Out of Control Policy Blog

A Breakdown of the House Healthcare Bill

So, here is the skinny on the House Democrat’s three-committee healthcare overhaul bill that was released yesterday. Ultimately this is a job-killing bill wrapped up in an economy-strangling bill bundled with a deficit-increasing bill.

Cost

  • $1.2 trillion (though the CBO said it still had a few numbers to adjust)
  • $773 billion of this is to create an insurance “exchange”—the public option
  • $438 billion of this is for additional Medicaid and SCHIP funding

How to pay for it

  • A $580 billion tax increase on the wealthiest one percent of Americans and a handful of companies
  • An estimated $500 billion in cost-savings from Medicaid and Medicare
  • An estimated $163 billion in fees collected from companies that do not offer health insurance and pay an 8% payroll tax instead

Part of this is good, because there is a concerted effort to cut the costs of the current government run healthcare programs. But the other two parts are deadly. The payroll tax is the job killer. Forcing small businesses to offer healthcare will hurt many, the 8% payroll tax, on top of the current 15% payroll tax would destroy many, many more. The tax increase on the wealthy will also strangle economic recovery. Taking more money out of the hands of investors and producers won’t help the country get back on track. It will also hurt deficits in the future as tax increases cross the Laffer Curve threshold.

Who is covered?

  • 97% of Americans will have some form of health insurance based on the House plan, significantly more than previous versions. But they won’t all have insurance until 2019.
  • 30 million of the 37 million currently uninsured would have access to a public option by 2019. 
  • The remaining 7 million are estimated to receive coverage from their employers, or move into Medicaid or the Children’s Health Insurance Program (SCHIP)

This public option “exchange” is specifically for those with income between 133 and 400 percent of the poverty line. According to 2009 numbers, this means the option is available for individuals with income of up to $43,500 or families of four with an income up to $88,200.

What about the Senate?

On the Senate side, negotiations are pretty intense. There is a concerted attempt to reach out to Republicans (i.e. Olympia Snowe) so the bill isn’t totally partisan. Highlights of the negotiations thus far:

  • Senator Baucus said that they dropped the idea of taxing employer-based health benefits
  • The increased tax on wealthy Americans is a big sticking point for the Senate GOP and is holding up negotiations 
  • There is still talk of raising $20 billion from drug companies in fees (even though they only represent 10 percent of healthcare costs)
  • Another revenue option still on the table is a $75 billion bonding authority for states to finance Medicaid expansion
  • The Senate beefed up a tax-compliance proposal that would raise $22 billion by expanding the types of transactions companies have to report to the IRS. The proposal, significantly stricter than the Obama administration $3.3 billion version, will also eliminate thresholds for reporting and increase record keeping requirements
  • Rep. David Camp (R-MI) said yesterday, “Speaker Pelosi's $1 trillion government-takeover of health care will force millions of Americans to lose their current health insurance, increase premiums and impose massive new taxes and mandates on employers, especially small businesses. With unemployment rapidly approaching 10 percent, it is not surprising that Senate leaders have all but declared many of these provisions dead on arrival.”
  • Sen. Baucus is still holding out that the cost will drop when the bill comes to the Senate

Anthony Randazzo is Director of Economic Research


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