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By: Max Pappas and Matthew Clemente                                                          

Friday, November 20, 2009

After weeks of keeping his bill hidden from the public, Senate Majority Leader Harry Reid (D-Nev.) finally unveiled his proposal for a complete overhaul of the American healthcare system.  Revealing his lack of commitment to transparency, Reid refused requests by his fellow Senators and the American people to see the bill for weeks. 

Finally, Reid released his 2,074 page nightmare late on a Wednesday night while much of the country was asleep.  That same night, he released a report from the Congressional Budget Office (CBO) that needed 36 pages to say how much Reid’s bill would.  Now, using his overwhelming majority in the Senate, Reid seeks to push through a bill that would completely remake the American healthcare system.

Such an inappropriately large bill calls for at least a slightly larger Top 10, so here are 11.

1. America cannot afford Harry Reid’s bill

It will cost $2.5 trillion in the first 10 years of full implementation (2014-2023).

It does not take a dean of a prestigious American business school to understand that spending this much money in the midst of the worst recession in recent history is a terrible idea.  But that is exactly what Glenn Hubbard, the dean of the Columbia’s School of Business, and two of his colleagues argue in a Wall Street Journal article.  After examining Democrat healthcare proposals, the three economists claim that such plans will, “add more than $100 billion per year in perpetuity to the already soaring national debt.”

With the federal deficit reaching $1.4 trillion in 2009—an all time high—and unemployment reaching 10.2% in October—a 26 year high—now is not the time to spend money that we simply do not have.   

1. Your taxes will go up

Under the Reid bill, the federal government expects to generate revenue from tax increases that include but are not limited to:

·        $156 billion in taxes levied against insurers, pharmaceutical companies and the medical device industry which will be passed on to consumers.

·        $149 billion in taxes levied against individual health insurance plans (A 40% excise tax on insurance plans costing more than $8,500 a year per individual or more than $23,000 a year per family).

·        $64 billion in new income taxes which the government expects to raise because it predicts that employers will soon offer taxable wages rather than non-taxable health insurance to employees. 

·        $28 billion in employer penalties which will be paid by employees in the form of lower wages.

·        $8 billion in penalties paid to the IRS by those who do not purchase insurance.

Senator Christopher Dodd (D-Conn.) claims that the Reid bill contains, “real savings for America.” 

Senator Dodd, this bill spends $2.5 trillion between 2014 and 2023.  Thinking that this is a “savings” is the sort of nonsense that lead to the current financial crisis.  Tax increases on health care, health insurance and jobs do not make healthcare more affordable.  Piling burdensome, job-killing taxes upon the American people most certainly does not constitute “real savings.”

1. Your insurance premiums will go up 

States that have implemented plans similar to the Reid bill have seen dramatic increases in the cost of health insurance premiums.  Massachusetts, the state with insurance regulations that most resemble Reid’s proposal, has by far the highest insurance prices of any state in the country.  The Reid plan will incorporate these same failed reform efforts, driving consumer prices up and affordability down.

The government-run public option would have even higher premiums than private plans.  The CBO stated that the government plan would, “typically have premiums that were somewhat higher than the average premiums for the private plans in the exchanges.”

1. Harry Reid uses budget gimmicks to hide the $2.5 trillion cost over the first 10 years of full implementation  

Although Senator Reid claims that his government takeover of the healthcare system will cost less than $900 billion, the total cost of the bill is actually much higher.  When he makes such assertions, Reid fails to explain the elaborate budget gimmicks that he has strategically placed within the bill to produce such a cost estimate.  Among other tricks, Reid and backers ignore the costs of:

·        The withholding of benefits: According to the Heritage Foundation:

The Senate bill is cleverly designed to gather revenues (higher taxes, fees, and other offsets) over the full 10 year window but delays paying out the major benefits, like subsidies, until the last 6 years. So, the 2010-2019 estimate is not a full cost estimate of all provisions fully implemented and will certainly add significantly to the true cost of the bill.

Although the total cost of reform is unknowable, it has been estimated that the cost of the bill is somewhere around $2.5 trillion over 10 years of full implementation (2014-2023).

·        The deceitful “Doc Fix” that could not pass through the Senate: Introduced by Senator Debbie Stabenow (D-Mich.), S. 1776, the Medicare Physician Fairness Act of 2009, would have spent an additional $247 billion in taxpayer money on reimbursements for physicians through Medicare.  In part, the Reid bill owes its “deficit neutral” status to the reduction of $200 billion in physician reimbursements through Medicare that exist within the legislation.  The savings in the Reid plan are almost the exact equivalent of the cost of S. 1776.  The passage of S. 1776 would have negated reductions in Reid’s legislation without adding to the perceived cost of reform.  This deception helps to explain why the Reid proposal was estimated to cost less than a trillion dollars and also why it was estimated to reduce the deficit.

With the defeat of S. 1776 by a bipartisan majority, the price of the $247 billion doc-fix will have to be added to the cost of Senator Reid’s bill.  The CBO examined what would happen if the cost of the doc-fix bill in the House—H.R. 3961—was added to the cost of the House bill.  It estimated that combining the two would “add $89 billion to budget deficits over the 2010–2019 period.”

·        The CLASS Act: Senator Reid’s bill includes the creation of a government healthcare program for individuals with disabilities called the Community Living Assistance Services and Supports Act, or CLASS Act.  At first, the premiums collected for the new entitlement will raise revenues for the federal government.  The benefits paid out will be lower than the premiums taken in.  This gives the impression that the Act lowers the deficit.  It does not.  The CBO points out that after 10 years the program would, “lead to net outlays when benefits exceed premiums” and, thus, it would add billions to the deficit over time.

·        Underestimates: Historically, such attempts to estimate the price of government programs have fallen woefully short of the actual cost of legislation. For example, in 1967 House Ways and Means analysts estimated Medicare would cost $12 billion in 1990. They were wrong—by a staggering factor of 10. The actual spending in 1990 was $110 billion.  If the current CBO estimates are off by a similar margin, the Reid bill could end up being a multi-trillion dollar piece of legislation. 

1. Passage of the Reid bill could bring with it an additional $310 billion of waste, fraud and abuse 

In October, CBS’s 60 Minutes revealed that Medicare, “provides a rich and steady income stream for criminals who are constantly finding new ways to steal a sizable chunk of the half trillion dollars that are paid out each year in Medicare benefits.”  The report found that every year, $60 billion in taxpayer money is lost to fraud.  An editorial piece in the Washington Examiner further emphasizes this point: 

To put the $60 billion in fraud in perspective, Medicare loses seven times as much money in fraud every year than the combined profits of the 14 health insurance companies on the Fortune 500.

A report issued by the federal government on November 14^th claims that Medicare did not lose $60 billion to fraud; it “only” lost $47 billion (12.4%).  It also reveals that $18.1 billion (9.6%) in Medicaid claims are fraudulent. 

More government-run healthcare will undoubtedly have even more fraud and abuse.  Assuming that the new spending in the Reid bill will result in the same rates of fraud as currently happens in Medicare and Medicaid, rather than more, as would be likely, then: 

·        If 9.6% of the $2.5 trillion that the government will spend over the first 10 years of full implementation goes to fraudulent claims, then $240 billion in hard earned taxpayer money will be lost.

·        If 12.4% of the $2.5 trillion goes to fraud, then $310 billion in hard earned taxpayer money will be lost.

In his first joint session address to Congress, President Obama pledged that healthcare reform would, “root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier.”  A laudable goal and something to be pursued, yes, but the vast expansion of the Medicaid system and the creation of a new government-run public option can only increase the amount of money lost to waste, fraud and abuse.

1. The Reid bill hurts seniors 

Where is most of the money for the $2.5 trillion dollar Reid bill supposed to come from?  Over the next ten years: 

·        $436 billion of the total cost is set to come from cuts in Medicare. 

·        $192 billion of that $436 billion will come from reductions in non-doctor payment rates which may lead to a lower quality of care for seniors.  

·        $118 billion will come from cuts in the popular Medicare Advantage plan which offers one out of every five senior citizens more benefits than traditional Medicare.

·        $43 billion will come from cuts in Medicare payments to hospitals that are already struggling to serve low-income patients.

·        $83 billion will come from additional cuts.

These cuts will likely lead to lower quality coverage and less access to care for seniors.

1. Congress will use the force of government to make you buy a product 

Like the other Democrat proposed reform legislation, the Reid bill includes an individual mandate which will make every American purchase health insurance.  Citizens will be forced—at times against their will—to buy insurance simply because they are alive.  Non-compliance with this mandate could result in harsh fines which are considered "taxes."  Forget to pay such "taxes" and you could be fined an additional $25,000 and even face up to a year behind bars.

1. Senator Reid’s reform bill exploits individuals and benefits insurance companies 

Under the Reid proposal, the federal government will mandate and subsidize private health insurance.  This means that it will serve insurers as many as 46 million new customers on a silver platter and then help pick up the bill.  Consumers will be forced to purchase a product that they may not want and all the while insurance companies will reap the benefits. 

To further underscore this boondoggle, consider that this past summer President Obama's Council of Economic Advisers reported that the average annual premium for single coverage is $4,321.  If the 46 million uninsured are forced to purchase health insurance, then the insurance industry stands to make up to $200 billion in new insurance premiums per year.  They would also receive $848 billion in taxpayer subsidies over the next 10 years in the Reid bill.

Of course, Harry Reid has good reason to include such sweetheart deals in his plan.  Over the course of his career, he has received a staggering $1,974,476 in campaign contributions from the health care industry.  Supplying insurers with millions of new customers and subsidies while imposing harsh mandates and fines upon the American people hardly seems like true healthcare reform.

1. Mandating health insurance is unconstitutional 

Of the powers that the founding document vests in Congress, there are two that Congress may argue grant it the ability to mandate the purchase of insurance.  They are the power to, “lay and collect taxes, duties, imposts and excises, to… provide for the… general welfare of the United States,”  and the power to, “regulate commerce… among the several States.”

It has been argued that the Constitution grants Congress the power to, “impose a tax on people who do not have health insurance.”  Such a tax would be a means by which Congress could enforce its mandate on the purchase of insurance.  Punishing those who do not buy insurance with an added tax burden will force a majority of Americans to acquire coverage. 

It may seem like a legitimate way to discourage individuals from lacking insurance but the federal government does not possess such broad taxation powers.  Like every other power vested in Congress, the Constitution holds limitations on lawmakers ability to collect taxes.  Article I Section 8 of the Constitution grants Congress the power to collect excise and capitation taxes.  The 16th Amendment created a national income tax.  But an extra tax burden placed on individuals who choose not to purchase health insurance does not fall under any of these three categories. 

An excise tax is a surcharge on a purchase but this “individual mandate tax” does not tax people for what they purchase, it taxes them for what they refuse to purchase.  A capitation tax is a tax laid equally upon every person within the same state but this individual mandate tax would only be levied upon certain citizens (those who did not buy insurance).  And an income tax is based on personal income but a mandate tax would be based whether or not one purchases insurance.  Furthermore, the Supreme Court has held that Congress cannot use its ability to lay taxes to pass regulations that it would otherwise not pass. 

Supporters of Democrat reform plans also argue that Congress is granted constitutional authority to mandate health insurance under the Commerce Clause.  Article 1 Section 8 of the Constitution gives Congress the power, “to regulate Commerce… among the several States.”  However, the Supreme Court has held that in order for something to be considered commerce it must at very least be an economic activity.  A mandate on health insurance forces Americans to purchase a product simply because they are alive.  Merely existing is not an economic activity.  Giving Congress the ability to force citizens to buy a certain product eliminates every restraint put in place by our nation’s founders and imposes upon the liberties that our government was established to defend.

1. The Reid bill puts the unelected Secretary of Health and Human Services in control of our health care  

It doesn’t take 2,047 pages to put patients back in control of our health care interactions.  It doesn’t take 2,047 pages to respect the fact that we are free people.  But it does take that many pages to orchestrate a dramatic power grab by Washington elites.  It does take that many pages to give an inordinate amount of power over how health care and health insurance are received in America to one unelected individual.

The Reid bill could just as easily be called the “Secretary Shall Bill.”  It references the “Secretary” 2,185 times and it uses the phrase the “Secretary shall” a shocking 725 times.  Each time it is granting a power to whoever is appointed Secretary of Health and Human Services, instead of empowering individuals.

What shall the Secretary do?

·        Page 19: “The Secretary shall promulgate regulations to define the dependents to which coverage shall be made available…”

·        Page 103:  “The Secretary shall define the essential health benefits…”

·        Page 935: “The Secretary shall impose a civil money penalty…”

·        Page 1086: “The Secretary shall give priority for the award of the contracts or grants…”

·        Page 1117: “The Secretary shall take such action as may be necessary…”

·        Page 1168: “[T]he Secretary shall begin implementing the 5-year campaign.”

·        Page 1447:  “The Secretary shall require Federally qualified health centers to submit to the Secretary such information as the Secretary may require…”

·        Page 2061: “The Secretary shall take action to approve or deny any application…”

1. The Reid bill is massive 

The bill brought forth by Majority Leader Reid and other leading Senate Democrats is 2,074 pages.  Not only is it the largest of the health care bills to come out of Congress, it is 84 pages longer than the Speaker Pelosi’s (D-Calif.) bill and a whopping 696 pages longer than the 1,368 page Hillarycare bill released in the early 90s. 

To read the bill straight through, one would have to read 28 pages an hour for 3 days with no breaks and no sleep.

During his campaign, then-Candidate Obama promised to usher in a new era of transparency in government.  Americans, he said, would finally be able to see what really goes on in Washington.  Speaking of health care reform, Mr. Obama stated, “[W]e'll have the negotiations televised on CSPAN so that people can see who is making arguments on behalf of their constituents and who is making arguments on behalf of the drug companies or the insurance companies.”  Instead, Harry Reid crafted a 2,074 page bill behind closed doors, refusing even to let his fellow Senators to see it. 

History—as recently as the “stimulus” bill this spring—tells us that the bigger the bill, the more room there is for favors, pet projects, and political shenanigans.  As more people read this bill, more disturbing parts will surely be exposed, like the $100 million for Louisiana which was included as a shameless attempt to garner support from an undecided Senator.  This probably explains why Majority Leader Reid wants this Leviathan to come to a vote as soon as possible.

And these are just a few of the many problems with Harry Reid’s takeover of the American healthcare system.

Max Pappas is Vice President, Public Policy and Matthew Clemente is a Researcher

at FreedomWorks Foundation