Government Watch

Obama’s Second-Term Agenda: Making Obamacare’s Taxes, Spending, and Regulations Permanent

from Forbes – by Avik Roy –

On the campaign trail, Mitt Romney has been criticizing President Obama for not proposing an agenda for his second term. “Although President Obama won’t lay out his plan for his second term,” said Romney in Florida last week, “we already know what it will be: a repeat of the last four years.” But in fact, Obama’s second term would look quite different from his first, because it’s in the next four years that Obamacare’s web of new taxes, spending increases, and regulatory mandates will be weaved. Here’s a timeline.

(DISCLOSURE: I am an outside adviser to the Romney campaign on health care issues. The opinions contained herein are mine alone, and do not necessarily correspond to those of the campaign.)

Obamacare was cleverly designed such that its most politically toxic provisions wouldn’t go into effect until after the election. In addition, the Obama administration spent billions of unauthorized taxpayer dollars this year and last so that the impact of its cuts wouldn’t be felt until after the election.

2013: Tax increases and Medicare cuts

Over the next ten years, Obamacare cuts $716 billion from the Medicare program in order to fund its $1.9 trillion in new health spending over the same period. $156 billion of those cuts come from the market-oriented Medicare Advantage program, and those Medicare Advantage cuts start to kick in in 2013. 27 percent of all seniors are enrolled in Medicare Advantage, including 32 percent in Wisconsin and 36 percent in Ohio.

The chief actuary of the Medicare program, Richard Foster, has estimated that these cuts to Medicare Advantage will force more than half of MA enrollees out of the program. “[Obamacare’s] new provisions will…result in less generous benefit packages. We estimate that in 2017, when the MA provisions will be fully phased in, enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law).”

Those cuts were supposed to kick in during Obama’s first term. But the Department of Health and Human Services decided to illegally spend $8.4 billion of taxpayer money—without Congressional authorization—to prop up the MA program until the 2012 election. Once the election is over, however, the cuts will come.

In addition, a number of Obamacare’s tax increases will come into effect. The law will, among other things, raise taxes on investment income, itemized medical expenses, privately-sponsored retiree prescription-drug coverage, medical devices, and flexible spending accounts.

2014: Individual mandate, new spending, more taxes

2014 is the critical year for Obamacare. It’s the year that the bulk of the law’s provisions go into effect. Notably, it’s the year that the law’s controversial individual mandate goes into effect, requiring most Americans to buy a government-sanctioned health insurance product. But the mandate is too weak, and will incentivize Americans to skip out on insurance and take advantage of Obamacare’s requirement that insurers take them after they’ve already fallen ill.

In addition, 2014 is the year that Obamacare’s employer mandate begins to be enforced. That mandate requires all businesses with 50 or more workers to provide government-approved health insurance to all of their workers, or face steep fines. In reality, the mandate will encourage many employers to stop hiring full-time workers, or drop coverage so that workers can fall under the law’s subsidized exchanges.

2014 is also the year that Obamacare’s gusher of new spending kicks in, through its expansion of the Medicaid program and the institution of federally subsidized health insurance exchanges. Once these two programs are in place, it will become impossible to repeal Obamacare.

In 2014, Obamacare guts the laws related to consumer-driven health plans, by capping deductibles in the small-group market at $2,000 for individuals and $4,000 for families, down from $6,050 and $12,100 today. By forcing insurers to offer lower deductibles, Obamacare will drive premiums upward, making insurance less affordable, and diminishing the utility of health-savings accounts.

Also, in 2014, Obamacare will force insurers covering small businesses and individuals to cover a set of “essential health benefits” defined by the Secretary of Health and Human Services. By forcing all insurers to cover what Washington wants, regardless of cost, insurance will become more expensive.

In addition, the law will impose a tax on health insurance premiums, though labor unions and government-sponsored plans are exempted from the tax. The premium tax is probably the dumbest provision in Obamacare, and that’s saying a lot: insurers will be forced to pass the cost of the tax onto policyholders, making health insurance less affordable and driving government subsidies upward in compensation.

2015-16: More spending and tax increases

If President Obama is reelected, he will preside over significant spending and tax increases during the latter half of his second term. In 2010, the Congressional Budget Office calculated that the ten-year cost of Obamacare, in terms of its spending increases, was $944 billion. In July of 2012, the CBO’s ten-year spending estimate was $1.9 trillion. By 2015, the CBO’s ten-year spending projections are likely to exceed $2.5 trillion.

Our federal debt exceeds $16 trillion today. Under the Congressional Budget Office’s alternative fiscal scenario—its most realistic estimate of future spending and revenue—Obama’s second term will add another $4 trillion to the federal debt, along with the $6 trillion he incurred in his first term. It wasn’t that long ago—2008, in fact—when Senator Obama called George W. Bush “unpatriotic” for racking up $4 trillion in debt during his eight years in office.

2017 and beyond: Bankrupt hospitals; premium hikes; doctor shortages

Richard Foster, the chief actuary of the Medicare program in the Obama administration, estimates that Obamacare’s cuts to Medicare will drive 15 percent of Medicare providers out of business by 2019, and even more in future years. “Absent other changes,” says Foster, “the lower Medicare payment rates would result in negative total facility margins for an estimated 15 percent of hospitals, skilled nursing facilities, and home health agencies by 2019, and this percentage would reach roughly 25 percent in 2030 and 40 percent by 2050.”

Obama adviser Jonathan Gruber, who was heavily involved in designing Obamacare’s insurance regulations, calculates that the law will significantly drive up health insurance premiums in the non-group market: by 2016, premiums will go up by an average of 19 percent in Colorado, and 30 percent in Wisconsin, relative to what they would have been without Obamacare. And that’s the average; due to Obamacare’s community rating provision, premiums for young people will go up even more.

In addition, the law will make it harder for tens of millions of Americans to see their doctors, especially those with government-sponsored health insurance. Just as the baby boomers are retiring, requiring more health care, baby boomer physicians will also be retiring. As a result, even without Obamacare, we’ll have less doctors per capita than we need. On top of that, Obamacare will subsidize increased health-care consumption by $1.9 trillion, without increasing the supply of physicians. Under such a system, patients with government-sponsored insurance, who pay less than private insurers, will move to the back of the line.

So far, the case against Obamacare has been about what the law will do in the future. If President Obama is reelected, the future will be at hand.

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10 years ago

I am shocked at the way the obamacare taxes the people of retirement age right out of the market. I am ashamed that we have a president who has set out to literally bankrupt our nation, and all we stand for in the world. I pray and I mean pray for Gov. Romney.

10 years ago

Tune in to Fox News this morning. They are now doing an expose’ on how the CEO of AARP was in cohoots with the Obama Administration to pass ObamaCare…they have uncovered e-mails.

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