Johnson Questions 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 them.

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, correct?

Sebelius: “Again, there is no new marketplace yet for insurance policies.

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 Americans, correct?

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, correct?

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.

Sebelius: “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.