B) from being construed to limit the Secretary’s authority to reject bids, it effectively makes meaningless the premium negotiation prohibition of subparagraph (a)(6)(B).
Wednesday, September 23, 2009
ROBBING PETER TO PAY PAUL – FUNDING THE SENATE FINANCE BILL BY CUTTING HEALTH CARE FUNDING FOR OLDER AMERICANS
[Updated October 8, 2009]
The $829 billion (over ten years) bill for expanding health insurance coverage under the Senate Finance Committee bill as it now stands would be funded (roughly) 50% by cuts in Medicare and also 24% by a 40% tax on health insurance premiums over certain thresholds.
Thus, over half of the cost of covering the uninsured would come from “robbing Peter to pay Paul.” Older Americans, in particular, would be targeted, facing Medicare cuts of over $410 billion over the ten years from 2010 through 2019.
The one source of funding that would keep pace with the rising resources devoted to health care would be the 40% levy on health insurance premiums. Initially, this would apply (with some exceptions) to insurance plans that cost over $8000 annually for an individual or $21,000 annually for a family. These threshold amounts would increase each year by the average rate of inflation plus one percent. Since what is spent on health care consistently rises substantially more each year than the average inflation rate, the effect would be that, over time, larger and larger proportions of those with health insurance would begin to pay the tax on gradually rising portions of their premiums. [Compare NRLC's plan to extend healthcare without rationing here and an explanatory webinar here.]
DETAILS AND DOCUMENTATION
It is important to understand that the precise figures are in a state of flux, as the bill has not yet been converted to legislative language.[1] The objective here is solely to give a “big picture” rough analysis.
The total cost of expanding coverage (the subsidies for the uninsured, outlays for Medicaid and the Children’s Health Insurance Program and credits for small business) was estimated by the Congressional Budget Office at $829 billion.[2]
The total cuts to Medicare are over $410 billion dollars. [3]
The 40% excise tax on health care plans with annual premiums of more than $8000 for an individual or $21,000 for a family (with this threshold rising annually at the average rate of general inflation plus 1%), and with exceptions for over-55 retirees and those in certain high-risk professions is estimated to produce $201 billion over 10 years. [4]
NOTES
[1] The Senate Finance Bill as amended is available here.
[2] Based on tables entitled “Preliminary Estimate for Title I, Subtitle F Through Title V of the Chairman's Mark as Amended...” attached to Letter of Congressional Budget Office Director Douglas Elmendorf to Chairman Max Baucus of October 7, 2009, available here. The figure of $829 billion is derived from adding back in the offsets in that table for penalty payments and the excise tax on high premium insurance plans.
[3] Letter, from Doug Elmendorf and CBO to Chairman Max Baucus of October 7, 2009, available here. For a breakdown of Medicare spending see here.
[4] Joint Committee on Taxation, “Estimated Revenue Effects of the Revenue Provisions Contained in Title Vi Of Fiscal Years 2010 – 2019 as Amended Through October 2, 2009, And Under Consideration By The Committee On Finance" available here.
The $829 billion (over ten years) bill for expanding health insurance coverage under the Senate Finance Committee bill as it now stands would be funded (roughly) 50% by cuts in Medicare and also 24% by a 40% tax on health insurance premiums over certain thresholds.
Thus, over half of the cost of covering the uninsured would come from “robbing Peter to pay Paul.” Older Americans, in particular, would be targeted, facing Medicare cuts of over $410 billion over the ten years from 2010 through 2019.
The one source of funding that would keep pace with the rising resources devoted to health care would be the 40% levy on health insurance premiums. Initially, this would apply (with some exceptions) to insurance plans that cost over $8000 annually for an individual or $21,000 annually for a family. These threshold amounts would increase each year by the average rate of inflation plus one percent. Since what is spent on health care consistently rises substantially more each year than the average inflation rate, the effect would be that, over time, larger and larger proportions of those with health insurance would begin to pay the tax on gradually rising portions of their premiums. [Compare NRLC's plan to extend healthcare without rationing here and an explanatory webinar here.]
DETAILS AND DOCUMENTATION
It is important to understand that the precise figures are in a state of flux, as the bill has not yet been converted to legislative language.[1] The objective here is solely to give a “big picture” rough analysis.
The total cost of expanding coverage (the subsidies for the uninsured, outlays for Medicaid and the Children’s Health Insurance Program and credits for small business) was estimated by the Congressional Budget Office at $829 billion.[2]
The total cuts to Medicare are over $410 billion dollars. [3]
The 40% excise tax on health care plans with annual premiums of more than $8000 for an individual or $21,000 for a family (with this threshold rising annually at the average rate of general inflation plus 1%), and with exceptions for over-55 retirees and those in certain high-risk professions is estimated to produce $201 billion over 10 years. [4]
NOTES
[1] The Senate Finance Bill as amended is available here.
[2] Based on tables entitled “Preliminary Estimate for Title I, Subtitle F Through Title V of the Chairman's Mark as Amended...” attached to Letter of Congressional Budget Office Director Douglas Elmendorf to Chairman Max Baucus of October 7, 2009, available here. The figure of $829 billion is derived from adding back in the offsets in that table for penalty payments and the excise tax on high premium insurance plans.
[3] Letter, from Doug Elmendorf and CBO to Chairman Max Baucus of October 7, 2009, available here. For a breakdown of Medicare spending see here.
[4] Joint Committee on Taxation, “Estimated Revenue Effects of the Revenue Provisions Contained in Title Vi Of Fiscal Years 2010 – 2019 as Amended Through October 2, 2009, And Under Consideration By The Committee On Finance" available here.
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