Obama's Health Care Plan: A Recipe for Increased Costs

Strategic Insights -

The Colorado Republican Party released information outlining the unintended consequences of Obama's health care plan. According to the RNC Research Department, Obama claims that his plan will make health care affordable, but the reality is that it will drive up costs due to new taxes, mandates, and regulations. The plan includes a tax on insurance benefits, which will increase premiums for many Americans, including small businesses and individuals. The Congressional Budget Office (CBO) also estimates that the tax on medical devices will raise insurance costs by 1%. Furthermore, the CBO states that Obama's mandates for preventive care could raise, not lower, costs due to increased medical spending.

Key Takeaways:

  • The new tax on insurance benefits will increase premiums for many Americans, including small businesses and individuals, by targeting "Cadillac" plans valued at $8,000 or more for individuals and $21,000 or more for families.
  • Small employers will also be hit by the taxes, as they tend to pay more for their insurance than larger employers.
  • The CBO estimates that the tax on medical devices will raise insurance costs by 1%.
  • The CBO states that Obama's mandates for preventive care could raise, not lower, costs due to increased medical spending.
  • The proposed $40 billion tax on the medical device industry will sharply cut the resources available for research and development of life-saving medical treatments, exceeding the total amount of venture capital dollars invested in device companies in 2007.
  • Mandates to buy insurance make coverage more expensive, as they require insurers to pay for care consumers previously funded out of their own pockets.
  • Higher health care costs due to Medicare cuts will be passed along to individuals and businesses, resulting in increased costs for insurers, employers, and people with private medical coverage.

Statistics:

  • The tax on insurance benefits will increase premiums for many Americans, including small businesses and individuals.
  • The tax on medical devices will raise insurance costs by 1%.
  • The proposed $40 billion tax on the medical device industry will sharply cut the resources available for research and development of life-saving medical treatments, exceeding the total amount of venture capital dollars invested in device companies in 2007 ($3.7B).
  • The tax on medical devices is four times the amount of venture capital dollars raised in 2007 for IPOs ($1B).
  • Mandates to buy insurance increase the cost of basic health coverage from a little less than 20% to perhaps 50%, depending on the number of mandates, benefit design, and initial premium.

Sources:

  • CNN's "State Of The Union" (9/20/09)
  • The Wall Street Journal (Janet Adamy and Greg Hitt, 9/19/09)
  • The New York Times (Reed Abelson, 9/20/09)
  • Congressional Budget Office (Douglas W. Elmendorf, Letter to Sen. Max Baucus (D-MT), 9/22/09)
  • Advanced Medical Technology Association (Press Release, 9/16/09)
  • Council For Affordable Health Insurance (Victoria Craig Bunce and JP Wieske, "Health Insurance Mandates In The States 2009", Accessed 8/26/09)
  • The Washington Post (David S. Hilzenrath, 6/18/09)
  • Congressional Budget Office (Douglas W. Elmendorf, Letter To Rep. Nathan Deal, 8/7/09)