Healthcare reform effort stumbles over spending and taxes

October 16, 2009

The great Dan Clifton of Strategas Group nails the difficulties of paying for reform through spending cuts or tax hikes:

But these goals are now in jeopardy as the process moves forward. Doctors want legislation to permanently fix their payments holding a cost roughly of $250bn and Senators are pushing for an expansion of coverage. Both initiatives raise the fiscal cost of healthcare program to roughly $1.2 trillion (violating the total cost goal) and there are no additional options to pay for this expansion (violating the deficit neutral goal). Not only is the cost of spending going up, but the push is now to lower the impact of the revenue raisers as unions push to reduce the tax on high end insurance plans. This provision is one-quarter of the total offsets for healthcare and reducing that further exacerbates the gap between revenues and spending. Also, this is viewed as a key provision to reduce the cost of healthcare and will added further headwinds to passage.


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Karl Rove writing in the Wall Street Journal
The Congressional Budget Office (CBO) released a report last week claiming the (Baucus) bill won’t add to the deficit.
But this assumes that employers who dump employee coverage under the Baucus bill will then increase worker paychecks by an amount equal to what they had spent on health care.
This replaces a nontaxable event (providing health insurance) with a taxable one (increasing worker paychecks), magically producing $83 billion in revenues.
Without this windfall, the Baucus bill adds billions of dollars to the federal deficit in the first decade.
Of course, why would a company drop employee coverage just so it could pay more (in fines, taxes and wages) than it did before?
Mr. Rove spoke of this last night On The Record. This is important! This is what I was afraid of.
This has to do with the “employer free rider mandate” that is in the Baucus bill.
Rove speaks of “employers who dump employee coverage.”
Senator Frist wrote that in Massachusetts, where they have a similar employer mandate, the number of people who get their health insurance through their employer actually went up.
So, which is it?
If the Baucus “employer free rider mandate” or something similar becomes law, what will be the net effect?
Will more or less of us be getting our health insurance through our employer?
And for the CBO to assume that employers will then “increase worker paychecks by an amount equal to what they had spent on health care” is absurd!
Will anyone in the MSM ask an intelligent question, please?!

Posted by sisterrosetta | Report as abusive

Don’t knock it. If a company drops coverage and doesn’t raise salaries, the savings presumably come under the corporate income tax rate, which last I knew was 40%.

Posted by Pete Cann | Report as abusive