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Thursday, January 6, 2011

House Majority Releases Report Documenting ObamaCare’s Devastating Impact on American Jobs

I could not embed the graph so if you need to see them click the heading and it will take you to original document and please notice that this report was done by Republicans.....

 
New Report Finds ObamaCare Will “Eliminate Jobs” & “Exacerbate the Nation’s Dire Fiscal Condition” 

Washington (Jan 6)
Speaker of the House John Boehner (R-OH) today joined Majority Leader Eric Cantor (R-VA) and several House committee chairmen in releasing a report entitled ObamaCare: A Budget-Busting, Job-Killing Health Care Law.  The report, which can be found online here(read below), provides a compelling case for taking immediate action to repeal ObamaCare and replace it with reforms that will lower costs and protect jobs.  Boehner released the following statement:
“The evidence is clear: by raising taxes, imposing new mandates, and increasing uncertainty for employers and entrepreneurs, ObamaCare is already destroying jobs in this country.  And it will continue to destroy jobs unless we do something about it.  The report released today shows how the health care law is making it harder to end the job-killing spending binge that threatens our children’s future.   When you look at it dollar by dollar, the numbers just don’t add up.  This report presents a very sobering picture, and every lawmaker and taxpayer – no matter where you stand on this critical issue – should take a look at it.
“With nearly 10 percent unemployment and massive debt, the American people want us to focus on cutting spending and growing our economy.  That’s why tomorrow the House will take the first steps towards repealing this job-killing health care law and replacing it with reforms that will bring down costs and protect jobs.”
NOTE: Joining Boehner and Cantor on the report are Rep. Dave Camp (R-MI), Chairman of the Committee on Ways & Means; Rep. John Kline (R-MN), Chairman of the Committee on Education & the Workforce; Rep. Paul Ryan (R-WI), Chairman of the Committee on the Budget; and Rep. Fred Upton (R-MI), Chairman of the Committee on Energy & Commerce.


OBAMACARE: A BUDGET‐BUSTING,

A REPORT ON THE ECONOMIC AND FISCAL CONSEQUENCES
OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT
(PUBLIC LAW111‐148)
&
THE HEALTH CARE AND EDUCATION RECONCILIATION ACT
(PUBLIC LAW111‐152)

Rep. John Boehner (R‐OH), Speaker of the House
Rep. Eric Cantor (R‐VA), House Majority Leader  
Rep. Dave Camp (R‐MI), Chairman, Committee onWays & Means
Rep. John Kline (R‐MN), Chairman, Committee on Education & the Workforce
Rep. Paul Ryan (R‐WI), Chairman, Committee on the Budget
Rep. Fred Upton (R‐MI), Chairman, Committee on Energy & Commerce
JANUARY 6, 2011

EXECUTIVE SUMMARY
This report details the economic and fiscal consequences of the Patient Protection and 
Affordable Care Act (PPACA,) signed into law by President Barack Obama on March 23, 
2010.  Several rationales were offered in support of this legislation, including that it would 
lead to the creation of jobs and the reduction of the federal budget deficit.  This report 
shows that the health care law will achieve neither effect.  
Economic Consequences.  Consistent with respected economists’ forecasts, the health 
care law contains a number of provisions that will eliminate jobs, reduce hours and wages, 
and limit future job creation.  Specifically, the law: 

 Penalizes employers for failing to offer coverage deemed acceptable by the 
government;  

 Imposes burdensome mandates on small businesses, including new paperwork 
requirements; and  

 Compounds the uncertainty employers and entrepreneurs are facing amid a 
challenging economic climate.
   
Independent analyses have determined that the health care law will cause significant job 
losses for the U.S. economy: the non-partisan Congressional Budget Office has 
determined that the law will reduce the “amount of labor used in the economy by … 
roughly half a percent...,” an estimate that adds up to roughly 650,000 jobs lost.
i  A study by the National Federation of Independent Businesses (NFIB), the nation’s largest small 
business association, found that the law’s employer mandate alone could lead to the 
elimination of 1.6 million jobs, with 66 percent of those coming from small businesses.
ii By comparison, then-Speaker Nancy Pelosi (D-CA) stated that “in its life,” the health care 
law would “create 4 million jobs – 400,000 jobs almost immediately.”
iii Fiscal Consequences.  Studies of the health care law reveal that it will cost taxpayers 
more than originally estimated, and may exacerbate the nation’s dire fiscal condition.  
Specifically, the law:  

 Relies on accounting gimmicks that mask its true cost to taxpayers;  

 Double-counts savings from Medicare that are widely viewed as unsustainable; 
and  

 Requires additional government spending to direct its implementation. 

According to an analysis by House Budget Committee Republicans, the health care law 
will cost the nation $2.6 trillion when fully implemented, and add $701 billion to the 
deficit in its first ten years.
iv  By comparison, President Obama stated during a joint 
session of Congress on September 9, 2009 that he would not sign health care reform that 
“adds one dime to our deficits – either now or in the future.”v
   
Recommendations.  The evidence is overwhelming: Immediate steps should be taken to 
repeal the health care law and replace it with common-sense reforms to lower costs and 
protect jobs.  Such measures would ease uncertainty for employers and entrepreneurs, and 
give Congress an opportunity to take the necessary measures to address the nation’s fiscal 
challenges.

ECONOMIC CONSEQUENCES  
The health care law will cause significant job losses for the U.S. economy: the 
Congressional Budget Office has determined that the law will reduce the “amount of labor 
used in the economy by … roughly half a percent...,” an estimate that adds up to roughly 
650,000 jobs lost.vi   A study by the National Federation of Independent Businesses 
(NFIB), the nation’s largest small business association, found that an employer mandate 
alone could lead to the elimination of 1.6 million jobs between 2009 and 2014, with 66 
percent of those coming from small businesses. ii  By comparison, then-Speaker Nancy 
Pelosi (D-CA) stated that “in its life,” the health care law would “create 4 million jobs -- 
400,000 jobs almost immediately.” viii 

Speaker Pelosi’s estimates were derived from a Center for American Progress (CAP) 
analysis showing that the health care law would lead to the creation of 250,000 to 400,000 
jobs over ten years.ix    This study relies on cost estimates that are widely viewed as 
unsubstantiated.  An analysis by Americans for Tax Reform and the Beacon Hill Institute 
using CAP’s methodology, but with what was deemed more realistic cost estimates, finds 
that the law will destroy between 120,000 and 700,000 jobs over the same ten-year 
period.x

Around the time these conflicting estimates were released, more than 130 respected 
economists addressed a letter to President Obama stating “the health care bill contains a 
number of provisions that will eliminate jobs, reduce hours and wages, and limit future job 
creation.”xi   According to the letter, those job-killing provisions include:  

“New Taxes.  The bill raises taxes by almost $500 billion over ten years.  
A significant portion of these tax increases will fall on small business 
owners, reducing capital and limiting economic growth and hiring. 

“New and Increased Medicare Taxes.  An increase in the Medicare 
payroll tax included in the bill will affect small businesses employing 
millions of Americans.  Over time, higher payroll taxes will decrease 
wages for these employees.  And a new Medicare tax on investment 
income such as interest, dividends, and capital gains proposed by 
President Obama and likely included in the bill will threaten jobs and 
decrease economic growth. 

“Employer Mandate.  The bill will impose a tax of $2,000 per employee 
on employers with more than 50 employees that do not provide health 
insurance.  The bill will also tax employers that offer health coverage 
deemed ‘unaffordable’ by the government.  These new taxes on employers 
will reduce employment or be passed on to workers in the form of lower 
wages or reduced hours.” 

Sections 1513 and 1003 of the health care legislation that passed Congress contain new 
mandates that penalize employers for failing to offer their workers coverage deemed 
‘acceptable.’  Businesses with more than 50 employees that fail to adhere to federal 
guidelines will be penalized $2,000 per full-time employee.  The first 30 employees are 
exempted.  Under one scenario, then, employers that expand from 50 to 52 workers 
without offering sufficient coverage would have to pay annual penalties of $44,000.  
Employers with 55 to 60 workers stand to benefit from finding ways to reduce their 
workforce to under 50. 

What’s more, even if an employer does provide coverage, a $3,000 penalty is levied for 
each full-time employee who still elects to receive subsidized coverage.  The legislation 
provides a strict definition of ‘full-time worker’ as someone who works at least four days 
per week.  

One small business owner, Gail Johnson, president & CEO of Rainbow Station, Inc., a 
nationally accredited preschool and school age recreation franchise, told members of 
Congress last spring that the employer mandate would slow or stall the growth of small 
and medium-sized firms like hers: 

“As crafted, I believe the new law is intended to eliminate all flexibility 
for employers to design a benefits package for our employees that is 
affordable. … This represents a significant government intrusion into the 
benefits decisions of employers.  In order to comply, small employers will 
be faced with decisions such as cutting back wages, forgoing new hiring 
and raising prices for services.  These measures will further stunt any 
economic recovery and curtail future job growth.”xii

This analysis has proven true for small- and medium-sized businesses around the 
country.  Consider the case of White Castle.  The hamburger chain has stated that 
the law’s employer mandate “will eat up roughly 55 percent of its yearly net 
income after 2014.”xiii   The company’s spokesman noted that this “will make it 
hard for the company to maintain its 421 restaurants, let alone create new jobs.”
xiv  According to the National Council of Chain Restaurants, “the entire restaurant 
industry will have trouble dealing with costs the bill imposes in 2014,” and it will 
be “expensive either way” for businesses, workers, and customers.xv
  
An independent report by Mercer Consulting has concluded that the retail industry 
will face new challenges on account of the health care law.  The study highlights 
how many retailers are likely not currently in compliance with the requirements of 
the law, as well as the difficulty for employers acting in good faith to know 
whether they will be in compliance:  

“The consultancy analyzed data from its annual survey of employer 
health plans and found that 62% of retailers face problems with at least 
one of three big requirements of the new law: to provide ‘affordable’ 
coverage, to offer coverage for part-time employees working at least 30 
hours per week, and to go above and  beyond the limited benefit plans 
sometimes offered to part-timers. 

“The mandate to provide ‘affordable’ coverage is one of the knottier 
issues.  Employers aren’t supposed to charge their full-time employees 
more than 9.5% of household income for coverage.  If they do, and if even 
one employee receives government aid to purchase individual coverage 
through an exchange, the employer gets socked with a penalty.  But, 
Mercer notes, household income is not a figure that employers typically 
know.”xvi
  
To assist retailers, the National Retail Federation (NRF) has created a “Health Mandate 
Cost Calculator” to help employers and entrepreneurs understand their exposure to the 
health care law’s penalties.xvii   An NRF spokesman said, “We do worry about this 
discouraging employment, particularly when employment hasn't taken off.”xviii

Impact on Low-Wage Workers 
Evidence indicates that the health care law is likely to affect low-wage workers more than 
other workers.  By discouraging the hiring of new employees, the law is pushing 
employers and entrepreneurs to find new ways to save on costs.  As economist Diana 
Furchtgott-Roth of the Hudson Institute put it: “With higher-skill jobs, employers can 
offer the required benefits and pay for them by cutting the wage.  But low-wage jobs in 
the restaurant and retail sectors leave little room for cuts in wages.”
xix   Employers, then, have little incentive to cover low-wage workers, an unfortunate trend at a time when 
unemployment among adults without high school diplomas is currently 15.7 percent, more 
than three times as high as the rate for college graduates.  Unemployment among teens is 
25 percent, also well above the national average.xx

CBO has specifically noted how the employer mandate will disproportionately affect lowwage workers:  

“Those penalties, whose amounts are based on the number of full-time 
workers in the firm, will, over time, generally be passed on to workers 
through reductions in wages or other forms of compensation.  However, 
firms generally cannot reduce workers’ wages below the minimum wage, 
which will probably cause some employers to respond by hiring fewer 
low-wage workers.  Alternatively, because firms are penalized only if 
their full-time employees receive subsidies from exchanges, some firms 
may instead hire more part-time or seasonal employees.”xxi

This analysis is echoed by Dr. Kate Baicker, a member of CBO’s panel of health advisers, 
whose research has found that “when it is not possible to reduce wages, employers may 
respond in other ways: employment can be reduced for workers whose wages cannot be 
lowered, outsourcing and reliance on temp agencies may increase, and workers can be 
moved into part-time jobs where mandates do not apply.”xxii

Experts at the Congressional Research Service (CRS) expect this as well, stating in a 
paper on “Health Reform and Small Business” that “economic theory suggests the penalty 
should ultimately be passed through [as] lower wages [to an employee].  But, if firms 
cannot pass on the cost in lower wages, the higher cost of workers may lead firms to 
reduce output and the number of workers.  Unfortunately, CRS estimates that about one in 
five employees work for a business that could be negatively impacted by the new employer 
penalty.”xxiii
  
NFIB has found that an employer mandate could ultimately lead to the elimination of 1.6 
million jobs between 2009 and 2014.xxiv   Specifically, NFIB determined that:  

 Of the more than 1.6 million jobs lost between 2009 and 2013, small businesses 
would account for more than 1 million, 66 percent, of all jobs lost. 

 U.S. real GDP would contract by approximately $200 billion between 2009 and 
2013.
 Small businesses would lose roughly $113 billion in real output and account for 
56 percent of all real output lost.
 Labor intensive industries (e.g. construction or restaurant) and businesses with 20 
– 99 employees would experience the most job loss. 

Evaluating the ‘1099 Mandate’  
Section 9006 of the health care law requires employers and entrepreneurs to submit to the 
Internal Revenue Service (IRS) a tax reporting form for every vendor with which it has 
more than $600 in transactions in a year.  Employers will have to track down the taxpayer 
identification number of each vendor and may be responsible for withholding payments 
from the vendor if requested by the IRS.
   
Put more plainly, if a landscaper wants to buy a new lawnmower, or a restaurant needs a 
new ice-maker, they have to report that to the federal government.  If you’re a Mom-andPop grocery store, and you buy $1000 worth of merchandise each from 15 different 
vendors, that’s 15 different forms you have to file.  This will inevitably create higher 
compliance costs for small businesses.  
  
In July 2010, the Internal Revenue Service’s National Taxpayer Advocate highlighted 
several consequences of the 1099 mandate:
 “[T]he new reporting burden, particularly as it falls on small businesses, may 
turn out to be disproportionate as compared with any resulting improvement in 
tax compliance.” 

 “[S]mall businesses may have to acquire new software or pay for additional 
accounting services, incurring additional costs.” 

 “In our view, it is highly likely that the IRS will improperly assess penalties that 
it must abate later, after great expenditure of taxpayer and IRS time and effort.” 
  
 “[S]mall businesses that lack the capacity to track customer purchases may lose 
customers, leaving the economy with more large national vendors and less local 
competition.”xxv
  
Karen Mills, the Administrator of the Small Business Administration, has advocated for 
repeal of the 1099 mandate, calling it “burdensome” and conceding it adds up to “too 
much paperwork, too much filing.” xxvi   Small businesses around the country have testified 
to challenges surrounding the new paperwork requirements:  

 “Chip Rankin, the president and owner of EBC Carpet Services Corp., finds fault 
with a particular provision … that mandates all companies to issue tax forms, 
known as 1099s, to any individual or corporation from which they purchase goods 
or services worth more than $600. … ‘The lawmakers are going to have to find a 
way to pay for this thing that they’ve created, but is it going to help? No,’ said 
Rankin… ‘There are going to be a lot of businesses that are small and mid-sized 
that will hurt from this.’ … ‘We’ve got it coming and going,’ he said. ‘A portion 
of some of my workers’ jobs will now have to go toward taking care of this.’”
xxvii

 “That means local start-ups and mom-and-pop shops with limited bookkeeping 
resources would have to collect tax ID information and file 1099 forms for every 
gas station or office supply store they spend $600 with to support their business.  
‘There has got to be a better way,’ said Ed Fritz, owner of Centerville Coin & 
Jewelry Connection. ‘It’s just creating a big headache for small business 
owners.’”xxviii

Prolonging Economic Uncertainty
The health care law provides for the creation of nearly 160 boards, bureaus, bureaucracies, 
and commissions.  In August 2010, the Joint Economic Committee minority released the 
following chart xxix  detailing how the law operates:  
   
Overall, the federal government is expected to issue roughly 10,000 pages of new 
regulations to govern the implementation of the new law.  Small businesses around the 
country are concerned about the implications of these new regulations: 
  
 “[S]ome business owners say they’re holding back on creating new jobs because 
they’re unsure if the newly added provisions will increase their health premiums 
or those of their customers.  Among them is Rick Ledesma, owner of DataLogic 
Software Inc., a software company in Harlingen, Texas, with 15 employees.  ‘We 
can’t plan to hire in this environment,’ he says. ‘It’s not just necessarily your 
business but also the people you do business with who might be impacted. If it 
impacts them, it will impact you indirectly.’”xxx

 “[Omaha Friendly Services owner Paul Fraynd] and Adam Kalyn, the company’s 
manager…said they have been fearful of what the newly passed health care 
legislation could mean for the firm. … ‘I think (the health care bill) very much 
hurts small businesses,’ Kalyn said. … ‘It’s very adversarial to small businesses 
right now.’”xxxi

 “Ron Ruff, president of Winfree, Ruff & Associates … said he is concerned about 
potential penalties that could be assessed to his business for not fully complying 
with the new [health care] guidelines. ‘My concern is a lot of these regulations 
aren’t written yet.  Weekly, monthly, we hear new things come out.  It’s a big 
unknown in the future,’ he said.  ‘There’s a lot of unknowns; that’s the scary part 
about this.’”xxxii

Evaluating the Small Business Tax Credit    
Sections 1421 and 10105 of the health care bills passed by Congress provide for the 
creation of a tax credit to help small businesses afford the cost of covering their workers.  
Evidence suggests, however, this tax credit actually has the opposite effect than was 
intended: it acts as a disincentive to increase wages and hire additional workers.  A NFIB 
analysis xxxiii  determined that the tax credit “will do little to nothing to make purchasing 
insurance more affordable for small firms”:  

 Early estimates by CBO indicated that just 12 percent of small business workers 
would benefit.
  
 The credit is very restrictive and requires small business owners to meet three 
complicated “tests” to qualify for any portion of the credit. 
 The credit is only available for a maximum of six years, but according to the 
actuaries at the Centers for Medicare and Medicaid Services, health care costs will 
continue to increase well after those six years. 
  
Response to the small business tax credit has been described as “tepid” because 
“the credit starts to phase out for companies that pay average annual wages of 
more than $25,000 or employ more than 25 workers.  The value of the benefit 
declines quickly, so many business owners in high-cost states get no tax break, 
and those elsewhere often say the credit is too small to make much of a 
difference.”xxxiv

Experts at the Congressional Research Service have determined that, by 2016, just 
three million workers – or one percent of the nation’s total population – will 
benefit from the credit.xxxv

Evaluating the Impact of Rising Costs on Large Employers 
In December 2009, major U.S. employers wrote a letter to then-Speaker Nancy Pelosi (DCA) and Senate Majority Leader Harry Reid (D-NV)  warning that the health care law’s 
massive tax increases would hurt the economy.xxxvi   In the hours after President Obama’s 
signing ceremony took place, businesses began publicly identifying losses in the millions 
– all on account of new tax increases in the law: 
 AT&T, $1 billion.  
 Verizon, $970 million.  
 Deere & Co., $150 million.  
 Boeing, $150 million.  
 Caterpillar, $100 million.  
 Prudential Financial Inc.,  
$100 million.  
 Lockheed Martin, $96 million.  
 Exelon, $65 million.  
 3M Co., $85-$90 million.  
 Ingersoll-Rand, $41 million.  
 AK Steel, $31 million.  
 Eaton, $25 million.  
 Illinois Tool Works, $22 million.  
 Xcel, $17 million.  
 Valero, $15-$20 million.  
 Honeywell, $13 million.  
 Goodrich, $10 million.  
 Carpenter, $5.9 million.  
 Allegheny Technologies, 
$5 million.xxxvii

Health care costs are expected to continue rising for employers in 2011, a trend attributed to 
the health care law.  A recently released Hewitt Associates report xxxviii  forecasts a nine 
percent increase in costs for employers, the highest level in five years.  In turn, employers 
are likely to ask workers to take on 12 percent more of these costs.  The consequences of 
these cost increases are already being felt, with companies warning employees they will 
have to pay more for health care, and some going so far as to drop retirees:  
  
 Boeing. “In a letter mailed to employees late last week, the company cited the 
overhaul as part of the reason it is asking some 90,000 nonunion workers to 
pay significantly more for their health plan next year.  ‘The newly enacted 
health care reform legislation …  is also adding cost pressure as requirements 
of the new law are phased in over the next several years,’ wrote Rick Stephens, 
Boeing’s senior vice president for human resources.”xxxix

 3M. “3M Co. confirmed it would eventually stop offering its health-insurance 
plan to retirees, citing the federal health overhaul as a factor.”xl

 McDonalds.  “McDonald’s Corp. has warned federal regulators that it could 
drop its health insurance plan for nearly 30,000 hourly restaurant workers 
unless regulators waive a new requirement of the U.S. health overhaul.  The 
move is one of the clearest indications that new rules may disrupt workers’ 
health plans as the law ripples through the real world.”xli

Evaluating the Excise Tax on Medical Device Manufacturers
Section 1405 of the health care law contains a 2.3 percent excise tax on medical device 
manufacturers that companies warn will lead to considerable job losses in the industry: 

“A 2.3 percent excise tax on companies that supply medical devices like 
heart defibrillators and surgical tools to hospitals, health centers and 
ambulance services will cost medical device manufacturers an estimated 
$20 billion in new taxes over the next decade.  And they say that will force 
them to lay off workers and curb the research and development of new 
medical tools. 

“‘Many small to midsize medical device companies will owe more to the 
federal government in taxes than they make in profits,’ said Mark Leahy of 
the Medical Device Manufacturers Association.  ‘We're talking about a 2.3 
percent tax on total sales irrespective of whether a company is making a 
profit.’ …
“Richard Packer, CEO of Chelmsford, Mass.-based Zoll Medical Corp., 
which employs 650 workers in Massachusetts, said the tax will put his 
company, which produces defibrillators, ‘at a break-even position’ and 
dismissed the idea that companies should be grateful the tax wasn't 
higher.”xlii

The Issue with Government Waivers
The Department of Health and Human Services (HHS) is empowered by the health care law 
to grant waivers exempting entities from being required to comply with its mandates.  To 
date, HHS has granted 222 such waivers, which last for one year.  The complete list of 
recipients – including McDonald’s, which had previously warned it would drop coverage – 
can be viewed on the HHS website.xliii   A number of unions are also on the list of waiver 
recipients, including:  

 The Service Employees Benefit Fund 
 The Local 25 SEIU Welfare Fund  
 United Food and Commercial Workers Allied Trade Health and Welfare Trust Fund 
 International Brotherhood of Electrical Workers Union No. 915 
 Asbestos Workers Local 53 Welfare Fund 
 Employees Security Fund 
 Plumbers and Pipefitters Local 123 Welfare Fund 
 United Food and Commercial Workers Local 227 
 United Food and Commercial Workers Local 455 (Maximus) 
 United Food and Commercial Workers Local 1262 
 Musicians Health Fund Local 802 
 Hospitality Benefit Fund Local 17 
 Transport Workers Union 
 United Federation of Teachers Welfare Fund 
 International Union of Painters and Allied Trades (AFL-CIO)   
   
One analyst stated that the waivers prove that the health care law is a job-killer: “When you 
put the power in the hands of the administration and the bureaucracy to decide who is going 
to obey the law and who isn’t going to obey the law, you’ve vitiated the purpose of the 
entire law in the first place.  … What they’ve done here is admitted that they cannot create 
jobs with this.  They know that this is a job-killer.”xliv
   
Findings  
With nearly one in ten Americans looking for work, evidence strongly indicates that the 
health care law will continue to increase strain on employers and entrepreneurs.  The law’s 
impact will especially be felt by the most vulnerable in our nation’s workforce and small 
businesses, which create the overwhelming majority of the nation’s new jobs. 

FISCAL CONSEQUENCES
The government takeover of health care is exacerbating the already dire fiscal challenges 
our nation faces.  If fully implemented, the health care law will cost taxpayers $2.6 trillion, 
while adding $701 billion to the deficit in its first ten years.
xlv   By comparison, President Obama told a joint session of Congress on 
September 9, 2009, that he would not sign health care reform that “adds one dime to our deficits – either now or in the future.”xlvi


Revisiting CBO’s Initial Analysis  
Claims that the health care law would lower the deficit were based primarily on an analysis 
by the non-partisan Congressional Budget Office (CBO) showing costs of $940 billion over 
ten years and deficit reduction of $143 billion over the same period.xlvii

An analysis by House Budget Committee Republicans, however, reveals the true cost of the 
health care law – if fully implemented – to be $2.6 trillion.  The nearby chart shows the 
rapid growth in the cost of the law over time.
xlviii
  
This chart also demonstrates how the law’s authors used CBO’s methodology to their 
advantage.  CBO evaluates legislation over a ten-year budget window.  The health care 
law’s most significant benefits don’t take effect for four years, however, meaning that the 
law requires ten years of tax increases and ten years of Medicare cuts to pay for six years of 
spending.  This trend is reflected in the chart below. 

Budget Committee Republicans’ analysis also uncovered that the health 
care law will actually increase the deficit by $701 billion over the next ten 
years.  

 This figure is reached after balancing the CBO savings figure against a 
number of accounting gimmicks that were ineligible for inclusion in CBO’s 
original analysis:  

 $53 billion of savings is claimed by counting increased Social Security payroll 
revenues.  These dollars, however, are already spoken for by Social Security 
beneficiaries, meaning either that benefits will not be paid out, or the law’s authors 
are double-counting the savings. 

 $70 billion of savings is claimed from the newly created Community Living 
Assistance Services and Support (CLASS) program.  These savings are achieved 
by collecting premiums immediately and beginning to pay out benefits after five 
years, hence why savings appears in the ten-year budget window.  Over time, 
however, as CBO has found, this new entitlement “would eventually lead to net 
outlays when benefits exceed premiums.”xlix   The Washington Post has said of the 
CLASS program: “These are not ‘savings’ that can be honestly counted on the 
balance sheet of reform.”l   Senate Budget Chairman Kent Conrad (D-ND) has 
called CLASS “a Ponzi scheme of the first order.” li

 $115 billion in new government spending required to implement the health 
care law is not factored into CBO’s initial estimate.  On May 11, CBO notified 
Congress that additional discretionary spending would be required to implement the 
government takeover of health care.  This includes roughly $9 billion for both the 
Internal Revenue Service (IRS) and the Department of Health and Human Services 
(HHS).lii

 $398 billion is claimed in Medicare Hospital Insurance Fund savings.  CBO has 
previously noted that “to describe the full amount of HI trust fund savings as both 
improving the government’s ability to pay future Medicare benefits and financing 
new spending outside of Medicare would essentially double-count a large share of 
those savings and thus overstate the improvement in the government’s fiscal 
position.”liii

The CBO estimate also does not account for the cost of the scheduled cut in Medicare 
payments to physicians (the ‘doc fix.’)  

There are additional provisions in the law that present the possibility of cost overruns.  
Section 1101 provides for the establishment of a “temporary high-risk insurance health 
insurance program” to benefit patients with pre-existing conditions.  Under the law, 
Congress allotted $5 billion to get the program up and running, a sum that evidence shows 
may be insufficient.   

Two months prior to final passage, Medicare’s chief actuary, Richard S. Foster, determined 
that the $5 billion sum would be “exhausted” within two years of the program’s 
implementation, resulting in “substantial premium increases” that would “limit further 
participation.”liv   CBO echoed Foster’s analysis in a June 21, 2010 letter, stating “that the 
funding available for subsidies would not be sufficient to cover the costs of all applicants 
through 2013.”lv  Nearly half of the states have opted not to enroll in the program on 
account of cost concerns.   

Recent reports have indicated that “in at least a few states, claims for medical care covered 
by the ‘high-risk pools’ are proving very costly, and it is an open question whether the $5 
billion allotted by Congress to start up the plans will be sufficient.”lvi

In a separate analysis, CBO director Douglas Holtz-Eakin found that the health care law 
“will raise the deficit by more than $500 billion during the first ten years and by nearly $1.5 
trillion in the following decade.”  He concludes:  “In light of the precarious state of federal 
fiscal affairs and the enormous downside risks presented by the act, one can only hope that 
every future effort is devoted to reducing its budgetary footprint.”lvii
  
In May 2010, CBO director Douglas Elmendorf gave a presentation to the Institute of 
Medicine in which he defended his office’s initial finding that the health care law would 
lower the deficit over ten years.  At the same time, he provided a more complete picture of 
the health care law’s impact on the budget, concluding that the law does little to reduce the 
pressure rising health care costs are placing on the federal budget deficit.
lviii
  
Cost Analyses 
In April 2010, Medicare’s Office of the Actuary released an analysis showing that the new 
law would increase national health care spending by more than $311 billion over the next 
ten years.lix   Specifically, chief actuary Richard Foster’s report concluded that:  
 The law’s new taxes would lead to higher premiums for patients.
 The CLASS program, one of the law’s cost-savers, carries “a very serious risk” of 
insolvency. 

 Roughly 15 percent of hospitals and providers would go into the red, “possibly 
jeopardizing access” for seniors. 

Foster reserved his “most sober assessments” for Medicare.lx   Foster found the law’s 
Medicare cuts to be unsustainable, their long-term viability “doubtful.”lxi   Foster echoed the 
CBO’s finding that savings from the program cannot be double-counted.  

In August 2010, Medicare’s trustees stated in their annual report that the solvency of the 
Medicare Hospital Insurance Fund had been extended by 12 years.  HHS Secretary 
Kathleen Sebelius welcomed the trustees’ analysis, stating that the savings could be 
attributed “in large part to the Affordable Care Act.”lxii
  
For his part, Foster appended to the trustees’ report his view that it does not “represent a 
reasonable expectation for actual program operations in either the short range . . . or the 
long range.”lxiii   He went so far as to highlight an “alternative scenario”lxiv showing that 
Medicare’s share of the economy would rise 60 percent over the next three decades, more 
than double the rate forecasted by the trustees. 

Other Medicare experts concur with Foster’s analysis.  Dr. Tom Saving, a Medicare trustee 
from 2000- 2007, said that “while some savings are necessary to shore up the Medicare 
program, we know that the new law’s unrealistic cuts will hurt care for seniors.  Instead of 
reducing the existing program’s tremendous burden on taxpayers, the new law commits 
future taxpayers to a bigger burden through a bigger trust fund.”lxv

In August 2010, reports surfaced that the health care law’s most fervent supporters had 
backed away from claims the law would reduce the deficit as promised: “key White House 
allies are dramatically shifting their attempts to defend health care legislation, abandoning 
claims that it will reduce costs and the deficit and instead stressing a promise to ‘improve 
it.’”  A PowerPoint presentation put together by Democratic pollsters conceded “that the 
fiscal and economic arguments that were the White House’s first and most aggressive sales 
pitch have essentially failed.”lxvi

In December, President Obama’s National Commission on Fiscal Responsibility and 
Reform addressed the health care law in their final report.  Calling federal health spending 
“our single largest fiscal challenge,” the commission found that the Administration’s 
projections “count on large phantom savings.”lxvii   Echoing CBO director Elmendorf’s May 
presentation, the commission calls for “a number of other reforms to reduce federal health 
spending and slow the growth of health care costs more broadly.”   

Findings 
Respected economists have argued for the need to cut spending and begin tackling the 
nation’s debt load in order to boost confidence and encourage economic growth.  Evidence 
suggests that the health care law is not well-positioned to improve the nation’s fiscal health.  
Instead of lowering costs and reducing the deficit as promised, the health care law has left 
taxpayers on the hook for more spending and more debt.  

CONCLUSION
The evidence is overwhelming:  immediate steps should be taken to repeal the health care 
law and replace it with common-sense reforms to lower costs and protect jobs.  Such 
measures would ease uncertainty for employers and entrepreneurs, and give Congress an 
opportunity to take the necessary measures to address the nation’s fiscal challenges. 
On January 12, 2011, the House of Representatives is scheduled to take two votes related to 
replacing President Obama’s health care law (P.L. 111-148) with common sense reforms 
that will actually lower costs and make health care more affordable for all Americans. 
The first, the Repealing the Job-Killing Health Care Law Act, is sponsored by Majority 
Leader Eric Cantor (R-VA).lxviii The second vote comes on a resolution lxix  calling for congressional committees “to report legislation replacing the job-killing health care law.”  The committees of jurisdiction – 
Education & the Workforce, Energy & Commerce, and Ways & Means – are further 
instructed to produce legislation that will, among other key reforms: 

 “foster economic growth and private sector job creation by eliminating job-killing 
policies and regulations;” 

 “lower health care premiums through increased competition and choice;” 

 “preserve a patient’s ability to keep his or her health plan if he or she likes it;” 

 “provide people with pre-existing conditions access to affordable health coverage;” 

 “reform the medical liability system to reduce unnecessary and wasteful health care 
spending;” 

 “increase the number of insured Americans;” and 

 “provide the States great flexibility to administer Medicaid programs” 

These reforms mirror better solutions House Republicans supported during the health care 
debate in the 111th  Congress.   

Rep. John Boehner (R-OH)  
Speaker of the House

Rep. Eric Cantor (R-VA)  
House Majority Leader  

Rep. Dave Camp (R-MI)
Chairman, Committee on Ways & Means

Rep. John Kline (R-MN)
Chairman, Committee on Education & 
the Workforce

Rep. Paul Ryan (R-WI)
Chairman, Committee on the Budget

Rep. Fred Upton (R-MI)
Chairman, Committee on Energy 
&Commerce




ENDNOTES
                                                           
i
 “The Budget and Economic Outlook: An Update,” August 2010. http://cbo.gov/ftpdocs/117xx/doc11705/08-18-Update.pdf   


iii  Remarks at Bipartisan Meeting at Blair House on Health Insurance Reform, February 25, 2010.  

iv  “The Budget Record of the 111th  Congress,” September 29, 2010. 
v
 Remarks by the President to a Joint Session of Congress on Health Care, September 9, 2009.  
vi
 “The Budget and Economic Outlook: An Update,” August 2010. http://cbo.gov/ftpdocs/117xx/doc11705/08-18-Update.pdf   
vii
viii
 Remarks at Bipartisan Meeting at Blair House on Health Insurance Reform, February 25, 2010.  
ix
 “New Jobs Through Better Health Care,” January 8, 2010. 
x
 “Study: Health Care Legislation Will Cost up to 700,000 Jobs by 2019,” March 19, 2010. 
xi
 Letter to President Obama, March 18, 2010.  
xii
 Press Release, “Blunt Chairs Forum to Investigate True Cost of Health Care Law,” May 27, 2010. 
xiii
 Cleveland Plain Dealer, July 4, 2010.  
xiv
 Ibid. 
xv
 Ibid. 
xvi
xvii
xviii
 Cleveland Plain Dealer, July 4, 2010.  
xix
 Diana Furchtgott-Roth, Washington Examiner, December 16, 2010. 
xx
 BLS data 
xxi
 “The Budget and Economic Outlook: An Update,” August 2010.  
xxii
 “Myths and Misconceptions about U.S. Health Insurance,” Health Affairs, 2008. 
xxiii
 “Health Reform and Small Business,” April 8, 2010.  
xxiv
xxv
 Mid-Year Report to Congress, July 7, 2010. http://www.irs.gov/newsroom/article/0,,id=225270,00.html
xxvi

xxvii
The Delaware News-Journal, 10/31/10. 
xxviii
xxix
 Joint Economic Committee minority release, August 2, 2010.  
xxx
The Wall Street Journal, September 23, 1010.  
xxxi
 Omaha World-Herald, November 7, 2010.  http://www.omaha.com/article/20101107/MONEY/711079938
xxxii
Lancaster Eagle-Gazette, November 7, 2010.  
xxxiii
xxxiv
xxxv
 “Summary of Small Business Health Insurance Tax Credit Under PPACA,” April 5, 2010.  
xxxvi
xxxvii
 Specific citations for this list can be found here: 
xxxviii
xxxix
xl
The Wall Street Journal, October 4, 2010.  
xli
The Wall Street Journal, September 30, 2010. 
xlii
Associated Press, June 7, 2010.  
xliii
xliv
xlv
 “The Budget Record of the 111
th
 Congress,” September 29, 2010. 
xlvi
 Remarks by the President to a Joint Session of Congress on Health Care, September 9, 2009.  
xlvii
xlviii
 This chart is from a report issued by Sen. Tom Coburn, M.D. (R-OK) and Sen. John Barrasso, M.D. (R-WY.) 
xlix
 Letter to Rep. Charles Rangel (D-NY), October 29, 2009. 
l
li
lii
 Letter to Rep. Jerry Lewis, May 11, 2010. http://www.cbo.gov/ftpdocs/114xx/doc11490/LewisLtr_HR3590.pdf
liii
 Director’s Blog, December 23, 2009. http://cboblog.cbo.gov/?p=448
liv
 “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Passed by the Senate on December 24, 
lv
lvi
lvii
lviii
 Presentation to the Institute of Medicine, May 26, 2010. http://www.cbo.gov/ftpdocs/115xx/doc11544/Presentation5-26-
lix
 “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Amended,” April 22, 2010. 
lx
lxii
lxiii
https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf
lxiv
 “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare 
lxvi
lxvii
 “The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform,” December 1, 2010. 
lxviii
 H.R. 2, the Repealing the Job-Killing Health Care Law Act is available here: http://rulesrepublicans.house.gov/Legislation/legislationDetails.aspx?NewsID=60
lxix
 H. Res. 9, “Instructing certain committees to report legislation replacing the job-killing health care law,” is available here: 

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