Some analysts have compared Obamacare to Medicare Part D, which is the drug benefit that was added to Medicare in 2006. Part D is “voluntary”, but if people don’t enroll in a plan, they will pay a penalty if they sign up later. By 2007, 50% of Medicare beneficiaries had enrolled in a Part D plan. Enrollment increased each year, but today about 10% of people on Medicare have chosen not to enroll in a Part D plan.
While Part D is part of Medicare, it is provided by insurance companies – but those companies are highly subsidized by Medicare. The cost to Part D was estimated to be $400 – $500 million over ten years.
And how was Part D paid for? Can you say “credit card”? That’s how Part D was paid for – by increasing the federal deficit. There were no new taxes raised to pay for adding $40 billion per year to the Medicare budget. In fact, Part D was added to the federal budget after two tax cuts were put in place and two wars were waged. So much for a fiscally conservative government. By the way, George Bush was President and Republicans were the majority in the House of Representatives (228) and the Senate (51). The final vote took place in the middle of the night after deals were made to get a few more votes from reluctant Republicans.
Part D is said to be a big success and seniors appreciate the benefits. It also turned out to be about 30% less expensive than expected, supposedly because of competition among insurance companies. But it is still very expensive and highly subsidized by the federal government.
There are many parts to Obamacare, but at the heart is the goal of getting 40 million uninsured Americans signed up for health insurance. It is expected that about 10 million people will get coverage in 2014, so the process of reaching “universal coverage” will take years.
So the heart of Obamacare is “the mandate” that everyone have health insurance. And people will buy health insurance through private insurance companies, or be enrolled in their state Medicaid program. The government will subsidize the purchase of health insurance for people who earn less than 400% of the federal poverty level. (See the chart below.) This sounds a lot like Part D to me – except that Obamacare includes multiple mechanisms to generate revenue to pay for what the government will spend on it.
Unlike Part D, Obamacare is paid for. It’s paid for with taxes and penalties paid by employers and individuals who do not obey the mandates:
And it’s paid for by spending cuts: (These CBO charts appeared in the Washington Post.)
DETAILS OF TAXES: Note that insurance companies, pharmaceutical companies, and medical device companies -all of which will benefit enormously from Obamacare – are paying new taxes to help finance it.
- +.9% Increase in Medicare Tax Rate (plus next item…)
- 3.8% New Tax on unearned income for high-income taxpayers= $210.2 billion ($200,000 for individual and $250,000 for joint filers)
- New Annual Fee on health insurance providers = $60 billion (For calculation – Sec 9010 (b) of the PPACA.)
- 40% New Tax on health insurance policies which cost more than $10,200 for an individual or $27,500 for a family, per year = $32 billion (inland tax as opposed to an importation tax)
- New Annual Fee on manufacturers and importers of branded drugs = $27 billion (For calculation – Sec 9008 (b) of the PPACA)
- 2.3% New Tax on manufacturers and importers of certain medical devices = $20 billion
- +2.5% Increase (7.5% to 10%) in the Adjusted Gross Income floor on medical expenses deduction = $15.2 billion
- Limit annual contributions to $2,500 on flexible spending arrangements in cafeteria plans (plans that allow employees to choose between different types of benefits) = $13 billion
- All other revenue sources = $14.9 billion
- 10% New Tax imposed on each individual for whom “indoor tanning services” are performed.
- 3.8% New Tax on investment income. Includes: gross income from interest, dividends, royalties, rents, and net capital gains. Investment income does not include interest on tax-exempt bonds, veterans’ benefits, excluded gain from the sale of a principle residence, distributions from retirement plans, or amounts subject to self-employment taxes. (The lesser of net investment income or the excess of modified Adjusted Gross Income over a the dollar amount at which the highest income tax bracket, typically $250,000 for married filing jointly and $200,000 filing as an individual).
Who will get help with their health insurance premiums?