Democrats’ Taxing Health Care Promises

July’s Democratic presidential debates left seasoned health policy professionals confused, struggling to understand both the candidates’ policies and the differences among them. But working families should find Democrats’ health care debate taxing for another reason. For all their vows that Americans can obtain unlimited “free” health care while only “the rich” will pay, the major candidates are writing out checks that will end up on middle class families’ tab.

In this debate, Bernie Sanders wins credit for candor, in the sense that he has dissembled less than his opponents. Admitting that his single-payer plan will require tax hikes, in April Sanders proposed a 4% income tax, along with a 7.5% payroll tax, among other revenue increases to fund his system.

Unfortunately for Sanders, however, the Committee for a Responsible Federal Budget believes the tax increases he has proposed to date will pay for only about half of the more than $30 trillion cost of his single-payer scheme. In that, the organization echoes experience from Sanders’ home state of Vermont. In 2014, Gov. Peter Shumlin abandoned efforts to enact a state-based single payer system, because the accompanying tax increases created “a risk of an economic shock.” Shumlin said single payer in Vermont would have required a 9.5% income tax, and an 11.5% payroll tax—far higher levels than Sanders has proposed.

While Sanders admits that the middle class will pay more taxes to fund single payer, both he and Elizabeth Warren argue that families will save overall, because the program would eliminate premiums, deductibles, and other forms of cost-sharing. Unfortunately, studies from across the political spectrum—from the conservative Heartland Institute to former Clinton Administration official Kenneth Thorpe—disagree.

In 2016, Thorpe concluded that 71% of households would pay more under a Sanders plan fully funded by tax increases. Low-income households would get hit even worse, with 85% of families on Medicaid paying more. Since then, Sanders has only increased the generosity of his single-payer proposal, meaning taxes on the middle class could rise even more than Thorpe originally estimated.

Perhaps to elide the tax landmines, Kamala Harris’ plan breaks with Warren and Sanders, delaying the move to a single payer system for a decade. She claims the delay “will lower the overall cost of the program”—but only until the program phases in fully. At that point, her pledge not to raise taxes on families making under $100,000 will prove unsustainable. But if Harris has her way, a 10-year delay until full implementation of single-payer could punt the tax problem to her successor.

As for Joe Biden, he has tried to portray himself as protecting middle class families from the tax hikes he calls inevitable under the other major contenders’ plans. But Biden has two problems.

First, Biden supports restoring Obamacare’s individual mandate penalty, which Republicans eliminated in 2017. The Supreme Court in 2012 dubbed the mandate a tax—and that tax happens to hit the middle class hard. The most recent IRS data show that in 2016, of the $3.6 billion in mandate penalties paid by American households, nearly 63% came from households with incomes of under $50,000, and more than 88% came from households with incomes below $100,000.

Second, as the Wall Street Journal reported back in July, Biden over the past two years deliberately utilized tax loopholes to avoid paying Obamacare taxes. By classifying more than $13 million in proceeds from books and speeches as profits from his corporations, rather than wage income, Joe and Jill Biden circumvented nearly $500,000 in self-employment taxes—taxes that fund Obamacare and Medicare.

Biden’s behavior, which multiple experts interviewed by the Journal called legally questionable, belies both his “Middle Class Joe” reputation and his support for Obamacare. Apparently, Biden supports Obamacare only if someone else will pay for it. But if a one-percenter like Joe Biden finds paying for the Affordable Care Act unaffordable for him, then whom would Biden hit to pay the $750 billion price tag of his Obamacare expansion efforts? Why, the middle class, of course.

Biden’s unwillingness to pay the taxes associated with an Obamacare law he purportedly wants to protect epitomizes Margaret Thatcher’s axiom that socialists eventually run out of other people’s money. At the rate he and his fellow candidates are racking up costly health care promises, that moment seems very near at hand.

This post was originally published at The Daily Wire.

Democrats Agree: Free Health Coverage for Undocumented Immigrants

If a picture is worth a thousand words, then three series of pictures, featuring Democrats discussing health benefits for those in this country illegally, speak volumes. First, Hillary Clinton in September 1993:

Finally, Democratic candidates for president last night:

Whereas Indiana Mayor Pete Buttigieg called coverage for illegal immigrants an “insurance program” and “not a hand out,” Clinton said in 1993—well before the most recent waves of migration—that “we do not want to do anything to encourage more illegal immigration into this country. We know now that too many people come in for medical care, as it is. We certainly don’t want them having the same benefits that American citizens are entitled to have.”

Likewise, whereas Joe Biden said “you cannot let people who are sick, no matter where they come from, no matter what their status, go uncovered,” the president whom he worked for promised the American people that “the reforms I’m proposing would not apply to those who are here illegally.” Granted, the promise had a major catch to it—Obamacare verifies citizenship but not identity, allowing people here illegally to obtain benefits using fraudulent documents—but at least he felt the need to make the pledge in the first place. No longer.

Ironically enough, even as all Democrats supported giving coverage to illegally present foreigners, the candidates seemed less united on whether, how, and from whom to take health insurance away from U.S. citizens. Only Sens. Kamala Harris and Bernie Sanders said they supported abolishing private health insurance, as Sanders’ single-payer bill would do (and as Sen. Elizabeth Warren and New York Mayor Bill de Blasio pledged on Wednesday evening). For Harris, it represents a return to her position of January, after fudging the issue in a follow-up interview with CNN last month.

As usual, Sanders made typically hyperbolic—and false—claims about his plan. He said that his bill would make health care a human right, even though it does no such thing. In truth, the legislation guarantees that individuals would have their bills paid for—but only if they can find a doctor or hospital willing to treat them.

While Sanders pledged that under his bill, individuals could go to whatever doctor or hospital they wished, such a promise has two main flaws. First, his bill does not—and arguably, the federal government cannot—force a given doctor to treat a given patient. Second, given the reimbursement reductions likely under single payer, many doctors could decide to leave the profession altogether.

Sanders’ home state provided a reality check during the debate. Candidates critical of single payer noted that Vermont had to abandon its dream of socialized medicine in 2014, when the tax increases needed to fund such a program proved too overwhelming.

Shumlin gave his fellow Democrats a valuable lesson. Based on the radical, and radically unaffordable, proposals discussed in this week’s debates—from single-payer health care, to coverage for undocumented immigrants, to “free” college and student loan forgiveness, and on and on—they seem hellbent on ignoring it.

This post was originally published at The Federalist.

Waiver Wrap-Up

Two quick hits on the state waiver program proposed by the President yesterday, followed by a summary of stories in major dailies this morning regarding the announcement:

Medicaid Exempt from Waiver Program?  Administration officials claimed yesterday that the waiver program would “allow…states to move some of their Medicaid-eligible populations into the exchange.”  However, the text of the state waiver program does not appear to address Medicaid at all.  Section 1332(a)(2) of the law (page 98) lists the statutory requirements that the Secretary can waive under the innovation program:

(2) REQUIREMENTS.—The requirements described in this paragraph with respect to health insurance coverage within the State for plan years beginning on or after January 1, 2014, are as follows:

(A) Part I of subtitle D. [Essential health benefits package – but ONLY IF the coverage to be provided is “at least as comprehensive” as the essential benefits package propounded by the Secretary in rulemaking]

(B) Part II of subtitle D. [Requirements for Exchanges]

(C) Section 1402. [Cost-sharing subsidies in Exchanges]

(D) Sections 36B [Exchange subsidies], 4980H [Employer mandate], and 5000A [Individual mandate] of the Internal Revenue Code of 1986.

In other words, there is NOTHING in the waiver program that would allow states to opt-out of the new Medicaid mandate created in Section 2001 of the bill, release states from the unfunded mandates created by same, or allow low-income individuals to receive coverage other than that provided by Medicaid.  To be sure, it is possible that other sections of the law could be used to allow states to enroll their low-income Medicaid beneficiaries in Exchange coverage.  But given that the waiver section of the statute explicitly excludes the Medicaid mandate as a requirement from which states can receive an exemption, it appears implausible for the Administration to claim that the waiver program would grant states ANY flexibility in managing their Medicaid populations. (It’s also worth why asking Democrats’ health care law was drafted so that low-income Medicaid beneficiaries can’t participate in the state-based approaches under the innovation waiver program.)

Double-Standards on Block Grants?  Section 1332(a)(3) of the statute provides states participating in the waiver program the opportunity to receive a “pass through” of funding – in other words, states can receive the aggregate amount of insurance subsidies their eligible populations would have received had they been enrolled in Exchanges, and devote that funding to other coverage expansions.  For this reason the New York Times called the waiver concept a “block grant.”  But yet coming out of yesterday’s White House meeting, Administration officials “douse[d] cold water on the idea” of a block grant for Medicaid.

Likewise, the Center for Budget and Policy Priorities (CBPP) last week published a paper criticizing a proposed Medicaid block grant as saying it would provide “inadequate federal funding” of Medicaid, because federal spending on the program would only be allowed to grow at the rate of economic (i.e., GDP) growth plus one percent.  Yet Section 3403 (page 413) of the health care law creates the EXACT SAME growth level for Medicare – GDP plus one percent.

All this raises obvious questions:

  • Why does the Administration support a block grant for Exchange subsidies but not for Medicaid?
  • Why does CBPP believe a GDP plus one percent growth level will provide “inadequate federal funding” for Medicaid but not Medicare?
  • Do these positions have something to do with the fact that Republican governors are the ones arguing for a Medicaid block grant?
  • Or is this inflexibility – to say nothing of potential hypocrisy – on Medicaid based on the belief that governors should not be allowed to innovate without meeting top-down, Washington-imposed standards?


Summary of Reactions to the President’s Waiver Proposal

Associated Press:  “[The President’s proposal] would be no change to the fundamental requirements of a federal law that has divided the nation and prompted about half the states to try to overturn it through lawsuits….‘I was disappointed,’ said Texas Gov. Rick Perry, chairman of the Republican Governors Association.  ‘Pretty much all he did was reset the clock on what many of us consider a ticking time bomb’ that could ‘crush our budgets’….The closer Republicans look at the details, the less flexibility they will see, said economist Douglas Holtz-Eakin, leading domestic policy adviser to 2008 GOP presidential candidate John McCain.  ‘If you can’t control eligibility or the benefits package, it’s like saying: “Here’s the bill, you go figure out how to pay for it,”’ he said….For his part, Obama showed no give on the law’s core elements. He said was convinced the law would cut costs, end insurance industry abuses and ‘cover everybody.’”

New York Times:  “Political calculations, as much as policy ones, were at work in the President’s announcement….While some Republican governors praised Mr. Obama for reaching out, they said the move did not address their underlying discomfort with the law or the major structural flaws facing state budgets….Many [Democrats] are convinced that it is not possible to expand health care coverage and achieve deficit reductions without the federal mandate….At the same time, the mandate, and the health care law more generally, is sure to be an issue in the President’s 2012 re-election campaign, which may be a reason he is offering the proposal now.  ‘It’s to his advantage to show that he wants to be more moderate on this…because the mandate is terribly unpopular politically and he doesn’t want to be saddled with that going into the next election.’”

Washington Post: “President Obama sought to defuse criticism of the new health care overhaul Monday by saying he is willing to give states an earlier opportunity to opt out of certain key requirements – but only if they can find their own ways to accomplish the law’s goals….Governors’ more immediate focus was on the potentially crushing burden of rising Medicaid costs….New Jersey Gov. Chris Christie said that on the question of Medicaid flexibility, the President ‘said some very nice things and he says them really nicely.’  But, he added, ‘I didn’t hear any real substance’ that would suggest the governors will get what they want….[Former HHS Secretary] Mike Leavitt…called Obama’s announcement ‘sort of a hollow victory,’ [claiming that] Obama was essentially telling states, ‘“We’ll give you permission to ask for permission sooner rather than later.”  What Republicans are saying is that we don’t want to have to ask for permission at all, because we can’t afford to build the system that you’ve laid out for us.’”

Wall Street Journal:  “Few states are expected to seek the health-law waivers, and the move did little to appease elected Republicans, who are overwhelmingly opposed to the law.  ‘That doesn’t help us any,’ said South Carolina Gov. Nikki Haley, a Republican.  ‘They’d do us a favor if they let us opt out’ of the entire law….Vermont Gov. Peter Shumlin, a Democrat, said the change would make it easier for his state to develop a ‘single-payer’ plan, under which the state would be the central funder of health care.”