House Health Care Bills Show Misplaced Priorities

Why would House Republican leadership place the concerns of gym owners over those of pro-lifers? And why would that same leadership embrace a policy suggestion from the liberal group Families USA that could entrench Obamacare while raising premiums for young people?

While the House will consider legislation this week providing tax breaks to individuals who buy gym memberships, the House has yet to consider legislation cutting off tax breaks for abortion this Congress. On the latter front, an expansion of “copper” catastrophic insurance plans would effectively eliminate a regulatory provision that has lowered premiums for young Americans—another misplaced priority that could cause consternation for some conservatives.

What’s Inside Some Health Savings Account Legislation

However, Section 8 of one of the bills would allow for a $500 deduction for gym memberships or instruction, and a $250 deduction for safety equipment, as a qualified medical expense. The amounts would double for joint returns.

While just about everyone supports increasing Americans’ levels of physical activity, the provision seems questionable at best. The tax reform bill enacted not eight months ago attempted to eliminate these kinds of deductions from the tax code, creating a simpler, fairer process. This proposal would turn right around and add more complexity, by requiring the IRS to issue new regulations “to determine…what does not constitute a qualified physical activity, including golf, hunting, sailing, horseback riding, and other similar activities.”

The federal government already tries to do too many things, and has too great a role in Americans’ lives as it is. Do we really need the IRS determining what is, and is not, a “qualified physical activity?”

As for Abortion and HSAs

In fact, some pro-life leaders have opposed provisions that would allow individuals to use HSA dollars to fund insurance premiums, because pro-lifers want to prohibit those funds from being used to pay for abortion coverage (or abortions period). But the House has yet to vote this Congress on limiting abortion as a qualified medical expense.

The pro-life legislation that the House voted on in January 2017, H.R. 7, sponsored by Rep. Chris Smith (R-NJ), prohibited taxpayer dollars from funding abortion in all cases, including Obamacare exchange plans. However, it did not address preferences in the tax code relating to abortion, such as the qualified medical expense deduction.

It seems that the House Ways and Means Committee, which marked up the bills in question, cares more about satisfying lobbyists than responding to their large pro-life constituency. From gym owners to device makers—who have lobbied intently for the Obamacare device tax repeal that the House will also consider this week—the series of health care bills contains myriad provisions, some good and some not-so-good, advocated by business lobbyists. Unfortunately, pro-life advocates have yet to receive similar consideration.

Unintended Consequences of Expanding ‘Copper’ Plans

However, because only certain individuals currently qualify for “copper” plans, insurers can adjust their premiums downward accordingly. Section 1312 of Obamacare contains a single risk pool requirement, meaning that insurers must rate all their products in a given state as a single book of business in determining premium rates. But a rule the Obama administration released in 2013 included a special exception to that provision for “copper” plans. These catastrophic plans may adjust their rates to reflect “the expected impact of the specific eligibility categories.”

In other words, because primarily young individuals enroll in catastrophic plans, insurers can at present lower their premiums to reflect that fact. However, by making everyone eligible for “copper” coverage, the House bill would effectively eliminate this adjustment, thus raising premiums for the 18- to 29-year-old individuals enrolled in the plans.

Effects of the ‘Copper’ Change

Catastrophic plans have not proven particularly popular on the exchange market, with only 1 percent of enrollees purchasing them as of earlier this year. However, that lack of popularity arises because individuals receiving premium subsidies (i.e., most of the people buying coverage directly from the exchange) cannot apply those subsidies to “copper” plans.

Paradoxical as it may sound, expanding these popular plans to all age groups could actually curb their appeal. While a recent eHealth analysis claims that an expansion of “copper” plans could save near-seniors (i.e., those aged 55-64) an average of $4,608 per year, it likely will not do so. eHealth’s analysis compares the current 41 percent differential between “copper” premiums and bronze premiums to arrive at its figure.

However, as noted above, the current “copper” rates assume enrollment primarily by individuals under 30. eHealth’s analysis thus compares rates for a market of individuals aged 18-29 to a market of individuals aged 18-64—which explains the 41-percentage point difference in premiums. But if “copper” plans expand to all ages, that premium differential will narrow—and premiums for the 18-29 population will likely increase.

Single Risk Pool Bolsters Obamacare

More to the point: The “copper” plan provision includes language reinforcing Obamacare’s single risk pool. It also undermines the intent of last year’s Consumer Freedom Amendment, offered in the Senate by Sen. Ted Cruz (R-TX), which would have allowed for the sale of non-compliant plans alongside Obamacare-compliant plans.

The difference on this one provision speaks to a broader philosophical debate. Moderates want to support Obamacare’s exchanges by passing “stability” legislation and expanding subsidies. So does Families USA, which in December 2012 submitted a comment to the Department of Health and Human Services opposing the rate adjustment provision for catastrophic plans, because it could tend to segment the market.

By contrast, conservatives want to offer people lifeboats away from the exchanges—options such as short-term insurance plans, association health plans, and the like. On that front, this week’s legislation does not advance the ball, and expanding “copper” plans could on balance represent a step back.

Thankfully, House leadership did not end up attaching attach an insurer bailout to this week’s HSA bills, after early rumblings in that direction. But the fact that conservatives even need to have these discussions speak to the ways in which many House Republicans want to strengthen Obamacare rather than repealing it.

This post was originally published at The Federalist.

Liberals Suddenly Rediscover Federalism — Will Conservatives?

On Thursday, a series of liberal groups sent a letter to the nation’s insurance departments, asking them to effectively undermine President Trump’s October executive order on health care. In so doing, the Left suddenly rediscovered the virtues of federalism in setting an independent policy course from Washington, particularly when governed by an executive of the opposite party.

Unfortunately, however, because Congress has yet to repeal Obamacare’s federally imposed regulations—as I noted just yesterday—legislators in conservative states will have little such recourse to seek freedom from Obamacare unless and until Congress takes action.

Liberals Want to Thwart More Affordable Coverage

For instance, the Trump administration likely will revoke an Obama administration rule prohibiting short-term insurance policies—which need not comply with any of Obamacare’s statutory requirements—from offering plans of longer than 90 days in duration. In such a circumstance, the liberal groups want states to “act swiftly if the federal rulemaking allows these plans to last beyond a reasonable ‘short term’”—in other words, reimpose the 90-day limit on short-term plans, currently codified via federal regulations, on the state level.

The liberal groups also asked states to “consider ways to protect against potential harm from” other elements of the executive order, including association health plans (AHPs) and health reimbursement arrangements (HRAs): “If the proposed federal rules are weakened for short-term plans, AHPs, or HRAs, we urge state insurance regulators to take action to protect consumers in your states.”

In this case, as in most cases with liberal groups, “consumer protection” means protecting individuals from becoming consumers—preventing them from buying insurance plans that liberals do not approve of.

One-Way Federalism, In the Wrong Direction

As a supporter of the Tenth Amendment, while I might not agree with state actions designed to prevent the sale of more affordable insurance options, I respect the rights of states to take such measures. Likewise, if Congress repeals Obamacare’s mandate to purchase insurance, and states wish to reimpose such a requirement at the state level, they absolutely should have the ability to do so.

Unfortunately, however, Congress’ failure to repeal Obamacare’s regulations has created a one-way federalism ratchet. Liberal areas can re-impose Obamacare’s regime at the state level, by blocking the sale of more affordable insurance plans, or re-imposing a mandate to purchase insurance. But because Congress has left all of Obamacare’s federally set regulations in place, conservative states cannot de-impose Obamacare at the state level, to allow more affordable coverage that does not meet all of the law’s requirements.

Admittedly, by not thwarting Trump’s regulatory actions, conservative states can allow the sale of more affordable insurance products—for now. However, those executive actions have real limits when compared to statutory changes.

Moreover, another president could—and in the case of a Democratic president, almost certainly would—undo those actions, collapsing what little freedom the executive order might infuse into the market. Regardless, states will remain hostage to actions in Washington to determine control of their health insurance marketplaces.

This dynamic brings no small amount of irony: Liberal groups have suddenly discovered the benefits of federalism to “resist” a Trump administration initiative, even as Republican senators like Louisiana’s Bill Cassidy, by keeping the federally imposed pre-existing condition mandate in place, want to dictate to other states how their insurance markets should function.

At the risk of sounding like an apostate, liberals are on to something—not with respect to their policy recommendations, but to federalism as a means of achieving them. Perhaps one day, the party that purports to believe in the Tenth Amendment will follow suit, by getting rid of Obamacare’s federal regulations once and for all.

This post was originally published at The Federalist.

Gov. Jindal Op-Ed: The GOP Mustn’t Offer Obamacare Lite

There is a secret that people outside of Washington, D.C., aren’t aware of right now: Some Republicans in Congress are on the verge of proposing an alternative to Obamacare that imposes new tax hikes on the American people.

On March 4, the Supreme Court will hear arguments in a case that could upend Obamacare completely. In King v. Burwell, the court — if it follows the plain text of the law, which says that only individuals purchasing coverage on an “exchange established by the state” are eligible for federal insurance subsidies — could cause disruption to individuals in the 36 states that did not establish a state exchange, and instead rely on the federally run exchange. For this reason, many observers have argued that conservatives need to present an alternative vision of health reform before the court rules.

Take one major issue related to Obamacare: taxes. The law is chock full of them — no fewer than 18 revenue raisers totaling over $1 trillion through 2022.Yet several alternative proposals being discussed by Republicans don’t actually repeal the law’s tax increases. Instead, they repeal the law’s tax increases, only to replace them with new revenue hikes. So, rather than raise taxes by more than $1 trillion, as Obamacare did, these plans raise taxes by perhaps, say, “only” $500 billion.

This puts Republicans in the positions of being “cheap” Democrats, or Democrat-lite. We’ll raise taxes — but just … less than Obamacare. We’ll spend hundreds of billions on new entitlement programs — but just … less than Obamacare.

But the problem with programs that look like Obamacare is that they bring with them many of Obamacare’s problems. Remember when the Congressional Budget Office concluded that Obamacare will result in more than 2 million Americans working fewer hours, or leaving the labor force altogether? That’s because the law’s insurance subsidies are structured in ways that will cause individuals to work fewer hours, keeping their income low to maintain eligibility for subsidized insurance. Some so-called conservative health plans also have characteristics that will discourage work — even if perhaps less than Obamacare does.

So why talk about “conservative” health care reform if our vision turns us into cheap liberals? Why complain that Obamacare is expanding welfare and dependency, only to propose a similar — albeit smaller — program that could well have the same effects? If conservatives oppose Obamacare’s tax increases on the middle class, then why did one “conservative” health adviser propose accelerating the law’s tax on health plans by phasing it in sooner?

The reality is that while Beltway insiders in the elite salons of Washington can do and say whatever they want, the American people know better. A majority of voters — and even larger majorities of conservative and Republican voters — believe that “any replacement of Obamacare must repeal all of the Obamacare taxes and not just replace them with other taxes.” In other words, the voters won’t be fooled by quasi-liberal health plans masquerading in conservative clothing.

The other good news is that truly conservative health plans exist. Last year, I outlined a plan with America Next, the conservative policy group I founded. The plan focuses like a laser beam on controlling the health care issue that matters most to Americans — skyrocketing health costs. The plan empowers the states to enact reforms that can bring down costs, while also guaranteeing access for individuals with pre-existing conditions. Rather than stifling states with additional regulations from Washington, the America Next plan offers them incentives to improve their insurance markets in ways that offer more choices and lower costs. As a result, Americans should benefit from new avenues to buy portable health insurance they can own themselves — through their church, alumni group or trade association — and lower premiums, too. In fact, the Congressional Budget Office previously analyzed reforms similar to those in the America Next plan and found that they could reduce individual health insurance premiums by thousands of dollars per family.

I recognize there are other good conservative plans out there — and that’s great. For instance, the Republican Study Committee proposed reforming the tax treatment of health insurance without repealing and replacing the tax increases in Obamacare. We should have a robust debate and show both the Supreme Court and the American people that there are better ways to enact true reforms. But I don’t believe that any plan that repeals and replaces Obamacare’s trillions in taxes and spending is a conservative alternative — and the American people agree.

Recently, the left gave us an instructive lesson on why this debate about a conservative alternative is so important. The advocacy group Families USA released a report calling for a veritable orgy of new Obamacare-related spending — new subsidies, insurance mandates, even a proposal to extend subsidized insurance to illegal immigrants. It’s an important reminder, first that the left will always want more government intrusion in health care, and second that conservatives can never hope to outspend the left by acting as cheap liberals. That’s why it’s so important for our party to outline a conservative — repeat, conservative — vision for health care.

This post was originally published at Politico.

Who’s Going to Pay for This Obamacare Wish List?

I wrote in this space last June that supporters of the president’s health-care law had not made many specific suggestions about how to amend or otherwise change the Affordable Care Act. Last week, the advocacy group Families USA attempted to change that, releasing its “Health Reform 2.0” agenda of how to expand on Obamacare. But the paper also raises an important question for the law’s supporters—including presidential candidates running in 2016: How to pay for the myriad promises that liberal groups want to add to the health-care agenda?

The Families USA paper includes a full—and costly—wish list of new spending programs related to the law, including:

* Fixing the “family glitch,” in which families are ineligible for federal insurance subsidies if one member of the family has an offer of “affordable” employer-sponsored health coverage;

* Extending funding for children’s health insurance, a program that Obamacare funded only through September;

* Increasing federal cost-sharing subsidies—raising the amount of subsidies, currently provided to families with incomes under 250% of the federal poverty level, so as further to reduce deductibles and co-payments, and potentially raising the income cutoff for subsidies;

* Making permanent an increase in Medicaid reimbursement rates included in Obamacare that expired on Dec. 31, 2014;

* Extending coverage to immigrant populations (the report does not specify whether such coverage should also apply to the undocumented); and

* Increasing federal premium subsidies. Amending the current subsidy set-up in this way would necessitate two changes to current law, both of which would require an increase in federal spending. Congress would need to repeal the provision, set to kick in after 2019, scheduled to reduce the subsidies’ annual rate of growth; then lawmakers would have to pass the subsidy increase that Families USA advocates.

The proposal also contains numerous mandates on insurance plans—for instance, to cover adult dental care, all forms of pediatric care, and expand access to provider networks. These would come at a cost, raising insurance premiums for individuals and families—and raising costs for the federal government as well, related to the 87% of exchange participants receiving premium assistance subsidies.

While specific cost estimates for these proposals are unavailable, they are likely to be substantial. Cost concerns meant that the children’s health insurance program received funding for just a two-year extension in Obamacare. Likewise, the Medicaid reimbursement bump was so expensive—$8.3 billion—that lawmakers financed it for only 2013 and 2014 as part of the law. And Families USA’s proposed changes to the subsidy regime could cost far more: a 2011 study found that fixing just the “family glitch” could increase spending by nearly $50 billion per year.

In other words, a liberal group has proposed spending hundreds of billions—at minimum—on expanding Obamacare programs. And other than some suggestions about using government-imposed price controls—“direct intervention in pricing may ultimately be necessary”—the Families USA report contains precious little on paying for these expanded entitlements. It may have answered the “What?” when it comes to proposed “fixes” to the law, but it did not answer the “How much?” And as the law remains divisive, and federal debt continues to rise, the latter question must remain on the public agenda for some time to come.

This post was originally published at the Wall Street Journal Think Tank blog.

More Liberal Scare Tactics on Pre-Existing Conditions

The liberal group Families USA released another report that supposedly makes the case for Obamacare – but in reality just demonstrates the lengths liberals will go to in order to gin up support for their flawed law.  The report claims that “64.8 million non-elderly Americans have been diagnosed with pre-existing conditions that could lead to denials of coverage, absent health reform.”

There are several problems with this claim.  First, the Administration released a report last year claiming that 129 million individuals have pre-existing conditions and “could be denied affordable coverage.”  In other words, the Families USA study also claims that the number of individuals with pre-existing conditions has just been cut in half when compared to the prior HHS report.  Which is another way of saying the Families USA report implicitly admits that the HHS study is flawed, biased, and should not be considered reputable.  (But hey, what does a difference of a mere 65 million people make among friends?)

Second, enrollment in pools for people with pre-existing conditions is nowhere near as high as the Families USA report would suggest.  According to the most recent data released by the Administration, 73,333 individuals with pre-existing conditions are enrolled in the federal high-risk pool program established under Obamacare.  These enrollment data do not come anywhere close to earlier projections – the Medicare actuary originally projected enrollment at 375,000 individuals in 2010, and Congressional Budget Office estimated up to 700,000 individuals would attempt to enroll in the program by next year.  To put it another way, the number of enrollees in pre-existing condition pools under Obamacare is .11% of the 64.8 million people Families USA claims have pre-existing conditions.

Finally, it’s worth pointing out that today’s report was conducted for Families USA by the Lewin Group.  The Huffington Post and other liberal allies called Lewin a front group for insurers back in 2009, when it released studies showing how a government-run health plan could cause millions to lose their health insurance.  Surprisingly, we have yet to see HuffPo and other liberal groups similarly criticizing today’s Families USA/Lewin study as being biased by a tainted insurer front group, when it helps trumpet the talking points of Obamacare supporters.

It’s true that the problem of individuals with pre-existing conditions is real – but nowhere near as pervasive as the types of reports produced by HHS and Families USA would have you believe.  That’s why Republicans have offered and supported targeted solutions that would solve this problem WITHOUT a 2700-page law intruding into every corner of the American health sector.  The trumped-up claims in this latest Families USA report once again illustrate that while pre-existing conditions are a problem for some Americans,  Obamacare is far from the right solution.

There They Go Again…

The liberal advocacy group Families USA is out with a “study” today purporting to tally the number of individuals who died due to a lack of health coverage from 2005 to 2010.  Today’s report extrapolates from a 2002 Institute of Medicine study that claimed about 18,000 individuals died due to lack of health insurance.

There’s just one problem with the IOM study – it has since been challenged and repudiated as inaccurate.  A 2009 paper by Richard Kronick – himself a former Clinton Administration official – included the following conclusions:

Adjusted for demographic, health status, and health behavior characteristics, the risk of subsequent mortality is no different for uninsured respondents than for those covered by employer-sponsored group insurance at baseline….The Institute of Medicine’s estimate that lack of insurance leads to 18,000 excess deaths each year is almost certainly incorrect…There is little evidence to suggest that extending insurance coverage to all adults would have a large effect on the number of deaths in the United States.

And it’s not just Kronick who agrees with this analysis.  Here’s Brookings Institution scholar, and noted liberal, Henry Aaron, in an interview with Politifact on the links (if any) between the uninsured and death totals:

“I found his reasoning compelling,” said Aaron, himself a member of the Institute of Medicine. “In fact, after listening to his presentation, I had a hard time believing that the IOM had done what they had done.”  In interviews, Aaron and other health care scholars agreed with Kronick that uninsured and insured Americans differ in many ways other than their insurance status.  “To estimate the impact of the lack of insurance on mortality rates, one has to control statistically for all of those differences,” Aaron said.  That, he added, is exactly what Kronick has sought to do so.

So an intellectually rigorous analysis by one Democrat – supported as being compelling and thoughtful by other Democrats – gets ignored by a partisan liberal interest group, because it would take away their likely pre-determined conclusion that Obamacare will reduce death rates.  As The Gipper himself stated, there they go again

Families USA Report Misleads on Obamacare’s “Help” for Small Businesses

The liberal advocacy group Families USA is out today with a new report claiming that 3.2 million small businesses are eligible for the new health insurance tax credit created by Obamacare.  However, prior studies and claims – including reports from the Administration itself – demonstrate that Families USA’s “conclusions” vastly overstate Obamacare’s benefits for small businesses, while understating its drawbacks.  Here’s what you need to know about the study, and the issue:


  1. Even the Administration admits take-up of the small business credit has been much lower than expected, and lower than today’s report claims. While today’s study claims that 3.2 million small businesses are eligible for the credit, a February Administration fact sheet conceded that only 360,000 firms will actually benefit from the credit in 2011.  That’s only 11% of the number hyped in today’s report.
  2. The study omits many firms from its definition of “small business,” to make the credit seem more important than it isThe report admits that there are many ways to define small business.  However, it then proceeds to use the narrow definition of small business included in Obamacare – firms with fewer than 25 employees.  In other words, according to the study (and the law), a restaurant with 30 workers is NOT a small business, and does not need help funding its health insurance costs.
  3. The credit is administratively cumbersome and complex, leading many small businesses not to bother claiming it.  For instance, small businesses have to fill out seven separate worksheets in order to receive the credit.  Republicans have pointed out the credit’s administrative complexities since the law passed – and the low take-up rates for the credit are evidence of that fact.
  4. The credit provides little incentive for firms to start offering coverage – the credit’s benefits are time-limited, while the rising costs from offering coverage are permanent.  While the credit will expire for most firms by 2016, firms who use the credit to start offering coverage will face higher costs over time.  There are also premium increases for those small firms that do offer coverage; the law contains dozens of mandates to be implemented over the next several years, each of which could raise premium costs by 1-3 percent.  An article in the New York Times last year highlighted the skyrocketing premium increases faced by small businesses, profiling small firms receiving premium increases of 20, 40, even 60 percent or more.  According to a CBO analysis, the average tax credit would only cover about HALF of the cost of a 20 percent increase in premiums – meaning premium costs will STILL go up every year, even if a company qualified for the credit.
  5. Liberals are now trying to blame conservatives for the flaws in a tax credit they designed.  The Families USA report includes a line claiming that “the current heated political debate about [Obamacare] has created additional barriers to effectively reaching [sic] America’s small business owners with the facts about this new tax credit.”  However, the debate about Obamacare didn’t stop the Administration from spending nearly $1 million in taxpayer funds ($990,000, to be precise) to fund 4 million postcards promoting the tax credit – none of which helped improve enrollment, as noted above.  The facts are that the poor design of the tax credit – like the poor design of the entire law – has led firms to reject this option, just as the American people continue to reject Obamacare.


Finally, it’s worth pointing out that today’s report was conducted for Families USA by the Lewin Group.  The Huffington Post and other liberal allies called Lewin a front group for insurers back in 2009, when it released studies showing how a government-run health plan could cause millions to lose their health insurance.  It will be worth watching to see whether the HuffPo and other liberal groups will similarly criticize today’s Families USA/Lewin study as being biased, when it helps trumpet the talking points of Obamacare supporters.

On Premiums, Believe Barack Obama — or Your Lying Eyes

Last week we highlighted the misleading nature of the Obama re-election campaign’s claims that Obamacare will actually make health care more affordable.  The Obama campaign released its supposed “documentation” regarding this assertion, which makes for some interesting reading.  When it comes to the heart of the affordability debate – whether or not the law will reduce premiums – the only “evidence” the Obama campaign produced was a single study released by the pro-Obamacare advocacy group Families USA.  We thoroughly debunked this study when it was released back in October, but the bottom line is that the study:

  1. Was conducted by a paid consultant for the Obama Administration;
  2. Assumes the law will result in savings;
  3. Fails to admit that the law will NOT result in premiums going down, and that even under their rosy scenario, premiums will only go up by (slightly) less than projected. (The study talks about premium “savings” between now and 2019, but won’t disclose what premiums will actually cost then, because that number would still be MUCH higher than what Americans are paying now.)

The Washington Post’s Fact Checker blog and others aren’t buying this fuzzy math – it noted that “Insurance premiums have gone up, in part because of new benefits mandated by the law.”  The contradiction between rhetoric and reality is both obvious and glaring:

  • Candidate Obama repeatedly promised to CUT premiums by an average of $2,500 per family by the end of his first term (i.e., 2012).
  • Families USA – and by extension the Obama campaign – claims that Obamacare will still result in massive premium increases – but that premium increases between now and 2019 will be $717 less than they would have been without the law.

The American people see every month how much their premiums keep going up, in many cases because of Obamacare, not despite the law.  The Obama campaign’s cynical attempts to distract Americans from the reality of their unpopular law and broken promises – “Who are you going to believe: Me or your lying eyes?” – will not hold water.

Obamacare Underwhelms Yet Again

Today the Treasury’s Inspector General for Tax Administration released a report regarding the small business tax credit.  Recall that Families USA last year issued a study claiming more than 4 million small businesses could qualify for the credit.  The preliminary evidence is now in, and the results are thoroughly underwhelming:

Despite IRS efforts to inform 4.4 million taxpayers who could potentially qualify for the Credit, the volume of claims for the Credit has been low.  The Credit was designed to encourage small employers to offer health care insurance.  However, as of mid-May 2011, the IRS reported that just more than 228,000 taxpayers had claimed the Credit for a total amount of more than $278 million.  While some additional returns can be expected to continue to come in until the extension deadlines later this year, this is substantially lower than the Congressional Budget Office estimate that taxpayers would claim up to $2 billion of Credit for Tax Year 2010.

That means only 5.7% of the small businesses that Families USA claimed would qualify for the credit have actually received it thus far.  And why exactly might the credit have such a low take-up rate?  The report also makes that clear:

  • “The legislation concerning which taxpayers qualify for the Credit and how to calculate the Credit amount is complex.”
  • “There are multiple steps to calculate the Credit, and seven worksheets must be completed in association with claiming the Credit.”
  • “There is a risk of errors or irregularities occurring when the Credit is claimed or processed.  The Credit is new, and both taxpayers and IRS employees will need to acquaint themselves with the rules.”
  • “As described above, the rules themselves are complex, making it difficult for taxpayers to follow.”
  • “The Credit is refundable to tax-exempt taxpayers, which is a high-risk factor for erroneous refunds.  The IRS also had to complete new programming to accommodate the new Form 8941 and identify potential compliance risks.”
  • “Taxpayers have been slow to claim the Credit, and both taxpayers and tax practitioners are making mistakes on Form 8941.”
  • “Based on the information that was available, we concluded that some claims contained errors or were incomplete.”

It’s entirely predictable that this credit was too complex to be of much assistance to small businesses – Republicans pointed that out more than a year ago.  And spending nearly $1 million more in taxpayer funds ($990,000, to be precise) to fund 4 million postcards promoting the tax credit didn’t much help.  Based on 228,000 credits claimed, those IRS postcards cost $4.34 for every firm that has claimed the credit to date – making those postcards immensely expensive by any standard.

Of course, while the small business tax credit is having a nonexistent effect on most small businesses, the nearly $800 billion in higher taxes in the law will have an all-too-real effect on America’s job creators.  Then there are the premium increases for those small firms that do offer coverage – the law contains dozens of mandates to be implemented over the next several years, each of which could raise premium costs by 1-3 percent.  An article in the New York Times highlighted the skyrocketing premium increases faced by small businesses, profiling small firms receiving premium increases of 20, 40, even 60 percent or more.

So while the small business tax credit is doing NOTHING to help most small businesses, other portions of the law are causing significant damage on the entrepreneurs who serve as the engines of economic growth.  It’s yet another reason why Obamacare has proved a disastrous recipe for an American economy struggling to grow.

The Bottom Line: Families USA “Report” a Misleading Sham

Earlier this week, the liberal advocacy group Families USA released a “report” claiming to provide “the bottom line” costs and benefits of Obamacare to American families (including state-by-state analyses, which are being released over the next two weeks).  I was tempted not to dignify the report with an answer, but several press stories about it prompted me to reconsider, as these myths tend to linger if not immediately rebutted.  The bottom line about the “bottom line” report is that it doesn’t attempt to spin the facts surrounding rising premiums and costs so much as it attempts to hide them entirely (although it includes plenty of spin too).  Here are four reasons why:

  1. Modeling for the report was completed by Jonathan Gruber, who was a paid – though undisclosed – consultant on Obamacare itself.  When the controversy surrounding his previously undisclosed Administration contracts arose last year, Gruber alleged that he informed reporters of his paid consultancy “whenever they asked” – but that fact is not referenced anywhere in the report.  Yet nowhere in the report do Families USA and Gruber disclose the fact that the math behind the report was done by a paid consultant to the Obama Administration.
  2. The spin behind the report’s methodology can be found on page 11 of the national report:

The Commonwealth Fund reviewed relevant literature published by several teams of economists that looked at the health care system reforms in the Affordable Care Act as it was developed in Congress.  They reported that a 1.5 percentage point reduction in cost increases annually is realistic.  While many of the cost and quality provisions in the Affordable Care Act started last year or this year, some will not be in place until 2014.  Therefore, for our analysis, Families USA based our modeling on the Commonwealth Fund report’s most conservative cost reduction assumption of only 1.0 percentage point per year starting in 2014.  We believe this assumption is reasonable and defensible.

I’ve highlighted the key words – the report assumes that the law will reduce costs.  That’s like me saying I’m going to plan for retirement by assuming I will win the lottery – it results in all sorts of rosy scenarios, but it’s far from certain whether it will happen.  It’s real easy to assume the law will work to generate lots of “savings,” but as this week’s evaporation of $86 billion in savings due to the CLASS Act debacle showed, they don’t always materialize.  And the Medicare actuary has noted that the law will raise, not lower, overall health spending, and has been generally skeptical about the ability of some of its provisions to slow spending growth over time, saying most of the law’s experiments would have a “negligible financial impact” for the foreseeable future.

  1. The above excerpt from page 11 of the report also includes a key phrase, when it discusses “reduction in cost increases annually.”  So the Families USA study only presumes Obamacare will slow the increase of premiums, NOT reduce them outright.   A report published by the Business Roundtable in November 2009 made similar assertions; Exhibit 1 of that study (depicted below) indicated that under the BRT’s maximum achievable “savings” scenario, large employer premiums in 2019 would still by $12,408 higher than they were in 2009.  But candidate Obama promised to CUT premiums by an average of $2,500 per family, not just to slow their rate of growth; what’s a liberal advocacy group to do?
  2. Here’s where the report plays “hide the ball.”  The Families USA survey focuses solely on “savings” – at NO point does the study disclose what families are paying in premiums in 2011, and what they will be in 2019.  And the reason they don’t disclose the premium amounts is because the trend line would look exactly like the below graph from the BRT study – still skyrocketing, just by slightly less under the rosy scenarios assumed.  In other words, Families USA is attempting to pass off a massive premium INCREASE over the next decade as a SAVINGS to American families – and has to hide the facts to do it.

Even after doing all that, the Families USA report STILL only comes up with $717 in fictitious premium “savings” for those with coverage currently, and $1,571 in overall “savings”* for the average American family, and then only in 2019.  To recap:

  • Candidate Obama repeatedly promised to CUT premiums by an average of $2,500 per family by the end of his first term (i.e., 2012).
  • Families USA is claiming that Obamacare will still result in massive premium increases – but that premium increases between now and 2019 will be $717 less than they would have been without the law.

The fact that Families USA felt the need to resort to such misleading metrics and outright obfuscation is in many respects a tacit admission that Obamacare will not live up to its promise to lower costs – an admission more powerful than the conclusions in the report itself.

* The Families USA report does take the cost of taxes, and the benefits of subsidy payments, into account, which many other reports have not, in an attempt to come up with net costs versus savings.  But the detailed methodological assumptions, and the impact of specific policy changes on spending and premiums, are far from clear – not surprising, given all of the above.