Analyzing the Gimmicks in Warren’s Health Care Plan

Six weeks ago, this publication published “Elizabeth Warren Has a Plan…For Avoiding Your Health Care Questions.” That plan came to fruition last Friday, when Warren released a paper (and two accompanying analyses) claiming that she can fund her single-payer health care program without raising taxes on the middle class.

Both her opponents in the Democratic presidential primary and conservative commentators immediately criticized Warren’s plan for the gimmicks and assumptions used to arrive at her estimate. Her paper claims she can reduce the 10-year cost of single payer—the amount of new federal revenues needed to fund the program, over and above the dollars already spent on health care (e.g., existing federal spending on Medicare, Medicaid, etc.)—from $34 trillion in an October Urban Institute estimate to only $20.5 trillion. On top of this 40 percent reduction in the cost of single payer, Warren claims she can raise the $20.5 trillion without a middle-class tax increase.

Rhetoric vs. Reality: Health Care “Reform” and Jobs

CLAIM:  “So this bill is not only about the health security of America.  It’s about jobs.  In its life it will create 4 million jobs — 400,000 jobs almost immediately.”

— Speaker Pelosi at the White House health summit

FACT:  According to this morning’s release from the Bureau of Labor Statistics, the economy generated only 118,000 jobs during July – still below the 150,000 new jobs per month that most experts agree are needed just to keep up with the growth in the labor force.

FACT:  Former Obama Administration adviser Larry Summers, writing in an op-ed in the Washington Post earlier this week, acknowledged that “it would be surprising if growth were rapid enough to reduce unemployment even to 8.5 percent by the end of 2012” – even though the Administration promised in 2009 that unemployment would not rise below 8 percent if the “stimulus” bill passed.

Six Months Later…

As expected, there’s quite a bit of media coverage this morning of the September 23 festivities marking six months since the health care bill was signed into law.  A couple of key points to keep in mind:

  • In his town hall meeting in Virginia yesterday, the President claimed that “We feel pretty confident that over the long term…premiums are going to be lower than they would be otherwise, health care costs are going to be lower than they would be otherwise.”  That’s not however what the experts have claimed – the Congressional Budget Office confirmed that individual market premiums will go up by an average $2,100 per family more than they would have had the law not passed, and the Administration’s own actuary found that health costs will rise by an extra $310,800,000,000 over the next ten years as a result of the law.
  • While the President said yesterday his health care bill would reduce premiums “over the long term,” he promised immediate relief to struggling families during his presidential campaign.  Here’s what campaign advisor Jason Furman – one of the candidates to replace Larry Summers as the head of the President’s National Economic Council – said in July 2008: “We think we could get to $2,500 in savings by the end of the first term, or be very close to it.”
  • All the benefits being promoted today may be helpful or worthwhile to some – but because they are passed along to all consumers in the form of higher premium costs, everyone will pay for the benefits, regardless of whether or not individuals need, or want, that coverage.  And they are fundamentally inconsistent with the President’s promises – on the campaign and elsewhere – that the law will reduce health costs and lower premiums by $2,500 per family.  The Heritage Foundation has a great new one-pager providing a “Dirty Dozen” list of reasons why the health care law will raise premiums – it’s worth a look.
  • The President was quoted yesterday as saying Republicans should “look you in the eye” and tell a woman with Hodgkin’s disease that she shouldn’t have insurance.  This statement amounts to pure rhetoric on the President’s part, for Republicans have consistently supported high-risk pools for individuals with pre-existing conditions.  In fact, the House Republican health care alternative provided MORE funding for high-risk pools than the health care law itself—and didn’t require individuals with pre-existing conditions to go without insurance for six months before becoming eligible for coverage, as the health care law does.
  • Conversely, John Goodman writes in this morning’s Wall Street Journal about how enrollment in Medicare Advantage will fall by a projected 7.4 million seniors, according to the Medicare actuary, and how seniors will lose billions of dollars in Medicare Advantage benefits, as outlined in a Heritage Foundation study released last week.  Will the President look those seniors in the eye and tell them why they should be forced off their current health plan, or pay hundreds of dollars more a year in out-of-pocket expenses?

A wrap-up of this morning’s coverage of the September 23 events:

Democrat Health “Reform” IS a Massive, Middle-Class Tax Increase

“Very Regressive Tax, Penalizing People Who Cannot Afford to Buy Coverage”

 

 

“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

“Merriam Webster’s Dictionary: Tax—‘a charge, usually of money, imposed by authority on persons or property for public purposes.’”

—George Stephanopoulos, interview with President Obama, September 20, 2009

 

One year after making his now-famous “No new taxes” pledge during the campaign, President Obama has attempted to deny the impact of his health “reform” proposals on the middle class. However, most economists, his own advisors, his previous campaign rhetoric, and sheer logic all dictate that the President should provide straight answers to several inconvenient questions:

  • Finance Committee Chairman Baucus’ bill would require individuals with three times the federal poverty level to spend 13 percent of their income on health coverage premiums. Committee staff estimates found that in 2016—the fourth year after the bill’s mandates and insurance “reforms” would take effect—a family of four making $72,000 would be required to pay up to $9,400 in premium costs alone. Additionally, a family subject to the bill’s maximum annual cost-sharing would spend 29.5 percent of its income on health costs. How is requiring Americans to spend nearly one in seven dollars of income to pay for government-approved insurance, and nearly one in three dollars on potential health care costs—more than a family’s mortgage payments in most parts of the country—not a massive tax increase on the middle class?
  • In a January 31, 2008 presidential debate, candidate Obama asked how a mandate to purchase health insurance would be enforced: “Are you going to garnish [people’s] wages?” Likewise, on Meet the Press in April 2008, Obama’s senior campaign advisor David Axelrod criticized Hillary Clinton on the same grounds: “She said, ‘I will…garnish people’s wages if they don’t sign up for this health care plan’…Her mandate is a mandate on people to buy health insurance.” How is “garnishing people’s wages” to enforce an individual mandate not a tax increase on the middle class?
  • All the Democrat bills include tax penalties, administered through the Internal Revenue Service, for individuals and families who do not purchase “government-approved” coverage. Page 29 of the Baucus bill would subject families with incomes higher than three times poverty to an “excise tax” of up to $3,800 per year. Likewise, page 167 of the introduced version of House Democrats’ government takeover of care (R. 3200) includes the following language: “There is hereby imposed a tax” on individuals who do not purchase “government-approved” insurance—and neither the House nor the Senate bills exempt those with incomes under $250,000 from the penalties. How is what the legislation plainly calls a new tax on all Americans not purchasing “government-approved” insurance not a tax increase on the middle class?
  • Senior Obama Administration officials have also dubbed government mandates to purchase insurance for what they are—tax increases. Chief Health and Human Services policy advisor Sherry Glied has previously written that a mandate has the potential to be a “very regressive tax, penalizing uninsured people who genuinely cannot afford to buy coverage.” Moreover, the National Economic Council Director, Larry Summers, has also written that government mandates to purchase or provide various benefits “are like public programs financed by benefit taxes,” and that most economists regard such mandates “as simply disguised tax and expenditure measures.” How is what one of the Administration’s own advisors called a “very regressive tax” not a tax increase on the middle class?
  • The Baucus bill includes nearly $215 billion in tax increases on insurance companies who offer high-value insurance policies—which the President endorsed in his address to Congress. Both business and union groups alike are concerned that these taxes will be passed on to middle-class families in the form of higher premiums—exactly what candidate Obama criticized during his campaign as “taxing people’s benefits.” How is raising Americans’ insurance premiums through indirect taxes on insurance companies, and then forcing all individuals to purchase this more expensive coverage, not a tax increase on the middle class?
  • The Baucus bill also includes an additional $93 billion in “industry fees” on insurance companies, pharmaceutical companies, device manufacturers, and clinical labs. Many economists agree that some, if not most, of these tax increases will be passed on to consumers of all incomes. How are higher fees for life-saving medical services used by millions of Americans not a tax increase on the middle class?

Given the overwhelming arguments—from Administration officials, President Obama’s prior statements, and the legislation itself—many may view the Democrat health “reform” agenda as imposing tens of thousands of dollars in tax increases on vulnerable middle-class families to fund a government takeover of health care.

Larry Summers Admits: Obama Plan IS a Government Takeover of Health Care

Senior Advisor “Calls Out” President’s Own Agenda

 

“Now my proposal has been attacked by some who oppose reform as a ‘government takeover’ of the entire health care system….If you misrepresent what’s in this plan, we will call you out.”

— President Obama, address to Joint Session of Congress

 

Even as he derides opponents who criticize his health “reform” proposals, President Obama may do well to listen to the words of his own National Economic Council Director, Larry Summers, who in an earlier article admitted that mandates on employers and individuals to provide and purchase health coverage amount to a government takeover of health care:

  • The main thesis of the paper—which analyzes government mandates on employers to provide various benefits—finds that “essentially, mandated benefits are like public programs financed by benefit taxes. This makes them more efficient but less equitable than standard public programs.”
  • The article admits that “economists have generally devoted little attention to mandated benefits—regarding them as simply disguised tax and expenditure measures.”
  • To justify government-mandated benefits, Summers argues in favor of “paternalism” by government and employers—because individuals “may irrationally underestimate the probability of catastrophic health expenses,” or may be “especially inept at making inter-temporal decisions.”
  • The Summers analysis further includes the impact of government-mandated benefits: “Requiring employers to pay for employee leaves [or health care benefits] shifts their demand curve downwards…A new equilibrium level of employment and wages is reached, with lower wages and employment, but in general employment will be reduced by less” than under a system of government-provided benefits.
  • Finally, the article discusses potential downsides to mandated benefits—if the cost of health care is higher for older or sicker workers, “there will be efficiency consequences as employers seek to hire workers with lower benefit costs.”

In sum therefore, Summers makes the following points, all of which relate to the current debate:

  • Mandates on employers to offer—and individuals to purchase—health coverage amount to new federal programs, and thus a government takeover of health care for all Americans;
  • Employer-provided benefits are “more efficient” than “standard public programs”—so an inefficient government-run health plan should not be needed;
  • Mandates to purchase coverage are taxes—so the President’s individual mandate breaks his “firm pledge” that “no family making less than $250,000 a year will see any form of tax increase;”
  • Government should mandate the purchase of health coverage due to the “irrational” and “inept” behavior of individuals who do not wish to purchase it;
  • Mandated benefits will lead to lower wages and employment—even as unemployment nears 10 percent; and
  • Because they discourage the hiring of sicker workers, “mandated benefit programs can work against the interests of those who most require the benefit being offered.”

Given these characterizations by one of his senior advisors, will President Obama now call out the Democrat plan for what it is—a government takeover of health care?

Obama’s Tax Increase Bombshell

“If You Like Obama’s No-Tax Promise…He May Not Keep It”

 

“White House Budget Director Peter R. Orszag acknowledged, ‘there are additional steps that will be necessary’ [to reduce deficit spending]….Treasury Secretary Timothy F. Geithner and White House economic advisor Lawrence H. Summers have both delicately sidestepped the tax question…Orszag has also refused to discuss what steps Obama might take to reduce the deficit in the budget blueprint he will present to Congress in February.”

The Washington Post, “Tax Pledge Is A Target As Deficits, Debt Grow: Obama Advisers Will Not Rule Out Broad-Based Hike,” August 29, 2009

 

In announcing the release of updated deficit projections totaling more than $9 trillion over the next decade, Office of Management and Budget Director Peter Orszag vowed that next year’s White House budget submission would make deficit reduction a “top priority.” An examination of comments made by senior Administration officials over the past several months demonstrates a clear indication of the main ingredient in any Obama deficit reduction package—job-killing tax increases:

BOB SCHIEFFER: No—no tax increases for middle-income Americans?

LARRY SUMMERS: …There’s a lot—oh, there’s a lot that can happen over time. But the priority right now, and so it’s never a good idea to absolutely rule things—rule things out no matter what.

Face the Nation, August 2, 2009

TIM GEITHNER: When we have the recovery established…then we have to bring these deficits down very dramatically….And that’s going to require some very hard choices….

GEORGE STEPHANOPOULOS: So revenues are on the table, as well?

GEITHNER: Again, we’re not at the point yet where we’re going to make a judgment about what it’s going to take….

STEPHANOPOULOS: But you’re not ruling it out, you can’t rule it out.

GEITHNER: I think what the country needs to do is understand we’re going to have to do what it takes, we’re going to do what’s necessary.

This Week, August 2, 2009

QUESTION: The President on the campaign said that—he made a flat pledge that he would not raise taxes on anybody making under $250,000.  So is that pledge still operable?

ROBERT GIBBS:  Well, again, I think in some ways your question is hypothetical because there are any number of different bills, different proposals.  I think the President has outlined what he believes is the very best way to pay for health care.

QUESTION: He said, I am not going to raise taxes on anyone making under $250,000.  Is that pledge still active?

GIBBS:  We are going to let the process work its way through.

— White House press briefing, June 29, 2009

GEORGE STEPHANOPOULOS: That would get—would be a tax increase for many families earning under $250,000. But the president said he was open to it. So that means that the tax pledge he made back in September is no longer operative?

AXELROD: Well, George, first of all, there are a lot of different formulations of that plan….But there are a number of formulations, and we’ll wait and see. The important thing at this point is to keep the process moving, to keep people at the table, to the keep the discussions going. We’ve gotten a long way down the road and we want to finish that journey.

STEPHANOPOULOS: But if you’re open to tax increases for people under $250,000, that means that the pledge he made last September in Dover is no longer operative.

AXELROD: George, I think the president has made clear the way he feels this should be funded.

This Week, June 28, 2009

OMB Director Orszag’s comments about an impending deficit reduction package, coupled with comments from senior officials indicating a growing White House consensus about yet more job-killing tax increases, raises additional questions about the Administration’s fiscal priorities—and its candor with the American people about its true intent:

  • What exactly is the Administration’s secret plan to reduce the deficit? What kind of tax increases does it include?
  • If deficit reduction is such a “top priority,” as OMB Director Orszag claimed, why will the Administration wait months longer before bringing its proposals forward? Is the White House concealing its deficit reduction plans until February to prevent the erosion of yet more support for a $1.6 trillion government takeover of health care that Democrats intend to ram through this year?
  • Does the Administration believe that the more than $800 billion in tax increases in House Democrats’ health “reform” legislation (H.R. 3200) are insufficient to finance the full measure of Democrats’ appetite for government spending?
  • As the White House’s own budget estimates project an average unemployment rate of 8.6 percent in 2011, why does the Administration seem insistent on proposing new job-killing taxes? How many jobs does the Administration believe its apparent new tax increases will demolish or destroy?
  • Given Administration officials’ repeated refusal to re-state President Obama’s campaign pledge that “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,” what faith can the American people place in the President’s health care pledge that “If you like your current plan, you can keep it?”

Given the White House’s apparent legislative strategy—enact a government takeover of health care this year, with additional tax increases to finance new spending next year—many Americans may question how serious the Administration is regarding deficit reduction if it fails to take on exploding government spending—and how badly the struggling economy will be damaged by the new tax increases to pay for it.

Weekly Newsletter: April 20, 2009

Administration Reiterates Support for Government Rationing to Reduce Health Costs

Yesterday, National Economic Council Director Larry Summers appeared on Meet the Press, where he offered his comments on the Administration’s health reform proposals.  Asked how the Administration intended to pay for the $1.5 trillion cost of its proposed new government-run health plan, Summers responded that “cost-effectiveness research [and] doing a better job on reimbursements” would achieve savings—“we could take as much as $700 billion a year out of our health care system.”

Some Members may be concerned that these comments, coupled with President Obama’s stated desire to create a government-run health plan that would cause as many as 120 million Americans to lose their current health coverage, would result in explicit rationing of care by government bureaucrats in order to pay for the costs of the Administration’s universal coverage scheme.  Some Members may also question how many jobs will be lost as a result of this arbitrary reduction of up to $700 billion in health care expenditures.

A previously prepared Policy Brief on the potential for health care rationing as a result of proposals in the Obama budget can be found here.

If It Walks Like a Duck…

During Congress’ two-week Easter recess, Administration officials and others have been talking about a government-run health plan, and how a so-called “public option” could be structured in such a manner as to address Member concerns on the issue.  On Wednesday, the head of the White House Office of Health Reform, Nancy-Ann DeParle, claimed that a government-run plan need not look like Medicare, and that, “when you start talking to [Members of Congress] about what [a government-run plan] might look like, you realize that you’re talking about two different things.”

However, many Members may remain concerned that the very nature of a government-run health plan means that it will end up eliminating private health coverage.  Congressional Budget Office Director Elmendorf recently testified that it would be “extremely difficult” to have a government-run plan compete “on a level playing field” with private coverage—and Democrats’ own actions prove that point.  For instance, some Members may note that the same Obama Administration that proposed a “level playing field” between a government-run health plan and private coverage want to eliminate the private market for student lending, forcing all students to use the government-run plan for college loans.  Some Members may therefore be concerned that Democrats would purposefully use a government-run health plan, no matter its structure, in order to eradicate private health coverage—just as they are currently attempting to do with the student loan marketplace.

A Policy Brief outlining potential concerns with a government-run health plan can be found here.

A Victory for Honest Budgeting

Just before the Easter recess, the Congressional Budget Office (CBO) released a letter with significant implications for the upcoming health reform debate.  In a letter to House Budget Committee Chairman Spratt, CBO defended its estimates for current law spending under Medicare—including the impact of a 21% cut in physician reimbursement levels scheduled to occur in January under the Sustainable Growth Rate (SGR) mechanism.  CBO Director Elmendorf noted it is unclear whether reductions in physician payment levels would, for instance, cause hospital spending to rise—a scenario which would likely reduce the estimated $285 billion cost of repealing the SGR.

Some Members may be heartened by this assessment, and what it portends for its analysis of health reform proposals.  Democrats have already admitted the implications of the CBO scoring model on the Congressional debate, with Senate Finance Committee Chairman Baucus going so far as to claim that the success or failure of health reform legislation hinges on the actions of CBO Director Elmendorf.  Yet despite Chairman Baucus’ public comments—and a letter from Chairman Spratt designed to create “phantom” budgetary savings unsupported by evidence—CBO has thus far indicated that it will not be moved by Democrat political pressure.  In a world of record budget deficits and seemingly unrestrained spending, some Members may find CBO’s impartial, evidence-based philosophy to budgetary score-keeping to date a refreshing approach.

Article of Note: A Democrat Leader Cautions His Party

Last Monday, a voice from the 1993-94 health reform debate re-surfaced to offer President Obama and Congressional Democrats advice on over-reaching in their efforts this time round.  Former House Majority Leader Dick Gephardt (D-MO), in an interview with the New York Times, warned his fellow Democrats to spend more time focusing on reducing health costs and less time on creating a government-run health insurance plan for all Americans.  Gephardt—who unsuccessfully attempted to cobble together a health reform bill that could pass the House in the summer of 1994—said that universal coverage “needs to be dealt with.  But the way to get to it is to show that we can deal with some of these problems [i.e. skyrocketing health costs] first.”

Some Members may agree with former Leader Gephardt’s assessment, and believe that slowing the growth of health costs while placing our existing entitlement programs on a stable long-term footing should take precedence over creating a new government-run health plan.  Medicare currently faces unfunded obligations of $36 trillion, and its Hospital Insurance Trust Fund is scheduled to be exhausted as soon as 2016.  However, Democrats have put forth no comprehensive plan to solve Medicare’s shortfalls, and President Obama proposed to use Medicare savings in order to create a “reserve fund” financing new entitlements—taking money from a program for seniors to expand health coverage for the young.  Some Members may believe that spending as much as $1.5 trillion on a new government-run health plan is precisely the wrong way to control costs, and that expanding competition—not government—represents a better approach to health reform.

Read the article here.