In a speech at the American Enterprise Institute (AEI) today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, outlined the impact the partisan health spending law will have on the economy and job creation in America following the recent U.S. Supreme Court ruling which upheld the constitutionality of the law. Hatch further discussed the law's threat to Medicare and Medicaid and highlighted why health care reform is entitlement reform.
Hatch has championed efforts in Congress to repeal the health law. He has supported legislation to repeal the law in its entirety as well as introduced legislation to repeal: the individual mandate (S. 19); the job-crushing employer mandate (S.20); and the medical device tax (S. 17).
Below are key excerpts of Hatch's speech:
ON OBAMACARE'S IMPACT ON THE ECONOMY :
"To be clear, all of Obamacare needs to be repealed. Partial repeal is not an option. But in this economic climate, the employer mandate is a particularly obnoxious part of the law that has not received the attention it deserves.
"We just had the worst quarter for job growth in over two years. Last year, the CBO Director stated that Obamacare would reduce employment by 800,000 workers over a decade. Keep that in mind the next time you see a jobs report like the one we received last week. In June the economy only created 80,000 jobs. At that pace, it would take us ten months just to get back to even and undo the damage done by Obamacare. The Obamacare status quo is simply unsustainable. We will repeal it."
ON OBAMACARE'S JOB-KILLING TAX-HIKES:
"All told, Obamacare created over $500 billion in new taxes, fees, and penalties. It taxes the sales of medical devices. It taxes health insurance premiums. It taxes the sale of branded drugs. With respect to the medical device tax, Obamacare is a direct threat to job creation, putting a target on an industry that represents one of our economy's greatest opportunities for the creation of good high-paying jobs. These taxes will simply be passed through to America's families and businesses. It is hard to conceive of a more counterproductive set of tax hikes given that the fundamental problem facing families and businesses is the cost of health care.
"The Chief Justice agreed with the President and his lawyers that the individual mandate is a constitutional tax.[According to Congressional Budget Office] more than 10 percent of the folks hit by this tax will have income below the federal poverty level. That is $23,050 for a family of four. And that, my friends, is called a broken campaign promise. For sure, it is just one of many. But President Obama's campaign promise that he would not raise taxes on individuals or families making less than $200,000 or $250,000 is certainly his most memorable."
On the Need to Reform the Nation's Broken Entitlement Programs:
"We need to be brave, and assert the importance of critical reforms that will bring down the cost of care. First on that list is the reform of our two major health care entitlements, bringing the efficiencies of the market to these government-dominated programs.
"As Chairman of the Senate Finance Committee, I will live by a simple motto -- entitlement reform is health reform, and I will use every opportunity to reform these broken programs. And the first step toward entitlement reform is the repeal of Obamacare, which unrealistically cut Medicare and expanded Medicaid. We need to reclaim those dollars and put them in the service of real reform."
ON BENDING THE COST CURVE:
"The issue of health care costs is the essential driver of the need for health care reform. The lack of access to health coverage is largely owing to the high cost of care, which gets passed through to businesses and families in escalating insurance premiums. Yet Obamacare, despite its promises, has not and will not bring down the cost of care.
"Contra Obamacare, we cannot address the lack of coverage without addressing the fundamental problem that contributes to the lack of coverage -- the high cost of care. So we need to be relentless in reminding the American people that the problem is cost, and we mean to address it."
Below is Hatch's full speech as prepared for delivery:
A little more than a year ago, I was here at AEI, giving another speech -- urging the Senate to move the Korea, Panama, and Colombia free trade agreements. The Senate did eventually act.
My hope is that the Senate is as favorably disposed toward my suggestions today, because in the wake of the Supreme Court's ruling last week, I want to reemphasize the importance of repealing Obamacare.
I think it is fair to say that the Supreme Court's majority threw the nation a curveball. Most Court observers expected, at a minimum, that Obamacare's individual mandate would fall.
It is also fair to say that most Americans were disappointed. In poll after poll, a majority of Americans have made clear that they want Obamacare repealed. And I can say with certainty that conservative activists, conservative legal scholars, and conservative health policy experts were frustrated by the majority's opinion.
But our allotted time for mourning is now up. Though significant legal challenges remain for Obamacare, it is time to refocus on the hard work of repealing this law, and replacing it with pro-market alternatives that will provide the relief from rising health care costs that America's families and businesses demand. This will not be easy.
But the difficulty that we will face in undoing Obamacare does not mitigate the necessity of repealing this law in its entirety. It is the first order of business for Mitt Romney. It is the first order of business for Speaker Boehner and the Senate Republican leader Mitch McConnell. And, should the Republicans take back the Senate, as the Chairman of the Senate Finance Committee, repeal of Obamacare will be my first, second, and third priority.
There are many reasons to repeal Obamacare -- the tax increases, the CLASS Act, the unsustainable new spending, the IPAB, the coercion of the states through the Medicaid expansion, and of course the individual mandate. The list is long.
But together, these disparate policies form a coherent narrative.
From start to finish, the White House hid the ball. To claim that the law did not increase the deficit -- even though it set in motion $2.6 trillion in new spending -- the administration and its congressional allies resorted to creative accounting. And to insulate the President from the political backlash of the law's over $500 billion in new taxes, they pushed most of them off until after the 2012 election.
Today, the individual mandate is the feature of Obamacare most on the minds of citizens and taxpayers. But before turning to the individual mandate, I would like to discuss another episode that for me best represents the essence of Obamacare.
The Medicare Advantage program represents a step in the right direction for American health care. Rather than the traditional Medicare fee-for-service program, Medicare Advantage provides seniors with a choice. Instead of the traditional program, they can choose the greater efficiency and flexibility offered by the private insurers who contract with Medicare.
Medicare Advantage has been embraced by seniors, but nonetheless rejected by the left because it represents a decrease in government control and regulation. And so naturally, Obamacare cut it.
Yet rather than own up to the these cuts, the administration attempted to avoid the political fallout from the targeting of this popular program with a so-called pilot program that would restore some of the cuts for a few years.
As it turns out, this was the largest demonstration project in the history of demonstration projects -- over $8 billion. And I will give you one guess when most of this demonstration money will be spent. Conveniently it gets the administration past the election -- effectively rolling back most of Obamacare cuts to Medicare Advantage for three years.
Former Speaker Pelosi famously said that we needed to pass Obamacare to find out what was in it. In fact, however, the entire Obamacare episode has been an effort by the administration to hide what was in it.
Whatever the legal merits of Chief Justice Roberts' determination that the individual mandate is a tax, it has helped to lift the veil and reconfirmed that Obamacare is a massive tax increase on America's families and businesses. |
The Administration is running from this reality, but it cannot hide. They can deny that it is a tax, but their own legal team argued that it was before the Supreme Court. And the Supreme Court accepted that argument.
Having rejected the President's claim that the mandate was permitted by the Constitution's commerce and necessary and proper clauses, the Chief Justice upheld the mandate on the only grounds he could -- grounds advocated by the President's own legal team.
In other words, the Chief Justice agreed with the President and his lawyers that the individual mandate is a constitutional tax. It is understandable that having prevailed from a legal perspective the President and his reelection team are now eager to run from the political ramifications of their victory.
The Congressional Budget Office determined, shortly after Obamacare became law, that more than three-quarters of the individuals paying this individual mandate tax will have income under five times the poverty level. That is less than $120,000 for a family of four. And more than 10 percent of the folks hit by this tax will have income below the federal poverty level. That is $23,050 for a family of four. And that, my friends, is called a broken campaign promise.
For sure, it is just one of many. But President Obama's campaign promise that he would not raise taxes on individuals or families making less than $200,000 or $250,000 is certainly his most memorable.
And though we would have liked to see the Supreme Court go the other way, the decision has exposed once and for all that this campaign promise not to raise taxes was secondary to the President's desire to spend trillions on the new Obamacare entitlements.
Yet with all of the discussion about the individual mandate, it is important to recall that we did not need the Supreme Court to confirm that Obamacare is a huge tax hike bill. It has been from the get-go, and the individual mandate tax is only a sliver of it.
While that tax is uniquely regressive, its impact on our struggling economy and job creation is far less than some of the other taxes in Obamacare. All told, Obamacare created over $500 billion in new taxes, fees, and penalties.
It taxes the sales of medical devices. It taxes health insurance premiums. And it taxes the sale of branded drugs. With respect to the medical device tax, Obamacare is a direct threat to job creation, putting a target on an industry that represents one of our economy's greatest opportunities for the creation of good high-paying jobs.
These taxes will simply be passed through to America's families and businesses. It is hard to conceive of a more counterproductive set of tax hikes given that the fundamental problem facing families and businesses is the cost of health care.
The administration likes to speak about the problem of growing inequality and stagnant wage growth, but it then advocates policies that will either encourage employers to drop health insurance coverage due to increased cost, or forgo increased salaries to pay for higher health insurance premiums.
There are many more tax increases in Obamacare. Individuals with significant health costs will see their taxes go up through a limitation on the deduction for those costs. The Flex Spending Accounts and Health Savings Accounts that families and businesses increasingly depend on had significant restrictions placed on their use.
And most importantly, from the perspective of our economic recovery, the new Medicare surtax on both earned and unearned income, which kicks in at the start of 2013, contributes significantly to the fiscal cliff we already face at the end of this year as a result of the looming expiration of the 2001 and 2003 tax relief. By taxing investment income and, therefore, capital formation and economic growth, we will see less of both.
Though many Americans were unhappy with the majority opinion's analysis of the individual mandate, they received a pleasant surprise with respect to the Medicaid expansion.
Chief Justice Roberts rightly determined that while Congress could condition state participation in federal spending programs on the acceptance of certain policies, the federal government needed to give the states a true choice whether to participate in these programs or not.
The Chief Justice -- and a majority of the Court -- determined that the law's Medicaid expansion was a choice in name only.
By giving the states the option of accepting the Medicaid expansion or withdrawing entirely from the Medicaid program, the law's proponents made states make a choice with a gun to their head.
By overturning the law's expansion of Medicaid, the Chief Justice's majority opinion again laid bare a fundamental deceit in the law.
While touting that Obamacare would significantly expand health coverage to the uninsured, the Democrats who voted for this law minimized the fact that half of those newly insured would be insured under Medicaid. This program is already bankrupting the states and bleeding the federal treasury -- all for substandard care that is foisted on the most vulnerable Americans.
But rather than fix this program, and afford greater health care opportunity to the poorest Americans, President Obama doubled down on it, expanded it, and called it health care reform.
I believe the Court was correct in ruling the mandated Medicaid expansion unconstitutional, but the ruling, which effectively makes these Medicaid expansions optional, makes this law even more unworkable. Sure, states can take advantage of the new federal funding for the expansions, but they also have to think about whether they can afford the $118 billion in new costs for which they will be responsible. And as states are weighing their options they need to think about whether they can trust Washington to follow through with the current proposed match, when the nation is nearly $16 trillion in debt.
I don't believe that states can afford these Medicaid expansions, and I know that Washington can't. So where do we go from here?
First and foremost, Republican reform efforts must begin and end with efforts to lower the cost of coverage. Our brief experience with Obamacare should assist us in this effort. President Obama promised that this law would lower costs, or as his advisors put it, bend the cost curve.
The issue of health care costs is the reason we need health care reform. The lack of access to health coverage is largely owing to the high cost of care, which gets passed through to businesses and families in escalating insurance premiums. Yet Obamacare, despite its promises, has not and will not bring down the cost of care.
In 2011, the cost of an average family health plan was $15,073. This represented an increase of 9.5 percent from the year that Obamacare became law. Getting these costs under control is not just an issue of health policy. It is also an issue of economic equality. With median household income at $51,413, for those families without employer contributions to health care premiums, those premiums now represent 29 percent of household income.
The President and his allies like to think of themselves as progressives. They like to talk about the scourge of income inequality. Yet health care inflation is incredibly regressive, hitting poor and middle income Americans the hardest. And for all of its 2,700 pages and new spending and taxes, Obamacare does nothing to address health care costs.
Of course, the law's proponents tout the expansion of coverage. In spite of the law's failure to address rising health costs, at least it increased coverage significantly. Yet we all know that half of those individuals would be covered under Medicaid -- a failing entitlement program and health care wasteland that some studies suggest provides worse outcomes than having no health coverage at all.
Throwing millions of new individuals into this unreformed but expanded program and calling it progress is a cruel joke.
So perverse is Obamacare that it undermines access to high deductible / low premium plans and health savings accounts, one of the few proven pro-patient reforms that have reduced health care costs in recent years.
So we need to begin by addressing the cost of care, and conservatives cannot allow themselves to be browbeaten for failing to provide the same coverage numbers as Obamacare.
To be clear, it is a disgrace that so many American families go without health insurance coverage. But we cannot succumb to the pressure to argue on the left's terms. This is how the left identifies the issue.
We need to cover more people; Obamacare covered more people; and so the benchmark for any replacement for Obamacare is covering the same number of people. But to borrow a metaphor that the President might understand, trying to address coverage before addressing cost is like a recreational golfer with a lousy swing thinking that the only thing standing between him and the PGA Tour is a new set of clubs.
The golfer cannot fix the fundamentals of his swing by throwing money at the problem. And the same is true of health coverage. Contra Obamacare, we cannot address the lack of coverage without addressing the fundamental problem that contributes to the lack of coverage -- the high cost of care.
So we need to be relentless in reminding the American people that the problem is cost, and we mean to address it. And we need to remind Obamacare's partisans that the law's coverage numbers are an illusion.
To get there they tossed millions of new individuals into a failing entitlement program, vastly expanded Washington's control over the nation's health care system, and crushed businesses with new taxes and regulations.
We need to be brave, and assert the importance of critical reforms that will bring down the cost of care. First on that list is the reform of our two major health care entitlements, bringing the efficiencies of the market to these government-dominated programs. As Chairman of the Senate Finance Committee, I will live by a simple motto -- entitlement reform is health reform, and I will use every opportunity to reform these broken programs.
And the first step toward entitlement reform is the repeal of Obamacare, which unrealistically cut Medicare and expanded Medicaid. We need to reclaim those dollars and put them in the service of real reform.
Reforming Medicare will not just be good for America's seniors who depend on that program. It will also be a positive inducement toward cost-containment in non-retiree health care. The under-payment of physicians at government-dictated prices in Medicare forces the cost of care up for families and businesses. Fixing Medicare will go a long way toward fixing inflation in employer sponsored coverage and in the individual market.
With our economy barely treading water, we need to get serious about reforms that embrace the free market and free enterprise, rather than another Washington-centered, top-down effort to control the nation's health care through more regulation.
Following the Supreme Court's decision, former Speaker Pelosi opined that this was a market-oriented, private sector-oriented piece of legislation. That might be the view of a majority of her constituents in San Francisco, but the belief that this is a market-oriented law is a distinctly minority view.
According to the Congressional Budget Office it could cost as much as $20 billion for the Internal Revenue Service and the Department of Health and Human Services to implement Obamacare. The regulations stemming from this implementation now number in the tens of thousands of pages. And more are on the way.
The IRS is in the process of hiring 2,700 new workers to implement and enforce the new law. According to a report by the Ways and Means Committee, the IRS might ultimately require as many as 16,500 new employees to enforce the dictates of Obamacare.
And in the case of the President's health care law, the devil we don't know may be worse than the devil we know. The Administration is not even close to rolling out the complex and costly regulations that will be necessary to enforce the law's new employer mandate.
Beginning in 2014, Obamacare will begin taxing businesses with more than 50 full time equivalent employees if they fail to provide so-called affordable health insurance to their employees.
Businesses need to be planning now for the imposition of this mandate. Yet, they have received no hard legal confirmation from the administration about how they are to comply with these new mandates.
What are the essential health benefits that employers must cover? How do you calculate the number of full time employees? What is minimum essential coverage? How will employers report to the Department of the Treasury their compliance with these new requirements? What is affordable coverage? Who must be offered employer sponsored insurance?
The administration has provided no definitive answers to these questions. With so many critical issues unresolved, it is no surprise that America's businesses are worried.
The same small and mid-sized businesses most in need of pro-market reforms that will allow them to expand coverage and grow their businesses, are being injured by this law's regulations.
According to a recent survey of employers by the U.S. Chamber of Commerce, employers simply do not believe that Obamacare will be good for their bottom line. 85 percent of respondents indicated that they do not expect Obamacare to reduce the cost of health care or slow the rate of increase.
65 percent are very concerned that their businesses will not be able to comply with the law's new mandates. And 84 percent responded that the health care law would hurt their business.
In addition to the fiscal cliff we are facing at the end of this year, the implementation of the employer mandate is unquestionably a significant drag on economic growth. Obamacare is sapping employers of the certainty and optimism they need to grow their businesses and hire new workers.
To be clear, all of Obamacare needs to be repealed. Fixing Obamacare is not an option. But in this economic climate, the employer mandate is a particularly obnoxious part of the law that has not received the attention it deserves.
We just had the worst quarter for job growth in over two years. Last year, the CBO Director stated that Obamacare would reduce employment by 800,000 workers over a decade. Keep that in mind the next time you see a jobs report like the one we received last week. In June the economy only created 80,000 jobs. At that pace, it would take us ten months just to get back to even and undo the damage done by Obamacare.
The Obamacare status quo is simply unsustainable. We will repeal it.
And the Democrats know that we can. After their abuse of the budget reconciliation process in 2010 to get this law passed, it should come as no surprise when Republican majorities legitimately and appropriately use the same process to repeal this unpopular law next year.
But first we have some work to do between now and November. At the same time that Chief Justice Roberts has gained a strange new respect from the left for his decision, he has come under much fire from conservatives.
I am not going to pretend that I agreed with his decision. But I will give him this. His opinion shows a deep respect for the character of republican government and the responsibilities of citizens.
In conclusion, he wrote:
The Framers created a Federal Government of limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.
The Chief Justice is absolutely correct. President Obama wants us all to move on. Like the liberal law professoriate that he was once a part of, he looks to the Supreme Court as the principal guarantor of our constitutional liberties. And so he considers this matter resolved.
The Supreme Court has determined that the Affordable Care Act is constitutional, and so the American people should accept that determination. With due respect, the American people are made of sterner stuff.
They know that ultimately the Constitution does not belong to any one President or to a majority of five justices on the Supreme Court.
The Constitution belongs to the American people. And the American people will have the last word on this. In the Senate, every Democrat who voted for Obamacare was the decisive vote. And when those Senators face the voters this November, I am sure that many will also face a lot of questions.
Why did they vote to tax the medical device industry, even when that industry is a critical one in their state? Why did they vote to increase spending by $2.6 trillion? Why did they vote to increase taxes by over $500 billion? Why did they vote to force religious persons and institutions to violate their consciences by paying for health care services that they find morally objectionable? Why did they vote for more regulations and taxes on small businesses? Why did they support regressive taxes like the individual mandate and the limitation on the deduction for health care expenses? Why did they cut Medicare Advantage?
The answers to these questions are not easy ones, since many members of the Senate voted against the clear wishes of their constituents by supporting Obamacare.
Those citizens know that this law is unconstitutional in its DNA. It transfers significant lawmaking authority to the executive branch and to new independent agencies. It violates the First Amendment. And it expands the power of government far beyond anything contemplated by our Founding Fathers.
Ultimately, the American people will render the final verdict on this law. On that point, the Chief Justice was right. And I am confident that this November they will cast their votes to restore constitutional government by rolling back this law, and to begin the process of real health care reform that successfully addresses the cost of care.