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May 2013 Brief: Volume 20, Number 13

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Obamacare So Far…Increased Taxes and Increased Costs

 

by Deborah D. Thornton

 

Thomas Sowell said it best: “If we cannot afford to pay for doctors, hospitals, and pharmaceutical drugs now, how can we afford to pay for doctors, hospitals, and pharmaceutical drugs in addition to a new federal bureaucracy to administer a government-run medical system?”[1]

 

The promise of the Patient Protection and Affordable Care Act (PPACA) passed in March 2010, and better known as Obamacare, was that all Americans would have health insurance, access would increase, and costs would go down. Most famously, President Barack Obama promised American families, on multiple occasions, that “the cost of a typical family’s premium” will go down “by up to $2,500 a year.”[2] At this time, none of these promises are true, and none appear to have any hope of becoming true. In the last three years, health-care news has all been bad – access is going down and costs, both for premiums and service, are going up. Additionally, taxes are going up significantly to pay for the government takeover.

 

Reports are already show declining access to health insurance, as employers chose to drop coverage or alter hiring so that they are not required to provide coverage. Based on a wide variety of estimates, from 11 to 35 million workers will lose employer-based coverage, basically equal to those gaining coverage.[3] The Congressional Budget Office indicates that though the number of uninsured will drop from 56 million, approximately 26 million people will still not have health insurance even after PPACA is fully implemented.[4] This is even though all Americans will be required to purchase health insurance and fined if they do not.

 

Health insurance costs already rose by 7.5 to 9.5 percent or more from 2010 to 2011, with the cost for a family policy – whether paid by the employer or an individual – rising to over $15,000 a year, and individual policies going to almost $5,500.[5] Cost increases from 2011 to 2012 were comparable, and are continuing to rise. For 2013, Aon Hewitt’s (a Chicago-based employee benefits company) employers are reporting an average 8 percent premium increase to their employees.[6] Contrast this with the original claims of significant policy cost reductions.

 

A new 96-page report from the Joint Committee on Taxation details 21 tax increases. They estimate the total taxes to be collected at just over $1 trillion ($1.058 trillion). Initially, the tax increases were estimated at a “paltry” $569 billion in March 2010.[7] The largest new taxes are the 0.9 percent payroll tax on wages and self-employment income, and the 3.8 percent tax on dividends, capital gains, and investment income for those workers earning over $200,000 (singles) or $250,000 (married).[8] The amount to be collected from these two new taxes alone is now estimated at over $315 billion. These are new taxes on virtually all workers.

 

Additionally, major new taxes are going to be collected both directly from employers ($106 billion) and from health-insurance providers ($102 billion).[9] The money employers pay in taxes cannot be used to increase wages or hire new workers, and the cost of the tax on health-insurance providers will naturally be passed on to the health-insurance purchasers – whether individual workers or their employers.

 

The medical device tax of 2.3 percent has received the most attention. It is expected to total $30 billion over ten years, and will be passed onto insurance companies and consumers. The medical device tax was actually overturned in a symbolic vote in the U.S. Senate on March 21, 2013. There were 33 Democrat Senators who joined all 45 Senate Republicans in voting to overturn it. This included four of seven who are in Democrat leadership positions.[10]

 

The Milliman group, which specializes in Medicaid actuarial projections, prepared cost projections for Iowa in December 2011 and 2012. They predict a three-year enrollment increase from 110,000 to 181,000 people, caused by the coverage expansion itself, as well as woodwork and crowd-out enrollees. “Crowd-out” enrollees are those who will be forced on Medicaid by employers dropping coverage. By June 2015 over 710,000 Iowans will be on government-provided health care.[11]

 

The December 2011 report projects that the expansion cost through FY2020 will be between a negative $72 million (or decrease) and an increase of $237 million.[12] This does not sound too bad. However, by December 2012 the Milliman report increased those projections to a “low scenario” increase of $171.2 million and a “moderate” increase of $536.6 million.[13] This is an increase in state funding costs, even with “100 percent federal payment” of providers!

 

The estimate of projected costs to Iowa taxpayers, done by a reputable actuarial firm, more than doubled in one year. Even if the “low” increases for each year were the real numbers, the cost projections went up by almost $250 million. This projection is not a political statement by the Governor, Republican House, or Republican Senate – this is a qualified academic projection of reality. What will the 2013 costs be? And the 2025? And the 2050?

 

Obamacare does not solve the health-care issues it was purported to address. All it does is cost every one of us more money, both in taxes and in our health care. The State Legislature and Governor Branstad must not accept the “free” Medicaid expansion. We must say “NO” and keep saying “NO” to government control of our lives and decisions.

 

(Endnotes)
[1] Thomas Sowell, “The ‘Costs’ of Medical Care, Part III,” Townhall.com, November 5, 2009, <http://townhall.com/columnists/thomassowell/2009/11/05/the_costs_of_medical_care_part_iii/page/full/> accessed on February 15, 2013.
[2] J.B. Wogan, “No Cut in Premiums for Typical Family,” Politifact.com, Tampa Bay Times, August 31, 2012, <http://www.politifact.com/truth-o-meter/promises/obameter/promise/521/cut-cost-typical-familys-health-insurance-premium-/> accessed on March 24, 2013.
[3] Terrance Huiskens, “Obamacare in Pictures,” The Heritage Foundation, March 31, 2012, <http://www.slideshare.net/TerranceHuiskens/heritages-obamacare-in-pictures> accessed March 13, 2013.
[4] Ibid.
[5] Ibid.
[6] Bruce Japsen, “Worker Health Premiums Will Jump Next Year as Employers Shift Cost Burden,” Forbes, October 3, 2012, <http://www.forbes.com/sites/brucejapsen/2012/10/03/worker-health-premiums-will-jump-next-year-as-employers-shift-cost-burden/> accessed on March 13, 2013.
[7] Robert Wenzel, “Tax Prof: ObamaCare Tax Increases Are Double Original Estimate,” Economic Policy Journal, March 13, 2013, <http://www.economicpolicyjournal.com/2013/03/tax-prof-obamacare-tax-increases-are.html> accessed on March 14, 2013.
[8] Ibid.
[9] Ibid.
[10] Ricardo Alonso-Zaldivar, “Senate Democrats Vote to Repeal Obamacare Tax,” Huffpost Politics, March 22, 2013, <http://www.huffingtonpost.com/2013/03/22/democrats-obamacare_n_2934217.html?utm_hp_ref=politics> accessed on March 23, 2013.
[11] “Financial Impact Review of the Patient Protection and Affordable Care Act as Amended by H.R. 4782, the Reconciliation Act of 2010, on the Iowa Medicaid Budget: Medicaid Expansion to 138% FPL,” Milliman, Inc., December 13, 2012, pp. 1-3.
[12] “Financial Impact Review of the Patient Protection and Affordable Care Act as Amended by H.R. 4782, the Reconciliation Act of 2010, on the Iowa Medicaid Budget,” Milliman, Inc., December 5, 2011, p. 2.
[13] “Financial Impact Review of the Patient Protection and Affordable Care Act as Amended by H.R. 4782, the Reconciliation Act of 2010, on the Iowa Medicaid Budget: Medicaid Expansion to 138% FPL,” Milliman, Inc., December 13, 2012, pp. 1-3.

 

Deborah D. Thornton is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact her at Public.Interest.Institute@LimitedGovernment.org.

 

Permission to reprint or copy in whole or part is granted, provided a version of this credit line is used:"Reprinted by permission from INSTITUTE BRIEF, a publication of Public Interest Institute." The views expressed in this publication are those of the author and not necessarily those of Public Interest Institute. They are brought to you in the interest of a better-informed citizenry.

   

 

 

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