Congressional Democrat Health Care Overhaul Roundup; Now Including Windfall Profits Taxes On Insurers?

Sen. Max Baucus' health care proposal hasn't been reduced to legislation which is clear from the CBO and JCT treatment (both noting that there is no legislation based on the Baucus version), and that abomination likely will be twice as expensive as the CBO claims. Then there are the taxes imposed to make it work. The Baucus plan would result in marginal tax rates as high as 70%.

The CBO and JCT also note that the taxes imposed under the proposal kick in three years before the benefits start (10 years of revenues, 7 years of benefit, in the 10 year period being studied). Any shortfall in revenues in the first three years will compound shortfalls later and result in an ever more unbalanced situation.

With all these shortfalls creeping into every bill, no matter how expensive and how much Democrats have tried to hide the true costs, the need to raise revenue is all too necessary under all these plans.

Democrat Speaker Nancy Pelosi is now urging Rep. Charles Rangel (D-NY/tax cheat) to consider a windfall profits tax on health insurance companies, in lieu of either the surtax on wealthy taxpayers currently contained in HR 3200 or the tax on high value plans proposed by Baucus.

Never mind that the windfall profits tax will never provide the kind of revenue necessary to make the plan work. Never mind that a windfall profits tax will be passed on to the consumer because the entities involved will not absorb the cost but rather pass it on to their users.

Never mind that windfall profits taxes are a mighty difficult thing to do when the profits in the health care insurance sector are roughly 3%, or lower than what you'd find in the technology sector. This is razor thin profits, but Pelosi and Democrats know that raising taxes on most Americans is a nonstarter. They have to find a way to increase those taxes by any means necessary, even a back-door tax such as through a windfall profits tax.

If 3% is considered a windfall profit, how long before these same redistributionists look at the other companies on the list for windfall profits? When the taxes hit, the profits will disappear altogether, along with the services provided.

UPDATE:
The Hill has posted a story relating to the windfall profits tax.

BaucusCare Proving Just As Taxing As HR 3200

Democrat Max Baucus has floated an alternative plan to the House plan (H.R. 3200), which contains a multitude of taxing ideas to raise revenues to fund the massive adjustment to the health care delivery system in the United States. It may appear to cost less than the plan floated in the House (although Baucus now says that it is over $900 billion), but both are taxing credibility of its sponsors who claim that it will save taxpayers money in the long run.

In fact, many of the provisions in Baucus' bill and the House bill are filled with improbable assumptions and dubious math.

But the cost estimates in Baucus' bill, like those attached to many of the more than 500 amendments lined up for Finance Committee consideration, are full of magical math and budgetary sleight-of-hand designed primarily to serve political ends.

As a scaled-back alternative to liberal proposals, the Finance Committee bill is probably the Democrats' best hope for getting a health care overhaul through the Senate. It will also establish a benchmark for final negotiations, coming in well below the $1 trillion-plus price of the pending House bill.

Nonetheless, with cost shaping up as a deciding factor for the most important elements of a health care makeover, the top priority for many lawmakers has become generating politically palatable numbers, not focusing on what the actual costs turn out to be for consumers and businesses.

Despite the soaring cost of health care, for example, and the need for federal subsidies if lower-income Americans are required to buy medical insurance, the Baucus bill projects that by 2019 it will have a surplus of $49 billion.

And Baucus announced Monday evening that he would use this projected surplus to pay for added provisions to make health care more affordable for low- and middle-income consumers.

"Baucus learned a lot of lessons about how you have to construct the bill to get what you want," said Douglas Holtz-Eakin, a former chief of the Congressional Budget Office.

The CBO provides cost estimates that lawmakers use to tout the frugality of their proposals.

Baucus holds down the total cost of his proposals by assuming that there will be cuts in Medicare reimbursements to doctors. Yet Congress has repeatedly blocked those cuts in recent years and is widely expected to do so again. Not making the cuts would cost the government more than $200 billion in health care spending.

Then, there's the fact that it's filled with many of the same taxing ideas and a few new ones that tax credibility and taxpayers seeking care.

Another element in the bill being considered Tuesday involves revenues from a proposed 35 percent excise tax to insurers who offer "Cadillac plans," policies with a yearly premium cost of $8,000 for an individual and $21,000 for a family. The tax is estimated to generate $215 billion over 10 years.

How exactly does that bring the cost of care down? It appears to penalize those plans that are more comprehensive and forces insurers to either pass the cost on to the insureds, or to eliminate coverages to avoid paying the penalty provisions.

Of course, a far cheaper alternative to this taxing proposal would be to demand that insurance plans that are approved by any state be allowed to be accepted by any other state. If one can find a cheap plan from Utah in New York, one should be able to buy that coverage, instead of being forced to accept one of the plans that New York requires with its multitude of coverages that may or may not be in the best interests of a person seeking basic coverage.

Then, there's proposal to tax medical device manufacturers. Republicans raised a stink on the fact it would tax everything from condoms to pacemakers, and Baucus thereafter amended the cutoff for where the tax would be imposed to items costing $100 or more.

But Finance Committee Chairman Max Baucus, D-Mont., left intact a $4 billion-a-year levy on the medical devices industry — keeping the controversy alive. The industry makes some 80,000 different products from heart valves to imaging machines to tongue depressors. The Congressional Budget Office said Tuesday such industry fees could eventually raise insurance premiums by roughly 1 percent.

Baucus' last-minute switch came as his committee considers sweeping legislation to remake the health care system. It means that contact lens solution, scented maxi-pads and home pregnancy tests — among many other items — will not be taxed. (It's not clear if Q-tips were ever on his list.)

But more expensive consumer medical goods, from power wheelchairs to insulin pumps and hearing aids, would still get hit.

The difference is those are paid mostly through insurance, so the full cost doesn't come out of the household budget.

"He's trying to avoid the perception that the middle class is going to be taxed," said Dan Mendelson, president of Avalere Health, an information company that serves the health industry and government. "The trick is to get funding for the bill but not to have anything that smacks of a middle-class tax."

How exactly does that curtail costs of health care? It means that items that save lives, from automatic external defibrillators to pacemakers, will be hit by the tax. That means the cost for those items will necessarily increase, and such costs will be passed on to the consumer - the person seeking the health care.

It would affect everyone seeking care, not just those who are wealthy, but anyone in need of such items.

That compares with the sales tax treatment of medical items by some states, where some exempt health care related goods precisely because they are deemed to be critical to the health of taxpayers. Others, like Utah impose sales tax on sales of durable medical equipment or prosthetic devices without a prescription or when paid by Medicare or Medicaid. The rush to raise revenues actually costs those seeking health care treatment by taxing those items. How is that exactly sound health care policy when you're taxing the very items you're seeking to make more cost effective.

The real issue is one of perception, and Baucus is attempting to obfuscate the fact that the tax will hit items all across the board, and that everyone will feel the pinch of this tax proposal in the form of higher premiums. So, instead of doing something that will reduce costs of health care, this actually increases it.

Meanwhile, the Congressional Budget Office reported that ObamaCare is going to result in Medicare benefit cuts, contradicting what President Obama has repeatedly claimed in speeches and news interviews. As Ed Morrissey points out, Obama's claims that he can cut $414 billion in Medicare costs over 10 years without affecting benefits is pure bunk.

We budgeted $413 billion for this year, which makes a $50 billion “savings” target about 12% of its budget. Obama keeps talking about how efficient Medicare is compared to private health insurance, but how efficient can it be if he can slice 12% out of the budget without affecting benefits? In comparison, private health insurers spend 96.7% of all income on care and administrative costs, with only a 3.3% average profit margin.

The other possibility is that those billions in cost savings would come from a crackdown on fraud and waste in the system, but that's something that can and should be achieved without resorting to a massive overhaul of the entire health care delivery system. We don't need a massive overhaul of the system to eliminate waste and fraud.

Obama: It's Time To Act On Health Care

"It's time to act on health care" is the message that President Obama is going to deliver tomorrow after giving a nondescript speech to school kids today. That speech to kids got a whole lot of blustery attention from GOPers over the weekend, but I'm rather mystified over why. The need for educated kids is acute - and getting kids to focus on science and math has been a battle for decades. Then again, that's the problem, isn't it- no matter what the President says, the situation remains the same because the education system is governed by inertia and not on sound education principles that put the kids first.

It's not like he's going to say anything out of the ordinary for a speech of this type. People complained about what the Department of Education suggested for teachers to do in accompanying the speech, but that too was adjusted before the speech ran. The speech includes references to AIDS research and homelessness, but they're nothing but buzzwords that show sympathy to a particular interest group in and among Democrats, but no more.

Moreover, many students simply aren't in school as yet (they start tomorrow in NYC and on the 10th in Boston and Los Angeles for instance). Other schools are simply ignoring the speech altogether, including one in Chicago.

No, if you want reasons to complain, perhaps it's the fact that this speech will put the kids to sleep. It's 10 times longer than the Gettysburg Address, arguably the most important speech ever given by a President. There is something to be said for brevity and conciseness, but that doesn't appear to be a trait that this President has. He's hoping for a grand sweeping gesture, and the speech to kids simply isn't it. You write a speech for the audience, and on those grounds this speech fails. This is a speech by him, and about him, rather than the kids (at least those who are around to listen to it).

Note too that the Democrats slammed President George HW Bush's speech in 1991, and sought to investigate it for the improper use of funds (the investigation turned up nothing, but to claim that Democrats haven't done this tit-for-tat complaining over Presidential speeches is disingenuous). The GOP needs to pick and choose its fights, and the speech to kids is the sideshow compared to where the real action.

The real speech to watch is tomorrow's joint speech to Congress.

A "fired-up" President Obama declared that it's finally "time to act" on overhauling the nation's health care system.

"Every debate, at some point, comes to an end. At some point, it's time to decide. At some point, it's time to act," he told labor leaders in Cincinnati on Monday afternoon.

"It's time to act and get this thing done," he insisted.

Obama dusted off his "fired-up, ready-to-go" campaign chant during the speech in hopes of recapturing his mojo and setting the tone for what could be a make-or-break week for his presidency.

Lawmakers return to Capitol Hill Tuesday following a turbulent summer.

Obama and Democrats in his corner were repeatedly attacked by conservatives and constituents angry or confused over plans to revamp the nation's health care system. Republican support evaporated.

The President's poll numbers plummeted.

To wrestle the debate back onto his turf - and on his terms - Obama is delivering a prime-time speech tomorrow to Congress. If his call to action fails to motivate lawmakers, experts say, it could damage him politically.

Obama still has Democrats control the agenda in both the House and Senate. If he fails to get any kind of health care proposal through, it would damage him politically going into the 2010 election.

The problem is that the public has soured on the Administration and Democrats' attempts to claim that there's a crisis of health care in this country. People have realized that there's a difference between access to health care (which is universal - see how illegal aliens can obtain health care without any health insurance, much to the detriment of the hospitals that expend vast sums to provide such care), and the cost for such care - whether it's through private insurance and/or out-of-pocket costs, which include higher costs to offset the provision of care to illegal aliens and lower reimbursement rates provided under state and federal health care programs.

Obama's problem isn't that he hasn't been forceful. It's that he's not being persuasive. He called for a health care overhaul, and then left the details up to Congress, which turned it into a ill-understood and unread 1,000+ page behemoth. He hasn't made the case to justifiably overhaul a system that provides health insurance to 85% of Americans (based on the widely used 50 million uninsured (which itself is a dubious figure that includes millions of illegal aliens and those who are transitioning between insurance plans or who are eligible for various programs but choose not to use them and a US population of 300 million). People who are already satisfied with their health insurance aren't keen on a proposal that will change how things are done, and while the President has said that you'll be able to keep your existing insurance, the problem is various versions making their way through Congress have phase-in dates that allow for employers to shift employees to the proposed plans.

Then, there's the mother of all problems for the President.

Cost.

There's no way that his proposals are revenue neutral, which means tax hikes are inevitable (above the tax hikes and surcharges indicated in the existing bills).

As expected, Baucus’ proposal does not include a public insurance option, but instead features insurance cooperatives that could appeal to moderate Democrats and perhaps some Republicans. That’s a major difference from bills approved by three House committees and the Senate Health, Education, Labor and Pensions committee.

Baucus’ plan also is expected to be less generous in terms of subsidies and coverage than those bills – which, along with the absence of the public option, is sure to rankle more liberal Democrats.

The bipartisan group also is considering a tax on insurance companies
that provide expensive coverage plans. And one feature that might help satisfy the more liberal members of the committee is that insurance companies could face a separate new fee to help pay for the plan. It would be determined based on market share, and could raise $6 billion a year starting in 2010, the sources said.

The Baucus proposal doesn't quite get the fact that if you raise taxes on those insurance companies, they will pass through the costs to the consumer in the form of higher premiums and/or lower benefits. The companies aren't going to eat those costs.

President Obama has repeatedly attempted to claim that his proposals will save money over the first 10 years of implementation, but the CBO has already shot down that claim, finding that it will be in deficit, and will never save money. Preventative care is far more costly than the Administration was willing to countenance, and cost savings aren't likely to be there. Moreover, there's the problems with existing health care systems operated by the government such as the Veterans Administration and the Indian Health Service, both of which provide substandard care far too often to be seen as a model for all Americans.

Then, there's the question of who's going to provide all this care if there's 50 million people who aren't receiving this care. If you assume the 50 million (which I think is overblown based on various figures, but which works wonders to highlight the fact that at least 85% of Americans have insurance coverage), who is going to be there to provide the care without lowering the quality for everyone else. As it is, health care providers are already overburdened and there are shortages of nurses and general practitioners in various parts of the country. The proposals do nothing to address those concerns. They aren't going to be created out of thin air - in fact, it would take years to produce a crop of doctors to cover that many new patients into the system, which means quality is sure to drop in the short run.

The fact is that if the President dropped the current Democrats' plans (HR 3200 or the Baucus proposal in the Senate), he could find a plan that would reform the system and expand coverage to more Americans without scrapping a system that works for 85% of Americans. It would involve expanding insurance coverage regionally and nationally, as well as reduce costs to those Americans looking for cheaper insurance options. The problem is that the President would run into a roadblock from Democrats who want the public option, which means that he risks running afoul of Congressional Democrats.

It's a real test of leadership to see if he does what he says (call for bipartisanship) or kowtows to Congressional Democrats who have largely frozen Republicans out of input on the crafting of the bills.

A Real Killer

President Obama and his fellow Democrats are hell bent on ramming through a health care reform act that doesn't actually reform health care and will end up increasing the costs for health care, will kill job creation in small businesses, put a damper on the economy, and may end up killing patients in need of care. Moreover, one of the plans actually outlaws private health care providers, making the government solely responsible for health care insurance in the nation.

For starters, how exactly can a byzantine health care delivery system such as the one proposed result in lower costs?


Organizational Chart of House Democrats Health Plan -

That's just the tip of the iceberg.

The House plan basically phases out private health care altogether:

It turns out we were right: The provision would indeed outlaw individual private coverage. Under the Orwellian header of "Protecting The Choice To Keep Current Coverage," the "Limitation On New Enrollment" section of the bill clearly states:

"Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.

So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.

From the beginning, opponents of the public option plan have warned that if the government gets into the business of offering subsidized health insurance coverage, the private insurance market will wither. Drawn by a public option that will be 30% to 40% cheaper than their current premiums because taxpayers will be funding it, employers will gladly scrap their private plans and go with Washington's coverage.

People will initially be able to keep their private carriers, but they wont be able to switch. Doing so puts them in the pool of people who can only choose the government plans. The government plans, which will rely on massive taxation, will undercut the private plans since they aren't subsidized by the government, and businesses will drop their private coverage in favor of the government plan, which we're all paying for in any event. They reduce choice, plain and simple, and if you don't like it and want to opt out of paying for insurance, you'll be taxed for that privilege.

The health care proposals are sweeping in their tax and grab breath. In New York, the plans would be a disaster. It would put the marginal tax rates imposed on wage earners making as little as $80,000 at well above 50%, when factoring in state and local taxes.

The $544 billion tax hike would violate one of President Obama's ironclad campaign promises: No family will pay higher tax rates than they would have paid in the 1990s.

Under the bill, three new tax brackets would be created for high earners, with a top rate of 45 percent for families making more than $1 million. That would be the highest income-tax rate since 1986, when the top rate was 50 percent.

The legislation is especially onerous for business owners, in part because it penalizes employers with a payroll bigger than $400,000 some 8 percent of wages if they don't offer health care.

But the cost of the buy-in to the program may be so prohibitive that it will dissuade owners from growing their businesses -- a scary prospect in the midst of a recession.

Obama took to the airwaves yesterday with ads and TV interviews promoting the need to reform health care.

As a Senate health committee passed a different version of a health-care reform bill - a milestone for the issue - Obama said on NBC, "The American people have to realize that there's no such thing as a free lunch."

And in a Rose Garden speech, he said the "status quo" on health care is "threatening the financial stability of families, of businesses, and of government. It's unsustainable, and it has to change."

Asked if Obama supports the surtax on wealthiest Americans even though it would break a campaign pledge, White House spokesman Robert Gibbs said only, "It's a process that we're watching."

Republicans in Washington and small-business defenders in New York said the House legislation would effectively place a stranglehold on businesses while running off top earners.

Not only do these plans violate Obama's no tax hikes pledge on 95% of Americans, but he does so with massive tax hikes to boot. Throw in the fact that he's intent on imposing surtaxes on the very groups of people who are most likely to create jobs, and you have a significant brake on the economic recovery that he's hoping will improve Democrat chances in 2010 and beyond.

As Hot Air points out, the Bureau of Labor Statistics notes that many of the top wage earners in the nation are the very people who provide health care in the first place. If the tax burden increases on them the more work they do, why will they strive to see more patients? They will do just enough to maintain their current income levels, will engage in tax avoidance strategies, and the number of health care professionals will decrease, leaving fewer doctors to provide care to more people. That, on its face, is a serious reduction in the quality of care.

In other words, these plans are stunning in their economic destructiveness.

Now, as for what they will actually do to the delivery of health care? It's not much better. In fact, as reported by the AP and other outlets, the US already provides government health care to several groups of people. The Indian Health Service is supposed to provide quality health care to Native Americans across the nation. It has an abysmal record, and the quality of care is such that you don't want to get sick or injured on nights or weekends or pretty much any other time since the care is so shoddy.

The IHS has failed in its mandate to provide quality free health care as required by federal law and treaties with the Native American tribes. The care is free, but it isn't quality. In fact, it can be a real killer.

Then, there's the Veterans Administration, which is supposed to care for members of the US Armed Services; the very people sworn to defend the nation. We owe it to our Armed Forces to provide quality care, and yet we have repeatedly seen shoddy care, coverups, and inadequate resources devoted to quality care.

That inadequate care goes back decades and while the quality of care has improved to some degree, it still falls far short of the quality of care found outside the VA system.

Both systems service a population that is several magnitudes smaller than that of the entire US health care delivery system. Yet seeing how the government can't provide quality health care in either of those instances, why should anyone believe that the government will do better with the health care delivery of hundreds of millions of Americans?

UPDATE:
The Congressional Budget Office has thrown cold water on the Congressional health care bills, noting that it will not bring down costs of health care.

Under questioning from Chairman Kent Conrad , D-N.D., Elmendorf told the Senate Budget Committee that the congressional proposals released so far do not meet that second test.

“In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount and, on the contrary, the legislation significantly expands the federal responsibility for health care costs,” he said.

Elmendorf was not addressing the narrow question of whether the Democrats’ legislation would be budget-neutral over 10 years. Congressional Democrats and the White House have promised to offset the cost of health care legislation over that period.

But budget analysts and some members fear the legislation will not slow the growth of health care spending enough to prevent it from overwhelming the federal budget after that 10-year window.

Also, to remain budget neutral, massive taxation is required. The Democrats aren't even attempting to overhaul the health care delivery system without imposing massive taxation on already overburdened taxpayers, and this testimony reinforces that fact. Indeed, the costs will only rise as those imposed taxes don't meet revenue projections, requiring still more tax hikes or reduced services to compensate.

UPDATE:
Sen. Max Baucus (D-MT) says that he's close to getting bipartisan support on the health care makeover.

Senate Finance Committee Chairman Max Baucus(D-Mont.) said Thursday that he hopes to have a bipartisan deal on a health care reform bill by the end of the day.

He made the remarks after huddling for about two hours with five Finance Committee members most closely involved in the negotiations. It was the first time Baucus acknowledged a time frame for reaching an agreement.

“We are meeting very aggressively today,” Baucus said of the bipartisan group, which plans to meet again at 1:30 p.m. “We will keep meeting all day long. I hope we can reach some kind of agreement by the end of the day, but having said that, it depends on what kind it is.”

Asked again by reporters if he expected a deal Thursday, Baucus reverted back to his standard line that the group “will be ready when we’re ready.”

Baucus said the task of filling a $320 billion hole in the bill has been challenging since the Democratic leadership and President Barack Obama asked Baucus last week to take the idea of taxing health benefits off the table.

It's called taxes without calling it such. It will be playing fast and loose with the definitions and tax treatment of income and health care expenses, but the reality is that it will be new and additional taxes imposed to fund this mess.

More to the point, Baucus has no choice but admit that the bill as presented to him was not revenue neutral as written, which is a sign of bad things to come.

Obama's Tax Vaporware Policy

Much like software manufacturers who make all kinds of astounding claims about their software and the release turns out to be a massive disappointment, so too is President Obama's tax policy.

The Senate is taking up one of Obama's pet projects, adjusting the tax rates on the "rich".

During the campaign, Candidate Obama told everyone he wouldn't raise taxes on people making less than $250,000. Well, he's already lied about that since enacting an onerous cigarette tax that hits all American smokers regardless of income level to fund a massive expansion of the S-CHIP health care program. Now, he's pushing for adjusting the tax rates such that those making as little as $104,000 are going to get hammered with tax hikes starting in 2011.

Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, which has jurisdiction over federal tax law, is seeking a vote this year on legislation that would increase the income tax rates on some Americans who earn as little as $104,425 per year.

The bill, which Baucus introduced Thursday, would fulfill many of President Barack Obama’s promised tax changes, including making most of the tax cuts enacted under former President George W. Bush permanent while raising taxes on Americans making more than $250,000 per year.

But those making more than $250,000 per year would not be the only ones to see their taxes go up if Baucus’s bill becomes law.

The proposed legislation would raise the rates on the top two income brackets, from the current levels of 33 percent and 35 percent respectively, to 36 percent and 39.6 percent. The new rates would become effective after 2010.

The increase in the rates for these two brackets will affect all taxpayers who fall into these two brackets regardless of their filing status, according to Heritage Foundation Senior Policy Analyst Curtis Dubay, who reviewed the legislation.

That means some taxpayers earning as little as $104,425—far less than half the $250,000 threshold President Obama set for raising income taxes—would see their income tax rate increased.

Throw in the fact that there's no way that taxing the rich even at confiscatory levels not seen since World War II and thereafter and still balance the budget based on Obama's prodigious spending that the country simply cannot afford, and watch the level at which taxpayers get hit with tax hikes actually wanders down and encompasses many more people who are squarely in the middle class.