CBO takes a stab at calculating the cost of federal health care

Two stories just caught my eye within the last hour or so. First of all, the Congressional Budget Office sent a 14 page report to Rep. Charlie Rangel (D-N.Y.) with a wrap-up review of America’s Affordable (hah!) Health Choices Act. Second, Reuters is reporting there will be a 5.4 percent surtax on millionaires to help pay for this monstrosity.

First, hat tip to Malkin who got the letter from a Congressional staffer. I’ve uploaded the PDF [820kb] for your reading pleasure. I’ve highlighted the real juicy parts. From the first paragraph…

Among other things, those specifications would establish a mandate for most legal residents to obtain insurance, significantly expand eligibility for Medicaid, and set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage. The analysis presented here does not take into account other parts of the proposal that would raise taxes or reduce other spending (particularly in the Medicare program) in an effort to offset the federal costs of implementing those coverage specifications.

Certainly can’t have those undocumented workers burdened with a mandate to have health insurance, and why even bother researching how to pay for all of this!

The proposal would also impose a “play-or-pay” requirement on employers, who would either have to offer qualifying insurance to their employees and contribute a substantial share toward the premiums, or pay a fee to the federal government that would generally equal 8 percent of their payroll.

That is a huge tax on small businesses that will greatly slow down the ability for emerging companies to expand, to the contrary they would be crushed. The report states that small businesses with payrolls less than $250,000 would be exempt. Do they even realize how many businesses would fall into that category? Not many…

Of course, for those small businesses with small payrolls and few employees, the government will offer you some sort of rebate – up to half – of that 8 percent. Gee, thanks. Later in the report (page 11 of 14), the number mysteriously drops to $100,000 in employee payroll, then back up to $250,000. What the heck is this about?

Firms with an annual employee payroll above $100,000 would be subject to a “play-or pay” requirement. Employers could “play” by offering coverage that meets the minimum benefit standards described above and making a minimum contribution toward the premiums (72.5 percent for individual premiums and 65 percent for family premiums). Firms that do not meet those requirements would be subject to a payroll tax, with the rate depending on their annual payroll, as follows: 2 percent, for firms with a payroll between $250,000 and $300,000; 4 percent, for firms with a payroll between $300,000 and $350,000; 6 percent, for firms with a payroll between $350,000 and $400,000; and 8 percent, for firms with a payroll above $400,000.

Now, do we think everyone will be covered under this plan that will cost more than $1 trillion over what ends up being seven years? Note that all of a sudden, this report is stating there is currently 72 million people uninsured. Just last month the administration was telling us there were 46 million uninsured, and we found out that number was pretty misleading. Where did the additional 25 million uninsured come from in the last 30 days?

According to the preliminary analysis conducted by CBO and the JCT staff, once the proposed changes were fully implemented, the number of uninsured people would decline by 35 million to 37 million relative to our projections under current law—leaving about 16 million to 17 million nonelderly residents uninsured.

Page 6 of 14…

[T]he proposal’s provisions affecting health insurance coverage would result in a net increase in federal deficits of $1,042 billion for fiscal years 2010 through 2019.

The plan does not seem to kick in until 2013 at the earliest, so therefore that $1.042 trillion – in my opinion cleverly defined in accounting speak as $1,042 billion – is really spent during a seven year, not 10 year, period of actual insurance “coverage.”

Don’t have coverage? No problem, just like in Massachusetts, you’ll be fined if you don’t have insurance.

The penalty assessed on people who would be subject to the mandate but did not obtain insurance would equal 2.5 percent of the difference between their adjusted gross income (modified to include tax-exempt interest and certain other sources of income) and the tax filing threshold.

Now we get into the facts that will completely destroy all private health insurance options…

New health insurance policies sold in the individual and group insurance markets would be subject to several requirements regarding their availability and benefits. Insurers would be required to issue policies to all applicants and could not limit coverage for people with preexisting medical conditions. In addition, premiums for a given plan could not vary because of enrollees’ health but could vary because of their age by a factor of two (under a system known as adjusted community rating). Individual policies that were purchased before 2013 and maintained continuously thereafter would be “grandfathered,” meaning that they would not have to conform to the new rules but would still fulfill the individual mandate. Existing group policies would have to conform to the new rules by 2017.

Got that? I’m selling all of the health care stock I’ve got within days of this boondoggle passing – you should do the same. I too read about the instances where a family member has a pre-existing condition and can not get insurance coverage, it sucks. But demanding insurance companies enter into contracts with customers that guaranty insurers will loose tons of cash is not the way to solve any sort of problem.

This. Is. Not. Good. People.

Next, we have the Reuters article…

A sweeping overhaul of the U.S. healthcare system to be announced on Tuesday in the U.S. House of Representatives will include a surtax on millionaires of 5.4 percent, congressional sources said.

The tax rate is higher than the 3 percent surtax lawmakers had been discussing earlier and would be imposed on those making more than $1 million a year, the sources said.

Homework for readers… On average, how many tax returns are submitted each year with income more than $1 million? What percentage of the federal income tax collected is that group ($1 million+) already paying?

Allah at Hot Air also reading the doc and commenting.