Obamacare arguments: Time to start making them – Right Turn – The Washington Post

Obamacare arguments: Time to start making them – Right Turn – The Washington Post.

Yesterday, I noted that Obamacare’s unconstitutional malady — the individual mandate — may not be its biggest policy flaw. The Independent Payment Advisory Board, the unelected tribunal of 15 appointees who will determine reimbursement rates, is one, but by no means the only, pernicious part of the legislation. If Republicans are to win the battle over Obamacare, they would be wise to make two other policy arguments: 1) It creates new taxes on everything from medical devices to medication to flexible savings accounts (which many Americans now use to pay for insurance deductibles and other noninsured items); and 2) It worsens the business environment and adversely affects the labor market, especially for small businesses.

Americans for Tax Reform compiled a helpful list of the taxes in Obamacare, which total approximately $500 billion. These include a new 3.8 percent surtax on investment income that will push up the top marginal rate on dividends and capital gains (as the administration blames Wall Street and Republicans for the anemic recovery); a hike in the Medicare payroll tax; a tax on medical device manufacturers; and a new tax on drug companies. There are 20 separate taxes. Only if you believe insurance companies provide contraception for “free” would you think that these costs wouldn’t be passed onto consumers. Obamacare is a massive redistribution scheme in which huge taxes are extracted to subsidize health-care plans for a subset of the population. To achieve that, the government has to raise a whole bunch of revenue, and it certainly aims to do that.

A related and serious drawback in the Obamacare scheme is the impact on hiring and on small businesses. Last July, Douglas Holtz-Eakin of the American Action Forum testified before a House subcommittee on the impact on small businesses. The testimony is worth reading in full, but this portion is especially noteworthy:

Sadly, the new health-­care law is an assault on small business, beginning with the 3.8 percent Medicare tax on net investment income – a direct tax on many business owners. Of even greater concern is the law’s most celebrated feature – the mandate to cover full-­time employees with health insurance. For businesses with more than 50 workers, this means paying a penalty if any full-­time workers receive subsidized coverage.

The mandate creates a tremendous impediment to expansion. Suppose, for example, that a firm does not provide health benefits. Hiring one more worker to raise employment to 51 will trigger a penalty of $2,000 per worker multiplied by the entire workforce, after subtracting the first 30 workers. In this case the fine would be $42,000 to hire an additional worker. How many firms will choose not to expand?

Because Republicans have done a poor job of making policy arguments (in addition to the constitutional arguments) against Obamacare, I doubt many voters, who already are opposed to Obamacare in increasing numbers, know a fraction of what is in the bill. It is incumbent on Republicans to take them through these aspects of the bill and make the connection to the dismal economic outlook that many voters face.

When the GOP presidential and congressional candidates talk about Obamacare they ignore these aspects of the legislation at their peril. Outside the conservative base, commerce clause arguments and appeals to limited government may have limited traction. But telling voters that Obamacare brings a bevy of new taxes and new burdens on small businesses, along with a 15-person uber-medical decision-making board, should get their attention.

If nothing else, voters understand that their current insurance costs are going up, not down. According to President Obama, that wasn’t suppose to happen. The pie-in-the-sky promises that Obamacare was going to save us money, limit small-business costs and cut the deficit have proved to be false. And the president and those who voted for this monstrosity should be held accountable. To do that Republicans had better start making the case to the voters and stop relying on the Supreme Court to do the heavy lifting.


Opinion: Delay health law’s implementation – Douglas Holtz-Eakin and James C. Capretta – POLITICO.com

Opinion: Delay health law’s implementation – Douglas Holtz-Eakin and James C. Capretta – POLITICO.com.

Obamacare is not ready for prime time.

Though the Patient Protection and Affordable Care Act was passed in March 2010, most of its key provisions don’t start until January 2014. That is when “exchanges” are supposed to begin offering insurance policies with income-tested premium subsidies and substantially different insurance regulations.

So Congress has the opportunity to improve the budget outlook and improve health policy by just delaying the act’s implementation.

Why? As the recent demise of the CLASS Act, or Community Living Assistance Services and Supports Act, makes clear, much of the Affordable Care Act was slapped together with insufficient due diligence to make sure it could actually work.

The law is now on shifting legal and political ground. Many of its rules are unworkable, and implementation is well behind schedule. Even where it seems feasible, evidence is growing that the substantial infrastructure — notably the exchanges and related insurance subsidies — won’t be ready by 2014.

Meanwhile, serious legal challenges are pending. There also remain significant political disagreements over the merits of many provisions — likely to be debated extensively during the 2012 presidential campaign.

In this environment, it makes sense to clarify the future of health policy. Delaying the Affordable Care Act for two to four years would permit exactly that.

When it passed, the act’s health provisions were expected to reduce the federal budget deficit by $124 billion over 10 years, according the Congressional Budget Office. Within that total are numerous spending increases, spending cuts, tax increases and tax reductions. The provisions with the most significant budgetary consequences are: first, expanded eligibility for the Medicaid program; second, premium credits payable to households with incomes between 133 percent and 400 percent of the federal poverty line, which are enrolled in health insurance plans offered in the state exchanges; third, targeted cuts in spending in the Medicare and Medicaid programs; and fourth, new tax hikes on insurance premiums, drug manufacturers and upper-income households.

There are multiple ways to construct a freeze or delay of the act, with targeted exceptions to achieve any desired budgetary goal. For example, the main features of the state-based exchanges, along with the insurance rules that are to go into effect at that time, could be delayed for two, three or four years.

In addition, the main tax increases and other spending provisions could be delayed in a similar manner — with targeted exceptions on a few spending reductions to ensure that the act’s delay is scored by the CBO as deficit reduction.

To gain an idea of the opportunity facing Congress, our recent research estimated the effect of delaying the entire state exchange structure. We looked at postponing the premium credits, the insurance rules that become effective with the exchanges, the Medicaid eligibility expansion, the medical-loss ratio requirement that became effective in 2011, the cuts in Medicare spending (with some exceptions, like the hospital readmission payment adjustment) and all the tax increases contained in the Affordable Care Act (except the high-cost insurance tax that does not become effective until 2018 anyway, and the tax adjustment in the biofuels tax credit program).

What are the budgetary implications? In every case, the 10-year savings would be significant: $176 billion from a two-year delay, increasing to $308 billion from a four-year delay.

Looking at it another way, the savings over four years would be about a third of the deficit reduction goal that the Joint Select Committee on Deficit Reduction must achieve (not counting net interest savings) to avoid across-the-board spending cuts starting in January 2013.

The federal budget is already buckling under the weight of existing entitlement promises. The health care act would pile on top of these unaffordable commitments an additional $1 trillion in costs over the coming decade.

Congress and President Barack Obama agreed this summer that widening deficits and growing debt threaten our economic future, and something must be done to get our nation’s fiscal house in order. A good start would be to agree to delay initiating the new spending in the Affordable Care Act so that a broader and more stable bipartisan consensus can be built around fiscally sustainable entitlement and tax policy.

Douglas Holtz-Eakin served as a director of the Congressional Budget Office from 2003 to 2005. He is now president of the American Action Forum. James C. Capretta is a fellow at the Ethics and Public Policy Center and a former associate director at the White House Office of Management and Budget.