Research Briefing

Obama’s “Fix” Makes Health Care Bill Even Worse

OBAMA SIGNS “FIXES” INTO LAW TODAY: “President Obama will sign legislation making fixes to his sweeping health care bill -- and enacting sweeping changes to higher education financing -- at a ceremony in Alexandria next week… Tuesday morning at Northern Virginia Community College.” (Anne E. Kornblut, “Obama To Sign Health-Care ‘Fixes’ Bill Tuesday In Alexandria,” The Washington Post’s “44” Blog, 3/26/10)

WHAT’S IN THE BILL? MORE TAXES, MEDICARE CUTS, SPECIAL DEALS AND TAKEOVERS

$50 Billion More In New Taxes, Bringing The Total Tax Increase To $570 Billion, Including Larger Levies On Investment Income And Small Businesses. “The reconciliation bill’s changes to the Medicare tax represent the largest single revenue raiser in the health reform package. The CBO estimates the provision would raise $210 billion over 10 years. Currently, the Medicare payroll tax is 2.9% on all wages -- with the worker and his employer each paying 1.45%. The reconciliation bill, like the Senate bill, would raise the percentage paid by high-income individuals by 0.9 percentage points, so an individual would pay 2.35% on his wages. The reconciliation bill, however, also would subject the investment income of high-income households, such as dividends, interest and rent, to a 3.8% Medicare tax.” (Douglas W. Elmendorf, Letter To Speaker Nancy Pelosi, 3/20/10; Jeanne Sahadi, “Health Reform: Where The Money Will Come From,” CNN Money, 3/18/10)

$66 Billion More In Medicare Cuts, Bringing The Total Cuts To $523 Billion, That Will Force Doctors To Drop Patients. “Better beat the crowd and find a doctor. Primary care physicians already are in short supply in parts of the country, and the landmark health overhaul that will bring them millions more newly insured patients in the next few years promises extra strain … Massachusetts offers a snapshot of how giving more people insurance naturally drives demand. The Massachusetts Medical Society last fall reported just over half of internists and 40 percent of family and general practitioners weren’t accepting new patients, an increase in recent years as the state implemented nearly universal coverage.” (Douglas W. Elmendorf, Letter To Speaker Nancy Pelosi, 3/20/10; Lauran Neergaard, “Health Overhaul Likely To Strain Doctor Shortage,” The Associated Press, 3/28/10)

More Special Deals, This Time $100 Million That Only Tennessee Qualifies For. “EXTENSION OF DSH ALLOTMENT.—Section 1923(f)(6)(A) of the Social Security Act (42 U.S.C. 1396r-4(f)(6)(A)) is amended by adding at the end the following: ‘‘(v) ALLOTMENT FOR 2D, 3RD, AND 4TH QUARTERS OF FISCAL YEAR 2012 AND FOR FISCAL YEAR 2013.—Notwithstanding the table set forth in paragraph (2): ‘‘(I) 2D, 3RD, AND 4TH QUARTERS OF FISCAL YEAR 2012.—In the case of a State that has a DSH allotment of $0 for the 2d, 3rd, and 4^th quarters of fiscal year 2012, the DSH allotment shall be $47,200,000 for such quarters. ‘‘(II) FISCAL YEAR 2013.—In the case of a State that has a DSH allotment of $0 for fiscal year 2013, the DSH allotment shall be $53,100,000 for such fiscal year.’’” (Section 1203(b,) H.R. 4872, 3/18/2010)

And A Government Takeover Of Higher Education Financing That Uses $19 Billion From Student Loan Industry And Spends It On A New Health Care Entitlement. “The Obama plan calls for the U.S. Department of Education to move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans... The news from Washington now is that rather than scaling back federal involvement, the pols want the U.S. Department of Education to be the exclusive banker to America’s college students ... parents will soon have no choice beyond a Washington bureaucracy to borrow money for their college-bound children.” (Table 5, Douglas W. Elmendorf, Letter to Speaker Nancy Pelosi, 3/18/10; Editorial, “The Quietest Trillion,” The Wall Street Journal, 9/12/09)

WHAT’S NOT IN THE BILL? ANYTHING THAT CREATES JOBS

OR PROMOTES ECONOMIC GROWTH

AT&T Reports $1 Billion In Unexpected Costs After Health Care Takeover. “AT&T will take a $1 billion non-cash charge in the first quarter related to the health care overhaul. AT&T Inc. said Friday that the charge is to reflect the change of the tax treatment of Medicare subsidies. Companies say the health care overhaul, which President Barack Obama signed Tuesday, will make a subsidy that companies receive for retiree drug coverage taxable in 2011. AT&T also says it is looking into changing the health care benefits it offers to active and retired workers because of the legislation.” (“AT&T Will Take $1B Non-Cash Charge For Health Care,” The Associated Press, 3/26/10)

Caterpillar Inc. Said Obama’s Bill Would Increase Their Costs By $100 Million In First Year, “Place [Them] At A Disadvantage Versus [Their] Global Competitors.” “Caterpillar Inc. said the health-care overhaul legislation being considered by the U.S. House would increase the company’s health-care costs by more than $100 million in the first year alone. ... ‘We can ill-afford cost increases that place us at a disadvantage versus our global competitors,’ said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. ‘We are disappointed that efforts at reform have not addressed the cost concerns we’ve raised throughout the year.’” (“Caterpillar: Health Care Bill Would Cost It $100M,” Dow Jones Newswires, 3/19/10)

John Deere Is Losing $150 Million This Year Because Of Dems’ Government-Run Health Care Law. “Deere & Company, Iowa’s largest manufacturing employer, said in a statement this morning that the recently-passed health care legislation will cost the company $150 million after tax this year... Golden said Deere and other companies warned congress in a letter last December that the imposition of a tax on the prescription costs would force publicly-traded corporations like Deere to publicly account for the extra costs. Deere said the impact of the legislation had not been included in its forecast for a profit of $1.3 billion for this year...” (Dan Piller, “Deere Says Health Care Bill Will Cost It $150 Million,” The Des Moines Register’s “Green Fields” Blog, 3/25/10)

Government Takeover Of Student Loans Could Cause Lenders To Cut 35,000 Jobs. “But the student loan industry estimates that nearly 35,000 jobs would be lost if the federal government lent directly to students and only let private companies service the loans. Sallie Mae, one of the largest private lenders, would cut an estimated 2,500 workers in Pennsylvania, Indiana, Delaware, Virginia, New York and Ohio. Nelnet, a student lending company based in Nebraska, has already laid off employees in Indiana and Florida and could cut additional workers in Colorado.” (Alexander Bolton, “Dem Plan To Twin Healthcare And Student Lending Complicates Vote,” The Hill, 3/8/10)

CFO Of Zoll Medical Corp. In Massachusetts Called The Bill “A Jobs Killer” That Would “Force” Them To Move Jobs Overseas. “‘This bill is a jobs killer,’ said Ernie Whiton, chief financial officer of Chelmsford’s Zoll Medical Corp., which employs about 650 people in Massachusetts. Many of those employees work in Zoll’s local manufacturing facility making heart defibrillators. ‘We could be forced to (move) manufacturing overseas if we can’t pass along these costs to our customers,’ said Whiton.” (Jay Fitzgerald, “Beware The ‘Jobs Killer,’” The Boston Herald, 3/25/10)