Monthly Archives: January 2011

Obamacare Accelerates a Medicaid Meltdown

Over the weekend, both the New York Times and Kaiser Health News ran stories about the dire warnings being issued from several states regarding their Medicaid programs.  Facing massive budget shortfalls, governors as politically diverse as Florida’s Rick Scott and New York’s Andrew Cuomo are looking to achieve significant savings from their Medicaid programs.

However, the restrictions written into the health care law and the “stimulus” bill (which gave states temporary Medicaid relief) prevent states from reducing their eligibility requirements (i.e., cutting the budgetary coat to meet a state’s fiscal cloth) until the law takes full effect in January 2014.  Arizona’s Governor has already requested a waiver from the requirements, but it’s unclear whether the federal government will approve such a request, from Arizona or any other state.  If the Administration does not, some states may then face other, even more difficult, budgetary choices.  The National Governors Association and Republican Governors Association have both written to the Administration objecting to these “maintenance of effort” requirements, which the RGA said would have “unconscionable” effects.

Kaiser Health News quotes two other possible “solutions” to the Medicaid dilemma, neither of which would have much appeal to most Republicans.  Referring to the Medicaid program, HELP Committee Chairman Harkin suggested that “maybe the federal government should take over the whole thing.” (Remember, these are the folks arguing that the health care law is NOT a government takeover of health care.)  Besides just shifting costs from the states to the federal government, such a one-size-fits-all program would stifle states’ flexibility (not to mention sovereignty) in a way that allows them to generate innovative solutions on health care – including solutions that are more market-based.

The other option floated by several Democrats – including Finance Committee Chairman Baucus, HELP Committee Chairman Harkin, and former Speaker Pelosi – would extend federal Medicaid aid first included in the “stimulus” until 2014.  That however raises two important problems of its own.  First, such a move would cost hundreds of billions of dollars – likely wiping out the purported deficit “savings” from the health care law.  Second, if states’ Medicaid programs are in such a poor state that they require a federal bailout for over five years (the “stimulus” aid was made retroactive to late 2008, and Democrats want to extend it until 2014), why on earth should the federal government be forcing MORE individuals on states’ strapped Medicaid rolls in the years after 2014?

In a story this morning about a new Medicaid advisory commission, Politico quotes commission member Sara Rosenbaum as saying that the advisory body should “not add…one cent to the burden of the states.”  It’s unfortunate that Democrats didn’t take the same tack before imposing the new and onerous unfunded mandates on state Medicaid programs included in the health care law.

David Cutler, “Independent Analyst?”

This morning’s HHS report on premiums makes several questionable claims, including one about the potential long-term savings associated with the health care law.  Page 9 of the report includes the following paragraph:

“Independent analysts suggest that the combination of these policies could slow the growth of health spending by 1 percentage point a year starting in 2014.  By 2019, this could save 9 percent or $2,000 for a family policy, in addition to the savings that come from the policies implemented in 2014.”

The footnote in the report cites a paper by economist David Cutler released earlier this month to support its claims.  There’s just one problem with citing David Cutler, however: He served as an advisor to the Obama presidential campaign.  And during that time as a campaign advisor, Cutler co-wrote the famous memo attempting to defend candidate Obama’s assertion that his health plan would save $200 billion per year, or $2,500 per family – claims that the campaign alleged would occur within Obama’s first term.  Now the Cutler report cited by HHS claims that families could save a smaller amount (i.e., $2,000 vs. $2,500) over a MUCH longer time span – an example of the soft bigotry of low expectations if ever one existed.

These contradictions raise one obvious question:  If both Cutler and the White House can’t defend their prior allegations that health “reform” will cut premiums by $2,500 per family, why should anyone believe their claims – on premiums, job creation, or anything else for that matter – now?

Sebelius vs. Sebelius on Premium Increases

HHS Secretary Sebelius is preparing to release a report this morning claiming premiums will go down thanks to the health care law – an interesting turn of course, because the Secretary herself conceded just a few months ago that premiums will still continue to rise.  At a briefing back in September, the Secretary admitted that “I think the rate increases are likely to continue to be somewhat substantial”  (Clip can be found here; relevant exchange starts at 4:15.)

It’s also worth noting that page 5 of the HHS report cites as a “success story” an Iowa insurance decision that “reduced a 60 percent proposed increase to 16.5 percent.”  Since when does a 16.5 percent premium increase represent progress?

Remember, candidate Obama promised repeatedly that premiums would go DOWN by an average of $2,500 per family – not that they would go up by “only” 16.5 percent.  (Progress on candidate Obama’s pledge is demonstrated below.)  How does this violation of a clear campaign promise represent change Americans can believe in?

Premiums 2010

Democrats’ “War” Against the CBO on Premiums

The Administration’s “report” on premiums is out, and as expected the survey quotes misleading Congressional Budget Office data to claim that premiums would be 20 percent lower under the health care law.  Here’s the relevant paragraph from page 7 of the report:

“Together, these savings range from 14 to 20 percent. CBO also assumed that individuals and families would have, on average, coverage that is more comprehensive than what they have now, meaning that the savings would offset by higher premiums due to better coverage. It is important to note that this benefit enhancement is a choice, not a requirement.”

The report acknowledges that premiums would go up due to individuals buying richer benefit packages, but claims that these decisions will be entirely voluntary.  Unfortunately for the Administration, however, that is NOT what the CBO stated in its analysis.  Here’s the relevant paragraph from page 7 of the CBO’s November 2009 report:

“Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained. In particular, the average insurance policy in this market would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits. Those expansions would reflect both the minimum level of coverage (and related requirements) specified in the proposal and people’s decisions to purchase more extensive coverage in response to the structure of subsidies.”

In other words, CBO admitted that while some Americans would choose to purchase additional coverage voluntarily, many Americans would face higher premiums due to the mandates contained in the law.  For the Administration to claim that “this benefit is a choice, not a requirement” in all cases is COMPLETELY FALSE.

During the last several weeks, liberal commentators and health law supporters have criticized Republicans’ “war” on the Congressional Budget Office, even though Republicans haven’t criticized the professionalism of CBO’s analysts, but rather the assumptions that the Democrat majority forced CBO to presume when scoring health care legislation.  But now that Democrats have both twisted and ignored critical points in the CBO’s analysis to make completely false statements about the law’s effect on premiums, will those same liberals have the same level of outrage about the misleading allegations in the Administration’s “report?”

More Administration Misinformation on Premiums

The Administration is scheduled to release a “report” on premiums later today; while the report itself has not been released, Politico has an article summarizing its contents.  Here are the critical sentences:

“The report, to be released by HHS later today, argues that individuals and families purchasing coverage through the exchanges in 2014 will save 14-20 percent over what coverage would cost them if the law had never been enacted….

“The report’s claims are likely to be challenged by Republican opponents of health care reform. The report is based on projections contained in a November 30, 2009 analysis of the ACA. But the Administration omits a part of the CBO’s analysis, which is being used by the law’s opponents to claim that the law actually increases premiums.

“The ACA requires the purchase of benefit packages that are more comprehensive than what many Americans would otherwise buy. These more generous benefit packages may mean higher premiums, though they may also lower Americans’ out-of-pocket costs. HHS does not factor in the “benefit buy-up” because it believes comparing the cost of the same level of coverage gives a more accurate picture of the law’s effect on premiums.”

As a reminder, the Congressional Budget Office found that the Senate bill would RAISE premiums by an average $2,100 per family.  While the Administration claims that the Exchanges would reduce costs on their own, CBO found that premiums will go up because individuals would be FORCED to buy richer policies.  In other words, the increased mandates in the law – because Democrats and government bureaucrats believe that some Americans’ coverage is “insufficient” – will RAISE premiums.  Even President Obama admitted at the White House summit last February that he was incorrect in his exchanges on this matter with Sen. Alexander, and that the law will raise premiums by $2,100 on average per family in the non-group market.

What does it say about this Administration that it continues to peddle information that the President himself acknowledged was incorrect and misleading?  And how is breaking the President’s campaign promise to lower premiums by $2,500 per family “change we can believe in?”

Obamacare Costing Thousands of Jobs

Cognitive dissonance alert:  Even as Secretary Sebelius is testifying before the HELP Committee that the health care law is good for the economy, Abbott Labs decided to lay off nearly 2,000 employees thanks to the very same measure.  Bloomberg reports that an Abbott press release noted the layoffs came “in response to changes in the health care industry, including U.S. health care reform and the challenging regulatory environment.”

Administration Admits: Premiums Will RISE by At Least $12,000

In her prepared testimony this morning before the HELP Committee, HHS Secretary Sebelius claims that a Business Roundtable study* found that the health care law will reduce premium costs for large employers by $3,000 per year.  But in reality, that’s not what the report said at all – in fact, it only presumes a reduction in the increase of premiums, NOT the reduction in absolute terms the President promised during his campaign.  But don’t take my word for it: Look at Exhibit 1 of the study (depicted below), which study illustrates that under the maximum achievable “savings,” large employer premiums in 2019 will be $23,151 per family – or $12,408 higher than they were in 2009How is a $12,400 increase in premiums – as opposed to the $2,500 reduction that candidate Obama repeatedly promised – a change that struggling middle-class families can believe in?

Business Roundtable


*  A further note on the Business Roundtable study: Its last page notes that the estimates referred to were generated in the following way: “We assumed that discretely identified savings opportunities found in health care reform, could, when fully implemented, reduce the overall cost trend by 15% to 20%.”  In other words, the study started out with savings under the law being assumed.  That might prove convenient for the Administration and its allies – but the non-partisan Medicare actuary disagrees, publishing an analysis indicating the law would raise costs by more than $310 billion, and just yesterday calling “False” the Administration’s stated goal of reducing health care costs.

Obamacare Side Effect: At Least 20 States Not Selling Child-Only Policies

Sen. Enzi’s HELP Committee staff has compiled a report indicating the 20 states in which individuals cannot buy child-only health insurance policies.  That report can be found here.  It’s also worth noting that in a Politico story on the matter, advocates claim “that the damage could have actually been a lot worse, had [states] not taken aggressive action to intervene.”  It’s interesting first that having “only” 20 states not selling child-only policies is being claimed by some as progress, and second that the apparent “solution” to government intervention (i.e., a bad law passed by Congress) is yet more government intervention, in the form of “aggressive action” by state governments and regulators.  It’s enough to bring to mind the famous quote that “The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.”

Fact Check on Jobs and Premiums

Testifying before the House Ways and Means Committee this morning, Council of Economic Advisors Chairman Austan Goolsbee has repeated Administration claims that the health care law will create jobs, citing a paper from economist David Cutler on this issue.  However, Cutler was the also same Obama campaign adviser who co-wrote the famous memo attempting to defend candidate Obama’s assertion that his health plan would save $200 billion per year, or $2,500 per family.  This of course raises an obvious question:  If both Cutler and the White House can’t defend their prior allegations that health “reform” will cut premiums by $2,500 per family, why should anyone believe their claims on job creation now?

Premiums 2010

Updated CBO Estimates on Health Care

The Congressional Budget Office released its updated baseline budget outlook this morning – which included a projection that this year’s budget deficit will total a record $1.5 trillion.  The document also included several relevant facts on health care:

  • A long-term “doc fix” freezing Medicare payment rates at 2011 levels would raise the deficit by $249 billion, not counting an additional $53 billion in debt service obligations. (Table 1-7, p. 21)
  • Insurance subsidies through the exchanges will result in $524 billion in spending over the 2012-2021 period, and $94 billion in spending in fiscal year 2021 alone. (The lower 10-year number comes from the fact that the subsidies take time to “ramp up” once the exchanges come online in 2014.) (Table 3-3, p. 58)
  • Medicare is projected to grow by 7 percent in 2011 – and by 7 percent on average in the coming decade.  “CBO projects that, under current law, Medicare spending will rise as a share of GDP from 3.6 percent in 2012 to 4.3 percent by 2021.  By that time, gross Medicare outlays will exceed $1.0 trillion.” (Page 62)
  • Spending on Medicare, Medicaid, and other mandatory federal health programs “will reach $870 billion in 2011, or 5.8 percent of GDP.  In CBO’s baseline projections, spending for health programs more than doubles between 2011 and 2021, rising by an average of about 7 percent per year and reaching $1.8 trillion in 2021.  That spending is projected to represent 7.4 percent of GDP In 2021 – a jump of 1.6 percentage points from its share in 2011.” (Page 61)

The overall conclusion from CBO:

America’s Current Entitlements are Unsustainable – and Health Care Reform Did Nothing to Alleviate This Trend:   “Spending on the government’s major mandatory health care programs—Medicare, Medicaid, CHIP, and health insurance subsidies to be provided through the new insurance exchanges—along with Social Security will increase from roughly 10 percent of GDP in 2011 to about 16 percent over the next 25 years.  If revenues stay close to their average share of GDP for the past 40 years, that rise in spending will lead to rapidly growing budget deficits and surging federal debt.” (Page 25)