Amidst all the intense speculation about quickly passing the President’s health care agenda through the Budget Reconciliation process before the Easter Recess, ordinary Americans should remember one thing: the House of Representatives must first pass the 2,700-page, $2.5 trillion, Senate health bill. So, the next big step in the national health care debate is floor action in the House of Representatives, where House Speaker Nancy Pelosi must round up at least 216 votes.
Heritage analysts have conducted some extensive research and analysis of the provisions of the giant Senate bill. If the House passes the Senate bill and it goes to the President’s desk for signature, it then would become the law of the land. For all intents and purposes, the legislative debate would then be over.
Regardless of Administration or Senate leadership promises to “fix” the new law (the Senate bill) through the Budget Reconciliation process, there are no guarantees. Any “fixes”—if they did come about—would have to survive another round of Senate floor action. So it is worth recalling what the Senate bill would mean for Americans were it to become law.
- Failure to address the drivers behind rising spending in health care. The Senate bill attempts to control costs by imposing heavy new federal regulations and punitive taxes on high-ticket medical expenditures such as medical devices, prescription drugs, and high-cost insurance plans. This top-down approach focuses on the symptoms, rather than the causes, of increasing health spending. Health insurance premiums, particularly in the individual market, will go up.
- An individual mandate with disastrous unintended consequences. To expand coverage, the bill includes guaranteed issue of coverage combined with an individual mandate. However, rather than encourage “young invincibles” to carry insurance, the mandate, which would be less expensive than insurance coverage, would create incentives for young and healthy adults to pay the penalty rather than buy and carry a costly health plan. This would destabilize the insurance market by reducing the spread of risk, leaving the elderly and sickly in insurance risk pools. Premiums would thus skyrocket—further discouraging healthy individuals from obtaining care.
- Stringent federal requirement push private insurers towards insolvency. The combination of an excise tax on high-cost insurance plans, a federally-defined minimum medical-loss ratio, and federally-defined required benefits could push private insurers to going out of business, should they be incapable of meeting all three requirements and simultaneously covering the cost of enrollees’ care. Alternatively, it could mean that health insurers, “too big to fail”, would become the next big industry recipients of taxpayer bailouts.
- A public option in disguise. The Senate bill requires the Office of Personnel Management to establish and manage health plans in the state exchanges to compete against private health plans. The bill expands the powers of this federal agency. This could lead to a de facto public option with federally defined premiums, benefits, etc: private insurance in name only. Of course, if the government sponsored health plans do not effectively compete against the other plans, it is likely that they will also be eligible for future federal bailouts at the taxpayers’ expense.
- Government subsidies which penalize marriage. The structure of the subsidies offered by the Senate bill to purchase insurance are inequitable, offering more financial assistance to non-married couples than to a married couple with comparable income. This is bizarre social policy.
- Trillions in new federal spending, questionable savings. Congressional liberals claim that their health care proposals are deficit neutral. In fact, they are based on budgetary gimmicks and hidden costs. When these are accounted for, the real cost of the Senate bill skyrockets, further augmented by the implausibility of the many promised savings in the bill.
- A special Medicaid deal for Nebraska. The Senate bill would force all federal taxpayers to cover the extra cost of expanding Medicaid in Nebraska. It is worthy to note that the President’s proposal would extend the taxpayer subsidies to all states, increasing the total cost of the bill.
- Expanding Medicaid on the states’ budgets. Though the federal government would initially cover most of the cost of expanding Medicaid, states would eventually have to pick up a portion of the cost. This comes at a time when states are cutting spending in Medicaid and other areas to accrue savings and avoid increasing debt. In fact, we show that states could save significantly if they were to drop their Medicaid programs altogether, which could become an appealing option after adoption of the Senate bill.
- Encourages employment discrimination. The structure of the bill’s employer mandate would discourage employers from hiring workers from low-income families and from offering insurance to all employees if a large portion of a firm’s workforce consists of low-income workers.
- Disparate federal assistance for families of comparable income. The generous subsidies available to purchase insurance in the exchanges would be available to only a select few of the millions that fall within the eligible income bracket. This would result in thousands of dollars in additional federal assistance for some individuals and little to no assistance for others, regardless of equal income.
- Taxing families’ health benefits. An excise tax on high-cost insurance plans is included in the Senate bill with the intention of lowering premiums. However, this tax on insurers would be passed down to the consumer, further raising premiums.
- Numerous new taxes—and not just for the wealthy. President Obama has promised not to introduce new taxes that would affect the middle-class, but the Senate bill would impose several new punitive taxes on to Americans of every financial background.