Speeches & Floor Statements
Floor Remarks of U.S. Senator Lamar Alexander (R-Tenn.) -- Health Care Reform: Premiums Will Rise Under the Current Plan
Posted on March 1, 2010
Mr. President, it was my privilege last Thursday, along with some other Members of the Senate, to attend a health care summit at the invitation of President Obama. It went on a long time. We learned one thing we already knew, that our President is smart and knows a lot about health care. So he stayed the whole time.
But it gave those of us on the Republican side a chance we do not have the opportunity to have as often, which is, to be on center stage and let the American people know, A, who we are, and, B, what our ideas are. So it was a terrific way for us to show, for example, that our goal is to reduce health care costs, that we wish to move step by step toward that goal.
We identified a number of areas, such as being able to buy health insurance across State lines, allowing small business health plans to pool together, reducing junk lawsuits -- all of which will tend to bring down the cost of premiums, which is what most Americans want.
During the discussion, early on, actually, the President and I had a little disagreement about whether his plan, which is based upon the Senate bill, which passed on Christmas Eve, would raise premiums. What I had said in my opening remarks on behalf of Republicans was that millions of Americans, under the Democratic plan, would pay higher insurance premiums in the individual market because of government mandates and taxes. The President says that is wrong. I cited a Congressional Budget Office report to show I was right. And rather than dispute the President of the United States in public -- I thought I had enough time to make my case -- I said I would send him a letter, which I did that same day. So I ask unanimous consent, Mr. President, to have printed in the Record the letter I gave to President Obama on Thursday.
But today what I wish to do in the next few minutes is explain why I believe I am correct, that under the President's health insurance plan, which is based upon the Senate plan, for millions of Americans in the individual market, premiums would go up because of one-size-fits-all government mandates, because of taxes that are passed on to consumers; but for other reasons as well -- by shifting costs.
When you dump 15 million people or 18 million people into a program called Medicaid, what happens is, we do not pay the doctors and the hospitals well enough to take care of those folks. So those providers shift the costs to people who are paying with private insurance, and premiums go up.
Costs for young people in the individual market will go up under this plan because if you put in a rule that says my insurance at my age cannot go up more than a certain amount compared with my son's insurance, then his insurance goes up, and because a scheme like the Democratic plan depends upon requiring everybody to buy insurance. There is a weak provision for that, and I suspect many young people will rather pay the $750 fine rather than buy a $2,500 insurance policy, which they think they cannot afford.
The President made the point in his usual very persuasive way that, wait a minute, actually you would be getting better insurance. But that is comparing apples and oranges. As George Will said on ABC's "This Week" yesterday -- he asked this question: If the government required you to buy a better, more expensive car, even if it was better than the car you have, it would still be more expensive, would it not?
That is the case with the President's health care plan. In fact, premiums will go up for millions of Americans in the individual market, up more than they otherwise would over the next several years -- and we all know how rapidly they are rising -- and the whole exercise we have been going through over the last year is to bring premiums down, not help drive premiums up.
What I said to the President, with respect, was that the Congressional Budget Office, on
November 30, said this about the Senate bill:
The Congressional Budget Office and the Joint Committee on Taxation estimate that the average premium per person covered for new nongroup -- That means individual policies -- would be about 10 to 13 percent higher in 2016 than the average premium for nongroup -- That is individual coverage -- in the same year under current law.
In other words, if you buy an individual policy -- that means not a policy with your employer -- by 2016 it will be at an average of 10 to 13 percent higher than it otherwise would.
I ask unanimous consent to have printed in the Record the relevant parts of the Congressional Budget Office letter of November 30 to Senator Evan Bayh on this point.
Now, the President said: Wait a minute. The premiums in the individual market will go down 14 to 20 percent. That is also in the same letter. Of course, he is right about that. They go down because of administrative efficiencies and new enrollment, but he left out that there are other factors involved so that the government mandates will drive them up 27 to 30 percent or, in the end, the average, as the CBO said, premium per person covered in an individual policy would be up 10 to 13 percent.
The bill has subsidies in it for some Americans. The same letter says about half of Americans who buy in the individual market will get a subsidy. Well, we are paying for that subsidy, but let's concede that point. Still, that leaves half of the people in the individual market for whom premiums will go up on an average of 10 to 13 percent.
Why is that? One reason is because the Senate bill says people will have to buy a richer policy than they have today. That means it has a higher actuarial value. They call it in the bill "minimum creditable coverage." It means this is the amount of insurance I think you should have before you buy a policy. That might be a good decision. It undoubtedly would be good to have the insurance. It just costs 27 to 30 percent more than today's average.
The National Federation of Independent Businesses wrote a December 12 letter in opposition to the Senate bill saying the benefit mandates will put small business owners "at risk of having to drop coverage due to cost increases that outpace their health budgets."
I ask unanimous consent to have printed in the Record the letter from NFIB to Senator McConnell and Senator Reid, dated December 8.
The one-size-fits-all provision in the Democratic bill says all individual and small group policies must have an actuarial value of 60 percent.
Senator Susan Collins of Maine, who was the insurance commissioner of Maine, made a speech on the Senate floor on December 18, and pointed out that 87 percent of the individual policies that are purchased in Maine today would cost more under the Reid bill.
I ask unanimous consent to have printed in the Record Senator Collins' remarks of December 18.
Senator Collins used the example that the most popular individual market policy sold in Maine costs a 40-year-old about $185 a month. Under the Senate bill that 40-year-old would have to pay at least $420 a month, more than twice as much for the policy that meets the new minimum standard, or face a $750 penalty. It is true Maine citizens, as is true for all Americans -- about half of them -- would receive subsidies to help them buy that policy, but the average premium for the other half of the 87 percent is going to go up under the Democratic bill.
We believe Americans ought to have more choices than that. That is a fundamental difference of opinion. Should Washington decide you need to buy a richer policy, or should you decide that for yourself based upon the other needs of your family?
The Congressional Budget Office does state, as I have mentioned, that there are a number of enrollees -- about half -- who would have the subsidies, and that is in the letter I have already introduced into the Record. But someone is paying for those subsidies: the taxpayers are paying for them, which brings up the second reason I said on Thursday that premiums for millions of Americans in the individual market will go up.
The commonsense idea is that if you tax an insurance company or a medical device company or a manufacturer of drugs, they will pass the taxes on to whom? To us, who are buying insurance policies or medical devices or drugs. So we end up paying. In fact, one part of the President's proposal deliberately does that. It is a 40-percent excise tax on insurance companies for what we call Cadillac plans, the high-cost private insurance plans.
I ask unanimous consent to have printed in the Record a letter from the Joint Committee on Taxation, dated February 24.
The letter from the Joint Committee on Taxation says the 40-percent excise tax will raise $32.7 billion, all of which will be passed along to consumers in the form of higher insurance premiums. That may be a good thing. In fact, I think it is because it helps to discourage the purchase of more expensive policies. But it does raise premiums in the individual market.
The Joint Committee on Taxation Memorandum on High Cost Plans, dated September 29, says:
The excise tax would be mainly passed along through increases in premiums.
I ask unanimous consent to have that letter printed in the Record.
Because the new tax is indexed to regular inflation plus 1 percent instead of medical inflation, which goes up very much higher and quicker, the new tax, like the alternative minimum tax, will pretty soon start to hit Chevy and Buick insurance policies and not just Cadillac policies.
But there are other taxes in the President's proposal. There are up to $1/2 trillion in new taxes, which will be passed on to consumers: $20 billion in excise taxes on lifesaving medical devices, $33 billion on drugs, and $60 billion on health insurance companies. In a the previously mentioned CBO letter and a JCT letter to Senator Grassley in October of last year, both said these taxes will be passed on to patients, increasing health insurance premiums.
I ask unanimous consent to have the JCT letter printed in the Record.
The Chief Actuary of the Center for Medicare and Medicaid Services, who is a part of the Obama administration said:
We anticipate such fees would be generally passed through to health consumers in the form of higher drug and device prices and higher insurance premiums.
That was on December 10 of this year, about the Senate bill.
I ask unanimous consent to have printed in the Record the relevant portions of that letter.
The Lewin Group, on October 30, said: Employer spending would increase steadily under the [Democratic] act, reflecting the cost of paying the various excise taxes under the act. Total employer health spending would increase by 2.1 percent by 2019.
I ask unanimous consent to have printed in the Record the relevant portions of the Lewin Group letter.
The National Federation of Independent Business letter says the same. There are other reasons the premiums will go up.
Mr. President, seeing no one else here, I wonder if I might ask unanimous consent for 5 additional minutes.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. ALEXANDER. I thank the President.
Here is a third reason, in addition to government mandates and taxes, that will cause premiums to rise. We call it cost-shift. Premiums will increase because the bill dumps 15 million to 18 million more Americans into the government program called Medicaid. This is the analysis of the Chief Actuary on January 8, 2010.
I ask unanimous consent that the relevant portions be printed in the Record.
The point is, Medicaid only pays doctors and hospitals about 60 percent of the cost of serving the 60 million patients who are now there. The Democratic bill would add 15 million to 18 million more patients. So what do the doctors and hospitals do? They see these patients, but then they shift the costs to the patients they see who have private insurance.
The President himself said that adds about $1,000 to every policy today, this cost-shifting. I have included that comment from the Chief Actuary.
The PriceWaterhouseCoopers report on the Senate Finance Committee bill in October of 2009 indicated that the net effect of the bills before Congress will make the Medicare and Medicaid cost-shift even more severe, raising the cost of private insurance premiums for large employers by $255 a year between 2015 and 2019.
I ask unanimous consent to have printed in the Record the relevant portions of the PriceWaterhouseCoopers report.
Younger Americans in the individual market will pay higher premiums under the Democratic plan because, as I mentioned earlier, it will mandate for individual coverage that I can't pay more than three times as much as my son can pay for an insurance premium. That might help keep my premiums down, but it is going to send his up pretty far because 42 States, including Tennessee, allow more variance of that. So young people across America, who include about 30 percent of the uninsured, are in for a big surprise when their individual policies jump up 30 to 35 percent, which is what the Oliver Wyman report on September 28 said theirs might do, or when, since they are uninsured, they are required to buy insurance and they find the insurance they are required to buy is very expensive.
I ask unanimous consent to have printed in the Record the relevant portions of the Oliver Wyman report.
Finally, the young and the healthy can skip out of this. That will drive up premiums. They may decide they would rather pay a $750 fine than $2,500 for a health insurance policy they think they don't need.
The American Academies of Actuaries wrote a letter on the Reid bill on November 20 that said: "Any premium variations by age limited to a 3.1 ratio between the highest and lowest premiums," and then it goes on to say, "would cause higher premiums on average relative to current premiums."
I ask unanimous consent to have printed in the Record the letter from the American Academy of Actuaries of November 20, 2009.
All in all, these factors suggest why, when Senator Collins took a look at Maine, she found that 87 percent of people in Maine are paying less for their individual policies than the policies would cost under the Reid bill. It is true that half or more of them would receive some subsidy, which would reduce their costs, but around half of them will pay more. In Tennessee, Blue Cross Blue Shield, which covers about one-third of Tennessee's individual market, estimates the premiums for those individuals will increase by 30 to 45 percent under the Reid bill.
I ask unanimous consent to include a chart which demonstrates that.
At our summit on Thursday, there were a number of good ideas about reducing health care costs that the President seemed to share with Republican Members who were there. There was some obvious irritation on the part of the majority leader and others when we said things such as there is $1/2 trillion worth of cuts in Medicare, which there are. Our real objection to it is that the cuts are not used to save Medicare, which is going broke, but spent on a new program -- $1/2 trillion in new taxes. There is $1/2 trillion in new taxes.
As I have just said, they tend to increase premiums for millions of Americans. There are premium increases. There is a deficit increase.
It is true the CBO has said that what was presented to them didn't increase the deficit, but what was not included in what was presented was paying doctors to serve patients in the government program we call Medicare. That is like having a horse race without the horses. How are you going to have a comprehensive health care bill and not include within its costs paying doctors to serve patients in the government program? When you put it in, the deficit goes up.
Then there is a problem of the passing off to States these expanded Medicaid costs without paying for them. I know as a former Governor -- and I see the former Governor of Virginia in the chair -- I struggled with that every single year. All the Governors are today in both parties. They don't want us sending them a bill for expanded health care. They can't pay the bills they have. We shouldn't do that. If we want to expand it, we should pay for it. That is another part of the bill.
So I came to the floor today to, No. 1, express my appreciation to the President for inviting us Thursday. It gave us a chance to show who we are and what we are for. I thought it was a good discussion. I believe there are 8 or 10, maybe a dozen different good ideas Senator Coburn and people on both sides of the aisle suggested. There are some differences between those ideas but, basically, they represent a way to move forward to reduce health care costs. That is what we ought to do. We don't do comprehensive very well in the Senate. Comprehensive immigration failed of its own weight. Comprehensive economy-wide cap and trade seems to be failing, again of its own weight. Comprehensive health care is very difficult to pass. That shouldn't be a surprise to any of us. This is a very big, difficult, complicated country with people of many different backgrounds and, in my judgment, we are just not wise enough for a few of us to rewrite the rules for 17 percent of our economy.
I think the American people have tuned into that. They want us to fix health care, but they want us to reduce costs. Again, we on the Republican side are ready to set that goal and, as we said 173 different times on the Senate floor the last six months of last year, we have offered 6 steps to move toward that goal. Maybe the President can think of six more. Maybe we can think of six more. We did that with the America COMPETES Act. We asked the national academies: What are the 10 steps that can help us become more competitive as a country? They gave us 20, and we passed most of them. In clean energy, we are coming together on nuclear power, offshore drilling, and energy development. Those are steps toward a goal that would be a more sensible way for us to work.
In the meantime, the unpleasant truth is, the current bill being considered -- will cut Medicare, not spend it on Medicare -- will raise taxes, and it will, as I have tried to demonstrate with respect to the President, raise individual premiums because of the one-size-fits-all government mandates and tax increases.
Finally, I ask unanimous consent to have printed in the Record, following my remarks, today's editorial from the Wall Street Journal detailing how the Massachusetts health care plan has unexpectedly caused premiums to rise over the last couple years and what lesson there might be in that for us.
I yield the floor and suggest the absence of a quorum.