Another Hidden Tax from the Democrats - The CHAMP Act Will Tax Health Insurance

From a "Dear Colleague" letter penned by Ways and Means ranking member, Jim McCrery:

Hidden near the back of their massive bill that will cut Medicare by $200 billion is a tax increase on health insurance. That’s right, the tax and spend Democrats are at it again proposing yet another new tax, this time on health insurance.

Section 904 of the so-called “CHAMP” Act establishes, through the tax code, a “Health Care Comparative Effectiveness Research Trust Fund.” The stated goal is to support research that will give information to health care providers and insurers that will allow them to identify the most cost effective treatment options. This could include research on the comparative effectiveness of drugs, devices, and therapies.

I’ll get to the funding in a minute, but this program is worth a critical review because it could easily pave the way in the future for a government bureaucrat, intent on holding down health care costs, to make it difficult for physicians to use “disfavored” drugs or therapies when treating a Medicare beneficiary.

As for financing, from 2008 through 2010, $300 million would be raided from the Medicare Trust Funds to fund this research. Beginning in 2011, those transfers will be supplemented with a new, mandatory tax on health insurance. Total receipts for the research fund will reach $375 million per year, with at least $285 million coming from the new tax on health insurers. Although a formal revenue estimate for the proposal is not yet available, the Joint Tax Committee did expect the Trust Fund to generate gross revenues of more than $2.9 billion during the 10-year budget window.

The amounts involved in the tax increase – at this point – may sound relatively modest. But this is dangerous territory. Once a tax on health insurance is created, it will be impossible to get rid of, and very easy to increase.

I urge all of you to protect your constituents and vote against H.R. 3162. If you have any questions, please contact Jon Traub with the Ways and Means Committee at x54021.