Monthly Archives: November 2010

Three Quick Medicare Hits

Ripped from the headlines today…

  1. No Democrat Victory on Medicare Advantage:  The White House released a blog posting trumpeting this morning’s Washington Post story on Medicare Advantage to claim that “Medicare Advantage is going strong.”  But dig deeper and you’ll find another story.  The Post article also quoted AARP – a staunch supporter of the law – to say “it may be a little early” for Democrats to be claiming that Medicare Advantage won’t be adversely affected by more than $200 billion in cuts, because “a lot of these changes [to Medicare Advantage] don’t kick in until next time around” in 2012.  Indeed, the CBO score of the law found that Medicare Advantage plans would be cut by only $1.8 billion in 2011, but $6 billion in 2012 – a nearly fourfold increase next year.  So the real story on Medicare Advantage is that plans are already dropping out – and with cuts scheduled to accelerate, the bad news for seniors can only get worse.
  2. If the Health Care Law Made Medicare “Stronger,” Why Are Doctors Being Driven Out of the Program?  AARP has also released a new ad campaign regarding scheduled cuts in Medicare physician payments scheduled to take effect on January 1.  The headline of the ad: “Don’t let Congress drive your doctor out of Medicare.”  Of course, Medicare physician payments are on the chopping block only because Democrats did not address it in the health care law, choosing to re-direct Medicare savings that would have financed a permanent “doc fix” to fund new entitlements instead.  But why is the Administration placing taxpayer-funded advertisements claiming that “Medicare just got stronger” thanks to the health care law if its allies like AARP are claiming that Congress is driving doctors out of Medicare due to looming reimbursement cuts?
  3. Hypocrisy Much on Insurance Competition?  The Center for Budget and Policy Priorities released an analysis of deficit reduction proposals that once again illustrates Democrat double-standards when it comes to private insurers competing against government.  Specifically, the report analyzed the Rivlin-Domenici plan’s concept of a premium support system, whereby private Medicare Advantage plans would compete on a level playing field with traditional, government-run Medicare. (Right now, Medicare Advantage plans only bid against a benchmark set in statute, and do not directly compete against traditional Medicare.)  Here’s what CBPP said about constructing a premium support mechanism:

“It may be possible in theory to structure a premium support system to assure that traditional Medicare and the private plans compete on a level playing field and that private plans do not enroll healthier beneficiaries, on average.  Traditional Medicare would need authority to offer an integrated benefit package, including drug and supplemental coverage, and to update that package in response to changes in the health care system and the insurance market.  In addition, the private plans would have to be subject to substantial regulation; it would be necessary to limit those plans to offering standardized benefit packages (to ensure that benefit packages were not designed to deter sicker individuals) and to preclude them from offering additional services designed to entice healthier enrollees.  In practice, securing congressional approval for legislation allowing or requiring such regulation would be extremely difficult, as would monitoring and enforcing such regulations adequately and effectively.”

In other words, creating a government-run health plan to siphon individuals away from private insurance for individuals under age 65 “would likely spur competition” and should be implemented, but allowing private Medicare Advantage plans to compete head-to-head against government-run Medicare is so difficult that Congress shouldn’t even bother considering it.  Slightly contradictory?  You decide…

Obamacare Leads to Highest Premium Increases in Five Years

From Aon Consulting today comes a survey indicating that “HMO plans will have the highest premium increases in five years” – an overall average increase of 9.8 percent.  One reason: “HMO plans have also been more aggressive in estimating the cost impact of some of the most immediate applications of health care reform—including covering children up to age 26, the elimination of certain lifetime and annual limits and covering preventive care at 100 percent.”

In other words, while candidate Obama promised a $2,500 premium reduction for families as a result of his health care plan, premiums are rising at an even faster rate thanks to the new mandates imposed by the law.  As a result, middle-class families struggling in a difficult economy will have to pay more for their health insurance – meaning the “Affordable Care Act” is not living up to its name.

Premiums 2010

Policy Brief: How State Exchanges Could Reduce Access to Health Care

“The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”

 — Dr. Donald Berwick, June 2009[i]

“Maybe you’re better off not having the surgery, but taking the painkiller.”

 — President Obama, June 2009[ii]

Over the next year, many state legislatures will consider legislation establishing insurance exchanges to implement the health care law.  These legislative debates will revolve around whether governments can or should limit the insurance plans available to consumers—and in so doing, potentially restrict access to life-saving but costly treatments:

  • In designing their exchanges, states will have to determine whether to allow their exchange to serve as an “active purchaser” of health insurance, negotiating rates directly with insurance carriers and excluding from the exchange those companies that do not comply with government diktats.  Among the two states with existing exchanges, Massachusetts’ insurance Connector, the Commonwealth’s version of an exchange, utilizes the active purchaser model, while Utah’s nascent exchange welcomes all insurance companies licensed to operate in the state.[iii]
  • States that choose to establish exchanges that function as active purchasers of health care could use their market clout to exclude plans that cover costly treatments.  Such actions would attempt to reduce costs using the blunt instrument of government-imposed rationing.
  • The health care law includes few restrictions on state exchanges regarding plans that cover costly treatments.  Section 1304 of the law[iv] requires only that exchanges may not exclude insurance offerings “on the basis that the plan provides treatments necessary to prevent patients’ deaths in circumstances the exchange determines are inappropriate or too costly.”

While the language of the statute may sound reassuring, the definition of “treatments necessary to prevent patients’ deaths” is far from clear.  For instance, whether costly chemotherapy drugs will be considered “necessary” to prevent a patient’s death is subject to interpretation.  In the same vein, cancer drugs that extend life, but do not necessarily cure illness or prevent death, could be restricted on cost grounds—the policy of Britain’s National Health Service until a reversal earlier this month.[v]  In other words, state exchanges granted the power to exclude insurance plans still would have broad latitude to exclude plans that cover treatments perceived as too costly.

  • Influential Democrats have already proposed using government boards to restrict access to costly treatments, as state exchanges could do under the new law.  In his book Critical, former Senate Majority Leader Tom Daschle—President Obama’s original choice to head the Department of Health and Human Services—noted that a board of health care bureaucrats, could “rank services and therapies by their health cost impacts,” and make coverage determinations based on that list.[vi]  Daschle argued that “government could exert tremendous leverage with its decisions,” including a “nitty-gritty” analysis “of which treatments are the most clinically valuable and cost-effective.” [vii]

“The chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here….There is going to have to be a very difficult democratic conversation that takes place.”

 — President Obama, April, 2009 [viii]

  • Former leader Daschle is far from the only one who has advocated restricting access to costly treatments.  Last year President Obama called for a “difficult democratic conversation” about what he perceives as excessive spending on end-of-life care.[ix]  And in appointing Dr. Donald Berwick to head the Medicare program, the president chose as one of the key officials implementing the new law a man who has expressed his desire to “learn from and adapt” the British scheme of rationing based on cost.[x]

Many may find troubling the prospect that state-based insurance exchanges could restrict access to insurance plans that cover costly treatments—imposing a de facto form of rationing on the millions of individuals who will be forced to buy policies through the exchanges to receive federal subsidies.  States wishing to avoid this particular problem could structure their exchanges in a way that prevents this form of government-imposed rationing.  More broadly however, the fact that the health care law even contemplates unelected bureaucrats restricting access to treatments in this manner represents one of the many pernicious ways in which the overhaul places government between patients and their doctors.



[i] “Rethinking Comparative Effectiveness Research,” Biotechnology Healthcare June 2009, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2799075/pdf/bth06_2p035.pdf

[ii] “Questions for the President: Prescription for America,” ABC News forum, June 24, 2009, transcript available at http://abcnews.go.com/Politics/HealthCare/story?id=7920012&page=1

[iii] “Health Care Overhaul Depends on States’ Insurance Exchanges” by Robert Pear, New York Times October 25, 2010, http://www.nytimes.com/2010/10/24/health/policy/24exchange.html

[iv] Patient Protection and Affordable Care Act, P.L. 111-148; http://www.opencongress.org/bill/111-h3590/text

[v] Life-extending drugs such as Sutent and Avastin were rejected by Britain’s National Institute for Health and Clinical Excellence (NICE) in 2008 as too costly; see “Kidney Patients Denied ‘Too Expensive’ Life-Extending Drugs,” Daily Telegraph 6 August 2008, http://www.telegraph.co.uk/health/2512639/Kidney-patients-denied-too-expensive-life-extending-drugs.html?DCMP=EMC-new_07082008.  However, press reports from November 2010 indicate the new British government will restrict NICE’s ability to restrict drug access on cost grounds.

[vi] Critical: What We Can Do About the Health Care Crisis, by Tom Daschle, Scott Greenberger, and Jeanne Lambrew, St. Martin’s Press, 2008, pp. 171-72

[vii] Ibid., pp. 171-72, 158

[viii] “After the Great Recession,” by David Leonhardt, New York Times, April 28, 2009, http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html

[ix] Ibid.

[x] “Rethinking Comparative Effectiveness Research,” Biotechnology Healthcare, June 2009

Johanns Amendment 4702 to S. 510 — 1099 Reporting Mandate Repeal

Senator Johanns has offered an amendment (#4702) to the food safety bill (S. 510) regarding new corporate reporting requirements included in the health care law.  A vote on the motion to suspend the rules to allow for consideration of the amendment is expected to occur this evening; the motion to suspend is subject to a 2/3rds majority vote.  Background information on the Johanns 1099 amendment can also be found in two articles on the issue, one by the New York Times and another in National Journal magazine.

Summary and Background:

  • The amendment repeals Section 9006 of the health care law.  This Section 9006 information reporting provision requires vendors and small businesses to file Forms 1099 for any goods purchases that total over $600 in the aggregate over the course of a year—which will force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor, caterer, etc.
  • According to an e-mail from the Joint Committee on Taxation, both the Baucus and Johanns amendments have the same effect of repealing the 1099 paperwork requirement.  From the JCT e-mail:

“The two amendments (4713-Senator Baucus) and (4702-Senator Johanns) accomplish the same result in that they only repeal the new 1099 requirements in PPACA and leave in place the 1099 rental real estate requirements from the small business bill and the score is the same for both amendments.

There are two versions because Senator Johanns amendment is somewhat unclear in that it says Section 9006 of PPACA and the amendments made thereby are repealed.  That wording is somewhat confusing and suggests that all new 1099 requirements are repealed (including rental real estate).  It turns out that the rental real estate requirements were added as an amendment to section 6041 as amended by section 9006 of PPACA so technically rental real estate is unaffected.  Baucus’ amendment states specifically what is being repealed and makes it clear that the rental real estate reporting requirements are left untouched.”

  • Unlike the Baucus amendment, the Johanns amendment is paid for through a rescission of $39 billion in unobligated discretionary funds from accounts other than the Departments of Defense and Veterans Affairs. (Although repealing the 1099 provision results in the loss of only about $19 billion in revenue, the amendment rescinds $39 billion because, in scoring the amendment, CBO assumed that not all of the rescinded funds would have been spent in the first place; therefore the amendment must rescind more than $19 billion.)  The Office of Management and Budget is given discretion to find appropriate sources for the rescissions.

Arguments in Favor:

  • According to a report issued by the National Taxpayer Advocate, the new 1099 reporting requirements will affect 40 million businesses—ten times the number of firms the Administration asserts will benefit from small business tax credits.
  • The Taxpayer Advocate has also called the reporting requirement “disproportionate” and “burdensome” for small business.  For instance, the Taxpayer Advocate noted that small businesses “may lose customers” to larger chains more easily able to comply with the new requirements, and that “it is highly likely that the IRS will improperly assess penalties” for not filing forms.
  • The Taxpayer Advocate has also noted that “the IRS will face challenges making productive use of this new volume of information reports” required by the health care law, because “the amounts on the information reports and the tax returns” will not match for a variety of technical reasons.
  • The amendment fully repeals the 1099 reporting requirements, and does so by reducing federal spending.
  • According to OMB, the projected amount of unobligated funds at the end of fiscal year 2010 (not including those from Defense or VA) is about $684 billion.  The Johanns amendment would rescind just over five percent of that total.

A Review of Deficit Reduction Plans

This Wednesday’s deadline for the fiscal commission to report a deficit reduction plan provides an opportunity to examine the health care components of the three proposals that have been released thus far:

  1. The Simpson-Bowles plan, named for the co-chairs of the fiscal commission, who released their own draft recommendations just after the midterm election;
  2. The Rivlin-Domenici plan, named for former CBO Director Alice Rivlin and former Senate Budget Committee Chairman Pete Domenici (R-NM), who released their own proposal as chairs of an independent commission operating under the aegis of the Bipartisan Policy Center; and
  3. The Rivlin-Ryan plan, which Alice Rivlin and House Budget Committee Ranking Member Paul Ryan released as an alternative to the Simpson-Bowles proposal, as both Dr. Rivlin and Rep. Ryan also sit on the fiscal commission.

CBO has conducted a preliminary analysis of the Rivlin-Ryan plan (the above link includes both the plan’s summary and score), and the Simpson-Bowles plan incorporates CBO scoring estimates where available.  However, it is unclear where and how the Rilvin-Domenici plan received the scores cited for its proposals.  The timing of the plans also varies; the Rivlin-Domenici plan postpones implementation of its plan until 2012, when the authors believe the economy will be better able to sustain a major deficit reduction effort.

The following analysis examines the similarities and differences of the three plans’ health care components in both the short term and the long term.  Keep in mind however that these are DRAFT proposals, which may a) change and b) be missing significant details affecting their impact.  Note also that the summary below is not intended to serve as an endorsement or repudiation of the proposals, either in general terms or in their specifics.

Short-Term Savings

Liability Reform:  All three plans propose liability reforms, including a cap on non-economic damages.  The Rivlin-Ryan and Simpson-Bowles plans both rely on specifications outlined in CBO’s October 2009 letter to Sen. Hatch; both presume about $60 billion in savings from this approach.  The Rivlin-Domenici plan is less clear on its specifics, but discusses “a strong financial incentive to states, such as avoiding a cut in their Medicaid matching rate, to enact caps on non-economic and punitive damages.”  Rivlin-Domenici also proposes grants to states to pilot new approaches, such as health courts; overall, the plan estimates $48 billion in savings from 2012 through 2020.

Prescription Drug Rebates:  Both the Simpson-Bowles and Rivlin-Domenici plans would apply Medicaid prescription drug rebates to the Medicare Part D program.  The Simpson-Bowles plan estimates such a change would save $59 billion from 2011 through 2020, whereas the Rivlin-Domenici plan estimates this change would save $100 billion from 2012 through 2018.  The disparity in the projected scores is unclear, as both imply they would extend the rebates to all single-source drugs (i.e., those without a generic competitor) in the Part D marketplace.  The Rivlin-Ryan plan has no similar provision.

Changes to Medicare Benefit:  All three plans propose to re-structure the Medicare benefit to provide a unified deductible for Parts A and B, along with a catastrophic cap on beneficiary cost-sharing.  The Rivlin-Ryan and Simspon-Bowles plans are largely similar, and echo an earlier estimate made in CBO’s December 2008 Budget Options document (Option 83), which provided for a unified deductible for Parts A and B combined, a catastrophic cap on beneficiary cost-sharing, and new limits on first-dollar coverage by Medigap supplemental insurance (which many economists believe encourages patients to over-consume care).  Conversely, the Rivlin-Domenici proposal provides fewer specifics, does not mention a statutory restriction on Medigap first-dollar coverage, and generates smaller savings (an estimated $14 billion from 2012 through 2018, as opposed to more than $100 billion from the Rivlin-Ryan and Simpson-Bowles proposals).

Medicare Premiums:  The Rivlin-Domenici plan would increase the beneficiary share of Medicare Part B premiums from 25 percent to 35 percent, phased in over a five-year period, raising $123 billion from 2012 through 2018. (When Medicare was first established, seniors paid 50 percent of the cost of Part B program benefits; that percentage was later reduced, and has been at 25 percent since 1997.)  The Rivlin-Ryan and Simpson-Bowles plans have no similar provision.

“Doc Fix:  The Simpson-Bowles plan uses the changes discussed above (i.e., liability reform, Part D rebates, and Medicare cost-sharing), along with an additional change in Medicare physician reimbursement, to pay for a permanent “doc fix” to the sustainable growth rate (SGR) formula.  The Simpson-Bowles plan would generate the final $24 billion in savings necessary to finance a permanent “doc fix” by establishing a new value-based reimbursement system for physician reimbursement, beginning in 2015.

The introduction to the Rivlin-Domenici plan notes that it “accommodates a permanent fix” to the SGR, but the plan itself does not include specifics on how this would be achieved, nor what formula would replace the current SGR mechanism.  Likewise, the Rivlin-Ryan plan does not directly address the SGR; however, the long-term restructuring in Medicare it proposes means the issue of Medicare physician reimbursement would become a moot point over several decades.  (See below for additional details.)

Other Provisions:  The Rivlin-Domenici plan would impose an excise tax of one cent per ounce on sugar-sweetened beverages; the tax would apply beginning in 2012 and would be indexed to inflation after 2018. (This proposal was included in Option 106 of CBO’s December 2008 Budget Options paper.)  The plan estimates this option would raise $156 billion from 2012 through 2020.

The Rivlin-Domenici plan also proposes bundling diagnosis related group (DRG) payments to include post-acute care services in a way that allows hospitals to retain 20 percent of the projected savings, with the federal government recapturing 80 percent of the savings for a total deficit reduction of $5 billion from 2012 through 2018.  Finally, the Rivlin-Domenici plan proposes $5 billion in savings from 2012 through 2018 by removing barriers to enroll low-income dual eligible beneficiaries in managed care programs.

The Simpson-Bowles plan includes a laundry list of possible short-term savings (see Slide 35 of the plan for illustrative savings proposals) in addition to the savings provisions outlined above that would fund a long-term “doc fix.”  Most of the additional short-term savings proposed would come from additional reimbursement reductions (e.g., an acceleration of the DSH and home health reductions in the health care law, and reductions in spending on graduate medical education), or from proposals to increase cost-sharing (e.g., higher Medicaid co-pays, higher cost-sharing for retirees in Tricare for Life and FEHB).

Long-Term Restructuring

Employee Exclusion for Group Health Insurance:  In its discussion of tax reform, the Simpson-Bowles plan raises the possibility of capping or eliminating the current employee exclusion for employer-provided health insurance.  (The Associated Press wrote about this issue over the weekend.)  One possible option would eliminate the exclusion as part of a plan to lower income tax rates to three brackets of 8%, 14%, and 23%; however, this proposal presumes a net $80 billion per year in increased revenue per year to reduce the deficit.  The plan invokes as another option a proposal by Sens. Gregg and Wyden to cap the exclusion at the value of the FEHBP Blue Cross standard option plan, which would allow for three income tax rates of 15%, 25%, and 35%, along with a near-tripling of the standard deduction.  Separately, the Simpson-Bowles plan also proposes repealing the payroll tax exclusion for employer-provided health insurance as one potential option to extend Social Security’s solvency.

The Rivlin-Domenici plan would cap the exclusion beginning in 2018, at the same level at which the “Cadillac tax” on high-cost plans is scheduled to take effect in that year.  However, the proposal would go further than the “Cadillac tax” (which would be repealed) by phasing out the income and payroll tax exclusion entirely between 2018 and 2028.  (This proposal would also prohibit new tax deductible contributions to Health Savings Accounts, on the grounds that health care spending would no longer receive a tax preference under any form.)  Notably, the Rivlin-Domenici plan accepts that some employers might stop offering coverage from this change to the tax code, and projects some higher federal spending on Exchange insurance subsidies as a result; however, if more employers drop coverage than the authors’ model predicts, the revenue gain from this provision could be entirely outweighed by the scope of new federal spending on insurance subsidies.

Although Rep. Ryan has previously issued his “Roadmap” proposal that would repeal the employee exclusion, the Rivlin-Ryan plan does NOT address this issue.

Medicare:  The Rivlin-Domenici program would turn Medicare into a premium support program beginning in 2018.  Increases in federal spending levels would be capped at a rate equal to the average GDP growth over five years plus one percentage point.  Seniors would still be automatically enrolled in traditional (i.e., government-run) Medicare, but if spending exceeded the prescribed federal limits, seniors would pay the difference in the form of higher premiums.  Seniors could also choose plans on a Medicare Exchange (similar to today’s Medicare Advantage), with the hope that such plans “can offer beneficiaries relief from rising Medicare premiums.”

The Rivlin-Ryan proposal would turn Medicare into a voucher program beginning in 2021.  (Both the Rivlin-Domenici premium support program and the Rivlin-Ryan voucher program would convert Medicare into a defined benefit, whereby the federal contribution toward beneficiaries would be capped; the prime difference is that the premium support program would maintain traditional government-run Medicare as one option for beneficiaries to choose from with their premium dollars, whereas the Rivlin-Ryan plan would give new enrollees a choice of only private plans from which to purchase coverage.)  The amount of the voucher would increase annually at the rate of GDP growth per capita plus one percentage point – the same level as the overall cap in Medicare spending included in the health care law as part of the new IPAB.  Low-income dual eligible beneficiaries would receive an additional medical savings account contribution (to use for health expenses) in lieu of Medicaid assistance; the federal contribution to that account would also grow by GDP per capita plus one percent.

The Rivlin-Ryan plan would NOT affect seniors currently in Medicare, or those within 10 years of retirement, except for the changes in cost-sharing described in the short-term changes above.  However, for individuals under age 55, the plan would also raise the age of eligibility by two months per year, beginning in 2021, until it reached 67 by 2032.

While the Rivlin-Domenici and Rivlin-Ryan plans restructure the Medicare benefit for new enrollees to achieve long-term savings, the Simpson-Bowles plan largely relies on the health care law’s new Independent Payment Advisory Board (IPAB) to set spending targets and propose additional savings.  The Simpson-Bowles plan suggests strengthening the IPAB’s spending targets, extending the IPAB’s reach to health insurance plans in the Exchange, and allowing the IPAB to recommend changes to benefit design and cost-sharing.  The plan also suggests setting a global budget for all federal health spending (i.e., Medicare, Medicaid, exchange subsidies, etc.), and capping the growth of this global budget at GDP plus one percent – the same level that IPAB capped spending in Medicare.  If costs exceed the target, additional steps could be taken to reduce spending, including an increase in premiums and cost-sharing or a premium support option for Medicare.  The plan also suggests overhauling the fee-for-service reimbursement system, or establishing an all-payer model of reimbursement (in which all insurance carriers pay providers the same rate) if spending targets are not met.

Medicaid:  The Rivlin-Domenici plan suggests that in future, Medicaid’s excess cost growth should be reduced by one percentage point annually.  The plan implies some type of negotiation between states and the federal government over which services in the existing Medicaid program that the state should assume and fund and which services the federal government should assume and fund.  While specifics remain sparse, the overriding principle involves de-linking Medicaid financing from the open-ended federal matching relationship as a way to reduce future cost growth by one percentage point per year.

The Rivlin-Ryan plan converts the existing Medicaid program into a block grant to the states, beginning in 2013.  The size of the federal block grant would increase to reflect growth in the Medicaid population, as well as growth in GDP plus one percent.  The costs of the new Medicaid expansion would be covered according to current law through 2020; in 2021 and succeeding years, the Medicaid expansion would be rolled into the block grant.

The Simpson-Bowles plan includes conversion of Medicaid into a block grant as one option to generate additional savings; however, it does not explicitly advocate this course of action.

CLASS Act:  The Rivlin-Ryan plan would repeal the CLASS Act.  The Rivlin-Domenici and Simpson-Bowles plans do not discuss any changes to this program.  This is the ONLY provision in the three deficit reduction plans that proposes elimination of any part of the health care law’s new entitlements.

Obamacare Dis-Union: SEIU Local Drops Dependent Health Coverage

Just before the holiday break, the Wall Street Journal reported on the decision by SEIU local 1199, which represents home health workers in New York, to drop dependent coverage for more than 6,000 children – a decision made as a direct result of the health care law that the SEIU worked feverishly to support.  While the SEIU 1199 health fund previously covered some children up until age 23, a letter from a union official explained that the new law’s costly mandates proved unsustainable for the plan: “New federal health-care reform legislation requires plans with dependent coverage to expand that coverage up to age 26….Our limited resources are already stretched as far as possible, and meeting this new requirement would be financially impossible.”  In other words, instead of some dependent children having health coverage prior to the law’s enactment, now none will.

Also of note in the article: Because SEIU local 1199 represents home health care workers, the union’s finances were strained as a result of $370 million in cuts to Medicaid reimbursement rates that the state of New York enacted in the past two years.  This of course raises another interesting question: If New York is making reimbursement cuts because it can’t afford its Medicaid program now, how will states handle the fiscal impact of an estimated 18 million new enrollees after 2014?

The Responsiveness of Government-Run Health Care

On a lighter note on the day before Thanksgiving comes this cautionary note from north of the border about the perils of an unresponsive government-run health care system.  When exiting a meeting about long emergency room waiting times, the head of Alberta’s health service was approached by reporters and asked what he was doing to shorten the waiting lists.  The head of the health service responded by saying he couldn’t be disturbed, because he was eating a cookie.  No, seriously; watch the exchange yourself.

This amazing-but-true incident typifies the problems with government-run health care, where bureaucrats can afford to be flippant with the public, because the public has no other choice of health care options. (For the record, in Alberta private health insurance is prohibited to compete with the government-run health system in offering the basic benefit package.)  The same predicament will face the estimated 18 million individuals dumped into the Medicaid program as a result of the health care law – individuals who will NOT have the choice of health care plans, and will instead be forced into a government-run program with significant access difficulties and waiting times (just like those in Canada).

Having seen the responsiveness of the Canadian health care system in full bloom, do you think that American bureaucrats wouldn’t ignore similar questions from reporters about the government restricting patients’ access to care?  Think again…

Yet Another Way Obamacare Will Raise Costs

The New York Times had a story on Sunday outlining how “the health care law could worsen some of the very problems it was meant to solve – by reducing competition, driving up costs, and creating incentives for doctors and hospitals to stint on care, in order to retain their cost-saving bonuses.”  The front-page article outlines how the new law has sparked “a growing frenzy of mergers involving hospitals, clinics, and doctor groups eager to share costs and savings, and cash in on the incentives.”  Consumer advocates and others fear that the newly merged entities will use their market clout to demand higher prices; the article also interviews the chairman of the Federal Trade Commission about the potential antitrust implications of the new law.

The article concludes that the increase in mergers, and potential increase in prices for consumers, is largely a direct result of government involvement in health care brought on by the new law, yet several of the quotes in the piece imply that the “solution” to the problem is…yet more government involvement, through antitrust enforcement and regulations.  Some may find it baffling that government can solve problems its own perverse incentives and myriad regulations have created.  For instance, Kansas insurance commissioner Sandy Praeger recently noted that that as a result of new regulations on insurance companies, “There will be some companies that I think will decide, they have a very small book of business in a state and they’ll decide maybe it’s not worthwhile to stay in the state.”  Such a development will give LESS choice to consumers, resulting in higher premiums for insurance.

Creating a few large group medical practices and hospitals organized under the aegis of accountable care organizations to negotiate with a few select insurers who will remain once the law’s new regulations have taken effect is not a recipe for competition and lower costs, as the Administration asserts.  It’s a recipe for higher costs and less market choice for individuals and businesses alike – and it’s yet another reason why the health care law falls short of its promises.

Americans Like Their Current Coverage — But Won’t Be Able to Keep It

Gallup is out this morning with a new survey finding that Americans’ satisfaction with their current health insurance is at a decade-long high.  Two in five Americans rate their health care coverage as “excellent” – the highest number since 2001 – with another 42% believing their health care is good.  Thus a total of 82% believe the health care they receive is excellent or good – including the vast majority of individuals at every income level surveyed.

Two other items of note: Individuals with private insurance have six points higher satisfaction than those in government-run health care (i.e., Medicare and Medicaid) – 88% of those with private insurance call their health care excellent or good, compared to only 82% with government-run coverage. (Unfortunately, the Gallup poll didn’t include a category just surveying individuals within Medicaid, which suffers from chronic access problems in most states, to see how waiting times affect patient satisfaction.)  And even a bare majority of the uninsured (52%) believe they receive excellent or good health care, though the number of individuals rating their care as excellent is rather low (14%).

The news from the Gallup survey may not come as a surprise to most Americans, but it once again illustrates the impact the unpopular health care law will have on the millions of Americans who like their current coverage, but won’t be able to keep it:

  • The majority of employer plans that won’t maintain their current coverage under the Administration’s grandfathering rules by 2013;
  • The more than 1 million seniors forced to change their Medicare Advantage or Part D prescription drug plan this year;
  • The 800,000 individuals losing their coverage because Principal Financial Group decided to drop health insurance offerings entirely – the first of many carriers that may do so.

These few examples, coupled with the high satisfaction rates most Americans have with their current health care, illustrate why the health care law remains so unpopular nearly eight months after its enactment.

A Coercive Expansion of Medicaid?

The Wall Street Journal this morning reported on studies by various state legislatures about the feasibility of dropping their Medicaid programs.  Much of the information has been previously reported in earlier articles; however, the Journal piece did include one key paragraph with significant implications:

“A quirk in the law passed in March suggests that a portion of the new Medicaid enrollees could instead qualify to get a tax credit to buy private insurance on state-run exchanges, although Democrats say that wasn’t the intent of the law.”

In other words, Democrats claim it “wasn’t the intent of the law” to allow low-income individuals to obtain subsidies to purchase health insurance if their state drops out of Medicaid.  Does that mean that Democrats intended to leave low-income individuals – including those with incomes below the poverty level – without coverage if their state drops out of Medicaid?  Or does that mean that Democrats effectively commandeered state governments, by indicating that low-income individuals could ONLY obtain subsidized insurance coverage if states incurred additional costs by expanding their Medicaid programs?

The Administration has yet to weigh in on this issue with an official ruling, perhaps because of the fiscal – and legal – questions it raises.  If the Administration allows low-income individuals to obtain subsidies if their states drop out of Medicaid, states will have a financial incentive to do just that.  If however the Administration prohibits such individuals from obtaining subsidies, it will become patently obvious that Democrats intended to expand insurance coverage – the health care law’s top goal – by forcing financially strapped states to expand their Medicaid programs, raising further constitutional questions about a law already subject to multiple legal challenges.