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The Obamacare Fiscal Cliff

By: Daniel Horowitz (Diary)  |  December 11th, 2012 at 11:30 AM  | 

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Obama claims that his tax plan would only increase the tax burden on those earning more than $200,000.  What the Democrats, the media, and even Republicans fail to mention is that there is another aspect of the fiscal cliff that will hit everyone.  A number of Obamacare’s tax increases are scheduled to take effect in January.  These tax increases will be severely regressive to those at the middle and bottom of the income ladder, as they will engender a record spike in the cost of health insurance premiums.

The new taxes in 2013 include a cap on the Medical Itemized Deduction, a cap on private flexible savings accounts, a 2.3% excise tax on medical devices, a 3.8% surtax on investment income for those earning more than 200k, and a .9% increase in the Medicare payroll tax for the rich.

Well, what if you are not one of those evil rich seniors?

First, the excise tax on medical devices will affect everyone.  The tax will be applied to anything from wheelchairs and dental bridges to hearing aids and walkers.  It will also cripple medical innovation.

But wait until 2014 when Obamacare will begin levying a tax on insurance companies.

 

Now, liberals might think that it’s a good thing to sock it to those nefarious insurance companies.  But according to a new analysis by the Oliver Wyman for America’s Health Insurance Plans (AHIP), everyone will suffer from an inexorable rise in insurance premiums.

In 2014, a new sales tax will be levied on all premiums collected by insurance companies that have more than $50 million in profits.  Obviously, that will have a direct effect on the cost of the premiums.  The new tax will raise families’ insurance costs by as much as $7,000 over a decade.  And as is the case with the other tax increases, the blue states will be hardest hit.  New Yorkers will see the cost of their family plans rise by almost $10,000 over the next 10 years.  If you are a senior who is currently enrolled in Medicare Advantage, the one quasi free-market Medicare program, your premiums will increase by $3590. Throw in all the regulations and mandates that have yet to take effect, and we are looking at the death of the private market, with single-payer as the only option.

Instead of banal Republican politicians parading their ugly faces in front of TV to capitulate on taxes, why don’t they mention the Obamacare taxes?  How many Americans are even aware of the silent fiscal cliff, which will affect everyone?

Republicans can’t surrender and condemn their policies as political losers as long as they fail to articulate their strongest arguments.

Cross-posted from The Madison Project

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  • septembergurl

    Democraps have now asked for a delay in implementing the medical devices tax. As these get nearer I think we will see more of this because these taxes, fees etc are terribly regressive and punitive. Example, the $63 fee on each insurance policy (to pay for insuring pre-existing conditions). This would be paid by the individual or the employer.
    Kidding! The employer will pass it on to you, the employee.

    There’s also hidden taxes — the increase in the amount you pay for medical expenses before you can claim a deduction. Also, the ratio between the price for policies for seniors and young people has changed — from 5:1 to 3:1 (possibly the other way around). The result of this anyway is that prices will be raised for young people (who are generally healthy and hence their policies are, or were, cheaper). All of these are taxes on people who are not necessarily rich. Also, the fee for using the exchanges that the insurance have to pay will be passed on to customers in the form of higher premiums. That’s also a hidden tax.

  • checkmate2012

    You’re right sept’gurl. Two from MN (senators I think) and Warren from MA, both states with large medical device manufacturers. Well boo-hoo to them that they didn’t read the bill. It’s the ole tax the rich and those evil corporations, except not those from my state! They can’t have it both ways but oh they will try. Given how blue they are, they’ll probably get a waiver from King O.

  • checkmate2012

    Daniel is spot on and I’ve been waiting for the Reps. to include this in the fiscal talks. It’s the big elephant in the room no one is talking about for the most part, and definitely not Boehner. If O wants 1.2T in “revenue”, then Reps. should subtract out any from O’care that are coming due come Jan 2013 and in 2014. They can easily make the case since the cost of O’care went from $940B to $1.76T per the CBO, after the court ruling. Don’t give a penny more than what the bill was sold- $940B.

    This is insane to couple a supposed healthcare bill with taxing investments; more proof this was never about HCare.

  • eisenhowerliberal

    I’m not a fan about Obamacare, but I don’t understand why Boehner isn’t using the fiscal cliff leverage to get rid of these taxes. The medical device tax is crazy to me. I don’t think a 2.3% tax will “cripple medical innovation,” but it clearly is not something you want to tax.

    I know a lot of people on this site object to any sort of tax increase, but if I’m Boehner, I tell Obama something like this: we’ll let the Bush tax cuts on capital gains end, so they’ll be at 20%, but then you have to get rid of the 3.8% capital gains tax by Obamacare. To me, that’s a win.

    Scoring political points aside, it’s clear that Obama is rife with “laws of unintended consequences.” This is generally what happens when you pass legislation with only one party. What I don’t understand is why Republicans didn’t play ball. We elected these guys to solve problems. I live in true-blue California, and whenever I mention all the negatives of Obamacare — the medical loss ratio causing insurance companies to just outright drop policies, state exchanges requiring policies have extensive benefits, so healthy young people can’t just buy a cheap policy if they only want catastrophic coverage — the two responses I get back are:

    1) Well, it’s still better than our current system.
    2) What is the Republican plan?

    What am I supposed to say? There are great arguments for Obamacare sucks. Unfortunately, there are also great arguments for why our current system sucks. A few years ago I didn’t have insurance (I was a software developer contractor), and pre-existing conditions prevented me from getting an individual policy. At one point I got a thrombosed hemorroid — it’s basically a tremendously painful blood clot in an ass vein (if you want to some gross pictures, Google it). The ER bill would have been something like $800, and they wouldn’t treat me before I paid since it’s technically not life-threatening. So I tried to basically pop the vein myself (hint: don’t ever do this), nearly died of blood loss, and got rushed to the ER anyway. That was an expensive bill.

    I’m lucky enough to work for an employer that provides insurance now, but what’s the Republican solution? “Repeal and replace.” With what? What is the conservative solution? I may be in the minority on this site, but there is a basic idea to Obamacare that I like. I don’t believe in “total free market healthcare,” because insurers will just cherry pick healthy individuals, and “voting with your wallet” doesn’t quite apply. If you get screwed on a cell phone bill, you will switch cell phone providers. If you get screwed on a health insurance claim, you will die.

  • commonsenseobserver

    Obviously, there must be reasonable safeguards to protect patients. For instance, those with pre-existing conditions, but who have prior insurance, are already protected, and Republicans have advocated extending and expanding these protections. Many of us also support more stringent rules to ensure transparency and fairness from insurers.

  • eisenhowerliberal

    These all sound like great policies to me. Do you know which institutions or Congressmen have been trying to advocate these solutions? I would love to research these conservative positions in more detail. I feel we’d get a lot more traction with “we can do better than Obamacare” than just “Obamacare sucks.”

  • commonsenseobserver

    http://www.heritage.org/initiatives/health-care

    http://paulryan.house.gov/healthcare/

    http://tomprice.house.gov/humanevents-empowering-patients-first-act

    http://www.cato.org/health-care
    http://blogs.forbes.com/aroy/

    Just a few. Some are specific proposals, others are just scattered blog posts and commentary.

    In fact, I remember reading an article in the National Review about reforming Medicare. Some ideas like bundled payments were actually in Obamacare, but, of course, ruined by the whole top-down bureaucratic rationing thing.

  • bob570

    If anyone is naive enough to believe that our Leftist President, and Democrat colleagues, are going to do anything to help the Middle Class in this country, they should study some history. Or just study the History of them helping Blacks in this country, first they enslaved them, then forced segregation on them, and today they enslave them again with Promises, that never seem to materialize.

  • daniel22

    Why hasn’t anybody mentioned or even made an issue concerning the lack of honesty here? We have a fiscal cliff and all of these Obama taxes going to happen. We have a Speaker replacing conservatives with his good old boys in spite of their popularity or ability. Yet their is not one mention about being lead down the primrose path by the very ones that are supposed to represent conservative interests?
    Let’s face it the republicans want the tax increases for the same reasons the democrats do. The only advantage that the GOP has is that they will just play blame the democrats. They do not want to offend the 47 percent nor the AARP.
    The way I see it and most anybody else that wants to actually look is that the GOP calls the tune and we dance.

  • jaykali

    Ya I mean I think that will happen. I don’t know what the Democrats next move is once that happens. It’s hard for them to blame Republicans in that scenario. I think they would prob want to raise taxes or something at that point or push for a public option. We all know the end game is single payer and public option is the next logical step. All they have to do is strain the insurance companies enough that the public demands change. It’s hard to see how this thing shakes out. I mean this is not the 1950s and we’re not Britain. I don’t know that single payer is quite as inevitable as some might think it is.

  • Marcus_Traianus

    The egregious, economically damaging tax affects of Obamacare are the prime reason President Obama is seeking a tax “fig leaf” from Republicans.

    A “fiscal cliff” deal will not be cut without providing the President this cover with which he will dissemble, confuse, demagogue and contort all tax issues for the public. It is Mr. Obama’s sine qua non so he can fallaciously deflect blame.

    Mr. Obama will never simply accept a deal which solely “taxes the rich”. In that, there is no political cover. He needs more.

    Democrats are already trying to delay the new tax on so-called “medical devices” simply because it is damaging and wholly owned by them. There are no bogeymen Republicans to blame.

    This is Mr. Obama’s Achilles heel in the negotiations. It is one reason why he is not serious about the negotiations or whether the fiscal cliff arrives.

    Let’s hope Mr. Boehner can negotiate himself out of the position he fully owns.

  • remalimo

    It’s is a mentality issue. Like union labor, No job at all is better than working for $50/hr instead of having a union job that would have paid $52/hr. Bohner needs to clear the tears from his eyes and take a better look at this loosing BO proposal.

  • robertdavidhummel

    Dear Executive and Legislative Branches of the U.S. GOV.

    I served my
    country to protect our FREEDOM….”NOT,… OUR FAILURE”.

    I strongly urge
    YOU… to…”NEVER VOTE TO RAISE OUR NATIONS DEBT LIMIT”,…without enacting
    fundamental spending cuts and management of Constitutional DEMANDS of essential
    spending needs.

    I’, a, plain old but accountable American Citizen , am
    compelled to manage my FIXED INCOME and BUDGET…NEEDS …before WANTS…I
    suggest my Executive and Legislative Leaders …adhere to the same
    principles.

    I’, and Many, Many, MILITARY SERVANTS since Our Nations
    Inception, have provided YOU with the Privilege of FREEDOM…”I suggest YOU, use
    it wisely with YOUR service in Our Legislature, that FREEDOM is preserved and
    provided to Our Next Generation.

    May God Bless YOU, and the FUTURE of OUR
    AMERICA.

    rdhopa@aol.com Inverness FL 34452-5754

    Robert David
    Hummel

  • Bill S

    You posted this once before. Don’t do it again. Spamming the comments is forbidden.

  • checkmate2012

    It’s not nice to gloat, but if I may for a few seconds….ok, I’m done, for now.

    Isn’t it ironic that the same politicians that voted for O’care now want a reprieve for the 2.3% medical device tax? 18 senators/senators-elect, sent a letter to Reid asking for a delay in the implementation of the tax increase, mostly from the states of the biggest manufacturers of said devices. Here’s the letter:
    http://online.wsj.com/public/resources/documents/MedDeviceLetter12102012.pdf

    The House passed a bill last summer (H.R. 436) to eliminate the taxes and Reid ridiculed them and promptly left a similar Senate bill introduced by Scott Brown, on his bookshelf of bills to rot.

    (http://www.bloomberg.com/news/2012-06-06/u-s-medical-device-backers-face-tough-health-care-vote.html)

    Well, reality now sets in and it seems the Reps. can extract some concessions here. I think the best approach would be either don’t bring it to the floor or more amusing would be to trade a floor vote from each party. The House should request a vote from the Senate on the president’s $1.6T tax hike plan (like McConnell asked for on Dec. 6 and of course Harry called trickery) in exhange for a do-over of vote on H.R. 436.

    Seems there is as much dissent in the Dem party as there is in the Rep party. Don’t cave on the fiscal cliff Boehner and you may gain support from some Dems!