Fox baselessly suggests states opting out of public option would be paying something for nothing

››› ››› JOCELYN FONG

Following Senate Majority Leader Harry Reid's announcement that the Senate health care reform bill will include a public option that each state could opt out of, several Fox News commentators baselessly suggested that states choosing not to participate in the public option would, in Karl Rove's words, have to pay taxes "for this sucker for decades," but "we're not going to get any of our money back." However, while Reid has yet to release details of the compromise Senate legislation, every other proposed bill with a public option so far has required the costs of the public plan to be covered by the premiums of those who enroll in it, and the taxes proposed in each of the bills are used to cover the expansion of coverage through Medicaid and subsidies to help certain families purchase insurance, both of which are provided to residents of every state regardless of any public option.

Fox News figures baselessly suggest health care reform taxes will be used to run public option

Rove claims states not participating in public option will have to "pay for this sucker for decades," but "we're not going to get any of our money back." Rove stated of Reid's announcement, "What state is going to say -- what governor and legislature of Republican or Democrat majority is gonna say to its citizens of its state, 'You can pay for this sucker for decades and decades to come, but you're not gonna -- we made a decision -- we're not going to get any of our money back?' I mean, it's like your choice is pay a buck and get some of it back, or pay a buck and get nothing of it back." [Hannity, 10/26/09]

Gingrich: "What if a big state like Texas opts out? Does that mean they don't have to pay taxes on it?" Fox News contributor Newt Gingrich stated that "nobody knows what this idea is. Nobody knows how it would work. And I think you have to raise a question. What if a big state like Texas opts out? Does that mean they don't have to pay taxes on it?" He added, "Or are they going to opt out and pay for California and New York's health care?" [On the Record, 10/26/09]

Van Susteren: "I pay ... into the federal fund, but my state then decides to opt out ... I am paying twice, essentially." During an interview with Sen. John Cornyn (R-TX), On the Record host Greta Van Susteren stated of Reid's proposal, "Is it like this? If I am from Wisconsin and I pay into it because I am a taxpayer, into the federal fund, but my state then decides to opt out so I'm now going off and getting my private -- I am paying twice, essentially." She added, "There is no rebate back to the state that opts -- that opts out. There's no -- in the plan?" Cornyn responded, "Apparently not," and stated that "of course, the government is going to need the revenue from taxpayers in all 50 states in order to pay for it regardless of whether your state opts out." [On the Record, 10/26/09]

Bills already written with public option require its costs to be covered by premiums

House, Senate Health Committee bills require premiums to cover costs of public plan. Although the Senate has not released the text of its compromise bill, both the House tri-committee bill and the Senate HELP Committee's bill require their public options to charge premiums sufficient to cover administrative costs as well as the cost of enrollees' benefits.

From the America's Affordable Health Choices Act of 2009, as introduced in the U.S. House of Representatives:

SEC. 222. PREMIUMS AND FINANCING.

(a) ESTABLISHMENT OF PREMIUMS. --

(1) IN GENERAL. -- The Secretary shall establish geographically-adjusted premium rates for the public health insurance option in a manner --

(A) that complies with the premium rules established by the Commissioner under section 113 for Exchange-participating health benefit plans; and

(B) at a level sufficient to fully finance the costs of --

(i) health benefits provided by the public health insurance option; and

(ii) administrative costs related to operating the public health insurance option.

From the Affordable Health Choices Act as passed by the Senate Health, Education, Labor, and Pensions Committee:

''(5) PREMIUMS. --

''(A) PREMIUMS SUFFICIENT TO COVER COSTS. -- The Secretary shall set premium rates in an amount sufficient to cover expected costs (including claims and administrative costs) using methods in general use by qualified health plans.

Bills' tax revenues are used to cover expansion of coverage, with or without public option

Senate Finance bill with no public option requires tax on high-cost plans to cover expansion of Medicaid and subsidies for lower- and middle-income Americans purchasing insurance. The revenues from the excise tax and penalty payments, along with the savings from Medicare, would pay for the expansion of the Medicaid program and the subsidies to help certain lower- and middle-income Americans purchase private insurance through the exchanges. From the Congressional Budget Office's (CBO) analysis of the Senate Finance Committee bill, which does not include a public option:

According to CBO and JCT's assessment, enacting the Chairman's mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010-2019 period (see Table 1). The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children's Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

House tri-committee bill requires tax on high-income Americans to cover expansion of Medicaid and subsidies for lower- and middle-income Americans purchasing insurance. CBO's July 17 cost estimate of the House bill indicates that expanding Medicaid and providing subsidies for some families to purchase insurance through the exchanges would cost around $1.2 trillion. This cost is offset, in part, by revenues from a surtax on high-income Americans as well as savings from Medicare and other federal health programs. Congress Daily reported that House leaders "released CBO estimates for liberals' preferred version of the public option that show $85 billion more in savings than for the version the Blue Dogs prefer."

CBO score of Senate HELP bill shows bulk of cost is for subsidies for lower- and middle-income Americans purchasing insurance. CBO's July 2 analysis of the Senate HELP Committee's bill, which does include a public option, shows that the subsidies to help certain low- and middle-income Americans purchase insurance through the exchange would cost around $723 billion. CBO also found that the public option "did not have a substantial effect on the cost" projections for the bill.

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