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Mr. KIND. I thank the gentleman for yielding.
Mr. Speaker, I'm sure my good friend and colleague, the previous speaker from Texas, also realizes that this money that they will owe on this hidden tax is something they never see to begin with. This is a tax credit that goes directly to the private health insurance companies. And this bill would be better titled the Republican Tax Trap of 2014, 2015, 2016, and on and on and on, because that's exactly what's going to happen. There's this hidden tax trap that's going to affect hundreds of thousands of working class, middle class families through no fault of their own.
I think my colleague and friend from New York explained very succinctly what would happen here with the cliff. If you're at 400 percent poverty level, a family of four at roughly $88,000 a year, and you receive a little bit of extra income, you receive a little bit of a bonus that might put you just over the edge, you're going to be hit with a $4,600 tax liability at the end of the year. Now they're not going to be in a position to deal with that. So either they're going to have to find a way to come up with the money to pay the Republican tax that they didn't expect, or it's going to discourage work and they're not going to try to earn as much income because they don't want to go over that 400 percent level, or they're not going to participate in a health insurance exchange to begin with. We've got a score on that as well: that over 266,000 families will choose not to participate in a health insurance exchange for fear of this hidden Republican tax trap that we have before us today.
And what's ironic about this is this insurance exchange that's part of the Affordable Care Act is a bill that I and others have worked on for years in a bipartisan fashion, called the SHOP Act. Republicans were in favor of creating these health insurance exchanges, coupled with tax credits, so that small businesses, family farmers, individuals, finally had a place where they could go and shop for affordable health care coverage with competing private health plans finally competing for their business for a change, so that they had the same type of leverage that large corporations do. This has been proven in models and pilot projects throughout the Nation that have shown how effective these health insurance exchanges work.
What they're doing now with this legislation, with the offset that they're proposing, hitting the middle class, is doing things to undermine, once again, the health insurance exchanges and the ability for small businesses and individuals to go out and obtain affordable coverage. That's unfortunate, but it's consistent with the zeal on the other side of doing everything they can to undermine the Affordable Care Act, regardless of who it hurts, regardless of the additional tax burden.
As my friend from Michigan indicated, we fixed this problem last December in a bipartisan fashion, so instead of creating a cliff, which was a mistake in the original bill, there would be a gradual phaseout of these tax credits; so it wouldn't be a hidden tax trap as my Republican colleagues are calling for today.
But at some point we're going to have to come to grips that a lot of what's in the Affordable Care Act is necessary and long overdue, not least of which, and I think this is going to be the key to health care reform and its final verdict, is the ability for us to change the way we pay for health care in this country, changing the fee for service that exists in Medicare today to a fee for value or a quality-based reimbursement system. We can start by doing that with Medicare, and the tools are in place under health care reform to do that. This will extend then to the private health insurance industry.
This, too, is a bipartisan issue. Newt Gingrich has been talking about it; Dr. Bill Frist; Tommy Thompson, my former Governor and former Secretary of HHS, has been talking about changing the reimbursement system in health care so we reward value and quality and outcome of care as opposed to the volume-based payments which is literally bankrupting our Nation today. Health care costs are the largest and fastest growing expense that we have at all levels, Federal, State and local level, and for businesses and families alike. It's one of the reasons why I've got folks in Wisconsin at each other's throats right now talking about public employee benefits, and the biggest cost driver in State budgets today are rising health care costs.
So why not embrace the reforms that we have in health care reform that will lead us to a value-based reimbursement system, which many people on a bipartisan basis have been talking about for years. We were finally able to get those tools in place under the Affordable Care Act. We just can't do it overnight. You don't change the way you pay for one-fifth of the entire U.S. economy overnight.
We've got accountable care organizations, medical homes, bundling programs to incent value-based payments. But we also have the National Academy of Sciences, the Institute of Medicine, doing a 2-year study right now to change the fee for service under Medicare to a fee for value system and they will present an actionable plan to the administration to implement it, which gives us, I think, the best hope of changing the outdated and perverse incentive system that we have in the delivery of health care today. It's leading to overutilization in health care. And studies have shown that close to one out of every three health care dollars, or about $800 billion a year, are going to tests and procedures that don't work.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. LEVIN. I yield the gentleman 2 additional minutes.
Mr. KIND. One out of every three health care dollars, or $800 billion we're spending a year that we're not getting a good bang for the buck. It's going to tests and procedures that don't work. And because of the overutilization and the overtreatment that some patients are receiving, they're being left worse off, rather than better off.
That's going to be the game-changer when it comes to true fiscal responsibility in this place. It's something that everyone's been ducking. For the last couple of weeks we've been talking about this continuing resolution that only deals with 12 percent of the Federal pie. Unfortunately it goes after the most vulnerable people in our society, especially our kids' education. Yet we all know where the big money lies. It's in the health care programs, Medicare and Medicaid. It's in defense spending. If we don't get serious in turning the cost curve around when it comes to health care, then we're just fooling ourselves with everything else that we're doing with the budget.
We've addressed that in the Affordable Care Act with programs that are set up now and payment reform that is moving forward to change how we pay for health care so we can improve the quality of care for all Americans but at a much better bang for the buck for the American taxpayer. That's what we should be coming together on, rather than discouraging people from participating in an exchange which will create true competition with these private insurance companies, which again is long overdue, and instead of offering this legislation today that sets up this Republican tax trap for middle class working families who will be surprised at the end of the year because they put in a little bit more time and they earned a little bit more income or they got that last-minute bonus from their employees, and then suddenly they realize, oh, my God, we're going to owe $4,600 because of what they're doing here today.
It's outrageous. It's unfair. There are better offsets.
And here's an idea. The retired CEO of Chevron just this past week said: Hey, when oil is above 70 bucks a barrel, let's stop the subsidies, let's stop the tax breaks.
This is a retired CEO of a major oil-producing company that's saying that this is nonsense that we're still wasting so much money, around 50 billion dollars per year by subsidizing Big Oil when oil is above 70 bucks a barrel. Today, it's over $100 a barrel. That would be a more appropriate offset.
I'm going to hand off to my friend from Oregon to pick it up at that point.
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