Big Labor, Big Favors

The Cornhusker Kick: Just when we thought the health care legislation could not possibly get any worse, any more damaging, or any more disgusting in its vote-buying kickbacks and special favors, then along comes this!

In marathon meetings at the White House, the president and congressional Democrats came up with a "big, fat wet kiss for labor unions" (New York Post) in exempting them from the tax on high cost health plans until 2018.

The deal exempts them from one of the "revenue generating" parts of the Senate health overhaul bill that exposes expensive health plans to a 40% excise tax. The tax on plans costing more than $24,000 a year for families and $8,900 for individuals would be paid by insurance companies, who would simply pass it along in even higher premiums.

And how is Congress going to make up the revenue? With another jobs-killing tax that would subject investment income to Medicare payroll taxes. This will hit small businesses and others that rely on investment income to build their businesses. Apart from the economic damage this would do, it is terrible policy to start thinking of Medicare taxes as yet another piggy bank to fund special political deals.

It is relatively clear that President Obama's economic policy is strictly one dimensional: raise taxes everywhere and anywhere you possibly can to expand the size and scope of government. And the only people who will be exempt from these crushing taxes will be political friends who have cut special deals.

This is not a democracy. This is banana republic politics. Unless you have political connections and lots of campaign cash, expect to get hit.

It's clear that the winners are the powerful labor unions who've bought a place at the table with their huge campaign contributions and election spending. That bought them the deal that exempts union members from $60 billion in taxes on health benefits.

But who are the losers? For starters, workers in states that have fewer labor unions, such as Nebraska. Is Sen. Ben Nelson going to be able to defend a deal that would tax health insurance for workers in his state, most of whom are not unionized, at a higher rate than the more highly-unionized workers in Pennsylvania? This might be called the "Cornhusker Kick."

The union payback shows the same raw politics as a deal in the Senate bill that would force construction companies with five or fewer workers to provide expensive, government-mandated health insurance to their employees. (For other industries, the mandate doesn't kick in until a firm has 50 workers.) The unions had complained that exempting the small, non-union firms from the mandate put unionized companies at a competitive disadvantage.

This is disgraceful.

Political guru Charlie Cook writes today: "Honorable and intelligent people can disagree over the substance and details of what President Obama and congressional Democrats are trying to do on health care reform and climate change. But nearly a year after Obama's inauguration, judging by where the Democrats stand today, it's clear that they have made a colossal miscalculation."


Massachusetts: And what impact is the Massachusetts special Senate election going to have on health reform?

You know the world has changed when people around the country are looking to Massachusetts to stop expansion of a liberal social agenda. One member of Congress told me his constituents are stopping him on the street to ask what they can do to send a message to Massachusetts voters, saying they are all that stands between them and passage of a health reform bill that frightens them.

Republican Scott Brown had the quote of the campaign during Monday night's Massachusetts Senate debate when moderator David Gergen asked him, "Are you willing … to say I'm going to be the person — I'm going to sit in Teddy Kennedy's seat and I'm going to be the person that's going to block [health reform] for another 15 years?"

Brown replied, "Well, with all due respect, it's not the Kennedys' seat and it's not the Democrats' seat, it's the people's seat."


The public plan lives on, despite most claims that this central pillar of Big Labor's agenda won't be part of the final health overhaul bill.

There is a reason they are silent on this issue. Their government-run health plan just has a new name. It's now called a national health insurance exchange.

The federal government, rather than the states, would have the authority to set up the new health insurance purchasing exchange. This would be the vehicle to centralize health insurance regulation, with Washington dictating what benefits must be covered, what insurers can charge, and how health plans must operate.

The House bill calls for the national exchange to be run by the Orwellian "Health Choices Administration," vesting vast new power for health insurance regulation with the federal government and giving states, consumers, and businesses little or no say over the health "choices" available to them through the exchanges. The national exchange would quickly become a vehicle for price controls and excessive regulation of insurance markets, which have driven up costs and driven out competition in many states.

Giving the federal government power over health insurance through this new regulatory mechanism would create the foundation for a government-run public plan. Speaker Pelosi gave a preview of the power that she believes will be invested in the national exchange when she said at a recent news conference that once the legislation is passed, the insurance companies "will be crying out for a public option."

The politics of intimidation and political favors will not win support for this plan. Stay tuned. This still is not over yet.


This week, we're featuring two "Clips of the Week." The first, entitled "Healthcare Reform with 2020 Hindsight," comes from Robert F. Graboyes, a senior healthcare advisor for the National Federation of Independent Business. It looks at the new requirements, taxes, fines, and penalties mandated by the health reform bills that unfold over the next ten years.

The second clip is part of the Galen Institute's efforts to increase our original audio and video content in 2010. Grace-Marie Turner recently spoke at a conference on health reform in Virginia, and she offers her reactions, including how doctors and other health professionals at the conference feel about potential changes to America's health sector. This clip is available on the Galen Institute's iTunes Podcast.


Don't Discriminate Among Michigan Health Insurers

Grace-Marie Turner, Galen Institute

The Detroit News, 01/13/10

In voting for the Senate's health overhaul bill last month, Michigan Sen. Carl Levin made a special deal with the Senate leadership to exempt Blue Cross Blue Shield of Michigan from paying any portion of a new health insurance premium tax the Senate bill would create. The insurers who didn't get Levin's sweet deal will have to pay the tax, which certainly will be passed on to the thousands of individuals and small businesses in the form of higher premiums, making their policies less attractive to consumers. So, ironically, rather than creating a more competitive market for health insurance, the exemption will discourage competition and choice among health plans in Michigan. Read More »

The Public Plan Lives On

Grace-Marie Turner, Galen Institute
National Review Online: Critical Condition, 01/14/10

As Democrats meet behind closed doors, they've simply given their government-run health plan a new name, Turner writes. It's now called a national health insurance exchange, and it has the enthusiastic support of President Obama. But rather than "streamlining the purchase of health insurance," as proponents claim, a new national health insurance exchange would steamroll over private choice and patient preferences and would provide a vehicle to extend sweeping federal regulation into virtually every corner of our health sector. The national exchange is just one more reason to encourage Congress to stop and start over. Read More »


"Play-or-Pay" Insurance Reforms for Employers — Confusion and Inequity

Bradley Herring, Ph.D., Johns Hopkins University, and Mark V. Pauly, Ph.D., Wharton School, University of Pennsylvania
The New England Journal of Medicine, 12/30/09

Economists Mark Pauly and Brad Herring say a "play-or-pay" mandate on employers to provide health insurance or pay penalty fees would come out of the pockets of workers. Although the mandate is described as involving employer "contributions" toward insurance, this money actually comes out of what would otherwise have been workers' wages. And any tax penalty for not complying would almost surely be passed along as a levy on workers' wages. Rather than fostering transparency, the play-or-pay approach results in confusion about who is paying how much for what coverage — and careful analyses indicates that this method would not address existing inequities and could add further inequities to our system. Read More »

The Real Budgetary Impact of the House and Senate Health Bills

James C. Capretta, Ethics and Public Policy Center
The Heritage Foundation, 01/14/10

The President has said that he wants a health reform bill in large part because it is necessary to get better control of the federal budget. But the bills that have been developed in the House and Senate fall far short of his stated objectives, Capretta writes. The spending would far exceed $900 billion through 2019, and the federal budget deficit would increase dramatically, not decrease, when all of the numbers are honestly accounted for. The Senate bill's provisions, even excluding the "doc fix," would total $2.3 trillion over the period 2014 to 2023, with the coverage provisions fully in place. The House bill's true 10-year cost would be comparably high, even excluding the large costs of the physician fee fix. Read More »

Obama's Prescription for Low-Wage Workers: High Implicit Taxes, Higher Premiums

Michael F. Cannon
Cato Institute, 01/13/10

House and Senate Democrats have produced health care legislation whose mandates, subsidies, tax penalties, and health insurance regulations would penalize work and reward Americans who refuse to purchase health insurance, Cannon writes. Those mandates and subsidies would impose effective marginal tax rates on low-wage workers that would average between 53 and 74%. Over small ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100%. For example, under the House bill, families of four starting at $43,670 who earn an additional $1,100 would see their total income fall by $870 due to higher taxes and reduced subsidies. Read More »

One Year Out: President Obama's Fall

Charles Krauthammer
The Washington Post, 01/15/10

The health care drive is the most important reason Obama's popularity has sunk to 46%, Krauthammer writes. By essentially abolishing medical underwriting and replacing it with government fiat, Obamacare turns the health insurance companies into utilities, their every significant move dictated by government regulators. The public option was a sideshow. As many on the right have long been arguing, and as the more astute on the left understand, Obamacare is government health care by proxy, single-payer through a façade of nominally "private" insurers. At first, health care reform was sustained politically by Obama's own popularity. But then gravity took hold, and Obamacare's profound unpopularity dragged him down with it. After 29 speeches and a fortune squandered in political capital, it still will not sell. Read More »

The Health Lady Has Yet to Sing

Kimberley A. Strassel
The Wall Street Journal, 01/15/10

Republican Scott Brown is running strong in Massachusetts on a promise to be the 41st vote against health care in the Senate. Democrats' bigger worry right now is whether Mr. Brown might prove the 218th vote against health care in the House, Strassel writes. The Democratic leadership is now clinically obsessed with passage of the health overhaul bill, but there is now officially enough nervousness that anything can happen. Whatever the Tuesday election outcome, Mr. Brown already claims victory for rattling Democratic minds. This isn't over yet, Strassel writes. Read More »


Workplace Wellness Programs Can Generate Savings

Katherine Baicker, Harvard University, David Cutler, Harvard University, and Zirui Song, Harvard Medical School
Health Affairs, 01/14/10

Employer-based wellness initiatives may not only improve health, but may also result in substantial savings over even short-run horizons, Baicker et al. write. The authors' revi
ew of the existing evidence finds that medical costs fall by about $3.27 for every dollar spent on wellness programs and that absenteeism costs fall by about $2.73 for every dollar spent. Although further exploration of the mechanisms at work and broader applicability of the findings is needed, this return on investment suggests that the wider adoption of such programs could prove beneficial for budgets and productivity as well as health outcomes. Read More »

Health Spending Growth At A Historic Low in 2008

Micah Hartman, Anne Martin, Olivia Nuccio, Aaron Catlin, Centers for Medicare and Medicaid Services
Health Affairs, 01/10

In 2008, U.S. health care spending growth slowed to 4.4% — the slowest rate over the past 48 years. Despite the slowdown, national health spending reached $2.3 trillion, or $7,681 per person, and the health care portion of the gross domestic product grew from 15.9% in 2007 to 16.2% in 2008. Of the total, 47% was spent through public programs, and 53% was through private spending. Read More »


Medicare and the Mayo Clinic

The Wall Street Journal, 01/08/10

The Mayo Clinic announced this month that it will no longer accept Medicare patients at one of its primary care clinics in Arizona, The Wall Street Journal writes. This decision is part of a two-year pilot program to determine if Mayo should also drop Medicare patients at other facilities in Arizona, Florida, and Minnesota, which serve more than 500,000 seniors. Mayo is probably a leading indicator of where other hospitals and doctors are headed, the Journal writes. Physicians on average earn 20% to 30% less from Medicare than they do from private patients, and many are dropping out of the program. Mayo says it lost $840 million last year treating Medicare patients, the result of the program's low reimbursement rates. Read More »


Liberating Bone Marrow Donors
Cato Institute Policy Forum
Tuesday, January 19, 2010
Washington, DC

A Discussion on Health Care Reform
George Washington University Department of Health Policy Lunch Seminar
Tuesday, January 19, 2010
12:00pm – 1:00pm
Washington, DC

The Office of Personnel Management: A Power Player in America's Health Insurance Markets?
The Heritage Foundation Event
Wednesday, January 20, 2010
Washington, DC

ObamaCare's High Implicit Tax Rates for Low-Wage Workers
Cato Institute Policy Forum
Thursday, January 28, 2010
Washington, DC

Global Warming or Climate Change? Health Care Reform or Insurance Reform?
The Heartland Institute and Illinois Policy Institute Luncheon
11:30am – 1:30pm
Chicago, IL
For more information, call Tonya Houston at 312-377-4000.