Alexander: Health Care Law A “Ticking Time Bomb"

Says It Will Affect State Budgets, College Students, Businesses, & People With Employer Health Insurance

Tuesday, March 27, 2012

Senators Lamar Alexander (R-Tn.), Mike Johanns (R-Ne.) and John Hoeven (R-N.D.) spoke together on the Senate floor Monday about the cost of the new health-care law to states, given their experience as former governors of their respective states.

Sen. Alexander said, “The health care law mandates that the states spend more money on Medicaid, and, as a result, the state cuts the money it is spending for the University of Tennessee or Nebraska or North Dakota. In order to keep the quality of education up, tuition goes up. So students are paying more for tuition and they are paying more for interest rates on their student loans directly because of the health care law.”

“What most people do not realize is the effect this has on higher education and student tuition. I hear a lot of talk about, ‘Let's see if we can lower student tuition.’ One way we can lower it is: Not take money from student loans and spend it to pay for the health care bill. Most people are not aware that the federal government took $8.7 billion in so-called profits it earns when it borrows money at 2.8 percent and loans it to students at 6.8 percent—the government took that money and spent it to pay for the health care bill.”

Senator Alexander’s remarks follow:

“All three of us here today have wrestled with this business of the rising costs of Medicaid, paid for partly by the states, according to rules set in Washington, and how do we deal with public education, especially higher education.

“I remember during the debate two years ago, I suggested to our colleagues on the other side of the aisle who were supporting the health care law—which I thought was an historic mistake because it expanded a health care delivery system we already knew was too expensive, instead of taking steps to reduce it. I suggested to them that they ought to be sentenced to go home and run for governor if they vote for it and see whether they can implement it over an eight-year period of time.

“Let me try to be very specific on the effect of the health care law on higher education in the states. This is not all President Obama's fault. Some 30 years ago, when I was a young governor, I was still struggling with saying: We get down to the end of the budget process and we have money either to put into higher education or into Medicaid, and the rules from Washington say it has to go to Medicaid.

“I remember going to see President Reagan and saying: ‘Why don’t we just swap it, Mr. President? You take all of Medicaid. Let the states take elementary and secondary education.’ I wish we had done that. But we did not do it. Gradually, the increasing Washington-directed costs have distorted state budgets until, as the senator from Nebraska said, 24 percent of the state budgets go to the Medicaid program.

“Now we are at a point where, because of the health care law, we are going to add 25.9 million more Americans onto Medicaid, according to the Medicaid Chief Actuary. Employers are going to decide: I would rather pay my $2,000 penalty and allow my employees to go into the exchange or, if they are lower income, into Medicaid. Then the costs to states are going to go up.

The senator from Nebraska talked about what the current governor of Nebraska said. Our former governor, Governor Bredesen, a Democratic governor, estimated that between 2014 and 2019 it would be $1.1 billion in new costs for the state of Tennessee from the Medicaid expansion.

“What most people do not realize is the effect this has on higher education and student tuition. I hear a lot of talk about, ‘Let's see if we can lower student tuition.’ One way we can lower it is not to take money from student loans and spend it to pay for the health care bill. Most people are not aware that the federal government took $8.7 billion in so-called profits it earns when it borrows money at 2.8 percent and loans it to students at 6.8 percent—the government took that money and spent it to pay for the health care bill.”

“If it did not do that, it could lower the interest rates on student loans, according to the Congressional Budget Office, to 5.3 percent and save $2,200 per student over 10 years on the basis. So the health care law is costing students who borrow money more on their loans.

"In addition, and I will close with this example, it is raising college tuition. You say: How could the health care law cause tuition to go up in California or Tennessee? If in Tennessee, as last year, the increase for Medicaid went up 15.8 percent, that is how much more state tax dollars it had to go up. Spending for the University of Tennessee and community colleges went down 15 percent. Then the result of that was tuition went up in our state by about 8 percent. That was true all across our country.

“So the effect – and I will come back to this later if we have more time – is that the health care law mandates that the states spend more money on Medicaid, and, as a result, the state cuts the money it is spending for the University of Tennessee or Nebraska or North Dakota. In order to keep the quality of education up, tuition goes up. So students are paying more for tuition and they are paying more for interest rates on their student loans directly because of the health care law.

“President Obama should not be blamed for the last 30 years of rising costs of Medicaid. But he should be held responsible and this health care law should be held responsible for making it worse. …

“After the passage of the health care law, I met with a number of representatives from chain restaurants. Chain restaurants are the kind at which we go out to dinner for a modest cost. They are among the largest employers in America. They employ largely low-income and young people – people who are the waiters and waitresses we see when we go into Ruby Tuesday or O'Charley's or one of these other places, and usually it is someone with a part-time job or somebody who is working his or her way up.

“Many of those companies offer some health insurance to their employees. At one of the companies, Ruby Tuesday, headquartered in Tennessee, the chief executive officer told me the cost of the health care law to his company would equal the profit of the company that year. This is a company with several billion dollars in revenue.

“One of the companies that is even more successful than Ruby Tuesday in terms of profit, and is larger, told me their goal was to have 90 employees per store. But after the health care law, they said they would have 70 employees per store in order to comply with the cost of the health care law. This not only raises the cost of business, but it reduces employment in the United States.

"Unfortunately, I am afraid what we may find is these restaurant companies, after 2014 – we are about one year away from a ticking time bomb for state budgets and businesses and also for people with employer health insurance. I am afraid these companies will look at the penalty and say they would rather pay $2,000 per employee and let them find their way into one of these state exchanges or into the Medicaid Program.

“Millions of Americans, because of the health care law, are going to lose their employer-sponsored insurance, and millions of Americans will not have as many jobs because of the costs imposed on businesses such as these restaurants.”


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