Sebelius on True Cost of Obamacare
March 21, 2012
Senator Ron Johnson (WI) questioned Secretary of Health and Human
Services Kathleen Sebelius at a Senate Appropriations Labor, HHS and
Education subcommittee hearing this morning:
Senator Johnson: “Madame Secretary, welcome. I’d like to concentrate on
the cost estimates of the healthcare law, because it’s what I
concentrated on last year, and there’s been new information that’s
surfaced since then. I’d like to start out by pointing out that when
they passed Medicare back in 1965, they estimated out 25 years and said
it would cost $12 billion in 1990. In fact it ended up costing $109
billion - nine-times the original cost estimate - so I don’t have a
great deal of faith in some of these estimated numbers and I certainly
don’t have faith in the estimates for Obamacare. In the President’s
fiscal year 2013 budget - just released - he’s increased the mandatory
outlays for health insurance exchanges by $111 billion - from $367
billion in his last year’s budget to $478 billion. Is that correct?
Secretary Sebelius: “Yes sir.
Johnson: “Okay. The CLASS Act I think we all ended up recognizing that
was not going to work out; that wasn’t going to be financially solvent.
So that was $86 billion of the claimed $143 billion of deficit reduction
for the first ten years, correct?
Sebelius: “The original estimate, yes. I think that’s –
Johnson: “Right. So, the original estimate for deficit reduction –
Sebelius: “I’m assuming –
Johnson: “The original estimate for deficit reduction in the first 10
years was $143 billion, correct?
Sebelius: “Yes –
Johnson: “So now we, we’ve reduced that $143 billion by $86 billion - by
not getting revenue from the CLASS Act - and now $111 billion because
we’ve increased the mandatory costs of the exchanges, correct?
Sebelius: “I’m assuming the numbers are correct. I’m sorry I don’t have
Johnson: “So, when you add those together, that’s $197 billion added to
the first 10-year cost estimate of Obamacare, so now we are instead of
saving $143 billion, we are adding $54 billion to our deficit, correct?
Sebelius: “Sir I --
Johnson: “We’ll submit that to the record. But, that’s basically true.
So instead of saving $143 billion, by this administration’s own figures
and budget, we’re now adding $54 billion to our deficit in the first 10
years. To me, that would be the first broken promise. It is true that
the President said that by enacting this healthcare law, every family
would save $2500 per year, in their family insurance plan - correct?
Sebelius: “He said that once the exchanges are up and running, and you
have an affordable marketplace, the insurance estimates were that the
rates would go down by about $2500, yes – that has not occurred yet.”
Johnson: “The Kaiser Family Foundation has already released a study
saying that average costs of family healthcare plans is up $2200,
Sebelius: “Again, there is no new marketplace yet for insurance
Johnson: “But the costs are already up. We’re already different by
$4700; it’s going to be hard to get us down to $2500 cost savings. I
would consider that broken promise number two.
“It’s also true, that President Obama very famously said, ‘if you like
your doctor, you will be able to keep your doctor.’ Period. ‘If you like
your healthcare plan, you will be able to keep your healthcare plan.’
Period. No one will take it away, no matter what. Now, we’ve granted
quite a few waivers - about 1,200 to 1,700 waivers - on about 4 million
Sebelius: “I’ve no idea what waivers you’re talking about or –
Johnson: “Well, those are waivers –
Sebelius: “On doctors and health plans, is that…I –
Johnson: “Just waivers from having to implement portions of the
healthcare law that probably would have allowed those - or forced those
workers - off their employer-sponsored care.
Sebelius: “Again, I’d be happy to answer these questions, but I have no
idea what waivers you’re talking about –
Johnson: “The waivers that HHS has granted to employers not –
Sebelius: “Which do what?
Johnson: “Not having implemented sections of the healthcare law.
Sebelius: “There have been waivers granted to employers, yes.
Johnson: “And had those waivers not been granted, chances are, those
employees probably would have lost their employer-sponsored care,
Sebelius: “I have no idea. I mean, I’m happy to answer those one at a
time and look at the waivers and see what –
Johnson: “Unfortunately, I’m pretty short on time. The CBO alone
estimated that a million people would lose their employer-sponsored
care. Now, I think that’s a wildly underestimated figure. The McKinsey
Group has surveyed employers and said that 30 to 50 percent of employers
plan on dropping coverage as soon as the healthcare law is implemented.
Douglas Elmendorf, I think, has even admitted that that’s credible
evidence for him to retake a look at that estimate.
“The decision employers are going to have is pretty linear; they can pay
$15,000 for a family plan or pay the $2,000 penalty. They’re not
exposing their employees to financial risk; they’re making them eligible
for $10,000 subsidies if they make $64,000 household income. Are you
sure that only a million people - only a million people - will lose
their employer-sponsored care? Last year, you said that there were 180
million people that get coverage through their exchanges. Are you
certain that only a million people are at risk for losing their
employer-sponsored care and get put in those exchanges?
Sebelius: “Sir, you’re quoting a CBO number; all we have to go on is
what’s happened in Massachusetts where actually more people have
coverage today with the exchange, with a very similar framework, than
did before. They haven’t lost employer coverage, more employers have
come back into the market. So the practicing application of a
state-based exchange, on the ground, with similar penalties, in a
similar framework, is employer coverage rose, it didn’t decrease.
Johnson: “It’s not similar because those employees lose coverage for six
months before they’re eligible for the exchanges. There aren’t these
types of subsidies that create a huge incentive for employers to drop
coverage and make their employees eligible. The bottom line here is, the
cost of this healthcare law is so uncertain, don’t you think we ought to
put the brakes on it? You know, Nancy Pelosi said, we have to pass this
law to figure out what’s in it. What I don’t want to see is that we have
to implement it to figure out how it’s going to bust a hole in our
already horribly broken budget.
“Well, I would just say, Senator, that statistics you gave on the rising
healthcare costs for families and small business owners that Kaiser put
out recently is the very reason that we desperately need a new insurance
market. The private insurance market is basically on a death spiral
where younger and healthier people are dropping out, where small
employers who can’t afford to pay 18 percent more than their large
employers are dropping out. Doing nothing is really not an option; we
now have 50 million uninsured in this country, and that number has gone
up year in and year out and the costs continue to rise. So a new market,
with competition, putting people in a larger pool, making companies
compete on the basis of price and quality, not who can lock out folks
with pre-existing conditions or drop them out or drive them out of the
market, is desperately needed by millions and millions of Americans,
which was part of the driving force of passing the healthcare law.
Johnson: “Madame Secretary, if 50 percent of the employees lose their
coverage, that will cost us a half a trillion dollars a year, not $95
billion. Thank you, Mr. Chairman.