Monthly Archives: April 2010

Harry Reid Gets a Big Thank You from Big Pharma

You may have seen Politico is reporting this afternoon about a new PhRMA-sponsored a new ad airing in Nevada that thanks Harry Reid for his work supporting…jobs.  As Politico notes, “Though the ad makes a passing reference to health care, it’s basically the groups’ way of saying “thank you” to Reid for pushing the health care bill to passage.”

This shocking – shocking! – development raises some interesting questions: First, How does a health care bill with $573 billion in tax increases create jobs for anyone other than government bureaucrats?  Second, why should the American people believe that Democrats’ government takeover of health care will benefit them if “Big Pharma” is running ads celebrating the outcome?  Who exactly were Harry Reid and his Democrat allies seeking to help – their constituents, or themselves and their special interest friends?

IRS and the Individual Mandate: Annoying Taxpayers, Raising Premiums, or Both?

USA Today has a story out this morning on the individual mandate and the IRS’ role in implementing the health care law.  Several experts are quoted as saying that with respect to the new individual mandate to purchase government-approved health insurance, the IRS “will be sending notices that will annoy people” without any follow-through, and that “the IRS’ hands are tied, to a considerable extent.”  In short, the mandate is “basically designed for failure.”  And even liberals agree that a failed mandate would result in higher premiums, as healthy people would shun coverage until they become sick, knowing they could obtain coverage once they do.

In response, IRS Commissioner Doug Shulman argues that compliance with Massachusetts’ mandate shows that most citizens will comply with the law.  But as the article points out, Massachusetts’ Department of Revenue has its full authorities – including the powers of imprisonment – available to force citizens to buy government-approved insurance, powers not available to the IRS under the national statute.  More importantly, data from multiple insurance companies in Massachusetts show that many people are paying the tax associated with the mandate while healthy, only to obtain coverage and run up high health costs once becoming sick – placing more upward pressure on insurance premiums.  If this is success, what exactly constitutes failure?

So in sum: Either the IRS, in addition to just “annoy[ing] people,” can use more heavy-handed tactics to enforce individuals to buy government-approved health insurance they do not need or want, or premiums will rise for all Americans because healthy people will not buy insurance until they need it.  Once again, many may ask: How does this represent “reform?”

A final note: The article also examines the IRS’ ability to handle all the new tasks assigned to it in the law, and whether tax compliance efforts will suffer as a result.  It’s worth noting that in attempting to rebut concerns about fraud, the agency pointed out that the law does NOT provide tax cuts to individuals for the purchase of insurance: “The health care subsidies will go directly to insurers, not taxpayers, giving individuals little incentive to cheat, says IRS spokesman Frank Keith.”

AARP: Always Looking Out for Itself…

As you may have heard, AARP has publicized a special insert included in its monthly bulletin to members to outline the new health care law.  The first page includes a list of “Ten Things You Need to Know about the Law,” including that it “makes pre-existing conditions a thing of the past.”  However, later in the document, some critically important fine print appears in the summary of Medicare provisions:

Medigap supplemental insurance: No change. You will not be required to buy a private medigap policy. If you buy medigap insurance outside of the limited time frames when full federal protections apply, insurers can still deny coverage or require you to pay higher rates because of your health and preexisting conditions.

When it comes to Medigap insurers denying coverage because of pre-existing conditions, AARP knows what it’s talking about – because the AARP- sponsored Medigap plan denies coverage and imposes waiting periods for vulnerable seniors with pre-existing conditions in many states.  And for AARP, denying vulnerable seniors supplemental coverage is a lucrative business indeed: By its own admission AARP has received more than $3 billion in windfall profits over the past decade for selling Medigap and other insurance products – and obtained nearly 40 percent of its $1.1 billion in 2008 revenue from United Health Group.

So while AARP is happy to trumpet Democrat talking points about pre-existing conditions, it very conveniently received a “backroom deal” from those same Democrats that preserved AARP’s right to continue denying care to vulnerable seniors with pre-existing conditions in the Medigap market where AARP makes most of its money.  An advocacy organization that puts preserving its own kickbacks before protecting vulnerable seniors – that’s the real news “bulletin” AARP should be providing to its members.

The First Missed Deadline — But Not the Last

You may be aware that Section 1552 of the health care law – entitled “Transparency in Government” – requires the HHS Secretary to list on the Department’s website within 30 days “a list of all the authorities provided to the Secretary” under the Act.  Such a list could allow members of the public to determine what types of powers HHS will hold in the 159 new bureaucracies and programs established in the law.  Senators Grassley, Enzi, and Gregg sent the attached letter to Secretary Sebelius last week reminding her of her statutory obligation to issue such a list by April 23.  Yet Friday’s deadline came and went without such a list being publicly released, as the law required.

HHS’ non-compliance with its statutory requirements came during the same week in which the White House began mailing out millions of government-funded postcards touting a small business tax credit in the law and hired a political operative “to aid in selling health care” before the November mid-term elections.   So which is the Administration’s top priority: Implementing the law as required, or creating taxpayer-funded propaganda campaigns to bail out Democrats who voted for this unpopular government takeover of health care?


UPDATE:  Several folks have pointed out that HHS has a section of its website titled “Health Reform and the Department of Health and Human Services.”  It is in fact a list, and it does include the word “authorities” at the top, but it certainly doesn’t make more transparent what explicit authorities HHS believes it has as a result of the new law.  Instead, the website just lists the law’s table of contents, and allow individuals to pore through the law’s 2,800-plus pages to attempt to decipher the statute – hardly a victory for clarity and transparency in government.

It is far from an academic exercise to ask the department charged with interpreting much of the new law to provide its views of the scope – and limits – of the statute.  For instance, does HHS believe the law gives them the authority to deny patients drugs or therapies because bureaucrats consider them too expensive?  The Administration’s nominee to head Medicare, Donald Berwick, supports using such authority to deny patients access to life-saving treatments, writing that “the decision is not whether or not we will ration care – the decision is whether we will ration with our eyes open.”  It’s worth asking whether HHS has declined to release a clearer and more definitive list of the scope and limits of its authority under the law because it intends to use that law to impose arbitrary rationing of care by government bureaucrats.

The Effect of Health “Reform:” Higher Costs

Two separate articles this morning outline how Democrats’ government takeover of health care will NOT reduce costs as promised.  The Associated Press has an article noting that “Insurance premiums are likely to keep going up over the next few years.  Experts predict that the law’s early benefits — such as expanded coverage for children and young adults — could nudge rates a little higher than would otherwise have been the case.”  Once the coverage expansions are fully implemented in 2014, “increased demand will push up health care spending, putting more pressure on premiums.”  Overall, the article gives the new law “a C minus or D for cost control” – not welcome news to many Americans struggling to pay their existing insurance premiums, and a far cry from the $2,500 in premium reductions the President promised during his campaign.

Separately, Business Insurance magazine writes about how carriers may decide to drop medical cost-containment activities to comply with new regulations  requiring companies to spend no more than 15% of their premiums on “administrative costs.”   Such an effect from these government-imposed price controls would RAISE, not lower, costs over time, as carriers would have a perverse incentive not to undertake disease management and other related activities that work to bring down costs by improving beneficiaries’ health.

Policy Brief: One Month Later: What America Has Found in Obamacare

“We have to pass the bill so that you can find out what is in it.”

 — Speaker Nancy Pelosi, March 2010[i]

Speaker Pelosi claimed that Democrats needed to pass their government takeover of health care so that the American people could find out its benefits “away from the fog of the controversy.”[ii]  But one month after President Obama signed the measure into law (P.L. 111-148),[iii] the American people have found new problems in the Democrat approach—leading to further declines in the overhaul’s popularity:

Costs Will Go Up.  The Centers for Medicare and Medicaid Services released its analysis of the health and reconciliation laws, which found that the legislation will increase health costs, not contain them.[iv]  The actuaries also asserted that health care shortages and price increases “should be considered plausible and even probable” after the law’s enactment, that many provisions in the legislation intended to control health costs will have a “negligible financial impact,” and that some of the major savings projections in the legislation are “unrealistic” and “difficult to attain.”[v]

Millions Forced to Buy Insurance.  A study by Administration advisor Jonathan Gruber[vi] found that more than 20 million people will obtain health coverage, not because they need it, want it, or find it valuable—but solely because the federal government is forcing them to buy it, and taxing them if they do not.[vii]  The Congressional Budget Office found that the tax penalty imposed under the law for the millions expected to violate the individual mandate will average nearly $1,000—and that more than three-quarters of those subject to the individual mandate tax will have incomes of under $250,000, breaking one of candidate Obama’s key campaign promises.[viii]

Millions Forced Out of Their Current Insurance.  Earlier this month, the Administration released the 2011 payment rates for Medicare Advantage plans, reflecting the more than $202 billion in cuts to the program scheduled to take place over the next decade.[ix]  The cuts scheduled to take effect beginning next year will begin a process that will see nearly five million fewer seniors in Medicare Advantage plans, and millions more losing extra benefits that they currently enjoy.[x]

Rationing With Open Eyes.  Earlier this week, President Obama nominated Donald Berwick to head the Centers for Medicare and Medicaid Services.  Berwick has previously indicated his support for federal restrictions on medical treatments that are too costly.  He has noted that since “we have a limited resource pool…the decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”[xi]  These kinds of statements—supporting policies that could limit access to life-saving treatments for Medicare beneficiaries—suggest one way the Administration intends to cut costs to fund its $2.6 trillion health care expansion.

Democrats Don’t Understand the Bill.  A New York Times article, entitled “Baffled by Health Plan?  So Are Some Lawmakers,” highlighted the confusion surrounding one provision in the law requiring Members of Congress and their staff to give up their current coverage and join the new government-run exchanges.  A Congressional Research Service report cited in the article “found that this provision was written in an imprecise, confusing way, so it is not clear when it takes effect.”[xii]  As one Member of Congress observed, “If Members of Congress cannot explain how it’s going to work for them and their staff, how will they explain it to the rest of America?”[xiii]

Unpopularity Grows.  Even the Administration now admits the President’s government takeover of health care defied the public will; “White House advisors said their own polling showed the health care plan was still unpopular.”[xiv]  And an Associated Press survey indicated that opposition to the health law has grown since its enactment.  Disapproval of the President’s handling of health care jumped six points within a month, to “a level not seen since last summer’s angry town hall meetings.”[xv]

A Taxpayer-Funded Propaganda Campaign.  Because of the bill’s widespread unpopularity, the Washington Post reported that the Administration “would soon be hiring a ‘very senior official’ whose sole portfolio would be to sell their health care overhaul to the public in the months leading up to the Nov. 2 elections.”[xvi]  Shortly thereafter, the Administration also unveiled an initiative to mail out “more than 4 million” postcards to small businesses touting the tax credits in the legislation.[xvii]  However, a White House aide admitted that “the outreach is going to vary depending on what the provision is.”  Translation: The Administration is unlikely to put much effort into informing individuals that their taxes will be going up, or giving seniors the details of the cuts to Medicare Advantage that will result in millions losing extra benefits or access to their current plan.[xviii]

In one short month, the American people have found out about many elements of the bill.  Given these revelations, many may wonder how the reality of this brave new health care world in any way resembles the rhetoric of President Obama and the majority.

[ii] Ibid

[iii] Senate-passed bill (H.R. 3590) text available at; reconciliation bill (H.R. 4872) text available at

[iv] Richard Foster, Department of Health and Human Services, Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as amended, April 22, 2010,

[v] Ibid

[vi] Gruber has received two no-bid government contracts totaling nearly $400,000 to consult with the Department of Health and Human Services on “national health care reform.”  Detailed information available at

[vii] “Why We Need the Individual Mandate” by Jonathan Gruber, Center for American Progress paper, April 8, 2010,

[viii] Congressional Budget Office, estimated distribution of individual mandate penalties under P.L. 111-148 and P.L. 111-152, April 22, 2010,

[ix] Congressional Budget Office analysis of H.R. 4872 in concert with H.R. 3590, March 20, 2010,

[x] Congressional Budget Office analysis of  Medicare Advantage provisions in H.R. 4872 in concert with H.R. 3590, March 19, 2010

[xi] “Rethinking Comparative Effectiveness Research,” An Interview with Dr. Donald Berwick, Biotechnology Healthcare June 2009,

[xii] “Baffled by Health Plan?  So Are Some Lawmakers” by Robert Pear, New York Times April 13, 2010,

[xiii] Ibid

[xiv] “Democratic Party Plans Unprecedented Aid for Congressional Campaigns” by Paul Kane and Chris Cillizza, Washington Post April 17, 2010,

[xv] “AP-GfK Poll: Jump in Opposition to Health Care Law” by Ricardo Alonso-Zaldivar, April 15, 2010,

[xvi] Ibid

[xvii] “For Small Businesses, Health Care Pitch Is in the Mail” by George Condon, CongressDaily AM April 20, 2010,

[xviii] Ibid

Policy Brief: Medicare Actuary: “Reform” = Higher Costs, Less Access, Unsustainable Spending

“If any bill arrives from Congress that is not controlling costs, that’s not a bill I can support.  It’s going to have to control costs.”

— President Obama, June 23, 2009[i]

The Chief Actuary of the Centers for Medicare and Medicaid Services (CMS) has issued a report on the effects of the “Patient Protection and Affordable Care Act” along with the subsequent reconciliation measure, which showed that Democrats’ health care takeover is anything but affordable.[i]  The Chief Actuary warns that the two new laws will increase health care costs, raise federal spending, threaten access to care for seniors, and result in higher premiums.  In other words, the Administration’s own actuary demonstrates that the Democrats’ rhetoric about health care reform has diverged from reality.

Higher Costs

The cost curve would bend up, not down.  National health expenditures are expected to increase from 17 percent of GDP now (more than any other country) to 21 percent under the new law.  The Actuary concluded that the federal government and the country will spend $310 billion more under the new law than we would have without it.

Health care shortages and price increases are “plausible and even probable.”  Because of the increased demand for health care, “supply constraints might interfere with providing the services desired by the additional 34 million insured persons.”  The result could be “some of this demand being unsatisfied,” meaning that people will not have access to care.  Additionally, providers are expected to negotiate for higher rates, meaning that health care costs and premiums would increase.

“Negligible financial impact” for most provisions.  The actuary found “a negligible financial impact over the next 10 years” for most provisions in the legislation “intended to help control future health care cost growth.”

Less Access

The law “jeopardizes access to care” for seniors.  Because of the law’s payment reductions, “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”  About “15 percent of Part A providers would become unprofitable within the 10-year projection period” absent further legislative action.

Medicare Advantage access cut in half.  Because of the law’s significant cuts to Medicare Advantage (MA) plans, the actuary projects that “enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law).”

Employers will drop coverage.  The Chief Actuary concludes that 14 million people will lose their employer-sponsored coverage.  Smaller employers will be inclined to terminate coverage so their workers can qualify for “heavily subsidized coverage” through the exchange.

“Cadillac Tax” will hit “Chevy” health insurance plans. The actuary notes that the excise tax on high-cost health plans—also known as the “Cadillac tax”—would hit 12 percent of insured workers initially, but “this percentage would increase rapidly thereafter….The effect of the excise tax on reducing health care cost growth would depend on its ongoing application to an expanding share of employer plans and on an increasing scope of benefit reductions for affected plans.”

Medicaid insurance card not a guarantee of care.  The actuary notes that “it is reasonable to expect that a significant portion of the increased demand for Medicaid would be difficult to meet, particularly over the first few years.”  According to the actuary, the estimated 18 million new Medicaid beneficiaries would comprise more than half of the law’s expansion of insurance coverage.

Higher taxes will lead to higher premiums.  The actuary concludes that the new taxes on medical devices, prescription drugs, and insurance plans “would generally be passed on through to health consumers in the form of higher drug and device prices and higher insurance premiums.”

Unsustainable Spending

Federal spending will rise.  The actuary calculates that net federal spending on health care will increase by $251.3 billion over the ten year budget window.

Budgetary double-counting does NOT improve Medicare’s solvency.  The actuary notes that the bill’s Medicare provisions “cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the [life of the Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.”

The law uses budget gimmicks to claim that it is in balance.  The Chief Actuary notes that the health care takeover relies on revenues from the CLASS Act,[ii] but that the CLASS Act will result “in a net Federal cost in the longer term.”  The Chief Actuary also has determined that the program faces “a significant risk of failure” because the high costs will attract sicker people and lead to low participation.

The law does almost nothing to limit actual fraud and abuse.  One new report found that Medicare paid $47 billion in suspect claims last year.[iii]  Now the Chief Actuary estimates that the fraud provisions in the law will save only about two percent of that annual total.

[i] Richard Foster, Department of Health and Human Services, Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as amended, April 22, 2010, .

[ii] The CLASS Act creates a new federal long-term care insurance program that provides cash benefits to purchase non-medical services and supports.  The Washington Post called the CLASS Act a “gimmick” “designed to pretend that health care is fully paid for.”  The Post goes on to say that “…the money that flows in during the 10 year budget window will flow back out again.  These are not ‘savings’ that can honestly be counted on the balance sheet of reform.” Washington Post, “How Not to Fix Health Care,” July 10, 2009.

[iii] Associated Press, “Govt: Medicare paid $47 billion in suspect claims,” November 15, 2009.

Taxpayer-Funded Propagandists…

In case you hadn’t seen, the Post is reporting this afternoon that Stephanie Cutter – a Democrat political operative with no known health care background – is being “tasked with overseeing the White House’s health care messaging strategy…in advance of the 2010 midterm elections.”

In addition to the concerns about this type of taxpayer-funded propaganda campaign previously outlined below, it’s also worth noting that the article points out that Cutter “is expected to return to her consulting firm – the Cutter Media Group – at some point in the not-too-distant future.”  But wasn’t candidate Obama the one who said: “I will make it absolutely clear that working in an Obama Administration is not about serving your former employer, your future employer, or your bank account—it’s about serving your country, and that’s what comes first.”

Taxpayer-funded propaganda campaigns and a “revolving door” for political operatives in the White House – how is that change we can believe in?

It’s NOT a Moderate Bill…

As some Democrat talking points being circulated in recent days attempt to characterize the health care takeover as a “moderate” bill, I think it’s worth examining this argument from a fiscal perspective.  Specifically, the enacted bills (the Senate bill and reconciliation combined) spend nearly as much as the original measure introduced in the House (HR 3200) that many experts viewed as fiscally irresponsible – and mask the spending through a series of budgetary gimmicks and timing shifts.

The chart below demonstrates how spending on health coverage provisions changed during the legislative process – and does so based on CBO estimates of the bills’ first six years of implementation, to use a standard measure of spending.  It contains two important caveats.  First, the spending examined covers the costs of the Medicaid expansion, health insurance subsidies, and small business tax credits ONLY – it doesn’t include other mandatory spending (e.g., the prevention and wellness trust fund, temporary high-risk pool funding, etc.) or discretionary appropriations.  Second, the Finance Committee Chairman’s Mark implemented the coverage expansions in July 2013, as opposed to the rest of the bills, which stuck to a January implementation date; I used 2014 as “Year 1” for purposes of the chart below.


Comparison of Health Care Bills’ Spending on Coverage Subsidies (in Billions)

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6


House Introduced Bill (HR 3200)








House-passed bill (HR 3962)








Senate Finance Committee Chairman’s Mark*








Finance Committee bill (S. 1796) as passed








Reid substitute to HR 3590








Senate Bill (HR 3590) as passed in December








Enacted Bill (PL 111-148) Plus Reconciliation









Source: CBO Scores of Legislative Proposals

Several things are clear from the chart:

  • From the time Chairman Baucus introduced his Chairman’s Mark, the health “reform” price tag in the Senate rose and rose at every step of the legislative process – such that the bill that passed the Senate was actually more costly than the bill that passed the House on a like-for-like basis. (The House bill had a higher price tag solely because its coverage expansions started in January 2013, not January 2014.)
  • Even though the Senate bill actually spent more on coverage subsidies than the House-passed measure, House liberals still deemed this expense insufficient, and insisted on even more government spending on subsidies in the reconciliation measure.
  • The reconciliation measure’s $921 billion in spending on subsidies far exceeds BOTH the score of both the House-passed AND the Senate-passed bills on a like-for-like basis.  In fact, if the effects of an increase in Medicaid reimbursements – which CBO included in the cost of the Medicaid expansion in its score of HR 3200, but later distilled into a separate line-item for subsequent legislation – are removed, the enacted measures spend nearly as much as the House-introduced HR 3200, which Blue Dog Democrats decried as too costly.

This analysis logically raises the question of how a measure nearly as costly as HR 3200 could not increase the deficit – as CBO claimed would be the case with the legislation introduced in the House in July.  The answer lies in four provisions included in the law not included in HR 3200:

  • A reduction in the growth of health insurance subsidies – but only in the years after 2018, once President Obama leaves office;
  • Implementation of the “Cadillac tax” on high-cost insurance plans – which the Administration, under pressure from labor unions, delayed until 2018, again after President Obama leaves office;
  • A board of unelected bureaucrats ordered to make additional cost reductions in Medicare beginning in 2015 – the third year of a potential Obama second term; and
  • The omission of an adjustment to Medicare physician payments included in HR 3200, but removed from the health law due to its high cost – meaning that physicians will continue to face a 21 percent payment decrease in Medicare payments later this year, and further reductions thereafter.

If the first three provisions were removed from the law, and the “doc fix” provisions re-inserted, CBO admitted that the legislation WOULD in fact increase the deficit.  So essentially, the Obama Administration has decided to rely on its successor Administrations and Congresses to do what this Congress could not – find ways to pay for this unsustainable entitlement in the long term.

So for those claiming the legislation is a “moderate” bill, the question can reasonably be asked: How does the law’s immoderate reliance on budgetary gimmicks in order to achieve anything approaching balance (on paper at least) signify a responsible approach to governance?

More Taxpayer-Funded Propaganda

You may have seen a CongressDaily piece this morning indicating the Administration is mailing out millions of postcards to small businesses to tout the small business tax credit included in Democrats’ health care takeover.  This of course raises intriguing questions about what other elements of the health care law the Administration will be reaching out to inform Americans about:

  • Has the White House pointed out in its postcards about the tax credit that businesses who do not offer “acceptable” coverage will be taxed by $2,000 per employee beginning in 2014?
  • Will the White House send postcards to the 11 million seniors in Medicare Advantage plans highlighting the fact that their extra benefits will be reduced to fund the health care takeover – and the coverage they have and like could go away entirely?
  • Will the White House send postcards informing consumers insurance premiums on the individual market will go up by $2,100 per family?
  • Will the White House send postcards to all Americans pointing out that they will be taxed if they do not purchase government-approved health insurance, and that the IRS will have the power to garnish their tax refunds and take other punitive actions against them?

Of course, the White House had its own response to these questions: “The outreach is going to vary depending on what the provision is.”  In other words, benefits of the law will be trumpeted through mass mailings to millions of Americans sent at taxpayers’ expense – while the costs will be ignored and minimized whenever possible.

Wikipedia notes that propaganda as defined “often presents facts selectively to encourage a particular synthesis, or uses loaded messages to produce an emotional rather than rational response to the information presented” – which sounds a lot like the scenario being described by the White House.  So the ultimate question is: With the federal government running up trillion-dollar record deficits, why are millions of dollars in taxpayer funds being used for these transparent attempts to promote Democrats’ unpopular government takeover of health care?