Monday, December 28, 2015

Suspend. Delay. Postpone. Repeat

The cost of Obamacare just got bigger and since history is a strong indicator we should be prepared for huge deficits to cut into the President's signature disaster. The vote by Congress to pass the annual spending bill contained three items of interest tied to the revenues that were supposed to be coming in to pay for a large part of the Not So Affordable Care Act.

By postponing the Cadillac Tax from 2018 to 2020, pausing the Medical Device Tax for 2017 and 2018, and also pausing the Health Insurance Tax for 2017 the federal government is reducing revenues to fund Obamacare by $32.1 Billion. Some are saying so what, in government world that's pennies. This is correct in the short term, but given the track record of Congress pushing things off, the long term of not letting these expire or removing them altogether will be financially irresponsible.

How financially irresponsible? In reviewing the 10 year Obamacare costs based on the December 2nd release from the Office of Management and Budget regarding H.R. 3762 and the CBO's Budget and Economic outlook for 2015 we found a significant potential for lost revenue based on these three taxes being eliminated.

The smallest of the three is the Medical Devices Tax. The two year pause that has already passed will cost $4.1 billion. Should Congress repeal this tax - which has bipartisan support - would reduce revenues by $23.9 billion over ten years.

The Cadillac Tax is the one receiving the most attention. This tax will hit more employers over time and the primary revenue generator is new tax dollars on employee compensation. The CBO can only score on the garbage in, garbage out rules. Because Congress is full of garbage, they assumed that as the tax kicked in employers would reduce benefits and therefore lower premiums. In turn they assumed that employers would replace this lower premium with a dollar for dollar match in compensation. The end result is higher income tax revenue on taxpayers. The cost of delaying this for two years is $13 billion. Many in Congress want this tax fully repealed. Doing so would reduce Obamacare revenues by $149 billion over ten years.

The sneaky one is the Health Insurance Tax - or as we refer to it - The HIT. This tax bill is sent to health insurers based on their market share. It has flown under the radar because it was sold as a tax on insurance companies. Nobody likes insurance companies so taxing them would seem to be a good thing. But if you look at your insurance bill you will see that this tax is built in to your premium. This tax being paused for a year will lower revenues by an additional $13 billion. Continuing the delay for ten years will cost $159 billion - even more than the Cadillac Tax.

The total cost over ten years of eliminating these three taxes will decrease Obamacare revenues by $331,900,000,000. This makes up more than half of the revenues Obamacare is supposed to generate over that same time period.

We already knew that Obamacare was financially unsustainable. Adding these reductions in revenue to the fold will accelerate it's death. And that might be a good thing.

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