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Mr. President, I rise to talk about the Majority Leader’s health care reform bill.  Specifically, I want to discuss how this bill will increase health care costs, raise taxes and make America’s small businesses less competitive.

Mr. President, small businesses across America are the engine of our economy.   As many of my colleagues know, before I came to the Senate, I was a small business owner.  My wife and I owned three small shoe stores in Wyoming.  When I talk about small business, I don’t talk about it in the vacuum of the Senate floor, I speak from my own life experience. 

I know what is like to manage a small business – to keep the books, pay the vendors and always serve your customers.  I have faced the challenges of making payroll and trying to negotiate good, affordable benefits for my employees. 

As a former small business owner, I also understand that if we pass this bill, it will harm that engine of economic growth and be a disaster for millions of Americans. 

This bill will impose $493 billion in new taxes, which will fall disproportionately on the backs of small business owners.  For instance, the new $54 billion increase in the Medicare payroll tax will hit approximately one-third of the small business owners across the country.  These are the same businesses that employ over 30 million Americans.

I do not understand why, at a time when small business owners are struggling to pay their bills and keep their lights on, the Majority Leader has decided to increase their taxes.  These businesses are fighting for their very survival, and this bill makes it harder for them.

Small business owners are also health care consumers.   Like the rest of us, they take prescription drugs to treat diseases like cholesterol and hypertension and they might also use a pacemaker or have had a hip or knee replaced.  If this bill is passed, the prices they pay for all of those items will increase. 

The bill contains over $40 billion dollars in new fees for prescription drugs and medical devices.  The non-partisan Joint Commission on Taxation has said that these types of fees will ultimately be passed through to the consumer, meaning that the small business owner is going to pay more for his health care.

Many small businesses still manage to provide health insurance coverage for their employees, despite the ever increasing costs of health insurance.  I understand how hard it is to pay these ever increasing costs.  That is why I fought for many years to help small businesses band together and be able to get the same types of discounts that insurers typically provide for large employers.

Rather than lowering these costs, the Reid bill will actually increase the cost of insurance, by creating a new $60 billion tax on insurers.  Just like the new taxes on drugs and devices, the cost of this new insurance tax will be passed through to consumers, meaning that small businesses will see their health insurance premiums go up even more.

The damage this bill will do to small businesses is, unfortunately, not limited to the new taxes it creates.  The bill will also impose expensive new mandates and requirements on insurance, which will have the effect of dramatically increasing costs for small employers.

One of the worst provisions dealing with insurance market reforms is the so-called “shared responsibility for employers”.  What the authors of the bill are trying to hide behind such a harmless sounding euphemism is a new $28 billion dollar job- killing tax on employers.

Under the bill, if an employer does not provide health insurance benefits to any employee eligible for the new insurance subsidies – which includes families making up to $90,000 a year – then that employer has to pay a fine.  The penalty is equal to $750 per employee for all employees.

Both the non-partisan score-keepers at the Congressional Budget Office, along with nationally recognized economists, have said that the costs of this new tax will ultimately be paid by workers.  Businesses who cannot afford to provide health insurance will pass the costs of these new penalties on to their workers in the form of lower wages, reduced hours and eliminated jobs.

According to one recent study by the Heritage Foundation, this type of new job killing tax will place more than 5 million low-income workers at risk of losing their jobs or having their hours reduced and an additional 10 million workers could see lower wages and reduced benefits.
 
The bill contains a narrow exemption for small businesses with 50 or fewer employees.  Like many of the other poorly conceived provisions in this bill, even this exemption is likely to create unintended and harmful consequences. 

What is the likelihood that a small employer with 50 employees will agree to expand their business, if by adding a single extra employee they will expose them to this new job killing tax.  Small businesses are the engine of economic growth and job creation in this country, but this provision will actually discourage the creation of new jobs.  

Fifteen million Americans are currently unemployed and 19 percent of small businesses have reported that they reduced employment in their firms in the last three months.  If this bill is passed, the Reid job killing employer tax will mean that more Americans will lose their jobs.

The Reid bill also would impose sweeping new regulations over the health insurance marketplace.  Like most new regulatory schemes imposed on small businesses, the one will also mean increased costs for small businesses.

Small business owners know that the current market for health insurance is not sustainable.  According to a recent Kaiser Family Foundation report, costs for small businesses (those with less than 200 employees) rose by 5 percent from 2008 to 2009, and they are expected to rise again next year. 

We all agree that the status quo for health insurance is not acceptable.  Equally unacceptable, however, should be any proposals that make the current situation worse.  Unfortunately that is exactly what the Reid bill would do.

The non-partisan Congressional Budget Office, the Administration’s own official actuaries, the National Association of State Insurance Commissioners and at least six other private studies have all looked at provisions that are similar to what is in the Reid bill, and they all found that these provisions will drive up health insurance costs.

Actuaries at the consulting firm, Oliver Wyman, which did one of the studies, estimated these provisions will increase premiums for small business by at least 20 percent.  WellPoint, the largest Blue Cross Blue Shield plan in the nation, looked at their actual claims experiences in the 14 States in which they operate, and concluded that premiums for healthier small businesses will increase in all 14 states—in Nevada by as much as 108 percent. 

The bill also eliminates consumer choices, requiring Americans to buy richer types of plans that cover more deductibles and out of pocket expenses.  These plans typically have much higher premiums.

These new mandates will make it more difficult for small businesses to adopt new, affordable high deductible health plans.  These plans, when combined with a Health Savings Account, have been enormously successful in recent years in helping small businesses control their health care costs.

According to the Kaiser Family Foundation, 11 percent of small businesses employees are enrolled in HSAs.  Average HSA premiums for small businesses are 20 percent lower than traditional PPO plans and the number of employers offering HSAs has nearly doubled in the last three years.
Unfortunately, the new mandates in the bill will prevent some high deductible health plans from being sold, because they do not provide a rich enough benefit.

Small businesses are not just purchasers of health care – they are often providers as well.  Doctors, home health aides and nursing homes owners are all small business owners and have a significant stake in how this bill turns out.
Unfortunately a number of the provisions in the Reid bill will devastate these small businesses.  The bill cuts over $460 billion from Medicare over the next ten years, slashing Medicare payments to hospitals, nursing homes and home health agencies.

The Reid bill will cut over $15 billion in Medicare payments to nursing homes.  In a rural state like mine, this level of cuts will destroy many small businesses and force the closure of facilities that currently provide nursing home care to hundreds of Medicare patients.

Connie Jenkins, the Executive Director of the Star Valley Senior Center, recently wrote to me about the important role that nursing homes play in rural small towns in Wyoming.  She noted that many small communities depend on nursing facilities to provide a large portion of the available jobs.  She wrote that “in a rural state, such as ours, closure of nursing homes would mean families travelling farther to visit loved ones and in some cases loss of access all together.”

The Reid bill would also cut more than $40 billion in Medicare payments to home health agencies.  According to the analysis done by one industry association, this level of cuts could put nearly 70 percent of all home health agencies at risk of having to close their doors.

Home health agencies provide valuable assistance to disabled individuals, allowing them receive health care in their home.  If these cuts are enacted and these agencies are forced to close, the patients who depend on them will have to go back into institutional facilities to receive their care.  In addition to devastating these small businesses, this proposal would clearly break the President’s promise to protect Medicare beneficiaries and not reduce their benefits.

Many doctors, like my colleague John Barrasso, have also been small business owners.  Doctors currently are facing a 21 percent reduction in Medicare payments that is slated to go into effect in January.  Despite cutting $460 Billion from the Medicare program, the Reid bill does nothing to fix the Medicare payment formula for physicians.

Unlike the federal government, small business owners cannot lose money on every Medicare patient, but hope to make it up by volume.  A 21 percent payment cut is not sustainable and it highlights why we need to fix the broken Medicare physician payment formula.  Rather than stealing $460 billion from Medicare to create a new entitlement program for the uninsured, we should use those monies to strengthen and improve Medicare.

The Reid bill will also drive up health care costs for small businesses by its massive expansion of Medicaid.

This bill includes the largest expansion of the Medicaid program since it was created in 1965.  In addition to trapping 15 million low income Americans in the worst health program in America, this Medicaid expansion will also increase costs for many small businesses.

Medicaid uses government price controls to set payment rates far below what private insurers pay, often below the cost of what it costs to provide the care.  According to one estimate, Medicaid pays only 60 percent of the rates paid by private insurers.

This forces doctors to make up for their losses on Medicaid patients by increasing their costs to other purchasers.  According to a recent estimate by the accounting firm, Milliman, inadequate Medicaid payment rates resulted in physicians shifting $23.7 billion dollars in costs onto private sector purchasers.

Enrolling 15 million more Americans into the broken Medicaid program will only worsen this cost shift.  That means if this bill is enacted, small business owners will see their health care costs increase as physicians and hospitals struggle to make up for inadequate payments for many more Medicaid patients.

In addition to doctors and hospitals, states also cannot afford to pay for this expansion of the Medicaid program.  The Reid bill imposes approximately $25 billion in new unfunded Medicaid costs upon state budgets, at a time when states are facing the worst economic crisis in a generation.

What this will mean for small businesses will be even higher state taxes and fees, as states struggle to close the estimated $22 billion budget short fall they will face in fiscal year 2011.  According to the National Association of State

Budget Officers, states have already enacted $23.8 billion in new taxes and fees in the current fiscal year.  These numbers are only expected to increase, as states see no end in sight to their current fiscal crisis.

Increased state and federal taxes, higher health care costs and Medicare payment cuts are the results small businesses are most likely to see if the Senate passes the Reid health care reform bill.  While these would never be welcome changes, the Senate will be debating these policies at a time when small businesses face their most severe economic challenges since the Great Depression. 

As I mentioned, unemployment is already at 10.2 percent.  Even that number, which is the worst we have seen in 26 years, may actually understate the severity of the current situation.  The government estimates that up to 17.5 percent of the population may be entirely without a job or underemployed. 

Other economic indicators paint a grim picture for a potentially jobless recovery.  In October, new housing starts fell 10.6 percent, which is 30 percent lower than one year ago.

Federal Reserve Chairman Ben Bernanke recently noted that the ongoing financial crisis has led to the reduction or elimination of bank credit lines for many small businesses.  He also noted that the fraction of small businesses reporting difficulty in obtaining credit is near a record high, and these conditions are expected to tighten further. 

Small businesses are the engine of economic growth that can lead this nation out of our current economic crisis. 

Unfortunately, the Reid bill will have the effect of sand being poured into the gears of that engine. 

The recent statement of the National Federation of Retail Businesses does the best job of summarizing the impact of the Reid bill on small businesses.  They said:

“We oppose the Patient Protection and Affordable Care Act due to the amount of new taxes, the creation of new mandates, and the establishment of new entitlement programs. There is no doubt all these burdens will be paid for on the backs of small business. It’s clear to us that, at the end of the day, the costs to small business more than outweigh the benefits they may have realized.”
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