Spinning the Supreme Court ruling on ‘Obamacare’

at 06:02 AM ET, 06/29/2012


(Luke Sharrett/AP)

“The highest court in the land has now spoken.”

— President Obama, June 29, 2012

 “What the Court did today was say that Obamacare does not violate the Constitution. What they did not do was say that Obamacare is good law or that it's good policy.”

— Former Massachusetts governor Mitt Romney, June 29, 2012

Soon after the Supreme Court ruling upholding the health-care law, President Obama and his presumed GOP rival Mitt Romney emerged with talking points so dissimilar you’d wonder if they were speaking about the same law. We will try to disentangle some of the differences.

 But, first, a word about the claim, advanced by Rush Limbaugh and others, that because of the ruling that the individual mandate is a tax, “Obamacare” is now the biggest tax increase in history. That’s an absurdity.

The health-care law did include substantial taxes, such as an additional tax on investment income for the wealthy, but those were always disclosed and never hidden. The penalties it included for failing to get health insurance — which the Supreme Court has now labeled a tax — amounted to just about $13 billion a year, or $65 billion in the first 10 years of the law, according to the Congressional Budget Office and the Joint Committee on Taxation. (See Table 2.)

 That compares to a total of $525 billion in new revenues contained in the bill. (The CBO always listed the penalties as a revenue, along with the other taxes and fees contained in the bill.)

 As to whether this is the biggest tax increase in history, the best way to measure the impact of taxes over a long period is to consider a tax increase or decrease as a percentage of the overall economy, also known as the gross domestic product.

A 2006 Treasury Department study listed a tax increase passed in 1942 as the clear winner for the title of biggest tax increase — worth more than 5 percent of GDP. (Yikes, now that’s a tax increase. But the United States was fighting a world war at the time.)

 The health-care law doesn’t even come close — 0.49 percent of GDP. That’s one-tenth the size of the 1942 tax cut. Essentially, the health-care law’s taxes are about the size of Bill Clinton’s 1993 tax increase and significantly smaller than Ronald Reagan’s 1982 tax hike. (Our friends at PolitiFact beat us to the punch on this, awarding  “Pants on Fire” to Limbaugh, and they have all of the math, plus other statistics.)

 Now, let’s review the political statements.

“If you’re one of the more than 250 million Americans who already have health insurance, you will keep your health insurance -- this law will only make it more secure and more affordable.”

— Obama

 “Obamacare also means that for up to 20 million Americans, they will lose the insurance they currently have, the insurance that they like and they want to keep.”

— Romney

 The two presidential contenders are talking past each other here. Obama is using a figure for everyone who currently has health insurance. Nearly 150 million Americans get it through their employers, while others receive insurance through Medicare, Medicaid or in the individual market. Casual listeners might think Obama is promising that each person would keep his or her current plan, but instead he is simply saying that Americans should not fear losing insurance because of a job loss or some other reason.

Romney, meanwhile, is referring to a recent CBO study that gave several scenarios for what could happen to employer-based coverage once the law was implemented. The most positive scenario has 3 million people being added to employer coverage, while “on balance, the number of people obtaining coverage through their employer would be about 3 million lower in 2019 under the legislation than under prior law,” the CBO concludes.

The worst-case scenario was 20 million people, which is where Romney got his number. (Note that he carefully said “up to 20 million” would lose the insurance they currently have.) It’s worth noting that the baseline scenario — 3 million fewer people — represents just 2 percent of the people who now get insurance through their employers.

 The CBO cautions that there is a “tremendous amount of uncertainty” about how employers and employees will respond to the legislation. “One piece of evidence that may be relevant is the experience in Massachusetts, where employment-based health insurance coverage appeared to increase after that state’s reforms,” the CBO noted.

Romney, as governor, ushered in health-care legislation that served as a model for Obama’s health plan.

 

“Obamacare raises taxes on the American people by approximately $500 billion. Obamacare cuts Medicare — cuts Medicare, by approximately $500 billion.”

— Romney

 We’ve already dealt with the tax issue; the $500 billion figure is essentially correct. But, as we have often noted, the claim about Medicare is technically correct but misleading.

 Under the health-care bill, Medicare spending continues to go up year after year. The health-care bill tries to identify ways to save money, and so the $500 billion figure comes from the difference over 10 years between anticipated Medicare spending (what is known as “the baseline”) and the changes the law makes to reduce spending. (Look at slide 15 of this interesting tutorial on the law’s impact on Medicare by the Kaiser Family Foundation to see a chart of the year-by-year savings.)

The savings actually are wrung from health-care providers, not Medicare beneficiaries. These spending reductions presumably would be a good thing, since virtually everyone agrees that Medicare spending is out of control. In the 2013 House Republican budget, lawmakers repealed the Obama health-care law but retained much of the Medicare savings — and even sought an additional $205 billion beyond Obama’s budget. (Republicans argue they use Medicare savings for Medicare reform, not something new like the health-care law.)

  The health-care law also raised Medicare payroll taxes by $113 billion over 10 years, further strengthening the program’s financial condition, according to the Congressional Budget Office. Since about half of the $500 billion stems from reduced outlays for Medicare hospitalization expenses, the payroll taxes and those reductions would add about $358 billion to Medicare trust fund balances.

 

“And even with those cuts, and tax increases, Obamacare adds trillions to our deficits and to our national debt and pushes those obligations onto coming generations.”

— Romney

 This is highly debatable, at least in the short term. The law basically breaks even in the first 10 years, in part because it is slowly implemented. The CBO also predicted that in the second 10 years, the law would reduce the deficit within a “broad range between one-quarter percent and one-half percent of gross domestic product.” The Democrats translated that estimate into $1 trillion in deficit reduction, but it is a pretty fuzzy figure.

Republicans have tried to make hay over a more recent CBO estimate that indicated the 10-year price tag of the fully implemented health-care law would be $2 trillion. But that’s before counting taxes and fees, which are supposed to balance out the costs. 

 

“By this August, nearly 13 million of you will receive a rebate from your insurance company because it spent too much on things like administrative costs and CEO bonuses, and not enough on your health care.”

— Obama

 The president is referring to a provision in the law that requires any insurance company that spends less than 80 percent of its premiums on medical care to rebate the portion of premium dollars that exceeded this limit. The government recently said that 12.8 million people will get rebates averaging $151 per household.

But the Associated Press recently reported that nearly two-thirds of those people will be entitled only to prorated rebates because they are covered by employers who pay most of the premiums. So the money would mostly go to employers.

In other words, don’t look too eagerly in your mailbox.

“Because of the Affordable Care Act, young adults under the age of 26 are able to stay on their parents’ health care plans, a provision that’s already helped 6 million young Americans.”

— Obama

Here, Obama is hyping the facts. The Department of Health and Human Services this month reported that more than 3 million young adults would not have health insurance without the health care law. So how does Obama get to say that 6 million have been “helped” by the law?

That’s because he is relying on a different survey, published by the Commonwealth Fund, that showed that 6.6 million young adults “stayed on or joined their parents’ health plans” in 2011.

But not all of these people were uninsured, as Obama implied; they simply joined their parents’ plan for other reasons. The HHS report notes this fact in a footnote: “This number exceeds our calculation because it includes some individuals who were already insured, often through their own private coverage.”

The White House would be better off relying on a government calculation.

***

(As is our practice in these sorts of round-ups, we do not offer a Pinocchio Test, but certainly both men would qualify, as they have in the past, for these assertions.)  

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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