Monday, February 22, 2010

Obama Healthcare Plan: Same Sh*t, Different bowl

When I went through the President's "plan", it really didn't seem like he learned anything from the last few months. The American Spectator has a good piece summarizing it and how it really isn't all that much different from the bills we have already seen:

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 tax double, to 2.9 percent. 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 payroll tax for the third time, to 1.45 percent (that's on top of the 1.45 percent all workers already pay). 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. When adding the new Obama tax, the rate would be almost 14 percent on higher incomes.

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.

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