Beneath The Surface

What the Pelosi Health-Care Bill Really Says

Like Rep. John Conyers (D-MI), if you’re having trouble reading the nearly 2000 pages in ObamaCare, here is a simple break down for you.

The Personal Mandate and Getting a Qualified Plan

• Sec. 202 (p. 91-92) of the bill requires you to enroll in a “qualified plan.” If you get your insurance at work, your employer will have a “grace period” to switch you to a “qualified plan.”
• Sec. 224 (p. 118) provides that 18 months after the bill becomes law, the Secretary of Health and Human Services will decide what a “qualified plan” covers and how much you’ll be legally required to pay for it.
• Congressional Budget Office estimated that an individual earning $44,000 before taxes who purchases his own insurance will have to pay a $5,300 premium and an estimated $2,000 in out-of-pocket expenses, for a total of $7,300 a year, which is 17% of his pre-tax income. A family earning $102,100 a year before taxes will have to pay a $15,000 premium plus an estimated $5,300 out-of-pocket, for a $20,300 total, or 20% of its pre-tax income. Individuals and families earning less than these amounts will be eligible for subsidies paid directly to their insurer.
• Sec. 303 (pp. 167-168) makes it clear that, although the “qualified plan” is not yet designed, it will be of the “one size fits all” variety. You will have to enroll in the same plan, whether the government is paying for it or you and your employer are footing the bill.
• Sec. 59b (pp. 297-299) says that when you file your taxes, you must include proof that you are in a qualified plan. If not, you will be fined thousands of dollars. Illegal immigrants are exempt from this requirement.

The Cost to Businesses

• Sec. 412 (p. 272) says that employers must provide a “qualified plan” for their employees and pay 72.5% of the cost, and a smaller share of family coverage, or incur an 8% payroll tax. Small businesses, with payrolls from $500,000 to $750,000, are fined less.

The Effects on Medicare

• In addition to reducing future Medicare funding by an estimated $500 billion, the bill fundamentally changes how Medicare pays doctors and hospitals, permitting the government to dictate treatment decisions.
• Sec. 1302 (pp. 672-692) moves Medicare from a fee-for-service payment system, in which patients choose which doctors to see and doctors are paid for each service they provide, toward what’s called a “medical home.”
• A medical home - A primary-care provider manages access to costly specialists and diagnostic tests for a flat monthly fee. The bill specifies that patients may have to settle for a nurse practitioner rather than a physician as the primary-care provider.
• Sec. 1114 (pp. 391-393) replaces physicians with physician assistants in overseeing care for hospice patients.

Effects on Care Givers

• Secs. 1158-1160 (pp. 499-520) initiates programs to reduce payments for patient care to what it costs in the lowest cost regions of the country.
• Sec. 1161 (pp. 520-545) cuts payments to Medicare Advantage plans (used by 20% of seniors). Advantage plans have warned this will result in reductions in optional benefits such as vision and dental care.
• Sec. 1402 (p. 756) says that the results of comparative effectiveness research conducted by the government will be delivered to doctors electronically to guide their use of “medical items and services.”

This too counts as “health care reform”

• Sec. 399V (p. 1422) provides for grants to community “entities”  to “educate, guide, and provide experiential learning opportunities” aimed at drug abuse, poor nutrition, smoking and obesity. “Each community health worker program receiving funds under the grant will provide services in the cultural context most appropriate for the individual served by the program.”
• Secs. 2521 and 2533 (pp. 1379 and 1437) establishes racial and ethnic preferences in awarding grants for training nurses and creating secondary-school health science programs. Grants for nursing schools should “give preference to programs that provide for improving the diversity of new nurse graduates to reflect changes in the demographics of the patient population.” And secondary-school grants should go to schools “graduating students from disadvantaged backgrounds including racial and ethnic minorities.”

The Return of the Inflation Tax

Buried in Nancy Pelosi’s health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as earnings rise over a lifetime you can look forward to paying higher rates even if their income gains aren’t real.

In order to raise enough money to make their plan look like it won’t add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not offering health insurance.

This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases. The negative effects of failing to index compound over time, yielding a revenue windfall for government as the years go on.

The Alternative Minimum Tax

Passed to hit only 1% of all Americans in 1969, the AMT wasn’t indexed for inflation at the time and neither was Bill Clinton’s AMT rate increase in 1993. The number of families hit by this shadow tax more than tripled over the next decade. Today, families with incomes as low as $75,000 a year can be hit by the AMT unless Congress passes an annual “patch.”

Effect on Personal Income Taxes

The tax would begin in 2011 on income above $500,000 for singles and $1 million for joint filers. Assuming a 4% annual inflation rate over the next decade, that $500,000 for an individual tax filer would hit families with the inflation-adjusted equivalent of an income of about $335,000 by 2020. After 20 years without indexing, the surcharge threshold would be roughly $250,000.

Effect on Capital Gains and Dividends

Also the capital gains tax rate that is now 15% would increase in 2011 to 25.4% with the surcharge and repeal of the Bush tax rates. The tax rate on dividends would rise to 45% from 15% (5.4% plus the pre-Bush rate of 39.6%).

Effect on Businesses

As for the business payroll penalty, it is imposed on a sliding scale beginning at a 2% rate for firms with payrolls of $500,000 and rising to 8% on firms with payrolls above $750,000. But those amounts are also not indexed for inflation, so again assuming a 4% average inflation rate in 10 years this range would hit payrolls between $335,000 and $510,000 in today’s dollars.

Printed in The Wall Street Journal, page A24

Fiscal Conservatism and the Soul of the GOP: An Interview with Rick Perry

Here is an abridged version of a WSJ interview with Texas governor Rick Perry

Tort Reform

• Six years ago Texas underwent a critical tort reform that was codified in the state constitution.
• Between 1997 and 2006 Texas’ economy grew an average of 4.3% while California’s grew at a rate of 3.7%. But as of 2002 (to 2007), with tort reform in place, Texas’ annual economic growth jumped to 5%, while California’s remained essentially the same at 3.6%.

State Income Taxes

• Texas does not tax capital gains or income.
• Texas created more jobs in 2008 than the rest of the states—combined.
• Texas had an unemployment rate of 7.5%, two points below the national average.
• Between 2000 and 2007, over 500,000 people have moved to the state.

Education

• Texas “grant program for kids to go college and university … expanded by 44%” this last session

Guiding Principles

• Businesses like Medtronic and Caterpillar are “coming here [because] [Texas] haven’t spent all the money, the taxes are low, the regulatory climate is fair—they won’t be frivolously sued—and they know when they get here that they’ll find a skilled work force.”

October Jobless Rates Tops 10% - WSJ

In February, President Obama urged legislators to pass the massive stimulus bill because he claimed that it would help prevent the unemployment rate from suprassing 8%.

Today’s numbers from the Labor Department shows that the unemployment rate is now at 10.2%, the highest value in over 26 years.

The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs and this value has hit 17.5%

Nancy Pelosi's New Health-Care Bill - WSJ.com

Nancy Pelosi has reportedly told fellow Democrats that she’s prepared to lose seats in 2010 if that’s what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a “critical milestone,” may well be the worst piece of post-New Deal legislation ever introduced.

With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time…The goal is to ram through whatever income-redistribution scheme they can claim to be “universal coverage.”

•The spending surge. The CBO figures the House program will cost $1.055 trillion over a decade. Most of the money goes into government-run “exchanges” where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth

The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, “saving” about $250 billion.

• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to “pay for” universal coverage…The only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.

As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.

• European levels of taxation. The House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point “surcharge” on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won’t have any difficulty sheltering their incomes.

Under another new tax, businesses would have to surrender 8% of their payroll to government if they don’t offer insurance or pay at least 72.5% of their workers’ premiums, which eat into wages. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate.

Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won’t buy insurance in 2019.

• The insurance takeover. A new “health choices commissioner” will decide what counts as “essential benefits,” which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.

The cost of insurance, naturally, will skyrocket.

Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as “private” health insurance.