Tuesday, March 23, 2010

Making a Bad Bill Worse: Executive Summary of Reconciliation Legislation

The reconciliation bill recently released by Democrats[i] would not mitigate the effects of the Senate-passed health care bill, but in fact make them worse:

More Tax Increases: The reconciliation bill raises taxes by an additional $50 billion when compared to the Senate bill, for an overall tax increase of $569.2 billion. The bill specifically expands the Medicare payroll tax—for the first time in history—to all investment income for individuals with incomes over $200,000 and families with incomes over $250,000. Because the underlying Senate bill does NOT index this new tax for inflation, more and more middle-class American families will be hit by this tax over time, just like the Alternative Minimum Tax (AMT).

Higher Premiums: The reconciliation bill nearly doubles the tax on health insurers beginning in 2014, and also raises taxes and fees on drug makers and medical devices. The Congressional Budget Office has specifically stated that these taxes will be passed on to all Americans in the form of higher health costs and rising insurance premiums.[ii]

Budget Gimmicks Galore: The reconciliation bill includes a physician payment “cliff” in Medicaid, whereby payments for primary care physicians are increased for 2013 and 2014 only—a provision designed to mask the long-term cost of such a change. The bill also hides the cost of filling in the “doughnut hole” by not fully phasing in the provision until 2020. Health insurance subsidy levels would be increased in the short-term—but would grow more slowly in the years after 2019. And the threshold at which health insurance plans would be hit by the “Cadillac tax” would grow more slowly after 2020—resulting in a major and growing tax increase on the middle class if actually implemented.

Phony Deficit Reduction: The reconciliation bill and the Senate-passed measure combined do not reduce the deficit after excluding the more than $120 billion in revenue generated by the Social Security program and the CLASS Act long-term care entitlement. Since this revenue will eventually be used to pay out benefits to these two programs, the bill does NOT reduce the deficit in the near-term—or the long term.

More Lost Jobs: The reconciliation bill nearly triples the penalty—from $750 to $2,000—on businesses that cannot afford to provide their workers with health coverage, and applies these taxes to part-time as well as full-time workers. As if these higher taxes were not enough of a disincentive to prevent firms from hiring workers, the reconciliation bill also includes an unprecedented extension of the Medicare tax to all non-wage income. These tax increases will raise the top marginal rate on small business owners by 20%, and the top tax rate on investment income by 60%–discouraging the activity needed to grow the economy and create new jobs.

More Medicare Cuts: The reconciliation bill raises another $66.1 billion from Medicare Advantage, cutting a total of $202.3 billion from the program in order to fund new entitlements for other Americans. The total Medicare cuts in the bill now add up to $523 billion.

Sweetheart Deals: The reconciliation bill retains unpopular provisions in the Senate-passed measure—the “Louisiana Purchase,” Medicare coverage for individuals in Libby, Montana, and $100 million for a Connecticut hospital—while adding yet more backroom deals: Increased disproportionate share hospital payments for Tennessee, and other hospital payments to targeted areas. Many may wonder why citizens in other states should see their taxpayer dollars fund special deals in places like Tennessee and Louisiana.

Empty Promises: The reconciliation bill forces an additional 1 million individuals into Medicaid on top of the 15 million already forced into Medicaid in the Senate bill. That means that 16 million of the 32 million newly insured individuals would obtain that coverage through Medicaid—a program which President Obama admitted at the recent health care summit suffers from serious access problems already.[iii] The Congressional Budget Office estimates that 2 million fewer individuals will have a choice of plans on the Exchange, and 23 million individuals would remain uninsured.

Federal Funding of Abortion: The reconciliation bill fails to prohibit federal funds from flowing to plans that cover elective abortion, and also increases funding for community health centers by $2.5 billion—and neither the reconciliation bill nor the Senate-passed measure include ANY prohibition on community health centers using these federal funds to offer elective abortion.

[i] Text available at http://docs.house.gov/rules/hr4872/111_hr4872_amndsub.pdf.

[ii] Congressional Budget Office, Letter to the Honorable Evan Bayh, November 30, 2009, http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf.

[iii] Letter from the President to Congressional Leaders, March 2, 2010.