HR 4872 – The Health Care Reconciliation Bill (An Analysis)

I am frankly a bit pissed at my Representatives at this time. While I applaud the following of the letter of the law and posting the final text of the bill 72 hours before a vote, the vote is going to take place on Sunday, when none of us can call and voice our opinion. But I think that was by design. In addition, the final text is not really the final text, as it is reconciliation bill. This means you have to get this bill, along with the House, er Senate bill (As the Senate cannot enact legislation that adds taxes, they hijacked an Affordable Housing for military bill). Having to read amongst bills is a royal pain in the rear. In addition, the analysis of the bill on many sites has a different numbering scheme than what you can find on Thomas.loc.gov, which makes this even more confusing. I also believe that is intentional.

If you are interested in reading it yourself, you can look at the following:

• HR 4872 – reconciliation bill (153 pages)
• HR 3590 – Senate bill being reconciled (2409 pages)
• CBO latest estimates (March 20)

For the record, this is a reconciliation bill, as it gets around filibuster rules. If they can get the votes, there is little that has to be done to get it passed. Note also that the Senate can reintroduce abortion provisions, etc, and only need 51% (or 50% plus 1 in House) to get it passed. I am not sure whether they would consider putting Blue Dogs out to dry in this manner, but it is a possibility. They need them now, but may not next week.

There are some good things in the bill, which may help some Americans, but the overall result is rising costs are not controlled, except through Medicare and Medicaid cost cutting provisions (which traditionally have been overridden by Congress to keep doctors happy). In addition, there are tons of new taxes in the bill.

Cost to America

The bill claims it will reduce the budget deficit by $138 billion from 2010 to 2019. But this figure has already been revised today (March 20) to $82.1 billion, almost $56 billion less savings than claimed just 3 days ago (March 17). There is a provision to stop the growth of tax credits past 2019, which suggests, to me, that the government knows that health care costs will continue to rise under their plan, as there are no provisions that guarantee lower health costs.

There is a provision to lower the cost of Medicare, but the actual decision on the funding is in another bill and can be changed or voted down. As the bulk of the savings are located in Medicare and Medicaid, there is no guarantee we will ever realize the budget deficit. Considering past actions, where the lowering of Medicare rates for doctors have not been enacted, there is no guarantee this bill will have any effect on the the cost of health care.

One should also note that taxes are enacted prior to the enactment of health care provisions in bill. This means the $82.1 billion deficit reduction (about $8 billion per year) includes 4 years of taxation prior to enactment of most provisions (the years 2010, 2011, 2012 and 2013). The amount of taxes raised during the first four years is estimated at $68 billion (other revenue provisions) plus $27 billion (effects on direct spending and other revenue provisions) for a net raised of $95 billion prior to enactment of the major health care provisions of the bill. If you consider a budget deficit of $82.1 billion. If you are not getting the picture yet, it is fairly simple. Starting in 2020, the jump start monies will not longer be in effect, and true yearly costs versus revenues will be realized. You should take this in account when you consider the tax credits to keep health care affordable are designed to cap out in 2019 if health care rises above the Consumer Price Index (CPI) and the actual costs are not more than 10% below the CBO budget estimates. In all likelihood, they will cap..

Employee and Employer Costs

From tax year 2013 on, you will only be able to sock away $2500 in your HSA or FSA. There is currently no max, other than the max set by your company. My current plan, for example, allows me to sock away $2500 for me and $5000 for my family. I would only be able to sock away 1/3rd of that in 2013.

Businesses are fined $2000 per FULL TIME employee (FTE) for not offering insurance. The first 30 employees are not counted in the calculation, however, so the fine for not having insurance for a company of 50 employees is $40,0000, or about what they currently pay on 4 employees. In businesses that do not have to offer insurance to remain competitive, this would be a major savings for the business and force you into a public pool. If we take that business with 50 employees, it stacks up like this:

                           2009           2014 if drops coverage     NET
EMPLOYER           $495,000     $20,000                            ($475,000)

The average employee pays around $3500 for premiums in 2009. Under the new plan, his premiums will cap at $4060, a $560 increase over current payments. This may still be lower than what he would pay in 2014 if costs continue to rise, but it also makes him a recipient of government assistance (welfare for the middle class?). There is also a max for cost sharing that is added on top of this. To get the credit, as a married couple, you must file jointly.

Taxes

Here are a list of new taxes:

1. Investment dividends are no longer excluded for Medicare taxes, so all monies made on savings accounts, as well as other investments, will be taxed at 2.8% under the new plan. This only applies to individuals making $200k per year and families making more than $250k per year.
2. .9% increase in Medicare taxes for
3. Cadillac plan tax of 40% over threshold. This is delayed until 2018 and the plans are now set at $10,200 value for individuals and $27,500 for families.
4. Can only put $2500 in an HSA after 2013 (a year before the health care provisions go into effect)
5. 2.9% excise tax on all medical equipment, except common equipment purchased by individuals – This was originally a fee
6. $4.8 billion per year fee on pharmaceuticals
7. Elimination of deduction of Medicare Part D for individuals (delayed until 2013)
8. Tax on tanning services – this one will not hit me, as I don’t use a tanning booth, but will hit average Americans

The current upper limit for taxes is 39% in the United States, under this bill it would rise to 43.4%, 6.6% less than 1/2 a person’s earnings. Think about that for a second. Sure it is only the “rich” that are getting soaked.

Student Loans

There are provisions in the Health Care Reform bill to alter the way student loans are procured and paid back. This makes perfect sense. If you take out the fact that student loans have nothing to do with health care and reform, they are the same issue.

My Feelings

There is still nothing in the bill that is guaranteed to lower the cost of health care. There are provisions to lower Medicare and Medicaid spending, but the actual vote on the reduction requires passing additional legislation. It also appears the government is planning for a rise in costs, as they have a stop gap measure in affordability credits in 2019 if the cost of health care rises above the CPI and the CBO estimates are correct (they have to be 10% less than estimates to not cap the credits).

Looking at the taxes on pharma, medical devices and health insurance providers, I expect the cost of health care to go up somewhere between 10% and 20% in the next few years, increasing costs for average Americans significantly. Then, in 2014, when the provisions enter, these Americans will be able to get some of the money back at the end of the year in the form of affordability credits. That is scary to me.

Middle class two-income families will likely see a huge sock when the bill goes into effect, as they can easily fall outside of the 400% above poverty level “get a credit” crowd. Many of these people are having problems making ends meet today.

I also see employers, especially small employers, having a great incentive to drop health care coverage and allow the worker to pick up insurance elsewhere. Admittedly, without pre-existing conditions, this will be much easier.

End the end, I see this bill as another “reward the irresponsible” bill, much like the interest rate reduction for homeowners who got themselves into too much home for their salary. It helps a few people, but it makes welfare recipients out of the middle class, through credits. And I see costs rising even steeper than they have risen over the past ten years.

What we need to do is get the middle man out of the mix, not embed a new middle man.

Peace and Grace,
Greg

Twitter: @gbworld