Until Midterm Elections...

Scott versus Scott

Welcome to our blog. Here we will debate the days most serious topics and allow users the chance to discuss the topics as well. The range of topics will vary, but one thing will remain certain, the debate will rage on. Scott Lesinski is a proud conservative and Scott Jones is a proud liberal. However, the roles will switch on some topics. Stay tuned.

Scott Lesinski is currently an actuarial associate for a large human resources and insurance consulting firm in Saint Louis. He is also an avid student of US history and enjoys following current events, with an eye to their contextual relationship to the past. He is also, in fact, a former student of Mr. Scott Jones. Scott is working toward his FSA credentials, which is akin to earning a PHD in Actuarial Science.

Scott Jones is currently a high school social studies teacher at a high school in suburban St. Louis, MO. He teaches World History, AP American Government and Senior American Foreign Policy. He has a BS. Ed. (Secondary Social Studies) from the University of Missouri - Columbia and a M.A. (History) from Southeast Missouri State University. He is currently working on a dissertation in character education to earn a Ph.D. in Educational Psychology.

Monday, March 22, 2010

Repeal! A Conservative Call to Arms

On March 21, 2010, the House of Representatives passed the Patient Protection and Affordable Care Act. The bill is with the President, who will most likely sign the bill into law on March 23, 2010. The vote was 219-212. Not one Republican voted in favor of it.

So now that it’s done, what does it mean? What can we do? What comes next? Will America ever be the same again?

I need to apologize to the readers of my blog for losing hope yesterday in my pre-vote blog posting. I admit, I did feel incredibly upset, angry, betrayed, depressed, and all around sick to my stomach because I know what this bill represents. I know what a power grab it is. I know how all of our lives will be changed if it is enacted. I know of the massive new tax increases it will impose, and I know of the insurmountable debt it will add to our already nearly budget busting levels of red ink.



But if we allow ourselves to sink into depression, roll over, give in, and lay back and accept the blanket of government in which our Dear Leaders seek to envelop us then we deserve what we will get. So to my Conservative readers, my moderate readers and even my fiscally minded liberal friends out there I say this: Take a deep breath, lift up your head, and get ready, because we have not yet begun to fight.

The way we will beat back this healthcare takeover is a 3 step process.

Step One - We need to know what this bill will do if enacted

The number one resource we have is our minds and our ability to carefully and logically develop arguments. If this bill is not overturned by the Supreme Court and it becomes law, our only hope is to repeal it. Repeal will not be easy because we will be up against a state-run media machine determined to save Obama at any cost. The miss-information brigade will be out in full force in approximately one day and we MUST be equipped to counter all the arguments brought up in favor of the bill. This starts with knowing what is in it. I have presented a summary of the main chronology of this bill as it will affect America’s employers. This is not exhaustive and I encourage you to read the bill or other summaries and post new things I may have missed:

2010
A temporary early retiree reinsurance program will be enacted 90 days after the bill is signed. This program is projected to cost $5 billion and is designed to subsidize employers offering retiree medical plans to retirees age 55-64. This will end by 2014.

Also, the Medicare Part D “donut hole” will slowly be filled in so that the beneficiary cost reaches 25% by 2020. Currently, Medicare Part D has a deductible, then covers most of the next thousand or so dollars, then there is a “donut hole” of roughly 5,000 that beneficiaries have to cover, after which the beneficiary only covers a small portion. Filling in this hole will substantially increase costs to the government.

2011
Beginning in 2011, employer plans:

Must offer coverage to adult children (what?) up to age 26 (regardless of whether they qualify as the employee’s tax dependent). By 2014, this will be mandatory even if the child qualifies through another employer’s plan.

May not impose lifetime limits or annual limits after 2014.

May not impose preexisting condition exclusions on children under 19. By 2014, this extends to all adults as well.

Must satisfy increased regulation standards relating to evenly distributing benefits among employees that previously were only required of self-insured plans.

Also, account based plans such as FSAs, HSAs, and HRAs will not be allowed to use such funds for over-the-counter medicines unless obtained with a prescription. So instead of saving money by purchasing an OTC allergy medicine, I’ll have to go to the doctor and get a prescription for either the same or a prescription allergy medicine, either of which will cost me time and money.

Drug manufacturers will be required to provide a 50% discount to Medicare Part D beneficiaries on brand-name drugs and biologics in the “donut hole” coverage gap.

Employers will be required to disclose the value of each employee’s health coverage on the annual W-2 that is filed with the IRS (which gets 16,500 new hires paid for with this bill).

And finally, the new law imposes annual fees on pharmaceutical manufacturers that will be passed on to employers and consumers, according to this schedule:
$2.5B in 2011
$2.8B for 2012 – 2013
$3.0B for 2014 – 2016
$4.0B in 2017
$4.1B in 2018
$2.8B for 2019 and on.

2013

A change in the tax treatment of the Medicare Part D Retiree Drug Subsidy will happen. Essentially, the incentive for employers to offer retiree drug coverage will be greatly reduced and I can tell you as a member of the consulting practice, many employers will be dropping their retiree drug coverage plans due to the higher costs this will result in.

The Medicare Hospital Insurance tax will be increased on taxpayers earning above $200,000 (single return) or $250,000 (joint return) to 2.35% on wages earned above these amounts, up from 1.45%. Bear in mind that the vast majority of small business owners file their returns as single returns and will be subjected to this tax increase.

A new excise tax of 2.3% will be imposed on the sale of medical devices. Still not sure what counts as a “medical device”, but rest assured this will hurt the medical device business.

2014

Employer “Pay or Play” – employers with more than 50 employees (including part-timers) will have two options:

A) If they offer insurance coverage options, they must pay the lesser of $3,000 times the number of employees who opt to buy insurance from a new Health Insurance Exchange or $2,000 times the number of employees
B) If the do not offer insurance coverage, they must pay $2,000 per employee so long as at least one employee is participating in the new Health Insurance Exchange

For certain lower income employees, the employer will be forced to offer a tax-free voucher to be used to purchase insurance on the Exchange.

Employers will be required to report annually to the government on whether they offer minimum essential coverage, the length of any applicable waiting period, the lowest-cost option in each enrollment category under the plan, the employer’s share of the total allowed costs of benefits provided under the plan, and finally the total number and names of full-time employees receiving health coverage.

New fees will be imposed on health insurers according to their market share, according to the following schedule:
$8B in 2014
$11.3B for 2015 – 2016
$13.9B in 2017
$14.3B in 2018
Indexed to the rate of premium growth in subsequent years.

This new tax, among other new regulations, will destroy the private health insurance practice in America. Note that after 2018, any increase in premiums will be taxed away.

Individuals will be mandated to enroll in “minimum essential coverage” or pay a penalty. The penalty is the greater of a flat dollar amount or a percent of pay. The penalty is per the following schedule:

2014 - $95 or 1% of pay
2015 - $395 or 2% of pay
2016 + - $695 or 2.5% of pay and indexed thereafter

Coverage will be required to be offered to those up to age 65 via the new Exchanges. There will be guaranteed availability and renewability, no health status underwriting, no preexisting condition exclusions, and limits on premium rating bands. This is what will kill private insurance.

Low and middle income individuals will be subsidized by taxpayers (this is 400% of the poverty level and below).

Medicaid eligibility will be expanded for those up to 133% of the poverty level. States will have to pay the cost of the new enrollees.

2018

High cost (Cadillac) health plans will be subject to a 40% excise tax. Cadillac is defined to be coverage that exceeds $10,200 for single coverage and $27,500 for family coverage. Note that individual contributions to an HSA, FSA or HRA count toward the threshold.

Step Two – We need to be able to explain how this bill will destroy America’s economy and healthcare industry

People don’t understand economics as much as they should, but we need to be able to argue the facts regarding what will happen with this bill.

The private health insurance industry is the target under this bill. I’ve pointed out several reasons, so let me summarize:

Insurers will be subjected to massive new taxes to help fund the legislation beginning in 2014. Insurers will be required to offer coverage to all comers and will not be able to underwrite their policies based on health conditions. This means they can’t charge different premiums to different people based on the health status of the applicant. So a healthy 45 year old pays the same as 45 year old cancer patient. What does this mean? The healthy guy’s premium is going to skyrocket.

And finally, insurers will have to offer coverage regardless of preexisting conditions.

Now then, recall that individuals are required to buy insurance, but if they don’t they have to pay a fee. In the vast majority of cases, the fee will be negligible compared to the cost of buying insurance, which can cost thousands of dollars. This means that you would be a total moron to buy insurance until you contracted a disease, because you’d have to be covered!

All of this is a recipe for putting the private insurance market out of business within 10 years.

When this happens, we will get full-blown Single Payer, Universal Healthcare.

As for the economy, the bill imposes new costs on employers. It raises taxes on individuals and it will destroy the insurance industry. It will also put trillions more on top of our already astronomical debt. Don’t believe anything anybody tells you that this bill will reduce the deficit. When you account for the double counting of Medicare cuts and you add in the Medicare Doctor Fix, the conservative estimates by the CBO put this bill $600Billion in the red after ten years, and that is with only 6 years of “benefits” and 10 years of taxes. In reality, this bill will lead to the overloading of the government’s healthcare roles and responsibilities and a ballooning deficit that we cannot predict at this time. Suffice to say they said Social Security would be budget neutral when they passed that.

Why is debt bad? We must pay interest on our debt. As the debt piles up, the cost of annually servicing the debt, the annual interest payments, will eat up more and more of our budget. There is already a lot of talk of lowering America’s AAA credit rating to AA, a move that will substantially weaken the dollar in world currency markets. The more debt we have, the more likely an eventual hyper-inflationary situation will happen, much like in the Weimar Republic in Germany prior to WWII.

Step Three – We need to have real solutions to counter this one-sized fits all government takeover

Due to the length of this post, I’ll get more specific on a comprehensive, conservative solution to the healthcare problem in America. For now, know that real reforms do exist. Consumer choice, free trade across state lines, utilizing Health Savings Accounts in place of Medicare and Medicaid, tort reform, and increasing competition are just a few of the basic ideas and principles we need.

Don’t let the argument be made that “republicans had control from 2002 – 2006 and did nothing.” Republicans did (much to my dismay actually) pass a Medicare Part D enhancement that has actually not exploded the deficit, due to the cost sharing with beneficiaries that this new bill will remove. And conservatives have been trying to get the process of rolling back government influence in the healthcare industry for decades. Ronald Reagan tried to implement Health Savings Accounts in the 80s. Its not that we have done nothing or have no ideas, it’s that our ideas lead to too much individual freedom and responsibility to satisfy liberals. HSAs lead to increased consumer awareness and increased individual control, which leads to far reduced government control over our healthcare decisions. Statists don’t like this.
But we can win this ideological battle. Common sense and careful analysis will prove us to be in the right. People just need to be taught our ideas. They need to be shown that there is a better way, one that preserves the promise of liberty and capitalism and one that will improve the quality of care, not restrict innovation.

I’m not interested in hyperbole or rash statements. I want what is best for all of us, not what is best for a small portion of us at the great expense of the rest of us. We do not need to tear down one sector of America to lift up another. We need to lift everyone up together: rich and poor, man or woman. The key is education; the resource is each and every one of us. The time is now. We have seven months to convince as many people as possible that our way will work, is far better, and will lead to greatly increased prosperity and the preservation of the American dream.

Because that is something I’m not going to give up.

1 comment:

  1. This is a lot of work for us to do, but Scott, I am with you all the way! Hopefully our hard work can overturn this monstrosity before it kills the middle class with taxes.

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