HHS FY25

WM: Hearing with Health and Human Services Secretary Becerra, March 20, 2024

General Approach

For obvious reasons, this year will be more hectic than the last. The budget and appropriations process needs to be simple. To do this, pass a consensus caretaker budget with two draft partisan supplemental bills, one of which can be enacted during the Lame Duck Session or at the beginning of the next Congress for the President-Elect to sign upon taking office, depending on who wins. 

If such a budget is enacted, use it as the basis for spending caps for a new Budget Control Act. Make the targets realistic and self-enforcing for purposes of Appropriations Committee allocations. 

Contingencies

In the event the majority in the House shifts due to early retirements or insurrection indictments, the Senate majority and the House minority should have legislation ready to enact a Public Option, including reconciliation instructions for the FY24 budget year. Please see the attachment for details. 

As any such change in control will only last through the special election cycle, this should be the second priority. The first must be amending the Electoral Count Act and the jurisdiction of the Ethics Committees to provide for the enforcement of the Fourteenth and Twentieth Amendments, including provisions for removing and related disability for members and the president-elect.

The President’s Budget addresses the following two top line points:

Lowers Health Care Costs, making permanent the expanded premium tax credits that the Inflation Reduction Act extended, providing Medicaid-like coverage to individuals in States that have not adopted Medicaid expansion, paired with financial incentives to ensure States maintain their existing expansions.

Protects and Strengthens Medicare,  extending the solvency of the Medicare Hospital Insurance (HI) trust fund indefinitely by modestly increasing the Medicare tax rate on incomes above $400,000, closing loopholes in existing Medicare taxes, and directing revenue from the Net Investment Income Tax into the HI trust fund as was originally intended. 

Regarding lowering healthcare costs, the President is forgetting his promise to create a  Public Option. 

We disagree with the president on how to shore up the HI trust fund and expand the Affordable Care Act.  ACA subsidies are too low and are funded by taxing the wrong people (investors). Families in the Silver Plan still have problems meeting copays and paying premiums. The funding is also unfortunate. Rather than expanding Medicaid, replace it for the non-elderly with the  Public Option proposed in 2009.  

The public option should be extended to individuals who are denied coverage under pre-existing condition rules. Such rules must be revoked as the price of passing the bill. Such a trade-off is necessary for enactment of such a proposal on a bipartisan basis. 

Developing the Public Option needs to be funded in this budget. Particularly, it should explore the impacts on coverage and cost of automatically enrolling individuals who are denied coverage under pre-existing condition rules. 

The way to fully fund healthcare is through an employer-paid subtraction value added tax.

Taxes to support Medicare should be broad based, funded either by an employer paid subtraction VAT or a border adjustable goods and services tax (credit invoice VAT). This would allow for the repeal of the ACA-SM surtax on higher income individuals enacted as part of the Affordable Care Act. Tax increases on higher income individuals should be dedicated toward fully funding net interest, eventually reducing the national debt, funding veterans healthcare and overseas military and ocean deployments. 

The President’s Budget cites PhARMA profits as a rationale for increasing business income tax rates.  He proposes raising Tax Rates for Large Corporations

Instead, we suggest eliminating Corporate Profits taxes and taxation of business income on Form 1040 with a Subtraction VAT (with offsets for employee and retiree healthcare) and a credit invoice tax on both labor and profit. The combined rates of these taxes will burden both profits and labor costs, raising much more money.

This tax will be levied for all income earned in the country of production (for subtraction VAT) and of sale (Credit Invoice VAT). A new agreement on rate uniformity for our proposed Asset VAT will prevent rate shopping for stock trading (see the second attachment).

From Tax Reform Attachment: Subtraction Value Added Taxes

Subtraction Value-Added Tax (S-VAT). Corporate income taxes and collection of business and farm income taxes will be replaced by this tax, which is an employer paid Net Business Receipts Tax. S-VAT is a vehicle for tax benefits, including

Health insurance or direct care, including veterans' health care for non-battlefield injuries and long term care. 

Employer paid educational costs in lieu of taxes are provided as either employee-directed contributions to the public or private unionized school of their choice or direct tuition payments for employee children or for workers (including ESL and remedial skills). Wages will be paid to students to meet opportunity costs.  

Most importantly, a refundable child tax credit at median income levels (with inflation adjustments)  distributed with pay. 

Subsistence level benefits force the poor into servile labor. Wages and benefits must be high enough to provide justice and human dignity. This allows the ending of state administered subsidy programs and discourages abortions, and as such enactment must be scored as a must pass in voting rankings by pro-life organizations (and feminist organizations as well). To assure child subsidies are distributed, S-VAT will not be border adjustable.

As above, S-VAT surtaxes are collected on all income distributed over $75,000, with a beginning rate of 6.25%. replace income tax levies collected on the first surtaxes in the same range. Some will use corporations to avoid these taxes, but that corporation would then pay all invoice and subtraction VAT payments (which would distribute tax benefits). Distributions from such corporations will be considered salary, not dividends.

Funding Orphan Drugs and the issue of PhARMA profits

PhARMA justifies its profits because it is burdened with high development costs for new and orphan drugs. We renew our call for a more “corporate approach” for government research and testing of new drugs.

Part of ARPA-H is the funding for research on orphan drugs and the lingering problem of their cost once research leads to product development. In comments to Senate Finance on March 16th of this year, we repeated our proposal in this area for NIH to retain ownership in any such drug and contract out its further development and manufacture. Keeping ownership in public hands ends the need for drug companies to charge extreme prices or increase prices for its existing formulary to fund development. 

PhARMA would still make reasonable profit, but the government would eat the risk and sometimes reap the rewards. NIH/FDA might even break even in the long term, especially if large volume drugs which were developed with government grants must pay back a share of basic research costs and the attached profits, as well as regulatory cost.

Attachment: Single Payer from HHS 2022 Budget

Attachment: Asset Value Added Taxes Video