As Wisconsin Representative Paul Ryan recently argued, the Affordable Care Act (a.k.a. Obamacare) was sold on “three broken promises.” The administration pledged that its massive health-care-reform law would be paid for without hiking taxes on middle-class families, that it would reduce the cost of insurance, and that it would allow all Americans to keep their existing insurance if they wished.
Ryan is correct: On all these grounds, the administration has made promises it cannot keep. Even worse, however, than its failure to deliver the benefits it advertised is the actual harm that Obamacare policies will cause — policies that will make it harder for the U.S. to develop sustainable health-care reform.
“Health-care reform won’t raise taxes on families earning less than $250,000.” President Obama initially made that pledge during the 2008 campaign. Now that the Supreme Court has ruled that the individual mandate can stand only as an exercise of Congress’s power to tax, the administration will have trouble claiming that it has not raised taxes on middle-income Americans.
Certainly the financial impact that the mandate will have on those subject to it remains the same regardless of how we label it. A 2012 study from the Urban Institute finds that 7.3 million uninsured Americans are too wealthy to qualify for either Medicaid or the exchange-based premium tax credits, which Obamacare makes available to the uninsured who have incomes up to 400 percent of the federal poverty level. That comes to $92,200 for a family of four. The number of such relatively well-off Americans who are uninsured may seem high, but the Urban Institute’s figure is roughly consistent with a 2003 report from Blue Cross Blue Shield, which found that one-fifth of the uninsured in America earn more than $50,000 annually and so are, in effect, uninsured voluntarily.
These families and individuals, though solidly middle-class, are hardly among the “millionaires and billionaires” whom Obama routinely insists should pay more in taxes. And the incomes of many of the uninsured will clearly fall well below the $250,000 that the president promised would serve as the minimum for any proposed tax increases.
But even if we accept the White House’s premise that the mandate is not a tax, many of the actual taxes contained in the Affordable Care Act, though not levied directly on individual taxpayers, will ultimately be passed on to them in the form of higher insurance premiums and higher health-care costs. Former Congressional Budget Office director Douglas Holtz-Eakin points this out in a recent paper.
Though “invisible,” these taxes are real, and they will eat into the paychecks of all Americans carrying health insurance, no matter how modest their incomes. Holtz-Eakin calculates that the premium taxes alone that the Affordable Care Act imposes on insurance companies could add $475 to the annual cost of the average family’s insurance plan.
In short, these new costs and taxes, though in some cases hidden, will increase the cost of insurance for millions of Americans.
“Health-care reform will reduce the cost of insurance.”
Soon after President Obama took office, his transition team set up a website that repeated a promise the candidate had made frequently on the campaign trail: that health-care reform would lower the average family’s health-insurance premiums by $2,500 before the end of his first term. Clearly, this has not happened — and won’t happen.
The president could argue that the promise will be fulfilled once his reforms have been phased in. This would be a convenient claim, since many of Obamacare’s cost-reducing provisions — like the “Cadillac tax” on high-cost insurance plans — aren’t scheduled to phase in until well after Obama’s second term is over. So while it’s possible that the law will lower the cost of health care, voters have no way of knowing whether it will in fact.
Health-insurance costs have already risen significantly since the passage of Obamacare, albeit at a slower rate than before, owing to a stagnant economy. Since the law imposes heavy costs on the insurance industry — through taxes and onerous regulations that force insurance companies to spend more on health expenses — insurance premiums will likely continue to rise.
In truth, Obamacare is largely a coverage expansion, with relatively weak cost controls at the margins.
The end result: Employers and employees alike will find themselves paying more for health insurance. Substantial costs will also likely be shifted from employers to taxpayers as the government defines insurance in ways that make it more expensive.