How an Obscure Regulatory Change Could Transform American Health Insurance

Between the election campaign and incidents of terrorism ranging from attempted bombings to a synagogue shooting, an obscure regulatory proposal by the Trump administration has yet to captivate the public’s attention. However, it has the potential to change the way millions of Americans obtain health insurance.

In the United States, unique among industrialized countries, most Americans under age 65 receive health coverage from their employers. This occurs largely due to an Internal Revenue Service (IRS) ruling issued during World War II, which excluded health insurance coverage from income and payroll taxes. (Businesses viewed providing health insurance as one way around wartime wage and price controls.)

The Trump administration’s proposed rule would, if finalized, allow businesses to make a pretax contribution towards individual health insurance—that is, coverage that individuals own and select, rather than employers. This change may take time to have an impact, but it could lead to a much more portable system of health insurance—which would help to solve the pre-existing condition problem.

How Would It Work?

Under the proposed rule, employers could provide funds through a Health Reimbursement Arrangement (HRA) to subsidize the purchase of individual health insurance. Employers could provide the funds on a pretax basis, and—provided that the workers purchase their coverage outside of the Obamacare exchanges—employees could pay their share of the premiums on a tax-free basis as well.

In practical terms, some employers may choose to provide a subsidy for health coverage—say, $300 per month, or $5,000 per year—in lieu of offering a firm-sponsored health plan. Individuals could go out and buy the plan they want, which covers the doctors whom they use, rather than remaining stuck with the plan their employer offers. And employers would get better predictability for their health expenses by knowing their exposure would remain fixed to the sums they contribute every year.

Could Employers Game the System?

The proposed rule acknowledged the possibility that employers might try to “offload” their costliest patients into individual health coverage, lowering expenses (and therefore premiums) for the people who remain. The rule contains several provisions designed to protect against this possibility.

Employers must choose to offer either an HRA contribution towards individual coverage or a group health plan. They cannot offer both options, and whatever option they select, they must make the same decision for an entire class of workers.

A “class” of workers would mean all full-time employees, or all part-time employees, or all employees under one collective bargaining agreement. Hourly and salaried workers would not count as separate “classes,” because firms could easily convert workers from one form of compensation to another. These provisions seek to ensure that firms will offer some employees health insurance, while “dumping” other employees on to individual coverage.

Can Workers Buy Short-Term Coverage with Employer Funds?

Yes—and no. The proposed rule would allow HRA funds to purchase only individual (i.e., Obamacare-compliant) health insurance coverage, not short-term insurance.

However, the rule creates a separate type of account to which employers could contribute that would fund workers’ “excepted benefits.” This term could include things like long-term care insurance, vision and dental insurance, and the new short-term plans the Trump administration has permitted. But employers could only fund these accounts up to a maximum of $1,800 per year, and they could create these special “excepted benefits” accounts only if they do not offer an HRA that reimburses workers for individual insurance, as outlined above.

Will Firms Drop Health Coverage?

Some firms may explore the HRA option over time. However, the extent to which businesses embrace defined-contribution coverage may depend upon the viability of the individual health insurance market, and the status of the labor market.

However, if and when more insurers return to the marketplace, firms may view the defined-contribution method of health coverage as a win-win: employees get more choices and employers get predictability over health costs. Particularly if unemployment ticks upward, or one firm in an industry makes the move towards the HRA model, other businesses may follow suit in short order.

Will the Proposal Cost Money?

It could. The proposed rule should cost the federal government $29.7 billion over the first ten years. That estimate assumes that 800,000 firms, offering coverage to 10.7 million people, will use the HRA option by 2028. (It also assumes an 800,000 reduction in the number of uninsured Americans by that same year.)

The cost, or savings, to the federal government could vary widely, depending on factors like:

  • Whether firms using the HRA option previously offered coverage. If firms that did not offer coverage take the HRA option, pretax health insurance payments would increase, reducing tax revenues. (The rule assumes a reduction in income and payroll tax revenue of $13 billion in 2028.)
  • Whether individuals enrolling in individual market coverage via the HRA option are more or less healthy than current enrollees. If the new enrollees are less healthy than current enrollees, individual market premiums will rise, as will spending on Obamacare subsidies for those individuals. (The rule assumes a 1 percent increase in individual market premiums, and thus exchange subsidies.)
  • The extent to which HRAs affect eligibility for Obamacare subsidies. If some low-income individuals whose employers previously did not offer coverage now qualify for HRA subsidies, they may lose eligibility for Obamacare subsidies on the exchanges. (The rule assumes a reduction in Obamacare subsidies of $6.9 billion in 2028.)

Given the many variables in play, the rule has a highly uncertain fiscal impact. It could cost the federal government billions (or more) per year, save the federal government similar sums, or have largely offsetting effects.

An Overdue (and Welcome) Change

The proposed rule would codify the last element of last October’s executive order on health care. It follows the release of rules regarding both short-term health insurance and association health plans earlier this year.

Ironically, the Trump administration represents but the most recent Republican presidency to examine the possibility of defined-contribution health insurance. While working on Capitol Hill in 2008, I tried to encourage the Bush administration to adopt guidance similar to that in the proposed rule. However, policy disagreements—including objections raised by, of all places, scholars at the Heritage Foundation—precluded the Bush administration from finalizing the changes.

Since I’ve fought for this concept for more than a decade, and included it in a series of regulatory changes the administration needed to make in a paper released shortly before Trump took office, I can attest that this change is as welcome—and needed—since it is overdue. Although overshadowed at the time of its release, this rule could have a substantial effect on Americans’ health insurance choices over time.

This post was originally published at The Federalist.

Gov. Jindal Op-Ed: Obamacare Is Anything But Compassionate

The verdict is in, and it’s not good: Obamacare is rippling through the U.S. economy with vast implications for American prosperity.

On Friday, we learned that the Obama economy has hit stall speed, with a paltry 113,000 jobs added in January.

Two days earlier, we learned the president’s health care law is discouraging Americans from working, according to an analysis by the nonpartisan Congressional Budget Office . The report makes for bracing reading. The law will reduce the labor supply by the equivalent of 2.3 million full-time workers, the CBO says — up from an estimated 800,000 just three years ago.

It gets worse. The CBO also concluded that the law’s “expanded Medicaid eligibility … will, on balance, reduce incentives to work.” Think about that: Obamacare is giving low-income Americans fewer reasons to work — to find and pursue the jobs that could transform their lives and the lives of those around them. The president talks a lot about tackling inequality. But his health care law is a recipe for increasing inequality, not decreasing it.

Obamacare’s Medicaid expansion doesn’t just discourage work; it also prioritizes coverage for able-bodied adults over the needs of persons with disabilities. That’s a dirty little secret the Obama administration and its liberal allies, in their rush to expand government-funded health coverage to millions more Americans, won’t tell you. And it’s yet another reason why states should resist the siren song of the administration and its leftist supporters, who plan to spend 2014 persuading them to embrace the expansion.

According to the Kaiser Family Foundation, in 2012 more than half a million seniors and people with disabilities on state Medicaid lists were awaiting access to home and community-based services. Prompt access to these services could keep individuals with disabilities out of institutions, which are often more costly.

Yet Obamacare provides states with a much greater federal Medicaid match — 100 percent for the first three years, phasing down to 90 percent over time — to cover previously ineligible low-income individuals. According to the Urban Institute, nearly five in six adults to be covered under the Medicaid expansion are adults without children, most in their prime working years.

In other words, Obamacare’s incentive structure places a greater emphasis on expanding coverage to these able-bodied adults — the vast majority of whom could be working or preparing for work — than helping the individuals with disabilities Medicaid was initially created to serve.

That’s not compassionate — just the opposite, in fact. So while the president’s advisers ask why states aren’t expanding Medicaid under Obamacare, I have another question for President Obama: Why is expanding Medicaid to cover millions of working-age Americans a bigger priority than giving access to hundreds of thousands of people with disabilities waiting for care?

To me, the answer is simple: It shouldn’t be. I won’t take lectures on compassion from those whose skewed priorities jeopardize critical coverage for America’s neediest citizens, those for whom Medicaid was designed. Expanding eligibility to working adults will only crowd out resources that should be invested in caring for our most vulnerable. That’s why my administration is focused on reforming our Medicaid system to extend access to critical services for people with disabilities, not participating in Obamacare’s massive and costly expansion to new categories of individuals. We have also focused on improving health care coverage for another population Medicaid was originally designed to protect: uninsured children. I am proud to say that 95.6 percent of Louisiana children have health insurance.

In Louisiana we are focused on strengthening the safety net for children and people with disabilities. Our proposed budget for next fiscal year includes $26 million in new funding of home and community-based services for elderly individuals and people with disabilities — part of a 50 percent increase in spending on these services since we took office. We’ve increased the number of participants in home and community-based programs by nearly 5,000 people, and this year’s funding ultimately will reduce waiting lists by more than 4,000. We also are in the process of designing a major transformation of these programs that will result in better-integrated and coordinated care.

Helping people stay healthier and more independent not only improves quality of life, it saves money. And those savings can be reinvested in these programs to serve more Americans and shorten the wait for these critical services.

Obama has defended his health care law by stating, “We are a compassionate nation”— implying that the millions who oppose it are not. That’s as wrong as it is insulting. A law that gives Americans with low income additional incentives not to work and prioritizes able-bodied adults ahead of persons with disabilities demonstrates a fundamentally flawed definition of “compassion.”

This post was originally published in Politico.

How Obamacare Undermines American Values: Penalizing Work, Marriage, Citizenship, and the Disabled

A PDF of this Backgrounder is available on the Heritage Foundation website.

”We are a compassionate nation,” President Barack Obama recently stated in his weekly radio address, talking about the health care law—implying that critics of Obamacare are not.[1] Nothing could be further from the truth. Obamacare itself is an uncompassionate law.

While President Obama and his fellow liberals may have held the best of intentions while ramming Obamacare through Congress, the law’s policies are far from compassionate toward the uninsured and Americans with low and modest incomes. Obamacare discourages work, penalizes marriage, places citizens at a disadvantage compared with non-citizens, and prioritizes coverage for able-bodied adults over services and supports for the disabled.

To restore the values of hard work that Americans have held dear for centuries, Congress should repeal all of Obamacare. Further, Congress should reexamine other tax and welfare policies with an eye toward encouraging work and marriage.

Obamacare Creates Inequities

Many of Obamacare’s flaws are well known.[2] According to the Congressional Budget Office (CBO), the law will spend nearly $1.8 trillion over the next 10 years on new insurance subsidies and an expanded Medicaid program.[3] However, inherent design flaws in that subsidy regime will create winners and losers in a way that penalizes both work and marriage and that prioritizes the able-bodied over the disabled and citizens over non-citizens.

Rather than “spreading the wealth around” as then-Senator Obama famously discussed during his 2008 campaign, Obamacare will actually concentrate wealth.[4] By penalizing work, the law fundamentally acts as a brake on low-income and middle-income families’ desire to prosper. Instead of improving their prospects to succeed, Obamacare focuses solely on making their current status less bleak. The American people deserve better than Obamacare’s dystopian vision.

Inequity #1: Discouraging Work

Many of the inequities present in Obamacare stem from Section 1401 of the law, which establishes eligibility for subsidized insurance in government-run exchanges.[5] Obamacare’s formulae for allocating federal premium and cost-sharing subsidies include several “cliffs.” At these cliffs, individuals and families will actually benefit more by working less because additional earnings could cause them to lose thousands of dollars in taxpayer-funded subsidies.

For example, Obamacare subsidizes insurance premiums for individuals with incomes of up to 400 percent of the federal poverty level (FPL), which is just over $62,000 for a couple in 2013.[6] According to the Kaiser Family Foundation’s subsidy calculator, a married couple, each 50 years old, making a combined $60,000 per year would receive a taxpayer-funded insurance subsidy of up to $5,081.[7] The couple would qualify for this subsidy because their combined income would be just below 400 percent of the FPL. However, if the couple earned an additional $2,500—raising their income just above 400 percent of the FPL—they would receive no subsidy at all. Even though they receive $2,500 more in cash compensation, the couple would actually be worse off financially because they would lose more than $5,000 in federal insurance subsidies.

Similar cliffs occur elsewhere in Obamacare’s subsidy structure. As income approaches 400 percent of the FPL, the percentage of income that households are expected to devote to insurance premiums rises, and the premium subsidies under Section 1401 fall. Individuals with rising income also face the loss of federal cost-sharing subsidies established under Section 1402 of the law, which reduce out-of-pocket expenses including co-payments and deductibles. These effects are particularly acute at certain cliffs established in the statute—for instance, 150 percent, 200 percent, and 250 percent of the FPL—but they also pervade the entire subsidy structure. Overall, University of Chicago economist Casey Mulligan has concluded that Obamacare will help raise effective marginal tax rates by more than 10 percentage points.[8]

The subsidy formulae in Obamacare and the disincentives to work compound an existing system of tax credits and welfare programs that places families of low and modest incomes in a “poverty trap.” Testifying before two subcommittees of the House Ways and Means Committee in June 2012, Urban Institute fellow Gene Steuerle explained how the phaseouts of various income-linked programs—such as food stamps, housing assistance, and cash welfare benefits under the Temporary Assistance to Needy Families program—create very high effective marginal tax rates. His testimony cited an example of a single-parent, two-child household in Alabama and the effects of work on their net financial compensation:

With no work at all this family generates $14,000 in benefits. If it earns poverty level income of about $17,000, its total income would rise to about $26,700, or close to $13,000…. However, if the family earns about twice the poverty level, or an additional $17,000, income would rise by only about $6,900—an effective average marginal tax rate of about 60 percent, to which must be added any loss of health insurance benefits.[9]

Families facing these kinds of poverty traps may ask the obvious question: If I will lose so much in government benefits by earning additional income, why work?

Obamacare will only worsen the poverty trap created by existing programs. By expanding exchange insurance subsidies to those making up to 400 percent of the FPL, the law effectively raises marginal tax rates for a wide swathe of Americans. The law gives millions of Americans new incentives not to work—or not to raise their income levels—because they may lose federal insurance subsidies. According to the most recent Census data, nearly 64 percent of the non-elderly population lives in households below 400 percent of the FPL. These individuals could face the work disincentives created by Obamacare’s new insurance subsidy structure.[10]

The Congressional Budget Office agrees that Obamacare will reduce work incentives by raising marginal tax rates. In a report released shortly after the law’s enactment, the nonpartisan CBO concluded that Obamacare “on net will reduce the amount of labor used in the economy … primarily by reducing the amount of labor that workers choose to supply.” The CBO found that the Medicaid expansion and exchange insurance subsidies “will encourage some people to work fewer hours or to withdraw from the labor market” to remain eligible for taxpayer-funded insurance subsidies. Furthermore, “the phaseout of the [insurance] subsidies as income rises will effectively increase marginal tax rates, which will also discourage work.”[11] CBO Director Doug Elmendorf testified before Congress that Obamacare would reduce the labor supply by about 800,000 workers.[12]

At a time when 5.7 million fewer Americans are looking for work than when the recent economic recession began in December 2007, Obamacare will reduce the size of the labor force even further.[13] The law’s subsidy formula leads to perverse outcomes: “[A]s an individual makes more money, they are rewarded by losing subsidies.”[14] Rather than encouraging hard work, initiative, and entrepreneurship, Obamacare instead undermines these essential American values.

Inequity #2: Penalizing Marriage

Obamacare contains not one, but two penalties on marriage—one for families with low and moderate incomes and another for families with higher incomes. The first is in its eligibility definitions for insurance subsidies in Section 1401,[15] which sets eligibility based on federal poverty level guidelines. However, because the FPL for a couple is less than twice that for a single person, a married household will remain at an inherent disadvantage compared with two single individuals or an unmarried, cohabiting couple.[16]

A hypothetical example illustrates the nature and scope of the marriage penalties in Obamacare.[17] A 50-year-old non-smoker making $35,000 per year would qualify for a sizable insurance subsidy, according to the Kaiser Family Foundation’s insurance subsidy calculator.[18] The individual’s premium would be capped at 9.5 percent of income, resulting in an insurance subsidy of $2,065 paid by the federal government. However, if this 50-year-old is married to another 50-year-old who also makes $35,000 per year, the couple would receive no insurance subsidy at all. This couple would incur a marriage penalty of $4,130 in one year—equal to the $2,065 that each individual could have received if they were not married.

Obamacare imposes a second marriage penalty that is related to its “high-income” tax. The law creates a new 0.9 percent tax on wage income and 3.8 percent tax on unearned income that exceeds preset thresholds.[19] In both cases, the thresholds for the tax are at $200,000 for a single individual, but $250,000 for a couple. As with the insurance subsidy formula, this new tax will automatically penalize married couples because the tax threshold for couples is less than twice the threshold for single individuals.

As with these subsidy calculations, the marriage penalties from the high-income tax could also be substantial. Two individuals who are each earning wage incomes of $195,000 would fall under the $200,000 threshold for single filers and would therefore not incur any additional liability under Obamacare. However, if these two individuals married, their combined income of $390,000 would easily exceed the $250,000 threshold, triggering the high-income tax. This couple would owe an additional $1,260 in taxes.[20] The marriage penalty on this couple would be even higher if some of their income was unearned because Obamacare taxes unearned income above the $250,000 threshold at a 3.8 percent rate.

Because the high-income tax is not indexed for inflation, more and more couples will pay this marriage penalty in the coming years. The Medicare actuary has estimated that, while this tax increase will affect only 3 percent of workers this year, it will affect 79 percent by 2080.[21] As more and more middle-income Americans face this high-income tax over time, the Obamacare provisions will disproportionately affect married couples due to its structural penalty against marriage.

As with the work disincentives noted above, Obamacare’s penalties only exacerbate a policy environment that already discourages middle-income couples from marriage. As Steuerle testified:

Means testing and joint filing has resulted in hundreds of billions of dollars in marriage penalties for low- and middle-income households. Essentially, when moderate-income couples marry, their marginal tax rate moves up from, say, 25 percent, to the 50 and 80 percent ranges shown above….

Not getting married is the major tax shelter for low- and moderate-income households with children. In many low-income communities around the nation, marriage is now the exception rather than the rule.

Marriage penalties or subsidies are assessed primarily for taking wedding vows, not for living together with another adult. Those who do not feel morally compelled to swear fidelity in religious or public ceremonies for the most part do not suffer the penalties. Our tax and welfare system thus favors those who consider marriage an option—to be avoided when there are penalties and engaged when there are bonuses. The losers tend to be those who consider marriage to be sacred.[22]

While advocates of the law claim its compassion toward those with limited incomes, Obamacare, like much of the existing welfare state, undermines marriage as an institution by penalizing “those who consider marriage to be sacred” and creating a culture in which “marriage is now the exception rather than the rule.”

Even though policy choices like those in Obamacare discourage low-income and middle-income households from participating in the institution, marriage still provides the most stable venue for raising children. Studies have shown that cohabiting couples with children break up with greater frequency than married couples with children.[23] In a front-page article in July 2012, The New York Times noted that marriage trends—sparked in part by existing government policy—have exacerbated income inequality:

Estimates vary widely, but scholars have said that changes in marriage patterns—as opposed to changes in individual earnings—may account for as much as 40 percent of the growth in certain measures of inequality. Long a nation of economic extremes, the United States is also becoming a society of family haves and family have-nots, with marriage and its rewards evermore confined to the fortunate classes. “It is the privileged Americans who are marrying, and marrying helps them stay privileged,” said Andrew Cherlin, a sociologist at Johns Hopkins University….

While many children of single mothers flourish … a large body of research shows that they are more likely than similar children with married parents to experience childhood poverty, act up in class, become teenage parents and drop out of school. Sara McLanahan, a Princeton sociologist, warns that family structure increasingly consigns children to “diverging destinies.” Married couples are having children later than they used to, divorcing less and investing heavily in parenting time. By contrast, a growing share of single mothers have never married, and many have children with more than one man. “The people with more education tend to have stable family structures with committed, involved fathers,” Ms. McLanahan said. “The people with less education are more likely to have complex, unstable situations involving men who come and go.” She said, “I think this process is creating greater gaps in these children’s life chances.”[24]

In a recent interview with ABC News touching on income inequality, President Obama claimed that “I think the President can stop it,” but that “you’ve got a portion of Congress who—whose policies don’t just, you know, leave things alone, they actually want to accelerate these trends.”[25]

The President could not be more incorrect. By continuing failed policies that undermine the institution of marriage, Obamacare will accelerate a root cause of income inequality in the United States.[26] Policymakers seeking to restore the institution of marriage and reduce income inequality in the process should work to eliminate the tax and welfare policies that penalize low-income and middle-income households who marry.[27] A great place to start would be to repeal Obamacare because its marriage penalties will exacerbate income inequality.

Inequity #3: Placing Citizens at a Disadvantage

Obamacare includes special provisions that allow many legal, non-citizen residents to qualify for federally subsidized insurance and, in so doing, offers these non-citizens more and better coverage options than American citizens. Section 1401, which creates Section 36B of the Internal Revenue Code, includes a “Special Rule for Certain Individuals Lawfully Present in the United States.”[28] The rule states that lawfully present aliens with incomes under the federal poverty line who are “not eligible for the Medicaid program under Title XIX of the Social Security Act by reason of such alien status” shall be treated as if they had incomes above the federal poverty level, thus entitling them to federal insurance subsidies.

This special rule effectively circumvents the restrictions imposed by Congress in its landmark 1996 welfare reform legislation. In enacting welfare reform, Congress intended to prevent individuals from migrating into the United States and becoming public charges. Section 403 of the welfare reform bill included provisions prohibiting most legal aliens from receiving means-tested benefits, including most Medicaid benefits, for a five-year period.[29] Obamacare did not explicitly override this five-year waiting period for legal aliens receiving taxpayer-funded benefits. Instead, Obamacare circumvented the prior law by creating a new entitlement—federal insurance subsidies in the new exchanges—with language ensuring legal aliens would qualify for this new program while in the five-year waiting period.

While legal residents who are not citizens will receive federal insurance subsidies under Obamacare, American citizens of modest means will qualify for Medicaid or may not receive health insurance at all. In states that expand their Medicaid programs, all citizens with incomes below 138 percent of the FPL who qualify for Medicaid will be automatically enrolled in the Medicaid program.[30] In states that do not expand their Medicaid programs, citizens with incomes above 100 percent of the FPL will receive subsidies to purchase insurance coverage on the exchange, but citizens with incomes below 100 percent of the FPL may not qualify for subsidized insurance at all.[31]

The law as implemented thus creates two inequities that place citizens at a disadvantage compared with legal aliens. First, in states that expand their Medicaid programs, citizens with incomes under 138 percent FPL will be automatically enrolled into Medicaid, while legal aliens will receive subsidies to purchase coverage in the exchange.[32] In addition to denying citizens the option of the exchange granted to similarly situated legal aliens, this inequity also consigns an entire class of American citizens to a Medicaid program plagued by low physician reimbursement levels with a resulting history of poor health outcomes. Several studies show that patients with Medicaid coverage have worse outcomes than the uninsured,[33] and some Medicaid beneficiaries do not consider the program “real insurance.”[34] Yet Obamacare dumps millions of American citizens into this troubled program, even as it grants many legal aliens the opportunity to pick health plans of their choosing.

Second, in states that do not expand their Medicaid programs, legal aliens will be able to purchase subsidized health insurance on exchanges, while citizens below 100 percent of the poverty line may not qualify for subsidized coverage at all. The Supreme Court’s ruling on Obamacare found that the law’s Medicaid expansion, which required states to expand Medicaid or lose all their existing Medicaid funds, consisted of unconstitutional “economic dragooning” and made the expansion optional.[35] The law as written did not envision such a scenario, assuming that all individuals below 100 percent of the FPL would be placed in the Medicaid program. The one exception was the “special rule” for legal aliens, thus allowing legal aliens, but no other individuals, below 100 percent of the FPL to receive insurance subsidies.

The solution to this problem is not for states to accept Obamacare’s massive Medicaid expansion. Expanding Medicaid would impose additional costs in the short term[36] and even larger costs in the long term.[37] Moreover, expanding Medicaid would consign millions of Americans to a flawed health program. Instead, the solution lies in repealing the special rule that offers non-citizens more and better coverage options than American citizens, potentially encouraging immigration to the United States by those seeking recourse to taxpayer-funded welfare programs.

Inequity #4: Prioritizing the Able-Bodied over the Disabled

Obamacare encourages states to expand their Medicaid programs to all individuals with incomes below 138 percent FPL by offering an enhanced Federal Medical Assistance Percentage (FMAP) covering the new expansion populations. The law provides for a 100 percent federal match for 2014 through 2016, phasing down over time to a 90 percent match by 2020.[38]

The Medicaid expansion will not be cost free to states. Implementing the expansion will cost an estimated $12 billion in administrative costs,[39] and state costs will rise as the federal matching percentage falls after 2016.[40] However, the enhanced Medicaid match under Obamacare is significantly higher than the traditional FMAP rates covering the rest of the Medicaid program. Under existing law, FMAP rates for state Medicaid programs covering the aged, blind, and disabled populations can range from 50 percent to 83 percent.[41] For fiscal year 2014, FMAP rates will range from 50 percent in 15 states to 73 percent in Mississippi.[42]

Studies suggest that the vast majority of individuals to be covered under the enhanced Medicaid match are able-bodied adults. According to the Urban Institute, if all states expand Medicaid, over four in five uninsured adults eligible for coverage (82.4 percent) would be those without dependent children.[43] Because many states already provide Medicaid coverage for parents with children, the number of additional parents eligible for coverage under the Obamacare expansion would be comparatively small.[44] Moreover, of those adults eligible for Medicaid if all states expand Medicare, more than half (52.1 percent) would be ages 19–34, and more than five in six (86.6 percent) would be ages 19–54, which are the prime working years for most Americans.[45]

Because most of the individuals gaining eligibility for Medicaid under the Obamacare expansion would be able-bodied adults of prime working age, these individuals should be able to work and therefore would likely earn enough income not to qualify for Medicaid coverage. An able-bodied adult, working full time (40 hours per week for 50 weeks per year) at a job paying $8 per hour would earn $16,000 annually, placing that individual above the 138 percent FPL cutoff for Medicaid eligibility. This hypothetical example strongly suggests that the able-bodied adults gaining Medicaid coverage under Obamacare are either unemployed or underemployed. It also suggests that Obamacare will exacerbate the existing poverty trap by providing benefits to adults able to work, but not currently employed.[46]

Even as the federal government provides an enhanced federal match for state Medicaid programs to cover able-bodied adults, many more vulnerable individuals cannot obtain coverage from Medicaid. According to the Kaiser Family Foundation, 511,174 individuals are currently on waiting lists in 37 states for access to home and community-based services under Medicaid waiver programs.[47] Of these individuals, more than 316,000 seek Medicaid services due to intellectual or developmental disabilities.[48] Yet in creating an enhanced federal match for states to participate in Obamacare’s Medicaid expansion, Congress created a very clear signal that covering able-bodied adults constitutes a greater priority than covering the aged, blind, and disabled populations that Medicaid currently covers.

A public safety net is necessary for those truly in need. However, by spending more than $700 billion on its massive Medicaid expansion,[49] Obamacare places a greater emphasis on covering able-bodied adults than the disabled populations that Medicaid was originally intended to serve. By extending health coverage to those who should be able to work, Obamacare could jeopardize the coverage of disabled populations. Moreover, by subsidizing health coverage for millions of unemployed and underemployed, Obamacare could accelerate the development of a permanent underclass who chooses not to work because there is little financial incentive to work.

What Congress Should Do

Rather than perpetuating a law that includes perverse incentives that discourage work, policymakers should focus on reforming America’s tax and welfare system to encourage initiative and hard work. To that end, Congress should:

 

  • Repeal all of Obamacare. The penalties and disincentives that the law places on Americans are compelling reasons for Congress to repeal this harmful and misguided legislation.
  • Expand work requirements for able-bodied adults. Even after the repeal of Obamacare’s new entitlements, policymakers should examine and bolster work requirements for other welfare benefits to preserve incentives for the able-bodied to work or prepare for work.[50]
  • Reaffirm the importance of marriage. While Congress reduced the marriage penalties in the tax code in the past decade, policymakers should examine and revise policies in the tax code and elsewhere to promote committed marital relationships.[51]
  • Maintain waiting periods before legal residents can access welfare benefits. Obamacare undermines one basic premise of the 1996 welfare reform: A legal immigrant should not become a public charge immediately upon arrival in the United States. Particularly given record federal deficits, Congress should restore this principle as a way to curb soaring entitlement spending.
  • Restore Medicaid’s focus on the neediest citizens. Given its poor outcomes for patients,[52] Medicaid needs significant changes. However, true reform cannot come from adding able-bodied adults to an already overburdened program. Instead, Congress should focus on improving Medicaid’s quality of care, while restoring its emphasis on providing a safety net for the truly needy.[53]

 

Conclusion

The subsidy formulae and minutiae underpinning Obamacare represent a complex set of choices enacted by Congress more than three years ago. Each of these policy choices is antithetical to traditional American values: the spirit of entrepreneurship and work, the marital bonds that have served as the touchstone of strong families for generations, the spirit of self-reliance that led immigrants to come to these shores to contribute to American society, and a safety net focused on protecting those in greatest need.

Collectively, these policy choices send a clear signal that reliance on government supersedes these traditional American values. While liberals argue that Obamacare is a compassionate law, the facts suggest the exact opposite. The law is not compassionate because it further entrenches a superstructure that penalizes work and encourages dependence for a wide swathe of Americans.

In calling for Obamacare’s repeal, opponents have pointed out the law’s economic impacts, its new bureaucracy, and its negative impacts on the American health care system. But conservatives should also make a values-based case against Obamacare. The American people deserve better than a law rooted in the notion that some individuals cannot improve their station in life and therefore should not be encouraged to work or advance their condition.

 



[1] Barack Obama, “Congress Must Act Now to Pass a Budget and Raise the Debt Ceiling,” The White House, September 21, 2013, http://www.whitehouse.gov/the-press-office/2013/09/21/weekly-address-congress-must-act-now-pass-budget-and-raise-debt-ceiling (accessed October 21, 2013).

[2] The Heritage Foundation, “The Case Against Obamacare: Health Care Policy Series for the 112th Congress,” http://www.heritage.org/research/projects/the-case-against-obamacare.

[3] Congressional Budget Office, “Effects on Health Insurance and the Federal Budget for the Insurance Coverage Provisions in the Affordable Care Act—May 2013 Baseline,” May 14, 2013, p. 2, Table 2, https://www.cbo.gov/publication/44190 (accessed October 21, 2013).

[4] Fox News, “Obama—Spread the Wealth Around,” video file, PopModal, http://www.youtube.com/watch?v=OoqI5PSRcXM (accessed October 21, 2013).

[5] Patient Protection and Affordable Care Act (PPACA), Public Law 111–148, § 1401, as amended by the Health Care and Education Reconciliation Act (HCERA), Public Law 111–152, http://housedocs.house.gov/energycommerce/ppacacon.pdf (accessed October 21, 2013).

[6] U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “2013 Poverty Guidelines,” January 24, 2013, http://aspe.hhs.gov/poverty/13poverty.cfm (accessed October 21, 2013).

[7] Henry J. Kaiser Family Foundation, “Subsidy Calculator,” http://kff.org/interactive/subsidy-calculator/ (accessed October 22, 2013). All figures are in 2014 dollars.

[8] Casey Mulligan, “How Obamacare Wrecks the Work Ethic,” The Wall Street Journal, October 3, 2013, http://online.wsj.com/news/articles/SB10001424127887323623304579061423122639430 (accessed October 27, 2013).

[9] Gene Steuerle, “Marginal Tax Rates, Work, and the Nation’s Real Tax System,” testimony before the Subcommittee on Human Resources and Subcommittee on Select Revenue Measures, Committee on Ways and Means, U.S. House of Representatives, June 27, 2012, http://waysandmeans.house.gov/UploadedFiles/Eugene_Steuerle_Testimony_HR-SRM_062712.pdf (accessed October 21, 2013).

[10] Of the non-elderly population of 267.4 million, 170.5 million live in households with incomes under 400 percent of poverty. U.S. Census Bureau, “Annual Social and Economic Supplement: 2012 Poverty Table of Contents,” September 2013, Table POV01, http://www.census.gov/hhes/www/cpstables/032013/pov/pov01_400_1.xls (accessed October 21, 2013).

[11] Congressional Budget Office, “The Budget and Economic Outlook: An Update,” August 2010, p. 48, Box 2-1, and p. 66, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/117xx/doc11705/08-18-update.pdf (accessed October 21, 2013).

[12] J. Lester Feder and Kate Nocera, “CBO: Health Law to Shrink Workforce by 800,000,” Politico, February 10, 2011, http://www.politico.com/news/stories/0211/49273.html (accessed October 21, 2013).

[13] James Sherk, “Not Looking for Work: Why Labor Force Participation Has Fallen During the Recession,” Heritage Foundation Backgrounder No. 2722, September 5, 2013, http://www.heritage.org/research/reports/2013/09/not-looking-for-work-why-labor-force-participation-has-fallen-during-the-recession.

[14] Drew Gonshoworski, “The Affordable Care Act Negatively Impacts the Supply of Labor,” Heritage Foundation Issue Brief No. 3873, March 11, 2013, http://www.heritage.org/research/reports/2013/03/impact-of-the-patient-protection-and-affordable-care-act-on-labor-supply.

[15] PPACA, § 1401.

[16] In 2013, the federal poverty level for the continental United States (excluding Alaska and Hawaii) is $11,490 for a single person and $15,510 for a two-person household. The U.S. Department of Health and Human Services updates the guidelines annually. See U.S. Department of Health and Human Services, “2013 Poverty Guidelines.”

[17] For similar analyses from an earlier version of Obamacare, see Robert Rector, “The New Federal Wedding Tax: How Obamacare Would Dramatically Penalize Marriage,” Heritage Foundation WebMemo No. 2767, January 20, 2010, http://www.heritage.org/research/reports/2010/01/the-new-federal-wedding-tax-how-obamacare-would-dramatically-penalize-marriage.

[18] Henry J. Kaiser Family Foundation, “Subsidy Calculator.” All figures are in 2014 dollars.

[19] Section 9015 of the PPACA established the 0.9 percent tax on wage income, and Section 1402 of HCERA established the 3.8 percent tax on unearned income.

[20] ($390,000 – $250,000) * 0.9 percent = $1,260.

[21] Centers for Medicare and Medicaid Services, 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, August 5, 2010, p. 87, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2010.pdf (accessed October 21, 2013).

[22] Steuerle, “Marginal Tax Rates, Work, and the Real Tax System.”

[23] Chuck Donovan, “A Marshall Plan for Marriage: Rebuilding Our Shattered Homes,” Heritage Foundation Backgrounder No. 2567, June 7, 2011, http://www.heritage.org/research/reports/2011/06/a-marshall-plan-for-marriage-rebuilding-our-shattered-homes (accessed October 21, 2013).

[24] Jason DeParle, “Two Classes in America, Divided by ‘I Do,’” The New York Times, July 15, 2012, http://www.nytimes.com/2012/07/15/us/two-classes-in-america-divided-by-i-do.html (accessed October 21, 2013).

[25] ABC News, “Transcript: President Barack Obama,” This Week, September 15, 2013, http://abcnews.go.com/ThisWeek/week-transcript-president-barack-obama/story?id=20253577 (accessed October 21, 2013).

[26] For more on the link between marriage and poverty, see Robert Rector, “Marriage: America’s Greatest Weapon Against Child Poverty,” Heritage Foundation Special Report No. 117, September 5, 2012, http://www.heritage.org/research/reports/2012/09/marriage-americas-greatest-weapon-against-child-poverty.

[27] Donovan, “A Marshall Plan for Marriage.”

[28] 26 U.S. Code § 36B(c)(1)(B). This specific provision was created by PPACA, § 1401.

[29] Personal Responsibility and Work Opportunity Act, Public Law 104–193, § 403.

[30] Section 2001(a)(1)(C) of PPACA established the Medicaid eligibility threshold at 133 percent of poverty; however, Section 1004(e)(2) of HCERA amended this requirement by adding an automatic 5 percent income disregard, effectively establishing an eligibility threshold of 138 percent of poverty.

[31] 26 U.S. Code § 36B (c)(1)(A), as amended by PPACA, § 1401.

[32] Robert E. Moffit and Edmund F. Haislmaier, “Obamacare’s Insurance Exchanges: ‘Private Coverage’ in Name Only,” Heritage Foundation Backgrounder No. 2846, September 26, 2013, http://www.heritage.org/research/reports/2013/09/obamacares-insurance-exchanges-private-coverage-in-name-only.

[33] Many of these studies are summarized in Scott Gottlieb, “Medicaid Is Worse Than No Coverage at All,” The Wall Street Journal, March 10, 2011, http://online.wsj.com/article/SB10001424052748704758904576188280858303612.html (accessed October 21, 2013).

[34] Vanessa Fuhrmans, “Note to Medicaid Patients: The Doctor Won’t See You,” The Wall Street Journal, July 19, 2007, http://online.wsj.com/article/SB118480165648770935.html (accessed October 21, 2013).

[35] NFIB v. Sebelius, 567 U.S. 52 (2012), http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf (accessed October 21, 2013).

[36] Edmund F. Haislmaier and Brian Blase, “Obamacare: Impact on States,” Heritage Foundation Backgrounder No. 2433, July 1, 2010, http://www.heritage.org/research/reports/2010/07/obamacare-impact-on-states.

[37] Drew Gonshorowski, “Obamacare and the Medicaid Expansion: How Does Your State Fare?” March 5, 2013, http://blog.heritage.org/2013/03/05/obamacare-medicaid-expansion-state-by-state-charts/ (accessed October 21, 2013).

[38] PPACA, § 2001(a)(3), as amended by HCERA, § 1201(1)(B).

[39] Haislmaier and Blase, “Obamacare.”

[40] Gonshorowski, “Obamacare and the Medicaid Expansion.”

[41] 42 U.S. Code § 1396d(b).

[42] Federal Register, November 30, 2012, p. 71422, Table 1, http://www.gpo.gov/fdsys/pkg/FR-2012-11-30/pdf/2012-29035.pdf (accessed October 21, 2013).

[43] Genevieve M. Kenney et al., “Opting in to the Medicaid Expansion Under the ACA: Who Are the Uninsured Adults Who Could Gain Health Insurance Coverage?” Urban Institute, August 2012, p. 9, Appendix Table 2, http://www.urban.org/UploadedPDF/412630-opting-in-medicaid.pdf (accessed October 21, 2013).

[44] Henry J. Kaiser Family Foundation, “Adult Income Eligibility Limits at Application as a Percent of the Federal Poverty Level (FPL),” January 2013, http://kff.org/medicaid/state-indicator/income-eligibility-low-income-adults/ (accessed October 21, 2013).

[45] Kenney et al., “Opting in to the Medicaid Expansion Under the ACA,” Appendix Table 1, p. 8.

[46] Edmund F. Haislmaier, “New Medicaid Welfare Trap,” The Heritage Foundation, May 29, 2013, http://www.heritage.org/research/commentary/2013/5/new-medicaid-welfare-trap. First published in The Philadelphia Inquirer.

[47] Henry J. Kaiser Family Foundation, “Waiting Lists for Medicaid Section 1915(c) Home and Community-Based Services (HCBS) Waivers,” December 2012, http://kff.org/medicaid/state-indicator/waiting-lists-for-hcbs-waivers-2010/#table (accessed October 21, 2013).

[48] Ibid.

[49] Congressional Budget Office, “Effects on Health Insurance and the Federal Budget,” Table 2.

[50] For instance, see Robert Rector and Jennifer A. Marshall, “The Unfinished Work of Welfare Reform,” January 22, 2013, http://www.heritage.org/research/reports/2013/01/the-unfinished-work-of-welfare-reform (accessed October 21, 2013).

[51] Rector, “Marriage.”

[52] Kevin Dayaratna, “Studies Show: Medicaid Patients Have Worse Access and Outcomes Than the Privately Insured,” Heritage Foundation Backgrounder No. 2740, November 7, 2012, http://www.heritage.org/research/reports/2012/11/studies-show-medicaid-patients-have-worse-access-and-outcomes-than-the-privately-insured.

[53] Nina Owcharenko, “Saving the American Dream: A Blueprint for Putting Patients First,” Heritage Foundation Issue Brief No. 3628, June 6, 2012, http://www.heritage.org/research/reports/2012/06/saving-the-american-dream-a-blueprint-for-putting-patients-first.

The Massive Costs of the Latest Obamacare Waiver

Policymakers are still recovering from yesterday’s shocking admission by the Administration that it can’t implement Obamacare’s employer mandate without destroying jobs.

The announced one-year delay in enforcement brings with it an immediate revenue loss. But by further encouraging firms to drop coverage now—allowing businesses to privatize gains and socialize losses—the change could cause federal spending on Obamacare exchange subsidies to soar.

The Congressional Budget Office (CBO) estimated in May that the employer mandate would raise $10 billion in revenue in its first year. (Because the employer mandate is a tax penalty, firms will pay the penalties the following year—penalties for 2014 will be paid in 2015; penalties for 2015 will be paid in 2016, etc.) That $10 billion in employer mandate revenue projected for fiscal year 2015 will almost certainly disappear.

Then there’s the separate question of whether, when, and how employers will drop their health insurance plans and dump their workers on the exchanges. Here’s what we know on that front:

  • In its most recent economic forecasts in February, the CBO estimated that unemployment would average 7.8 percent in 2014. That number is nearly three percentage points higher than the CBO’s estimate of 2014 unemployment at the time of Obamacare’s passage. Because unemployment will be higher than the CBO first projected when Obamacare passed, firms will have more incentive to drop health insurance now, while labor markets are more competitive and workers have fewer employment options.
  • The CBO now projects that, if firms do drop health coverage, insurance subsidies on exchanges will average $5,290 per enrollee next year. By comparison, shortly after Obamacare passed, the CBO projected subsidies would average $3,970 in 2014. In other words, the projected average subsidy for 2014 has grown by one-third since the law passed.
  • As we documented last week, since Obamacare’s enactment, the CBO has increased the number of projected uninsured and decreased the number of individuals projected to retain their employer coverage.

Over the past several years, numerous studies, papers, briefs, reports, employer questionnaires, consultant presentations, surveys, op-eds, interviews, quotes, and comments from Democrats suggest that employers will drop coverage in significant numbers, resulting in trillions of dollars of added federal costs. Even Jon Stewart, in an interview with Health and Human Services Secretary Kathleen Sebelius last year, would not believe that employers would keep offering coverage:

Is the penalty more than the [cost of] insurance?… Is there a consequence other than a fine or shame—cause I know the shame thing’s not gonna work.

Instead of facing a decision to pay more than $10,000 for a worker’s insurance policy or pay a $2,000 per-employee penalty, employers next year will now be able to raise their workers’ wages to compensate them for the loss of their health plans. And the cost of that choice—which some would argue is so obvious as to not be a choice—could result in skyrocketing federal spending.

This post was originally published at The Daily Signal.

JEC Member Viewpoint: Sen. Jim DeMint on Mandates to Cover Dependent Children

This Member Viewpoint by Sen. Jim DeMint was originally published by the Joint Economic Committee.

Numerous press reports in recent weeks have focused on what actions Congress may take in the event that Obamacare is repealed, or struck down in its entirety by the Supreme Court.  Many of these stories have focused on the law’s new mandate requiring insurers to cover policy holders’ children under age 26.  Several Members of Congress have expressed support for this provision, and one has even proposed extending the mandate for coverage of dependent children to all those under age 31.[1]  If the latter proposal passes, 28-year-old Mark Zuckerberg, with an estimated net worth of $17.5 billion, would be one of those eligible for dependent coverage under his parents’ health insurance.[2]

While the Obama Administration has attempted to use the under-26 mandate to sell their unpopular health law, the mandate itself is not without costs and perverse incentives, both to the health system and the economy as a whole.  A closer examination of the costs of this new government mandate reveals it may not be the panacea supporters have claimed.

Impact on Costs:  In its interim final rule implementing the under-26 mandate, the Administration claimed the provision would impose transfer costs of $3.5-$6.9 billion annually, and would raise premiums by 1 percent per year.[3]  However, a George Mason University study released in January found that the Administration omitted several key components in its regulatory impact analysis for this rule, understating its cost, potentially by billions.[4]  Given an average premium for employer-sponsored insurance of $15,073 in 2011,[5] an under-26 mandate raising costs by 1 to 3 percent would increase premiums by $151 to $452 per year.[6]  Conservatives have frequently criticized Obamacare for raising health insurance premiums, in direct violation of candidate Obama’s promise to lower them.[7]  Even the Administration admits that the under-26 mandate has led to higher premiums for businesses and families.

Impact on Coverage:  While many press reports have focused on the “children” obtaining coverage thanks to the under-26 mandate, fewer have examined how many individuals have lost coverage due to the federal requirements.  However, studies suggest these numbers are not insignificant.  For instance, multiple[8] studies[9] have suggested that every 1% increase in premiums increases the number of uninsured by approximately 200,000-300,000 individuals nationwide.  With the under-26 mandate raising premiums by at least 1%, and potentially much more for some plans, it is reasonable to conclude that hundreds of thousands of individuals have lost coverage – because they were priced out of the individual market, or because their employers decided to stop offering coverage – as a result of the new requirements.  These newly uninsured individuals represent what authors William Graham Sumner and  Amity Shlaes famously referred to as the “Forgotten Men” – the individuals suffering harm as a result of government intervention.

Meanwhile, the mandate would turn one of the health market’s few remaining natural incentives on its heads, discouraging young adults from purchasing insurance for themselves.  Instead of mandating that health insurance plans include family coverage for adult children, policy should encourage all young adults to purchase an individual health plan that they can afford and keep throughout their lives.

Impact on Jobs:  The under-26 mandate could have a negative impact on jobs and the economy, in two respects.  First, to the extent that businesses are forced to absorb the billions of dollars in costs associated with the mandate, they would prove less eager to take on additional workers, or increase hours for existing workers.  Second, numerous[10] studies[11] have illustrated that extended unemployment benefits tend to lengthen the average duration of unemployment, and increase the unemployment rate, by discouraging individuals from looking for work.

For similar reasons, some would argue that the under-26 mandate likewise provides financial incentives that discourage work, thereby increasing unemployment.  Both the Congressional Budget Office and then-Speaker Pelosi have admitted that Obamacare’s health insurance provisions will hinder the labor market.  The CBO stated that the law as a whole will “discourage work,”[12] reducing the labor supply by about 800,000 jobs.[13]  Pelosi encouraged young people to “leave your work” and “go be creative and be a musician or whatever,” because Obamacare would provide them with health insurance, thanks to the under-26 mandate and similar provisions.[14]

The heightened focus on under-26 coverage in many respects focuses on the symptom of a larger problem.  Put simply, fewer Americans would need to remain on their parents’ health insurance if they had stable, full-time work.  As of last year, a majority of firms, and more than five of six firms with more than 25 employees, offer insurance coverage to their workers.[15]  However, most firms do not offer health benefits to part-time or temporary workers.[16]  Recent surveys indicating that half of all recent college graduates are unemployed or under-employed – a devastating indictment of the Obama Administration’s failed economic policies – illustrate the real reason why the under-26 provision has attracted so much attention:  Because millions of young Americans can’t find full-time work.[17]

Given prolonged economic stagnation and its toll on young Americans, economic growth and job creation – not new government mandates – should take precedence.  Just as conservatives insisted on reducing the length of extended unemployment benefits as part of the payroll tax extension earlier this year, removing disincentives for young people to seek full-time employment may be one ingredient necessary to restoring the job market to full strength.

As policymakers ponder the fate of the law in the wake of the Supreme Court’s ruling, Congress would be wise to consider the economic impacts listed above.  Re-instituting a government mandate on the private sector would have significant economic costs, and would also undermine the cause of individual liberty in the process.  A welfare state administered by the private sector, yet mandated by government, remains a welfare state at its core.

 

[1] Louise Radnovsky, Naftali Bendavid, and Sara Murray, “Tension in GOP Over Health Care Response,” Wall Street Journal May 23, 2012, http://online.wsj.com/article/SB10001424052702304019404577420210854278188.html.

[2] “Mark Zuckerberg,” Forbes 400 Profile, http://www.forbes.com/profile/mark-zuckerberg/.

[3] “Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act,” Federal Register May 13, 2010, http://www.gpo.gov/fdsys/pkg/FR-2010-05-13/pdf/2010-11391.pdf, Tables 1 and 5, pp. 27127-29.

[4] Christopher J. Conover and Jerry Ellig, “Beware the Rush to Presumption, Part A: Material Omissions in Regulatory Analyses for the Affordable Care Act’s Interim Final Rules,” Mercatus Center Working Paper 12-01, January 2012, http://mercatus.org/sites/default/files/publication/Beware_the_Rush_to_Presumption_PartA_ConoverEllig.pdf, pp. 14-15, 40-49.

[5] 2011 Kaiser Family Foundation/HRET Employer Health Benefits Survey, http://ehbs.kff.org/pdf/2011/8225.pdf, Exhibit 1.1, p. 1.

[6] Bruce Japsen, “Young Adults’ Coverage May Cost Parents Even More,” New York Times Prescriptions blog, November 23, 2011, http://prescriptions.blogs.nytimes.com/2011/11/23/young-adults-coverage-may-cost-parents-even-more/

[7] Freedom Eden, “Obama: 20 Promises for $2,500,” http://freedomeden.blogspot.com/2010/03/obama-20-promises-for-2500.html.

[8] Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs Web Exclusive, April 5, 2005, http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.143/DC1.

[9] Government Accountability Office, Impact of Premium Increases on Number of Covered Individuals is Uncertain GAO Report HEHS-98-203R, July 7, 1998, http://archive.gao.gov/paprpdf2/160930.pdf, pp. 3-4.

[10] Bhashkar Mazumder, “How Did Unemployment Insurance Extensions Affect the Unemployment Rate in 2008-10?” Chicago Fed Letter No. 285, April 2011, http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2011/cflapril2011_285.pdf.

[11] Lawrence F. Katz and Bruce D. Meyer, “The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment,” NBER Working Paper No. 2741, October 1988, http://www.nber.org/papers/w2741.pdf.

[12] Congressional Budget Office, “The Budget and Economic Outlook: An Update,” August 2010, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/117xx/doc11705/08-18-update.pdf, Box 2-1, Effects of Recent Health Care Legislation on Labor Markets, pp. 48-49.

[13] Lester Feder and Kate Nocera, “CBO: Health Law to Shrink Workforce by 800,000,” Politico February 10, 2011, http://www.politico.com/news/stories/0211/49273.html.

[14] Nicholas Ballasy, “Pelosi to Aspiring Musicians: Quit Your Job, Taxpayers Will Cover Your Health Care,” CNS News May 14, 2010, http://cnsnews.com/node/65950.

[15] 2011 Kaiser Family Foundation/HRET Employer Health Benefits Survey, Exhibit 2.3, p. 37.

[16] Ibid., Exhibits 2.5 and 2.6, p. 39.

[17] Associated Press, “Half of New Graduates are Jobless or Underemployed,” USA Today April 23, 2012, http://www.usatoday.com/news/nation/story/2012-04-22/college-grads-jobless/54473426/1.

Rep. Stearns Op-Ed: Medicaid for Millionaires

“We shouldn’t have to do that, because they should know better.”

So said President Obama in explaining why the Treasury—quite rightly—forced Citigroup to cancel the purchase of a $50 million corporate jet after the banking firm accepted tens of billions in federal bailout dollars. But he could well have been talking about his Democratic colleagues in Congress, who seem perfectly willing to give the former executives of these firms generous federal health benefits—even though they too should know better.

Consider the case of Henry Waxman, a Democrat who has represented Beverly Hills in Congress for over 30 years. Last fall, as Chairman of the Oversight and Government Reform Committee, he led hearings on the financial crisis, and criticized companies for taking “massive risk. When the bottom fell out, senior management walked away with millions of dollars, while shareholders and taxpayers lost billions.”

Fast forward to this year and a new Congress, where Mr. Waxman assumed the Chairmanship of the Energy and Commerce Committee, on which I sit. As Chairman, Waxman wrote major health-related sections of the economic “stimulus” legislation which Congress is currently considering. The proposal Mr. Waxman presented to the Committee spent more than $100 billion on various health spending projects, and created two new federal entitlements—one expanding Medicaid to individuals receiving unemployment compensation, and the second providing subsidies to individuals who choose continuation coverage from their former employers.

But for the new entitlements, there was a massive loophole. Because the bill explicitly prohibited income or asset tests from being applied to people receiving the new health care entitlements, anyone who recently lost their job—including the former CEOs who Mr. Waxman said last fall “walked away with millions”—could receive free or subsidized health care courtesy of federal taxpayers. At a time when all Americans are struggling to make ends meet, I viewed these uncapped subsidies as a poor use of taxpayers’ hard-earned money—and an unnecessary expansion of government to boot.

So when our Committee met to consider the “stimulus” legislation, I offered an amendment to the legislation to make sure that individuals with income over $1 million who elected continuation coverage from their former employers would not receive federal subsidies to pay for that coverage. Chairman Waxman accepted my amendment, and said he would “try to find a way to structure” the subsidies so that wealthy executives wouldn’t be eligible for subsidies they really shouldn’t need.

But several days later, when Democrat leaders introduced the version of the “stimulus” legislation that the House was actually going to vote on, my amendment was stricken from the bill. The omission wasn’t because a cap on the federal health subsidies was unworkable—Congressional tax advisers told a Senate committee an income-based cap was feasible to implement. No one was able to give me a straight answer as to why my amendment wasn’t included in the final bill—Speaker Pelosi actually put out a press release saying my amendment had been accepted as part of the “bipartisan” debate, when in reality my amendment and those of two of my other Republican colleagues had been unceremoniously dumped behind closed doors.

This incident raises a couple of key questions—one procedural, the other political. First, how bipartisan is it to accept an amendment one week, only to remove it without explanation or cause the next? Second, now that they control Congress and the White House, are Democrats so insistent on expanding the federal government’s role in health care that they want to provide subsidized coverage to the same fired executives they have so recently blamed for causing our current economic crisis?

In the end, the final “stimulus” product included an income cap so that taxpayers’ funds won’t be to subsidize the health insurance of Bernie Madoff and other similar characters. But it begs the same point President Obama raised when talking about Citigroup’s desire for a new corporate jet: We shouldn’t have to tell Democrats not to give federal health benefits to millionaires—because they should know better.

This post was originally published at RedState.