One of the major objectives of health care reform ought to be reducing costs. That seems lost on the Democrats. The bill seems to focus more on sucking money out of consumers and taxpayers so they can spend it on growing the welfare state.
The National Federation of Independent business has published a health care bill implementation timeline. Here are a few of the dumbest things in the bill.
2010
- Brand-name drug tax: Manufacturers and importers of brand-name drugs will pay a tax of $2.3 billion. This cost will be passed on to consumers.
2011
- W-2 reporting: Employers will be required to report employees’ health benefits on W-2s.
- HSA & FSA limits: Consumers can no longer use HSAs and FSAs to purchase certain items, including most over-the-counter medication prescribed by physicians.
- HSA penalty: The penalty for making non-qualified purchases with an HSA increases to 20%.
- FSA limits: Cafeteria plan FSAs will be limited to $2,500 (inflation adjusted after 2011.)
- Medical device tax: Manufacturers and importers of certain medical devices will be taxed $2 billion per year (for 2011-2017) and then $3 billion per year thereafter. These costs will ultimately fall on the consumer.
- Small business health insurance tax: An annual fee on health insurance providers will be passed on to consumers. This tax will fall on the vast majority of plans that small businesses purchase, but not on self-insured plans (such as most big business and labor union policies). The amounts are $2 billion for 2011, $4 billion for 2012, $7 billion for 2013, and $9 billion per year for 2014 through 2016, $10 billion thereafter, with certain exceptions. 2012
- 1099 reporting: Businesses will have to send Form 1099s for every business-to-business transaction of $600 or more – a tremendous new paperwork burden for small business.
2013
- Cadillac tax: The government will collect a so-called “Cadillac Tax” – a 40% excise tax on health coverage in excess of $8,500 annually for an individual or $23,000 annually per family. This tax is inadequately indexed for medical inflation, so as healthcare costs rise, more and more people will be swept into this tax each year. This is similar to the Alternative Minimum Tax – designed to hit the “rich” but reaching farther and farther into the middle class each year.
- Fewer deductible medical expenses: New limits are placed on the deductibility of medical expenses on individual income tax returns. This provision raises the 7.5% AGI floor on medical expenses deductions to 10%. The AGI floor for those 65 and older (and their spouses) remains at 7.5% through 2016.
- “Medicare” payroll taxes: The Medicare payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) will increase to 2.35% and is not indexed to inflation. This tax marks the first time that funds designated for Medicare will be diverted elsewhere – specifically to pay for the insurance policies of people under the Medicare age. This establishes a precedent for treating the payroll tax as a revenue raiser for other purposes.
2014
- Individual mandate: Starting in 2014, all U.S. citizens and legal residents must have qualifying health coverage or pay penalties. For an individual, the penalty begins in 2014 at the greater of $95 or 0.5% of household income. In 2015, it grows to $495 or 1.0%. In 2016, it reaches $750 or 2%. (For families, the figure will be $2,250.) After 2016, the amount will rise by a cost-of-living adjustment.
- Employer mandate: The bill contains a complex employer mandate requiring some firms to provide insurance, pay penalties or both. The penalties are based on (1) the number of full-time employees, (2) whether or not the firm offers coverage, and (3) whether or not one or more employees qualify for government subsidies toward the purchase of health insurance. An employee qualifies for a subsidy if his or her household income is below 400% of the federal poverty line ($88,000 for an individual today).
- Small construction company employer mandate: In all other industries, firms with 50 or fewer employees are exempt from the mandate. In the construction industry, the exemption only applies to firms with 5 or fewer employees. Consider a construction firm that does not provide insurance and which has seven employees and a payroll of $250,000. This firm will owe $5,250 (= 7 employees x $750). In addition, the law does not define what it means by “construction firm” and leaves that definition to regulators.
Obviously all of the additional costs – direct costs and the indirect costs of massive new bureaucracy and paperwork – will be passed on to consumers. All that cost could have actually gone to better care and more choice but the lunkheads running the show don’t seem to understand anything about economics. So it will go to busy work done by even more statist drones in the government and their counterparts in the health care cartels.
There is one – and only one – way to reduce health care costs. When you go to the doctor you need to see how much it costs and that cost should impact you directly. People need to be responsible for their own health care choices and expenses. That is the only way to fix America’s broken health care system and that means a free market in health care.