Jim Capretta writes that Obamacare would raise Americans’ taxes and eventually ration their health care. Furthermore, “the most transparent administration in the history of our country” (that’s Robert Gibbs’s description, not Capretta’s) would do so in stealth fashion — by breaking from the Reagan-era precedent of indexing tax brackets to inflation, and by attempting to use Obamacare’s Independent Payment Advisory Board (IPAB) to impose a nationwide “global budget” or “social budget” for health care.
Capretta writes that, when it comes to deficit-reduction, “the president and his allies do have a plan of sorts. They just don’t want voters to know what it is. Indeed, it is their hope that they can get their plan adopted by stealth — and that voters never fully realize that the government has adopted it.”
“To Democrats, the solution to our budget problem has two components. First, massive and steady tax hikes, not just over the next few years but every year for the next quarter century to match the explosion in entitlement costs. Second, they want stiff government cost controls on the entire health sector, not just on public insurance programs.
“On taxes, the Democrats were more aggressive than most realize. The Congressional Budget Office (CBO) says the total tax hike over the next ten years will exceed $800 billion — a significant sum. But that’s really just the beginning of it. The authors of Obamacare were looking for a ‘game-changer’ that went beyond a near-term tax hike. What they really wanted was a perpetual cash machine for the government, something that would generate ever-increasing amounts of revenue over the coming decades without forcing Democratic politicians to cast any further votes in support of higher taxation.
“Their solution: Go back to 1970s-style bracket creep. One of the key economic reforms of the Reagan years was to put an end to the automatic tax hikes that used to occur every year as inflation pushed households into higher tax brackets. The Reagan tax cut permanently indexed those brackets to inflation, thus forcing politicians to get their tax hikes the old-fashioned way — by voting for them.
“But the Obamacare tax hikes associated with Medicare — 0.9 percent on wages and 3.8 percent on non-wage income — were sold as hitting only individuals with incomes exceeding $200,000 and couples with incomes above $250,000 annually. But those income thresholds are fixed. They will be the same in 2030 as they are in 2013, when they kick in. Consequently, as the years go by, more and more Americans will find themselves paying much higher federal taxes for Medicare — even though they are decidedly not the ‘rich’ people the president said he was targeting.”
Indeed, if the economy grows at the rate that it has over the past quarter-century, and if incomes rise accordingly, then by 2030 the tax would hit the “rich” who are currently making $74,000 a year — and couples currently making $92,000.
Similar, Capretta writes that, under reasonable assumptions, by 2026 the average American’s health policy would qualify as a “Cadillac plan,” so he or she would have to pay the “Cadillac tax.”
“By 2020, the total tax hike associated with Obamacare will already be bad enough — about 0.5 percent of GDP. But by 2035, because of bracket creep, it will have more than doubled — to 1.2 percent of GDP, according to CBO. And it won’t stop there. It will keep going up every year, in perpetuity.
“The second part of the Democrats’ long-term budget plan is the imposition of a global budget on the U.S. health sector….
“Obamacare established what’s known as the Independent Payment Advisory Board, or IPAB, supposedly to find cost ‘efficiencies’ in Medicare. In truth, the IPAB’s mandate is to enforce what amounts to a cap on overall Medicare spending. The only tool at its disposal to do so is price setting for suppliers of services and products to Medicare patients. It will impose arbitrary, across-the-board payment-rate reductions to hit budget targets, which will have the predictable result of driving willing suppliers of services out of the marketplace.
“As the years go by, if Obamacare is allowed to stand, tens of millions of American will become enrolled in publicly subsidized coverage. The costs to the Treasury will be steep — and will lead to calls for greater cost control. That’s when Democrats will push for the next step — to extend the IPAB’s authority beyond Medicare to the insurance plans subsidized by Obamacare. We will nearly be at the bottom of the slippery slope to a Canadian-style health system.
“The Democratic plan for closing the budget gap has always centered on raising taxes and rationing care. What most people don’t yet realize is just how far Obamacare has already taken us down that road.”