Senators on the Health, Education, Labor, and Pensions Committee have revised the Democrats’ health care overhaul bill after an analysis by the nonpartisan Congressional Budget Office revealed the bill’s measures would carry a price tag of at least $1.6 trillion.
In a letter to HELP Committee members, Sens. Edward Kennedy (D-MA) and Chris Dodd (D-CT) called the original version of their Affordable Health Choices Act “incomplete” and said their updates would shrink the measure’s cost while providing health insurance for 97 percent of uninsured Americans.
The CBO had concluded the original bill would cover only about a third, or 16 million, of the 45 million Americans currently without health insurance.
Employer Mandate Imposed
The original version of the Affordable Health Choices Act, released in June, established a framework for federal and state-level taxpayer-subsidized health coverage for middle-income Americans. It also proposed tightening regulations on insurance companies, establishing a new government agency responsible for preventing Americans from going without health insurance, and imposing a nationwide individual insurance mandate.
In their revision, Kennedy and Dodd sought to offset the $1.6 trillion estimated cost of the bill’s implementation by specifying how much employers with 25 or more employees who do not offer those workers health insurance could be fined.
The bill sets the initial annual level of the fine at $750 per employee for full-time workers and $375 for part-timers. The original version of the legislation had left the dollar amount of those fines, as well as the fine for violating the individual mandate and the level of tax increases necessary to fund the entire overhaul, to the discretion of the secretary of the Department of Health and Human Services.
Government-Run ‘Option’
The revised version of the bill also includes a “public option,” a government-run health insurance program designed to compete in the same market as private insurers. Prominent senators such as Charles Schumer (D-NY) have been very vocal about their unwillingness to support a health care overhaul bill that does not include a public option.
Some members of Congress, including Sen. Jim DeMint (R-SC), have expressed concerns the public option would destroy the private insurance market as the latter would be unable to compete with the resources and lawmaking ability of the federal government.
Kennedy and Dodd say the employer mandate included in the revision “virtually eliminates” the likelihood employers will respond to the availability of a government-run insurance option by dropping funding for employee coverage. However, an evaluation of the bill by health care consulting and analysis firm Health Systems Innovations found the public option provision would “likely crowd out …79 million individual contracts with existing private insurers.”
Government-Caused Crowd-Out
Instead of preventing employers from dropping coverage for their workers, setting the fine at $750 per worker “will encourage employers to drop coverage because they will have a cheap way to fulfill their responsibility,” said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute.
“It is madness to think that employers will not drop coverage if the penalty for dropping coverage is $750 per worker,” Scandlen said. “Once they’ve paid their $750, they are off the hook and can feel virtuous at the same time.”
In 2008, employer-provided insurance policies averaged $4,704 a year for individuals and $12,680 for families, according to the Kaiser Family Foundation—far above the $750 annual fine imposed by the Affordable Health Choices Act.
“What you are going to see is adverse selection and crowd-out on a massive scale should this become law,” said Indiana state Rep. Eric Koch (R-Bedford). “Premiums for private-sector insurance will skyrocket as a result.”
The $750-per-employee fine will end up being passed along to those workers, said Devon Herrick, Ph.D., a senior fellow and health care economist with the National Center for Policy Analysis. “Hiking taxes on low-income workers by $750 in order to expand the federal government’s control of access to medical services would be painful at the best of times. With unemployment rising quickly towards 10 percent, it’s a sure recipe for job destruction,” he said.
Cooking the Books
In their letter, Kennedy and Dodd said the CBO put the cost of their new proposal at just over $611 billion—almost a trillion dollars less than the original bill. CBO Director Doug Elmendorf confirmed this in a letter to the two Senators, published on the CBO Web site.
“The Senate HELP Committee ‘brought down’ the $1.6 trillion cost of their proposal by adding $58 billion in new taxes on individuals, setting a massive penalty on the individual mandate, and adding $52 billion in taxes on employers through the pay-or-play mandate,” said Peter Fotos, director of government relations at The Heartland Institute. “That’s not reducing costs; that’s increasing the price everybody else pays in an effort to make it look like this scheme costs far less than it actually does.”
“Raising taxes on employers does not mean the bill will cost less than it did before,” said Scandlen. “It only means there will be less deficit spending.”
Joe Emanuel ([email protected]) writes from Georgia.
For more information …
“The Affordable Health Choices Act”: http://help.senate.gov/BAI09A84_xml.pdf
CBO Letter to Sens. Kennedy and Dodd: http://www.cbo.gov/ftpdocs/104xx/doc10431/07-02-HELPltr.pdf
