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The Spectacle Blog
President Obama on Monday unveiled a new health care proposal that adds spending provisions and raises taxes without making any real concessions to Republicans ahead of this week's health care summit.
President Obama's plan (available here), would eliminate the so-called "Cornhusker Kickback" and instead raise the Federal government's Medicaid subsidies to all states; it would close the so-called "donut hole" on Medicare prescription drug benefits by providing more subsidies to seniors; it would increase subsidies for individuals and small businesses to purchase insurance; and it would hike funding for health clinics. To address the controversy surrounding the so-called "Cadillac Tax" on benefit rich health care plans, it essentially gives everybody the deal that unions cut last month, which would delay enactment of the tax until 2018 and raise the value of the health plans that are affected. All of these provisions will make it more costly than the Senate bill.
To finance the changes, President Obama proposes raising taxes even more than the Senate plan does. Under Obama's proposal, higher income workers would see their portion of the Medicare payroll rise even higher. The tax would create a marriage penalty by applying to individuals earning over $200,000 and couples earning over $250,000. When the original version of the Senate health care bill was produced, the Medicare tax on those earning over $200,000 was supposed to be 0.5 percent. In the version that passed in December, the tax had been raised to 0.9 percent. And though it hasn't even been made law yet, Obama is raising the Medicare tax for the third time, by assessing an additional 2.9 percent tax on income "from interest, dividends, annuities, royalties and rents..." This follows the historical pattern of payroll taxes, which have increased 20 times since first introduced in 1935, going from a combined total of 2 percent (including employer/employee contributions) to 12.4 percent today.
The Obama proposal would also raise the proposed tax on drug makers by $10 billion, to a combined $33 billion over 10 years, while delaying enactment by a year. It also delays enactment of the tax on medical devices and health insurers.
The Senate bill's version of the individual mandate taxes those without health insurance by charging them either a flat dollar amount, or a percentage of income -- whichever is higher. The Obama proposal lowers the flat dollar tax slightly (to $695 from $750 when phased in), but raises the percentage of income. This would result in even higher taxes for many individuals for whom the percentage of income is higher. For instance, when fully phased in, somebody earning $40,000 who chooses to go uninsured would be subject to a tax hike of $1,000.
Like the Senate bill, Obama's proposal doesn't include a strict employer mandate, but it does penalize businesses who do not offer insurance to workers who then get their insurance through the exchange. The Obama proposal provides more subsidies to small businesses, and helps mid-sized businesses by exempting the first 30 workers when calculating the tax, but large employers who do not offer coverage would face higher penalties under the Obama proposal. In the end, the tax will make it more expensive for large employers to hire lower income workers (who qualify for government subsidies), and thus exacerbate unemployment.
On the regulatory front, Obama proposes a new federal Health Insurance Rate Authority to help police premium hikes, and also requires that "if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable."
There are some positive measures to combat Medicare and Medicaid fraud in the proposal. For instance, I'm particularly supportive of the idea of giving background checks to providers who have the ability to bill Medicare. But these are things that we should be doing anyway, and don't justify Obama's move toward a government takeover of the health care system, with all of the spending, taxes and regulation that goes along with it.
UPDATE: I corrected an earlier version of this post which incorrectly interpreted the new payroll tax provision.
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More Blog Posts by Philip Klein
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Pingback| 2.22.10 @ 11:56AM
Hot Air » Blog Archive » New ObamaCare bill: Are you ready for price controls on insu links to this page. Here’s an excerpt:
Fiscal Pigs| 2.22.10 @ 12:46PM
Democrats are populist jokes. So as Healthcare spending continues to rise, the plan will just to keep increasing taxes every year. Not fixing problems, kickign problem down the road, making tax system more uncompetitive, jumping on populism bandwagon. if healthcare spending keeps outpacing GDP. Its a shame they never highlight that healthcare spending is growing faster than GDP, so simply raising taxes is a stop gap measure just to win votes. Amazing. I wonder if 50% of Americans become illiterate then we will see a literacy tax to solve the problem.
Stan Redmond| 2.22.10 @ 12:50PM
Wow, all this free government money to subsidize "the poor," new regulations adn requirements, and a commision to make sure new costs are not passed on to consumers. What could go wrong?
Are there any more idiots out there that still believe Obama doesn't want to take over the health care industry?
Pingback| 2.22.10 @ 2:05PM
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Louise| 2.22.10 @ 2:19PM
No offense, but the president's PLAN is not at the website you provided. It is a series of documents of "overviews" and "summaries." Where is the full, un-summarized, straight text language for the bill? I realize that this is what the WH has provided - but it is NOT a plan. It is a marketing brochure. Where is the actual language that is proposed for inclusion or replacement of the current bill? I don't want someone to tell me what it says - I want to see that for myself.
robert Brown| 2.22.10 @ 2:50PM
let me get this straight, Barry is going to provide everyone with an 11 page "overview" of a 2000 page boondogle so us small minded people can understand it? And the best part is, that most democraps wont care, because thier free lunch is in it! Whoops, I mean "free" healthcare!
Pingback| 2.22.10 @ 3:16PM
Fausta’s Blog » Blog Archive » The President’s $1 trillion health bill links to this page. Here’s an excerpt:
Pingback| 2.22.10 @ 4:31PM
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Nancy| 2.22.10 @ 7:55PM
The fact remains: scrap all and start over in a true bipartisan fashion. One glaring omission by Dems & GOP is that the Fair Tax Plan would do more for jobs, HCR, the entire nation if it alone, were enacted. Govt can't create competition in the free mkt. Portability, HSAs, high risk pools, Fair Tax, all create competition, brings down prices.
J.Peden| 2.23.10 @ 4:03AM
How can the Adm. be so stupid as to provide a "Plan" which the CBO can't score? Absent a score, what's there to discuss? Hopefully this feature will allow the Repubs. to further load up on it on thursday during the infomercial. Among other things, the Medicare cuts have always been telltale in themselves, given the fact that current Medicare reimbursement is not enough now to sustain quality care delivery which instead relies upon private ins. reimbursement to make up the difference. It should be possible to hammer Obama on tv.
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Kudiwuhao| 4.12.10 @ 9:29AM
ObaMao is trying to do an end-run around the legislative process because it’s too slow? Duh, it is supposed to be slow, as in deliberative. Any legislation that affects 1/5-1/6 of the economy and that is certain to adversely affect employment had better grind to a halt.
We had “urgent” speed on TARP and on the “stimulus” bill. Look how far down the hole we are because of that haste.
What is this? Pass in haste (defying the will of the respresented) and repent in leisure (into perpetuity).
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care| 11.18.10 @ 7:42AM
The Obama administration has made the tax higher. its already hard for us to pay these taxes and now the increase it.
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naldi| 1.26.11 @ 2:23AM
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Driver Updater| 4.29.11 @ 12:53PM
I believe Obama's HC bill is the best legacy he'll leave when he vacates the white house. The system works quite well in the UK and I belive it'll work here as well
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