Tags: pelosi | plan | fines

Pelosi Plan Makes Millions of People Pay Fines

Monday, 02 Nov 2009 09:39 AM

By Ernest Istook

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Speaker of the House Nancy Pelosi’s healthcare plan presumes that about 8-14 million American workers will pay fines rather than buy health insurance. Unless they do, there’s a $167-billion hole in her financing plan and everything falls apart.

Like the rest of us, this group would face higher-than-ever insurance prices under Pelosi’s proposed bill.

Speaker Pelosi, President Obama, and others claim they will make coverage cheaper, yet the official projection relies upon millions who would prefer to pay fines rather than join their system. In some cases the individuals would pay the penalty; in others their employers would pay; and sometimes both.

The estimate of 8-14 million who would be fined is based on the official projections made by the Congressional Budget Office (CBO).

The plan is built around a major contradiction. Only if it fails to make insurance more affordable would the bill generate the promised $167-billion by fining people who would still remain uninsured.

Why would this happen? Because insurance would become more expensive if the legislation passes, thus increasing the disincentives to buy coverage.

Premiums under the new government-run “public option” will probably be higher than from private insurance, according to the CBO (page 6 of its report). The Associated Press reports that “premiums in the public plan would be higher than the average for private plans.” Rather than inducing private carriers to lower their premiums, other experts agree that private insurance will also be costlier under Pelosi’s plan, as insurers pass along the bill’s tax increases.

Yet Speaker Pelosi claims the measure will bring “lower costs for every patient” by “lowering healthcare costs for all of us.” President Obama campaigned on a promise that the plan would save families $2,500 a year in lower premiums. He doesn’t mention that figure anymore.

The exact number of those who will pay fines is unknown, but it is huge. Here’s how the projection of 8-14 million was calculated, based on the CBO report:

• It starts with the finding by the CBO that $167 billion in penalties would be paid in the next 10 years — $135 billion by employers who don’t provide insurance and $32 billion by workers who don’t buy it. For companies, it’s an 8 percent payroll tax; for individuals it’s a convoluted formula that comes out to about 2-2.5 percent of income.

• CBO concluded that by 2019, the employer tax would generate $27 billion a year. Since that’s 8 percent, it represents a tax on $340 billion in wages. If an average wage were $40,000, that would represent 8.4 million workers for whom fines would be paid.

• CBO also says by 2910 the annual fines paid by individuals would be about $6 billion per year. If their average wage were $40,000, it would represent 6-million tax filers (individuals and couples) paying the penalty.

• There would be overlap between the groups, so the total paying the penalty should be in the 8-14 million worker range — akin to about 1 worker in every 10 nationwide.

For this group of uninsured, the Pelosi plan makes them pay a lot and get little or nothing.

This is not a “millionaire’s tax.” It’s a tax on the uninsured. According to The New York Times, these tend to be “the working poor.”

Only a fraction of these Americans might receive some form of subsidy or assistance under the Pelosi plan. Yet sponsors claim they will finance the plan by collecting $167 billion in taxes from the uninsured! It contradicts the very premise of the legislation.

While attention has focused on the “public option” provision, the notion of collecting billions of dollars from millions of Americans — and still leaving them uninsured — is a serious wrong that deserves serious attention.

Ernest Istook, a former U.S. congressman from Oklahoma, is a distinguished fellow at The Heritage Foundation. This article is cross posted from The Foundry.

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