Energy Tax Revenues Intended to Fund Health Reform
This past week, Democrat leaders in both the House and Senate advanced the idea of using climate change legislation as a means to finance health reform, including an expansion of federal entitlements. On Wednesday, Senate Majority Leader Harry Reid (D-NV), noting that President Obama’s budget proposed raising $646 billion in revenue from a national energy tax, called the figure “exactly how much we need for the first phase of health reform.” The next day, House Majority Leader Steny Hoyer (D-MD) “didn’t rule out using money from a potential cap-and-trade program…to make the necessary down payment” for health reform.
Some Members may be concerned by these developments, for several reasons. First, a national energy tax would result in tax increases of up to $3,128 per family in higher energy costs, as well as up to 7 million job losses. Congressional Budget Office Director Elmendorf further admitted on Thursday it is “unlikely” that such a tax would cause any goods not to rise in price—resulting in additional indirect tax increases on hard-working American families. Just as important, some Members may believe that funding new health entitlements through tax increases may demonstrate a lack of focus on stringent efforts to make health care more affordable.
GAO Report Shows States Not Monitoring “Crowd-Out”
Last week the Government Accountability Office (GAO) publicly released a report requested by Senate Finance Committee Chairman Max Baucus (D-MT) regarding states’ efforts to study whether children enrolling in the State Children’s Health Insurance Program (SCHIP) were doing so after dropping private health insurance—a phenomenon known as “crowd-out.” The report found many states were not properly monitoring the extent to which government-run health insurance was substituting for private health insurance—for instance, 19 states did not provide annual information to the Centers for Medicare and Medicaid Services (CMS), and fewer than half investigate whether applicants had access to private insurance, “which is key to understanding the extent to which crowd-out should be a concern.”
Some Members may be concerned about these developments, particularly as Congress recently enacted an SCHIP reauthorization measure (P.L. 111-3) that significantly expanded the program—without first finding out the extent to which government-run health insurance is substituting for private coverage. With Medicare facing unfunded obligations of nearly $36 trillion, some Members may consider it unwise for Congress to have expanded SCHIP by more than $70 billion without first examining whether such a measure would increase access to coverage, or merely replace private spending with a new government entitlement.
Article of Note: Playing Monopoly
This past week, a University of Pennsylvania professor wrote an op-ed stating that Americans should not fear the creation of a government-run health program for the entire population. The op-ed compared the competition from a government-run plan to American’s current options for mail delivery: “As with the competition between FedEx and the U.S. Postal Service, all Americans would have the option of purchasing public or private health insurance.”
Some Members would use the very same postal analogy to argue why “competition” with the federal government would never occur on a level playing field. When it competes with the private sector, the Postal Service does so with a built-in monopoly—FedEx and other private carriers are prohibited by federal law from using residential mailboxes for deliveries. Similarly, in health care, Medicare also holds a built-in monopoly—upon reaching retirement age, seniors are automatically enrolled in government-run Medicare, even if less-costly and higher-quality Medicare Advantage plans exist. These and other examples caused the Director of the non-partisan Congressional Budget Office to state recently that it would be “extremely difficult” to have a government-run plan compete “on a level playing field”—precisely because the government would bias the rules in its own favor.
Independent estimates from the Lewin Group confirm that as many as 120 million Americans—including three out of every four with employer-sponsored health insurance—would lose their current coverage due to the creation of a government-run health plan. In other words, the competition alluded to would be a virtual monopoly for government-run health care.
Read the article here:
A new Policy Brief outlining potential concerns with a government-run health plan can be found here.