Tag Archives: Milliman

What You Need to Know about Invisible High Risk Pools

Last Thursday afternoon, the House Rules Committee approved an amendment providing an additional $15 billion for “invisible high risk pools.” That surprising development, after several days of frenetic closed-door negotiations and a study on the pools released Friday, may have some in Washington trying to make sense of it all.

If you want the short and dirty, here it is: Thursday’s amendment doesn’t resemble the model cited by pool proponents, undermines principles of federalism, relies on government price controls to achieve much of its premium savings, and requires far more taxpayer funding than the amendment actually provided. But other than that, it’s great!

Want more info? Read on.

The Amendment Text Does Not Match Its Maine Model

The legislative text the Rules Committee adopted last week bears little resemblance to the invisible risk pool model the amendment’s proponents have described.

In response to my article last week asking whether the invisible risk pool funding differs from Obamacare’s reinsurance program, supporters cited a blog post highlighting the way such a pool works in Maine. Under Maine’s program, insurers cede their highest risks to the pool prospectively—i.e., when individuals apply for insurance. Insurers also cede to the pool most of those high-risk patients’ premium payments, to help pay for the patients’ health claims.

Conversely, insurers participating in Obamacare’s reinsurance program receive retrospective payments (i.e., after the patients incur high health costs), and keep all of the premium payments those patients make. In theory, then, those two differences do distinguish the Obamacare reinsurance program from the Maine pool.

But there’s one other key distinction: The amendment the Rules Committee adopted last week doesn’t include the parameters of the Maine model. The original version proposed by Rep. Gary Palmer—the amendment language upon which the Milliman study was based—more closely tracked the Maine model. But the Rules Committee instead passed an amendment with generic language leaving much more discretion to the Trump administration. On Friday, Politico explained why:

The [Milliman] study…assumes that insurers would agree up front to surrender most of the premiums paid by high-risk enrollees, in exchange for protection against potentially costly claims down the line… Palmer included those specifics the first time he proposed adding a risk-sharing program to the [American Health Care Act], roughly two weeks ago. But they were stripped out of the final version presented Tuesday, and likely for good reason…Insurers likely wouldn’t be too enthusiastic about having that much skin in the game. Instead, the amendment essentially tells state and federal officials to sort out the details later—and most importantly, after the program is passed into law.

The federal pools may end up looking nothing like the Maine program advocates are citing as the model—because the administration will determine all those critically important details after the fact. Or, to coin a phrase, we have to pass the bill so that you can find out what’s in it.

The Amendment Undermines State Sovereignty

As currently constructed, the pool concept undermines state sovereignty over insurance markets. Paradoxical as it may sound, the amendment adopted last Thursday is both too broad and too narrow. With respect to the invisible high risk pool concept, the legislation doesn’t include enough details to allow policy-makers and insurers to determine how they will function. As noted above, all of those details were essentially punted to the administration to determine.

But the amendment is also too narrow, in that it conditions the $15 billion on participation in the invisible risk pool model. If a state wants to create an actual high risk pool, or use some other concept to stabilize their insurance markets, they’re out of luck—they can’t touch the $15 billion pot of money.

Admittedly, the amendment the Rules Committee adopted last Thursday isn’t nearly as bad as the original Palmer amendment on invisible pools. That original amendment required all insurers to participate in the invisible pools “as a condition of doing business in a state”—potentially violating both the Fifth Amendment for an unconstitutional taking against insurers, and the Tenth Amendment by undermining states’ sovereignty over their insurance markets and business licensing.

In a post last week, I cited House Speaker Paul Ryan’s February criticism of Obamacare: “They’re subsidies that say, ‘We will pay some people some money if you do what the government makes you do.’” That’s exactly what this amendment does: It conditions some level of funding on states taking some specific action—not the only action, perhaps not even the best action, to stabilize their insurance markets, just the one Washington politically favors, therefore the one Washington will attempt to make all states take.

Ryan was right to criticize the Obamacare insurance subsidy system as “not freedom.” The same criticism applies to the invisible pool funding—it isn’t freedom. It also isn’t federalism—it’s big-government, nanny-state “conservatism.”

The Pools’ Claimed Benefits Derive From Price Controls

Much of the supposed benefits of the pools come as a result of government-imposed price controls. The Milliman study released Friday—and again, conditioned upon parameters not present in the amendment the Rules Committee adopted Thursday—models two possible scenarios.

The first scenario would create a new insurance pool in “repeal-and-replace” legislation, with the invisible pools applying only to the new market (some individuals currently on Obamacare may switch to the new market, but would not have to). The second scenario envisions a single risk pool for insurers, combining existing enrollees and new enrollees under the “replace” plan.

In both cases, Milliman modeled assumptions from the original Palmer amendment (i.e., not the one the Rules Committee adopted last Thursday) that linked payments from the invisible risk pools to 100 percent of Medicare reimbursement rates. The study specifically noted the “favorable spread” created as a result of this requirement: the pool reduces premiums because it pays doctors and hospitals less than insurers would.

Under the first scenario, in which Obamacare enrollees remain in a separate market than the new participants in “replace” legislation, a risk pool reimbursing at Medicare rates would yield total average rate reductions of between 16 and 31 percent. But “if [risk pool] benefits are paid based on regular commercially negotiated fees, the rate reduction becomes 12% to 23%”—about one-third less than with the federally dictated reimbursement levels.

Under the second scenario, in which Obamacare and “replace” enrollees are combined into one marketplace, premiums barely drop when linked to commercial payment rates. Premiums would fall by a modest 4 to 14 percent using Medicare reimbursement levels, and a miniscule 1 to 4 percent using commercial reimbursement levels.

Admittedly, the structure of the risk pool creates an inherent risk of gaming—insurers could try to raise their reimbursement rates to gain more federal funds from the pool. But if federal price controls are the way to lower premiums (and for the record, they aren’t), why not just create a government-run “public option” linked to Medicare reimbursement levels and be done with it?

The Study Says This Doesn’t Provide Enough Money

According to the study, the amendment adopted doesn’t include enough federal funding for invisible risk pools. The Milliman study found that invisible risk pools will require more funding than last Thursday’s amendment provided—and potentially even more funding than the entire Stability Fund. Under both scenarios, the invisible risk pools would require anywhere from $3.3 billion to $17 billion per year in funding, or from $35 billion to nearly $200 billion over a decade.

By contrast, Thursday’s amendment included only $15 billion in funding to last from 2018 through 2026. And the Stability Fund itself includes a total of $130 billion in funding—$100 billion in general funds, $15 billion for maternity and mental health coverage, and the $15 billion specifically for invisible risk pools. If all 50 states participate, the entire Stability Fund may not hold enough money needed to fund invisible risk pools.

Remember too that the Milliman study assumes that 1) insurers will cede most premium payments from risk pool participants to help finance the pool’s operations and 2) the pool will pay claims using Medicare reimbursement rates. If either or both of those two assumptions do not materialize—and insurers and providers will vigorously oppose both—spending for the pools will increase still further, making the Milliman study a generous under-estimate of the program’s ultimate cost.

Let States Take the Reins

All of the above notwithstanding, the invisible high risk pool model could work for some states—emphasis on “could” and “some.” If states want to explore this option, they certainly have the right to do so.

But, as Obamacare itself has demonstrated, Washington does not represent the source and summit of all the accumulated wisdom in health care policy. States are desperate for the opportunity to innovate, and create new policies in the marketplace of ideas—not have more programs foisted upon them by Washington, as the Rules Committee amendment attempts to do. Moving in the direction of the former, and not the latter, would represent a true change of pace. Here’s hoping that Congress finally has the courage to do so.

This post was originally published at The Federalist.

21st Century Health Care Options for the States

A PDF version of this paper is available here.

Across the country, state legislatures are considering whether or not to expand their existing Medicaid programs.  Last year’s Supreme Court ruling struck down the mandatory nature of Obamacare’s expansion of Medicaid to all families with incomes up to approximately $30,000 a year.  Chief Justice Roberts’ June 2012 opinion stated that the health law as originally written engaged in “economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”[1]  The Court’s opinion gave states a choice whether or not to expand their Medicaid programs to approximately 20 million new individuals,[2] a decision which states are weighing during their current legislative sessions.

The reasons why states should NOT participate in Obamacare’s Medicaid expansion are well-documented[3]: Medicaid patients have worse health outcomes than patients with other forms of insurance, and in many cases worse health outcomes than the uninsured;[4] Medicaid beneficiaries often face difficulty finding doctors who will treat them;[5] and by increasing federal spending funded by massive tax increases, a Medicaid expansion will destroy jobs rather than create them.[6]

Less well known, however, are the innovative programs states have utilized over the past several years to modernize and enhance their health sectors, expanding coverage and improving quality of care while lowering costs.  Rather than utilizing Obamacare’s top-down, government-centric approach of putting more people into a broken Medicaid program, these policy solutions seek to transform Medicaid using market incentives to create a health system that works for patients.

Recently the Centers for Medicare and Medicaid Services (CMS) issued a bulletin providing clear evidence that the Obama administration views Medicaid expansion as an all-or-nothing proposition.[7]  The Administration apparently hopes that pressure from hospitals and special interests will force state legislators to approve Obamacare’s massive Medicaid expansion.  However, as Chief Justice Roberts indicated in his opinion last June, states now have a real choice.  Based on the examples presented below, states should choose innovative, market-driven solutions, rather than Obamacare’s bureaucratic approach.

Rhode Island

States seeking to improve their health care system should closely examine Rhode Island’s successful global compact waiver for its Medicaid program.  The waiver, negotiated by then-Gov. Don Carcieri and approved by CMS in January 2009, attempts to reduce expenses by giving the state the flexibility to improve the quality of care.  The Rhode Island waiver focuses on promoting home-and-community-based services as a more affordable (and more desirable) alternative to nursing homes, on improving access to primary care through managed care enrollment, and on other similar methods to provide quality care at better cost.  In December 2011, the non-partisan Lewin Group released an analysis of the Rhode Island global compact waiver.[8]  The Lewin report provides demonstrable examples of the waiver’s policy success, saving money while simultaneously improving care:

  • Shifting nursing home services into the community saved $35.7 million during the three-year study period
  • More accurate rate setting in nursing homes saved an additional $15 million in Fiscal Year 2010 alone
  • Better care management for adults with disabilities and special needs children saved between $4.5 and $11.9 million, and
  • Enrollment in managed care significantly increased the access of adults with disabilities to physician services.

Lewin’s conclusion:

The GW [Global Waiver] initiatives and budget actions taken by Rhode Island had a positive impact on controlling Medicaid expenditures.  The actions taken to re-balance the [Long Term Care] system appear to have generated significant savings according to our estimates.   The mandatory enrollment of disabled members in care management program reduced expenditures for this population while at the same time generally resulting in improved access to physician services.  Continuing the GW initiatives already undertaken by the state and implementing the additional initiatives included in the [Global Waiver] will result in significant savings for the Rhode Island Medicaid program in future years.[9]

All this progress comes despite the Obama administration’s efforts, not because of them.  Pages 14-15 of the Lewin report note that maintenance of effort mandates imposed in Obamacare and the “stimulus” prevented Rhode Island from imposing modest premiums on some beneficiaries, even though the approved waiver was supposed to give the state that flexibility.[10]

Despite the ways in which the Obama administration’s bureaucratic requirements interfered with Rhode Island’s ability to implement its global waiver fully, the state achieved measurable progress in reducing costs while improving care – providing a clear example that other states can emulate.

Indiana

The Hoosier State’s Healthy Indiana Plan (HIP), created in 2008, applied the principles of personal responsibility, consumer-driven health plans, and Health Savings Accounts in its expansion of coverage to low-income populations.  Initiated as part of a Medicaid demonstration waiver, the program requires individuals to make contributions to a Personal Wellness and Responsibility (POWER) account.  No beneficiary pays more than 5% of their income, and the state supplements individual contributions so that all participants will have $1,100 in their accounts to pay for routine expenses.

Healthy Indiana promotes personal responsibility in several ways.  First, the required beneficiary contributions to the POWER account ensure that all participants have an incentive to take greater responsibility for their own health and health spending.  Second, the program promotes preventive care by providing an additional $500 to fund important preventive screenings.  Moreover, only those beneficiaries who participate in a series of annual screenings may roll over unused POWER account funds from year to year.  Third, Healthy Indiana assesses co-payments for non-urgent visits to the emergency room, attempting to reverse a trend of high ER usage by Medicaid beneficiaries prevalent nationwide.[11]

Overall, Healthy Indiana has achieved many of its policy goals.  Despite the modest incomes of beneficiaries enrolled in the program – all of whom must have incomes below 200% of the federal poverty level, or about $31,000 for a couple in 2013 – nearly four in five contributed to their POWER account.[12]  Nine in ten participants have at least one physician visit in their first year of enrollment, demonstrating that the HIP deductible does not hinder patients from obtaining needed care.[13]  And an analysis by the consulting firm Milliman found that parents in Healthy Indiana “seek preventive care more frequently than comparable commercial populations.”[14]

Healthy Indiana has not only proved successful – it’s been popular as well.  Only about one-quarter of participants ever enrolled in the program during its first two years left the program, “a retention rate much higher than the rate for adults in Indiana’s regular Medicaid managed care program.”[15]  Approximately 70% of beneficiaries considered the required POWER account contributions just the right amount, and 94% of members report being satisfied or highly satisfied with their coverage.[16]

A 2011 policy brief by Mathematica Policy Research commented on the program’s successes:

HIP has successfully expanded coverage for the uninsured, while giving enrolled members an important financial stake in the cost of their health care and incentives for value-based decision making.  Early implementation suggests that members value HIP benefits and that at least some low-income, uninsured adults are willing and able to contribute toward the cost of their care.[17]

Just as important, the program’s increase in preventive care, and decrease in emergency room usage, have achieved measurable savings. Milliman reports that HIP exceeded its targets for budget neutrality, spending nearly $1 billion less than its original spending cap in its first five years.[18]

In the past five years, the market-based incentives of the Healthy Indiana Plan have yielded two-fold success in improving the population while containing overall spending.  It remains to be seen whether CMS will approve an extension of HIP or will instead claim that Obamacare’s bureaucratic mandates preclude the program’s continuation.  The week the law passed, then-Gov. Mitch Daniels publicly worried that Obamacare would force him to plan for HIP’s termination.[19]  State legislators seeking to avoid Obamacare’s requirements and restrictions who are looking instead to market incentives as a way to control costs would be wise to examine the Healthy Indiana Plan approach.

Florida

Earlier this year, CMS granted approval to the state of Florida’s two waivers to alter its Medicaid program.  These waivers, which follow on the heels of a five-county pilot reform program begun in 2006, will roll out over the coming 18 months; both waivers should be fully implemented by October 2014.[20]

One of the two waivers would transform the Medicaid program for low-income beneficiaries. The waiver will allow all Medicaid recipients to enroll in managed care plans; each will have at least two, and as many as 10, Medicaid plans from which to choose.[21]  The waiver allows managed care plans – which are based in one of 11 regions – to create customized benefit packages that meet the unique needs of their local populations.  In applying for its waiver, Florida rightly noted that “each plan will face the competitive pressure of offering the most innovative package,” which will allow beneficiaries “to use their premium [dollars] to select benefit plans that best meet their needs.”[22]

Other features of the waiver likewise seek to reduce costs while improving the quality of beneficiary care.  Managed care plans will be required to “establish a program to encourage and reward healthy behaviors,” similar to the Healthy Indiana Plan incentives discussed above.[23]  Florida also is seeking waiver flexibility from CMS to encourage beneficiaries to enroll in health coverage through their employer when available and require modest cost-sharing for certain populations.[24]

Coupled with another waiver for the state’s long-term care program – one which seeks to place individuals in home and community-based services instead of nursing home facilities – the two waivers collectively will transform the Medicaid program in Florida.  The waivers’ focus on participant choice, competition among plans to enroll beneficiaries, and incentives to promote wellness and preventive care all hold the potential to provide a more personalized experience for Medicaid beneficiaries – and, just as important, a more effective and efficient one as well.

Even as Florida moves ahead on implementing its waivers, state legislators are offering state-based alternatives to Obamacare’s costly Medicaid expansion.  House Speaker Will Weatherford introduced legislation – the Florida Health Choices Plus bill – with Rep. Richard Corcoran, chairman of the House Health and Human Services Committee, to provide incentives for low-income individuals to obtain health insurance.[25]  Under the proposal, individuals with incomes below the federal poverty line would receive $2,000, deposited into a CARE (Contribution Amount for Reasonable Expenses) account.[26]  Beneficiaries would be required to deposit $25 per month, or $300 per year, into the account, and employers could contribute additional amounts as well.  The money could be used to purchase affordable health coverage in the Florida Health Choices insurance clearinghouse, or used directly for health expenses.

Because more than two in three uninsured Americans lack coverage for periods of less than a year, Florida Health Choices Plus would provide bridge funding to the majority of citizens who suffer only short spells without health insurance.[27]  It does so without providing incentives for individuals to drop private health insurance and enroll in a government program – a problem that has plagued past state coverage initiatives.[28]  The proposal includes a personal responsibility component, coupled with incentives for beneficiaries to serve as wise consumers of health care.  And it accomplishes these objectives without relying on Obamacare’s massive new gusher of federal spending.

Texas

Although it has not yet come to fruition, state thought leaders have begun to consider how additional flexibility from Washington could result in better care for patients and a more predictable and stable Medicaid budget for states.  The Texas Public Policy Foundation recently released a paper outlining its vision for a Medicaid block grant, and how Texas could use the flexibility under a block grant to revamp its existing Medicaid program.[29]  The paper describes how the amount of a block grant might be set, along with the terms and conditions establishing a new compact between the federal government and states – giving states more flexibility, but also requiring accountability for outcomes in the process.

Texas envisions a block grant as providing a way to revamp its Medicaid program for both low-income and elderly beneficiaries.  For lower-income applicants, the state could choose to subsidize private health insurance, with incentives linked to Health Savings Account (HSA) plans.  Beneficiaries would fund the difference between the amount of the state-provided subsidy and the cost of the insurance plan, “provid[ing] strong incentives to the enrolled population to purchase low premium, high value plans.  Beneficiaries selecting coverage that costs less than their premium support entitlement would be allowed to deposit the difference in an HSA.”[30]

With respect to long-term care for the elderly, the Texas paper envisions a series of reforms under a Medicaid block grant.  Incremental reforms – including partial benefits for those who seek to remain in community settings, a competitive bidding process for nursing home care, and greater restrictions on asset transfers, to ensure benefits are targeted toward truly needy individuals – would eventually lead to a fundamental transformation of the long-term care benefit into a defined contribution model.  Under this reform, “the state will provide a pre-determined level of financial support directly to those eligible by establishing and funding an account on each beneficiary’s behalf” to be used for eligible care expenses – maximizing beneficiary choice and flexibility and encouraging the use of community-based service over institutional nursing homes.

Unfortunately, a block grant requires approval from Congress – and neither the Democrat Senate nor President Obama currently appear inclined to grant states the degree of flexibility the Texas paper envisions.  But Rhode Island’s Global Waiver, approved in the final days of the George W. Bush administration, shows that the administration does have the authority to grant global waivers to other states seeking the same control over their Medicaid programs.

Nevertheless, the ideas offered in the paper present a vision where both flexibility and market incentives can provide better quality coverage to residents while providing budgetary stability to federal and state governments alike.

Learning from other states

Other examples of states taking action on their Medicaid programs:

North Carolina:  States first need to be armed with solid information about how the Medicaid program is working.  They need to know who is being helped or harmed and how much is being lost to waste and inefficiency in this ossified, rule-driven program.  In North Carolina, state auditor Beth Wood recently found that the state’s Medicaid program endured $1.4 billion in cost overruns each year, including $375 million in state dollars. As a result, North Carolina has decided not to expand its Medicaid program. Before considering any action, others states should commission objective, independent audits of their Medicaid programs to understand the program and the problems that need fixing.

New York also was able to gain more control over how Medicaid subsidy money is spent in exchange for a global cap on a substantial fraction of its Medicaid expenditures.

West Virginia offers alternative benefit packages that create incentives for beneficiaries to take responsibility for their own health and health care. Kentucky and Idaho are among other states with similar programs.  Patients receive additional benefits if they select a medical home, adhere to health improvement programs, keep and arrive on time for appointments, use the hospital emergency room for emergencies only, and comply with prescribed medications.

Utah fought for and received a waiver that allowed the states to scale back Medicaid’s excessively large benefit package to stretch the money to cover more citizens.

These are a few examples of the creative programs that states could develop if they weren’t forced to jump through Washington’s Mother-May-I Medicaid hoops to get approval to make even minor changes to their Medicaid programs.  

Lessons and Themes

While each state’s Medicaid program is unique, the examples discussed above each contain common themes that should guide policy-makers seeking to transform their state health systems – and avoid the pitfalls of Obamacare’s massive, bureaucratic expansion:

  • Customized Beneficiary Services:  Providing beneficiaries with a choice of coverage options can provide plans an incentive to tailor their benefit packages to best meet individuals’ needs.  Similar incentives promoting competition in the Medicare Part D prescription drug benefit helped keep that program’s cost more than 40% below original estimates.[31]
  • Coordinated and Preventive Care:  Several of the reform programs focus on providing individualized, coordinated services to beneficiaries – an improvement to the top-down, uncoordinated care model of old.  In many cases, preventive care interventions for Medicaid recipients suffering from chronic conditions can ultimately save money.
  • Personal Responsibility:  Cost-sharing can be an appropriate incentive, to encourage beneficiaries to take ownership of their health, and discourage costly practices, such as emergency room trips for routine care.  The fact that more than two-thirds of Healthy Indiana Plan participants consider their cost-sharing levels appropriate proves that even families of modest means are both willing and able to provide some financial contribution to their cost of care.
  • Home and Community-Based Services:  Several of the reform programs attempt to continue and accelerate the trend of providing long-term care in patients’ homes, rather than in more cumbersome and costly nursing home settings.
  • No New Federal Funds:  Most importantly, each of the reform projects discussed above neither seek nor require the massive new spending levels contemplated by an Obamacare expansion.  In many cases, the programs above were implemented successfully despite Washington’s interference, not because of it.

Conclusion

Functioning in their traditional role as laboratories of democracy, states have provided better solutions for policy-makers seeking to reform their Medicaid programs.  These solutions have expanded coverage, and improved the quality of care, even while reducing costs to taxpayers.  As the Obama administration denies states true flexibility when it comes to Obamacare’s costly Medicaid expansion, states have demonstrated that they can convert a modicum of leeway from Washington into maximum improvements for their citizens – and savings for taxpayers.

The analysis above shows that Chief Justice Roberts was right: states do have a choice when it comes to their Medicaid programs.  They can – and should – choose the options that will reform and revitalize their programs, rather than the massive and costly expansion of the Medicaid monolith included in Obamacare.

States must take the lead in insisting that Washington provide more flexibility over Medicaid spending so they can expand access to care without burdening taxpayers with significant new costs or burdening their citizens with a program that can be worse than being uninsured.

States can show that Medicaid can have a more efficient and effective service delivery system that enhances quality of care and outcomes.  Expanding Medicaid without a guarantee of flexibility would be a major missed opportunity for the states. If states join together, they have more leverage to demand true flexibility than if they try to gain leverage one by one.

Chris Jacobs is a visiting fellow at the Galen Institute, a non-profit research organization devoted to market-based solutions to health reform. Jacobs blogs at www.chrisjacobshc.com.

 


NOTES

[1] NFIB v. Sebelius, June 28, 2012, http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf, p. 52.

[2] Prior to the Supreme Court ruling, the Congressional Budget Office estimated that Obamacare would expand coverage to 17 million individuals through Medicaid by 2022, while the Office of the Actuary at CMS estimated the Medicaid expansion would cover 25.9 million individuals by 2020.  See CBO, “Estimates for Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” July 24, 2012, http://cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf, Table 1, p. 19, and Office of the Actuary, Centers for Medicare and Medicaid Services, “2011 Actuarial Report on the Financial Outlook for Medicaid,” March 16, 2012, http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2011.pdf, p. 30.

[3] Grace-Marie Turner and Avik Roy, “Twelve Reasons States Should Not Expand Medicaid,” Galen Institute, March 15, 2013, http://www.galen.org/topics/tennessee-should-block-medicaid-expansion/.

[4] Scott Gottlieb, “Medicaid Is Worse than No Coverage at All,” The Wall Street Journal March 10, 2011, http://online.wsj.com/article/SB10001424052748704758904576188280858303612.html.

[5] See, for instance, Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine June 16, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285.

[6] Chris Conover, “Will Medicaid Expansion Create Jobs?,” Forbes, February 25, 2013, http://www.forbes.com/sites/chrisconover/2013/02/25/will-medicaid-expansion-create-jobs/.

[7] CMS Bulletin, “Medicaid and the Affordable Care Act: Premium Assistance,” March 29, 2013, http://medicaid.gov/Federal-Policy-Guidance/Downloads/FAQ-03-29-13-Premium-Assistance.pdf.

[8] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf.

[9] Ibid., p. 40.

[10] Specifically, the report notes that the maintenance of effort requirements included in the “stimulus” (P.L. 111-5) and Obamacare (P.L. 111-148) “had a profound impact on the flexibility Rhode Island anticipated…The Special Terms and Conditions for the global waiver authorized Rhode Island to charge premiums of up to 5 percent…however, CMS prohibited Rhode Island from using this authority,” citing the maintenance of effort requirements.  Ibid., pp. 11-12.

[11] See, for instance, a 2010 Centers for Disease Control research brief finding Medicaid beneficiaries were nearly twice three times as likely as those with private insurance to visit the ER multiple times in one year.  Tamrya Caroll Garcia, Amy Bernstein, and Mary Ann Bush, “Emergency Department Visitors and Visits: Who Used the Emergency Room in 2007?” National Center for Health Statistics Data Brief No. 38, May 2010, http://www.cdc.gov/nchs/data/databriefs/db38.pdf.

[12] Timothy Lake, Vivian Byrd, and Seema Verma, “Healthy Indiana Plan: Lessons for Reform,” Mathematica Policy Research Issue Brief, January 2011, http://mathematica-mpr.com/publications/pdfs/health/healthyindianaplan_ib1.pdf.

[13] Indiana Family and Social Services Administration, Healthy Indiana Plan 1115 Waiver Extension Application, February 13, 2013, http://www.in.gov/fssa/hip/files/HIP_WaiverforPosting.pdf, p. 18.

[14] Cited in Ibid.

[15] “Healthy Indiana Plan: Lessons for Reform.”

[16] Healthy Indiana Plan 1115 Waiver Extension Application, pp. 19, 6.

[17] “Healthy Indiana Plan: Lessons for Reform.”

[18] Milliman letter to Indiana Family and Social Services Administration regarding budget neutrality of Medicaid Section 1115 waiver, January 30, 2013, http://www.in.gov/fssa/hip/files/041115_Budget_Neutrality_Waiver_Renewal.pdf.

[19] Mitch Daniels, “We Good Europeans,” The Wall Street Journal March 26, 2010, http://online.wsj.com/article/SB10001424052748704094104575144362968408640.html.

[20] Frequently Asked Questions on Statewide Medicaid Managed Care Program, Florida Agency for Health Care Administration, http://ahca.myflorida.com/medicaid/statewide_mc/pdf/FAQ_MC-SMMC_general.pdf.

[21] Ibid.

[22] Florida Agency for Health care Administration, Section 1115 waiver submission to the Centers for Medicare and Medicaid Services, http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/fl/fl-medicaid-reform-pa.pdf.

[23] Ibid., p. 16.

[24] A summary of the specific federal authorities Florida seeks to waive can be found on the state Agency for Health Care Administration website, http://ahca.myflorida.com/medicaid/statewide_mc/pdf/Summary_of_Federal_Authorities_01232013.pdf.

[25] “Florida Health Choices PLUS+: Creating a Stronger Marketplace for Better Health, More Choices, and Expanded Coverage,” Floriday House Majority Office, April 2013, http://myfloridahouse.gov/Handlers/LeagisDocumentRetriever.ashx?Leaf=housecontent/HouseMajorityOffice/Lists/Other%20Items/Attachments/6/Florida_Heath_Choices_Plus.pdf&Area=House.

[27] Congressional Budget Office, “How Many People Lack Health Insurance and for How Long?” May 2003, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/42xx/doc4210/05-12-uninsured.pdf, Table 4, p. 11.  For a further discussion of the cohorts comprising the uninsured, see Chris Jacobs, “Deconstructing the Uninsured,” Republican Study Committee Policy Brief, August 26, 2008, http://rsc.scalise.house.gov/uploadedfiles/pb_082608_uninsured%20analysis.pdf.

[28] See for instance Jonathan Gruber and Kosali Simon, “Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Insurance?” Journal of Health Economics, February 2008, http://economics.mit.edu/files/6422.  The study found that about three in five individuals enrolled in government health programs dropped their private coverage to do so.

[29] James Capretta, Michael Delly, Arlene Wohlgemuth, and John Davidson, “Save Texas Medicaid: A Proposal for Fundamental Reform,” Texas Public Policy Foundation, March 2013, http://www.texaspolicy.com/sites/default/files/documents/2013-03-RR05-MedicaidBlockGrants-Final.pdf.

[30] Ibid., p. 10.

[31] Robert Moffit, “Medicare Drugs: Why Congress Should Reject Government Price Fixing,” The Heritage Foundation Issue Brief 3880, March 18, 2013, http://www.heritage.org/research/reports/2013/03/medicare-drugs-why-congress-should-reject-government-price-fixing. ­­­

How Obamacare is RAISING Premiums & Costs

The Administration has announced a conference call with press this afternoon, where Secretary Sebelius is expected to make announcements regarding Obamacare’s exchanges. It is likely that the Administration will once again attempt to repeat the old saw that Exchanges will lower premiums. Here’s what you need to remember about this bogus claim:

1. Obamacare’s Exchanges will actually RAISE premiums, not lower them. The Administration claim that Exchanges will lower premiums ignores the fact that Obamacare’s new benefit mandates will increase individual market insurance premiums overall — by an average of $2,100 per family, according to the Congressional Budget Office. CBO also agrees that much of this increase in premiums will come from individuals being forced to buy richer coverage than they may need or want. Politico summarized this HHS sleight-of-hand: “The Administration omits a part of CBO’s analysis.…[Obamacare] 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.”

2. Candidate Obama repeatedly promised premiums would go down by $2,500 – and would go down that amount by this year. For instance, in a speech on February 27, 2008, he said that “We’re going to work with you to lower your premiums by $2500 per family per year. And we will not wait 20 years from now to do it or 10 years from now to do it. We will do it by the end of my first term as President.”  Likewise, in July 2008, Jason Furman — who remains a senior economic advisor within the Administration – told the New York Times that “we think we could get to $2,500 in savings by the end of the first term, or be very close to it.”

3. Secretary Sebelius has publicly admitted that candidate Obama’s goal of a $2,500 premium reduction will not be met. In September 2010, she said that premium “rate increases are likely to continue to be somewhat substantial.” And earlier this year, she conceded to questioners at both the House and Senate Appropriations Committees that premiums would not fall until at least 2014, when the Exchanges are first established. Of course, the Exchanges actually won’t reduce premium costs, as noted in point #1 above. Regardless, lower premiums in 2014 do NOT meet candidate Obama’s promise: he pledged premiums would go down by $2,500 “by the end of my first term as President.”

4. Yet another survey issued this week illustrates how Obamacare is NOT controlling health costs or premium increases, both of which continue to skyrocket. Actuaries at Milliman released their annual medical index yesterday, and it found that the total cost of health care for a family of four in a preferred provider organization rose by 6.9% this year — such that costs now exceed $20,000 for a family of four. The record $1,335 increase in costs this year alone is far from the $2,500 cut candidate Obama promised back in 2008.

This afternoon’s call should not focus on Secretary Sebelius repeating the same old, tired, and debunked claims that Obamacare will lower premiums. The real question is whether the Secretary will finally apologize on behalf of the entire Obama Administration for failing to deliver on its broken promise to lower health costs NOW for struggling middle-class families.

What Americans Don’t Know about Obamacare Is ALREADY Hurting Them

The Kaiser Family Foundation released their monthly health care tracking poll today.  This month’s poll includes one interesting, but inaccurate, survey question: “When the requirement that nearly all Americans have health insurance goes into effect in 2014, do you think you will have to change your current health insurance arrangements, or not?”  Phrased that way, 28% of Americans said they believe they will have to change insurance plans.

But here’s the catch:  Under regulations implementing Obamacare, tens of millions of Americans are already losing their current health coverage, even before 2014.  According to the Administration’s own estimates, its onerous regulations on grandfathered health plans will force half of all employers – and as many as 80 percent of small businesses – to give up their current coverage by next year.  When plans lose grandfathered status, they will become subject to more of Obamacare’s costly mandates and regulations, thus raising premiums for many Americans.

Other surveys suggest the Administration’s estimates could be a significant under-estimate.  The National Business Group on Health released a study of its large-employer members last August, in which nearly half (49%) of firms already lost their pre-Obamacare coverage in 2011, with a further 19%having at least one plan that loses its pre-Obamacare coverage this year.  And the state of Ohio also released a report from independent actuaries at Milliman last year that came to much the same conclusions: “The estimated prevalence of grandfathered plans is expected to diminish quickly and be almost non-existent by 2014” – meaning virtually everyone will lose their current plan within three short years of Obamacare’s passage.

So while the Kaiser survey – influenced by flawed and inaccurate questioning – indicates that many Americans do not believe they will lose their current coverage under Obamacare, the facts speak otherwise, and show how millions of Americans are losing their pre-Obamacare coverage, incurring higher costs as a result.  It’s one more reason why the Kaiser survey, like others, shows that the American people remain resolute in their opposition to the 2700-page health care law.

Ohio Study Confirms: Obamacare Will Raise Premiums, Kill Your Current Coverage

Last month, Wisconsin released a study showing how Obamacare will raise premiums and lead firms to drop coverage.  Yesterday, the state of Ohio released a report from independent actuaries at Milliman that came to much the same conclusions – nearly 700,000 individuals leaving employer-sponsored coverage in Ohio alone, along with premium increases for individual policies averaging 55-85%.  The report is over 150 pages long, but the key section is from pages 26-45, which highlights the major changes in both premiums and coverage scheduled to take place thanks to Obamacare:

Dropped Coverage

  • A total of 688,000 Ohio residents will move OUT of employer coverage; “population decreases in the [employer insurance] markets will be driven by low-income individuals opting out of these plans for Medicaid.”
  • While 503,000 previously uninsured residents will obtain Medicaid coverage, a greater number of individuals (569,000) who already have coverage will move into government-run Medicaid – suggesting Obamacare encourages both employers and employees to quit private coverage in order to join taxpayer-funded programs.  As the report notes, “The other half of new Medicaid enrollees will consist of individuals who currently have ESI [employer-sponsored insurance] or individual coverage.”
  • Likewise, while 289,000 previously uninsured residents will obtain new coverage in Exchanges, almost as many (204,000) will join Exchanges after having employer coverage – likely because Obamacare will encourage firms to “dump” their workers.
  • “The estimated prevalence of grandfathered plans is expected to diminish quickly and be almost non-existent by 2014” – meaning virtually everyone will lose their current plan within three short years of Obamacare’s passage.

Higher Premiums

  • Before subsidies, “the individual health insurance premiums are estimated to increase by 55% to 85% above current market average rates (excluding the impact of medical inflation).”  The report goes on to delineate the specific reasons for these skyrocketing premiums.
  • “Individual health insurance market premium rates are estimated to increase between 20% and 30% on average due to benefit expansion requirements” – i.e., Washington bureaucrats forcing individuals to buy more health coverage than they may want or need.
  • Premium rates on the individual market will increase between 35% and 40% because high-risk pools will close and the individuals purchasing insurance through Exchanges will be sicker than the population as a whole.  This conclusion is noteworthy because it contradicts the Congressional Budget Office, which predicted that individuals in Exchanges would be healthier than average.
  • Premiums will also increase by 2-3% due to the various taxes – on device manufacturers, drug companies, and insurers – included in Obamacare; “as with any tax on businesses, these fees will be passed along to the consumer to the extent possible.”
  • Requirements under [Obamacare] to cover preventive services at 0% cost-sharing have already caused premiums to increase.”
  • For small businesses, premiums could rise 150% for some firms with healthy populations – but the firms with the highest-risk (i.e., least healthy) populations would see their premiums fall by only 38%.
  • The cumulative effect of these rating changes may result in a majority of [small businesses] experiencing premium rate increases or decreases beyond the average estimated market change of 5% to 15%.  In many cases these changes could be greater than 25%, ignoring changes in medical inflation. Premium rate volatility may affect the stability of the ESI-small group market by creating greater financial incentives for employers to self-fund or terminate their plan.  Employers wanting to continue their plan may address the issue of substantial premium rate increases by changing plan designs to shift more cost to employees, as current benefit plans may become unaffordable.”

The report also includes a separate study indicating that the Exchanges will likely cost at least $20 million dollars per year to maintain (exclusive of implementation costs) just in Ohio alone.  These administrative costs could raise premiums by more than 1% – over $50 per year – for individuals enrolling in Exchange plans.

Candidate Obama repeatedly promised to cut insurance premiums by an average of $2,500 per family, and also promised that “for those of you who have insurance now, nothing will change under the Obama plan – except that you will pay less.”  Today’s report once again illustrates how Democrats’ 2700-page health care law fails on both counts.

Rising Costs — And the Risk of Employers Dropping Coverage

Amidst the news created by the Medicare trustees report at the end of last week, it’s worth pointing out that another report was also issued demonstrating the continued rise in health spending, and the impact it places on both employers and families.  Actuaries at the consulting group Milliman released their annual medical index, and the results were not encouraging.  Their report – which quantifies the total cost (employer and employee, premiums and out-of-pocket expenses) for preferred provider organization (PPO) plans – showed a $1,319 increase in the total cost of health care for a family of four compared to 2010.  That’s a 7.3% rise in health expenses for families and employers in just one year.  Remember that candidate Obama promised repeatedly his bill would CUT costs by $2500 for the average American family, and that those reductions would occur within Obama’s first term.  The Milliman report once again demonstrates how the President’s promise is NOT being kept.

The impact of rising health spending on employers was further quantified by a paper released by analysts at Lockton, a privately owned HR benefits consulting firm.  The report notes that “employers are burdened and frustrated by aspects of the health reform law that add costs to their health plans,” and that “some employers WILL eliminate group health insurance and full-time jobs in 2014 because of the law.”  The analysis found that across all industries, the mandates instituted in the past year will raise employer premiums by an average of 2.5%, and that other mandates taking effect in 2014 – such as auto-enrollment provisions and shorter waiting periods – could raise premiums in some industries by up to 40%.  On the other hand, employers could save an average 44% of their health insurance costs by dropping coverage and placing their employees in government-run Exchanges; some industries could save more than 80% of premium costs by “dumping” their employees.

Both these reports illustrate the convergence of disturbing trends.  Rising health spending, plus the perverse incentives included in the law, could easily compel employers to place their workers in Exchanges – causing taxpayer-funded insurance subsidies to skyrocket.  At a time when families are struggling to afford health coverage and America is struggling to finance its existing entitlements, neither development should come as welcome news.

Senate Democrat Talks about Medicaid “Stigma”

Earlier this week, Sen. Ben Nelson – he of the infamous Cornhusker Kickback – made the startling admission that the Medicaid program, which the health care law expands dramatically, carries a “stigma for some.”  The statement came in response to Nebraska Governor Dave Heineman’s outreach to education groups encouraging them to support repealing the health law, as its Medicaid unfunded mandates would squeeze out state funds for education.

On Monday, Sen. Nelson’s office put out a release calling the Governor’s accusations overblown.  Specifically, Sen. Nelson alleged that Milliman’s independent analysis of the health care law’s impact on the Medicaid budget was “seriously flawed,” for two reasons:

“The Milliman study anticipates 100 percent participation in the Medicaid program under health reform.  Medicaid is voluntary and voluntary programs never see 100 percent participation.  Also, the governor’s new study assumes that about 60,000 people who have private insurance now will switch to Medicaid.  Will that happen when private insurance generally is better than Medicaid, which also comes with a stigma for some?”

This remarkable statement leads to some interesting questions for Sen. Nelson, and Democrats generally:

  1. What exactly is voluntary about forcing individuals to purchase “government-approved” health insurance, and then taxing them if they do not do so?  How is the message that Medicaid is a voluntary program consistent with the mantra of “personal responsibility” used for the past year to justify the unpopular individual mandate?
  2. Given that their supposed goal in health “reform” is universal coverage, shouldn’t Democrats WANT 100 percent participation in the Medicaid program?  Or do Democrats merely want to CLAIM they have created universal coverage, while hoping that individuals do not sign up at rates that will overwhelm the fiscal capacity of states and the federal government to finance this new entitlement?
  3. According to the Medicare and Medicaid chief actuary, most individuals obtaining new health insurance coverage as a result of the law will do so via Medicaid.  Why should these projected 18 million individuals be “stigmatized” by what Sen. Nelson himself called an inferior form of health insurance?
  4. The health law’s expansion of Medicaid PROHIBITS individuals eligible for the Medicaid expansion (i.e., those with incomes under 138 percent of poverty) from receiving federal subsidies to cover the cost of private insurance.  In other words, poor people weren’t granted a choice of health care plans, and were instead dumped on to the Medicaid rolls.  If Sen. Nelson believes that the inferior Medicaid program carries a “stigma,” why did Democrats not only not fix this troubled program, but instead perpetuate and deepen the “stigma” attached to it by giving poor people no other choice of coverage?
  5. Is Sen. Nelson’s belief that private insurance “generally is better than Medicaid” the reason why he, along with the rest of his Senate Democrat colleagues, opposed an amendment offered by Sen. LeMieux to enroll Members of Congress in Medicaid?  Do Democrats want to “stigmatize thee, but do not stigmatize me” by enrolling others – but not themselves – in what Sen. Nelson called an inferior Medicaid program?

The comments above illustrate how Democrats are attempting to “have it both ways” when it comes to the health care law – trumpeting supposedly universal coverage, while simultaneously arguing that the law will not bankrupt states and the federal government because many individuals eligible for free entitlements will not enroll in them.  Similarly, the majority consigned 18 million Americans into a health “insurance” program that they themselves refused to accept – not least because, as Sen. Nelson admitted, the program is inferior to private insurance.  This latest example of Democrats’ double-talk, and double standards, once again illustrates why the health care law does not constitute health reform.

Policy Brief: Study Admits: Government-Run Plan Will Raise Private Insurance Premiums

A study recently published in the journal Health Affairs has confirmed what many have feared—that enrollment in a government-run health plan could cause premiums for private health coverage to skyrocket, as doctors and hospitals charge private patients more to compensate for low government reimbursements:

  • The study followed up on earlier work conducted by independent actuaries at the consulting firm Milliman that found families with private coverage currently pay nearly $1,800 more in health costs to subsidize lower payments made by government-run health plans like Medicare and Medicaid, and attempted to extrapolate the impact of a new government-run health plan on both hospitals’ finances and private health premiums.
  • While the study found that enrolling previously uninsured individuals in a government-run plan paying Medicare reimbursement rates would not adversely affect hospital finances, it also concluded that any subsequent shift of individuals with private coverage into the government-run plan could have disastrous consequences on medical providers.  If the government-run plan enrolled even one quarter of individuals currently with private coverage, hospitals’ negative margins on patient care would rise by as much as 50 percent.  And if a government-run plan reimbursing at Medicare rates plus 10 percent—more generous than H.R. 3200 as introduced—enrolled 75 percent of those with private coverage, the study “suggests a tripling of cost-shift pressures on [private] premiums.”
  • The study then attempted to use the government-run plan’s impact on hospital finances to project how all providers would shift their costs from the government-run plan to private insurance carriers—and how premiums would rise as a result.  The authors concluded that the cost-shift pressures could cause insurance premiums to skyrocket: For a family of four, “The range of increase would be…$3,024-$4,536 nationally.”
  • As significant as those potential increases are, the study’s authors also assume that only about half of the losses stemming from lower government reimbursements would be passed on to private payers in the form of higher costs.  If in fact hospitals and providers are unable to make the efficiency gains necessary to absorb 50 percent of the loss, cost-shifting—and private insurance premiums—could rise even higher than the study’s projections.

Independent experts all agree that the legislation proposed would result in millions of Americans losing the coverage they have—the Congressional Budget Office believes several million, the Urban Institute up to 47 million, and the Lewin Group as many as 114 million.  Given the results of this new study, many may question why Democrats insist on including a government-run health plan in their takeover of health care—since such a change could result in skyrocketing premiums for those individuals with the audacity to attempt to keep their current coverage.

Policy Brief: Myth vs. Fact: President’s Address to Congress

The following analysis of President Obama’s address to Congress on health care rebuts several of his major claims:

Quote:  “And every day, 14,000 Americans lose their coverage.  In other words, it can happen to anyone.”

Fact:  The major coverage expansions in all the legislation being considered would not begin until January 2013—so according to the President’s own methodology, Democrat bills will allow more than 15 million additional Americans to become uninsured.

Quote:  “And it’s why those of us with health insurance are also paying a hidden and growing tax for those without it—about $1000 per year that pays for somebody else’s emergency room and charitable care.”

Fact:  An even larger tax—of nearly $1,800 per year—is paid by individuals with private coverage who are forced to subsidize lower payments made by government-run health plans like Medicare and Medicaid, according to a study conducted by independent actuaries at the consulting firm Milliman.

Quote:  “Nothing in this plan will require you or your employer to change the coverage or the doctor you have.  Let me repeat this: nothing in our plan requires you to change what you have.“

Fact:  Independent experts all agree that the legislation proposed would result in millions of Americans losing the coverage they have—the Congressional Budget Office believes several million, the Urban Institute up to 47 million, and the Lewin Group as many as 114 million.

Quote:  “Under my plan, individuals will be required to carry basic health insurance – just as most states require you to carry auto insurance.”

Fact:  Senior Obama Administration official Sherry Glied has previously written that a mandate “is in many respects analogous to a tax”—and furthermore has the potential to be a “very regressive tax, penalizing uninsured people who genuinely cannot afford to buy coverage.”  Thus this policy stance breaks the signal promise of the Obama campaign: “I can make a firm pledge.  Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

Quote:  “There are also those who claim that our reform effort will insure illegal immigrants.  This, too, is false—the reforms I’m proposing would not apply to those who are here illegally.”

Fact:  Nothing in any of the Democrat bills would require individuals to verify their citizenship or identity prior to receiving taxpayer-subsidized benefits—making the President’s promise one that the legislation itself does not keep.

Quote:  “And one more misunderstanding I want to clear up—under our plan, no federal dollars will be used to fund abortions, and federal conscience laws will remain in place.”

Fact:  The National Right to Life Committee, among other independent pro-life groups, have confirmed that the legislation will result in federal funds being used to pay for abortions—both through the government-run health plan, and through federal subsidies provided through the Exchange, despite various accounting gimmicks created in an Energy and Commerce Committee “compromise.”

Quote:  “I will not sign a plan that adds one dime to our deficits—either now or in the future.  Period.”

Fact:  The non-partisan Congressional Budget Office has found that H.R. 3200 would increase deficits by $239 billion over ten years—and also found that the legislation “would probably generate substantial increases in federal budget deficits” thereafter.  The Peter G. Peterson Foundation released a study today which found that in its second decade, H.R. 3200 would increase federal deficits by more than $1 trillion.

Quote:  “Not a dollar of the Medicare trust fund will be used to pay for this plan.”

Fact:  Among more than $500 billion in proposed savings from Medicare, the Democrat bills also propose re-directing $23 billion from the Medicare Improvement Fund to fund new health care entitlements.  According to current law, the Medicare Improvement Fund is designated specifically “to make improvements under the original Medicare fee-for-service program.”

Quote:  “Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan.  Much of the rest would be paid for with revenues from the very same drug and insurance companies that stand to benefit from tens of millions of new customers.”

Fact:  The Congressional Budget Office has previously found that the cuts to Medicare Advantage plans included in the Democrat legislation would result in millions of seniors losing their current plan—a direct contradiction of the President’s assertion that “nothing in this plan requires you to change what you have.”

Quote:  “This reform will charge insurance companies a fee for their most expensive policies, which will encourage them to provide greater value for the money—an idea which has the support of Democratic and Republican experts.  And according to these same experts, this modest change could help hold down the cost of health care for all of us in the long-run.”

Fact:  While some Republicans support addressing the current employee exclusion for health insurance in the context of overall tax reform, the President’s proposal would raise “fees” in order to finance new federal spending—a tax increase of hundreds of billions of dollars, and one that many Republicans may not support.

Quote:  “Add it all up, and the plan I’m proposing will cost around $900 billion over ten years.”

Fact:  The Congressional Budget Office, in its score of H.R. 3200 as introduced, found that the legislation would spend approximately $1.6 trillion over ten years—nearly double the President’s estimate.

Quote:  “I will continue to seek common ground in the weeks ahead.  If you come to me with a serious set of proposals, I will be there to listen.  My door is always open.”

Fact:  On May 13, House Republican leaders all wrote the President a letter reading in part: “We write to you today to express our sincere desire to work with you and find common ground on the issue of health care reform….We respectfully request a meeting with you to discuss areas for potential common ground on health care reform.”  Nearly four months later, that meeting has yet to take place.

Policy Brief: A Federal Health Board Would Raise, Not Lower, Health Costs

“If You Like The Plan You Have…You Will Probably Lose It Anyhow”

The Administration has advanced various proposals to create a new, Presidentially-appointed board empowered to make recommendations on Medicare reimbursement levels as one way to lower the growth of health care costs.  However, an analysis of the bills’ provisions demonstrates that each could have significant unintended consequences that could undermine individuals’ current coverage:

  • The proposals being discussed would empower government boards to make recommendations on reductions in Medicare payment levels—the White House bill through its new Council, and a separate bill proposed by Sen. Jay Rockefeller (S. 1110; H.R. 2718) through a revamped Medicare Payment Advisory Commission (MedPAC).
  • The Congressional Budget Office has testified that Medicare already pays doctors 20 percent less than private health plans; hospital reimbursement rates are “as much as 30 percent lower.”
  • Independent actuaries at the consulting firm Milliman, analyzing current reimbursement rates, found that below-cost payments by government-run plans like Medicare and Medicaid result in private coverage—primarily employer-sponsored plans—paying nearly $90 billion more a year to offset below-cost reimbursements from Medicare and Medicaid.
  • Milliman also found that this cost-shift increases health costs for families with private coverage by nearly $1,800 per year.
  • Non-partisan actuaries at the Lewin Group, in analyzing the House Democrat health bill (H.R. 3200), found that this cost-shifting phenomenon would result in as many as 114 million Americans losing access to their current coverage, as employers would drop coverage in order to enroll workers in a government-run health plan.
  • Empowering a board of federal bureaucrats with the power to reduce Medicare payment levels still further beyond their current below-cost levels would likely exacerbate cost-shifting from public to private payers—leading many employers to drop their current coverage and raising insurance premiums for those employees lucky enough to retain their existing plan.

As many as 92 percent of Americans with health coverage are satisfied with the plan they currently hold.  However, permitting a government board to reduce Medicare payment rates could result in yet more individuals losing access to their current private plans, placing millions of Americans in a government-run health plan.  Members may view this cost-shifting dynamic as yet another reason to be concerned by proposals to give unelected and unaccountable bureaucrats power to micro-manage the doctor-patient relationship and deny life-saving treatments to millions of American seniors.