Dalhart Area Chamber of Commerce

The Congressional Budget Office (CBO) reports that, if enacted, the House-passed health care reform legislation ("Patient Protection and Affordable Care Act") would, over the next 10 years, cost about $950 billion, but as scored by CBO it would raise revenues and lower costs, it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs - health insurance subsidies and long-term health care benefits - and alter another entitlement program would improve the nation's bottom line.

How? - The CBO is required to take written legislation at face value and score it accordingly.

The bill front-loads revenues and backloads spending. Taxes and fees begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for 6 years of spending.

To operate the new programs over the first 10 years, future Congresses will need to vote for $114 billion in additional annual spending to implement the programs. This discretionary spending is excluded from the Congressional Budget Office's tabulation.

The health care bill in Congress imposes new taxes on medical devices, prescription drugs, and health insurance itself. These taxes will be passed on to patients through higher prices and higher premiums. The president's plan includes a 40 percent excise tax on high-premium plans, which would bend the premium cost curve upward unless benefit packages for those plans are cut. The extra taxes will be passed on to consumers, according to CBO and JCT. The net result is insurance premiums will go up, not down.

The bill will have huge negative effects on employers who currently provide retiree benefits. Currently, those companies receive a subsidy to help pay for their Part D costs (Rx benefit), and the bill will end the tax exclusion on the subsidies-making them taxable for the first time. This will have a negative impact on company's cash flows decreasing cash available for capital investments and job creation.

A new 3.8% "Medicare" tax on non-wage income would be placed on high earners, income from interest, dividends, capital gains, and some profits from investments in partnerships and S-corporations. The revenues from the tax on unearned income would be credited to the Supplemental Medical Insurance trust fund. If the unearned income tax-and other proposed tax hikes on high-income individuals included in the president's FY 2011 budget-become law, a high-income taxpayer could have an effective tax rate on capital gains and qualified dividends of 23.8 percent. Significantly, however, the effective tax rate on nonqualified dividends would be 43.4 percent.

The primary cost-control mechanism and long-term revenue source for the program is the tax on "high-cost plans" effective in 2018 (note - during the 2nd term of a President that would follow Obama including if Obama is reelected for a 2nd term). The financial sustainability of the entire bill rests on the hope that a future Congress will accept these tax increases when the current Congress wouldn't. The so called "Cadillac tax" is postponed until 2018, but will be indexed to CPI inflation, causing an insidious, AMT-like affect.

Employers with over 50 employees will be forced to offer coverage or pay a $2,000-per-employee fine. Businesses will also face a $3,000-per-employee fine if the coverage they offer is deemed "unaffordable" for employees (if the employee opts-out and gets a subsidy in exchange). This means that an employer with low-income employees who offers comprehensive, affordable coverage could nevertheless be fined just as much as an employer who offers no coverage at all. The employer mandate tax - rises from $750 per employee in the Senate bill to $2,000 per employee in the Reconciliation bill, a 166% increase. It is estimated that 219,961 small businesses could be subject to the employer mandate. The percentage of employees employed by small businesses which could be subject to the employer fine is projected to be 26.4 million workers or, 22 percent of the entire private-sector workforce

$70 billion in premiums expected to be raised in the first 10 years for the legislation's new long-term health care insurance program ("Class Act" - long-term care insurance). The revenues are counted as deficit reduction, because the benefits are assumed not to be paid out in the first 10 years. . CBO has said that the Class Act will be "unsustainable" in the long-term, adding tens of billions to the deficit.

Corporations must deposit $8 billion in higher estimated tax payments in 2014, meeting fiscal targets for the first five years. But the corporations' actual taxes would be unchanged; the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

Uses $53 billion in anticipated higher Social Security taxes to offset health care spending. Social Security revenues are projected to rise as employers shift from paying for health insurance to paying higher wages. If workers have higher wages, they qualify for increased Social Security benefits.

The legislation cuts $463 billion from Medicare spending and uses the revenues to finance insurance subsidies. Medicare currently has an unfunded liability of $38 trillion. The Chief Actuary of the Medicare program has said that these cuts are unrealistic because they would continuously cut reimbursements without touching the actual costs of providing care. CMS expects as many as 20% of doctors and hospitals would be driven into serious financial distress. The New England Journal of Medicine reported (3/17/2010): 46 percent of general practitioners feel they will be forced out or make them want to leave medicine AND without these Medicare cuts, the Senate bill is a long-term budget buster.

CBO said the healthcare bill's $138 billion in savings over 10 years would disappear if the government: extends the current Medicare doctor payment rate instead of allowing it to expire (resulting in a 21% cut in reimbursements to Doctors). Over the next decade actual spending will be between $200 and $300 billion higher than projections. This added cost more than wipes out any purported savings in the bill.

Includes more than $200 billion in reductions from the Medicare Advantage program serving nearly 11 million seniors. These cuts would lead to higher out-of-pocket costs, reduced benefits and fewer health care choices for our seniors.

The Senate health care bill contains an extraordinary reversal of 30-year-old reforms in the black lung benefit program. The provision would rescind reforms in eligibility standards governing black lung benefits enacted in 1981. This creates another new entitlement program returning to non-diagnostic presumptions and affidavit processes that, according to medical experts, are even more imprudent now than they were 30 years ago. Insurers can't charge premiums retroactively, so companies will take on liabilities worth hundreds of millions of dollars.

President Obama states that the projected deficit savings ($1.1 trillion) from health care reform will all come to pass over the next 20 years (fully implements the half-trillion in Medicare cuts and half-trillion in new taxes).   The CBO says that the President underestimated the deficits his FY 2011 budget would create over the next 10 years-by $1.2 trillion. In other words, even if the President's projected deficit savings ($1.1 trillion) all come to pass over the next 20 years they won't even make up for the additional $1.2 that the CBO found that the President missed in his budget projections in just the next 10 years.

CBO expects the cost of the new entitlement spending aimed at coverage expansion in the Senate bill - the premium subsidies in the exchanges and the expansion of Medicaid-to reach about $200 billion by 2019 and then grow at a rate of 8 percent every year thereafter. In other words, this new health entitlement spending is expected to escalate just as rapidly as Medicare and Medicaid have in the past.

The federal deficit is already expected to exceed at least $700 billion every year over the next decade, doubling the national debt to more than $20 trillion.