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Health Reform Breaks Bad

The deceptions and disasters of Obamacare

Oct 21, 2013, Vol. 19, No. 07 • By CHRISTOPHER J. CONOVER
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Deception #2: no new taxes on the middle class

Obama’s promise: “I can make a firm pledge under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes” (September 12, 2008).

Reality: By 2022, Obamacare will have imposed just over $1 trillion in new taxes. It’s true that $318 billion of this will come in the form of taxes on payroll, dividends, capital gains, and other investment income specifically targeting taxpayers earning over $200,000 (singles) or $250,000 (married). 

The remaining taxes, however, represent a laundry list of levies and limitations that will hit the pocket-books of both middle-class and low-income families. One could argue that the Cadillac tax on high-cost health plans ($111 billion) will tend to hit higher-than-average income workers (though certainly not just the top 1 or 2 percent). That may be true initially, but the threshold for determining which plans are taxed is indexed to general inflation rather than medical inflation. Consequently, Bradley Herring, a health economist at Johns Hopkins Bloomberg School of Public Health, estimates that as many as 75 percent of plans could be affected by the tax just in the next decade.

As well, Obamacare’s employer mandate penalties ($106 billion) assuredly will hit the lowest-income workers, since they are the ones least likely to be covered through employer health plans. Similarly, taxes levied on health insurers ($101.7 billion), drug manufacturers ($34.2 billion), and medical device manufacturers ($29.1 billion) nominally are levied on big corporations. But everyone knows these ultimately will be passed along to consumers in the form of premium increases or higher out-of-pocket spending. 

How do we know this? Because the Congressional Budget Office told us so, in November 2009, months before Obamacare was actually signed into law. Oliver Wyman, a well-known international consulting firm, has estimated the health-insurers tax alone is expected to increase premiums for single coverage by a minimum of $2,150 over the next 10 years while boosting family premiums by $5,080 during the same period. Even older people on Medicare Advantage plans, who tend to have lower-than-average incomes, will see premiums go up by $3,590 over 10 years according to the Oliver Wyman calculations.

Even for progressives who might fantasize that these corporate levies will somehow come out of big business’s (presumably obscene) profits, there can be little doubt that the individual mandate ($55 billion)—which, in fairness, wasn’t a tax until Chief Justice John Roberts declared it to be—will hit the little guy. Likewise, the new limits on Flexible Spending Accounts ($24 billion) and the higher threshold for deducting medical expenses from one’s income tax ($18.7 billion) will hit average families squarely in the pocketbook.

In short, when all is said and done, the very folks the president assured wouldn’t see taxes go up a dime to bankroll health reform will shoulder close to 70 percent of Obamacare’s tax burden. The president has shown himself to be a diligent student of former Louisiana senator Russell Long: “Don’t tax you, don’t tax me, tax that fellow behind the tree.” 

And that’s just in the short term. Despite repeated pledges to make “hard decisions” and have an “adult conversation” over entitlements, the president has put us on a fiscal path that his own Treasury Department has declared “unsustainable.” Health entitlements (including Obamacare) will grow so rapidly that federal spending as a share of GDP will rise by more than 40 percent by the year 2085. Rising health entitlements will account for every penny of that increase! All this from a president who assured us last year that “it is not a bigger government we need.”

Deception #3: annual premium savings of $2,500

Obama’s promise: “We’ll lower premiums by up to $2,500 for a typical family per year. .  .  . We’ll do it by the end of my first term as president of the United States” (June 5, 2008).

Reality: Taken literally, we know this promise failed spectacularly. According to the authoritative annual Kaiser Family Foundation/HRET Employer Health Benefits Survey, average premiums for family coverage (i.e., the kind of private coverage the “typical” family has) were $13,375 in 2009 and $16,531 in 2013. In short, average premiums for family coverage grew by $2,976 by the end of President Obama’s first term. Thus, we can accurately say that both in direction and magnitude reality turned out to be the opposite of what the president pledged.

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