1. The PPACA/”ObamaCare:”
On March 23, 2010, President Obama signed into law the “Patient Protection and Affordable Care Act” (“PPACA”), a 2049 page health care reform bill citing major changes to the laws governing health insurance practices: Medicare, Medicaid and other tax provisions. The controversial legislation is intended to rein in runaway health care spending that both its supporters and detractors agree threatens to cripple economic growth in the United States.
2. Court Challenges to Healthcare:
The price tag for this reform is projected at $940 billion across the decade, although that figure is an estimate at best (other estimates have been as high as $2.6 trillion), presupposing a reduction in the historical growth rate of Medicare spending from 4% annually to 2%. Experience, moreover, shows that ambitious federal programs often end up costing much more than their original estimates. Moreover, opponents of the legislation have challenged the constitutionality of the law’s requirement that all individuals obtain health insurance. This creates uncertainty regarding the law until a potential U.S. Supreme Court decision is reached.
On Monday, April 25, 2011, the Supreme Court refused to consider an early challenge to the federal health care law – a decision which did not receive much mention on network television, with coverage of the royal wedding dominating the broadcasts. Judge Hudson, a U.S. District Court Judge in Virginia, ruled unconstitutional the law’s requirement that individuals carry health insurance or pay a penalty. (See here and here). This provision is slated to go into effect in 2014.
The U.S. Court of Appeals for the Fourth Circuit in Richmond heard oral arguments in the case on May 10, 2011. The losing party will almost certainly petition the Supreme Court to hear the case, but the Supreme Court’s refusal to consider an early challenge was not a surprise, as the Supreme Court rarely agrees to hear cases directly after rulings by the Federal District Court. Two Republican appointed judges, Judge Hudson in Virginia and Judge Vincent in Florida, have found the insurance mandate unconstitutional. Three other federal judges, all Democratic appointees, have ruled the law constitutional. Federal Appeals Courts in Cincinnati and Atlanta are scheduled to hear similar cases in early June.
3. Small Business Will Pay the Price of Healthcare:
As is clear, this health care reform is mired in controversy. What is even clearer is where the proceeds to pay for these programs are to come from. The PPACA makes provisions to raise $409 billion in additional revenues between 2010 and 2019, including fees for drug manufacturers, health insurance providers and others. However, a projected $2.10 billion, will be generated by increasing taxes on “high income” taxpayers.
The PPACA imposes a new 3.8% tax on unearned investment income for taxpayers with an adjusted gross income (“AGI”) greater than $200,000 (individuals) or $250,000 (married couples). Under the current law, starting in 2013, “high income individuals” will see effective rates of 43.4% on dividends and interest and 23.8% on capital gains. Opponents argue that the “high earners not rich yet” (“Henrys”) are primarily small business owners whose business income inures “flows down” to the individual business owner.[1] The consensus is that small business will suffer a tremendous blow. This inordinate tax burden will stultify further employment growth. Construction companies are primary targets of the new tax, many are Subchapter S or Limited Liability Companies, the revenues of these firms are counted toward the owners’ adjusted gross income. Most small or medium sized construction companies will be saddled with this new tax burden.
4. Broken Promises and Back Room Deals:
Why is health care reform so controversial? In my view, it has a lot to do with the way it came about in the U.S. Congress. I recall gullibly believing President Obama’s promise to “remake America” and his promise for “change.” His promise, as far as health care was concerned, held that “every voice has to be heard, every idea has to be considered, every option should be on the table, there should be no sacred cows.” I recall when he took office, that he filled his cabinet with Washington insiders – extremely disappointing.
Shortly thereafter, the President launched his universal comprehensive health care plan in the midst of one of the worst recessions in U.S. history. Instead of fostering change, he appointed the consummate Washington inside deal maker Rahm Emanuel to head up the health care reform push. His next move was to team up with Senator Max Baucus (head of the Senate Finance Committee), who raised $2.5 million from special interests in the health care industry, to spearhead health care reform.
Obama’s first step in passing the health care reform bill was to make a deal with the pharmaceutical industry, headed by another Washington insider, Billy Tauzind. Billy Tauzind gained fame as a congressman in 2003 by passing the Medicare Prescription Health Bill in the middle of the night. After that coup, Tauzind then went to work for Pharma, the pharmaceutical industry lobby, for a salary of $2 million (the reward for selling out the country). The Comptroller General described Tauzind’s Medicare Prescription Health Bill as one of the worst pieces of legislation in history, costing the country hundreds of billions of dollars. In fact, I recall “candidate” Obama (before he became President) ridiculing Tauzind on TV as an example of what was wrong with Washington and why change was required. How our President could turn around and make a deal with Tauzind and the pharmaceutical industry as the first step in his health care reform defies imagination. However, despite his promise for “openness,” the backroom dealing continued. The President reasoned that he wanted to make an early “deal” with Pharma, so that Pharma would not oppose the rest of his plan. He compromised his principals and paid the price in Massachusetts a few months later.
The backroom deals reached a pinnacle in December 2009, when this time, the Obama administration bought off its own democratic senators. Senator Evan Bye of Illinois got a deal for lower taxes for medical device makers (his special interest group). The best deal of all, however, went to Democratic Senator Ben Nelson from Nebraska, who got all other U.S. taxpayers to foot the $100 million cost of expanding Nebraska Medicare indefinitely, and only for Nebraska – a shameful deal that has been called the “Cornhusker Kickback.” President Obama justified the payoff because he needed Senator Nelson’s vote! It is this type of backroom dealing and dirty politics that have tainted my perception of the health care reform legislation to the point that I cannot trust that our politicians are truly inclined to do what is best for their constituents. Instead, the special interest groups in this country seem to have Congress’ ear.
From this rant, you may conclude that I am a disappointed and frustrated Republican venting my spleen. I am not a Republican, nor am I a Democrat. Granted, I voted for Barrack Obama, trusting his assurance that there would be no “backroom” deals in his administration. I trusted his promise that in his administration, every voice would be heard, every idea to be considered and every option to be put on the table. The manner in which President Obama’s ideals were hijacked and the health care reform act was passed has not only been extremely disappointing, it has alienated me from the political process to the point that I do not trust any utterance by any political candidate. If these are the kind of “deals” that have to be cut to get legislation passed in the capital, our country is in big trouble. I remain idealistic enough to believe that this record of selling out the taxpayers is not how politics should be or will be conducted in the future.
The backlash of the health care “cram down” came on July 9, 2010, when voters in Massachusetts, fed up with the broken promises and politically expedient deal making, gave Senator Ted Kennedy’s democratic senate seat (he had held that seat for 46 years and was a staunch advocate of healthcare reform) to a young upstart Republican, Scott Brown. Brown won despite President Obama’s personal intervention and campaign for Brown’s opponent. The entire country, particularly our politicians, hopefully received a wake up call that Washington’s “business as usual” will no longer be tolerated.
[1] For additional articles on who is paying for the bailout and how Henrys are being squeezed click here and here.