Question of the Week: Health Care
These questions are culled from phone calls, letters, faxes and e-mails sent to my Thousand Oaks, Solvang, and Washington offices. Each week I will add another question and answer.
Week ending October 30, 2009
• Question: How would H.R. 3962, the bill introduced by the House Leadership on October 29, 2009, change our nation’s health care system?
→ Answer: According to a preliminary estimate prepared by the nonpartisan Congressional Budget Office (CBO), H.R. 3962 would cost $1.05 trillion over 10 years. However, this estimate does not include a variety of new costs in the bill, including disease prevention costs. The CBO is working to complete its final analysis.
H.R. 3962 would:
• Establish a new Health Insurance Exchange for individuals and small employers in 2013.
◊ Policies offered as part of the exchange must meet standards mandated by Washington. Current employer-based health insurance plans are grandfathered in for five years, but would eventually have to meet Washington standards. Current individual health insurance policies could continue, but the plans may not accept new customers. Many economists predict that these government mandates will increase the cost of health insurance premiums. The CBO will analyze whether the bill will increase the cost of premiums in the future.
• Leave 12 million Americans and legal permanent residents without health insurance. In addition, the CBO estimates that 6 million illegal immigrants would be uninsured.
• Establish a government-run health care insurance plan:
◊ The plan would negotiate rates with physicians and other health care providers.
◊ The CBO estimates that the government-run plan’s premiums would be higher than the average premiums for private plans.
◊ The federal government would impose mandates on private insurance plans.
• Require employers to contribute 72.5 percent of the cost of premiums for full-time workers and 65 percent for a family policy. Most economists, including CBO experts, have concluded that these requirements could discourage businesses from hiring low-wage workers. It could also lead to wage stagnation as payroll is diverted to comply with new federal mandates on health care coverage. Companies with payrolls under $500,000 a year would be exempt. The penalty would be phased in for companies with payrolls between $500,000 and $750,000 a year.
• Impose $460 billion from new income taxes on high-income taxpayers ($500,000 a year for individuals and $1 million on couples), many of whom are small business owners.
• Require everyone to purchase health insurance or pay a tax penalty of 2.5 percent of income. Low income individuals may be able to apply for a hardship waiver.
• Provide tax subsidies to people with modified adjustable gross incomes (net income after tax deductions) of up to 400 percent of the Federal Poverty Level (FPL). For example, the current average cost of health insurance for a family of four is $12,680 per year. Under H.R. 3962, a family of four, with an annual net income of $88,200, would receive $1,096 in taxpayer subsidies. These subsidies will cost taxpayers $605 billion, according to the CBO.
• Limit contributions to flexible savings accounts, which are tax advantaged accounts that may be used to pay qualified medical expenses.
• Extend access to Medicaid to individuals with incomes up to 150 percent of the federal poverty level ($33,100 per year for a family of four) in 2013. Beginning in 2015, approximately 10 percent of this cost would be shifted from federal taxpayers to state taxpayers, costing state taxpayers $34 billion.
• Impose $400 billion in cuts to Medicare over 10 years, including $170 billion reduction to Medicare Advantage plans, which provides insurance coverage for many seniors. H.R. 3962 also phases out the gap in Medicare prescription drug coverage, and requires the federal government to negotiate drug prices on behalf of Medicare beneficiaries.
• Does not address the 21 percent reduction in Medicare reimbursement to physicians that is scheduled to go into effect on January 1. Many people are concerned that if this issue is not addressed, physicians will stop seeing Medicare beneficiaries. This issue is addressed in another bill, but will add $285 billion to the federal debt.
For more information on healthcare, please see my Health Care key issue page.
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