2009 October 18 Sunday
Obama Healthcare Revenue Sources
The middle class pays - contrary to Obama's campaign promises.
Think back to the 2008 election, when Obama promised again and again that he would not increase taxes on the middle class.
"And if you're a family making less than $250,000 a year, my plan won't raise your taxes one penny--not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes," Obama told an audience in Orlando, Florida, in August 2008, something he repeated at almost every opportunity.
This not the last tax Obama will level on the middle class. He can't do all he wants to do without casting a wide net.
One of the sources of tax revenue for the Obama medical plan involves taxing high benefit medical insurance plans that cost more than $8000 per year or more than $666 per month. Most of the people who have such plans are in unions and the rest are in upper management of some big corporations. So who is going to pay? The bulk of the money will come from people with yearly incomes less than $250k and more than half the money will come from people with yearly incomes less than $100k.
The analysis by the Joint Committee on Taxation concluded that tax payments would indeed rise. And it found that the middle class would be stuck with the tab.
The report projected that the excise tax would raise about $52 billion in 2019. Of that, about $8.9 billion would come from taxpayers with incomes of less than $50,000; about $19.4 billion from taxpayers with incomes between $50,000 and $100,000; and about $17.4 billion from taxpayers with incomes between $100,000 and $200,000.
Add those up, and you see that about 87 percent of the revenue in the original Baucus proposal to finance Obamacare would come from individuals with incomes of less than $200,000.
On the bright side, if you aren't in a union you probably won't pay - at least not for this particular tax. Other taxes in the plan will hit you though. Obama and the Democrats in Congress are putting taxes on the medical industry that will raise costs of medical services and therefore prices of medical services. This will push up co-pay costs and also insurance premiums.
Massachusetts is supposed to serve as the model for a national requirement to buy medical insurance. In Massachusetts costs are up and rising rapidly.
But insurance premiums for most residents are going up, not down. Many middle-class people who had insurance before the overhaul see little change -- except that they're spending more. They're seeing little or no difference in the quality of their care.
In crafting their plan, Massachusetts lawmakers ducked the tough issues of cost control, including how much public and private insurers would pay physicians and hospitals. So the state still has some of the most expensive medical care in the U.S. And costs are rising faster than the national average. Far faster than wages too.
We are as a nation poorer than our government acts. We are living beyond our means. The reckoning on that lies in the future.
Is $800 per year a typo? Did you mean $8000? Also, I find the use of 666 in a bill determining limits rather disturbing, but then I'm really superstitious.
There's only one promise that matters: "I promise to be the first black president."
He's kept that promise.
The rest -- economic recovery of the middle class, healthcare, peace, planetary survival, upholding the Constitution -- are irrelevant so long as he keeps that promise.
Obama changes his mind again and breaks another campaign promise? Ho hum, so what else is new? Here's a list (last updated in July) of 53 promises that Obama's already broken, so what difference does one more make?
A great, quick & cheap 2012 campaign advertisement will be that speech about no taxes on folks under 250K witht he visual blurred as an in focus list of the new taxes on families under 250K scrolls. Allowing the Bush tax cuts to expire would be a bad move for him as it would jack the lower tax brackets considerably making the tax returns for the years just prior to 2012 stick in the minds of lower income voters.
The Cadillac Plan scheme as reported out of the Senate Finance Committee calles for a 40% excise tax on the value of plans that cost over $23,000 per year. For comparison, the average family plan cost about $12,000 in 2008. That's near the cost (employer + employee premiums) of my own high-deductible, significant-copay plan. However, apparently the Cadillac tax will be figured on HSA contributions as well as premiums. So that brings my current plan to about $18,000. Add in the current rate of 15% to 20% annual price hikes (ignore the rising deductibles), and I'll be riding a Cadillac by the time the Baucus/Obama tax phases in.
Except that I won't, since my employer will have dumped employees' families into the exchange/public/whatever option by then, anyway.
The cost, revenue, and budget projection figures that the Reformers are using range from squishy-soft to totally phony. And all the errors point in the same direction, surprise. I don't think one can trust any of these projections.
This Reform will improve the lot of the uninsured, probably including illegal aliens. People covered under Medicare and some other socialized medicine programs will probably fare about the same. It seems very likely to me that the Reform will harm most people who have fair to good insurance coverage today.
Regards $23,000: Is that per employee even if the employee has several family members covered under it? Or is it per person?
My impression was that the $8000 number was per person. But it is hard to keep up with the twists and turns of this bill.
Also regards $23,000: There's no inflation adjustment? Keep in mind that insurance policy costs are going up a lot faster than overall inflation. So the Cadillac cut-over point will get hit by lots more people as the years go by.
What's really unfair about Cadillac plan limits: They hit people in their 50s and especially in their early 60s because their medical insurace costs go up for the same set of features. Older people are higher risks and their plans are priced accordingly.
Including HSA premiums: Uh Oh. I max my HSA contribution every year. I wonder how much my health care plan costs.
The "tax Cadillac plans" meme seems to have started with Presidential Candidate McCain (WaPo cite); Sen. Baucus seems to have run with this ball without giving a great deal of thought to what it actually was. He was looking for revenue, any revenue, to offset the (grossly underestimated) costs of the new subsidies and entitlements in the Senate Finance Committee bill.
"Under the Senate Finance plan, a 40% tax would be levied on portions of health insurance plans above $8,000 for an individual and $21,000 for a family plan." Link. There had been talk of bumping $21,000 to $23,000; I guess that's out.
The Cadillac idea was supposedly aimed at Wall Street fat cats and their ilk, but of course this never made any sense for a scheme designed to generate tens of billions of dollars of revenue per year. Such plans are most often held by union members, who have negotiated super-generous benefits packages with their employers. Think UAW, NEA, other public-sector unions. Also pensioners, older people and retirees, those working in dangerous jobs.
Though the bill as reported out of the SFC (1502-page PDF) increases the limits for "certain retired employees and employees engaged in high-risk professions" (page 1422).
The escalater starts with the above limits in 2013, which rise by a COLA, which, as best I can make out (pg. 1423) is an index of general inflation, not medical-sector inflation--an important distinction. There is also a provision for setting the threshold higher (20% in 2013, 10% in 2014, 5% in 2015, pg. 1424) for the 17 "high cost states."
I haven't seen much coverage of HSA inclusions in these limits. The bill reads (pg. 1430): "B) HSAs.—In the case of applicable employer-sponsored coverage consisting of coverage under an arrangement under which the employer makes contributions described in sub-section (b) or (d) of section 106, the cost of the coverage shall be equal to the amount of employer contributions under the arrangement." This seems to say that employee contributions to the HSA account are not counted.
I guess this should make me sympathetic to Senator Tom "I don't actually read the legislative language" Carper and his elite colleagues of both parties in The World's Greatest Deliberative Body.
Robert Laszewski has written about the phony CBO scoring of Cadillac plan taxation revenue at his blog.
Thanks for the extra info. So someone with a lot of kids would get hit hard by the $21k or $23k limit on families.
To get an idea of how much monthly medical insurance goes up by age I checked out ehealthinsurance.com which lets you compare health insurance plans by price and features. A 20 year old guy in my area would pay about $50 per month. A 50 year might pay $135 and up. A 60 year old would find the cheapest plan at over $200. Note these are the cheaper plans and I didn't spend time trying to find equivalent features at the different age groups.
The $8000 figure for someone who has an existing condition and in their late 50s is a low number. I saw monthly plans for 60 year olders that were $1000 per month. No existing condition mentioned.