For Halloween, a Real-Life Fright Show: Speaker Pelosi’s Government Takeover of Health Care

Special Interest Groups Get Treats—While the American People Get Tricked

 

Many may find the release of House Democrats’ health “reform” legislation the week of Halloween particularly apt, as the legislation includes several “monstrous” provisions likely to wreak havoc on the American people, their jobs, and their health care:

Werewolf of Government-Run Insurance: Experts agree that this monster would quickly devour the health coverage of millions of Americans—the Congressional Budget Office believes several million, the Urban Institute up to 47 million, and the Lewin Group as many as 114 million will lose their current coverage.

“Count Tax-YOU-la:” This creature would suck the life out of the American economy, by imposing $729.5 billion in job-killing tax increases on all Americans—taxing people who can’t afford to purchase government-forced insurance, taxing businesses who want to hire new workers, taxing small businesses, even taxing health benefits. According to a model developed by President Obama’s chief economic advisor, these new taxes would demolish or destroy up to 5.5 million jobs—and other studies confirm that minority workers would be disproportionately affected.

Weird Scientists: These bureaucrats working for a new a comparative effectiveness institute funded by a tax on health benefits, could publish the protocols needed to deny patients access to life-saving treatments on cost grounds. When Republicans offered an amendment to prevent these scientists from conducting their experiments on the American people, Democrats rejected the idea on a party-line vote.

Frankenstein: Refers to the dozens of bureaucracies created by the legislation—to say nothing of the difficulties for patients to receive actual treatment—all in the name of health care “reform.”

A Ghoulish Czar: The “Health Choices Commissioner” created in the legislation could forcibly enroll individuals in government-run insurance, and would be required to conduct random compliance audits on health benefits plans—allowing the federal government to intervene in the business practices of all employers who offer coverage to their workers.

However, while creating new and frightful government bureaucracies for the American people, Democrats have managed to include sweet treats for their liberal allies:

  • ACORN and Planned Parenthood could be eligible for enrollment and outreach grants administered by the Health Choices Commissioner;
  • Trial lawyers would receive new “whistleblower” provisions allowing them to bring suit against employers of all kinds—even as Democrats refuse to fund liability reforms that would place any caps on attorneys’ fees; and
  • AARP’s popular Medigap policies would not be subject to the same pre-existing condition restrictions or price controls placed on all other private insurance plans—thus allowing the organization to continue to receive hundreds of millions of dollars in “kickbacks” by overcharging seniors for coverage.

While Halloween may come and go, many may be concerned that the monsters created in the bill will stay—causing permanent fright for all Americans forced to live under Democrats’ government takeover of health care.

Pelosi Health “Reform” Still a Fiscal Train Wreck

Neither $894 Billion, Nor Deficit-Neutral

 

“I will not sign [health care legislation] if it adds one dime to the deficit—now or in the future.  Period….The plan I’m proposing will cost around $900 billion over ten years.”

— President Obama, address to Joint Session of Congress

 

While the Democrat majority may attempt to assert that Speaker Pelosi’s health “reform” bill costs under $900 billion and will reduce the federal deficit, the CBO score of H.R. 3962 reveals that such claims amount to nothing more than a budgetary mirage:

  • While Democrats claim their the coverage expansions total $894 billion, this figure represents the net costs of expanded coverage. The CBO score reveals total costs of the coverage expansion total $1.055 trillion—$425 billion in Medicaid costs, $605 billion in “low-income” subsidies for individuals to purchase coverage through government-run Exchanges, and $25 billion for small business tax credits. Democrats’ lower $894 billion number conveniently includes offsetting revenue from more than $150 billion in tax increases (only a portion of the $729.5 billion in total tax increases)—$33 billion from individuals who do not purchase, and $135 billion from employers that do not offer, government-forced insurance.
  • The more than $1 trillion in spending on coverage expansions does not even include additional federal spending included in the legislation—including extension of Medicaid “stimulus” funding to the States, a new reinsurance program for retirees, and a $34 billion trust fund for public health—that totals $224.5 billion. When combined with the cost of the coverage expansions, total spending under the bill actually approaches $1.3 trillion.
  • CBO estimated that the bill would increase State Medicaid spending by $34 billion over the next ten years—unlike prior versions of the legislation (H.R. 3200), which featured Medicaid expansions fully paid for by the federal government. Many may agree with what Tennessee Democrat Gov. Phil Bredesen termed “the mother of all unfunded mandates” being imposed upon States—and view such mandates as a further budgetary gimmick designed to mask the true cost of a government takeover of health care.
  • The Pelosi bill also relies on more than $70 billion in revenue from a new program for long-term care services. As the long-term care program requires individuals to contribute five years’ worth of premiums before becoming eligible for benefits, the program would find its revenue over the first ten years diverted to finance other spending in Democrats’ health care “reform.” However, as even Democrats, such as Senate Budget Committee Chairman Kent Conrad (D-ND), have called the program a “Ponzi scheme,” many may find any legislation that relies upon such a program to maintain “deficit-neutrality” fiscally irresponsible and not credible.
  • Democrats claim their legislation is “deficit-neutral” by including in a separate bill (H.R. 3961) reforms to the Sustainable Growth Rate (SGR) mechanism for Medicare physician payments—the total cost of which stands at $285 billion over ten years, according to CBO. While Members may support reform of the SGR mechanism, many Members may oppose what amounts to an obvious attempt to hide the apparent cost of health “reform” by introducing separate legislation to repeal the SGR mechanism without paying for this more than $200 billion increase in federal spending.
  • Because the Democrat SGR reform bill provides a permanent repeal to the SGR cost-containment mechanism, physician spending will rise compared to current law not only in bill’s first ten years, but in the years after 2019 as well. Thus any claim that the Pelosi bill decreases the long-term budget deficit must be viewed as highly suspect in light of the exclusion of hundreds of billions of dollars in new federal spending contained in H.R. 3961.
  • In its rollout of the Pelosi bill, the Democrat majority released a one-page document claiming that “a previous Congress established the policy for paying Medicare doctors, so the update for 2010 is not a new policy to be paid for.” By this logic, future Congresses will not have to pay for any increases in federal deficits and spending associated with the Pelosi health “reform” bill—directly contradicting President Obama’s pledge that his bill would not increase the federal deficit by one dime. Regardless, many may note that adding hundreds of billions in new spending will be paid for—by America’s children and grandchildren, through mountains of new federal debt.

Adding in the more than $200 billion cost of Democrats’ stand-alone SGR legislation, the health “reform” agenda propounded by Speaker Pelosi totals more than $1.5 trillion—nearly double President Obama’s targeted figure—and would further break the President’s promise by increasing the deficit to the tune of hundreds of billions of dollars. At a time of record deficits, the multiple multi-billion dollar budgetary gimmicks in H.R. 3962 are designed solely to mask the full cost of Democrats’ government takeover of health care.

Legislative Bulletin: Key Provisions of H.R. 3962, House Democrats’ Government Takeover of Health Care

On October 29, 2009, Speaker Pelosi and the House Democrat leadership introduced H.R. 3962, the Affordable Health Care for America Act. The legislation combines provisions in the versions of H.R. 3200, America’s Affordable Health Choices Act, approved by the Committees on Education and Labor, Energy and Commerce, and Ways and Means, as well as other provisions negotiated behind closed doors by the Democrat leadership. The bill is expected on the floor the week of November 2, under a likely structured rule. While press reports indicate the bill will cost at least $894 billion, a CBO score is not yet available, and the following analysis will be updated as events warrant.

Buried within the contents of the 1,990 page bill—as well as a separate 13-page bill (H.R. 3961) that would increase the deficit by more than $200 billion—are details that will see a massive federal involvement in the health care of every American, including the following:

  • Creation of a government-run insurance program that could cause as many as 114 million Americans to lose their current coverage;
  • Abolition of the private market for individual health insurance, forcing individuals to purchase coverage in a government-run Exchange;
  • Stifling insurance regulations that would raise premiums and encourage employers to drop coverage;
  • Trillions of dollars in new federal spending that will exacerbate the deficit and imperil the nation’s long-term fiscal solvency;
  • Taxes on all Americans—individuals who purchase insurance, individuals who do not purchase insurance, and millions of small businesses—that will kill jobs and raise health care premiums; and
  • Cuts to Medicare Advantage plans that will result in higher premiums and dropped coverage for more than 10 million seniors.

Summary of Key Provisions

The Government Takeover

Creation of Exchange: The bill creates within the federal government a nationwide Health Insurance Exchange. Uninsured individuals would be eligible to purchase an Exchange plan, as would those whose existing employer coverage is deemed “insufficient” by the federal government. Once deemed eligible to enroll in the Exchange, individuals would be permitted to remain in the Exchange until becoming Medicare-eligible—a provision that would likely result in a significant movement of individuals into the bureaucrat-run Exchange over time. Employers with 25 or fewer employees would be permitted to join the Exchange in its first year, with employers with 25-50 employees permitted to join in its second year. Employers with fewer than 100 employees would be permitted to enroll in the third year, and all employers would also be eligible to join, if permitted to do so by the Commissioner. Many may note the limits on employer eligibility in the first several years are significantly higher than in H.R. 3200, thus expanding the scope of the government-run Exchange.

Exchange Benefit Standards: The bill requires the Commissioner to establish benefit standards for all plans. These onerous, bureaucrat-imposed standards would hinder the introduction of innovative models to improve enrollees’ health and wellness—and by insulating individuals from the cost of health services with restrictive cost-sharing, could raise health care costs.

Government-Run Health Plans: The bill requires the Department of Health and Human Services to establish a “public health insurance option” through the Exchange. The bill states the plan shall comply with requirements related to other Exchange plans. Empowered to collect individuals’ personal health information, with access to federal courts for enforcement actions and $2 billion in “start-up funds”—as well as 90 days’ worth of premiums as “reserves”—from the Treasury, the bill’s headings regarding a “level playing field” belie the reality of the plain text. In addition, the bill requires the Secretary to establish premium rates that can fully finance the cost of benefits and administrative costs, but there would always be the implicit backing of the federal government.

The bill provides that the government-run plan shall enlist all Medicare providers unless physicians affirmatively decide to opt-out of the program. While the Secretary will be required to “negotiate” reimbursement rates with doctors and hospitals, nothing in the bill prohibits the Secretary from using such negotiation to impose Medicare reimbursement levels on providers as part of a government-imposed “negotiation.” Should such a scenario occur, the Lewin Group has estimated that as many as 114 million individuals could lose access to their current coverage under a government-run plan—and that a government-run plan reimbursing at the rates contemplated by the legislation would actually result in a net $16,207 decrease in reimbursements per physician per year, even after accounting for the newly insured.

The bill requires the Secretary to “establish conditions of participation for health care providers” under the government-run plan—however it includes no guidance or conditions under which the Secretary must establish those conditions. Many may be concerned that the bill would allow the Secretary to prohibit doctors from participating in other health plans as a condition of participation in the government-run plan—a way to co-opt existing provider networks and subvert private health coverage.

“Low-Income” Subsidies: The bill provides subsidies only through the Exchange, again putting employer health plans at a disadvantage. Individuals with access to employer-sponsored insurance whose group premium costs exceed 12 percent of adjusted gross income would be eligible for subsidies.

The bill provides that the Commissioner may authorize State Medicaid agencies—as well as other “public entit[ies]”—to make determinations of eligibility for subsidies and exempts the subsidy regime from the five-year waiting period on federal benefits established as part of the 1996 welfare reform law (P.L. 104-193). The second provision would give individuals a strong incentive to emigrate to the United States in order to obtain subsidized health benefits without a waiting period. Despite the bill’s purported prohibition on payments to immigrants not lawfully present, and the insertion of a citizenship verification provision, some may be concerned that the provisions as drafted would not require individuals to verify their identity when confirming eligibility for subsidies—encouraging identity fraud while still permitting undocumented immigrants and other ineligible individuals from obtaining taxpayer-subsidized benefits.

Premium subsidies provided would be determined on a six-tier sliding scale, such that individuals with incomes under 133 percent of the Federal Poverty Level (FPL, $29,327 for a family of four in 2009) would be expected to pay 1.5 percent of their income, while individuals with incomes at 400 percent FPL ($88,200 for a family of four) would be expected to pay 12 percent of their income. Subsidies would be based on adjusted gross income (AGI), meaning that individuals with total incomes well in excess of the AGI threshold could qualify for subsidies.

The bill further provides for cost-sharing subsidies, such that individuals with incomes under 133 percent FPL would be covered for 97 percent of expenses, while individuals with incomes at 400 percent FPL would have a basic plan covering 70 percent (the statutory minimum). These rich benefit packages, in addition to raising subsidy costs for the federal government, would insulate plan participants from the effects of higher health spending, resulting in an increase in overall health costs—exactly the opposite of the bill’s purported purpose.

Medicaid Expansion: The bill would expand Medicaid to all individuals with incomes under 150 percent of the federal poverty level ($33,075 for a family of four). Under the bill, the bill’s expansion of Medicaid to more than 10 million individuals would be fully paid for by the federal government only through 2014—thus imposing billions in unfunded mandates on States, which would be expected to pay nearly 10 percent of the cost of the expansion beginning in 2015.

Benefits Committee: The bill establishes a new government health board called the “Health Benefits Advisory Committee” to make recommendations on minimum federal benefit standards and cost-sharing levels. The Committee would be comprised of federal employees and Presidential appointees.

The bill eliminates language in the discussion draft of H.R. 3200 stating that Committee should “ensure that essential benefits coverage does not lead to rationing of health care.” Many view this change as an admission that the bureaucrats on the Advisory Committee—and the new government-run health plan—would therefore deny access to life-saving services and treatments on cost grounds. As written, the Committee could require all Americans to obtain health insurance coverage of abortion procedures as part of the bill’s new individual mandate.

Funneling Patients into Government Care

Abolition of Private Insurance Market: The bill imposes new regulations on all health insurance offerings, with only limited exceptions. Existing individual market policies could remain in effect—but only so long as the carrier “does not change any of its terms and conditions, including benefits and cost-sharing” once the bill takes effect. With the exception of these grandfathered individual plans subject to numerous restrictions, insurance purchased on the individual market “may only be offered” until the Exchange comes into effect, thus abolishing the private market for individual health insurance and requiring all non-employer-based coverage to be purchased through the bureaucrat-run Exchange.

Employer coverage shall be considered exempt from the additional federal mandates, but only for a five year “grace period”—after which all the bill’s mandates shall apply. By applying new federal mandates and regulations to employer-sponsored coverage, this provision would increase health costs for businesses and their workers, encourage employers to drop existing coverage, and leave employees to access care through the government-run Exchange.

“Pay-or-Play” Mandate on Employers: The bill requires that employers offer health insurance coverage, and contribute to such coverage at least 72.5 percent of the cost of a basic individual policy—as defined by the Health Benefits Advisory Council—and at least 65 percent of the cost of a basic family policy, for full-time employees. The bill further extends the employer mandate to part-time employees, with contribution levels to be determined by the Commissioner, and mandates that any health care contribution “for which there is a corresponding reduction in the compensation of the employee” will not comply with the mandate—which would encourage them to lay off workers.

Employers must comply with the mandate by “paying” a tax of 8 percent of wages in lieu of “playing” by offering benefits that meet the criteria above. In addition, beginning in the Exchange’s second year, employers whose workers choose to purchase coverage through the Exchange would be forced to pay the 8 percent tax to finance their workers’ Exchange policy—even if they offer coverage to their workers.

The bill includes a limited exemption for small businesses from the employer mandate—those with total payroll under $500,000 annually would be exempt, and those with payrolls between $500,000 and $750,000 would be subjected to lower tax penalties (2-6 percent, as opposed to 8 percent for firms with payrolls over $750,000). However, these limits are not indexed for inflation, and the threshold amounts would likely become increasingly irrelevant over time, meaning virtually all employers would be subjected to the 8 percent payroll tax.

The bill amends ERISA to require the Secretary of Labor to conduct regular plan audits and “conduct investigations” and audits “to discover non-compliance” with the mandate. The bill provides a further penalty of $100 per employee per day for non-compliance with the “pay-or-play” mandate—subject only to a limit of $500,000 for unintentional failures on the part of the employer.

The employer mandate would impose added costs on businesses with respect to both their payroll and administrative overhead. An economic model developed by Council of Economic Advisors Chair Christina Romer found that an employer mandate could result in the loss of up to 5.5 million jobs as employers lay off employees to avoid providing costly, government-forced health insurance.

Individual Mandate: The bill places a tax on individuals who do not purchase “acceptable health care coverage,” as defined by the bureaucratic standards in the bill. The tax would constitute 2.5 percent of adjusted gross income, up to the amount of the national average premium through the Exchange. The tax would not apply to dependent filers, non-resident aliens, individuals resident outside the United States, and those exempted on religious grounds. “Acceptable coverage” includes qualified Exchange plans, “grandfathered” individual and group health plans, Medicare and Medicaid plans, and military and veterans’ benefits.

For individuals with incomes of under $100,000, the cost of complying with the mandate would be under $2,000—raising questions of how effective the mandate will be, as paying the tax would in many cases cost less than purchasing an insurance policy. Despite, or perhaps because of, this fact, the bill language does not include an affordability exemption from the mandate; thus, if the many benefit mandates imposed raise premiums so as to make coverage less affordable for many Americans, they will have no choice but to pay an additional tax as their “penalty” for not being able to afford coverage. Then-Senator Barack Obama, pointed out in a February 2008 debate that in Massachusetts, the one State with an individual mandate, “there are people who are paying fines and still can’t afford [health insurance], so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine.”

Medicare Advantage: The bill reduces Medicare Advantage (MA) payment benchmarks to levels paid by traditional Medicare—which provides less care to seniors—over a three-year period. This arbitrary adjustment would reduce access for millions of seniors to MA plans that have brought additional benefits.

The bill imposes requirements on MA plans to offer cost-sharing no greater than that provided in government-run Medicare, and imposes price controls on MA plans, limiting their ability to offer innovative benefit packages. This policy would encourage plans to keep seniors sick, rather than manage their chronic disease.

The bill also gives the Secretary blanket authority to reject “any or every bid by an MA organization,” as well as any bid by a carrier offering private Part D Medicare prescription drug coverage, giving federal bureaucrats the power to eliminate the MA program entirely—by rejecting all plan bids for nothing more than the arbitrary reason that an Administration wishes to force the 10 million beneficiaries enrolled in MA back into traditional, government-run Medicare against their will.

Tax Increases

Government-Forced Insurance Penalties: Offsetting payments to finance the government takeover of health care would include taxes on individuals not complying with the mandate to purchase coverage, as well as taxes and payments by businesses associated with the “pay-or-play” mandate.

Taxes on Small Businesses: The bill also imposes a new 5.4 percent “surtax” on individuals with incomes over incomes over $500,000 and families with incomes greater than $1 million. The tax would apply beginning in 2011. As more than half of all high-income filers are small businesses, this provision would cripple small businesses and destroy jobs during a deep recession.

Taxes on Health Plans: The bill prohibits the reimbursement of over-the-counter pharmaceuticals from Health Savings Accounts (HSAs), Medical Savings Accounts, Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs), and increases the penalties for non-qualified HSA withdrawals from 10 percent to 20 percent, effective in 2011. Because these savings vehicles are tax-preferred, adopting these provisions would raise taxes by $6.3 billion over ten years, according to the Joint Committee on Taxation.

H.R. 3962 would place a cap on FSA contributions, beginning in 2012; contributions could only total $2,500 per year, subject to annual adjustments linked to the growth in general (not medical) inflation. Members may be concerned that these provisions would first raise taxes, and second—by imposing additional restrictions on health savings vehicles popular with tens of millions of Americans—undermines the promise that “If you like your current coverage, you can keep it.” At least 8 million individuals hold insurance policies eligible for HSAs, and millions more participate in FSAs. All these individuals would be subject to additional coverage restrictions—and tax increases—under this provision.

The bill also repeals the current-law tax deductibility of subsidies provided to companies offering prescription drug companies to retirees. Many may be concerned that this provision would lead to companies dropping their current coverage as a result.

Taxes on Health Products: Finally, H.R. 3962 would impose a 2.5 percent excise tax on medical devices, beginning in 2013. Many may echo the concerns of the Congressional Budget Office and other independent experts, who have confirmed that this tax would be passed on to consumers in the form of higher prices—and ultimately higher premiums.

Budgetary Gimmicks

Unpaid-For Doctor Fix: While the Democrats claim their bill is now deficit-neutral, the majority also introduced a separate piece of stand-alone legislation (H.R. 3961). The more than $200 billion cost of this legislation is not paid for, thus adding hundreds of billions of dollars in deficit spending and interest costs to the federal debt. Many may also note that the Congressional Budget Office recently analyzed similar legislation (S. 1776) as raising Medicare premiums by $70 billion.

Long-Term Care Program: The bill includes a new program for long-term care services that provides a benefit of at least $50 per day to individuals unable to perform certain functions of daily living. As the long-term care program requires individuals to contribute five years’ worth of premiums before becoming eligible for benefits, the program would find its revenue over the first ten years diverted to finance other spending in Democrats’ health care “reform.” However, the Congressional Budget Office, in analyzing similar provisions included in Section 191 of legislation considered by the Senate HELP Committee, found that “if the Secretary did not modify the program to improve its actuarial soundness, the program would add to future federal budget deficits in a large and growing fashion beginning a few years beyond the 10-year budget window.” As even Democrats such as Senate Budget Committee Chairman Kent Conrad (D-ND) have called the program a “Ponzi scheme,” many may find any legislation that relies upon such a program to maintain “deficit-neutrality” fiscally irresponsible and not credible.

A Reading Guide to Nancy Pelosi’s Health Care Bill

In order to assist Members, staff, and interested parties seeking to read and review Speaker Pelosi’s government takeover of health care (H.R. 3962), the Republican Conference has compiled a list of important page numbers and provisions in the 1,990-page “Affordable Health Care for America Act:”

Page 94—Section 202(c) prohibits the sale of private individual health insurance policies, beginning in 2013, forcing individuals to purchase coverage through the federal government

Page 110—Section 222(e) requires the use of federal dollars to fund abortions through the government-run health plan—and, if the Hyde Amendment were ever not renewed, would require the plan to fund elective abortions

Page 111—Section 223 establishes a new board of federal bureaucrats (the “Health Benefits Advisory Committee”) to dictate the health plans that all individuals must purchase

Page 211—Section 321 establishes a new government-run health plan that, according to non-partisan actuaries at the Lewin Group, would cause as many as 114 million Americans to lose their existing coverage

Page 225—Section 330 permits—but does not require—Members of Congress to enroll in government-run health care

Page 255—Section 345 includes language requiring verification of income for individuals wishing to receive federal health care subsidies under the bill—while the bill includes a requirement for applicants to verify their citizenship, it does not include a similar requirement to verify applicants’ identity, thus encouraging identity fraud for undocumented immigrants and others wishing to receive taxpayer-subsidized health benefits

Page 297—Section 501 imposes a 2.5 percent tax on all individuals who do not purchase “bureaucrat-approved” health insurance—the tax would apply on individuals with incomes under $250,000, thus breaking a central promise of then-Senator Obama’s presidential campaign

Page 313—Section 512 imposes an 8 percent “tax on jobs” for firms that cannot afford to purchase “bureaucrat-approved” health coverage; according to an analysis by Harvard Professor Kate Baicker, such a tax would place millions “at substantial risk of unemployment”—with minority workers losing their jobs at twice the rate of their white counterparts

Page 336—Section 551 imposes additional job-killing taxes, in the form of a half-trillion dollar “surcharge,” more than half of which will hit small businesses; according to a model developed by President Obama’s senior economic advisor, such taxes could cost up to 5.5 million jobs

Page 520—Section 1161 cuts more than $150 billion from Medicare Advantage plans, potentially jeopardizing millions of seniors’ existing coverage

Page 733—Section 1401 establishes a new Center for Comparative Effectiveness Research; the bill includes no provisions preventing the government-run health plan from using such research to deny access to life-saving treatments on cost grounds, similar to Britain’s National Health Service, which denies patient treatments costing more than £35,000

Page 1174—Section 1802(b) includes provisions entitled “TAXES ON CERTAIN INSURANCE POLICIES” to fund comparative effectiveness research, breaking Speaker Pelosi’s promise that “We will not be taxing [health] benefits in any bill that passes the House,” and the President’s promise not to raise taxes on families with incomes under $250,000

Democrats Cut Backroom Deals Benefiting AARP

Organization Gouges Seniors to Fund PR Blitz

 

“There’s an inherent conflict of interest….They’re ending up becoming very dependent on sources of income.”

— Former AARP Executive Marilyn Moon, quoted in Bloomberg article

 

Speaker Pelosi recently called insurance companies “immoral villains,” and Sen. Jay Rockefeller derided their tactics as “rapacious,” yet the majority has simultaneously relied on an organization that has received billions of dollars in windfall profits from those same insurers as an “independent” source to support their government takeover of health care—AARP. The Democrat majority has even relied on AARP’s support for legislation (S. 1776) that would increase the federal debt by nearly $250 billion to fund physician reimbursements, even though the bill would raise seniors’ Medicare premiums by over $60 billion. AARP opposed unpaid-for legislation as recently as December for that very same reason. An analysis of Democrats’ rhetoric and actions provides evidence why AARP may have changed its position—in exchange for its support of a government takeover of health care, AARP has received special considerations regarding several provisions in health “reform” legislation that could benefit the organization quite handsomely:

  • While the AARP website claims that the organization supports “guaranteeing that all individuals and groups wishing to purchase or renew coverage can do so regardless of age or pre-existing conditions,” a review of the New York State Insurance Commissioner’s website finds that AARP-branded Medigap coverage imposes a six-month waiting period for individuals with pre-existing conditions. Yet Section 111 of H.R. 3200 would exempt Medigap policies from new limits on pre-existing condition restrictions—thus allowing AARP to continue to deny Medigap claims of individuals with serious health conditions.
  • The health “reform” bill approved by the Senate Finance Committee would eliminate the tax deductibility for all insurance company executive salaries over $500,000. However, as drafted by the Committee, the legislation would exempt AARP from this requirement, even though fully 38 percent of its $1.1 billion in 2008 revenue came directly from “royalty fees” paid by United Healthcare—more than AARP received in membership dues, grant revenue, and private contributions combined. But for Chairman Baucus’ exemption, AARP salaries would in fact be subject to the penalties in the Finance bill—in 2008, then-CEO William Novelli received total compensation of $1,005,830—more than 78 times the average annual Social Security benefit of $12,738.
  • Speaker Pelosi has recently discussed the imposition of a new “windfall profits” tax on insurance companies as a potential addition to the House’s health “reform” bill. However, she has made no comments indicating that she would apply a similar tax to AARP—even though the organization by its own admission has received nearly $3.4 billion in profits from selling health insurance and other similar products. Thus it is entirely possible that Democrats could exempt AARP from the insurance windfall profits tax, in the same way that Chairman Baucus created a loophole to allow AARP to continue paying its CEO more than $1 million per year without penalty.
  • White House senior advisor David Axelrod recently offered Administration support for price control provisions included in H.R. 3200 that would require insurance companies to pay out a minimum percentage of their premiums in medical claims. However, while H.R. 3200 would place strict price controls on Medicare Advantage plans—requiring them to pay out 85 percent of premium revenues in medical claims—Medigap policies face a far less strict 65 percent requirement. In other words, under the Democrat bill, seniors could pay as much as 20 cents more out of every premium dollar to fund “kickbacks” to AARP-sponsored Medigap plans.
  • A Bloomberg news analysis published in December highlighted what one observer called AARP’s “dirty little secret”—overcharging its senior members, many of whom who felt betrayed after paying hundreds of dollars above market price for AARP-branded coverage. One noted that “AARP has great buying power, and people should be able to get the best deal….This is unconscionable, what AARP has allowed to happen.” Another disillusioned senior wrote to the organization’s leadership asking whether AARP had a “‘special relationship’ with [insurance carriers] by which it receives commissions, incentives, rebates, or dare I say ‘kickbacks?’”
  • In November, news sources reported that AARP suspended the sale of “limited-benefit” health insurance policies, largely as a result of pressure from Republicans in Congress concerned that the organization was selling policies advertised as a “smart option for the health care insurance you need,” even though the policies would only pay up to $10,000 for surgery costs. However, the fate of the more than 1 million policy-holders who purchased limited-benefit coverage from AARP remains unclear—and the organization has made no public offers to return the “royalty fees” on the “bare bones” policies it sold under questionable pretenses.

The special deals provided to AARP in the House and Senate health care bills raise questions about whether and why the Democrats are ignoring a de facto insurance conglomerate in their midst:

  • Why did Finance Committee Chairman Baucus exempt AARP from the salary requirements imposed on all other insurance carriers in his health “reform” legislation? Did Chairman Baucus cut another “rock-solid deal” with AARP behind closed doors so that its executives’ ability to earn million-dollar compensation packages would not be impaired?
  • Will Speaker Pelosi exempt an organization that earns more than 60 percent of its revenue from “royalty fees”—and obtains more of its revenue from United Health Group than from membership dues, grants, and private contributions combined—from the windfall profits tax she proposes to levy on insurance companies?
  • If Energy and Commerce Committee Chairman Waxman wants to investigate the compensation levels and corporate practices of insurance companies, why did he not submit requests for information to AARP, which makes 60 percent of its income by selling health insurance and related products to seniors? More to the point, why has the Committee not focused any of its investigative efforts on the widely-reported instances of abuses related to AARP-branded products to ensure executives are held to account and seniors adequately protected?
  • Do the Administration and Democrats in Congress support exempting AARP and its Medigap policies from the same regulations they propose to place on other insurance companies? In other words, do Democrats want seniors to be less protected from inflated profits and denied coverage due to pre-existing conditions than the rest of the American population?

Beneath these questions lie two broader issues: Is AARP a seniors’ advocacy group, or a billion-dollar insurance company masquerading as a “charity” organization? And are Democrats so intent on enacting a government takeover of health care that they would knowingly ignore seniors being exploited in “unconscionable” ways to maintain the support of an organization who will lobby for their efforts?

David Axelrod on SGR Fix

As an FYI, attached below is a transcript from This Week, where George Stephanopoulos questioned David Axelrod on the Senate’s potential consideration of an unpaid-for $250 billion Medicare physician payment fix (S. 1776) in light of the President’s promise that health “reform” would not add to the deficit.  You will note that his lone defense of the bill was that an SGR fix was “in the budget” – even though the President’s budget also proposed to increase the deficit by $330 billion in order to pay for a long-term SGR fix.  Video of the exchange can be found here (exchange begins with 7:45 remaining in the video) – by my count, Axelrod used the word “um” at least 15 times in a 90-second span while trying to square an unpaid-for SGR bill with the President’s promise of a deficit-neutral bill.

To put an unpaid-for SGR fix in context, last December 150 House Republicans voted against a bill (H.R. 7321) to provide aid to Detroit automakers that CBO estimated would increase federal deficits by $1.7 billion over ten years.  If not paid for, S. 1776 would increase federal deficits by more than 145 times the amount of that proposed automaker bailout, which was rejected by the vast majority of House Republicans.

 

STEPHANOPOULOS: The president has drawn one other very red line in the sand, that he won’t sign any health care bill that increases the deficit. (BEGIN VIDEO CLIP)

OBAMA: I will not sign a plan that adds one dime to our deficits, either now or in the future. (APPLAUSE) I will not sign it if it adds one dime to the deficit now or in the future, period. (END VIDEO CLIP)

STEPHANOPOULOS: Yet just this week, the Senate majority leader, Harry Reid, is going to bring a bill to the floor that — Republicans call this the first installment on health care, which is going to permanently repeal savings gotten from payments — Medicare payments to doctors, $248 billion over 10 years. Must that be paid for, for the president to sign it?

AXELROD: George, first of all, understand that that — when the Republicans say this is the first installment on health care, it’s not part of the health care bill. This — this has been — there’s been…

STEPHANOPOULOS: It was in the House bill.

AXELROD: Yes, but the point is that, every year, this — this provision of the Medicare law goes into effect. Every year, draconian cuts are proposed for doctors that would have a deleterious effect on patients. And every year, the Congress acts on it and defers on that. And the fact is, it’s a charade. Everyone in the Congress knows they’re not going to let that go forward. All that we’re saying here is, let’s be honest about it. The president provided for it in his budgets, and we ought to acknowledge that this is a — this is an ongoing expense that we’ll have to meet.

STEPHANOPOULOS: But isn’t it actually — isn’t it also a charade if you’re saying, “We’re going to do this. We’re not going to pay for this $248 billion,” and that’s the only way you can end up not increasing the deficit… (CROSSTALK)

AXELROD: Well, it will be — it will be part of the budget. It will be paid for as we move — as we move forward. The fundamental health reform, George, that we’re talking about that would provide subsidies to people who can’t afford health care today and ancillary expenses are all going to be paid for.

STEPHANOPOULOS: But will — would this particular bill have to be paid for? Because the House — Speaker Nancy Pelosi has said that she’s not going to pass it through her chamber unless there are specific things… (CROSSTALK)

AXELROD: As I said, the president’s provided for it in his — in his budget, and we will account for it.

Government-Run Health Care and Government-Run Universities

Since Democrats, including President Obama in his address to Congress, have compared a government-run health plan as similar to public colleges and universities, you may be interested in the College Board’s annual survey of university tuition increases found that tuition increases at public institutions once again exceeded those at private universities.  Over the last decade, tuition increases at government-run universities have averaged nearly double those at private institutions on a percentage basis (4.6% versus 2.9% annually).  If these statistics are any indication of the “cost savings” derived from government-run health care, many may view the data as further confirmation that Democrats’ government takeover will in fact bend the cost curve—in the wrong direction.

If you want more information on this issue, we issued a Policy Brief on these false analogies to government-run health care that can be found here.

Candidate Obama vs. President Obama

Even as he campaigned on a platform of change and transparency, an examination of Barack Obama’s comments during the election—and his actions since taking office—indicates that on both politics and policy, the President has changed his tune on numerous issues of relevance to the proposed government takeover of health care, which may lead many to wonder where exactly he stands:

Then: “Senator McCain wants to pay for his plan by taxing your health care benefits for the first time in history.”

— Barack Obama, speech in Roanoke, Virginia, October 17, 2008

Now: “This reform will charge insurance plans a fee for their most expensive policies…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then: “You will not have to change [health insurance] plans. For those who have insurance now, nothing will change under the Obama plan—except that you will pay less.”

— Obama campaign handout, “Questions and Answers on Health Care Plan”

Now: “I mean—when I say if you have your plan and you like it and your doctor has a plan, or you have a doctor and you like your doctor that you don’t have to change plans, what I’m saying is the government is not going to make you change plans under health reform.”

— Barack Obama, White House press conference, June 23, 2009

Then: “Massachusetts has a mandate right now. They have exempted 20 percent of the uninsured because they have concluded that that 20 percent can’t afford it. In some cases, there are people who are paying fines and still can’t afford it, so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine.”

— Barack Obama, Democratic primary debate, February 21, 2008

Now: “Under my plan, individuals will be required to carry basic health insurance…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then: “If they cannot afford [health insurance]…what are you going to do about it? Are you going to fine them? Are you going to garnish people’s wages?”

— Barack Obama, Democratic primary debate, January 31, 2008

Now: “For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.”

— Barack Obama, trying to explain tax penalties for refusing to purchase government-forced health insurance, interview with George Stephanopoulos, September 20, 2009

Then: “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

— Barack Obama, Rally in Dover, New Hampshire, September 12, 2008

Now: “The one commitment that I’ve been clear about is I don’t want that final one-third of the cost of health care to be completely shouldered on the backs of middle-class families who are already struggling in a difficult economy.  And so if I see a proposal that is primarily funded through taxing middle-class families, I’m going to be opposed to that because I think there are better ideas to do it.”

— Barack Obama, White House press conference, July 22, 2009

Then: “It turns out that Senator McCain would pay for part of his [health care] plan by making drastic cuts in Medicare…even though Medicare is already facing a looming shortfall.”

— Barack Obama, speech in Roanoke, Virginia, October 17, 2008

Now: “The only thing this plan would eliminate is the hundreds of billions of dollars in waste and fraud [in Medicare]…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then: “The Obama [health care] plan will cost between $50-65 billion a year when fully phased in.”

— Obama campaign handout, “Questions and Answers on Health Care Plan”

Now: “Add it all up, and the plan I’m proposing will cost around $900 billion over 10 years…”

— Barack Obama, address to a joint session of Congress, September 9, 2009

Then: “What we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

— Barack Obama, town hall meeting in Chester, Virginia, July 21, 2008

Now: “At a certain point you start getting into all kinds of different meetings—Senate Finance is having a meeting, the House is having a meeting….I don’t think there are a lot of secrets going on in there.”

— Barack Obama, trying to explain closed-door health care negotiations, White House press conference, July 22, 2009

At best, the significant changes in position show the differences between lofty campaign rhetoric and the realities of governing; at worst, they reveal an Administration willing to abandon many of its key campaign promises in order to pass its government takeover of health care. Regardless of whether or not one agrees with the President’s policy positions—either those outlined “then” or “now”—many may wonder what exactly the President believes in—and, given his repeated reversals, why the American people should believe in him.

Speaker Pelosi Advocates Higher, European-Style Taxes

Liberal Groups Want President to Break His “Firm Pledge”

 

“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

—President Barack Obama, Rally in Dover, New Hampshire, September 12, 2008

“There is no way to restore this nation to fiscal health without higher taxes—for the middle class as well as for the rich. The only question is when.”

—Brookings Institution fellows Henry Aaron and Isabel Sawhill, Washington Post op-ed, October 13, 2009

 

Appearing last week on The Charlie Rose Show, House Speaker Nancy Pelosi demonstrated her openness—and desire—for new taxes to pay for health “reform” and other skyrocketing entitlement spending. Worse yet, the form of the tax she proposed would hurt the same struggling middle-class families that Democrats allege health “reform” would assist:

  • Asked whether or not a value-added tax (VAT)—a European-style sales tax applied at every level in the manufacturing process, and paid by end users—had “any appeal” to her, the Speaker replied that, “I would say put everything on the table and subject it to the scrutiny that it deserves.”
  • Talking about an alleged “competitive advantage” that foreign car manufacturers subject to a VAT in Europe hold over their American counterparts, Speaker Pelosi said that, “Somewhere along the way, [imposing an American] value-added tax plays into this….In the scheme of things, I think it’s fair [to] look at a value-added tax as well.”
  • Many economists have noted that, by taxing consumption more heavily, a VAT would place a disproportionate burden on low- and middle-income families. Other experts have noted that a value-added tax could reduce long-term economic growth by more than one percent annually; even a relatively small VAT of 3 percent would demolish or destroy up to 2.1 million jobs by its fifth year.
  • The Speaker’s comments come on the heels of a summit hosted by the liberal Center for American Progress—key allies of the Administration—where speakers discussed the organization’s recent paper calling for tax increases to combat high federal deficits: “We have the fifth lowest taxes as a share of GDP among economically developed nations…If we raised taxes in aggregate to a level that would safely balance the budget, the United States would still be in the bottom 10 out of 30.” While the paper notes that such higher taxes—a 22 percent across-the-board increase in every tax rate—would raise trillions, it fails to mention that many of the European developed nations with higher tax rates also have exhibited lower economic growth precisely because of those higher tax policies.
  • In addition, two researchers from the liberal Brookings Institution wrote an op-ed in Monday’s Washington Post noting that, “There is no way to restore this nation to fiscal health without higher taxes—for the middle class as well as for the rich. The only question is when.” The analysts also call for a value added tax to “solve America’s long-term fiscal problems”—and despite the evidence noted above, assert that a VAT “would also support and sustain the economic recovery.” Many may question how imposing trillions of dollars in job-killing tax hikes would ever grow the American economy.

Given her comments, many may question whether Speaker Pelosi believes that the more than $800 billion in tax increases in the House’s health “reform” legislation (H.R. 3200) are insufficient to finance the full measure of Democrats’ appetite for government spending. Moreover, with multiple liberal organizations calling for future tax rises to pay for skyrocketing federal spending, many may question whether the majority is engaging in a “bait and switch” with the American people—by failing to disclose exactly how many trillions in new, job-killing taxes will be needed to finance their government takeover of health care.

Another “Rock-Solid Deal” That Harms Seniors

Medicare Premiums to Rise, Thanks to Max Baucus

 

“But what we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

— Senator Barack Obama, Town Hall Meeting in Chester, Virginia, July 21, 2008

 

Even as Democrats campaigned on a platform of change and transparency, recent back-room dealings between health care industries, the Administration, and Finance Committee Chairman Max Baucus would raise Medicare premiums for seniors:

  • Both the Administration and Democrats in Congress have proposed the idea of creating a board of federal bureaucrats to recommend additional changes to, and generate savings from, the Medicare program. In particular, Sen. Jay Rockefeller (D-WV) has advocated such a commission as a way to de-politicize the process of adjusting Medicare payments.
  • While Chairman Baucus’ mark included such a commission, it exempted “providers scheduled to receive a reduction to their inflationary payment updates” from additional reductions by the Commission. In practical terms, this language exempted hospitals—who reached their own independent “agreement” to provide $155 billion in savings toward health “reform”—from having to contribute additional savings.
  • Unfortunately, neither Sen. Rockefeller nor the Congressional Budget Office (CBO) understood the hospitals’ exemption from additional cuts proposed by the Medicare Commission at the time the legislation was first unveiled. Because hospital payments comprise a large portion of total Medicare spending, exempting hospitals from the Commission’s purview effectively lowered the $23 billion in savings CBO originally assumed from the provision by at least half.
  • As a result of this lower score—and in his desire to preserve his “agreement” with the hospital sector—Chairman Baucus found a better target to achieve savings: seniors themselves. An amendment to the Chairman’s mark authorized the Medicare Commission to propose “reductions in federal premium subsidies” to Medicare Advantage and prescription drug plans—even though Medicare Advantage plans would already face a $123 billion cut in the underlying Baucus bill.
  • When pressed during the markup to explain the consequences of this amendment, Committee staff repeatedly refused to admit that a “reduction in federal premium subsidies” would be tantamount to premium increases for seniors’ Medicare Advantage and prescription drug plans. However, CBO Director Doug Elmendorf previously testified that fully half of the benefits currently provided to seniors under Medicare Advantage would disappear due to the existing cuts in the Baucus bill—and the scope of the premium increases and benefit cuts would likely be magnified if the Medicare Commission enacted additional savings.
  • Chairman Baucus’ actions during the Finance Committee markup do not represent the first time his agreements with the health care industry have been proven to harm seniors. In August, the head of the Pharmaceutical Research and Manufacturers of America (PhRMA) affirmed that drug manufacturers had negotiated a “rock-solid deal” with Chairman Baucus and the Administration. Previous analyses from the Congressional Budget Office have confirmed that portions of the “rock-solid deal” would significantly raise seniors’ Medicare prescription drug premiums.

Many may find the irony in an entity established to “de-politicize” the process of Medicare reform being modified in arbitrary—and harmful—ways in order to cement Chairman Baucus’ “rock-solid deals” with the health care industry. Moreover, if Democrats are willing to break yet another campaign promise on transparency in order to cut another back-room deal—and raise premiums for seniors in the process—what promises will they keep?