Health law taxes, penalties and the games politicians play

Ronald E. Bachman's picture

Only political junkies really care about the difference between taxes and penalties in the recently validated Patient Protection and Affordable Care Act also known as ObamaCare. All the average American cares about is, “What is it going to cost me?”

Republicans can complain that President Obama lied that the health reform costs were not taxes and Democrats can continue the canard that the now constitutionally defined taxes are still penalties. The reality is that are no new costs; they have been there all along. Most Americans just never knew that politicians were playing a game of “Fooled Ya.”

As Nancy Pelosi famously said, “We have to pass the bill so that you can find out what is in it.” And now Americans are now finding out.

Under the uniquely Washington, D.C., rules of the Congressional Budget Office (CBO), “Fooled Ya” costs are estimated over a 10-year period. What happens after 10 years doesn’t count. To explain the real-world-versus-Washington approach, consider the simple example of a car lease.

If you begin a 10-year contract to lease a car for $500 per month, the rest of America would say $500 for 12 months yields an annual cost of $6,000. Therefore, the cost of the contract over 10 years would be $60,000.

If your payments for the 10-year contract were delayed by four years, however, under the “Fooled Ya” Washington rules, your contract costs would $6,000, or $36,000, with the last four years of the contract initially ignored as outside the 10-year calculation period.

Of course, in the real world the actual cost of your lease is still $60,000. In “Fooled Ya,” the actual total costs are not disclosed until time passes and the added years become a part of a new 10-year calculation period. So that only after four years pass would the full $60,000 cost be acknowledged.

That is the essence of the initial cost estimates in the law. The original 10-year cost estimate of $940 million made in 2010 covered 2010-2019. Hence, the public was told health reform would cost less than $1 trillion.

But the law is not fully implemented until 2018. So the actual ongoing 10-year cost will be more fully disclosed with each passing year, until full implementation is reached in 2018.

In 2012, the CBO cost was updated to be $1.8 trillion. By 2013, the cost will be about $2 trillion. By 2018, the full implementation 10-year costs will be closer to $2.5 trillion.

Some supporters of the healthcare law have no regard for the true costs hidden under “Fooled Ya”; they believe the benefits of universal coverage far outweigh any cost.

So, when you read that the cost of the law is increasing, the truth is those costs have always been there. The true costs are becoming part of each new 10-year calculation. The previously unrecognized costs are now being exposed.

Fortunately, Americans can now have an honest discussion armed with knowledge of the law’s taxes, penalties and future cost estimates. The U.S. Supreme Court decision has provided another opportunity for Americans to become aware of the real costs and the subterfuge of the “Fooled Ya” game. The game now shifts to the Court of Public Opinion and the November election.

It is time for voters to remind politicians to stop playing games and for Americans to understand the burden imposed on our children and grandchildren. You know the old saying, “Fool me once, shame on you, fool me twice, shame on me.” Don’t be fooled twice.

[Ronald E. Bachman FSA, MAAA, is president and CEO of Healthcare Visions, Inc. and a Senior Fellow at the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. He is also a Senior Fellow at the Wye River Group on Health and the National Center for Policy Analysis.]

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