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Health Insurance Reform Daily Mythbuster: Republican Study Committee Claims

House Republicans have churned out their latest myths and scare tactics about health insurance reform.  In fact, they took  time to produce a list of distortions about the Affordable Health Care for America Act before they even released their own ideas--a substitute bill that USA Today calls “a missed opportunity.”  Here's a myth-by-myth response to the Republican Study Committee.

MYTH:  H.R. 3962 harms small businesses by raising taxes and making them cover workers.

FACT:  Both claims are wrong.  The House bill is good for small businesses and for working Americans - allowing them access to affordable, large-group rates in their health insurance policies and insurance plans with better benefits, and eliminating discriminatory rating practices.

According to the nonpartisan Joint Committee on Taxation (JCT), the surcharge would not affect 98.8 percent of all small businesses. Only 1.2 percent of the wealthiest Americans with any income from a sole proprietorship, a partnership or an s corporation would be affected by the health care surcharge. The 1.2 percent wealthiest small business owners will only be subject to the health care surcharge on dollars earned above $1 million for a couple and $500,000 for an individual. 

Approximately 86 percent of all businesses are exempt from the shared responsibility requirement to cover or contribute to coverage for their workers and family members - all small businesses with payrolls up to $500,000.  Those small businesses with payrolls up to $750,000 pay only a graduated fee for not meeting the shared responsibility requirement.Those businesses that are subject to the requirement or that choose to offer coverage will have access to the insurance reforms and other consumer protections, transparency and lower administrative costs in the Exchange to make coverage more affordable and meaningful for everyone.  Additionally, many small businesses will be eligible for a new tax credit to help firms provide health coverage.

MYTH:  Burdensome medical device tax is a “wheelchair tax.”

FACT:  In providing health insurance to 36 million more Americans, this legislation will improve patient access to medical devices and bring significant financial benefit to the medical device industry.  The bill raises $20 billion over ten years to help cover the cost of expanding insurance through an excise tax on an industry that will generate an estimated $1.5 trillion in revenue over that time period.  Sales of wheelchairs and other medical devices to individuals are exempt from the tax; the tax only applies to sales of medical devices to health care institutions, such as hospitals. 

MYTH:  New taxes on Health Savings Accounts.

FACT: The legislation allows Americans to keep HSAs and FSA's, and continue to use these tax-free dollars to make payments for reimbursement for doctor, hospital, and prescription drug expenses.  H.R. 3962 eliminates a tax loophole most Americans don't get for the purchase of over-the-counter medications through health flexible spending accounts (health FSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs).  Currently, such accounts can be used for the tax-free payment of medicine available without a prescription, such as aspirin, sunscreen, laxatives, cough and cold medicine, antacid tablets, allergy medication, etc.  These are items that most Americans use throughout the year but that are only available using tax-free dollars to those who can afford to make contributions to an HSA or a health FSA (if their employer even offers a health FSA), or those whose employer offers an HRA benefit. 

The savings generated by closing this loophole amounts to $5 billion over the next 10 years.  H.R. 3962 uses these and other savings to improve the health care system by providing tax credits to small employers who want to offer coverage to their employees and by providing affordability credits to those who do not have access to employer-sponsored health insurance.

MYTH:  The bill creates a new “voluntary” payroll tax to fund a new long-term care program--requiring mandatory spending--aka a new entitlement.   

FACT:    The bill creates a new, voluntary benefit to provide long-term care assistance: the Community Living Assistance Services and Supports (CLASS) program.  The program will provide benefits to adults who become functionally disabled.  It will be funded through voluntary premium contributions which may be deducted from enrollees' paychecks. There is no requirement that any individual or business pay for or take part in this program.    It is not a tax.

MYTH:  The government will fund abortions.

FACT:  The House bill continues longstanding federal policy, which bars federal funding for abortions except in the case of rape, incest, or to save the life of the woman.  The bill also explicitly prohibits abortion services from being included in the basic benefits package on the Exchange.  Each private insurance plan can decide on its own whether to cover abortion beyond those cases of rape, incest, or to save the life of the woman.  For plans that chose to cover those abortions, only private premium dollars - not taxpayer dollars -- may be used to cover the service.    

MYTH:  Members of Congress are exempt from the “Public Option.”

FACT:  To the contrary, provisions were added to the bill to ensure that Members of Congress have the choice to enter the “public option” on the Health Insurance Exchange (rather than automatically being in the current Federal Employees Health Benefits Plan.  If these provisions had not been added, Members would have automatically been in their employer-provided plan.  It is true that the bill does not require Members of Congress to enroll in the public option.  However, the bill does not require ANYONE to enroll in the public health insurance option.   

MYTH:  Health reform uses budget gimmicks, and leaves reimbursement rates for doctors up in the air.

FACT: The health care reform legislation is fully paid for, and will, according to the non-partisan Congressional Budget Office, create a budget surplus over the next decade. 

Absent Congressional action, doctors in Medicare will face a 21 percent cut in their reimbursement rates followed by several more years of drastic cuts.  Instead of simply averting similar cuts one year at a time as Republicans did for many years, companion legislation to H.R. 3962 will permanently and comprehensively fix the physician payment formula.

The Medicare Physician Payment Reform Act, H.R. 3961, will repeal the fee reduction scheduled for 2010 and replace the current payment formula with a more rational and stable system.  The new payment formula will support primary care and encourage coordination among providers, while holding physicians accountable for spending growth.  Statutory PAYGO legislation will be included with H.R. 3961 when it is considered by the House.

MYTH:  Health reform will decrease affordability credits and expand Medicaid.

FACT:  Unlike the Republican alternative, H.R. 3692 contains affordability credits to help low- and middle-income families purchase health insurance.  To make coverage affordable for individuals with incomes below $16,200 and families of 4 with incomes below $33,400, H.R. 3962 guarantees coverage through Medicaid.  To make coverage affordable for individuals and families with incomes above those levels who do not have coverage through their employers, H.R. 3962 creates affordability credits to reduce the cost of premiums for plans offered through the new health insurance exchange.  The combination of Medicaid and affordability credits is a main reason why the bill is able to reduce the number of uninsured Americans by 36 million in 2019.  Right now, uninsured Americans add more than $1,000 each year to the average American families' health care costs.

MYTH:  Health reform will mean that Medicare Prescription Drug Coverage will be more expensive for seniors.

FACT:  To the contrary, H.R. 3962 includes many provisions that will make prescription drugs less expensive for seniors.  It's one of the reasons the nearly 40 million strong AARP has endorsed the bill.  It reduces the size of the donut hole by $500 immediately, and eliminates the donut hole by 2019.  Until the donut hole is eliminated, seniors will receive a 50% discount on all brand name drugs they purchase in the donut hole.  By the time H.R. 3962 eliminates the donut hole, Part D out-of-pocket spending for a senior who is prescribed drugs that cost $1,000/month would be, on an annual basis approximately $6,000 lower than under current law.

Congressional Republicans falsely claim that seniors would pay more for their Part D coverage.  According to CBO, most seniors will see their overall prescription drug costs go down.

MYTH:  Health reform has no real medical liability reform.

FACT Real medical liability reform needs to include protections for patients - so that restrictions on legal recourse don't lead to poorer quality care for patients.  As proposed by House Republicans, medical malpractice reform would go too far in restricting legitimate claims, and do nothing to promote patient safety or foster communication between doctors and their patients.

H.R. 3962, coupled with Administration efforts, provides for strong medical malpractice and evidence-based patient safety reforms, to encourage pre-court settlements and medical expert review of potential cases.  We believe there is room for improvement in the medical liability system, but not at the expense of patients' rights.