Congress Set To Deficit Fund Obamacare Almost $40 Billion

iStock_000007047153XSmallI had always feared that Congress’ alternative to Obamacare was deficit funded Obamacare, and it looks like that is coming to pass. This is being done through the so-called “taxibus”, a legislative package that combines popular “tax extenders” (items like research and development tax credits that are legally temporary but practically permanent) with funding the federal government through September 2016.

The bill proposes a couple of years delay in three Obamacare taxes: The medical-device excise tax, he health insurance fee, and the excise tax on high-cost employer benefit plans. All three taxes are bad. However, the bill just delays them without cutting any Obamacare spending.

The medical-device excise tax is a 2.3 percent levy on medical devices sold in the U.S. A two-year moratorium will reduce tax revenue by almost $4 billion.

The health insurance fee is a similar charge on all employer-based health insurance. A one-year moratorium on this fee will reduce tax revenue by about $12 billion.

The excise tax on high-cost health plans is a little different. Delaying it by a couple of years will reduce tax revenue by about $20 billion. Yes, it is a bad tax. However, it is not quite as purely bad as the other two. Pre-Obamacare, firms could spend an unlimited amount on health benefits, which were never added to employees’ taxable income. This led to over-insurance, artificially high health spending, and higher income tax rates than otherwise. This excise tax, although poorly designed, recognizes the problem.

Of course, these taxes are discriminatory and harmful. However, they were included in the Affordable Care Act to make the numbers add up to a budget-neutral Obamacare. Reducing these taxes without reducing Obamacare spending – especially Obamacare’s dependency-inducing Medicaid expansion – does nothing to repeal Obamacare. It merely gives us deficit-funded Obamacare.

Comments (5)

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  1. ColoComment says:

    And don’t forget the earlier-repealed long-term care tax that was front-loaded in ACA, with revenues in the first years, and payouts in later years.

    So, yeah, since they’ve cut just about all of the revenue-raising provisions of ACA, what we’re left with is pretty much federal government funded health care/insurance.

    With providers either closing down or consolidating, we’ll be left with a few big hospital systems and a single payer, with Medicare-level payments as determined by IPAB administered through a few big third-party “insurers.”

    A more uneconomic, inefficient system cannot be imagined.

  2. Bob Hertz says:

    Thanks for an excellent post.
    There is an articulate conservative named Mark Steyn who talks about the craven willingness of Republicans to accept more deficit spending. In his interviews with Hugh Hewitt, (the talented moderator of the recent Repub debate), Steyn says that while he does not like Swedish socialists, at least the Swedes raise taxes when they expand social programs.
    In the USA, the Repubs block any broad new taxes, so the Democrat quasi-socialist programs rely on revenue gimmicks and targeted taxes, and then both parties cave in and drop the targeted taxes when campaign contributors put on the pressure. Ugh.

  3. Wanda J. Jones says:

    Dear John and Friends…

    Those of us who watch health policy as a moral duty, I am struck by how much the general public and even some bloggers seem to ignore the fact that our form of government does not favor rational decisions. Or prompt ones. Or dependable ones. Yet the solution that is the only one mentioned regularly is single payer.

    There is a great need for a documentary on this topic to educate the voters and Congress of the actual meaning of single payer, and its pitfalls in the US, because of the very government that many expect will correct the problems in the system now, and that will re-house Obamacare. Everytime I think that the decisions are about to make sense, they don’t. The perfidy under way, as in arbitrarily reducing the risk protection provision for insurers, should give us all a chilling lesson in the limits of government commitment to making the right decision, on time and sticking with it.


    Wanda J. Joens
    San Francisco

  4. Bob Hertz says:

    Thanks Wanda. It is pleasant (sort of) to see a conservative like you agreeing with me about the recent arbitrary slashing of risk adjustment funds. It was a grandstand play by Rubio to both harm ObamaCare and to impress the anti-bailout voters….
    and the result is that the persons stuck on the exchanges have fewer choices and worse policies. (but most of those persons are Democrats, so who cares?)

    It does not take a lot of reading in health care literature to see that guaranteed issue insurance requires some form of taxpayer support and mutual co-operation among insurers.
    I am not opposed to the argument that guaranteed issue is a mistake, but it is all we have right now and some accomodations must be made.

    • We “conservatives” have not overly criticized risk adjustment in Medicare Advantage or Obamacare. The issue with risk corridors is the law required appropriations and the Administration and insurers suggested they did not. And they had no way to ensure budget neutrality in that case, which is how Obamacare was sold.