Professional Documents
Culture Documents
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http://www.heritage.org/research/projects/obamacare/obamacare-in-pictures
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Budget Committee Chairman Paul
Ryan: Hiding
Spending Doesn't Reduce Spending :
http://www.youtube.com/watch?v=zPxMZ1WdINs&NR=1&feature=fvwp
http://www.youtube.com/user/AmericanRoadmap#p/a/f/1/4WOLkfnIlX
I
This is three and three-quarter minutes’ worth of Rep. Ryan
ripping apart last year’s useless CBO report on Obamacare costs,
with some additional commentary added in on how you can
reconcile said CBO report claiming that Obamacare will reduce
the deficit while the CBO is saying elsewhere that Obamacare
will increase the debt. Short version: when looking at the deficit
the CBO was forced by the then-majority party to make
assumptions that they couldn’t make while looking at the debt.
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The Impact of Obamacare: From
the Frontlines of Our Health Care
Crisis
Posted January 10th, 2011
http://blog.heritage.org/2011/01/10/the-impact-of-obamacare-from-the-
frontlines-of-our-health-care-crisis/
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http://www.heritage.org/Research/Projects/Impact-of-
Obamacare
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Obamacare: Impact on Seniors
Published on May 20, 2010 by Robert Moffit, Ph.D. WebMemo #2908
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Obamacare: Impact on Taxpayers
Abstract: The hodgepodge of new taxes that have already or will
soon take effect as a result of the Patient Protection and Affordable
Care Act may not all show up in the income tax tables, but their
huge cost is still very real. This cost will become most apparent in
lost wages and international competitiveness, and it reduces
middle- and low-income families' wages just as surely as an
income tax hike would. These taxes break President Barack
Obama's promise not to raise taxes on families making less than
$250,000 per year.
Now that the Patient Protection and Affordable Care Act
(PPACA) of 2010 has been passed by Congress and signed into
law by President Barack Obama, substantial tax increases can be
expected in the near future. Combined, all of these tax increases
(including those on employers that do not provide health
insurance for their employees and on individuals who do not buy
health insurance) will cost taxpayers $503 billion between 2010
and 2019.[1]
These tax hikes will slow economic growth, reduce employment,
and suppress wages. Further, in an act reminiscent of George H.
W. Bush breaking his "no new taxes" pledge in 1991, the tax
hikes in the PPACA will raise taxes on middle-income families in
direct violation of President Obama's oft-stated pledge not to do
so. And by delaying the effective date for most of these new taxes,
the President and Congress have shown themselves unwilling to
implement these taxes on their own watch, raising doubts as to
whether future Presidents and Congresses will be willing to do
so. This increases even further the likelihood that this bill will
substantially increase the deficit, which would break another
Obama promise.
Major New Tax Increases in the PPACA
Three major tax increases make up a majority of new revenue in
the PPACA.
1. A new 40 percent excise tax on health insurance plans. This
will apply to plans valued in excess of $10,200 for individuals
and $27,500 for families. It will take effect in 2018 and is
projected to raise $32 billion by 2019.
The PPACA could have fixed one of the health care system's
most serious flaws: the inefficient tax treatment of employer-
sponsored health insurance. Done rightly, a serious reform
of the federal tax treatment of health insurance could have
expanded opportunities for Americans to own and control
their own health insurance, created true portability of
coverage, stimulated intense competition within the health
insurance market, and reduced overspending on health care
by making workers more attuned to their health care costs.
[2] Instead, the new excise tax will make health insurance
more costly and complex, while leaving the perverse
incentives and inequities of the existing system in place. In
addition, this hidden tax will do nothing to make costs more
transparent.
Many families that make far less than $250,000 a year have
high-end health plans and will be subject to the excise tax
when it goes into effect in 2018, breaking President Obama's
pledge not to tax these families. The threshold above which
an insurance plan will be hit by the tax is indexed to increase
at inflation plus 1 percent, which is below the rate of medical
cost inflation. This means that more and more health
insurance plans that Congress never intended to tax will fall
above the threshold in future years. Many of these plans will
also belong to families making less than $250,000 a year,
further shattering President Obama's pledge.[3]
2. An increase in the Hospital Insurance (HI) portion of the
payroll tax. This will increase the employee's portion from
1.45 percent to 2.35 percent for families making more than
$250,000 a year ($200,000 for singles). Combined with the
employer's portion, the total rate will be 3.8 percent when
the tax hike takes effect in 2013.
There is a long-standing tradition that the payroll tax should
be used exclusively to fund Social Security and Medicare.
The increased HI rate not only breaks this principle, but
also, and for the first time, will fund a new, separate
entitlement. With this precedent broken, future Congresses
will be tempted to use payroll tax increases to pay for other
new programs that the tax was never intended to fund.
The $250,000 threshold is not indexed for inflation, so in
inflation-adjusted terms, families making less than $250,000
a year today will pay the tax when it takes effect in 2013. As
inflation increases, more and more middle-income families
will be hit by the tax. This tax hike also breaks President
Obama's pledge not to raise taxes on these families.
3. Payroll taxes on investment. The PPACA applies the new
higher 3.8 percent HI tax to investment income, including
capital gains, dividends, rents, and royalties, effective in
2013.
For the first time, a portion of the payroll tax will apply to
investment income--a sharp departure from the nature and
history of social insurance programs and another dangerous
precedent for future policy. This will discourage investment
and lead to slower economic growth, fewer jobs, and lower
wages.[4] Tax policy should work to reduce the growth-
depleting tax on capital income, not to increase that burden.
Together, these payroll tax hikes will raise $210 billion between
2013 and 2019.
Mandates on Individuals and Businesses Raise Taxes
In essence, the mandates on individuals to purchase health
insurance will raise taxes on families. When fully implemented in
2016, the individual penalty for not complying will reach up to
$695 per person (for up to three people or $2,085 per household)
or 2.5 percent of taxable income.[5] Many healthy but uninsured
individuals will now be forced to buy insurance plans under the
PPACA. This added cost--whether as new premiums or as a
penalty for not purchasing insurance--is a de facto tax increase
for these individuals.
Employers also have a new mandate to provide health insurance
for their employees. Employers with more than 50 employees
that do not offer coverage and have at least one full-time
employee who receives a premium tax credit will pay a fine of
$2,000 per employee (excluding the first 30) or $3,000 per
employee receiving the premium tax subsidy.
As with the individual mandate, families will feel the bite of these
tax increases in two ways:
1. If an employer begins to offer insurance, the wages of those
employees to be covered will drop by the amount that the
newly provided health insurance plan costs the employer.
2. If the employer fails to offer coverage, it will pay the tax, and
the employee's compensation will fall by that amount.
Either way, workers' total compensation does not change; only
its composition changes. But because workers will be forced to
take more of their compensation in the form of health insurance,
their cash wages will fall, and they will have less flexibility to use
their earnings as they wish. Even though their total
compensation will not change, lower cash income will negatively
affect middle- and low-income families.
Other PPACA Tax Increases
The health legislation includes a myriad of smaller tax hikes,
many of which will also fall on middle- and lower-income
Americans. Many of them will not take effect until after Obama's
potential second term. These hikes include:
• A reduction in the number of medical products that
taxpayers can purchase using health savings accounts
(HSAs) and flexible spending accounts (FSAs).
• An increase in the penalty for purchasing disallowed
products with HSAs to 20 percent.
• A limit on the amount that taxpayers can deposit in FSAs to
$2,500 a year after 2013.
• A requirement that corporations report more information on
their business activities, the theory being that if corporations
must report more about their activities, they will be less
likely to try to avoid taxation.
• An annual fee on manufacturers and importers of branded
drugs based on each individual company's share of the total
market. The tax starts at $2.5 billion in 2011 and goes to $2.8
billion in 2012-2013, $3.0 billion in 2014-2016, $4.0 billion in
2017, $4.1 billion in 2018, and $2.8 billion per year
thereafter.
• A 2.3 percent excise tax on manufacturers and importers of
certain medical devices.
• An annual fee on health insurance providers based on each
company's share of the total market. Since health insurance
companies stand to get more customers because of the
individual and employer mandates, Congress forced them to
share some of the revenue increase with the federal
government. The tax raises $8 billion in 2014, $11.3 billion in
2015-2016, $13.9 billion in 2017, and $14.3 billion in 2018.
After 2018, it will raise $14.3 billion, indexed to medical cost
growth.
• Elimination of the corporate deduction for prescription
expenses for retirees. This provision has caused many large
companies to announce write-downs of their future earnings.
• An increase in the floor on the deduction for medical
expenses from 7.5 percent of adjusted gross income to 10
percent.
• A limit on the amount that health insurance companies can
deduct from their taxes to $500,000 of compensation paid to
officers, employees, directors, and service providers.
• Repeal of the special deduction for expenses related to claims
adjustments and administrative expenses specifically for
Blue Cross/Blue Shield organizations.
• A 10 percent excise tax on indoor tanning services.
• Exclusion of unprocessed fuels from the existing cellulosic
biofuel producer credit. Some industries that do not make
biofuels were able to claim the credit because of byproducts
produced during their manufacturing process. This credit is
an unjustified use of the tax code that encourages certain
kinds of energy production at the cost of others. Congress
might better have scrapped the credit altogether.
• A change in the definition of which business activities are for
economic purposes and which are strictly to avoid taxation--
many of which were perfectly legal--along with penalties for
underpayments due to the latter.
Broken Promises to the Middle Class
President Obama repeated again and again during the campaign
that he would not raise taxes on any family making less than
$250,000 a year. He broke that promise early in his presidency
when he increased cigarette taxes, and he has done so in a far
grander way with this health care legislation. Not only will the
higher HI taxes cost middle-income families jobs and suppress
their wages, but the excise tax on high-cost plans will hit them
directly.
Several of the taxes listed above, while not targeting middle-
income families, will ultimately be passed on to them through
higher prices. These include the fees on medical device
manufacturers, pharmaceutical companies, and health insurance
companies and the new tax on tanning services.
Restricting how much taxpayers can set aside in HSAs and FSAs
will increase the income taxes paid by middle- and low-income
families, because income that they now set aside tax-free in these
accounts above the new threshold will now be subject to income
tax. Limiting the types of products that taxpayers can buy with
the funds in these accounts will cause middle- and low-income
taxpayers to put aside less money in their HSAs and FSAs,
increasing their income tax liability.
The mandates on individuals to purchase health insurance will
also function as a tax on middle- and low-income families that
are currently not covered. Even those who do have coverage will
be forced to buy more expensive insurance because of mandates
that require certain levels of coverage. As a result of the
employer mandate, middle- and low-income families will see
their wage income fall even as their total compensation remains
the same.
A Steep Price to Pay
Over time, the hodgepodge of new taxes in effect now or in the
future will substantially slow economic growth and affect
taxpayers from all walks of life. This will become most apparent
in lost wages and international competitiveness.
These lost wages, largely out of the pockets of low- and middle-
income families, represent a huge cost of this legislation that does
not show up in any official tables, but this cost is every bit as real.
It reduces families' incomes just as surely as an income tax hike
would and breaks the promise that President Obama made when
he said he would not raise their taxes.
Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for
Economic Policy Studies at The Heritage Foundation. Vivek Rajasekhar, an intern
in the Center for Health Policy Studies, contributed to this paper.
http://www.heritage.org/Research/Reports/2010/04/ObamaCare-
Impact-on-Taxpayers
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Obamacare and its Impact on Doctors
Published on June 14, 2010 by Robert Moffit, Ph.D.
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Obamacare: Impact on the Uninsured
Published on April 20, 2010 by Kathryn Nix WebMemo #2873
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http://blog.heritage.org/2010/07/02/ObamaCare%E2%80%99s-
impact-on-the-states/
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Obamacare: The Impact on States
Published on July 1, 2010 by Edmund Haislmaier and Brian Blase Backgrounder
#2433
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What Medicaid Expansion Will Cost States
Obamacare attempted to appease state lawmakers by
committing federal taxpayers to paying for the entire benefit
costs of the Medicaid expansion from 2014 to 2016. In 2017, state
taxpayers will be on the hook for 5 percent of the benefit costs
for the additional enrollees, with each state’s share then
increasing to 6 percent in 2018, 7 percent in 2019, and 10 percent
in 2020 and thereafter.[5]
Beyond the benefits costs of the expansion, there will be
additional administrative costs to both the federal and state
governments. The added costs are not included in the estimates
prepared by the Congressional Budget Office (CBO) and the
Centers for Medicare and Medicaid Services, but they will be a
significant expense for states. Administrative costs are divided
between state governments and the federal government at
separate, uniform match rates. The standard administrative cost
match rate is 50 percent, though the federal government provides
higher match rates (in most cases 75 percent) for a few, discrete
administrative expense items, such as certification of nursing
facilities or operation of a state Medicaid fraud control unit.[6]
The most recent available data show that administrative
expenses add an average of 5.5 percent in addition to total
(federal and state) benefit costs, and that, on average, the federal
government pays 55 percent of total administrative costs, with
the other 45 percent paid by the states.[7] Thus, every $100
increase in benefit spending can be expected to generate another
$5.50 in administrative costs, of which states would pay $2.48.
Because the legislation does not change the match rates for
administrative costs, states will still have to pay their share of
administrative costs, even during the initial three years of the
expansion when the federal government is funding all of the
benefit costs.
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As shown in Table 2, The Heritage Foundation’s initial estimates
are that the Medicaid expansion will increase state tax
obligations by just under $33.5 billion for federal fiscal years
(FY) 2014 through 2020. Of that amount, $21.5 billion will be the
states’ share of the benefit costs, and just under $12 billion will
be the states’ share of the added administrative costs. Indeed, the
state share of administrative costs for the expansions will exceed
$100 million a year in each of the four biggest states—California,
Florida, New York, and Texas. In fact, the complexity of the
system with separate rules for three classes of individuals— those
who qualify for Medicaid under prior rules, those who qualify
under the new expanded Medicaid eligibility rules, and those
who instead qualify for the new subsidized coverage
administered by the exchanges—will likely produce actual
administrative costs that are higher than these estimates.
It is also important to emphasize that the total cost (federal and
state) of the Medicaid expansion— which, based on CBO and
CMS estimates, will likely be between $400 billion and $500
billion over the first seven years—will be shouldered by
taxpayers. Although some state policymakers may think that the
Medicaid expansion is a relatively good fiscal deal for their states
because the federal government will pick up at least 90 percent of
the cost for newly eligible individuals, taxpayers in their states
will face higher tax bills as a result, not just for the state costs but
for the federal costs as well. Furthermore, the additional federal
taxes or borrowing needed to fund this expansion will inevitably
dampen economic activity in the states.
“Crowd Out” Effects. Under the new law, Medicaid coverage
will extend not only to those who are currently uninsured and
whose income is below 133 percent of the FPL, but will also
sweep into the program several million individuals below that
income threshold who are currently covered by private
employer-sponsored coverage or individual coverage. This
“crowding out,” or displacement, of private coverage will most
likely occur among individuals who work for businesses with
fewer than 50 employees. The reason for this is that the law
exempts the vast majority of such firms from the new mandate
on employers to provide coverage— which will apply to larger
firms starting in 2014.[8] Given that their workers will qualify
either for Medicaid or for heavily subsidized coverage through
the new health insurance exchanges, many small businesses that
currently offer coverage will likely terminate their health
insurance plans in 2014.
While the employer mandate penalties may discourage larger
employers from dropping their plans, it is likely that many of the
large firms that are still providing coverage after 2014 will offer
only the minimum level of required coverage. Thus, states can
expect that even those low-income workers who still have access
to a large employer plan will likely enroll in Medicaid as “wrap-
around” coverage.
“Woodwork” Effect. States can expect their Medicaid program
costs to further increase in 2014, as a result of what Medicaid
officials refer to as the “woodwork” effect—meaning, that
individuals who qualify under current law for Medicaid, but who
have not yet enrolled, will “come out of the woodwork” to do so.
This effect will result from the interaction of other provisions in
the legislation with the Medicaid expansion. Specifically, the
legislation establishes a new set of generous health insurance
subsidies for individuals with incomes below 400 percent of the
FPL, administered through new health insurance exchanges. The
health insurance exchanges also have the task of determining
eligibility for those new subsidies. In cases where an exchange
determines that an individual qualifies for Medicaid, instead of
for the new subsidy system, the law requires the exchange to
enroll that individual in the applicable state Medicaid program.
State Medicaid officials are required to accept such individuals
into their programs and are prohibited from conducting their
own separate eligibility determination.[9] If the individual in
question is eligible for Medicaid coverage under the eligibility
criteria for the state’s Medicaid program that is in effect
immediately before the passage of the new federal legislation,
then the state’s Medicaid costs for that individual will be
matched by the federal government according to the state’s
standard match rate. (The higher match rates will apply only to
spending for individuals considered part of the “expansion”
population under the new federal law.) Thus, states will
experience yet higher costs associated with the enrollment of
individuals who had qualified for Medicaid under prior
eligibility standards, but who had not previously enrolled in the
program.
Exporting “Doc Fix” to the States
Another provision in the new federal legislation requires states to
increase Medicaid reimbursement rates for primary care
physicians (PCPs) to the same level as the applicable Medicare
payment rates for the 24-month period of January 1, 2013, to
December 31, 2014.[10] The legislation specifies that the federal
government will pay all of the added costs. However, this
provision will trigger a Medicaid “doc fix” issue for some states
starting January 1, 2015— when both the mandate, and the
federal funding to compensate for its costs, will expire.
Doc fix has become congressional slang for legislation to cancel
automatic reductions in Medicare physician payment rates.
Absent legislative overrides, the fees that Medicare pays doctors
would automatically decline based on a formula included in 1997
legislation that was supposed to limit Medicare spending growth.
However, since then, Congress has repeatedly bowed to political
pressure and concerns that enrollees will lose access to care by
passing legislation to cancel the physician payment cuts.
The new legislation sets up a similar political dynamic for the
Medicaid program and state lawmakers. When the mandated
increase in Medicaid primary care physician rates (and the
associated federal funding) ends, states could theoretically reduce
Medicaid PCP payment rates to their previous levels, but both
physicians and their Medicaid patients are likely to lobby against
such a move. The alternative, of course, is for states to continue
to reimburse PCPs at the higher rates, but with state taxpayers
covering the state’s share (based on normal match rates) of the
extra costs.
As Table 3 shows, increasing primary care physician payment
rates will not be an issue for the six states that already pay
Medicaid rates to PCPs equal to or in excess of the applicable
Medicare rates. Furthermore, for the 18 additional states that
pay Medicaid rates between 80 and 98 percent of Medicare rates,
the state cost impact will be minimal. However, a number of
states, most notably New York and California, would incur
significant state costs if they continued to reimburse PCPs at the
higher rates after 2014.
The states that will be most affected are those that have both low
Medicaid payment rates for primary care physicians and low
federal match rates for their Medicaid programs. For example,
New York’s Medicaid rates for PCPs are only 36 percent of
Medicare rates; New Jersey’s are 41 percent; and California’s
are 47 percent—while all three states have a 50 percent federal
match rate for their Medicaid programs. Thus, Medicaid rates
paid to PCPs in California and New Jersey will more than double
from their current levels, and rates in New York will nearly
triple, between 2013 and 2014. Continuing those payment levels
after 2014 will require taxpayers in all three states to fund half
the extra costs.
This also explains why states’ costs will increase even when the
federal government picks up the costs associated with the
expansion. Because provider reimbursement rates are uniform
across the eligibility groups, any rate increase will apply to
current enrollees as well as to the newly eligible.
In some states providers have obtained federal court injunctions
preventing the state from reducing Medicaid reimbursement
rates. For example, in March, a federal appeals court affirmed
the district court’s order of a preliminary injunction preventing
implementation of Medicaid provider payment reductions
enacted by the California General Assembly last year.[11]
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Other Medicaid Costs for the States
Beyond the extra Medicaid costs that states are certain to incur,
there are some other state Medicaid cost increases that are
probable, but not definite. The two most significant items in this
category are payments to so-called Disproportionate Share
Hospitals (DSH) and payments to specialist physicians.
DSH Payment Reduction. DSH funding consists of extra, lump-
sum Medicaid payments to hospitals that treat a
“disproportionate share” of Medicaid patients. Theoretically,
DSH payments help defray those hospitals’ costs of providing
uncompensated care to the low-income uninsured, though most
states have little real accounting control over how hospitals
actually use the funds.
Under the new law, beginning with FY 2014 (October 1, 2013),
federal DSH funding will be reduced each year. The theory is
that as more of the uninsured gain coverage, hospital
uncompensated care costs will decline, with the rationale for
offsetting DSH payments diminishing as well. While this theory is
logical, in practice, state lawmakers are likely to confront
political pressure from DSH payment–dependent hospitals
seeking to maintain their revenues.
That is exactly what has happened in Massachusetts, which
under its 2006 Medicaid waiver reallocated hospital DSH
funding to pay for health insurance coverage subsidies for the
low-income uninsured through the state’s new Commonwealth
Care program. While about 175,000 uninsured Massachusetts
residents gained coverage as a result, and while the cost of their
coverage has not exceeded the total amount of the reallocated
funding, the DSH funding–dependent hospitals in that state have
successfully lobbied to preserve some of their funding stream at
an added cost to state taxpayers. The hospitals’ justifications are
that they still incur significant uncompensated costs—though
they are obviously reticent about admitting how much of those
costs are attributable to treating illegal aliens who do not qualify
for Medicaid or other subsidized coverage—and that the extra
funding helps offset the lower payment rates they receive from
Medicaid.
Thus, under the new legislation, while states will theoretically
spend less on their share of Medicaid DSH funding, political
pressures may effectively negate any potential savings and, if
state lawmakers are pressured into replacing reduced federal
DSH funding with state funds, state costs may actually increase.
Payments to Specialty Physicians. While the provision in the new
law that requires temporary Medicaid payment rate increases
for primary care doctors will not apply to the rates paid for
procedures performed by specialty physicians, the reality is that
state lawmakers will likely find it politically difficult to limit
Medicaid payment rate increases to primary care physicians. As
with the increase in primary care payment rates, the political
and financial significance of the issue of specialty physician
payment rates will vary among the states according to their
current Medicaid physician payment levels. The states that pay
the lowest rates (relative to Medicare and private insurance) will
face the greatest political pressure to also increase specialty
physician rates and shoulder the largest added costs for such a
move. Furthermore, this issue is likely to come to the forefront in
the states’ 2012 legislative sessions, in anticipation of the
scheduled January 1, 2013, federally mandated payment rate
increase for primary care physicians.
Offsets to Costs. Other provisions of the federal legislation will
generate some offsetting Medicaid savings for states, though for
most states those savings are likely to be minimal. Only one
change is likely to produce state savings of any significance, and
only a few states stand to benefit from the applicable provision.
One provision of the federal legislation is likely to generate
savings between now and 2014 for taxpayers in some states by
enabling their state governments to shift some of their current
costs to taxpayers in other states. The new law allows states that
have health insurance programs that are funded by state tax
dollars and that already cover individuals who will qualify for
Medicaid in 2014, to enroll those individuals in Medicaid
immediately. The costs will be shared by the federal government
at normal match rates until 2014 and at the expansion match
rates thereafter.[12] Connecticut has become the first state to
take advantage of this provision, shifting an estimated $53
million in state costs for Connecticut’s next fiscal year onto
federal taxpayers in other states.[13]
Maintenance of Effort Requirement. The provisions of
Obamacare that will have the most immediate effect on state
budgets are the “maintenance of effort” (MOE) requirements in
the law that are applied to Medicaid and CHIP. Under those
provisions a state would lose all federal funding if it takes actions
that make eligibility more restrictive than the standards in effect
for the state’s program at the time the new federal legislation
was enacted. In fact, states are already subject to a similar MOE
requirement imposed as a condition of receiving a two-year
temporary increase in federal Medicaid funding (through the end
of 2010) as part of the 2009 stimulus legislation.
The bad news for states is that this federal mandate comes in the
midst of their worst fiscal situation in decades. Because Medicaid
is one of the largest items in any state budget, it is also one of the
first places where governors and legislators look for savings
when they need to trim spending to bring state budgets back into
balance. In 2008, aggregate state Medicaid spending accounted
for 20.7 percent of all state government expenditures, while
spending on elementary and secondary education represented
21.6 percent, and the share of aggregate state spending devoted
to transportation was 7.9 percent.[14]
Traditionally, states have three main tools for reducing Medicaid
expenditures: restrict eligibility, cut provider reimbursements, or
reduce benefits. The MOE requirements effectively mean that
states no longer have the first option of limiting eligibility.
However, they can still cut provider payments or scale back
program benefits.
Partly as a result of the MOE requirement in the 2009 stimulus
legislation, 41 states and the District of Columbia cut provider
reimbursements rates in 2009 or 2010, and 29 states and the
District did so in both years. Additionally, 39 states and the
District cut Medicaid pharmacy benefits, and 22 states cut
Medicaid medical benefits over the past two years.[15] All of
these cuts are likely to continue if state budget projections do not
significantly improve.
The problem is that in many states Medicaid reimbursement
rates are already quite low. That makes Medicaid beneficiaries’
access to health care providers problematic, particularly in states
such as New York, New Jersey, and California that pay
providers exceptionally low rates. In addition, setting physician
payment rates even lower will not necessarily reduce the
aggregate costs of state Medicaid programs if the result is that
more enrollees are forced to seek care in hospital emergency
rooms because they cannot find doctors willing to accept
Medicaid patients.
Even though the CHIP MOE prevents states from changing
eligibility, CHIP enrollment will decline somewhat after 2014,
resulting in some state savings. To qualify for CHIP, a child must
be uninsured. However, many children will likely become
insured through family coverage in subsidized plans offered by
the new exchanges starting in 2014, for which a state
contribution will no longer be required.
Washington’s New Insurance Market Rules
In addition to the Medicaid changes that will directly affect state
budgets, state lawmakers will also need to contend with a variety
of new federal health insurance market regulations. This federal
usurpation of long-standing state authority in regulating private
insurance will be expensive and disruptive for those who rely on
individual or employer-based commercial insurance for their
health care coverage. While the new law’s Medicaid provisions
will present governors and state legislators with fiscal challenges,
the insurance provisions will present them with policy challenges.
The task for state lawmakers will be to find ways to protect their
constituents from the adverse effects of the new federal health
insurance regulations.
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Revitalizing Federalism: The High Road Back
to Health Care Independence
Published on June 30, 2010 by Robert Moffit, Ph.D. Backgrounder #2432
Our Country is too large to have all its affairs directed
by a single government.
—Thomas Jefferson, Letter to Gideon Granger,
August 13, 1800
Abstract: The Patient Protection and Affordable Care Act
represents more than a federal takeover of health care; it is a direct
threat to federalism itself. Never before has Congress exercised its
power under Article I, Section 8 of the Federal Constitution to
force American citizens to purchase a private good or a service.
Congress is also intruding deeply into the internal affairs of the
states, commandeering their officers, specifying in minute detail
how they are to arrange health insurance markets within their
borders, and determining the products that will be sold to their
citizens. If allowed to stand, this unprecedented concentration of
political power in Washington will reduce the states to mere
instruments of federal health policy. State legislatures and
sympathetic Members of Congress should consider (among other
actions) crafting a constitutional amendment to guarantee the
personal liberty of every citizen in the area of health care. Given
the trajectory of federal policy, state officials should take the lead
in the next phase of the national health care debate, reclaim their
rightful authority, and change the facts on the ground for
Congress and the White House.
An Unprecedented Challenge
Americans face a direct and historic challenge to their personal
liberty and to their unique citizenship in a federal republic.
Though its enactment of the massive Patient Protection and
Affordable Care Act (PPACA), official Washington is not merely
engineering a federal takeover of health care, but is also radically
altering the relationships between individuals and the
government as well as the national government and the states.
In other words, the PPACA is a direct threat to federalism itself.
As Jonathan Turley, professor of law at George Washington
University, has argued, “Federalism was already on life support
before the individual mandate. Make no mistake about it, this
plan might provide a bill of good health for the public, but it
could amount to a ‘do not resuscitate’ order for federalism.”[1]
Never before has Congress exercised its power under Article I,
Section 8 of the Federal Constitution to force American citizens
to purchase a private good or a service, such as a health
insurance policy.[2] Congress is also intruding deeply into the
internal affairs of the states, commandeering their officers,
specifying in minute detail how they are to arrange health
insurance markets within their borders, and determining the
products that will be sold to their citizens.
If allowed to stand, this unprecedented concentration of political
power in Washington will result in the states being reduced to
mere instruments of federal health policy rather than “distinct
and independent sovereigns,” as James Madison described them
in Federalist No. 40.[3]
A Pivotal Role for State Officials
The officers and citizens of the states, however, have plenty of
options. These include the filing of lawsuits against the
imposition of the federal mandates on individuals and the states
themselves, and many are already pursuing that course of action.
They can also enact legislation that can facilitate a constitutional
challenge to excessive federal power, and bills have already been
filed in 38 states to accomplish that objective.
Legislators can also pass resolutions and memorials to be
transmitted to Congress petitioning for relief for their citizens
from the terms and conditions of the federal law that they
determine to be onerous, damaging, or excessively burdensome
to their people, their health care delivery systems, and their
economic life. On the great issues that have defined crucial eras
of American history, state legislators have often passed
resolutions and memorials dealing with such questions as
slavery, the right of women to vote, and Prohibition.
State legislators can also hold public hearings and invite United
States Senators, who are charged under the Constitution with
representing the states, to explain their support for or opposition
to the national health care law. Senators would have an
opportunity to clarify their own views on such matters as the
mandatory Medicaid expansions, the implementation of health
insurance exchanges, or projected premium or tax increases that
will affect the citizens of their states. Likewise, in preparation for
the implementation of the national health law, state legislators
can invite federal officials in charge of that implementation to
appear at special hearings to respond to their concerns and
answer questions about the impact of their regulatory changes on
the citizens of their states.
Finally, as the administrative and judicial processes unfold, state
officials and their congressional delegations may find it necessary
to amend the Constitution itself to ensure the protection of
personal liberty and the integrity of the states in the vital area of
health care.
The High Stakes
The Founders in 1787 crafted fundamental law for a large
Federal Republic, bucking the conventional wisdom of political
science. In the classical sense, a republic means limited
government; it underscores a sharp distinction between res
publica (public affairs) and res privata (private affairs). In a
republic, political authority is held as a public trust, not as a
private right, and is to be exercised only over public affairs.[4]
America’s Founders authorized a clear division of authority
between a national government, focused on general concerns,
and the particular governments of the states, focused on
particular concerns.[5] They thus recognized the astonishing
unity and profound diversity of the people of the United States.
In a free society, the people are sovereign, but in this instance,
they are the people of the states united. National and state
governments, under the Constitution, are supreme within their
own spheres; neither can encroach upon the other without
violating the constitutional order itself.
While Article VI declares the supremacy of federal law, its
supremacy is confined to those limited and enumerated powers
that are granted to the national government; the Tenth
Amendment unambiguously affirms that the residual powers of
the American Republic are left to the people in and through their
several state governments. In Federalist No. 45, James Madison
writes:
The powers delegated by the proposed constitution to the federal
government are few and defined. Those which are to remain in
the state governments, are numerous and indefinite…. The
powers reserved to the several states will extend to all the objects,
which, in the ordinary course of affairs, concern the lives,
liberties, and properties of the people; and the internal order,
improvement and prosperity of the state.[6]
The Arrogance of Power
The Constitution is ultimately a political document, and the
health care debate is ultimately a philosophical debate on the
scope of political authority. If one’s health care and medical
treatment is a personal matter and an exercise of personal
responsibility, then the new law is quintessentially un-republican;
for all practical purposes, it renders these intensely personal
affairs a public concern. The imposition of an individual
mandate to purchase health insurance is likewise an unconstitu-
tional restriction on personal liberty, pregnant with potential
abuses far beyond a mandate for health insurance.[7]
Under the new law, states are compelled to expand Medicaid.[8]
Equally troublesome is the congressional mandate on the states
to establish federally supervised health insurance exchanges
within their borders where government-sponsored plans and co-
ops will compete against private insurance.
Under Section 1311(b)(1), “Each state shall, not later than
January 1, 2014, establish an American Health Benefit Exchange
[emphasis added].” The exchange is either to be a governmental
agency or a nonprofit entity. Under Section 1321(c), if a state
does not establish such an exchange, the Secretary of Health and
Human Services will establish and operate an exchange within
the state. In the “state-based” exchanges, of course, only
federally approved heath plans would be allowed to compete.
The states, in other words, would be vehicles of federal health
policy. This is underscored by the highly prescriptive
requirements imposed on the states, governing everything from
the simple presentation of health plan information down to the
formatting of state Web sites. The statute authorizes over a
dozen regulatory interventions by the Secretary of HHS and
other federal officials.
At the very least, this is a profoundly undesirable alteration in
the relationship between the federal government and the officers
and citizens of the states—precisely the concentration of power
that the Founders feared—and it is also constitutionally suspect.
It is one thing to require state officials to obey federal law; it is
quite another to compel them to administer it and force their
citizens to bear the expense of that administration.[9] Our
constitutional tradition limits federal power and does not
sanction national intrusion into citizens’ personal, private, or
domestic relations. As Madison affirmed, law in these areas of
domestic life is properly within the jurisdiction of the states; this
latest act of Congress is a bold challenge to that jurisdiction.
State Legislators as Tribunes of the People
The states have emerged as the institutional centers of resistance
to the new health law. Twenty-one states have filed suit against
the individual mandate to purchase health insurance on the
ground that it is an unconstitutional burden on their citizens.[10]
Even legal specialists who have expressed sympathy for the
objectives of the new law fully acknowledge the broader issues at
stake in this national debate. According to Jonathan Turley:
Though the federal government has the clear advantage in such
litigation, these challenges should not be dismissed as baseless
political maneuvering. There is a legitimate concern for many
that this mandate constitutes the greatest (and perhaps the most
lethal) challenge to states’ rights in U.S. history. With this
legislation, Congress has effectively defined an uninsured 18-
year-old man in Richmond as an interstate problem like a
polluting factory. It is an assertion of federal power that is
inherently at odds with the original vision of the Framers. If a
citizen who fails to get health insurance is an interstate problem,
it is difficult to see the limiting principle as Congress seeks to
impose other requirements on citizens.[11]
Likewise, 13 states have filed suits against the Medicaid mandate.
[12] While these legal challenges work their way through the
judicial process, state governors and legislators, allied with their
aggrieved citizens, can and should pursue a broader political
strategy to repeal, resist, or roll back this unjustified expansion
of federal power. Because of the potential damage to the states
from these costly federal mandates and regulations, the national
health law should emerge as an issue in state politics.
State legislators can serve as the true tribunes of the people. They
can help to redefine and frame the terms of the national debate.
Thus far, legislators in 38 states have already introduced
“Freedom of Choice in Health Care Acts” based on model legis-
lation proposed by the American Legislative Exchange Council
(ALEC), the leading national association of conservative state
legislators. The proposals would generally allow persons to pay
directly for medical services if they wished to do so and block the
imposition of penalties on those who did not enroll in a particular
health plan. Such measures obviously invite a constitutional
challenge.
Playing Offense
Under the Tenth Amendment to the Constitution, the powers not
granted to the national government are reserved to the states and
to the people. There is a large role that states can play in making
health care policy, especially over the next four years.
Furthermore, inaction by the states is an invitation to the federal
government to take over their legitimate power when there is a
popular demand for action.[13]
State legislators can and should move ahead with their own
agenda for health reform, not just play a waiting game until
2014, listening for Washington to tell them what to do and how to
do it.[14] State legislators should seize every inch of territory in
the health policy debate within the law, such as health insurance
market reform, and challenge every transgression of their
legitimate authority if and when federal officials violate it.
State legislators should also hold their own public hearings on
the impact of the federal law on their citizens, employers,
employees, insurers and medical professionals, and state
agencies. U.S. Senators who voted to impose costly mandates on
their states should be invited to state legislative hearings to give
an account of their actions and explain why they believe that
such mandates advance the true interests of the states they
represent.[15]
Likewise, state legislators should invite federal officials to appear
and explain how they intend to implement mandates and make
them justify their proposed rules in broad daylight. State
legislators, in cooperation with colleagues in sister states, should
make it clear that dumping hundreds of pages of complex federal
rules into the Federal Register for public notice and comment is
no longer sufficient.
Alexander Hamilton, writing in Federalist No. 28, anticipated
such cooperation among the states in resisting unjust federal
power:
Projects of usurpation cannot be masked under pretences so
likely to escape the penetration of select bodies of men, as of the
people at large. The legislatures will have better means of
information; they can discover the danger at a distance; and
possessing all the organs of civil power, and the confidence of the
people, they can at once adopt a regular plan of opposition, in
which they can combine all the resources of the community. They
can readily communicate with each other in different states; and
unite their common forces, for the protection of their common
liberty.[16]
The Rebirth of Liberty
The enactment of the massive Patient Protection and Affordable
Care Act was a direct repudiation of the popular will and,
equally, a bold challenge to the continued viability of the federal
political order. There are no guarantees of victory either, in Con-
gress or in the courts, but the United States is still a federal
republic, not a unitary state or a mass democracy.
It is crucial that state officials make a compelling argument
against the concentration of power on the basis of first
principles: It is an argument that can succeed.[17] Anticipating a
political establishment insulated from popular will and feeling on
vital national issues, the Founders also provided the people of the
states with a final remedy for ills besetting the Federal Republic:
constitutional amendment.
Given the rapid and continuing growth of the already enormous
health care sector of the economy, as well as the gravity of this
threat to liberty in such a vital area of personal life, state
legislatures, in league with sympathetic Members of Congress,
should consider crafting a constitutional amendment to
guarantee the personal liberty of every citizen in the area of
health care. Prudential considerations, of course, would govern
the timing and content of such an action.
Given the trajectory of federal policy, state officials should take
the leadership role in the next phase of the national health care
debate, reclaim their rightful authority, and change the facts on
the ground for Congress and the White House.
—Robert E. Moffit, Ph.D., is Senior Fellow in Domestic and Economic Policy
Studies at The Heritage Foundation.
http://www.heritage.org/Research/Reports/2010/04/ObamaCa
re-Impact-on-Businesses
=============================================
Obamacare: Impact on the Economy
Published on September 22, 2010 by Karen Campbell, Ph.D. , Guinevere Nell and
Paul Winfree WebMemo #3022
Appendix
Microeconomic Simulation. Personal income tax provisions of
the PPACA were simulated using the Center for Data Analysis
Individual Income Tax Model in order to estimate effects on
revenue and distribution of tax burden. The model simulates the
effect of tax law changes on a representative sample of taxpayers.
Data for these taxpayers are extrapolated (or “aged”) to reflect
detailed taxpayer characteristics through 2016. The data are
aged for consistency with the CBO baseline forecast from the
Global Insight model in order to produce effective and marginal
tax rate estimates with which to forecast dynamic effects of the
changes in tax burden.
Two simulations were run for comparison: (1) current law prior
to the PPACA, and (2) current law with the addition of the
individual income tax provisions of the PPACA. The provisions
affecting individual income that were simulated were the
increase in the Medicare hospital insurance component of the
payroll tax on wages and self-employment income and the
increase in the adjusted gross income floor of the medical
expenses deduction from 7.5 to 10 percent. These were run
together in a single simulation and compared with the simulation
of current law in order to determine revenue, effective tax rate,
and distributional effects.
For the purpose of presenting tax policy effects on small
businesses, a small business is defined as a business that reported
income using a Schedule C or reported income as a partnership
or S-corporation.
Macroeconomic Simulation. Heritage analysts used the
IHS/Global Insight February 2010 short-term model of the U.S.
economy to estimate the overall net economic effects of the
PPACA.[3] The baseline represents the most likely path of the
U.S. economy in the next 10 years. The relationships in the model
are calibrated by historical U.S. data and mainstream economic
theory.
The model is a tool that gives insight into the likely magnitude
and direction of the policy changes in a dynamic world where
many indirect effects can play out. This gives policymakers the
information they need to determine which policies will lead to a
stronger, more robust economy and which policies will weaken
the economy and lead to fewer opportunities for citizens in the
future.
The simulation was conducted by estimating the direct price
changes that would likely occur in the health care markets. The
price changes were calculated using estimates of the aggregate
changes in premiums and coverage by the CBO as well as data
on insurance coverage type from the 2009 March Supplement of
the Current Population Survey and the 2007 Household
Component of the Medical Expenditure Panel Survey.[4] The
percentage change in prices was factored into the health care
price index variable and the benefits portion of employment cost
index. (The former was a price increase, the latter a slight
decrease.)
The excise tax on high-premium plans affects prices in the health
care markets and was therefore accounted for in the price index
changes.
The hospital insurance taxes on high income and investment
income affect individual average tax rates. The CBO estimated
revenue from these taxes. These estimates were used to calculate
the implied change in average effective tax rates. The implied
changes were factored into the average effective personal tax rate
variable. The tax changes were also simulated in the tax
microsimulation model. The rates estimated from the
microsimulation were used to check the macrosimulation of the
overall effective rate. Both the dynamic macro- and static
microsimulation estimated similar changes to average effective
rates (in the range of 0.1 percentage point).
Penalties and fees on businesses and taxes on medical devices and
pharmaceutical drugs were assumed to affect corporate taxes.
The CBO’s estimated revenues were used to calculate an implied
change in the corporate tax rate.
The net changes in Medicaid spending per year, estimated by the
CBO, were used as a proxy for real federal grants to state and
local governments for Medicaid in the model.
About the Author
http://www.heritage.org/Research/Reports/2010/09/Obamacare-
Impact-on-the-Economy
=============================================
Obamacare: Impact on Future Generations
Published on June 1, 2010 by James C. Capretta WebMemo #2921
http://www.heritage.org/Research/Reports/2010/06/ObamaCare-
Impact-on-Future-Generations
=============================================
Repealing Obamacare and Getting Health
Care Right
Published on November 9, 2010 by Nina Owcharenko WebMemo #3053
http://www.heritage.org/Research/Reports/2010/11/Repealing-
Obamacare-and-Getting-Health-Care-Right
=============================================
America’s health care system needs reform, but not the sort of
changes enacted under the new health care law.
The Patient Protection and Affordable Care Act (commonly
referred to as “Obamacare”) moves our health care system in the
wrong direction. This highly unpopular law asserts federal
control over health care benefits and financing, establishes a
complex one-size-fits-all health system, and centralizes America’s
health care decisions in Washington.
Instead, Congress should transform the health care system into
one that empowers individuals and families—not Washington—
to control more of their health care decisions.
For up-to-the-minute news on Obamacare, interactive tools to
explore the fiscal impact of changing our health care system, and
proposed solutions from experts at The Heritage Foundation, log
on to heritage.org/healthcare
The Impact on the Uninsured The Impact on States
The Impact on
The Impact on Families
Businesses
The Impact on Your
The Impact on Seniors
Future
The Impact on Doctors Repealing Obamacare
http://blog.heritage.org/2010/12/31/top-ten-side-effect-of-2010/
.Side Effects: Ball Drop Brings Bad News for Consumer-
Driven Health Plan Users
• Side Effects: Number of Waivers Grows As a Result of
Obamacare Authors’ Sloppy Handiwork
• Side Effects: AARP Employees Face Premium Hikes As
Result of New Law
• Side Effects: Obamacare Accelerates Hospital Job Losses
• Side Effects: Obamacare Encourages States to Drop
Medicaid
=============================================
The Side Effects of OBAMACARE
Once again, the promise that Americans can keep the health
coverage they like under Obamacare has been broken.
National Health Insurance, Aetna, John Alden, and Principle
have reported that they “need to make adjustments in their
business to accommodate the nation’s new federal health
care law.” The National Health Insurance Co. (NHIC), a
Dallas-based insurer, [...] More
Side Effects: Now Even Democrats Are Voicing Concern About
Obamacare’s Consequences
Posted November 2nd, 2010 at 2:00pm in Health Care
Imagine that one day, your boss takes you out to coffee. You
offer to pick up the tip as a contribution. The two of you
head down the street and are faced with quite the
conundrum: two coffee shops to choose from! Both offer a
delicious cup of joe for the same price, but in [...] More
Side Effects: Obamacare Strengthens Compliance-Based
Medicine
Posted October 22nd, 2010 at 4:00pm in Health Care
http://blog.heritage.org/tag/side-effects/
This week, the White House issued rules for health insurers to
extend dependent coverage to “children” up to 26 years old.
Beyond keeping the “Big Kids” dependent on Mommy and
Daddy, it also directly undercuts the President’s famous
campaign promise that American families would see a $2,500
reduction in their annual premiums. Now, we learn [...] More
Side Effects: Get Ready to Change Your Insurance
Posted May 10th, 2010 at 5:00pm in Health Care
“If you like your current health coverage, you can keep it.” It
was a key promise of Obamacare. But the new law gives
government a say in everything from the benefits you carry to
the treatment you receive. And that means very real changes to
existing coverage. One of those many changes derive from new
[...] More
Side Effects: Floridians Will Lose Medicare Advantage
Posted April 28th, 2010 at 12:00pm in Health Care
College seniors are eagerly ordering caps and gowns for May
graduation ceremonies. But graduation day often brings loss as
well as gain. Many graduates will lose coverage under their
parents’ health plans as soon as they get their diplomas. It wasn’t
supposed to be that way. Obamacare promised to let “children”
remain on their parents’ [...] More
Side Effects: Pre-Existing Physician Payment Problems
Persist
Posted April 12th, 2010 at 1:00pm in Health Care
Despite all the talk about how Obamacare would lower health
care costs, it’s already becoming clear that it just won’t be the
case. The Indianapolis Star reports that companies can expect
employee health insurance costs to rise even faster. “Driven by
worries about the economy and possibly the effects of health-care
reform, [health insurers] are [...] More
Side Effects: Laws No Longer Mean What They Say
Posted April 1st, 2010 at 4:00pm in Health Care
President Obama promised Americans that “If you like the plan
you have now, you can keep it.” It was a fundamental promise of
Obamacare. But if the coverage you like comes via a Health
Savings Account (HSA) or a Flexible Spending Account (FSA),
that promise may not hold. A recent analysis from HSA
Consulting Services [...] More
Side Effects: Medical Devices Tax Will Costs Jobs
Posted March 30th, 2010 at 6:00pm in Health Care
There’s only one way to pull the economy out of the doldrums.
We need more jobs. Now. As Obamacare inched its way toward
passage, boosters of the radical legislation began making bold
new claims about its virtues. The bill, they said, would do far
more than simply fix the health care system; it would create [...]
More
Side Effects: Young to Pay Higher Health Insurance
Premiums
Posted March 30th, 2010 at 4:15pm in Health Care
Facing an American public that hates their new health care law,
the Obama administration and their union/corporatist allies are
planning a multi-million dollar television ad campaign to sell the
benefits of Obamacare. While Food and Drug Administration
regulations require all advertising for prescription drug to
"present side effect information in a manner similar to that used
for the benefit information," the Obama administration faces no
such hurdle when making their pitch. But if it did, this is what a
typical pro-Obamacare ad would look like. More
Side Effects: Higher Health Insurance Taxes
Posted March 30th, 2010 at 8:01am in Health Care with 56 comments
Union bosses howled about one Obamacare tax hike: the levy on
“Cadillac” health plans (expensive plans rich in benefits). The
problem with this tax, as they see it, is that it hits the very plans
often enjoyed by their rank-and-file. Ever eager to please the
unions, Democratic leaders added a “fix” to the reconciliation
bill [...] More
Side Effects: Obamacare Doesn’t Work on Children After
All
Posted March 29th, 2010 at 8:39pm in Health Care
http://blog.heritage.org/tag/side-effects/page/4/
=============================================
Exclusive from Cancer Journal: Concerns on the
New Health Care Law:
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http://thf_media.s3.amazonaws.com/2010/pdf/CancerJournalArti
cledec2010.pdf
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http://blog.heritage.org/2010/11/09/health-care-voters-
overwhelming-favor-repealing-obamacare/
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http://www.heritage.org/Initiatives/Health-Care
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