Obamacare is Doomed


Henry Aaron writes in Newsweek that “Obamacare will survive a Republican president,” repeating the mantra that Obamacare is here to stay because everyone has a seat at the dining table. “All major elements of the health care system—insurers, hospitals, doctors and drug and device manufacturers—have an interest in continuation of the ACA. This alignment of forces suggests that Obamacare will survive current threats.”

The only two things wrong with Aaron’s analysis. First it does not include the customer or the taxpayer in the alignment of interests and second, the money he is counting on to hold it all together will run out. It already is. Nowhere is this clearer than in California, which is one of the most Democratic and liberal states in the union. The LA Times, citing a recent survey by private health insurance exchange EHealth said that the biggest worry of medically insured individuals is how to pay for treatment.

People who get health insurance through work and on their own have seen their costs rise dramatically over the last decade.

According to the Commonwealth Fund, a New York think tank, annual increases in work-based health plan premiums rose three times faster than wages from 2003 to 2013. Out-of-pocket costs have also been climbing.

"More people have [higher] deductibles than ever before," says Sara Collins, a Commonwealth Fund vice president. From 2003 to 2013, the size of deductibles has grown nearly 150%.

Whether a person is coping with a severe illness or trying to deal with everyday medical costs, the challenges are many. …

Bradley Konia of Burbank faces a different type of financial angst. He finds the health plan he buys on his own to be fairly reasonably priced at $265 a month.

But the plan comes with a $5,000 deductible he must meet before getting help with medical bills from his insurer.

The 46-year-old marketing professional takes just one prescription medication. He pays $137 a month, up from $60 last year. "I'm paying for all of it out of pocket even though I have insurance," he says.

Konia says he's able to cover his current costs without much strain, but he worries about unexpected medical expenses if he were to become sick or even require a second prescription drug.

"If something were to happen," he says, "I would be in a bad situation."

This is a phenomenon known as “insured but not covered”, a phrase coined by Elisabeth Rosenthal of the New York Times to describe what she was seeing. People with health insurance found that the bills still outran their ability to pay -- even when they received their insurance payments. To understand why this is so, one need only watch this explanatory video from Cigna health insurance.

The insurance pitchman cheerfully explains the customer pays out two items of money: the monthly premium and out of pocket costs. The out of pocket costs include deductibles, co-insurance and co-payments. The gist of it is that the out of pocket costs can still be huge and the patient, whose bank account is already depleted by the premiums, must face costs in addition.

This harsh reality is driven by one basic thing: the high cost of medical care. No matter how one slices and dices it, insurance is only a way of paying for these astronomical sums. The higher the cost of medical care, the more expensive the insurance and the more prohibitive the out of pocket expenses.

Obamacare has increased the number of people with a health card, but it has often failed to alleviate the financial burden it was meant to relieve. What is the good of a health card if you are not protected from financial disaster? What is worse, the ACA has expanded coverage by making insurance more expensive, either by regulation or by adding on charges to pay for the titanic bureaucratic empires it supports.

College students, who are notoriously poor, have been driven from their cheap plans into more expensive “Obamacare compliant” plans they can scarcely, if at all, afford. “SEATTLE (AP) -- The federal health care overhaul is leading some colleges and universities to get out of the health insurance business.”

Experts are divided on whether this change will be good or bad for students. Some call it an inevitable result of health care reform and a money-saver for students since insurance in the marketplace is usually cheaper than the college plans. Others worry that more students will go without health insurance since their premiums won't be folded into the lump sum they pay for school, and they say college health plans offer more coverage for the money than other options.

The main driver of colleges getting out of the insurance business is a provision in the Affordable Care Act that prevents students from using premium tax subsidies to purchase insurance from their college or university, according to Steven M. Bloom, director of federal relations for the American Council on Education, a Washington, D.C., group representing the presidents of U.S. colleges and universities.

The federal government recently published the latest guidelines on out-of-pocket expenses at levels that would boggle many lower income individuals.

For 2016, the out-of-pocket maximum for self-only coverage will be $6,850; and for non-self-only (family) coverage it will be $13,700. … In terms of compliance, the HHS said that “2016 plans must comply with this policy” – although the final regs take effect on April 28, 2015. So it’s not entirely clear whether plans have to comply with the embedding clarification for the 2015 plan year.

Aaron’s conclusion in Newsweek that “All major elements of the health care system—insurers, hospitals, doctors and drug and device manufacturers—have an interest in continuation of the ACA. This alignment of forces suggests that Obamacare will survive current threats” should be rewritten as: all major elements of the health care system—insurers, hospitals, doctors and drug and device manufacturers—have an interest in continuation of the ACA.  But taxpayers and customers have a clear interest in its abolition. This alignment of forces suggests that Obamacare will not survive for long.

One way to glimpse the future of Obamacare is to observe the crisis gripping the city of Chicago -- hometown to the president and many of his leading subordinates.  John Judis writes in the National Journal that it’s a “Broken City.”  For years it increased the size of its bureaucracy and the generosity of its giveaways until it realized there is no earthly way it can afford it.

If the gaping holes in Chicago's social and fiscal fabric can somehow be mended, the city will have created a powerful blueprint that other large urban centers could in theory follow. And if they can't be fixed? Then Chicago may end up serving as a cautionary tale about the grim political and economic fate awaiting other U.S. cities that put off or wish away their problems. …

The blame largely belongs to Daley, Emanuel's predecessor, who lavished money on civic projects and doled out funds to appease aldermen without raising taxes. When finally faced with falling revenues, he undertook several controversial efforts at privatization, but the initial funds the city gained quickly evaporated.

This is exactly the formula for Obamacare: unsustainable subsidies, bureaucratic expansion without limit, heedless of the consequences. The cynical calculation that everyone -- insurers, hospitals, doctors and drug and device manufacturers -- can be paid off fails to consider that eventually the bureaucrats run out of other people’s money.

A Wonderful Chance for US Senators to Buy Obamacare


James Downie writes in the Washington Post that Obamacare arch-critic Ted Cruz is a “hypocrite” for enrolling in it. “With Cruz’s wife, Heidi, stepping away temporarily from her job at Goldman Sachs, the Cruz family has to get its insurance somewhere, and the Texas senator has decided that ‘somewhere’ is”

The implication is that Cruz somehow covets membership this program, acquiring for himself and his family the benefits that he would deny to others.  However, as a survey by the Avalere company shows, the US Senator has voluntarily submitted himself to what is effectively a low-income person’s program.  Enrolling in Obamacare would be as if Cruz had passed up a meal at an upscale restaurant to eat at soup kitchen.

Not that there’s anything wrong with food at soup kitchens, but the comparison is apt. “As of the close of the 2015 open enrollment period, exchanges using had enrolled 76 percent of eligible individuals with incomes between 100 and 150 percent of the federal poverty level (FPL) or  $11,770 to $17,655. However, participation rates declined dramatically as incomes increase and subsidies decrease. For instance, only 16 percent of those earning 301 to 400 percent FPL picked coverage through an exchange, even though they may be eligible for premium subsidies.”

In other words very few higher income people enrol in Obamacare. Only 2% of those making 400% of the federal poverty level (FPL), or  $47,080, enrolled in Obamacare.  The annual salary of Ted Cruz as a US Senator is $174,000, or about 1,500%, of the FPL.  Finding people at Cruz’s level of income voluntarily choosing Obamacare is a statistical improbability.


The Avalere report suggests that more punishments must be enacted to force lower income people into the exchanges since ‘tax credits’ are clearly not a sufficient incentive to attract sufficient percentages into the ACA. (Emphasis mine)

“exchanges will need to attract higher income consumers to ensure enrollment continues to grow over time,” said Caroline Pearson, senior vice president at Avalere. “So far, tax credits do not appear to be enough to entice participation, so greater emphasis on individual mandate penalties may be needed to help increase enrollment among low- and middle-income individuals.”

Even that may not be sufficient. A McKinsey survey of 3,000 adults found  that many people would rather pay the fine than buy Obamacare. “Only about 12 percent of those who are uninsured would buy policies if they learned about the penalty”.  In a  Wall Street Journal article dated March 15, 2015 Stephanie Armour reports that “major tax-preparation firms say many customers are paying the penalty and not getting health insurance.”  The administration even announced a special enrollment period to give these people a second chance.

At H&R Block Inc., “our analysis indicates that a significant percentage of taxpayers whose household members were not covered for at least a portion of 2014 are opting” to pay the penalty, said Mark Ciaramitaro, a vice president of health-care enrollment services at the tax-preparation firm.

Richard Gonzalez, 59 years old, of Navarre, Fla., found out he will pay a $250 penalty for going without insurance. The retired employee of United Parcel Service Inc. said he won’t take advantage of the special enrollment period because it is cheaper for him to pay out-of-pocket for health care than to buy insurance on the exchange. He said he shopped on the exchange but would have to pay $400 a month for a plan with a $6,000 deductible.

“I think it’s wrong I have to pay the penalty,” said Mr. Gonzalez. “But it beats paying more than $10,000 a year.” …

Lackluster sign-ups during the special period mean the Obama administration may only get a small enrollment boost. About 11.7 million people have already signed up on state and federal exchanges this year, though not all of them have yet paid premiums.

While federal officials have said that as many as six million households may owe a penalty for not having insurance, they haven’t said how many people they expect to sign up for coverage during the special enrollment period. Still, the administration has been eager to increase sign-ups, especially for key demographics such as healthy young adults and minorities who have high uninsured rates. …

The special enrollment period applies to people who have to pay a penalty for going without coverage in 2014 and also face a penalty in 2015. They must pay any penalty they owe for not having coverage but can use the special enrollment period to obtain coverage and not generate any more fines.

People -- even those in low income brackets -- are hardly beating a path to the Obamacare exchanges.  Despite offers of money and threats of penalties, many middle class customers are giving it the ultimate insult: they are paying the fine for the privilege of going without it.  If it were a restaurant it would be like customers paying not to eat the food. Modern Healthcare reports that Obamacare is not meeting with much success among minorities and young people.  Young people, like the higher income brackets cited by Avalere, are necessary to keep the ACA actuarially viable, and they are staying away.

The agency appeared to lose ground in attracting minorities to the federal exchange. The percentage of Latino and Asian enrollees on federally operated exchanges remained flat compared to last year at 11% and 8%, respectively. The percentage of African-American enrollees dropped from 17% to 14%. …

Demographic details on enrollees show more than 4.1 million under the age of 35 signed up for marketplace coverage, representing 35% of all plan selections compared to 34% at the end of 2014 open enrollment.

These are problems to do with the cost and features of the product itself.  The packages offered by the ACA are not very attractive despite the penalties and subsidies offered. Clearly something has to be done to make it a better buy for consumers.  That is not going to happen any time soon because The Atlantic reports that Obamacare premiums are going to rise by 8.5 per year!

Between 2016 and 2018, CBO expects that the benchmark premium—the average cost of a "silver" plan on insurance exchanges—will increase 8.5 percent per annum. There are two reasons for that: First, the government will stop backing insurance programs that have especially high costs, and second, it seems as if many of the new insurance programs created under the law didn't pay providers as much as employer-based insurance. CBO thinks that's unsustainable, and that those plans will have to jack up premiums to bring their provider payments up to par.

Arguments that a wealthy man like Senator Ted Cruz would be salivating to get Obamacare are not credible.  Even the poor are shunning it if given the chance.  It must surely be improved to be attractive.  The ACA is not the wonderful program it is touted to be.

The Only Game In Town


Although many words have been written warning that a decision against the government in King vs Burwell would kill the subsidies that sustain Obamacare, relatively few people have pointed out that the administration will effectively do the same thing in 2017.  There are currently a number of programs which keep Obamacare premiums artificially low with respect to its true cost.  One the ways the price is lowered is through bailouts of insurance companies.

Republican critics of Obamacare have lately trained their fire on a program within the health care law that would provide a federal bailout to companies that lose money on insurance plans they sell on the Affordable Care Act exchanges.

But the “risk corridor” program, jointly funded by the government and the insurance industry, is not the only Obamacare program that would offset insurance companies against excessive financial losses. The “risk adjustment” program also provides money to insurers that lose money on the Obamacare exchanges. However, where “risk corridors” subsidize insurers’ losses on a plan, “risk adjustment” subsidizes losses suffered on an individual consumer.

The other method is subsidies, the most famous of which are under threat in King vs Burwell.  But there are other policies which effectively act as subsidies -- which are due to expire beginning in 2017.  “Michael Gotzler, chief legal counsel of QTI Group, a Madison-based human resources company ... said. If the Supreme Court bans subsidies in the majority of states that use the federal exchange, including Wisconsin, some firms may stop providing insurance”.

Premiums on the exchange mostly have been considered affordable, especially when factoring in the subsidies, but rates could increase in coming years, said Mike Hamerlik, president and CEO of WPS Health Insurance.

That is because two of three financial programs designed to keep costs down for insurers end in two years, Hamerlik said.

"When that goes away in 2017, that revenue is going to have to be replaced by premiums," he said. "They're artificially low right now."

These expiring programs were described by Jason Millman of the Washington Post in 2014. “Why the major test for Obamacare premiums might wait until 2017.”

Stephen Parente, a University of Minnesota health economist who advised Sen. John McCain's (R-Ariz.) 2008 presidential campaign, used the Obama administration's final 2014 enrollment reports and his microsimulation model to project health plan prices and enrollment over the next decade. His projections, shared first with the Washington Post, find an increase in individual plan enrollment in 2015 and 2016, before sharply dropping off in 2017 and then slowly decreasing below 2015 levels by 2024. …

So, how does Parente's model explain the big drop-off in coverage between 2016 and 2017? He cites two major factors: the scheduled expiration of ACA programs meant to blunt major rate hikes and the phasing in of new health plan requirements as old health plans come to an end.

On the first point, the temporary reinsurance and risk corridor programs are scheduled to end in 2016. These programs are designed to stabilize premiums as insurers adjust to the health-care law's new coverage requirements, with the idea that the reformed market will settle within three years. …

To the second point, Parente estimates between 4 million and 6 million people will see their existing individual coverage end in the next few years when either their plans lose grandfathered status or the White House's extension of non-compliant health plans runs out near the end of 2016. These holdovers from the individual market predating the ACA are expected to be younger, healthier and more sensitive to price. …

Parente's model finds these factors will have the most significant affect on 2017 premiums for less-robust plans in Obamacare's "metal tiers." These include catastrophic and bronze-level health plans, which have the cheapest premiums but the highest out-of-pocket costs. The effects will differ by state, but the national picture shows a big price jump for bronze and catastrophic plans between 2016 and 2017 — premiums for the average individual bronze plan, before subsidies, are projected to climb between $2,132 and $4,174 between those two years.

Megan McArdle, writing in Bloomberg in 2014, noticed the same thing. “We won’t actually know what effect the Affordable Care Act is having on insurance prices until 2017, when a bunch of temporary subsidies for insurers expire.”

Right now, and for the next year, insurers are operating under the expectation of large subsidies from the Obama administration via the various reinsurance provisions in Obamacare. Those provisions expire in 2016, and if a Republican takes the White House that year, insurers can also probably forget about getting favorable regulatory rulings.

Right now, it’s just not very risky to write a policy that loses a bunch of money, because your losses are capped at a few percent. Starting in 2017, all that changes. Insurers are going to need to price policies with the expectation of making money and the fear of losing it.

What we want to know is what happens when they’re actually in a competitive market. I can tell a story where the exchanges create transparency and competitive pressure that drive prices down; I can tell a story where the subsidies and various regulations drive prices even higher. I can tell a story where the insurers conclude that this market isn’t worth the tsuris and leave it to Blue Cross/Blue Shield, with all sorts of fascinating results. We won’t know which story is true until 2017 or beyond.

The irony of King vs Burwell is that the administration is decrying the loss of subsidies when it plans to effectively do the same thing in 2017. The strategy for establishing Obamacare appears to rely on the classic ploy of holding introductory prices at an artificially low level in order to capture market share and displace competing products.  This is known as penetration pricing.

Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. The strategy works on the expectation that customers will switch to the new brand because of the lower price. Penetration pricing is most commonly associated with marketing objectives of enlarging market share and exploiting economies of scale or experience.

Then, having destroyed the older health care insurance model, the Obamacare system would be free to raise premiums after 2017, since to all intents and purposes, it hopes to be the only game in town.

Obamacare and Medicare Fight For Dollars


Ezra Klein at Vox unintentionally tells the fascinating story of just how unpopular Obamacare was, even in the Democratic Party. He notes that without Harry Reid’s relentless maneuvering and strongarming it would not have had the numbers to pass.  “Obama has Harry Reid to thank for his biggest accomplishments.”

It passed because Harry Reid managed something that seemed almost unthinkable: he held every single Senate Democrat — 60 of them, at least at the crucial moment — together to vote for a sprawling, unpopular bill that raised taxes, cut Medicare spending, and insured tens of millions of Americans. …

This was an extraordinary accomplishment by Reid, and it speaks to the fact that what we call Obama's legacy is just as much Reid's legacy. If Obama had pushed his health-care bill but five Senate Democrats had defected, there would be no Patient Protection and Affordable Care Act — which is to say, there would be no Obamacare.

Speaking of cutting Medicare spending, Reid’s accomplishments led indirectly to the massive Medicare “doc fix” -- a giant infusion of cash to save it from going under.  Avik Roy writes “Unfixed: House Passes Medicare 'Doc Fix' That Will Increase Spending & Deficits For At Least 20 Years”.

Medicare and Medicaid alone account for $100 trillion of unfunded liabilities to the federal government.

But Congress appears to believe that the biggest problem facing American health care is that doctors don’t make enough money. This is such a big problem, they say, that it’s worth actually adding to Medicare’s unfunded liabilities in order to ensure that doctors make more.

You heard that right. According to the Congressional Budget Office, the bill passed by the House—formally titled the Medicare Access and CHIP Reauthorization Act of 2015—would increase the federal deficit by $141 billion over the next ten years. It would increase federal spending by $145 billion, and revenues by $4 billion, over that period.

(Remember that next time you hear about all the “free” federal money that the states are stupidly turning away.  The federal government has no real money to give away.  It is in hock for years to come.)  We live in an era where “accomplishments” means scheming to spend the taxpayer’s money.

The only way to stop the flood of red ink, says Roy, is to somehow cut costs.  He notes for example that doctors in America earn an extraordinary amount of money.  Howard Gleckman notes the Medicare fix hopes that some form of payments-for-results system will reduce overtreatment.  But there is no great confidence that it will. In fact, Gleckman writes:

While this sounds great, it will be very hard to do. Getting both the quality metrics and the payment incentives right is enormously complicated. My Urban Institute colleague Bob Berenson, a physician and health policy expert, fears the new system will be so challenging it may have the perverse result of driving more docs out of Medicare. Other critics argue that will encourage physicians to accept only the easiest-to-treat patients.

About the only sure-fire way to cut the deficit is to raise taxes or increase payments.  Gleckman notes that’s in the bill too. “Some costs of those extra doc payments would be funded by a small premium hike for all seniors. However, Medicare beneficiaries with high-incomes would face steep premium increase starting in 2018.”

The deficit is going to wind up like a pea under a carnival conjurer’s shell. It will be kited to save one program after another. “The House Republican budget would cut more than $5 trillion in federal spending over the next decade and abolish Obamacare while shoring up Medicare for generations to come,” is a phrase that sounds fine until one realizes that Obamacare was supposed to save Medicare  in the first place.

As Sophie Novak wrote in the National Journal: “If the ACA can deliver on its promise of a healthier population, it would save Medicare big money. The law’s critics aren’t holding their breath.”

Mitt Romney continually accused President Obama of "robbing Medicare to fund Obamacare" throughout the 2012 election. Now, long after the campaign, the charge lives on as one of Republicans' top talking points as they attempt to shore up support among seniors.

But the Affordable Care Act's defenders say the GOP has it backwards. If the law can deliver on its promise of a healthier population, they say, it will go a long way toward keeping the cash-strapped entitlement program solvent.

By expanding insurance to millions of people, the law hopes to reduce the rate of preventable conditions that, as patients age and enter Medicare, become very costly. And there's some evidence that broader insurance coverage will lead to better health and lower costs.

And now that even Klein admits Obamacare doesn’t save any money at all, American healthcare is right back to where it started. Klein writes in the Washington Post that “the 2010 health-reform law does little to directly address prices.”

It includes provisions forcing hospitals to publish their prices, which would bring more transparency to this issue, and it gives lawmakers more tools and more information they could use to address prices at some future date. The hope is that by gathering more data to find out which treatments truly work, the federal government will eventually be able to set prices based on the value of treatments, which would be easier than simply setting lower prices across-the-board. But this is, for the most part, a fight the bill ducked, which is part of the reason that even its most committed defenders don’t think we’ll be paying anything like what they’re paying in other countries anytime soon.

Ted Cruz is probably right when argues that the problem must be approached from first principles. “Number one, allow people to buy insurance across state lines. Number two, we need to expand health saving accounts. Number three, we need to de-link health insurance from employment.”  His general prescription is that only greater competition and freer markets hold any hope of breaking the deadly cycle of tax and spend.

Competition is the only hope.  Obamacare is the light that failed.

Competition or Price Controls


Five years into Obamacare its advocates can let their hair down and admit: it hasn’t cut any costs. Ezra Klein has been cheerleader of the ACA from the first but he writes in the Washington Post that “the 2010 health-reform law does little to directly address prices.”  The ACA turns a lot of wheels but the car goes nowhere, like a jalopy up on cinder blocks.

It includes provisions forcing hospitals to publish their prices, which would bring more transparency to this issue, and it gives lawmakers more tools and more information they could use to address prices at some future date. The hope is that by gathering more data to find out which treatments truly work, the federal government will eventually be able to set prices based on the value of treatments, which would be easier than simply setting lower prices across-the-board. But this is, for the most part, a fight the bill ducked, which is part of the reason that even its most committed defenders don’t think we’ll be paying anything like what they’re paying in other countries anytime soon.

Lower prices is not the part it ducked.  It’s the part it promised. Obamacare care is not called the Patient Protection and Affordable Care Act for nothing. But “affordable” in this case means as expensive as ever, and we have it on Klein’s belated admission that “even its most committed defenders don’t think we’ll be paying anything like what they’re paying in other countries anytime soon”.

Having admitted that nothing in Obamacare controls costs, Klein plunges ahead to describe what does: price controls.  Here’s how he puts it:

Prices don’t explain all of the difference between America and other countries. But they do explain a big chunk of it. The question, of course, is why Americans pay such high prices — and why we haven’t done anything about it.

“Other countries negotiate very aggressively with the providers and set rates that are much lower than we do,” Anderson says. They do this in one of two ways. In countries such as Canada and Britain, prices are set by the government. In others, such as Germany and Japan, they’re set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail.

It’s not that the price control idea has been hiding all this time.  Back in 2012 Sarah Kliff wrote “yes, we do know how to control health cost inflation”.  How? Price controls.

David Brooks's column today is a suggested opening for his Wednesday night debate. It includes this "brutal truth" about Medicare costs: "Nobody knows how to reduce health-care inflation."

It's would be a pretty brutal truth except for the fact it's not really true at all: We have a lot of examples to look at where governments have successfully held down the rate of health-care cost inflation. Most of them do that through some version of price controls, where the government sets the rates that doctors can charge for various services.

If “Soylent Green is people” Obamacare is smoke and mirrors. As Newt Gingrich put it in a video with USA Today’s Jayne O’Donnell (watch the video because O’Donnell’s article wholly misrepresents what Gingrich said), Obamacare is mostly Medicaid expansion plus some hideously expensive insurance to cover relatively few people.  And Medicaid is unsustainable if you can’t find a way to cut costs.

The two ways to cut costs are either to make the market more competitive or price controls.  We already know which strategy Klein thinks will work.  The trouble is, many of the countries Klein admires can simply charge the marginal cost of newly developed medical technologies or pharmaceuticals because the American market has paid the full cost.  Price controls in foreign countries don’t affect supply because demand is generated from the US market.

Our high spending makes medical innovations more profitable. “We end up with the benefits of your investment,” Sackville says. “You’re subsidizing the rest of the world by doing the front-end research.”

The moment this special condition is abolished, fixed prices will as everywhere, bring about a diminished supply of medical innovation.  One way Obamacare is already implementing price controls is by placing expensive drugs off limits to its subscribers through closed formularies. Scott Gottlieb writes:  “Obamacare is making closed formularies that offer very narrow selections of specialty medicines far more prevalent. But long term, provisions in Obamacare may also make such restrictions hard to maintain.”

But the other way to reduce costs is to undermine the ability of health providers to extract rents by encouraging competition.  Gottlieb says competition, not closed formularies, can bring new drugs within reach of patients.  He gives an actual example.

Express Scripts has captured headlines this past year waging a vigorous fight with Gilead Pharmaceuticals and that company’s drug for hepatitis C, Sovaldi. Express Scripts’ beef is with the way that Sovaldi was priced. The PBM’s solution has been to tacitly campaign for drug price controls. This earned Express Scripts some allies on Capitol Hill, and painted them onto one side of a policy divide. But in the end, it wasn’t price controls that got Express its discount. It was market-based competition.

With Sovaldi too expensive for many patients, “the Pharmacy Benefit Manager Express Scripts extracted a deep discount on AbbVie’s new medicine for hepatitis C (Viekira) and will offer it in lieu of competing drugs from Gilead and Johnson and Johnson.”  They took their business from the expensive drug and bought from the competitor.  This is good for Express, but the savings are unlikely to be passed to patients, which it could, if the market were freer.  And this is where the potential lies.

With new medicines launching that will compete with Sovaldi, Express Scripts was able to goose its profits, while taking advantage of AbbVie’s desire to win some early market share. Many PBMs like Express make money through a complicated web of discounts that they extract from drug makers, but don’t fully pass on to their customers – the self-insured businesses and health plans that contract with them. …

Closed formularies that offer very narrow selections of drugs are becoming far more common as a way to cut costs, especially in Obamacare. The battle Express waged, and its decision to completely freeze Gilead from its formulary, is a signal to the market that they are willing to take punitive measures as a way to extract price concessions and cut costs.

But Obamacare may be ironically making it harder for the ultimate consumer to extract the benefits from competition. “If a capitated provider group or hospital system has a patient on their roster, the provider group knows they are likely to be responsible for that person’s health for many years. This is becoming more acute as providers consolidate around hospitals, and health systems start to buy up their local markets.”

Obamacare has abetted the rise of local health provision monopolies which have no incentive to pass on savings to the consumers.  The problem, as Gottlieb sees it, is how to arrange things so that consumers get the discounts that companies like Express can extract; and not how to implement price controls, which is another word for rationing.  That choice between more competition or price controls is the fork in the road.

And it is also the basis of the fundamental debate over the character of the health care system. On the one side Obamacare’s advocates say price controls are the best they can do.  Ranged against that are the advocates of freer markets.  That is the issue at its most fundamental.

The Long Term Prospects of Obamacare


Grace Marie Turner writes in Forbes that positions on Obamacare have been deadlocked for a long time.  She cites polls summarized by Real Clear Politics which shows that the majority of respondents still oppose the program -- after five years -- and that those in favor have never taken the polling lead.








RCP Average

2/13 - 3/5




Against/Oppose +10.5

NBC News/Wall St. Jrnl

3/1 - 3/5

1000 A



Against/Oppose +7

FOX News*

3/1 - 3/3

1011 RV



Against/Oppose +20


2/27 - 3/3

2348 A



Against/Oppose +8

Rasmussen Reports*

2/28 - 3/1

1000 LV



Against/Oppose +8

Pew Research

2/18 - 2/22

1154 RV



Against/Oppose +12

CBS News

2/13 - 2/17

1006 A



Against/Oppose +8


Two years ago it was the same story.  And in 2014 Gallup found that even after the online exchanges were fixed, people still didn’t like it. “- Although the Obama administration is boasting higher-than-expected enrollment for the Affordable Care Act, Americans' attitudes toward the healthcare law have changed only marginally since the open enrollment period ended for 2014. A steady 43% of Americans approve of the 2010 Affordable Care Act, also known as "Obamacare," while a majority continue to disapprove of it, roughly where sentiment was before the enrollment window officially closed on March 31.”

How can a program which boasts it is giving away money in subsidies and heavily promoted by the government still be so unpopular.  Domenico Montanaro of KPBS offers up this graph to show just how immovable the attitudes have been.



It wasn’t suppose to be this way.  NBC's chief White House correspondent and political director Chuck Todd was probably echoing the Democratic Party’s internal reckoning when he declared the game over in 2014: "So at a minimum, the importance of hitting the six means the law is unrepealable....It means that it's here to stay."

Fast forward a year and enrollments and it is no more popular than before. One thing appears to be certain, Barack Obama has not made the sale despite two terms and hundreds of billions of dollars in government sugar. Montanaro writes that it will be up to future Democratic president’s to cement it in place.  He writes, “as he recedes into lame-duck status during his remaining time in office, it will be up to Hillary Clinton, the likely Democratic standard bearer in 2016, to sell that message, preserve Obama's signature law, and, with it, his legacy.”

Clinton appears willing to carry it forward. David Knowles of Bloomberg Politics says “make no mistake, Hillary loves Obamacare.”  But he adds that she would probably rather have it known as Hillarycare and that fact will mean that its provisions will be altered under her administration.

Clinton, who had tried and failed to push through a single payer healthcare system as First Lady, has defended the Affordable Care Act before, even while acknowledging some of its faults.

“I think we are on the right track in many respects but I would be the first to say if things aren’t working then we need people of good faith to come together and make evidence-based changes,” Clinton said at a healthcare event in Orlando, Fla., last June. Ahead of the 2014 midterm elections, Clinton had urged Democratic candidates to run on Obamacare's successes, rather than let Republicans control the narrative of what they portrayed as a failed law.

But if the permanence of Obamacare depends on Hillary, how likely is it that she will be elected in 2016?  They are probably in neighborhood of 50-50. That is probably what the chances of Obamacare’s survival area, and its not a good place to be. The product itself is not particularly attractive. It has high premiums, narrow networks, astronomical deductibles.  As Grace Marie-Turner puts it, “the majority of the newly-insured are enrolled in Medicaid, the joint federal-state health program that generally pays doctors and hospitals less than any other health plan.”

The persistent unpopularity of the ACA means it has no deeply entrenched constituency that will ensure its survival. For Obamacare’s long term survival to depend on the political prospects of an aging Democratic politician is too fragile a basis to depend upon. Even its most ardent backers can be expected to hedge their bets.

It is in this knowledge that Ted Cruz has unveiled an Obamacare alternative as has Marco Rubio, not to mention the proposal already being put forward by Kline, Ryan and Upton.  The core of these proposals are plans to deregulate the sale of medical insurance and to provide everyone with a tax credit towards it, with special provision for uninsurable people.  They all take from Obamacare the idea of universal or near universal coverage, but add to it some real prospect of actual affordability.  Many of the Republican proposals also give states far more latitude than the Obamacare system.

These alternatives are designed to be different enough from Obamacare to qualify as “repeal” yet offer enough opportunity to leach away Obama’s base of industry support.  More importantly, they offer the prospect of being at least partly acceptable to some Democrats.  One of the key problems of the Affordable Care Act was its excessively narrow political base. It was passed without a single Republican vote which ensured that it could not outlast its creator -- without a Hillary Clinton to continue it.

From a coldly political point of view, Obamacare is far from settled policy.  The public has manifestly refused to embrace it.  It is of dubious inherent utility and it is horridly expensive.  Its chances for survival depend largely on the election of Hillary Clinton.  Therefore the balance of probability is that it will not survive in its present form for very much longer.  It will be replaced -- even by Clinton.  It will be the enduring legacy of Barack Obama, except insofar as the Edsel is a monument to Edsel Ford.

Ted Cruz and Obamacare


Andy Borowitz has a satirical piece in the New Yorker implying that denying Senator Ted Cruz Obamacare coverage would be a form of punishment.

Just hours after Senator Ted Cruz (R-Texas) told CNN that he had no choice but to sign up for Obamacare, President Barack Obama signed an executive order making Cruz ineligible for coverage under the Affordable Care Act.

“Clearly, the hardship of receiving Obamacare was causing Ted a great deal of pain,” the President said. “This should take care of that.”

Obama acknowledged that the executive order, which makes Cruz the only American expressly forbidden from signing up for Obamacare, was an extraordinary measure, but added, “I felt it was a necessary humanitarian gesture to protect Ted from the law he hates.”

However long before president Obama fictionally exempted Ted Cruz from Obamacare, he actually exempted himself.  Jane Orient described the contrast between Obama’s Care and Obamacare.

The whole country has heard the saga of the President's sore throat. Many people who have a similar problem—or a true emergency—might compare his treatment with theirs.

For a complaint of an apparently mild sore throat lasting a couple weeks, the President reportedly got an ENT consult, a fiberoptic ENT examination, and a CT scan of the neck because some "swelling" was noticed. The scan was done on a Saturday afternoon to suit the President's convenience. According to an article in the Arizona Daily Star, an opening occurred in the Presidential schedule when rain caused the cancellation of his golf game. Then a diagnosis of acid reflux was announced, and unspecified "appropriate" treatment was prescribed.

Now suppose you, as a beneficiary of ObamaCare, developed this symptom. There would be no motorcade to an iconic medical center. Instead, you would need to seek an appointment with your PCP (primary care provider). Several weeks later, you might see the first available "provider"—probably a nurse practitioner or physician assistant.

To become a patient in the "medical home," you would need an electronic health record (EHR). It would document your complete "health" history, including an extensive sexual, drug, alcohol, and smoking history. Many practices now ask about gun ownership, and even about how any guns are stored.

Although EHRs are not very good at "interoperability" (sharing with other medical facilities), they are available to very large number of "authorized" users (such as law enforcement, government planners, insurers, and researchers) and quite vulnerable to hackers. Most patients have no opportunity to opt out of a health information exchange. Once in the record, an item may be impossible to remove, even if it is a serious error. Physicians are required by law to retain records and make them available to licensure boards, attorneys, courts, and law enforcement. They cannot "lose" records, as regularly happens in government agencies, with impunity. And don't even think about lying, or asking your doctor to lie. Making a misstatement in a health record is a federal felony.

This President, in contrast, has managed to keep much of his past a secret.

Not only has the president exempted himself, he’s exempted many high government officials. This exemption was created by executive regulation, in other words, under Obama’s authority itself. Senator Ron Johnson of Wisconsin actually filed suit in court to compel the legislative branch to live under the same rules as ordinary Americans.   In a Wall Street Journal article Johnson wrote:

On Monday, Jan. 6 [2014], I am filing suit in the U.S. District Court for the Eastern District of Wisconsin to make Congress live by the letter of the health-care law it imposed on the rest of America. By arranging for me and other members of Congress and their staffs to receive benefits intentionally ruled out by the Patient Protection and Affordable Care Act, the administration has exceeded its legal authority. …

It is clear that this special treatment, via a ruling by the president's Office of Personnel Management, was deliberately excluded in the law. During the drafting, debate and passage of ObamaCare, the issue of how the law should affect members of Congress and their staffs was repeatedly addressed. Even a cursory reading of the legislative history clearly shows the intent of Congress was to ensure that members and staff would no longer be eligible for their current coverage under the Federal Employee Health Benefit Plan.

In June 2014 a federal judge ruled that Johnson could not challenge the provision because he was not injured by this thinly disguised bribe.  In other words Johnson could not sue because he was better off staying out of Obamacare.

A Republican senator had no grounds to sue the Obama administration over how it interpreted the part of Obamacare that forces members of Congress to get their health care insurance through the law’s new exchanges, a federal judge ruled Monday.

Sen. Ron Johnson of Wisconsin said he was disappointed in the outcome of his legal challenge, which argued the administration provided lawmakers and their staffs with illegal preferential treatment when it decided it would still dole out employer-based subsidies to help them pay their monthly premiums. A provision of the president’s 2010 health law required members of Congress and key staffers to get their insurance coverage through the exchanges.

Mr. Johnson said ordinary Americans in the Obamacare marketplace will not enjoy those benefits and must qualify for less-generous income-based subsidies.

But first he had to prove he was harmed by the rules. On Monday, Judge William C. Griesbach said the lawmaker failed to meet that test.

“I conclude that any injury traceable to the contested regulation is too speculative and undeveloped to constitute a redressable injury,” the judge wrote in an order to dismiss the case.

Logically Cruz, by opting to enrol in Obamacare, is voluntarily disadvantaging himself by jumping from the frying pan into the fire.  Cruz in explaining his decision said, "I strongly oppose the exemption that President Obama illegally put in place for members of Congress because (Senate Minority Leader) Harry Reid and the Senate Democrats didn't want to be under the same rules as the American people," Cruz said, before repeating: "I believe we should follow the text of the law."

Borowitz’s snarky argument is the exact opposite of the truth.  Obama will not partake of the dish he insists everyone should eat.  If that isn’t hypocrisy, then what is

Has Obamacare Boosted Employment


One of the proud claims of Obamacare is that it’s created a plethora of jobs.  For example, Alex Wayne at Bloomberg News reports that “more than 90 new health-care companies employing as many as 6,200 people have been created in the U.S. since Obamacare became law, a level of entrepreneurial activity that participants say may be unprecedented for the industry.”

The health law, which took full effect in 2014, represents the most dramatic change to the U.S. health system in 50 years. Entrepreneurs, including some from within President Barack Obama’s administration, have founded companies that target employers, health insurers, hospitals, doctors and consumers looking to navigate new requirements and possibilities.

“There’s a lot of opportunity for new market entrants,” Zenefits’ Conrad said. “The ground is literally shifting under the feet of the incumbents.”

Conrad, a cancer survivor, said that after reading the Affordable Care Act cover-to-cover and talking to insurance experts, he realized it offered an opportunity to ease the process of pricing, selling and managing health insurance for small businesses. Zenefits, which has 10,000 clients, can “spit out pricing” for every health insurance plan in a state “in milliseconds,” using only the ages and addresses of employees, he said.

Zenefits is fairly typical of the kind of business that has sprung up around Obamacare.  It helps small businesses “ease the process of pricing, selling and managing health insurance”.  Michael Estrin of Bankrate examined the kinds of occupations that have thrived under Obamacare.

  • Lawyers. Median annual salary: About $113,000. The more than 900-page Affordable Care Act and its many related regulations have created a bonanza for lawyers, and for more of them. "First, the ACA is complicated and long (and) few people really want to read it. Second, there is an abundance of incorrect information freely disseminated (about the law)."

  • Management consultants. Median annual salary: About $78,000. For the most part, consultants are advising these institutional insurance customers on how to meet the law's requirements without breaking the bank. Consultants also are advising pharmaceutical firms and medical device makers on how to exploit opportunities presented by the ACA, and they're helping doctors adapt their practices for the potential influx of new patients.

  • Insurance Sales Agents. Median annual salary: About $47,000. To explain health insurance products to the potential new pool of customers, Blue Cross and Blue Shield companies across the U.S. are ramping up operations, says Eric Lail, a spokesman for the Blue Cross and Blue Shield Association, the nationwide umbrella group for the 37 separate "Blues."

  • Customer service representatives. Median annual salary: About $30,000. Many of those jobs are for call center operators, to explain insurance options and answer questions by phone. In one example, the consulting firm Challenger, Gray & Christmas says an Iowa call center added 120 jobs after winning a contract related to the health care law.

  • Navigators. Estimated average pay: $29.20 per hour. "Navigator" is a new class of job created by the health care law. The Obamacare navigators are charged with helping people work through enrollment paperwork. They educate consumers about the new marketplaces and determine if they qualify for a federal tax credit to save on the cost of health insurance. The job functions are similar to those of a call center operator.

  • IT professionals. Median annual salary: About $71,000. "The ACA mandate for the implementation of electronic medical records has created a strong need for IT professionals, which creates excellent job opportunities," says Amanda Bleakney, managing director for health services at The ExecuSearch Group, a New York City staffing firm.

While these are all decent, honest jobs they mostly spring from the need to help people understand the byzantine complexities of affordable care.  They are mostly paper pushing jobs.  People who explain the law; who litigate cases, answer telephoned questions, help fill out forms and handle electronic records.

H&R Block, for example, is part of this “entrepreneurial” boom. The Daily Caller wrote: “five years ago, a bevy of high-priced H&R Block lobbyists worked on the tax preparation company’s behalf to shape the Affordable Care Act.”

And this April 15, those efforts are set to pay off in a big way for the company.

H&R Block is well positioned to earn more than $100 million in additional fees from low-income Obamacare enrollees as they face the daunting challenge to properly file this year’s complicated health-related tax forms.

Consumers are familiar with H&R Block’s massive “Get Your Billions Back” ad campaign that includes direct appeals to Obamacare recipients who will have to file health information on this year’s IRS tax forms.

Obamacare has set off what some people call Regulation Rodeo.  The torrent of regulations pertinent to the Affordable Care Act are documented on this site.  Just tracking them is a full-time job. For businesses Obamacare means hiring more people -- another employment benefit -- to deal with the paper work. Joyce Rosenberg, the AP’s business writer says:

Complying with the health care law is costing small businesses thousands of dollars that they didn't have to spend before the new regulations went into effect.

Brad Mete estimates his staffing company, Affinity Resources, will spend $100,000 this year on record-keeping and filing documents with the government. He's hired two extra staffers and is spending more on services from its human resources provider.

The Affordable Care Act, which as of next Jan. 1 applies to all companies with 50 or more workers, requires owners to track staffers' hours, absences and how much they spend on health insurance. Many small businesses don't have the human resources departments or computer systems that large companies have, making it harder to handle the paperwork. On average, complying with the law costs small businesses more than $15,000 a year, according to a survey released a year ago by the National Small Business Association.

"It's a horrible hassle," says Mete, managing partner of the Miami-based company.

But there are some winners. Some companies are hiring people to take on the extra work and human resources providers and some software developers are experiencing a bump in business.

Despite efforts to depict these jobs as additions to the health sector brought about by Obamacare, they add almost nothing to the national stock of actual healthcare provision (like doctors, nurses and medical technicians).  They are mostly employment for admin and legal types.  The argument that it has boosted the economy is at the very least a cynical one.

Paul Ryan: Let Obamacare Die, We Have a Plan


Paul Ryan has a message for Republican state officials.  A Wall Street Journal article reports that if the Supreme Court rules against the federal government in King vs Burwell, Ryan advises against a panic rush to replace the subsidies. “It’s not going to be as if in a few weeks all these people in our states, my state included, are going to be out of subsidies and have a 256% increase in their premiums, which is the average price increase we’re predicting.

Mr. Ryan, chairman of the House Ways and Means Committee and the GOP vice presidential nominee in 2012, asked the state legislators to hold firm and promised them congressional Republicans would have alternative health-care legislation—with an official cost estimate—introduced by June 20. The bill, he said, would revive lower-cost, limited coverage insurance plans in states that didn't want their own exchanges. Currently, 37 states use

“If people blink and if people say this political pressure is too great, I’m just going to sign up for a state-based exchange and put my constituents in Obamacare, then this opportunity will slip through your fingers,” he said.

Ryan implied that under the new GOP plan people would be able to buy much cheaper insurance than that currently offered on the Obamacare exchanges.  The plans would be allowed to ditch certain features in the interest of reducing price and fostering competition.

Mr. Ryan said state lawmakers should brace for a “high octane” wave of criticism for refusing to set up their own exchanges, but that they could persuade people to embrace a specific GOP alternative. ...

His remarks Thursday offered the most detailed vision yet of the House Republicans’ thinking. Mr. Ryan suggested the GOP caucus was most enthusiastic about allowing states to strip some of the health law’s requirements that insurance plans must provide certain minimum benefits and a requirement that insurers sell to all customers equally regardless of their medical history.

“We think things like community rating and other regulations make insurance needlessly expensive for most people and that there are better more targeted ideas out there to help those with pre-existing conditions get affordable care,” he said. “We just want to give people market freedom and personal freedom so that they can buy what they want.”

Those ideas include reviving high-risk pools, which are state-run insurance pools for people turned down by commercial insurance plans, and beefing up protections that let people with insurance switch their plans regardless of their medical history.

The congressman’s remarks suggest the GOP is far closer to a comprehensive alternative to Obamacare than the ACA’s advocates have cared to admit.  Many pro-Obamacare pundits ridiculed the idea that the GOP could offer anything more than a pastiche given the long gestation time that the ACA itself had.  But Ryan has been working on an alternative for some time and the GOP has been fecund with ideas that have centered largely around breaking down regulations rather than creating an entire universe of them.

Stuart Butler of the Brookings Institution examined the Ryan proposal and found it was anything but slipshod. “But the real question is this: does the Ryan proposal have ingredients that could be part of a future agreement on the long-term shape of the American health care system? I believe it does.”

Butler notes that Ryan’s plan contains insurance protections against the denial of coverage, a system of tax credits to buy insurance on a much more liberated market than the Obamacare exchanges and a wide degree of state flexibility.

Such provisions overlap with protections in the ACA. So there is plenty of room for broad bipartisan agreement on a range of protections. …

Another reason for optimism is that the Ryan-Kline-Upton outline embraces a refundable, advanceable tax credit for health coverage meaning the assistance would be available to those paying little or no tax and would be available when premiums are due. Moreover, the credit would be available for coverage outside exchanges including, presumably, for those Americans affected by an adverse decision in King v. Burwell. And like the Hatch proposal, the House chairmen’s plan would adjust the credit by age, which is a rough approximation of the cost of insuring different segments of the population. This credit structure opens the door to a more comprehensive agreement on subsidies. …

The House chairmen’s plan would also give states an “off ramp” from the ACA to pursue their own vision of coverage and avoiding federal mandates as they do so. That sounds radical, but Section 1332 of the ACA also provides sweeping waivers to states, starting in 2017, to pursue the goals of the ACA without the legislation’s individual and employer mandates or the need to set up exchanges. To be sure, the House proposal doubtless envisions a much looser set of goals for states and no requirement that states must seek a waiver from Washington. But if Section 1332 were merely to be amended to take effect immediately, it would go a long way towards achieving the chairmen’s vision of state flexibility as well as giving options for addressing a King decision against subsidies in federal exchanges.

It’s the bipartisan bill Obamacare could have been had it not been obsessed with carrying out an unworkable vision of the president’s ideas. Butler writes:

It’s unfortunate that the Obama Administration and a bipartisan group of congressional lawmakers were not able to draw on broadly held ideas about protections, tax assistance and state flexibility to craft a bipartisan health reform in 2010. But the House chairmen’s plan, like the earlier Hatch, Burr and Upton plan, is a good starting point for a fresh discussion of lasting, bipartisan health reform.

Ryan has a trump card the president lacks.  He has a plan that might work, whereas Ryan knows from his long experience with congressional budgetary issues, that Obamacare hasn’t a snowball’s chance in hell of actually functioning. What is more Ryan knows the Democrats understand this too.  The Ryan proposal isn’t an “off-ramp” for Obamacare; it’s a life raft for Democratic politicians who are looking for a way out of the sinking ship without appearing to betray the president -- or at least the principles he espoused.

By offering a plan which is far more flexible than Obamacare, Ryan has given every politician in trouble a life-line to hang onto.  The governors need a way to provide health care to voters; the congressmen need a source of savings to rescue an starving Medicare; the states need flexibility (witness the Health Care Compact) and the American people need cheaper health insurance with fewer restrictions than Obamacare.

The Ryan alternative offers some chance of achieving at least some of these goals.  Obamacare has marked its fifth anniversary and it is now widely acknowledged that it will never meet its design targets. “Obamacare is now slated to hit only 65 percent of the CBO’s original coverage projection for 2015.”

If the Supreme Court rules against Burwell, it will not be the cause of the ACA’s demise so much as a coup de grace.  It’s been dying these five years.  There’s no future in it.

Don’t Limit People to the Company Store


Bruce Japsen asserts that the advent of Obamacare has not driven employers to push their staff out onto the public exchanges.  He argues that while the economic incentives tend to encourage this, the need to keep valued employees has forced most companies to suck up the costs of Affordable Care.  Japsen cites a Beth Umland, Mercer’s director of research for health and benefits, as evidence.

“Given that the penalty for not offering coverage under the ACA is far lower than the average per employee cost of health coverage – which hit $11,641 in 2014 – it’s not surprising that nearly one out of 10 employers saw terminating their health plans as a likely  option back in 2010,” Umland added.  “But in fact, virtually no large employers have jumped ship so far, and today few are even considering it.

Mercer’s survey of employers comes less than three months after employers with 100 or more workers in January were required by the Affordable Care Act to offer 70 percent of their full-time workers coverage. In 2016, employers with 50 or more full-time workers have to start offering coverage.

Employers see offering health benefits as important to keeping the best workers. “Few employers want to risk being the first of their competitors or in their markets to drop health benefits, especially in an improving economy,” Umland said.

Making the opposite case is Rick Lindquist, president of Zane Benefits, which specializes in individual health insurance reimbursement for small businesses.  He predicts that the employers will increasingly pushing employees out of group plans, a trend that will only accelerate in the future.

There will be a massive shift; in fact, we’re in the middle of it. People categorize this as employers dumping health insurance. Yes, they stop offering insurance but they don’t stop offering benefits. They’re just changing they way they deliver them and replacing them with defined-contribution plans. It could save millions of dollars for employees and employers. …

In our book, we project that by 2017, the majority of small businesses that now offer health insurance will switch to defined-contribution. This is being led by small-business owners. But it doesn’t stop there.

A few years ago, some big companies [Verizon and AT&T] leaked documents saying they were evaluating dropping health insurance plans. Some big companies will drop their plans and that will have a snowball effect. We project that 90% of all businesses will drop offering health insurance plans in the next 10 years. … Since the early 2000s, health-care costs for businesses have been growing faster than any other employee cost. And they’ve shifted the cost to employees over the last 15 years with higher deductibles, higher copays and higher premiums.

Time will tell who is right. Defined-contribution plans are similar to a health care voucher provided by employers to their workers.  The company gives workers a certain sum of money which they can use towards buying a plan that best suits their needs. According to Wikipedia describes “a Defined Contribution Health Benefit” as “a consumer-driven health care arrangement in which employers choose a set dollar amount to contribute towards an employee’s healthcare.”

Under a Defined Contribution Health Plan the employee is responsible for researching and purchasing his or her own insurance policy. Defined contribution health plans are an alternative to traditional employer-sponsored group health insurance plans. A defined contribution health plan by itself is not a health insurance plan, but rather a health benefits strategy.

Employer contributions can be made on a tax-free basis when offered under a qualifying plan such as a Section 105 Medial Reimbursement Plan.

Similar to a defined contribution plan used by employers to contribute to their employees' retirement savings, defined contribution health plans allow employers to avoid uncertainty by fixing future obligations. Defined Contribution Health Plans have in recent years become a viable method for offering benefits as individual health insurance plans have become more widely available under the Patient Protection and Affordable Care Act (ACA). Industry experts expect that in the coming decade there will be a shift to defined contribution health benefits plans, similar to the recent shift in retirement plans from defined benefit to defined contribution.

One of the problems with Obamacare is that it forces people to spend their insurance dollars at “the company store” -- at bureaucratically encumbered official health care exchanges that are so expensive in themselves that even states can’t afford to operate them. For example, Rhode Island discovered it is simply too small to afford an exchange of its own.

“Insufficient scale to justify investment.  Do not pursue.”

Such was the conclusion of a 2009 report funded by the Robert Wood Johnson’s State Coverage Initiative to investigate then-Lieutenant Governor Elizabeth Robert’s plan for HealthHub RI.  This year, the first budget proposed by Rhode Island’s new governor, Democrat Gina Raimondo, provides proof that the study was right. …

With the Affordable Care Act requiring federal funding to cease soon, Rhode Islanders are now finding out what “insufficient scale” actually means.

To pay for the exchange, Raimondo’s budget includes a brand new tax on health insurance.  The governor’s spokeswoman has been explaining the “fee” as structured similarly to the one that the federal government charges for its exchanges.

Moreover, the insurance sold at the “company store” is too expensive for many low-income employees who must then pay the Obamacare penalty -- or apply for an exemption -- for being too poor to afford Affordable Care. A recent New York Times article described the plight of people forced to shop in the government exchange. “Josephine Kennedy, 51, worked a series of low-paying jobs in 2014 and went without health insurance, despite the Affordable Care Act requirement that most Americans maintain coverage.”

The state has now expanded Medicaid, and Ms. Kennedy said she would apply even though she preferred the free clinic she had gone to for years. If she remains uninsured, she will most likely be subject to the penalty for 2015, which will grow to $325 per adult or 2 percent of household income, whichever is larger.

“I still don’t see the point of forcing someone to get insurance,” Ms. Kennedy said. “But I’m happy I got this taken care of for now.” …

H & R Block also found that as of Feb. 24, just over half of its clients with subsidized marketplace coverage had to repay a portion of their subsidy because their 2014 income turned out to be higher than what they estimated when they applied for coverage.

Kathy Pickering, executive director of the Tax Institute at H & R Block, said these clients had owed back $530 on average, decreasing their tax refund by an average of 17 percent.

A far better approach might be to provide everyone with a healthcare voucher and let them choose from a much wider set of plans.  Nobody buys his cell phone, food or other consumer goods at a government run store.  There’s no reason why health insurance should be the exception to the rule.  If employer provided health insurance is on the way out, the logical next step will be to free the insurance markets from the onerous requirement that they be Affordable Care exchanges.

The Regulatory Minefield


While some people may think that the “typo” which caused the King vs Burwell challenge to reach the Supreme Court represents the ultimate ticking time bomb in the ACA there are a number of other provisions buried that could potentially have wide-reaching impact.  One was unearthed by a suit brought by a transgender person against a hospital on the basis of an Obamacare provision guaranteeing nondiscriminatory treatments for persons other than male or female.

Jakob Rumble was in severe pain when he came to the emergency room of Fairview Southdale Hospital in Edina with his mother.

What happened next provoked a federal lawsuit by the West St. Paul resident and a decision by U.S. District Judge Susan Richard Nelson that is being hailed by national transgender and gay rights organizations.

Nelson ruled this week that Rumble, who identifies himself as a transgender man, has built a “plausible” case that he was a victim of discrimination and mistreatment by an emergency room doctor on the basis of gender identity. She denied a motion by the doctor’s employer and Fairview to dismiss the case.

Nelson’s 63-page ruling is believed to be the first extensive federal court analysis of Section 1557 of the 2010 Affordable Care Act. The provision prohibits discrimination by health care providers and is the first federal civil rights law barring sex discrimination in health care.

The details of the case can be found in the actual court documents from the United States district court of Minnesota, which says: “The Court also notes that on December 12, 2013, Plaintiff filed a complaint of discrimination with the Office for Civil Rights (“OCR”) in the Department of Health and Human Services alleging that Defendants violated his rights under Section 1557 of the ACA.”

There is also a little known provision in Obamacare which allows foreign diplomats and UN employees to receive taxpayer subsidies for their health care. “A new law introduced in Congress seeks to prevent foreign diplomats and employees of the United Nations from receiving taxpayer-funded Obamacare subsidies. The bill has been introduced in the House of Representatives by Republicans Ed Royce and Paul Ryan.”

U.S. Rep. Ed Royce (R-CA), Chairman of the House Foreign Affairs Committee, and U.S. Rep. Paul Ryan (R-WI), Chairman of the House Ways and Means Committee, introduced H.R. 1368, the No Healthcare Subsidies for Foreign Diplomats Act of 2015, legislation to prevent foreign diplomats from receiving subsidized health coverage under the Affordable Care Act (ACA).  According to the Department of Health and Human Services, foreign diplomats and United Nations employees in the United States are currently eligible to obtain American taxpayer-funded subsidies under the ACA, such as premium tax credits and cost-sharing reductions, just like American citizens and lawful permanent residents.

The trouble is that the president is determined to keep the Congress from tinkering with the law, for once he allows the legislature to amend and repeal legislation -- which is actually their job -- then control over Obamacare may pass out of his hands.  The tug of war over control of the ACA has often made things worse rather than better.  Much of the implementation for Obamacare has been offloaded on the IRS. IRS Commissioner John Koskinen told Congress on he has had to take money away from answering tax phone and divert it to Obamacare implementation activities.

The IRS chief said Congress didn’t provide additional money to prepare for Obamacare and the tax penalty filings that began this year, so he shuffled at least $100 million from user fee funding that had been going to customer service.

“Because of the zero funding for the Affordable Care Act and [the Foreign Account Tax Compliance Act], the only way we could implement those statutory mandates … in the last year was to move a significant part of that support for taxpayer service into the IT accounts,” Mr. Koskinen said.

Under Obamacare, Americans who don’t have insurance coverage and don’t qualify for an exemption are required to pay a tax penalty to enforce the law’s “individual mandate.”

The executive branch has not covered itself with glory, clearly botching many activities. Perhaps best known to the public are the catastrophic rollout of the original website.  Less notorious are the succession of federally funded state sites which have crashed and burned.

The federal government's, which broke down in the fall of 2013, has been one of the most criticized components of ObamaCare's rollout. Some estimates have put the cost of the botched launch and the series of tweaks to fix the website at $2 billion, a figure that Hatch's staff cited Thursday.

The analysis includes $1.3 billion spent on now-defunct state exchanges: Minnesota, Massachusetts, Oregon and Maryland. These systems, all in blue states, were plagued by technical issues and eventually scrapped or majorly reformed. Republicans have frequently pushed federal health officials to recoup the costs of the exchanges.

But perhaps nothing says “botched” like the 80,000 tax forms which are on hold as they await the replacement of a form mistakenly sent them by the IRS. The forms mistakenly used the wrong year’s data and were therefore unusable.  Until taxpayers receive an updated form they must mark time.

The Obama administration announced Friday that 80,000 corrected tax forms for people on plans through ObamaCare have still not gone out.

It's unclear how many people will be affected by the delay, but the administration said people who have not received the corrected forms do not have to wait to file their taxes and will not have to pay any additional tax due to the effort.

The issues stem from the announcement last month that 800,000 people on insurance plans through ObamaCare received incorrect tax information. At the time, the administration said forms with corrected information would be sent out in the first week of March.

This confusion has naturally opened the door to scam artists. Scott Goss of the News Journal writes, “IRS warns taxpayers of new Obamacare tax penalty scam”.  The complexity of the form has permitted unscrupulous persons to charge immigrants the tax penalty and pocket it for themselves.

The Affordable Care Act, most commonly referred to as Obamacare, was signed into law in 2010, but this is the first time taxpayers are being required to certify that they have health insurance on their tax forms.

For those insured through their employer or receiving other qualifying coverage, that simply means checking a box on their tax form to indicate their family had health insurance for all of 2014.

Taxpayers without insurance – including those who lacked coverage for more than two consecutive months – will be required to pay a penalty of $95 per adult and $47.50 per child up to a maximum of $285, or 1 percent of household income, whichever is higher.

The Internal Revenue Service last week issued a consumer alert about the new Obamacare fraud after receiving "several reports" of tax preparers instructing their clients to pay the penalty directly to them, instead of the U.S. Treasury Department.

King vs Burwell is but one of the legal mines strewn through the Affordable Care Act which can neither be fixed nor mitigated as both executive and legislative battle over it.  The law that had to be passed to find out what was in it is showing its hand.  And the loser is the public.

No Virginia, The Federal Government Isn’t Santa Claus


Emily Cohn at the Huffington Post says she had a dream: the dream of free contraception under Obamacare. And for one, brief it actually came true.  “I'll always remember the first day I got birth control for free just over two years ago. This was one of the first times I felt a tangible effect of Obamacare. I immediately called my mom to share the news. I texted all of my girlfriends. I even posted a picture of my $0 bill on Instagram.”

Then a terrible thing happened. Her Obamacare provider decided to charge a fee to prevent policyholders from wasting or overusing the giveaways.  Cohn remembers her outrage on that horrible day.

So you can imagine how upset I was when a CVS pharmacist told me recently that I owed $20 for a 28-day supply of pills.

"I'm a journalist who covers health care," I protested to the pharmacist. "I understand Obamacare. I shouldn't be getting charged for birth control."

In fact, as it turned out, it was perfectly legal for me to suddenly get charged for birth control after years of getting it for free. That's because health care companies are allowed to dictate how you get your care, even if that conflicts with the original intent of the Affordable Care Act, also known as Obamacare.

The druggist explained to the journalist that you could get it for free if you jumped through hoops, filled out forms and saw the doctor for renewed prescriptions more often than you liked.  Or you could pay $20. In truth these requirements were purposely laid roadblocks to keep usage down.  Cohn wrote an almost “coming of age” ending paragraph: “I guess the moral of my story is that free birth control for all women was a lofty promise. There's still a lot of work women need to do to ensure they get the legal protections they're guaranteed under the law.”

It’s a terrible thing for a young person to realize that money doesn’t come out of the wall, as a child watching ATMs work might conclude.  “Someone” has to pay for that free contraception.  That “someone” if it wasn’t Cohn, would be someone else.  The Washington Post reports that funds for rural hospitals -- like those for doctors accepting Medicare payments -- have been raided to pay for all those contraceptives on the house.

Despite residents’ concerns and a continuing need for services, the 25-bed hospital that served this small East Texas town for more than 25 years closed its doors at the end of 2014, joining the ranks of dozens of other small rural hospitals that have been unable to weather the punishment of a changing national health-care environment….

The Kansas-based National Rural Health Association, which represents about 2,000 small hospitals across the country and other rural care providers, says that 48 rural hospitals have closed since 2010, the majority in Southern states, and 283 others are in trouble. In Texas alone, 10 have closed. …

Experts and practitioners cite declining federal reimbursements for hospitals under the Affordable Care Act as the principal reasons for the recent closures. Besides cutting back on Medicare, the law reduced payments to hospitals for the uninsured, a decision based on the assumption that states would expand their Medicaid programs. However, almost two dozen states have refused to do so. In addition, additional Medicare cuts caused by a budget disagreement in Congress have hurt hospitals’ bottom lines.

The poor rural folks, the grandpas and grandmas on Medicare are the someone else.  It has to be. The need to pay for the cost of goods provided means either charges creep back or money is taken from other programs or other health delivery systems to make it up.  A pea moved around under walnut shells may seem like more than one pea, and the bewitched onlooker may momentarily believe the illusionist is making new peas out of nothing, but when the shells are finally lifted there’s only lonely one pea after all. And that’s how it works with Obamacare.

There are the same number of dollars in the economy as there always. Then the government takes some dollars from somewhere and calls it a “tax”.  Then the same government mails it someone else and calls it a “subsidy”.

Cohn will probably not be surprised to learn that her experience was typical of many other Obamacare policyholders.  In the beginning it seemed a grand promise.  Jason Millman of the Washington Post writes, “Millions more have coverage, but the public still isn’t sold on Obamacare”.  And the reason is they expected the product to look like the picture on the box.  Like Cohn they thought their dreams had come true. But when they opened the package, as Cohn did, once the shiny paint had rubbed off their dream was revealed as shoddy goods.

Forty-three percent of Americans this month view the law unfavorably, while 41 percent give it a favorable rating, according to the Kaiser Family Foundation's tracking poll. According to Kaiser data, overall opinion on the law has been improving over the past few months, which saw a much smoother Obamacare enrollment season compared to last year, with fewer glitches.

A deeper dive into the polling numbers, though, shows a more complicated picture. The number of uninsured has plummeted, but that success hasn't translated into broad popularity for the law. Partisan views are entrenched. And there's declining optimism among those expected to benefit most from the health-care law's coverage expansion, Kaiser's polling data show.

Interestingly enough the more people used it, the less impressed they were. This was the paint rubbing off. “Among Hispanics, as you can see below, support for Obamacare has been strong since the law's passage, though it has dropped since then. More than two-thirds viewed the law favorably in April 2010, almost four times the rate of Hispanics who had unfavorable views. But now, just under half of Hispanics — who have the highest uninsured rate of any ethnic groups — view it favorably.”

Those who remain uninsured are pessimistic about their chances of getting coverage. Almost half (44 percent) of the uninsured said they don't expect to get health insurance in the next few months. About two-thirds of the uninsured last year didn't bother to look for coverage, largely because they didn't think they could afford it, according to an earlier Kaiser survey.

When the president was on the stump for Obamacare, many people like Cohn thought that “affordable care” meant free or cheap medicine. And they were excited.  But in actuality for most people premiums have risen, deductibles have climbed and physician networks have narrowed.  ‘Affordable’ meant more expensive.  The millions who received a new insurance card proving they were covered found they had to ante up co-pays or drive long distances to see doctors.  Many people found you can be insured and yet to all intents and purposes, not be covered.

Cohn expressed resentment at all the procedural hoops she had to jump through just to get what she might have bought for $20 at CVS.  It’s the same for most recipients of Obamacare.  In exchange for subsidy which doesn’t get them all the way to a premium that itself is rising,  they have to fill out a complicated tax form: 1095-A.

When something sounds too good to be true, it usually is.  Politician’s promises are one thing, but cost, insurance companies and taxes are another.  Fantasy is what is promised. Reality is what you actually get.

The Republican Plan to Crack Obamacare


While press attention was focused on King vs Burwell, Congressional Republicans were executing a complex maneuver to, in the words of Jonathan Weisman of the New York Times, ‘overhaul Medicare and repeal Obamacare’.  The entire operation appeared to consist of interrelated components:

  • a $200 billion rescue package for Medicare sometimes referred to as the “doc fix”.

  • cuts to Obamacare funding;

  • a bridging fund designed to cushion the effect of a hoped for Supreme Court ruling against the government in King vs Burwell and

  • a general package of “reforms” designed to reduce the cost of medical provision.

The doc fix is designed to prevent a fall in the reimbursement rates for doctors participating in Medicaid.  Medicare lost $716 billion to Obamacare. “In a rare display of bipartisanship, House leaders are actively pursuing a deal to permanently change the way Medicare pays doctors and to extend a children’s health program for two years.”

The estimated $200 billion package could be introduced as soon as this week by House committees responsible for health care policy. Both Speaker John Boehner (R-Ohio) and Democratic Leader Nancy Pelosi (D-Calif.) are personally involved to the point that Pelosi reached out to Senate Minority Leader Harry Reid (D-Nev.), and Boehner has spoken to Senate Majority Leader Mitch McConnell in recent days.

In recompense, the Republicans hope to cut about $510 billion a year, amounting to $5.1 trillion over 10 years.  In another article, Jonathan Weisman describes the GOP plan. He is not impressed and apparently regards the expected savings as the product of wishful thinking.

The plan contains more than $1 trillion in savings from unspecified cuts to programs like food stamps and welfare. To make matters more complicated, the budget demands the full repeal of the Affordable Care Act, including the tax increases that finance the health care law. But the plan assumes the same level of federal revenue over the next 10 years that the Congressional Budget Office foresees with those tax increases in place — essentially counting $1 trillion of taxes that the same budget swears to forgo.

And still, it achieves balance only by counting $147 billion in “dynamic” economic growth spurred by the policies of the budget itself. In 2024, the budget would produce a $13 billion surplus, thanks in part to $53 billion in a projected “macroeconomic impact” generated by Republican policies. That surplus would grow to $33 billion in 2025, and so would the macroeconomic impact, to $83 billion.

To be fair, Obamacare was going to do the same thing for Medicare.  It was going to save the US medical system by doing things much more cheaply.  However that may be, the next element of the GOP attack is to provide a bridging fund to reassure the court that no cataclysmic loss of income due to canceled Obamacare subsidies will hit the electorate.

GOP leaders had been eying reconciliation as a way to show the Supreme Court that they have a plan of action in case King v. Burwell goes in their favor, while buying themselves several months to hammer out details.

Enzi’s proposal gives power to two committees to draft legislation on ObamaCare — the Finance Committee and the Committee on Health, Education, Labor and Pensions (HELP).

The Senate budget notes that the healthcare law "is now under review by the U.S. Supreme Court," and says the ruling in the case "could significantly alter the levels of spending in the budget resolution."

"Consequently, the Senate Republican budget includes reconciliation instructions for health care, but the actual contours of that legislation are unknowable at this time."

This combined package is a serious attack on Obamacare.  By packaging the repeal of Obamacare with the rescue package for Medicare, it puts the president in the position of having to veto both to stop an attack on the ACA.  Obama can hardly relish the prospect of killing off a program, Medicare, which serves more than 40 million people, to save his pet law, which serves fewer.

Moreover, the bridging fund undercuts the administration’s argument that the sky will fall should the Supreme Court rule of the plaintiffs in King vs Burwell.  Lastly the government is broke.  It needs a budget that will reduce the deficit.  Taken together the bill contains a powerful package of measures that will be hard to completely stop.

Scott Gottlieb, who has long been a vocal opponent of Obamacare, fears that the compulsion to save the Treasury from bankruptcy will mean the government will be forced to destroy the medical system in order to save it. He argues that doc fix will institutionalize all the “capitation” provisions that, under other guises, are so much a part of HMOs and Obamacare.

Twenty years ago, during the heyday of narrow network HMOs, these provisions were referred to as “capitation”. Today, they are termed “payment reform”.

The end result is the same. It was a big part of ACA. Mr. Obama didn’t give a single major speech on health reform without touting one of the large integrated health systems that formed the inspiration for this blueprint — Kaiser Permanente, Geisinger Health System, the Mayo Clinic, or Intermountain Healthcare. Obamacare was built on a premise that these institutions could be recreated everywhere.

Now Republicans in the House are about to pick up these ideas, and extend them, by extending and expanding the Obamacare “payment reforms” that transfer more financial risk to doctors and cement the current trends in healthcare delivery.

If the new measures pass intact, they will mark the moment that we cast a permanent end to the private practice of medicine. The provisions are so clumsy, and quickly transfer so much financial risk to providers, that it will be hard for doctors to remain independent, as part of small and medium sized groups. Even if doctors can assume the financial risk, they will have a hard time keeping up with the litany of complicated payment provisions that Medicare is poised to enact.

But it’s hard to see how it could be otherwise given the growing centralization of spending power in the hands of the government. In Gottlieb’s own words, doctors are becoming ‘price takers’ rather than ‘price setters’.  The rise of health provision monopolies has been matched by a corresponding rise in insurers.  And the biggest insurer of all is the government.

The last faint hope for restoring competitiveness is to break up the action into smaller arenas.  That is why the Health Care Compact idea is so powerful.  Only by dismantling the managed “competition” between giant institutions can real competition and innovation be restored.  Without breaking things up, a one size fits all Democratic health care plan will only be replaced by a Republican version.  But both will be made in Washington with all the problems that implies.

Obamacare Threatened by Arithmetic


The triumphant tone of last weeks talking points depicting Obamacare as an established success suddenly gave way to shrill warnings that the GOP was about to deal it a death blow through the new Congressional budget.

House Republicans on Tuesday will introduce a budget plan that eliminates the budget deficit within 10 years, repeals Obamacare, and gives more power to states to make choices about issues such as education.

The introduction of the GOP’s ‘balanced budget for a stronger America’ will mark the start of budget season in Washington, that time of the year when several factions will lay out competing visions of what the next fiscal decade should look like for Washington. Several Democratic versions of a budget will also pop up, as will a proposal from the conservative Republican Study Committee, which will likely call for steeper cuts to get to balance more quickly.

Hillary Clinton was not long in taking to Twitter to denounce it. “Our nation's future - jobs & economic growth - depends on investments made today. The GOP budget fails Americans on these principles. … Repeal of the ACA would let insurers write their own rules again, and wipe out coverage for 16 million Americans.”

The budget is a potential threat to Obamacare because the federal government may have enough money for Medicare or Obamacare, but not both.  Margot Sanger Katz in the New York Times tries to dance around the connection but is ultimately unsuccessful.  The linkage is too clear.

Less explicitly accounted for is the fact that the health law, despite its huge federal spending on insurance expansion, was also designed to reduce the deficit. The law imposed substantial cuts to the Medicare program and raised a series of new taxes, including ones on wages, health insurance and medical devices.

Perfect estimates are difficult at this point, because most of those changes are now integrated into current budget estimates, but it’s safe to say that the law’s Medicare cuts save more than $700 billion over the next 10 years, and the taxes will raise around $1 trillion.

The budget doesn’t ignore those dollars, but it’s awfully vague about how they can be recouped. In contrast with the $2 trillion cut in Obamacare spending that’s spelled out in its own line, there is no specific accounting of the Medicare savings and revenue gains that would be lost in a repeal.

It would be more accurate to say that Obamacare “saved $700 billion” from Medicare by moving that sum to Obamacare.  Now to keep Medicare from collapsing after it was drained of financial blood it is necessary to re-infuse $200 billion into the system.  The obvious remedy of clawing the money back from Obamacare is precisely what the administration doesn’t want to happen.  Katz writes: “That means that the budget assumes that if Congress wants to eliminate the Obamacare Medicare cuts, it must somehow find another several hundred billion dollars’ worth of Medicare changes to make up the difference.”

Five years after Obamacare started the government is right back where it began. Broke.  The ACA did not “bend the cost curve” and unpleasant fact is that money must be cut from somewhere, a process Katz describes as “complicated”.

Beyond Obamacare, the budget also recommends that Congress develop a new health reform package that will “increase access to quality, affordable health care by expanding choices and flexibility for individuals, families, businesses and states while promoting innovation and responsiveness.” If such a bill will cost the government money, the budget doesn’t specify where that money should come from.

Republicans in Congress may want to repeal Obamacare entirely and reduce the federal deficit. But the budget highlights how repealing the health law is much more complicated than simply cutting its spending programs.

The real threat facing Obamacare isn’t King vs Burwell but economics.  The budget is a threat to the ACA in ways that the Supreme Court case could never be because it forces a hard choice that the Republicans are clearly not inventing. Either save Medicare or choose to keep funding Obamacare.  It is an unavoidable dilemma.  The real significance of King vs Burwell is that it clearly illustrates how Obamacare must be held up by wires.

William Baude, in an op-ed for the New York Times asks: “Could Obama Bypass the Supreme Court?”  In order to keep the subsidies that keep Obamacare alive it might be worth taking the risk of ignoring the Court.  He writes: “If the administration loses in King, it can announce that it is complying with the Supreme Court’s judgment — but only with respect to the four plaintiffs who brought the suit.”

This announcement would not defy a Supreme Court order, since the court has the formal power to order a remedy only for the four people actually before it. The administration would simply be refusing to extend the Supreme Court’s reasoning to the millions of people who, like the plaintiffs, may be eligible for tax credits but, unlike the plaintiffs, did not sue.

To be sure, the government almost always agrees to extend Supreme Court decisions to all similarly situated people. In most cases, it would be pointless to try to limit a decision to the parties to the lawsuit. Each new person who was denied the benefit of the ruling could bring his own lawsuit, and the courts would simply rule the same way. Trying to limit the decision to the parties to the suit would just delay the inevitable.

But the King litigation is different, because almost everybody who is eligible for the tax credits is more than happy to get them. Most people who receive tax credits will never sue to challenge them. Lawsuits can be brought only by those with a personal stake, so in most cases the tax credits will never come before a court. The administration is therefore free to follow its own honest judgment about what the law requires.

Quite apart from its legal merits the op-ed piece is interesting because it illustrates the degree to which Obamacare survives on taxpayer money.  Money must continue to flow to policyholders. Indeed it must be supplied to the insurance companies. Paul Ryan recently wrote the Treasury to ask where the $3 billion being paid to insurance companies is coming from given that Congress never authorized it.

The U.S. Treasury Department has rebuffed a request by House Ways and Means Chairman Rep. Paul Ryan, R- Wis., to explain $3 billion in payments that were made to health insurers even though Congress never authorized the spending through annual appropriations.

At issue are payments to insurers known as cost-sharing subsidies. These payments come about because President Obama’s healthcare law forces insurers to limit out-of-pocket costs for certain low income individuals by capping consumer expenses, such as deductibles and co-payments, in insurance policies. In exchange for capping these charges, insurers are supposed to receive compensation.

What’s tricky is that Congress never authorized any money to make such payments to insurers in its annual appropriations, but the Department of Health and Human Services, with the cooperation of the U.S. Treasury, made them anyway. …

In response, on Wednesday, the Treasury Department sent a letter to Ryan largely describing the program, without offering a detailed explanation of the decision to make the payments.

While Treasury may be able to blow off Ryan, the question nobody can leave unanswered is where the money to save Medicare is going to come from.  Nothing explodes the myth of an unlimited cornucopia of taxpayer dollars which conservatives are stingily preventing from disbursement as well as the impending collapse of Medicare.  It puts the hard choices into stark focus. One dollar can’t be in two places at the same time.  Not even in the Obama administration.

The Talking Points


There are two ACA talking points this week. First, that Obamacare has cut the numbers of uninsured Americans to record lows; and second the program is far cheaper than first expected.  The Associated Press says “More than 16 million Americans have gained coverage since President Barack Obama's health care law took effect five years ago, the administration said Monday.”  And then the story adds, “but measuring a different way, an independent expert who took into account insurance losses during some of those years had a much lower estimate: 9.7 million.”

Of course the necessary sequel is, “what did it cost.”  Here again, spin rules.  The Huffington Post says, “Net spending on subsidies for private health insurance and greater enrollment in Medicaid and the Children's Health Insurance Program will total $1.2 trillion from next year through 2025. That's 11 percent less than the Congressional Budget Office projected just two months ago.”

It’s also $6,818 or $11,246 in subsidy per year per person insured depending on whether you use the administration’s or independent expert’s estimate of people who were covered. Most of that money is going to insurance companies, including the higher co-pays and premiums that everyone is complaining about it. Dr. James Hamblin in the Atlantic says all this progress is in danger if the subsidies are reduced.

"We think we will win the case," said a senior administration official this morning. If the Supreme Court decides against the federal government, it will be making a decision that tax credits and subsidies will not be available in the 36 states with a federal marketplace. Eighty-seven percent of the 8.4 million people who have come through the federal marketplace are receiving subsidies, at an average of $263 per individual per month.

"When you do the math, for most people, that's a lot of money," said the official. "The relationship between that drop and the affordability that's created through the tax credits or subsidies, one assumes, is extremely real."

Without subsidies, prices of insurance will rise because only sicker people will buy in. As premiums in the individual market go up, a so-called "death spiral" will ensue. While that might sound like a good thing, officials emphasize that it's not. It remains unclear exactly how many people would lose their insurance, but the same senior official today confirmed that the effect would be "massive damage."

But wait a minute: $263 x 12 is only about $3,000, where did the rest of the money go?  Well that’s friction for running the program.  Maybe the money would have been better spent mailing everyone a health tax voucher.  But the irony is that Obamacare originally started as “health care reform.”  It was going to save money, not spend it.

The other big piece of news this week which has been carefully left off the talking points is the $200 billion rescue of Medicare, which both Nancy Pelosi and John Boehner are working on to the chagrin of the Republican conservative caucus.  Briefly, Medicare is broke because Obamacare took about $716 billion. As Sarah Kliff of the Washington Post put it in 2012: “Romney’s right: Obamacare cuts Medicare by $716 billion”.

Unless Congress re-funds Medicare, which has been picked clean by Obamacare -- created to save it -- then Medicare will eventually collapse. And that would not be good news because of its importance in the health care system.

In 2010, Medicare provided health insurance to 48 million Americans—40 million people age 65 and older and eight million younger people with disabilities. It was the primary payer for an estimated 15.3 million inpatient stays in 2011, representing 47.2 percent ($182.7 billion) of total aggregate inpatient hospital costs in the United States.[1] Medicare serves a large population of elderly and disabled individuals

The original purpose of Obamacare -- “health care reform” -- was to save the system from collapse, which implies savings at some point. It has since morphed into an argument against all restraint.  The extent to which that transformation has happened is illustrated in Johnathan Weisman’s report in the New York Times. “House Republican Budget Overhauls Medicare and Repeals the Health Law.”

Why isn’t this Republican Budget health care reform?  Because it saves money.  And that’s bad. Money, or the lack of it, is the root of all Republican efforts to repeal, amend or otherwise modify Obamacare.

WASHINGTON — House Republicans on Tuesday will unveil a proposed budget for 2016 that partly privatizes Medicare, turns Medicaid into block grants to the states, repeals the Affordable Care Act and reaches balance in 10 years, challenging Republicans in Congress to make good on their promises to deeply cut federal spending.

The House proposal leans heavily on the policy prescriptions that Representative Paul D. Ryan of Wisconsin outlined when he was budget chairman, according to senior House Republican aides and members of Congress who were not authorized to speak in advance of the official release. …

Democrats — and those Republicans who support robust military spending — will not see Mr. Price’s “Balanced Budget for a Stronger America” in those terms. Opponents plan to hammer Republican priorities this week, as the House and Senate budget committees officially begin drafting their plans on Wednesday, and then try to pass them through their chambers this month.

The ACA has largely given up on “bending the cost curve.”  It no longer talks about saving money, only about spending less money that the blowout the critics feared.  It is emphasizing people “insured” and de-emphasizing numbers of people treated.  As Elizabeth Rosenthal put it in the New York Times, America is entering the age of “Insured, but Not Covered.”=

The notion that the Federal Government has this free money to subsidize expensive insurance flies in the face of headlines like the impending collapse of California’s pension system.  CBS Local recently attempted to answer the question: “why are people fleeing Illinois?” Illinois is president Obama’s home state

CBS 2’s Dorothy Tucker takes a look at what’s luring people away.

Weather, work and money.  Those are three of the biggest reasons people are leaving.

According to the Illinois Policy Institute’s Michael Lucci, some 95,000 people moved to other states last year.

The weather can’t be helped, but work and money are scarce.  And money is scarce at the Federal level as well.  Obamacare may look good in the talking points, but it’s not selling. Despite the individual mandate compelling people to buy it -- and unaffordable subsidies galore -- it is, as the Atlantic put it, in a precarious position. That suggests the economics of it are bad and that is something spin won’t cure.

The Needs of the Many


Doctors are still divided over whether Obamacare is a good or bad thing according to a DeLoitte survey of practitioners.  On the one hand, some can’t help but benefit from the spending increases on health insurance.  On the other hand other doctors resent the loss of professional independence and worry about their patient’s welfare.  Rick Ungar writes: “If these numbers—which clearly represent a highly divided point of view—sound familiar to you, it may be because they so closely mirror the general public’s feelings about the law.” But the differences of opinion among the categories of physicians surveyed is highly illuminating. In general, primary care doctors (or screeners) seemed to like Obamacare better than doctors whose job was to provide actual medical interventions -- like surgeons.

Forty-four percent of primary care physicians believe that Obamacare was a move in the right direction as compared to 39 percent who do not. Non-surgical specialist also came to this conclusion by a margin of 53 percent to 36 percent.  Other physicians (those who do not fit into the categories of primary care, non-surgical specialist or surgical specialist) are overwhelmingly supportive of the notion that the ACA was a good beginning by a ratio of 68-32.

Indeed, the only category of physicians where we find more physicians believing that the ACA was a step in the wrong direction are the surgical specialist who believe the law is bad news by a wide margin of 60 percent to 28 percent.

Perhaps one reason for the split popularityis a reluctance to accept “evidence-based medicine”, in which treatment decisions are based not on some individual doctor’s judgment, but on a cookbook which lists ‘cost-effective’ treatments for various ailments. People get treated according to an approved formula which is supposedly better on ‘average’ though it might be a death sentence in individual cases.

One outcome of “evidence based medicine” is the discontinuation of treatments and tests which ‘are not worth the money’. Glenn Reynolds noted that while this is not necessarily a bad approach, the parties responsible for ruling treatments out have a conflict of interest because they are rewarded for saving money.  Reynolds writes:

FUNNY HOW SINCE OBAMACARE, ALL THOSE “EARLY DETECTION” TESTS THEY USED TO PUSH HAVE BECOME BAD: CTA No Better Than Stress Test for Coronary Disease. “Patients with symptoms of coronary artery disease (CAD) who underwent coronary computed tomographic angiography (CTA) did not have better clinical outcomes than those who had functional testing. . . . Using CTA did not reduce the composite incidence of death, myocardial infarction, hospitalization for unstable angina, and procedural complications at 12 months. Event rates were low in both groups: 164 patients (3.3%) in the CTA group and 151 patients (3.0%) in the functional testing group. Overall radiation exposure was higher in the CTA group compared to the functional testing group, which included nuclear stress testing, stress echocardiography, and exercise electrocardiogram. One third of patients in the functional-testing group had no radiation exposure at all.” I’m not saying this is wrong, I’m just noticing.

This is exactly what occurred in one of the most notorious public hospital scandals in the United Kingdom. As many as 1,200 patients were basically left to die at Stafford Hospital because managers could improve their performance by applying the ‘guidelines’ in ways favorable to their careers. Instead of being doctors, those who ran Stafford acted like cost-cutting bureaucrats.

Academics at the University of Oxford and King's College London have criticised its recommendations to legally enforce a new duty of openness, transparency and candour amongst NHS staff, arguing that increasing 'micro-regulation' may produce serious unintended consequences. In their research on the effects of different forms of regulation in healthcare, Fischer and colleagues found rules-based regulation tends to erode values-based self-regulation, producing professional defensiveness and contradictions which undermine, rather than support, good patient care.

The inquiry into Stafford Hospital found that health bureaucrats tended to hide behind rules to meet cost targets and earn bonuses. Those who bucked the system were ousted.  Since resistance was futile, everyone was eventually assimilated.

Mr Taylor, whose firm helped devise the standardised measure of death rates that first picked up problems at Mid Staffordshire NHS Foundation Trust, said the Health Secretary had to address incentives that made managers “do the wrong thing”.

Writing for, he explained: “What happens when a hospital like Mid-Staffordshire finds it is struggling to deliver a high quality service with the resources available?

“As an NHS chief executive in that situation, you could simply overspend and breach your targets – and quite likely lose your job.

“You could try to argue to re-organise services but you are likely to face considerable opposition from both clinicians and the public.

"Or you can just cut costs, cross your fingers and and hope that no-one notices if the standards of care deteriorate.”

He continued: “The frightening truth about the NHS is that the third of those options is the one that every incentive in the system is pushing you towards.

Health care executive John Graham takes issue with Ezra Klein of Vox who argues that many diagnostic tests simply ruin health care statistics.  If you look for disease, one will likely find it.  But will knowing do society any good, because many of these diseases may not kill the patient anyway and thus lead to unnecessary treatment.  Graham writes that knowing is good and ignorance, while bliss, can kill you:

For other cancers, however, improvements in diagnoses and treatment are largely responsible for the improved outcomes. The five-year relative survival rate for all cancers diagnosed from 2004-2010 was 68 percent, up from 49 percent from 1975-1977. This is the number of people diagnosed who survive for five years divided by the total number diagnosed.

Critics like Ezra Klein disapprove of this measure, noting that more frequent testing will lead to earlier diagnosis of cancer which may not ever kill the patient, so will artificially improve survival rates. A better measure, according to Mr. Klein, is the death rate, which is simply the ratio of cancer deaths to the number of people in the country. The ACS report answers that convincingly:

Death rates for breast cancer are down more than one-third (35%) from peak rates, while prostate and colon cancer death rates are each down by nearly half (47%) as a result of improvements in early detection and treatments.

Two of those three, breast cancer and prostate cancer, are often identified as “over diagnosed” and “over treated” in America. The evidence of the last two decades tell us we should be wary of policies that would swing the pendulum back to under diagnosed and under treated. The death rate from prostate cancer has dropped from 40 per 100,000 men in the early 1990s to half of that in 2011. For women, breast cancer deaths peaked at about 30 per 100,000 in 1990 and dropped to about 20 in 2011.

Comparing the improvements in the five-year survival rate across different types of cancer also suggests that those who claim that over diagnosis is responsible for improvement in prostate or breast cancer survival may be stretching their case. Over the two periods, 1975-1977 and 2004-2010, the survival rate for prostate cancer increased from 68 percent to over 99 percent, an improvement of almost half, and the survival rate for breast cancer improved from 75 percent to 91 percent, an improvement of one-fifth.

However, the survival rate for lung cancer increased from 12 percent to 18 percent, an improvement of half. For stomach cancer, the improvement was from 15 percent to 29 percent, almost double. For cancer of the pancreas, the improvement was from 3 percent to 7 percent, more than double. Critics have not asserted over diagnosis of lung or stomach or pancreatic cancer during those years.

In light of this success, Americans should be wary of overly optimistic promises to change our health coverage dramatically, which could threaten future successes in the war on cancer. Obamacare brings about such change. Unfortunately, the ACS sees only good outcomes from Obamacare, cheering that it will increase the number of insured people.

Obamacare, like other forms of government medicine, has a strong redistributive streak.  It aims to smooth out the terrain, to reduce the inequalities. It has a definite bias toward providing average medicine for more people over providing exceptional medicine for relatively fewer people.  This is not necessarily a wrong approach, but it would be a bold man to argue that it is not the Obamacare methodology.  As the fictional Mr. Spock phrased it: “the needs of the many, outweigh the needs of the few”.  The question is whether you want this approach.

But in danger is that once bureaucratic medicine really gets a grip then “the needs of the many will be met by the few”.  Rationing is the normal result of socialized economies everywhere, which rarely provide average comfort; instead delivering universal penury. It would be foolish not to think that something like rationing -- whatever you want to call it -- isn’t part of the Affordable Care Act.

Plan B to Save Obamacare


Avik Roy claims that the Obama administration had a Plan B in case they lost the King vs Burwell suit in the Supreme Court all along. If the Court will allow it, they’ve simply got forms authorizing states to rebrand federal exchanges as state. Roy writes:

The Obama administration has been striving to create the impression that a health care apocalypse will ensue if SCOTUS sides with those who believe that a plain reading of the Affordable Care Act’s statutory language forbids the deployment of subsidies in the federal exchange. “If they rule against us,” said President Obama, “we’ll have to look at what our options are. But I’m not going to anticipate that.”

Behind the scenes, however, the administration appears to be telling another story. A few weeks ago, Rep. Joe Pitts (R., Pa.) told Burwell that he had learned of a 100-page document working through various contingency plans in the event of an adverse ruling. Burwell responded with a classic non-denial denial, stating that she was not aware of the existence of such a document.

Two sources who have spoken to HHS about the matter have informed me that the agency does in fact have a “Plan B” to deal with an adverse ruling. It involves encouraging states to declare that they are subcontracting the management of an insurance exchange to HHS, thereby “establishing” an exchange as per the law.

The existence of a Plan B was never seriously in doubt. The strategy of Obamacare’s architects was to “hook” or addict a wide variety of actors on federal money in order to establish it.  The basic defense of the subsidies is that, while the law seems to forbid it, there are too many people accustomed to receiving it already.  What was less evident was that the administration had been hooked by its own drug.

Too many bureaucrats, insurance lobby groups, pharmaceutical companies and giant hospital chains are invested in the scheme as it is to endure any wrenching change now.  While the average policy holder may stand to lose a few hundred dollars in subsidies (which he might have to pay back any way in the next tax filing) from an adverse decision, the stakes for the administration was much higher.  Billions of dollars, whole industries, entire political careers were at risk from Supreme Court decision.  With so much money at stake, of course they had a Plan B.

The harder part is getting the money to stay put.  The ACA is designed to take from and give to. The employer mandate is really an income tax on business, aimed at funding what some call a vote-buying program. Efforts by businessmen to turn it into a sales tax by passing the cost through to customers is a change the administration cannot countenance.

If you’re in Florida and planning to join in on the Papa John’s “buycott” scheduled for this Friday, you might want to save some room for dessert and hit Denny’s afterward. A West Palm Beach restaurant owner is the latest target of a boycott campaign after floating the idea of adding a 5 percent “Obamacare surcharge” to customer checks starting in 2014.

You wanted Obamacare? You got it -> Denny’s And Hurricane Grill & Wings Imposes Surcharge For Obamacare  …

Franchisor John Metz told the Huffington Post that “although it may sound terrible that I’m doing this, it’s the only alternative. I’ve got to pass the cost on to the consumer.” In August, Papa John’s CEO John Schnatter was among the first to come under fire for suggesting that implementing Obamacare would entail costs that would have to be passed on to customers.

Applebee’s has also been targeted for a boycott, although the company was quick to point out via a Twitter post that comments about a possible hiring freeze were made by an independent franchisee. Do little details like that matter, though, when Obamacare is insulted? Is Denny’s in for a boycott nationwide?

Obamacare is fundamentally a money distribution program.  The administration planned to buy political support by charging small businessmen money to sell overpriced health care.  The policyholders wouldn’t see any benefit unless they got sick.  For the most part the money would pass through to the insurance industry and Big Pharma. A surcharge would ruin everything if the businessmen passed the costs to Obama’s own constituency.

The winner-loser duality permeates everything in the program.  Big hospital chains get bigger but small rural hospitals close.  Winners and losers. The only question is which column you will be counted in.  Rich Weinstein, the investment adviser from Philadelphia, began to research Obamacare “when his own health insurance was canceled in late 2013.”  That led him to track down the little-known videos of Jonathan Gruber, who designed the Obamacare program.  What he found was Gruber boasting about how it would create winners and losers by creating a tax no one would see in order to create payoffs which he hoped no one would notice.

In several videos unearthed by Weinstein, Gruber refers to voters as “stupid.”

“And basically, call it the stupidity of the American voter or whatever, but, basically, that was really, really critical to getting the thing to pass,” Gruber says of the Affordable Care Act in an academic lecture on Oct. 4, 2013.

In another, Gruber discusses how a trick in wording hides a large tax that is passed onto consumers.

“Because the American voter is too stupid to understand the difference,” Gruber says, prompting laughter from the audience.

Weinstein says when he first heard the comments on the video he’d found, “I just thought he was trying to put one over on us. Not just on me or you, but on everybody.” …

In another, he states, “If you had a law in which it said healthy people are gonna pay in, you made [it] explicit that healthy people pay in and sick people get money, it would not have passed. Lack of transparency is a huge political advantage.”

Weinstein spent countless hours scouring the Internet. As he found more videos and information, he became disenchanted with the news media.

“It’s pretty disappointing,” he says. “The media just has not had any, very little intellectual curiosity … all these videos were out there in plain sight.”

The point of Obamacare was to create all those money flows which the HHS claimed would grind to a half if the Supreme Court held against them.  But they could never let that happen. For that reason there was always a Plan B to save it.  And a Plan C, D, E, F … too.  It’s all about money and the administration thinks the voters are too dumb to notice.

Robbing Peter to Pay Paul


Of the several games that the federal government plays with taxpayer money, few are more interesting than the interplay between Medicare and Obamacare. “Medicare is a national social insurance program, administered by the U.S. federal government since 1966, that guarantees access to health insurance for Americans aged 65 and older who have worked and paid into the system.”  But the funds available for Medicare have been slowly deflating, like a tire running out of air. “According to Dr. Hoven, the costs associated with caring for seniors have risen 25 percent since 2001, but Medicare payments to doctors have not even increased 4 percent over the same time period.”

Unless more money is provided to Medicare participating doctors will simply abandon it.  The Wall Street Journal writes: “The number of doctors who opted out of Medicare last year, while a small proportion of the nation's health professionals, nearly tripled from three years earlier, according to the Centers for Medicare and Medicaid Services, the government agency that administers the program. Other doctors are limiting the number of Medicare patients they treat even if they don't formally opt out of the system.”

The proportion of family doctors who accepted new Medicare patients last year, 81%, was down from 83% in 2010, according to a survey by the American Academy of Family Physicians of 800 members. The same study found that 4% of family physicians are now in cash-only or concierge practices, where patients pay a monthly or yearly fee for special access to doctors, up from 3% in 2010.

A study in the journal Health Affairs this month found that 33% of primary-care physicians didn't accept new Medicaid patients in 2010-2011.

The “fix” for Medicare is more funding and is the subject of the SGR Repeal and Medicare Provider Payment Modernization Act of 2014.  But there’s not enough money to re-inflate the Medicare tire because the funds have been diverted to Obamacare.  Avik Roy pointed out in 2012 that some of that money being touted as available to Obamacare really came from cuts to Medicare. “There are 600,000 physicians in America who care for the 48 million seniors on Medicare. Of the $716 billion that the Affordable Care Act cuts from the program over the next ten years, the largest chunk—$415 billion—comes from slashing Medicare’s reimbursement rates to hospitals, nursing homes, and doctors. This significant reduction in fees is driving many doctors to stop accepting new Medicare patients, making it harder for seniors to gain access to needed care.”

Sarah Kliff, writing for the Washington Post in 2012 admitted that’s how the money swap worked. But it was going to be a wash, she implied, because Obamacare would save so much money it would take up the slack.

As to how the Affordable Care Act actually gets to $716 billion in Medicare savings, that's a bit more complicated. John McDonough did the best job explaining it in his 2011 book, "Inside National Health Reform." There, he looked at all the various Medicare cuts Democrats made to pay for the Affordable Care Act.

The majority of the cuts, as you can see in this chart below, come from reductions in how much Medicare reimburses hospitals and private health insurance companies.

The blue section represents reductions in how much Medicare reimburses private, Medicare Advantage plans. That program allows seniors to join a private health insurance, with the federal government footing the bill. The whole idea of Medicare Advantage was to drive down the cost of health insurance for the elderly as private insurance companies competing for seniors' business.

That's not what happened. By 2010, the average Medicare Advantage per-patient cost was 117 percent of regular fee-for-service. The Affordable Care Act gives those private plans a haircut and tethers reimbursement levels to the quality of care administered, and patient satisfaction.

Obamacare was going to use the money it took from Medicare and save it by doing things more efficiently, or so the theory went. It was like transferring the balance from one credit card account to another credit card which demanded a lower interest rate.  Since Obamacare would do it better the transfer would pay off.

Only it didn’t.  Medicare itself continued to assure its enrollees that it wasn’t going away. “Medicare isn’t part of the Health Insurance Marketplace established by ACA, so you don't have to replace your Medicare coverage with Marketplace coverage.“  As US News emphasized: “Obamacare is not replacing Medicare. In fact, AARP representatives say Medicare will become stronger once the Affordable Care Act is in full swing. ‘Medicare's guaranteed benefits are protected in ways they hadn't been protected in the past," says Nicole Duritz, AARP's vice president for Health Education and Outreach.’”

AARP’s assurance was actually the opposite of the truth.  Medicare’s declining reimbursement rates were not protected. In fact they were fatally damaged by by the need to fund Obamacare. Nor did Obamacare seem to generate savings. On the contrary it appeared to develop an insatiable hunger for more money. The National Journal writes: “For the third consecutive year, the administration has proposed Medicare Advantage cuts, and a lot of members don’t like it.”

March 12, 2015 It's become an annual tradition: The Obama administration proposes Medicare Advantage cuts, the insurance industry and members of Congress from both parties lobby to stop them, and the cuts get walked back.

A group of 239 House members is sending a letter, provided exclusively to National Journal, to the Centers for Medicare and Medicaid Services on Thursday, urging the agency to reverse the cuts to the private Medicare plans, which serve 16 million seniors, that CMS proposed last month.

"The newly proposed cuts could represent a significant threat to the health and financial security of seniors in our congressional districts who rely on their MA plans to meet their health care needs," says the letter circulated by Reps. Brett Guthrie, R-Ky., and Patrick Murphy, D-Fla.

"As CMS works to finalize 2016 payment rates," the letter says, "we strongly urge you to protect Medicare beneficiaries by reversing the proposed payment cuts and providing a stable policy environment for the MA program."

The credit card payment balance transfer didn’t work.  There was still some hope that it would. The Brookings Institution explained how the Obamacare “fix” consisted of Congress finding $150 billion to keep Medicare alive for 10 years, by the end of which it would become as efficient as Obamacare via a new billing system.

The most fundamental change in the legislation is to give physicians an option to leave the traditional Medicare fee-for-service system behind. Physicians can receive bonuses of up to 5% per year from 2017 to 2022 for transitioning to “alternative payment models” in which payments are increasingly related to value defined as measured quality and total cost of care. In contrast, fee-for-service rates will only increase by 0.5% annually. The alternative payment model must account for an increasing share of a physician’s practice, rising to more than 75% in the next decade. While the details of the alternative payment models are not clear, the alternative payment would generally involve augmenting or replacing some of the current fee-for-service payments with a patient-level payment amount not related to volume or intensity. To receive full payment in the alternative payment arrangement, physicians would have to meet meaningful measures of quality of care. Qualifying alternative payment systems must not increase overall Medicare costs. ...

Before Medicare reaches that stage, however, there is one difficult legislative step ahead: finding a way to pay for a permanent SGR fix: 10 years of patches plus the costs of transitioning to the alternative systems. Over the past decade, Congress has only been able to cobble together offsetting savings to pay for short-term patches, mostly by shifting the payment rate cuts to other Medicare providers. These incremental reductions in payments to hospitals, nursing homes, home health agencies, and others have added up to close to $150 billion. Roughly the same total amount would need to be legislated all at once for a permanent fix, requiring more substantial reforms.

In the future everyone will be rich.  For the moment everyone’s broke.  On the face of things the administration took $716 billion from Medicare to fund Obamacare.  Obamacare was going to save Medicare, but that didn’t happen. Now Medicare needs $150 billion in new money to stay alive.  But don’t worry, there’s still that future billing system. The situation is beginning to resemble a circular check-kiting scheme, which aims to conceal the underlying defect that there is not enough taxpayer money - perhaps not enough money in the world - to pay for all the promises politicians made to voters.

And still they keep making the promises. The unlimited Federal money the administration keeps promising to people isn’t really new money, its just money taken out of one pocket and put in the other.

A Real Brawl


The fight between Obamacare critics and advocates has settled into a kind of trench warfare.  The polls suggest a stalemate. An NBC/Wall Street Journal survey concluded that “forty-seven percent of those surveyed (including 81 percent of Democrats) said that the law is working well or needs only minor modifications. Fifty-one percent (including 86 percent of Republicans) said that the law needs a major overhaul or should be totally eliminated.”  Despite billions of dollars in subsidies and an unprecedented promotional effort Obamacare has far from having swept the field.

In fact it is acting scared, resorting to increasingly more coercive measures to beef up its enrollment, which as Avik Roy has pointed out, has slowed down markedly. Nearly 200,000 Coloradans have had their existing health insurance policies canceled and told to buy Obamacare. “DENVER - About 190,000 Coloradans will lose access next year to health insurance plans which don't comply with the Affordable Care Act, the Colorado Division of Insurance (DOI) decided.”

In March of 2014, President Barack Obama decided to give states the option of allowing people on noncompliant health plans to be grandfathered in by renewing their old plans early, while problems with insurance exchanges were ironed out.

Colorado insurance commissioner Marguerite Salazar opted to do that for 2015, but told 9NEWS on Friday that the exception is no longer needed for plans in 2016, even though Colorado could have continued them an additional year.

"By delaying it, it doesn't give us a good pathway into full implementation of the ACA," Salazar told 9NEWS. "I feel like we gave people that year, we have a great robust market in terms of health insurance in Colorado."

“A great robust market” are hardly the words Michelle Malkin would use to express her experience with the Colorado exchange. She says she was literally transported by deceit from a plan of her choosing into an “Obamacare-compliant” option.

In 2013, our Anthem Blue Cross plan got canceled because of “changes from health-care reform (also called the Affordable Care Act or ACA).”

Millions like us in the individual market for health insurance — including self-employed people, small-business owners, writers and artists — suffered the same fate.

My husband contacted Colorado’s exchange, “Connect for Health Colorado,” to see what our options were. We later settled on purchasing a new, non-ObamaCare plan from a different private insurer, Rocky Mountain Health.

The provider network is much narrower than the plan we had before the feds intervened.

Our kids’ dental care is no longer covered, and we’ve had our insurance turned down at an urgent-care clinic — something that had never happened before. Better off? Bullcrap. But wait, it gets worse.

Somewhere along the way, Connect for Health Colorado dragooned us into an ObamaCare plan without our knowledge or consent.

Last month, we received an IRS 1095-A form, which indicated that we’d paid ObamaCare premiums every month in 2014.

It took hours on the phone and Internet to get an explanation on how this happened. Here was the government’s response, word for incomprehensible word:

‘‘We apologize for the delay in responding to your email. After checking your account we are showing you might have had coverage from October 2014 to June 2014. Please call the number below to speak with a Customer Service Representative if this information is incorrect.”

‘‘Might” have had coverage? From “October 2014 to June 2014”?

We were finally able to un-enroll in the ObamaCare plan.

Nor is it just those who are bitterly clinging to their doctors and insurance who Obamacare’s advocates are gunning for.  CNBC says yet another extension has been announced in an effort to attract young adults into the fold. These actions belie the outward show of confidence affected by the ACA’s pitchmen.

A month after Obamacare's open enrollment season closed, the federal government Sunday starts a special enrollment period for people who only now are finding out they face a penalty for failing to have obtained some form of health insurance in 2014.

"We clearly are very hopeful that people will avail themselves of the chance to get covered, to get insurance during this period," said Kevin Counihan, CEO of, the federal Obamacare insurance marketplace that serves 37 states.

But it's unclear how many people will take advantage of that offer and end up adding to the 11.7 million people or so who already signed up for 2015 health plans on government Obamacare exchanges.

Obamacare is also fighting for its life in the Supreme Court, where the legality of its subsidies are being challenged in King vs Burwell.  David Rivkin and Elizabeth Price Foley responded in Politico magazine to the defense du jour of Obamacare’s advocates, who claim the lawsuit would harm the states because it might deprive them of subsidies.  Rivkin and Foley argue that the states have the right to do that.

Beyond this fundamental understanding of when the concept of coercion can be properly applied, it’s important to realize that states had a meaningful choice, with pros and cons of both sides, regarding whether to operate a state exchange. If a state decided to operate a state exchange, it would cost it millions of dollars, but its residents would qualify for subsidies when they bought health insurance on the exchange. By contrast, if a state opted not to operate a state exchange, its residents would lose tax subsidies, but the state itself would save millions of dollars. And perhaps most importantly, the employers in that state would avoid the employer mandate and be able to create more jobs with the money saved.

Avoiding the ACA’s employer mandate would obviously be an economic boon for employers, and a victory for employers’ liberty. This is salient because the court has made it clear, most recently in a unanimous decision in Bond v. United States (2011), that “by denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power.” If, in King, the court concludes that states can’t opt out of the employer mandate, the liberty-enhancing function of federalism will be thwarted. If employers are subject to the employer mandate regardless of whether their state operates a state exchange, this is a net reduction of liberty for employers, with no net increase in liberty for individuals, who are subject to the individual mandate regardless of where they live. Since the purpose of federalism is to preserve individual liberty, this strongly suggests that the plaintiffs’ interpretation, not the Obama administration’s, furthers federalism.

The bottom line is that declining to operate a state exchange has both good and bad consequences—and each state is free to weigh those consequences as it thinks best. In this regard, as Oklahoma Attorney General Scott Pruitt argued in a recent Wall Street Journal op-ed, “The states are not children that the federal government must paternalistically ‘protect’ from the consequences of their choices by rewriting statutes. In our constitutional system, states are free to make decisions and bear the political consequences, good or bad, of those choices.” He further explained that declining to operate an exchange “allowed Oklahoma to voice its strong political opposition to the Affordable Care Act as a whole,” as well as proclaim that it didn’t want the “employer mandate … to have effect within its borders.” While Oklahoma’s citizens lost tax subsidies, the state believed the benefits of declining to operate an exchange outweighed this cost. And its choice, while difficult, “was a choice the state was happy to make.”

States thus had good reason to decline operating a state exchange. The fact that declining to operate a state exchange would have negative consequences for some of those states’ citizens isn’t the same as a negative consequence for the state qua state. Even if it is—which would be a novel interpretation of the clear statement rule indeed—there is no reason to believe that the states made the choice to opt out with anything less than eyes wide open.

The battle is joined across a wide spectrum of fronts.  One further complicating factor is the growing proximity of the 2016 presidential elections, an event which has led many Republicans to believe that presidential politics must be factored into it.

As Republicans weigh their options for how to respond to a victory in King, they’re likely to settle on the bill that gives the next presidential candidate the most flexibility to decide what Republicans will offer as an alternative to Obamacare. “They would probably say that they’d like to have that kind of latitude,” one GOP Senate says of the potential presidential contenders.

Other GOP sources suggest that the Senate may yet rally behind a single plan — that’s “the heart and soul of what is an everyday tactical discussion in the senate GOP conference,” according to one aide — but the impulse to adopt such an alternative is weakened by the knowledge that Obama will veto the legislation for as long as he is in office. That’s why the idea of deferring to the presidential candidates has broad support in the GOP conference, even among Republican lawmakers who tend to regard their own leadership as lacking in ideas.

In the House, majority leader Kevin McCarthy has tapped Ryan, Kline, and Upton to go beyond the King v. Burwell fixes and draft a plan to replace Obamacare entirely, in the hopes of uniting the conference behind a single bill.

But the goal is not to enact legislation that replaces Obamacare, which would be subject to the president’s veto, or even necessarily to push it through the Republican-dominated Senate. “You can do a lot of good work in the House that moves the broader conversation in conservative politics,” says Brendan Buck, a spokesman for Ryan at Ways and Means. “You look at what he did with his budget proposals over the years and they really became pretty central to what Mitt Romney was proposing. And so, I think as long as we are pushing out good conservative ideas and good thoughtful policy, you will find yourself in a much better place to easily enact things whenever you do have a Republican president.”

The bottom line is that neither side has yet scored a knockout -- a fact which suggests the Obamacare opponents are ahead on points.  The administration had reckoned their program would be established by now, cemented in place with billions of dollars.  What defeated their plan was less the Republicans than the mediocrity of their product.  Obamacare is bad and expensive; it neither solves the problem it set out to solve, and in the process has made the system worse while it also diminishes individual choice and freedom. It’s narrow networks and high deductibles have made “insured but not covered” a wry byword among its hapless policyholders. When looking at Obamacare through reality-tinted glasses, it’s obvious that though the proponents have dug their feet in, they really aren’t fighting for much.

The Fate of the ACA


It’s becoming abundantly clear that Obamacare will be superseded -- it will evolve, if you like -- whether or not the Supreme Court rules against the government in King vs Burwell.  In the first place, many of its design assumptions have not panned out. As Avik Roy points out, it will be far less universal than it thought. After scooping up the “low hanging fruit” the exchanges have picked up far less than they had projected, picking up 3 million uninsured as opposed to the estimated 6 million.

In other words, the low-hanging fruit have been picked: the people who have the most to gain from Obamacare’s subsidies and regulations.

When the CBO first estimated Obamacare’s impact on the uninsured, in March 2010, the agency predicted that the law would reduce the number of uninsured U.S. residents by 32 million by 2019. Its now predicts a reduction of 24 million; in other words, Obamacare’s impact on coverage will be 8 million fewer than originally predicted.

The price for swelling the ranks of the uninsured was increasing the average cost of insurance.  This was clearly going to happen because the money to pay for the indigent and uninsurable had to come from somewhere.  These price hikes have been folded into co-payments, narrow networks or just plain increases in the premium.  What is interesting, according to Roy is the price increases have been mitigated to some extent by competition.

We’re reported extensively in this space on how Obamacare has dramatically increased the cost of individually-purchased health insurance. The Manhattan Institute’s 2014 study found that in the average county, premiums increased 49 percent relative to the year before.

However, in 2010, the CBO estimated that average exchange-based premiums would increase by much more. That’s because the CBO guessed that Obamacare’s exchange costs would be similar to those in the pricey employer-sponsored market.

But the competitive, premium-support dynamic in the exchanges meant that premiums came in meaningfully lower than those in the employer-sponsored market, but meaningfully higher than those in the old individual market.

So why not concentrate on boosting the competition in the markets Roy asks?  Why not indeed. At the moment, many Obamacare markets are burdened with arbitrary requirements and overlaid with bureaucracy. Although it is common to speak of ACA exchanges as if they were “just there”, they do in fact cost astronomical amounts of money which require continuous taxpayer support.

Washington state’s health care exchange needed $125 million in taxpayer support last year. “Republicans are angry because they were told the exchange would be self-sufficient by the end of this year.”  It may never be.  The Obamacare exchanges are only partially competitive.

Only 14 states, including Washington, are operating their own ObamaCare exchanges and many are struggling to make it without help from taxpayers.

New York’s governor wants a $69 million tax on non-exchange health insurance policies while Vermont has projected a $20 million shortfall by the end of 2015. There also is a bill in Rhode Island to scrap the state exchange and go with the federal exchange to avoid a $24 million hit to taxpayers. Massachusetts, which has been at this longer than anyone, does not have a general tax to fund its exchange, but does rely on a hefty cigarette tax and an employer’s tax.

The fact is that competition may be the Federal Government’s last chance. Far from being flush with “free money” as Obamacare supporters like to suggest, Washington is actually about to go broke. Time Magazine describes the debate in Congress to keep Medicare funded.

Congress must act to prevent a big cut in fees to Medicare doctors. But a short-term solution now will mean soaring costs for older Americans later.

As of April 1 fees paid by Medicare to participating doctors will be slashed by a steep 21%. This cut is the result of a 1997 budget formula, called the Sustainable Growth Rate (SGR), which should have been junked years ago. Physicians have already been complaining about Medicare’s low level of reimbursement, and if the cut happens, there could be a mass exodus of physicians from the program.

Congress has had plenty of opportunities to reset the the SGR formula to permit fair fees and annual adjustments but instead has opted for short-term fixes 17 times. Last year lawmakers agreed on a long-term plan to set physician rates—a so-called “doc fix”—and this consensus proposal has been reintroduced in the new Congress. But the long-term price tag for the adjustment threatens to make it a non-starter.

How much would a long-term doc fix cost? The Congressional Budget Office (CBO) estimated the 10-year budget hit of a permanent reform at $138 billion in early 2014. A year later, the 10-year bill has risen to nearly $175 billion. For perspective, the agency’s latest 10-year price tag for the Affordable Care Act is “only” $142 billion.

It’s hard to believe that Congress will be able to find $175 billion in spending offsets in the next couple of weeks, or that Republicans would agree to boost the deficit in order to pay the long-term tab. So expect another one-year fix—number 18. It would cost an estimated $6 billion, which would not have much of an immediate impact on consumers.

A ten year “fix” that costs more than Obamacare is no solution.  The whole premise that government had money to spare on the Affordable Care Act was completely false.  There is no free money. There may not even be enough to keep Medicare alive. The fact is that there is no “fix”, either short or long term unless some way is found to rein in costs.

There are only thing that is certain are rising deficits.  The Hill reports that the Democrats and the Republican leadership may make common cause against fiscal conservatives in order to pass a $174 billion ten year “fix”.

But bringing up the legislation would be a huge gamble because it could spark a revolt among fiscal conservatives who are likely to balk at legislation that adds to the deficit.

A backlash on the right could force Boehner to rely on Democratic votes, once again thrusting House Minority Leader Nancy Pelosi (D-Calif.) into the role of deal-maker.

A Democratic aide said the GOP talks on a Medicare fix seemed to have “reached critical mass” this week.

What with fighting the fires in Medicare and Obamacare, the Federal Government has no hope of extinguishing the blaze using tax increases and deficit spending alone.  At some point it must try to align expenditures and incomes.  It must lower the cost and the best hope for that is competition.

Obamacare is on its way to becoming just another giant Washington program.  Big but far from universal.  It actually cannot aspire to universality because there’s no enough money in the public coffers to make it work for everyone as designed.  Therefore Obamacare will “die” -- that is, it will become another ordinary law, like Medicare Part D -- it will never be that Holy Grail of Liberals, the Universal Health Care system.  With or without a favorable ruling in King vs Burwell, the ACA has to change, and change so fundamentally that it will be tantamount to repeal and replace.

Subsidies Lost to Costs


Money, money, everywhere, yet not a drug to drink.  This phrase could describe the state of the Affordable Care Act, which claims it provides subsidies to a whopping 86% of all enrollees. According to a New York Times article by Robert Pear, “the Obama administration said Tuesday that 11.7 million Americans now have private health insurance through federal and state marketplaces, with 86 percent of them receiving financial assistance from the federal government to help pay premiums.”

Yet despite this vast amount of assistance many people are barely making the cost of the care they are charged.  The reason is high deductibles and high pharmaceutical costs.  The Daily Beast relates a not atypical story of a man who was “insured but not covered”.

Since the Affordable Care Act went into effect, Robert Shore’s health insurance premium has more than doubled, from $173 for a discontinued bare-bones plan with a $10,000 deductible to $373 for the least expensive bronze plan he could find on Then in November, the Ft. Lauderdale man’s health insurance went up again under Obamacare, as the ACA is popularly known.

The reason? Shore, a gay man, wanted to make sure he was as protected as possible from HIV. And that meant finding a plan that would allow him to afford the only medication approved by the Food and Drug Administration for HIV prevention. …

Shore doesn’t want them to end up in the situation he was in last year, when he went to pick up his Truvada prescription under his ACA plan, and was hit with a several-hundred-dollar deductible.

“Wow,” remembered Shore, who has since switched to a plan with a higher premium—$565 a month—but lower prescription drug costs. “I’m one of those people now, hit by a hundreds-of-dollars bill just to get a prescription. Wow. I’m going to have to do this.”

So Shore shopped around until he found an Obamacare plan whose premium/pharmaceutical benefit plan he could afford.  But that’s just the trouble, according to the AIDs Foundation of Chicago.  Although Obamacare is supposed to hang a “welcome” sign out for people with uninsurable or pre-existing conditions, in fact many policies hang a “keep out” sign where these infirm people are not wanted.  It’s called “adverse tiering”.

Placing drugs for AIDS and HIV, diabetes, cancer and other chronic conditions into higher-cost categories, or tiers, within an insurance plan is sometimes called "adverse tiering" and has been documented by researchers. Patient advocates say the tiering may be a new way for insurers to keep high-cost patients off their plans, a common practice before the Affordable Care Act prohibited it.

A recent Harvard study published in the New England Journal of Medicine found evidence that insurers were adversely tiering HIV and AIDS drugs on 12 of 48 plans sold on the federal exchange in 12 states. People with midrange "silver" plans that were adversely tiered would pay about $3,000 more per year for their drugs than those in other plans, according to the study.

Whatever the politicians have promised, treatments and pharmaceuticals still cost money.  Therefore providers must charge higher prices for expensive medicines.  The linkage between cost and price can never be eliminated.  It can only be disguised.  A health industry consultant explained why tiering was inevitable.

Nancy Daas, a partner at Chicago-based health industry consultant CMC Advisory Group, said the pricing of HIV and AIDS treatments is not the result of discrimination but a reflection of the costs insurers pay for the drugs.

"I'm not saying it's easy for people (to afford them), but these drugs cost a lot of money," Daas said.

A year's worth of a common, single-pill regimen called Atripla costs $26,000 to buy wholesale, up from $14,000 a year when the pill was introduced in 2006, Humana spokeswoman Cathryn Donaldson said in an email.

The problem, as the astute reader will have noticed, is embedded in the last paragraph.  The cost increases are overwhelming the subsidies.  When drugs which once cost $14,000 a year now cost $26,000 wholesale the “subsidies” touted by Obamacare become nothing but a pass through payment to the drug companies.  When out of pocket costs keep going up despite the so-called government subsidies and the consumer is as far behind as ever.  They are like a diner who is given a $10 meal ticket to eat and finds that all the restaurants charge a minimum of $50 for a hamburger.

Obamacare enrollees are just making it.  Just wow fragile the system is was unwittingly highlighted by Margot Sanger-Katz at the New York Times argues that any loss of subsidies arising from a government loss in King vs Burwell would send not just Obamacare, but the entire industry into a tailspin.

Even if you don’t receive Obamacare subsidies, you could still be harmed by the Supreme Court case that could take them away.

A court ruling for the plaintiffs in the case, King v. Burwell, would have wide-reaching effects for the individual insurance markets in around three dozen states. The approximately six million people currently receiving subsidies in those states would be hit hard, of course. But so could the millions who now buy their own insurance without subsidies. The results could be surging prices and reduced choice for health insurance shoppers across the income spectrum.

It’s a phenomenon some health policy experts call the “death spiral,” the result of an insurance pool getting smaller and sicker as more healthy people leave an increasingly expensive health insurance market.

But the loss of all those low-income, relatively healthy people could destabilize the individual health insurance markets for everyone else. No one knows for sure how bad things would get, but economic forecasters estimate that, on average, prices in the affected states would rise by at least a third, and some 1.4 million unsubsidized people would leave the increasingly expensive market.

If a health care system in which 86% of all Obamacare policyholders receive subsidies yet are just getting by; if the slightest reduction in coverage can send the entire insurance market into a “death spiral” in an economy where the health care industry gobbles up a bigger part of the economy that any comparable First World country -- then there is something wrong with the system that a mere government victory in King vs Burwell cannot fix.

This is exactly health care consultant Robert Laszewski’s argument in the Health Care Blog. “If Democrats would just admit Obamacare needs some pretty big fixes, and Republicans would be willing to work on making those fixes by putting some of these good ideas on the table, the American people would be a lot better off. In fact, I am hopeful that this is eventually what will happen once Obamacare’s failings become even more clear (particularly the real premium costs) and both sides come to understand that neither will have a unilateral political upper hand.”

The political arguments on both sides have obscured the central problem. The subsidies are just feeding the fire; they are creating a perverse incentive for providers to charge more and/or provide less. Somehow the healthcare markets must be made more competitive in ways that the pre-Obamacare and Obamacare systems failed to do.  Until then government can pay 100% of all policyholders subsidies, but that will still leave health care unaffordable, even for those in the cruel position of “insured but not covered”.

An Obamacare Triumph


Some time ago this blog observed that while the ostensible goal of Obamacare was to make health care more affordable, in reality it appeared geared towards controlling the skyrocketing consumption of medicine by raising its price.  That observation has now been made by the CBO itself, though of course they don’t put it that way.

Nick Timiraos and Stephanie Armour of the Wall Street Journal have an article encouragingly titled Future Obamacare Costs Keep Falling. “Nearly five years after President Barack Obama signed the Affordable Care Act into law, federal budget scorekeepers have sharply revised down the projected costs of the signature bill.”  Sounds good -- but why?

The slower growth in health care spending is attributed in part to the slow economic recovery and more insurance cost-sharing requirements like deductibles, which have prompted consumers to rein in their own spending on medical care. Medicare spending growth has also slowed….

The report also reflects lower-than-expected enrollment in federal and state exchanges set up under the Affordable Care Act. The Obama administration said about 11.4 million people signed up for private insurance through the health law’s exchanges so far this year.

Future costs to the government will fall because fewer people are going to use Obamacare and will have to pay more of the expenses themselves. This is definitely good news for the treasury, but it’s not really what supporters of Obamacare had in mind.

A PWC survey reported that “for 2015, PwC's Health Research Institute (HRI) projects a medical cost trend of 6.8%, up from 6.5% projected for 2014”.  The survey’s conclusions basically echoes the CBO report.  Health providers can expect business to boom. Consumers can expect costs -- and their share of costs -- to rise.

A stronger economy and millions of newly insured Americans mean an uptick in spending growth for healthcare organizations. That may be a welcome respite from recent years of budgetary pressure. But the fact that health spending continues to outpace GDP underscores the need for a renewed focus on productivity, efficiency, and, ultimately, delivering better value for purchasers.

As employers continue to shift financial responsibilities to their employees, the cost-conscious consumer will exert greater influence in the new health economy. Savings that come from standardization can help position health businesses for the value-driven future. But real success and profitability will go to the insurers, drug makers, and healthcare providers that deliver highly personalized customer experiences at a competitive price.

Eventually this will result in a cutback in demand for medical services.  The higher the price, the less people are willing to buy. As Elizabeth Rosenthal of the New York Times wrote,  people are entering the age of  “insured but not covered”.  Her article reprises, at an anecdotal level, what the dry macro prose of CBO and PWC have already said.

When Karen Pineman of Manhattan received notice that her longtime health insurance policy didn’t comply with the Affordable Care Act’s requirements, she gamely set about shopping for a new policy through the public marketplace. After all, she’d supported President Obama and the act as a matter of principle.

Ms. Pineman, who is self-employed, accepted that she’d have to pay higher premiums for a plan with a narrower provider network and no out-of-network coverage. She accepted that she’d have to pay out of pocket to see her primary care physician, who didn’t participate. She even accepted having co-pays of nearly $1,800 to have a cast put on her ankle in an emergency room after she broke it while playing tennis.

But her frustration bubbled over when she tried to arrange a follow-up visit with an orthopedist in her Empire Blue Cross/Blue Shield network: The nearest doctor available who treated ankle problems was in Stamford, Conn. When she called to protest, her insurer said that Stamford was 14 miles from her home and 15 was considered a reasonable travel distance. “It was ridiculous — didn’t they notice it was in another state?” said Ms. Pineman, 46, who was on crutches.

There in individual detail are all the accomplishments -- and reasons for the lower expenditures -- of Obamacare.  The high premiums.  The narrow networks.  The $1,800 co-pay.  And to top it off -- no doctor!   Rosenthal says Obamacare is Christmas in July for insurance companies.

The Affordable Care Act has ushered in an era of complex new health insurance products featuring legions of out-of-pocket coinsurance fees, high deductibles and narrow provider networks. Though commercial insurers had already begun to shift toward such policies, the health care law gave them added legitimacy and has vastly accelerated the trend, experts say.

It is also, to be frank, a case of bait-and-switch.  Many poor people thought “affordable care” would be “free health care”.  The more sophisticated consumers, like Ms Pineman, knew they would have to pay something towards.  But nobody imagined they would have to pay more for less. Now that the reality has sunk in the federal government can say, ‘at least we are saving the taxpayer money’.

Incredibly Michael Hiltzik of the Los Angeles Times thinks that states which refuse to participate in the program are themselves guilty of bait-and-switch. Speaking of the possibility that not every subsidy can be restored should the Supreme Court rule against the government in King vs Burwell, Hiltzik writes:

The biggest mistake is to assume these plans are for real. In the days since the Supreme Court's hearing on King vs. Burwell, Republican leaders seem to have dropped the pretense that they'll have even a transitional measure ready by June, when the court is expected to rule. "We'll do our best," Hatch said Thursday. "But we'll have to see." It's the old bait-and-switch — but all bait, and no switch.

This, from a program that promised that “if you like your doctor you can keep your doctor”, which canceled millions of policies as substandard and imposed a fine on those who would not enter its mediocre precincts is truly the pot calling the kettle black.  But Hiltzik will be glad to know that if the Supreme Court cancels the subsidies it can also be recorded as an Obamacare success, because then the federal government’s costs will be “lower than expected”.

“Don’t Push Us Off the Cliff


One thing nobody can do is join Obamacare as a human being with a medical problem.  The programs program sees every applicant primarily through the prism of money: how much you got, how much you ain’t got. Penalties, subsidies and even premiums are referenced according to your income.  Obamacare isn’t primarily interested in what you are sick of but in what you what you earn.

Families USA, an Obamacare advocacy group that received a million dollars to “tell pro-Obamacare stories” is doing the opposite just now.  It’s telling a sob-story featuring insurance industry figure Wendell Potter who is telling anyone who will listen that if subsidies are stopped by the Supreme Court in King vs Burwell, the program will go into a “death spiral”.

He explained that if the “premium tax credits” are struck down in the 34 states without state exchanges, that would put in place a process known as “adverse selection,” meaning that without subsidies to offset the cost only the oldest and sickest would be motivated to buy health insurance: “And if that happens, you have to raise rates, and that means more young and healthy people leave … and that creates a system where very few people can afford coverage.”

That would lead to what’s known in the trade as the “death spiral,” a phenomenon that Justice Anthony Kennedy, a key vote if the ACA is to survive, invoked during oral arguments. Kennedy told the plaintiffs’ attorney, Michael Carvin, that if his argument is accepted, “the states are being told either create your own exchange, or we’ll send your insurance market into a death spiral. We’ll have people pay mandated taxes which will not get any credit on -- on the subsidies. The cost of insurance will be sky-high, but this is not coercion. It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there’s a serious constitutional problem if we adopt your argument.”

Obamacare isn’t insurance in the business sense.  As Potter explains, if you pull away the taxpayer dextrose the whole structure will go into shock.  It’s like an actor flying on wires.  Cut the wires and the man falls.  Everything operates on subsidies. Investigating possibly subsidy scams has already become a priority for the HHS. “The government’s top healthcare watchdog plans to amplify its focus on ObamaCare this year, with a particular focus on subsidies and the security of personal data,” it said.  Called the Health Reform Oversight Plan it plans to examine a number of areas.

Financial assistance payments (premium tax credit, advance premium tax credit, and cost sharing reduction)

Consumer Operated and Oriented Plan (CO-OP) Loan Program

Establishment grants

Navigator grants

Payments to Federal contractors

This does not even include the subsidies to insurance companies, the so-called “risk corridors”, which the administration promised would be “budget neutral” but have trouble staying that way.

House Republican lawmakers are asking the Obama administration to defend its payments to health insurance companies under ObamaCare's cost-sharing reduction program.

In letters sent Tuesday, Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Ways and Means Committee Chairman Paul Ryan (R-Wis.) accused the administration of "unlawfully and unconstitutionally misusing" federal money to fund the program.

All these subsidies are the individual wires which keep the program aloft. The arguments for defending each is the same.  Pull the plug on the subsidy and the whole program goes into a “death spiral”.  As can be readily seen the argument before the Supreme Court isn’t based on what the law’s text says.  It’s based on what would happen if you followed what the law’s text says.

Yet even with subsidies insurers are losing money. In Massachusetts, three out of four of the commonwealth’s biggest insurers reported operating losses to newly required electronics records systems and high payouts for medication.

Blue Cross Blue Shield of Massachusetts saw one of the biggest losses, reporting an $118.8 million operating loss in fiscal 2014, from a $17.2 million operating loss the prior year.

"We had planned for an operating loss so that we could keep premium increases as low as possible and to help fund significant investments in new technologies and services," said Chief Financial Officer Allen Maltz.

Yet the loss was higher than anticipated, largely due to a 30 percent increase in the cost of specialty medications, and the taxes and fees associated with the Affordable Care Act – also known as Obamacare - which totaled $286 million in 2014.

Why? because even with the subsidies Obamacare is already in a death spiral because the young and healthy refuse to join it.  In addition to taxpayer subsidies, it needs intergenerational income transfers to trudge along. Repeated extensions in the 2015 open enrollment were intended to redress the imbalance in the number of young adults.

Officials haven't specifically said they're using the special extension because of a shortfall in young-adult sign-ups, but that might be a motivation. Data through mid-January showed that just 26% of the nearly 7.2 million people who signed up via were in the 18-to-34 age group vs. 28% during last year's open enrollment.

Minnesota, the only state disclosing its demographic mix for 2015, said 18-to 34-year-olds account for 24% of the total, below last year's 24.3%. That result may have been affected by low-cost insurer PreferredOne's decision not to offer subsidized plans on the exchange this year.

Young adults represent about 40% of the potential exchange pool.

The inability to attract the young and healthy directly cause insurers to be overloaded with the old and sick and thus rack up high bills. Without the young the subsidies have to go up. But we knew this already since Obamacare’s own spokesmen speak of the “death spiral” that will occur once the taxpayer strings are severed.

Although most of the attention is focused on the Supreme Court subsidy case  the real Obamacare problem is that income is less than expenditure.  So they’ve raised the prices and hidden them in high deductibles. Jed Graham of Investor’s Business Daily talks about the ‘insured but not covered phenomenon’ where many find their policies worthless under most circumstances since most of the payout has to come from their own pockets.  One plan had a deductible of over $12,000 which means that for anything short of a major health problem, you might as well be uninsured.

In addition nearly half of all Obamacare networks were found to be “narrow” by a McKinsey study.  In such networks a significant percentage of people find that while they have insurance there are no doctors within convenient distance to treat them.

About half of the health plans offered on the insurance exchanges created under the Affordable Care Act (ACA) are narrow network plans, according to a recent report released by the McKinsey Center for U.S. Health System Reform.

In its analysis, McKinsey defined narrow networks as plans that have 31% to 70% of hospitals in the rating area participating, in contrast to broad networks, which have more than 70% of hospitals participating.

It found that 48% percent of the plans offered on the ACA exchanges are narrow networks, and those plans make up 60% of the networks in the largest cities in each state.

When the customer reads the fine print he finds he really doesn’t have insurance as a practical matter.  He only has the expensive illusion of insurance. He’s been conned.

John McGinnis in the City Journal says there’s a tendency in all big liberal projects to portray a social program as better than it is. Obamacare was no different. It was going to be “something wonderful”.  You could “keep your insurance if you liked it”.  You could “keep your doctor if you liked it”.  You would save $2,500 a year on health care premiums.  You could purchase insurance for cell phone money. None of these shining promises was true.

Now all Obamacare’s paid advocates can do is trot out insurance industry veterans and plead that if you cut the subsidies the whole program will fall into a death spiral.  McGinnis says progressives often have to to lie to sell the dream.

Nothing shows the progressive dependence on subterfuge more starkly than Obamacare, which, by imposing a personal mandate to buy insurance in an effort to bring health care to all, will restructure one-sixth of the American economy. Single-payer government health insurance has been a dream on the left for decades, but it was never a politically realistic option. This was true even while Democrats controlled both houses of Congress, as they did during the first two years of Obama’s first term. The American public wouldn’t tolerate the level of government funding that a single-payer system would require, so the best that the administration could do was to impose a regulatory structure, while accepting a private-insurance model. In crafting the Affordable Care Act, the administration intentionally avoided describing the individual mandate as a tax—a tacit admission that doing so could have sunk the bill. After the bill became law, however, the administration turned around and argued before the Supreme Court that the mandate was, in fact, a tax. The Court upheld the mandate as an exercise of an enumerated government power to levy taxes. Even then, the administration concealed Obamacare’s taxes on the wealthy, which were not added to the income-tax tables. The recently publicized comments of MIT professor Jonathan Gruber about the deception involved in promoting the Affordable Care Act demonstrate that such chicanery has become intrinsic to modern progressivism.

American affluence also proved a political obstacle for the law’s drafters. Most Americans already had health insurance and a doctor with whom they felt comfortable. To secure support for the ACA, therefore, Obama had to promise repeatedly that those happy with their current health plans (and doctors) could keep them. But ACA requirements resulted in the cancellation of many insurance plans, causing patients to lose access to their doctors. This proved the most damaging blow to Obama’s credibility.

Some have labeled the president’s economy with the truth a personal failing, but it’s more like a professional necessity. Modern progressivism’s business model requires obscuring the reality that new programs have winners and losers—and the losers are spread throughout the general population, not confined to members of the so-called 1 percent. As the Affordable Care Act goes fully into effect, the losers will become more visible. If people had known the truth about Obamacare in 2010, the bill would almost certainly have been defeated. If they had known it in 2012, Obama would likely have lost his reelection bid

If the administration had told them the truth, the voters would never have gone along with it.  Maybe they’re lying still -- about the subsidies -- because there’s every possibility that even if the Supreme Court holds for the government in King vs Burwell, the house of cards will still collapse.  Then the dream becomes a nightmare.

The Hyperpartisan Struggle for Obamacare Goes On


Like a corrosive substance that attacks its very container Obamacare is pulling the Supreme Court apart at the seams. Lawrence Hurley of Reuters summarizes the basic story: “The U.S. Supreme Court appeared sharply divided on ideological lines on Wednesday as it tackled a second major challenge to President Barack Obama's healthcare law, with Justice Anthony Kennedy emerging as a likely swing vote in a ruling.”  What Hurley doesn’t capture is the intensity of conflict.

The liberal New Republic argues that by suggesting that simply by voicing skepticism over the ACA two justices were making themselves laughingstocks.

Antonin Scalia got laughed out of court (sort of) for claiming Congress might step in to fix the problem. Samuel Alito even intimated that states might step in and establish their own exchanges. The Court could even lend them several months time to do so.

“It's not too late for a state to establish an exchange if we were to adopt Petitioners' interpretation of the statute,” Alito said. “So going forward, there would be no harm.”

If his suggestion was designed to appeal to skeptical conservatives, like Chief Justice John Roberts, and Anthony Kennedy, he may have harmed his own cause.

Almost as astonishing is a piece by Slate claiming that Justice Sonia Sotomayor schooled Kennedy and Roberts, “backing them into a corner”. It says, “she curiously name-dropped a case that has twice reached the Supreme Court in recent years, Bond v. United States. The case had nothing to do with health care, but its two iterations did offer grand pronouncements on federalism—a constitutional principle respecting the dividing line between federal and state governments.”

And suddenly a light went on in the dark skulls of Kennedy and Roberts in this hagiographic account. This is par for the course in the media, as each side attempts to paint the other side in the blackest colors, attributing ignorance, base motives and even mental infirmity to those who would question their chosen point of view.  One standard argument, voiced with smug certitude by Greg Sargent of the Washington Post, is that conservatives are too stupid or lazy to conceive of an alternative to the ACA.  Therefore the only thing right thinking people should do is laugh the challenge out of court.

There’s a lot of media chatter out there this morning to the effect that Congressional Republicans are really, truly going to offer their own health reforms this time around, now that the Supreme Court may gut subsidies for millions of people in three dozen states. I’ve already repeated endlessly that these GOP feints appear designed to create the impression that lawmakers will step in to ensure that such disruptions might not be all that dire, perhaps to make it easier for the Court to rule against the ACA, a dance that two conservative justices (Samuel Alito and Antonin Scalia) engaged in at oral arguments this week.

The New York Times is a little more worried that Congress might actually pass a law. Jonathan Weisman opens his piece “As Supreme Court Weighs Health Law, G.O.P. Is Planning to Replace It” with the observation that the saboteurs are about to blow the charges. “The legal campaign to destroy President Obama’s health care law may be nearing its conclusion, but as the Supreme Court deliberates over the law’s fate, the search for a replacement by Republican lawmakers is finally gaining momentum.”

That is of course what legislative majorities do.  They write and repeal laws, just as Nancy Pelosi “destroyed” the pre-Obamacare legal health framework and replaced it with the one being questioned in the court.  When Pelosi did it, Obamacare’s advocates saw it as good. When the GOP does it they see it as bad. It may be either, but the automatic assignment is pure partisanship.

There are actually dozens of alternatives to Obamacare that have been offered, none of which the ACA’s proponents consider serious, since none of them rise to the choking, labyrinthine length of the bill which contained provisions so obscure and poorly that King versus Burwell arose precisely as a consequence.  In the eyes of the ACA’s proponents, length and verbosity equals profundity.

How did anyone live without it? Jeffrey Young at the Huffington Post paints disaster movie scenario should the court hold against Burwell. “Obamacare faces its strangest challenge yet when the Supreme Court takes up the law for the third time Wednesday, but the oddity of the lawsuit shouldn’t obscure the cataclysm that a loss for President Barack Obama would provoke.”

Note the word “cataclysm”. Actually, as Avik Roy notes in Forbes, continuing Obamacare would be the worst disaster possible because it is a huge, expensive and mediocre program.

Obamacare’s mandates and regulations have already led younger and healthier people to stay away from the exchanges: what wonks call “adverse selection.” Indeed, enrollment in the exchanges has skewed around 25 percent older than one would expect without adverse selection. And underlying premiums have skyrocketed; our Manhattan Institute analysis found that non-group premiums increased by 49 percent in the average county.

John Graham notes that even Obamacare’s implementors know this.  That is why the law cannot be implemented as written.  The Galen Institute notes 47 changes by administrative order so far in the interests of short-term practicability.  One of those changes was in fact the interpretation by the IRS -- more than a year after the ACA was passed -- that State Exchange meant Federal Exchange.  The Federal Register from mid-2012 says:

Commentators disagreed on whether the language in section 36B(b)(2)(A) limits the availability of the premium tax credit only to taxpayers who enroll in qualified health plans on State Exchanges.

The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange. Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges. Accordingly, the final regulations maintain the rule in the proposed regulations because it is consistent with the language, purpose, and structure of section 36B and the Affordable Care Act as a whole.

The Supreme Court isn’t contemplating a change on its own account.  It’s reviewing an administrative change. It’s quite clear that the IRS itself had to make the adjustment for the Act to work.  Other significant changes were the employer mandate delay, the SHOP exchange delay, exemption of the unions from reinsurance fees, funds for insurance bailouts, exempting US territories, etc.

And this is to be as expected. Given this extensive history of revision, it is senseless to treat Obamacare as off limits to the Congress and even Supreme Court on the grounds that tinkering with it will cause the ‘cataclysm’ predicted.   More likely, as Graham argues, the ACA will require even further revision.  Why not make the changes as provided by the Constitution rather than treat Obamacare like the Holy Writ dictated on the summit of Mount Sinai?  He suggests four general areas of change.

Here are four proposals that both Congress and the President should find acceptable:

First, because exchanges are the cause of the problem, Congress should get out of the exchange business. People who had never paid much attention to Obamacare were appalled at the Rube Goldberg websites were rolled out last year to enroll them in Obamacare. Obamacare proved to be the DMV on steroids. Instead of forcing people to buy health insurance through a government exchange, allow us to buy health insurance however we want: Online from private exchanges, or on the phone or in person from an agent or broker.

Second, eliminate the individual and employer mandates. These are red lines for individuals and employers, which the President crossed. Repealing the individual mandate would reduce the deficit; and repealing the employer mandate will increase employment among low-income workers

Third, subsidize individuals, not insurance companies. This tax season, millions of Obamacare beneficiaries are going into shock as they learn from the IRS that the Obamacare policy they bought was overly subsidized. Having the IRS claw back the subsidies is causing financial hardship. Instead of subsidizing health insurers through exchanges, allow individuals to apply for tax credits themselves.

Fourth, re-scale the subsidies to make them fair. Obamacare subsidies phase out as household incomes increase, creating a high effective marginal tax rate for households with incomes up to about $80,000. Earning more pay results in a significant loss of subsidies. As a result, these workers demand fewer working hours, an extremely perverse incentive. The scale of subsidies should be made more fair by flattening it significantly, and eliminating the punishment for work.

But that would be too simple.  So the charade goes on, with the liberal press mocking or describing as dunces all who would amend, improve or question Obamacare, while the administration itself furiously churns out exemptions, delays and changes simply to keep it going.

The Unkillable Spending Machine


Margot Sanger-Katz, writing in the New York Times, expresses a Washington truth. All the talk about a cataclysmic end to health care, the sky falling -- are untrue. Obamacare can’t die; there’s too much riding on it. Therefore it will live on, not primarily because people need health care but it must survive in some form in order to justify the money that providers, bureaucrats and lawyers require to keep breathing.

The case before the Supreme Court this week will not wipe Obamacare off the books.

Unlike the case the court considered in 2012, which could have erased the Affordable Care Act entirely, this one concerns the application of only one provision of the law, and only to certain states. A ruling for the plaintiffs in the case, King v. Burwell, would carry huge consequences in many states, but 15 million of the people estimated to get insurance under the law would still get it, according to an Urban Institute estimate.

The list of policy changes that would be untouched by any legal ruling is very long. The law’s Medicaid expansion, now covering more than nine million poor Americans, will endure. Regulations on health insurance, limiting insurers’ ability to impose lifetime caps on coverage or exclude customers who have pre-existing illnesses, will remain. Young adults will still be able to stay on their parents’ insurance until they reach 26. …

Major changes in the way Medicare pays doctors and hospitals, designed to make health care safer and more efficient, will continue. Workplaces will still need to provide places for lactating mothers to pump breast milk. Chain restaurants will still need to publish the calorie counts of their menu items. Drug companies will still need to report the money they pay to doctors.

As Akash Chougule notes in Forbes, it’s all about the money -- even Medicaid expansion. Obama hasn’t bent the health care cost curve.  But that’s alright as long as it has upped the spending. “With state legislative sessions now back in full swing for 2015, the Affordable Care Act’s supporters are upping their pressure on state lawmakers to expand Medicaid under President Obama’s signature health care law. Twenty-two states have yet to implement this federal largesse—and based on experiences of the 28 that have, they should continue refusing to expand.”

Perhaps no state is in worse shape than my home state of Rhode Island, where fully one-quarter of the population is now on Medicaid. Program spending has grown by a billion dollars since 2013—and is $118 million over budget this year. The state budget office estimates this single program will take up nearly one-third of this year’s $8.8 billion budget, squeezing out other spending priorities that are critical to the state.

As this health care program continues spiraling out of control, the state will be forced to make tough choices on how to plug the growing budget holes. Lawmakers will have to choose between a handful of politically difficult options: Raise taxes, cut Medicaid benefits, kick people off the program, reduce spending on other projects like roads and schools, or some combination thereof. The picture in Rhode Island is even bleaker in the context of years of out-migration resulting from slow economic growth—ironically, a byproduct of expansive government in the state.

Illinois offers additional evidence of the financial train-wreck that is Medicaid expansion. Health officials originally estimated it would cost $573 million from 2017 through 2020 when the state’s funding obligation kicked in. But nearly 200,000 more people enrolled in the program in 2014 than originally projected. State budget officials were forced to revise their cost estimates to $2 billion—more than triple initial estimates.

If anybody thinks the ACA music is going to come to a stop simply because six words in a law forbid it, they’ve got another thing coming.  The principle being followed is simple: if something stands in the way of expending taxpayer largesse, ignore it.  If any road block obstructs the gravy train, then smash right through it.

Jackie Bodnar at US News notes what has already been noted.  What’s being challenged in King vs Burwell is not the law, but an interpretation of the law by executive agencies.  King vs Burwell is about the Administration’s interpretation of the law. The Galen Institute notes 47 changes by administrative order have already been made.  One of those changes was an  the interpretation by the IRS -- more than a year after the ACA was passed -- that State Exchange meant Federal Exchange.  The Federal Register from mid-2012 says:

Commentators disagreed on whether the language in section 36B(b)(2)(A) limits the availability of the premium tax credit only to taxpayers who enroll in qualified health plans on State Exchanges.

The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange. Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges. Accordingly, the final regulations maintain the rule in the proposed regulations because it is consistent with the language, purpose, and structure of section 36B and the Affordable Care Act as a whole.

Bodnar notes “There is no language in the president’s health care law that specifically empowers the IRS to implement those taxes and subsidized premiums in states that did not set up their own exchanges. In fact, they intentionally left that language out in order to incentivize states to participate in Obamacare.”

The real intention behind the “special subsidies” is to lower the perceived costs of Obamacare coverage. In other words, the IRS is lying to the American people about the true cost of government-run health care. …

Forcing the IRS to fully follow the laws of the United States is not extreme. What’s really extreme is that the IRS has been enforcing a version of Obamacare that doesn’t exist. If the Supreme Court allows the IRS to continue hiding the bad outcomes of Obamacare for political coverage, it would set a dangerous precedent that agenda-driven agencies can enforce whatever laws they want.

And now the argument is, the law must be thus otherwise the program would collapse and that would be an absurdity. It must mean, “by any means necessary.” Whatever’s inconvenient will be disregarded. “The Treasury Department is raising eyebrows with its refusal to explain $3 billion in ObamaCare payments to health insurers that were not authorized by Congress. The department has denied a request by House Ways and Means Chairman Representative Paul Ryan for an explanation about payments that were made as cost-sharing subsidies to insurers.”

But that doesn’t seem to mean a thing. The law doesn’t exist as it is written. It exists as it has to be written for money to be spent.

Unpacking King vs. Burwell


Ever so slightly the ground over which King vs Burwell is being fought in the Supreme Court has shifted from one of pure statutory interpretation - the meaning of what “through an Exchange established by the State” - to one in which a decision for or against would involve an interpretation of constitutional law.  The change in context does not necessarily favor a particular side, but it raises the stakes to one of Great Issues, and the political ante to boot.

The first gambit came in through the side door.  As Avik Roy explains, Yale professor Abbe Gluck argued in an amicus brief that to threaten the subsidies is to punish the states, an argument which strode onto center stage when Justice Kennedy repeatedly brought the issue up.

According to Gluck, not to continue the subsidies would be tantamount to penalizing the States, from which anyone supportive of federalism should recoil in horror. “The challengers’ interpretation turns Congress’s entire philosophy of states’ rights in the ACA upside down. Congress designed the exchanges to be state-deferential—to give the states a choice. But under the state-penalizing reading that challengers urge, the ACA—a statute that uses the phrase ‘state flexibility’ five times—would be the most draconian modern statute ever enacted by the U.S. Congress that included a role for the states.”

Yet as Roy points out, nobody seems to mind if Obamacare penalizes the states in myriad other ways - just when it becomes politically convenient for the president.  Cutting off the subsidies would not be half so punitive as continuing Obamacare.

First of all, the argument that havoc and destruction will ensue if subsidies go away is simply factually wrong. There will remain an individual mandate, forcing many people to purchase health coverage regardless of their eligibility for subsidies. It’s true that in a subsidy-free state, average premiums would likely go up, and that fewer people would enroll in Obamacare than originally hoped. But guess what? That has already happened, even with federal exchange subsidies.

Obamacare’s mandates and regulations have already led younger and healthier people to stay away from the exchanges: what wonks call “adverse selection.” Indeed, enrollment in the exchanges has skewed around 25 percent older than one would expect without adverse selection. And underlying premiums have skyrocketed; our Manhattan Institute analysis found that non-group premiums increased by 49 percent in the average county.

At the Supreme Court, Obama’s advocates called adverse selection and higher premiums a disastrous, chaotic, punitive result. So, then, do they also think that the insurance markets of today, imposed by Obamacare, are disastrous, chaotic, and punitive?

Once the door was opened to these larger issues, then any idea could come in.  The next “big” issue to wander in was introduced by Justice Antonin Scalia, who argued that it was not the court’s job to fix the consequences of laws.  That was what Congress was for.  Thus, if the wording of Obamacare led to so dire a scenario as the government claimed, what of it?  The courts job was to interpret the law, as to effects why the ordinary workings of politics would soon remedy it.  Garrett Epps of the Atlantic caught the Scalia exchange.

The problem for Verrilli is that the sky-will-fall argument may very well make his case weaker, not stronger. For one thing, I suspect that the Justices are sick of hearing about how they must decide in favor of the government or else doom women and children to die without health-care. The practical consequences of a decision are always important; but emphasizing them too strongly may feel less like argument than like pressure—or even threats.

For another, the Act’s opponents have come up with a glib counterargument. If a loss for the government will be that all-fired bad, it runs, then the political system will fix it right away. The Act’s two most tenacious opponents were Justices Antonin Scalia and Samuel Alito, and they tag-teamed Verrilli with that claim. “t's not too late for a state to establish an exchange if we were to adopt petitioners' interpretation of the statute,” Alito said. “So going forward, there would be no harm.”

Verrilli responded that setting up an exchange takes time and requires multiple stages of federal approval. The deadline for an exchange that could begin next tax year is May—well before the result in King will even be known. Oh, said Alito airily, the Court could “stay the mandate until the end of this tax year.” Problem solved.

Justice Scalia jumped in to suggest that trusty ol’ Congress will act if the states don’t. “You really think Congress is just going to sit there while—while all of these disastrous consequences ensue,” he said sarcastically.

“Well, this Congress, Your Honor…” Verrilli answered, provoking laughter.

“I don't care what Congress you're talking about,” Scalia snapped. “If the consequences are as disastrous as you say, so many million people without—without insurance and whatnot, yes, I think this Congress would act.”

The sky is always falling. And politics keeps catching the ceiling before it crushes the public.  Laws are amended and repealed all the time.  The government could not keep crying wolf with a legislative shepherd clearly in employment.  Besides there were bound to be other ordinary defects in the law, which Congress should fix from time to time without involving the court. For example, the New York Times notes that Obamacare networks were extraordinarily narrow.  So narrow and high priced  that they defeat the purpose of insurance -- the purpose which the government says must be protected at all costs even if it means ignoring the wording of the law.

In an article entitled “Insured But Not Covered” Elizabeth Rosenthal almost channels Avik Roy.  She says that in many cases you can’t get a doctor.  You are out the money paid to the insurer with nothing in return.  That’s more punitive than subsidies.

Ms. Pineman, who is self-employed, accepted that she’d have to pay higher premiums for a plan with a narrower provider network and no out-of-network coverage. She accepted that she’d have to pay out of pocket to see her primary care physician, who didn’t participate. She even accepted having co-pays of nearly $1,800 to have a cast put on her ankle in an emergency room after she broke it while playing tennis.

But her frustration bubbled over when she tried to arrange a follow-up visit with an orthopedist in her Empire Blue Cross/Blue Shield network: The nearest doctor available who treated ankle problems was in Stamford, Conn. When she called to protest, her insurer said that Stamford was 14 miles from her home and 15 was considered a reasonable travel distance. “It was ridiculous — didn’t they notice it was in another state?” said Ms. Pineman, 46, who was on crutches.

Someone has to fix it.  In fact, the Federal Trade Commission heard accusations alleging that Obamacare, in establishing narrow networks, was abetting the violation of anti-trust laws. In an article by Paul Demko headed “antitrust experts wrestle with the rise of narrow networks” the stifling effect of Obamacare on competition became clear.

Greater transparency about health plans' provider networks is needed to help consumers understand which doctors and hospitals they can go to without incurring very high out-of-pocket costs, experts agreed at a forum Tuesday sponsored by the Federal Trade Commission.

Health plans with narrow networks are pervasive on Obamacare exchanges and increasingly are being offered by employers as well. An analysis of 2014 exchange plans by McKinsey & Company found that nearly half of the 2,366 unique provider networks qualified as narrow networks, meaning less than 70% of hospitals in a coverage area were included.

Narrow-network plans were a primary focus Tuesday at the FTC's summit on healthcare competition in Washington, co-sponsored by the FTC and the Justice Department's Antitrust Division. Participants agreed that tailored networks, including those with different pricing tiers, are likely to become a fixture of the insurance landscape. But they differed on the steps needed to ensure that consumers can make informed choices about which products will meet their needs.

Those supporters of the administration who would answer that administrative rule changes can fix all glitches will have to contend with yet another “big issue” raised by Chief Justice Roberts, who asked the government lawyer if it was also his view that the post Obama administration could legislate administratively in the same broad manner the current officials claimed was their right.  Epps of the Atlantic wrote:

The chief justice was as taciturn at the oral arguments as he’s ever been since taking the center seat on the bench. He sat passively for most of the rapid-fire questioning and made only one inquiry of real substance, near the end of Solicitor General Donald B. Verrilli Jr.’s presentation.

“If you’re right — if you’re right about Chevron, that would indicate that a subsequent administration could change that interpretation?” Roberts asked.

Sounds like code. Could be very important. (Cornell law professor Michael Dorf calls the intense scrutiny of the oral argument transcripts “SCOTUS Kremlinology.”)

Roberts’s question was referring to “Chevron deference,” a doctrine mostly unknown beyond the halls of the Capitol and the corridors of the Supreme Court. It refers to a 1984 decision, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., and it is one of the most widely cited cases in law.

Boiled down, it says that when a law is ambiguous, judges should defer to the agency designated to implement it so long as the agency’s decision is reasonable.

It is, in fact, the basis for the lower court decision in King v. Burwell that the Supreme Court is considering.

The Internal Revenue Service decided that even though the Affordable Care Act provides tax credits for low- and middle-income Americans who buy insurance on exchanges “established by the state,” the law envisioned the same subsidies for those who buy on exchanges set up by federal authorities."

Then the administration would be hoist on its own petard.  If Obama could make law without Congress, Robert was asking, then why not a President Ted Cruz should the occasion arise?  Why couldn’t Obama’s successor wave the same wand and make Obamacare go away?

This, say Ilya Shapiro and Josh Blackman of Cato Institute, gets to the core issue. Who decides? Why is the president treating the ACA like his private preserve, unwilling to see it amended, unable to accept a refusal from the states?  Where in the Constitution does it say he must have it his way instead of treating it like an ordinary amendable law?  They write:

This will be the third challenge to the Affordable Care Act to reach the court. But King is different. The law’s constitutionality was challenged in NFIB v. Sebelius, 2012, and the way certain regulations burden particular types of plaintiffs was addressed by Burwell v. Hobby Lobby last year. Now comes King, challenging the administration’s implementation of the law. Even though the ACA gives wide latitude to the executive branch over implementation, its most important parts—coverage rules, mandates and subsidies—were addressed by Congress with specific dates, formulas and other directions. None of these provisions has gone into effect as Congress designed, simply because the plan conflicted with the president’s political calculus.

For example, the executive branch delayed the “minimum essential coverage” provision for two years, suspended the requirement that millions maintain qualifying insurance, and modified the employer mandate into something very different than what the law demands. Through a series of memorandums, regulations and even blog posts, President Obama has disregarded statutory text, ignored legislative history and remade ObamaCare in his own image. …

But a funny thing happened on the way to utopia: Only 14 states set up exchanges, meaning that the text of the law denied subsidies in nearly three quarters of the states. This result was untenable to an administration intent on pain-free implementation. And so the administration engaged in its own lawmaking process, issuing an Internal Revenue Service rule that nullified the relevant ACA provision, making subsidies available in all states.

This is the ultimate political problem under King vs Burwell, the final “big issue” at stake.  Since Congress hasn’t the numbers to override a presidential veto the law, the tug of war is stalemated and it has found its way to the Supreme Court under the guise of statutory interpretation. But the arguments at their core are really over the substance of the law.  Ironically this may force the Court to decide on as narrow a basis as possible.  For the Justices to endorse the ‘wider intent’ or to endorse the challengers view that to do so would involve a violation of the separation of powers would be getting into the deep end of the pool.

King vs Burwell is really Congress vs the President, the States vs the Federal government in other clothing.  The challenge is there because the political process is locked in a standoff.  The Justices may look for a way out or be forced to make the political decisions that they are loathe to take upon themselves.

Reading the Tea Leaves


The punditry has begun to read the tea leaves, some doubtless in the hopes of affecting the kind of tea that is eventually brewed, as the opening arguments in the case of King vs Burwell began. David McCabe of CNN focused on the silence of Chief Justice John Roberts, which contrasted with his usual voluble demeanor and attempts to divine its significance.  Why is Roberts so reserved?

David Nather of Politico commented on the soaring hopes of Obamacare advocates following the close questioning by Justice Kennedy of the plaintiffs. “Obamacare supporters were cheered Wednesday by Justice Anthony Kennedy’s tough grilling of the lead attorney in the latest lawsuit — and the law’s opponents came away nervous.”

However Nather pointed out that Kennedy also raked the government lawyer over the coals and cautioned that the game is still even.  “Still, legal experts point out that both sides got tough questions, that Chief Justice John Roberts’ views are a big mystery, and that oral arguments aren’t always decisive in the Supreme Court, anyway. And conservative legal scholars say they saw signs that the court could still decide that the key phrase has to be read literally, which would badly damage the Affordable Care Act.”

The pattern of court activity established what everyone already knows: it will be close because the court is divided along ideological lines. To use a basketball analogy, what can be safely said is nobody pulled away in the opening minutes. Those who came expecting a blowout will be disappointed to learn that it will go down to the wire. Nather says the adjective that best describes things is “suspense.”

The New York Times marked time by publishing a lengthy human interest story on the lawyer for the plaintiffs Michael Carvin.  It depicted him as a “blunt-talking, rumpled” libertarian driven by the sting of his one and only defeat at the Supreme Court - when he failed to convince the justices to throw it out in the first place - to pursue Obamacare the way Ahab chased down Moby Dick.

To further the portrait of obsession, the NYT tells the anecdote of how he had to be restrained by cooler, wiser heads - the Wise Latina herself -  Sonia Sotomayor.

When he urged the Supreme Court on Wednesday to dismantle President Obama’s health care law, Justice Sonia Sotomayor — an ardent liberal — could not get in a word.

“Take a breath,” a slightly exasperated Justice Sotomayor finally said.

If being an obsessive were not sufficient, the NYT also depicted Carvin as a Luddite. “At 58 and decidedly not tech savvy — he edits legal briefs in longhand and only recently learned to use email — Mr. Carvin has toiled in conservative legal circles for decades, building a reputation for taking on the government and a specialty in elections law.”  

Well computer illiterates come in many flavors, such as a former Secretary of State who never had an State Department email address, relying on unidentified consultants to maintain a private email system of which she can say nothing definite.  But its politics all the time. In the absence of real court action, both the advocates and the opponents of Obamacare are taking their case to the public.  The Cato Institute for example, released this video summary of the issues it believed were at stake in King vs Burwell.

The case may be about law, but the battle for Obamacare resounds everywhere. Billions of dollars and untold political influence are riding on the decision and nobody can remain neutral in the face of those gigantic stakes. Reuters provided a balanced summary when it said, that “the U.S. Supreme Court appeared sharply divided on ideological lines on Wednesday.”

Kennedy, a conservative who often casts the deciding vote in close cases, raised concerns to lawyers on both sides about the possible negative impact on states if the government loses the case, suggesting he could back the Obama administration. But he did not commit to supporting either side.

Chief Justice John Roberts, who supplied the key vote in a 5-4 ruling in 2012 upholding the law in the previous challenge, said little to signal how he might vote.

The court's four liberals appeared supportive of the government. Conservatives Antonin Scalia and Samuel Alito asked questions sympathetic to the challengers. Fellow conservative Clarence Thomas, following his usual practice, asked nothing.

The knife-edge on which the fate of a large part of the American economy depends is an indictment of the whole process under which Obamacare was drafted.  Programs of this magnitude should be based on a broad political consensus. They can hardly be constructed on the basis of what a slim majority - now perhaps an actual minority - can impose on the rest.  Stable political programs are what the a clear preponderance of the population are willing to go along with.

The ACA was hardly that. Obamacare was passed without a single Republican vote.  Should it be scuppered by the Supreme Court - or confirmed - the margin will probably be one or two justice parsing perhaps six words in a roughly 2,700 page document, no more than the toss of a coin or the throw of the dice.  The fate of millions of Americans should never have to depend on what amounts to the turn of a card.

The structure built on that tiny sliver of legitimacy is astonishing. The sheer size of the Obamacare bureaucracy boggles the mind. It involves not just the HHS, but the IRS and numerous other government agencies.  As King vs Burwell highlights, there is not even an option for the states to opt out, for what meaningful dissent can there be from a program which, should states refuse to establish an exchange, the Federal government will establish one anyway?




When then Speaker of the House Nancy Pelosi said, “we have to pass the bill in order to see what’s in it,” she was only speaking the truth.  The defective legal language now at the heart of King vs Burwell are proof, if any more were needed, that even its authors did not know what the giant law said.

There is no escape from the toils of Washington.  There is no escape except through the Health Care Compact; to find in simplicity what a made-in-Washington solution can never provide.  Even if the Republican Party succeeds in overturning the ACA via the Supreme Court, any successor program to the Obamacare monstrosity will most likely resemble it in scope, complexity and perversity if a Democratic one-size-fits-all program should never be replaced by a Republican one-size-fits-all fix.

Today, as King vs Burwell begins, and highly paid journalists examine the expressions in the justices’ faces in the same way Kremlinologists used to analyze the postures of the Soviet politburo, people should ask themselves: how did it come to this?

Addiction versus Withdrawal


The whole sales strategy for establishing Obamacare consisted of getting the public - and the states - hooked on subsidies.  Ted Cruz used the metaphor explicitly when describing the ACA he said: “His [Obama’s] strategy is to get as many Americans as possible hooked on the subsidies, addicted to the sugar.”

The trouble was there was never enough sugar to turn the country into a nation of subsidy addicts. Moreover, the Supreme Court may strike down the delivery mechanism in the impending King vs Burwell.  Then the music stops.  This prospect has caused both the advocates and opponents of Obamacare to argue their case by focusing on either intensifying or mitigating the effects of withdrawal.

Kamala Harris told the public that an end to subsidies would be “devastating.”  That’s the talking point.  Recent actions by the IRS have coincidentally give the public a taste of what its like not to get a check in the mail. It has been delaying refunds for Obamacare policyholders.

Deana Ard wants her tax refund as soon as possible. She says she files her return in mid-January every year and receives her refund within two weeks.

This year, Ard said her refund is taking longer -- and she's blaming Obamacare.

Ard, who went without health insurance last year, doesn't mind having to pay a $160 Obamacare penalty as part of her 2014 tax return. But she says her $7,124 refund is on hold, and the IRS won't tell her why.

According to CNN Money, the IRS is deliberately not telling the taxpayers why. The mystery and the missing checks gives the public a foretaste of the withdrawal symptoms that Kamala Harris warned about.  This fortuitous circumstance seems to say to the general public, “this is what is going to happen to you if the Supreme Court finds against.”  You have been warned.

The IRS is delaying the refunds of tens of thousands of Obamacare enrollees, said Nina Olson, the National Taxpayer Advocate.

The hold up, she says, is subsidy data from state health exchanges.

What's more, Olson said the IRS told its telephone representatives not to tell callers the reason for the delay.

The doomsday theme is taken up in a Politico article by Jennifer Haberkorn who warns that millions could be plunged into financial darkness with the rapidity of an electric switch. “Halt to Obamacare subsidies could come swiftly.  The decision could affect more than 6.5 million Americans who currently qualify.”

Several lawyers consulted by POLITICO, some of whom requested anonymity because they are working on the case in some fashion, expect the tax credits to end immediately, much faster than the 25 days it takes for the official ruling to be finalized and the order formally issued.

It’s hard not to think that the administration will try to maximize the pain in some fashion in order to drive their point across. They won’t even wait for the official paperwork from the court, according to the article, before stopping the checks.  They’ll move to cut the payments as soon as they hear news on TV.

The Supreme Court won’t issue its mandate — the official copy of the decision — for about 25 days after the ruling is announced from the bench and made public. The official word then has to travel back down the legal path that took it to the Supreme Court — back to the Court of Appeals for the 4th Circuit, then to the U.S. District Court for the Eastern District of Virginia and to the trial judge, who would issue the official order, telling the government to stop issuing the checks. That would take weeks.

In reality, though, officials at Treasury will find out about the ruling instantaneously, just like everyone else: through news reports, on TV and via social media.

This has convinced some Republicans that some kind of detoxification strategy will be needed to wean voters off the cash drug. The role of methadone or nicotine gum - the so-called bridge away from Obamacare - will be a system of extensions. Sens. Lamar Alexander of Tennessee, John Barrasso of Wyoming and Orrin Hatch of Utah “said there would be financial assistance for a ‘transitional period’ and that states would be allowed the freedom to improve their health care systems.”

But there are other ways to maximize the pain besides withholding the subsidies from policyholders.  News articles are speculating that Obamacare itself will descend into a death spiral as people stay away. This spiral will inevitably reduce the profit margins of insurance companies and the incomes of doctors.  For once the music stops then so does the fun.  Ana Mathews of the Wall Street Journal describes the predicted catastrophe:

An analysis by researchers at the Urban Institute, a liberal-leaning policy research group, projected that in states where the subsidies disappeared, individual insurance premiums would go up 35% on average in 2016. That increase would affect all consumers purchasing their own plans in those states, including people who didn’t buy through the government marketplace, the researchers suggested. The financial blow would be particularly tough for smaller insurers that can’t dilute the impact with other, unaffected business, like employer and Medicare plans.

“What happens is, you go into a classic death spiral,” says  Janie Miller,  chief executive of nonprofit insurer Kentucky Health Cooperative Inc. “It doesn’t hang together.” Her nonprofit’s home state wouldn’t feel the direct impact of a ruling, because Kentucky has its own exchange. But the insurer has said that next year it will go into West Virginia, where the subsidies could potentially be affected. Ms. Miller said the co-op would have to re-evaluate its expansion plans if the court struck down tax credits there. …

Insurers offering products in the federal-exchange states are worried that they could be caught short this year. An antisubsidy ruling could potentially take effect—and prompt consumers to drop coverage—as soon as this summer. Insurers are locked into rates for 2015 and typically wouldn’t be able to raise prices midyear. And partly because of state regulations, it isn’t clear if or when insurers would be able to withdraw from the federal marketplace before January.

But for 2016, if the federal insurance tax credits are unavailable in a state, “the impact would be substantial enough that I would expect many carriers to consider pulling from the market,” says Tom Snook, an actuary with consultants Milliman Inc. who is working with a number of insurers offering exchange plans. “There’s a question, if the subsidies are struck down, if it’s an insurable market.” That could leave consumers with fewer, and far pricier, choices.

It’s all a system of hostages. Interestingly, this is an admission that all of Obamacare - including the insurance company’s profit margins - are being held aloft by taxpayer subsidies.  The thing doesn’t fly of itself.  It requires the support of wires.  Cut the wires and the contraption falls to the ground.  The bad news is this requires that everybody is addicted.  The insurance companies get their cut, the hospitals carve out their share.  Even the policyholder gets a small check - which he has to pay back at refund time - the sugar is everywhere.

The entire argument for the government in King vs Burwell reduces to this.  You can’t stop addiction.  People will need a fix, and need it bad.  The Supreme Court must be made to understand that if you strike down the government case, there will be hell to pay.  And that’s probably right.  Obamacare inevitably opened the gates of hell. Whether that inferno is one of government bankruptcy or consumer addiction matters little. Doom in one form or the other is upon us now until we fundamentally change the system from a centralized behemoth to one that allows for more choice and more accountability.

Why the GOP Can Afford to Win King vs Burwell


Obamacare may not be ready to die, but many of its advocates are starting to feel some of Elizabeth Kubler-Ross’ five stages of grief.  The denial stage has ended.  Lisa Rein’s Washington Post article on the semantic origins the of King vs Burwell lawsuit describes the moment when IRS lawyers first realized they might have a problem.

It had never occurred to the Treasury Department official responsible for making the changes in the tax code required by the law that there was more than one way to read the phrase — until she happened across an article in a trade journal.

Emily McMahon, deputy assistant treasury secretary for tax policy, read an article in Bloomberg BNA’s Daily Tax Report in January 2011 raising questions about whether federal subsidies could be paid for millions of Americans buying insurance under the Affordable Care Act, according to Treasury Department officials. The issue was whether the law allowed these payments if the coverage was bought in states that did not set up their own insurance marketplaces.

So McMahon called a meeting with two of her top lawyers, one of them recalled, and asked whether there was “a glitch in the law we needed to worry about.”

The staff lawyer’s answer was: the law can’t mean what it ostensibly says because we aren’t meant to fail.  “In the end, the Treasury and IRS officials who wrote the rules adopted the more expansive reading of the law — allowing subsidies for all marketplaces — because they concluded this was required for the new health-care initiative to succeed, according to current and former agency officials and documents they provided to congressional investigators. And, the officials reasoned, Congress would not have passed a law that it wanted to fail.” Then when the challenge wouldn’t go away they started laughing it off.

At first, the team of Treasury and IRS lawyers considered the subsidy question a minor issue, in part because it was widely expected that states would set up their own marketplaces.

“It didn’t occupy a lot of conversation, because it was not at all clear that a lot of states wouldn’t establish their own exchanges,” said Clarissa Potter, a deputy tax director at American International Group who was the IRS’s deputy chief counsel until May 2011.

When she learned that opponents of Obamacare were targeting the federal subsidies, Potter recalled, “I remember thinking: ‘Jeez, really? Is this the best you can do?’ ”

That marked the “end of denial”. Now that the problem has gone all the way to the Supreme Court, denial has been replaced by the next stage: regret. Eric Toder at TaxVox says that it  would have been so much easier if only the Republicans had cooperated from the start. He engages in a thought experiment:“What if we funded public school like Obamacare?” he asks. Toder says Obamacare like public school would still work but it would be awfully complex.  Why wasn’t it done simply? Well it had to be convoluted because they couldn’t sneak it past the GOP any other way.

it would make life much more complicated for state and local taxpayers and tax administrators.   Low-income households would need to receive subsidies in real time (perhaps in the form of tuition discounts) to pay their education bills. The subsidies would have to be based on prior year income or property values, with a subsequent reconciliation. Penalties would have to be designed for parents who refuse to pay for their kids’ schooling. …

Years ago, Princeton economist David Bradford suggested tongue-in-cheek that the federal government could cut defense spending without hurting national security if it replaced Pentagon spending on weapons procurement with a tax credit for arms manufacturers. In a more complex way, the designers of the ACA applied Bradford’s insight, substituting targeted tax credits for a fully tax-financed system that would appear to raise spending and taxes much more than does the ACA.

That may have been the only way the United States could have enacted a health law that vastly expands insurance coverage. And it may still work out in the end. But it could have been so much simpler.

It’s almost as if Toder were mentally preparing himself for bad news but rationalizing the failure as the Republican’s fault.  ‘If only they had let us run Obamacare like a public school,’ he moans,  ‘then we wouldn’t have had to write a 1,000 page bill filled with all sorts of unimportant but pesky legal defects.’

Robert Barnes, writing in the Washington Post, is even more wistful.  King vs Burwell he says, will end the dream of a “nonpartisan Supreme Court”.  Barnes argues that while John Roberts miraculously found some way to support the ACA in a nonpartisan way, should he find against Obamacare now, he will destroy his legacy forever.

In a spectacular display of spot-welding, the chief justice joined fellow conservatives on some points and brought liberals on board for others. Roberts was the only member of the court to endorse the entire jerry-rigged thing, and even he made sure to distance himself from the substance of the law. (“It is,” he wrote, “not our job to protect the people from the consequences of their political choices.”) Still, his efforts rescued President Obama’s signature achievement on grounds that many had dismissed as an afterthought….

And then here comes Obamacare II. In King v. Burwell , to be argued Wednesday, plaintiffs say the text of the law must be interpreted in a way that would neuter it, canceling health insurance subsidies for about 7.5 million Americans in at least 34 states. Can Roberts’s portrayal of the Supreme Court as above politics survive another round with the most partisan issue of the decade?

Funny how that works. Everywhere the pundits seem to be saying that even though they no longer believe Obamacare is unassailable, they are urging on the Republicans to forbear from plunging in the knife because it would ruin the GOP reputation forever.  David Frum’s article in the Atlantic is the least ridiculous of these attempts.  Frum says the Republicans don’t dare win for fear of starting chaos.

At the Washington Examiner, Byron York detailed Senate Republicans’ increasingly frantic political calculations:

Republicans are going to find a way to continue paying subsidies to the estimated 7.5 million Americans who receive taxpayer-funded help to pay their insurance premiums through the federal Obamacare exchange.

The prospect of seeing those people lose their subsidies—even though some have received them for a short period of time, and even though Obamacare has imposed burdensome costs on many other Americans—is just too much for Republican lawmakers to risk.

"We're worried about ads saying cancer patients are being thrown out of treatment, and Obama will be saying all Congress has to do is fix a typo," said one senior GOP aide involved in the work.

Precisely because the outcome of a successful challenge to the ACA will unleash such operatic chaos, it seems more likely that the Court will flinch. The Supreme Court has upheld every social program enacted by Congress since Social Security in 1937—and it would take five very bold justices to disembowel the Affordable Care Act less than three years after they upheld the constitutionality of its most controversial feature, the individual mandate.*

Yet the same considerations didn’t hold the Obama administration back when it was fundamentally transforming America.  Somehow the press only regards as radical and extremist a return to the status quo ante, which after all, has the benefit of being a known quantity.

It takes Bobby Jindal to point out the obvious: a government loss in King vs Burwell won’t cause the sky to fall.  Even if subsidies are canceled, he notes, it will only mean that less taxes will be collected.  For every person who doesn’t get the subsidy there’s someone who doesn’t pay a tax. Sometimes they’re the same person since 52% of all those who received subsidies, according to H&R Block, had to pay some or all of it back. The subsidy money that won’t be paid isn’t somehow destroyed.  Writing in the National Review Jindal explains:

As a result, a ruling in King v. Burwell striking down the subsidies would represent a sizable tax cut. The Congressional Budget Office (CBO) January baseline gives the numbers: Eliminating the employer mandate nationwide would cut taxes by $164 billion, and weakening the individual mandate — assuming it would no longer apply to any individuals who heretofore qualified for subsidies — would cut taxes nationwide by approximately $18 billion. Conversely, eliminating the subsidies would raise taxes, but only by $134 billion. That’s because most of the subsidies ($775 billion worth) come in the form of refundable credits — the government writing checks to individuals with no income-tax liability — which budget scorekeepers consider not a tax cut, but government outlay spending.

Eliminating the subsidies nationwide would therefore cut Americans’ tax liability by approximately $48 billion on net. Granted, these sums from CBO apply to all 50 states, while the King ruling would apply only to the 37 states that have not established exchanges. But the trend from the numbers is crystal clear: The tax reduction from eliminating the employer mandate, and weakening the individual mandate, outweighs any tax increase from eliminating the subsidies — meaning a favorable ruling in King v. Burwell would cut Americans’ taxes by many billions.

Which means uncollected tax money available for replacement programs, such as are suggested by John Kline, Paul Ryan and Fred Upton.  Or at the worst it would mean some kind of reversion to the status quo ante but with more money in consumer’s pockets.  Either way, it won’t be the end of the world.  It might even be the beginning of a new one.

Obamcare Driving a Stake Through Social Security’s Heart


The next time Obamacare advocates talk about the “free money” being passed up by states that refuse to expand Medicaid, or when you next hear about all the billions of dollars in subsidies that the ACA is handing out to policyholders, spare  thought for Social Security.  The crisis of Social Security is proof that the Federal government hasn’t got a dollar to spare.

The program that millions of Americans rely upon for retirement will so go bankrupt.  And when it does it will leave untold numbers in the lurch. According to Bankrate “one-quarter (26 percent) of retirees depend on Social Security as their only source of income.”

The problem is that the program disburses more in benefits than it receives in contributions.   According to Wikipedia, “in 2009 the Office of the Chief Actuary of the Social Security Administration calculated an unfunded obligation of $15.1 trillion for the Social Security program. The unfunded obligation is the difference between the future cost of Social Security (based on several demographic assumptions such as mortality, work force participation, immigration, and age expectancy) and total assets in the Trust Fund given the expected contribution rate through the current scheduled payroll tax.”

Investors Business Daily has a chart showing the drop-dead date of Social Security under different scenarios.  The red curve is the CBO’s estimate, the blue is Social Security’s, which the Investors Business Daily believes may be unrealistic.

In 2025, the Social Security Administration expects the economy to be nearly $2 trillion bigger than the Congressional Budget Office does: $29.6 trillion vs. $27.7 trillion. Even the White House budget office, sometimes accused of accentuating the positive, sees GDP $1.5 trillion smaller than does the SSA.

The divergence over the revenue outlook for the retirement program is even more dramatic: SSA expects revenue to grow roughly 40% faster than does CBO over the coming decade. In fiscal 2025, SSA anticipates program revenue of $1.4 trillion, up from $778 billion in 2014 and about $175 billion more than CBO projects.


The difference between the two dates is driven principally by falling work force participation, one of the key variables in the Social Security income equation. According to the Congressional Budget Office  Obamacare will depress this and this will bring forward the date on which Social Security collapses. The actual CBO report says that Obamacare will shrink the number of people who will work; hence the contributions to Social Security.

CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and

other incentives they will face and the financial benefits some will receive. Because the largest declines in labor supply will probably occur among lower-wage workers, the reduction in aggregate compensation (wages, salaries, and fringe benefits) and the impact on the overall economy will be proportionally smaller than the reduction in hours worked. Specifically, CBO estimates that the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017–2024 period, compared with what it would have been otherwise. Although such effects are likely to continue after 2024 (the end of the current 10-year budget window), CBO has not estimated their magnitude or duration over a longer period.

The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024. Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA. The decline in fulltime-equivalent

employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours; however, CBO has not tried to quantify those two components of the overall effect. The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise  rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).

Generally speaking, 7.65 percent of a paycheck is withheld for FICA -- 6.2 percent for Social Security and 1.45 percent for Medicare.  Fewer working people mean less money for Social Security and for Medicare.  The main point to remember is that the administration is not flush with free money.  It is on the edge of bankruptcy.  A $29 trillion dollar unfunded liability is a wall nobody knows how to get around.

In 2012, the Daily Kos predicted that Obamacare would help save Medicare! It carried an administration boast that the ACA would save Medicare $200 billion by 2020.  Unfortunately the exact opposite has happened.  By cutting employment Obamacare is starving Medicare -- and Social Security -- of funds. Now even Ezra Klein of Vox has given up on savings.  His new narrative is that the administration may be spending more money, but it is money well spent. “Cost is not the biggest problem in America's health-care system. Value is. And cutting costs may actually be counterproductive.”

If the health-care system got much better at delivering health, then it might make sense to spend what we do now — or to spend even more than that. So long as the system isn't delivering good value for the money, then yes, cutting costs makes sense. But it's important not to lose sight of the real goal: more health, not less health spending. Washington's myopic focus on costs risks doing just that.

Klein talks as if it were only a question of buying something you need even if it is expensive. But it’s money the Federal government doesn’t have.  And it makes no more sense to argue you should buy shoes you need even if you can’t pay for it than to argue Obamacare is worth every penny that isn’t there.

Margaret Thatcher famously said that socialists could never understand that you could run out of “other people’s money”.  The Federal government has run out of taxpayers money.  There is nothing spare left.  It will be lucky to avoid crashing Social Security.  Nothing justifies acting like a Big Spender and disbursing overpriced largesse like money was going out of style.

But that’s exactly what it is doing.  Economics, not King vs Burwell, is the Achilles Heel of the Affordable Care Act.

The Republican Dilemma


There were signs of division among Republican leadership figures over the whether -- or how hard -- to push for Obamacare’s repeal. The chief sign of vacillation came from Jeb Bush’s widely noted declaration that ‘repealing Obamacare was not one of the top 5 items’ on his agenda.  The Weekly Standard reported:

Over the past few days at CPAC, Sean Hannity has asked various prospective Republican presidential candidates to list their “top five agenda items.” Former governor Jeb Bush’s list did not include repealing Obamacare.

Bush’s list included (1) undoing President Obama’s lawless executive actions, (2) regulatory reform, (3) tax reform, (4) encouraging economic growth, and (5) sending “a signal to the rest of the world that we’re going to be their partner for peace and security.”  But it did not include repealing Obamacare or signing a conservative alternative to Obamacare into law.

Neither Governor Scott Walker nor Senator Marco Rubio listed repealing Obamacare as a stand-alone agenda item, but both did list it as a subcomponent of their first agenda item.

This was widely interpreted as suggesting that some in the GOP would not buck the lobby behind Obamacare. Mother Jones noted that “corporate America” was solidly behind their bailouts and expanded market share.

There's no better evidence of this than a brief filed on behalf of the government in King by the Hospital Corporation of America, better known as HCA, the largest health care provider in the country (once run by Obamacare foe Florida Gov. Rick Scott). HCA argues that the legal theory advanced by the plaintiffs is "absurd," but, more importantly, it presents detailed data drawn from its own operations that demonstrate that the health care law is helping patients and the company itself.

In a kind of voice from the “lesson from the past” kind of speech Ted Cruz described how the 2013 fight to defund Obamacare failed. “In a wide-ranging speech to the Club for Growth winter meeting Friday night, Sen. Ted Cruz looked back on his 2013 crusade to defund Obamacare — an effort that consumed Washington, led to bitter Republican party infighting, and resulted in a partial government shutdown — and concluded it was a fight he probably never could have won.”

The problem Cruz highlighted was a simple one: the Republican leadership was determined to sell out. They broke ranks and the resulting fragmented coalition could not hold.  Cruz implicitly conceded that the Democrats had won the media battle.

Cruz, who is considering a 2016 run for president, conceded that "I made some mistakes" in the shutdown battle. "The single biggest mistake … is I think that I and our allies did not spend enough time explaining the specific strategy to elite opinion makers," Cruz said. "And I think there was confusion that made it less effective."

Whatever mistakes he believes he made, Cruz reserved the biggest blame for the Republican Senate leadership under Sen. Mitch McConnell, whom Cruz never mentioned by name. Conceding that the defunders' plan "went awry," Cruz said the big problem stemmed from the GOP leadership. "What we did not anticipate was that Senate Republican leadership would actively, vigorously, vocally lead the fight against House Republicans," Cruz said. "Once that happened, it became almost impossible to win that battle."

But all the auguries are two sided coins.  For example, although Jeb Bush did not rate the repeal of Obamacare at the top of his list, Rubio and Scott Walker did.  At Cruz himself put the repeal of “every blasted word” of Obamacare at the head of his agenda.  This means that while some -- like Jeb Bush and Mitch McConnell -- were not onboard, the others had nailed their colors to the mast.

Bobby Jindal, who is also a 2016 presidential hopeful, frankly discussed the divisions within the party in a way that characterized them as unbridgeable.  Speaking to reporters at the Club of Growth, Jindal called “congressional Republican leaders ‘fearful’ of acting to fully repeal President Barack Obama’s health care law.”  They are caught on the horns of a dilemma, afraid of taking on the president on the one hand yet aware they owed their positions to a wave of anti-Obamcare sentiment that swept the country.

Jindal says he thinks GOP leadership in Congress and other lawmakers are fearful of being criticized “for putting anything out there that could be attacked.” He asks why there hasn’t been a vote yet.

Republicans captured the Senate, including almost every targeted race, and enlarged their House majority in part by campaigning against the health care law, Obama’s signature domestic accomplishment.

The Louisiana Governor spoke as if the GOP brand was in danger of ceasing to exist as a distinctive alternative to the Democratic party.  It had stopped being different because it was beholden to the same pressure groups and lobbies that the Democrats were controlled by.

“We don’t need a second Democratic party, we don’t need to be liberal, we don’t need to be cheaper liberal Democrats, we need to be principled conservative Republicans,” Jindal said Thursday at the Conservative Political Action Conference. …

“I don’t know about you, but I don’t remember during those campaign ads last November, I don’t remember them saying we’re just going to repeal the easy parts of Obamacare,” Jindal said. “It is time for them to govern the way they campaigned.”

He continued, “This election wasn’t about getting a nicer office for Sen. Mitch McConnell, it wasn’t about keeping a bigger office for Speaker John Boehner, this election was about taking our country back and it starts by repealing Obamacare.”

But that’s just the problem.  For many politicians elections are in fact about getting nicer offices and more personal power, not fighting some “Mr Smith goes to Washington” campaign against the establishment.  This line of reasoning is behind the cynical articles suggesting that the GOP is hoping to lose the King vs Burwell decision in the Supreme Court.

Yet despite the softness of the Republican leadership they continue to advance in spite of themselves, sucked in by the vacuum of an imploding Obamacare itself. Kimberly Strassel of the Wall Street Journal argues that the Republicans may have to face up to possibility that  they will win even if they try to lose.  Even a crooked boxer can’t actually take a dive if his opponent is lying kayoed on the floor.  “Pure, unadulterated political gifts don’t come often to Washington, and even when they do their recipients are often too busy inspecting the horse’s mouth to make use of them. The miracle gift this season is King v. Burwell, and next week will show whether Republicans have the wit to unify around an effective strategy to dismantle ObamaCare.”  She writes:

If the Supremes strike down the subsidies anyway, President Obama will be instantly on a stage, explaining that an activist court, at Republican bidding, stole health care from six million Americans. He’ll be flanked by dozens who lost subsidies and tell stories of cancer and bankruptcy. He’ll ask if Republicans really are willing to deny little Tommy chemo—out of a base desire to obstruct him—when they could make an easy and permanent fix by changing a few, tiny words in the law. He’ll pressure GOP governors to default to bad ideas that will effectively reinstate his policies.

There’s no way either Boehner or McConnell can keep their nice offices in the way of things.  Obama will attack in any event.  The only way the GOP can survive is to win.  They can’t get by just losing.

Washington Secrets


It’s a time for secrets in Washington. The Treasury has refused to explain where nearly $3 billion in bailouts of insurance companies have come from, despite inquiries by Congress.

The U.S. Treasury Department has rebuffed a request by House Ways and Means Chairman Rep. Paul Ryan, R- Wis., to explain $3 billion in payments that were made to health insurers even though Congress never authorized the spending through annual appropriations.

At issue are payments to insurers known as cost-sharing subsidies. These payments come about because President Obama’s healthcare law forces insurers to limit out-of-pocket costs for certain low income individuals by capping consumer expenses, such as deductibles and co-payments, in insurance policies. In exchange for capping these charges, insurers are supposed to receive compensation.

What’s tricky is that Congress never authorized any money to make such payments to insurers in its annual appropriations, but the Department of Health and Human Services, with the cooperation of the U.S. Treasury, made them anyway. …

In response, on Wednesday, the Treasury Department sent a letter to Ryan largely describing the program, without offering a detailed explanation of the decision to make the payments. The letter revealed that $2.997 billion in such payments had been made in 2014, but didn't elaborate on where the money came from. Over the next decade, cost-sharing payments to insurers are projected by the Congressional Budget Office to cost taxpayers nearly $150 billion.

There have been many warnings that hidden bailouts to insurers were in the offing. In late 2014 Scott Gottlieb wrote: “For months, there have been assertions that the mechanisms embedded in Obamacare, designed to offset losses that insurance companies will take this year on their exchange business, amount to a bailout of the insurance industry.  At the same time, it wasn’t clear where the money to pay for these “risk adjustments” would come from in the first place.”

Even if the Obama team tried to re-program slush funds that it surfaced inside the Department of Health and Human Services, a recent analysis by the Congressional Research Service makes clear that first, Congress would have to separately appropriate the funds in order for any money to be spent on the Obamacare plans. That was never likely to happen.

Where bailouts are actually coming from is still unknown -- and Treasury is not saying.  

There’s another big secret moving under the surface of the capitol.  Despite the show of confidence that the administration will prevail in King vs Burwell, it has been rumored that the administration may have a  confidential plan, operating under some unknown mechanism, to continue the subsidies by other means even if they are declared illegal by the Supreme Court.  “A Republican House subcommittee chairman is accusing the Obama administration of secretly preparing a fallback strategy if the Supreme Court strikes down a major piece of its healthcare reform law later this year, even as officials publicly maintain that no plan exists.”

Rep. Joe Pitts (R-Pa.), chairman of the House Energy and Commerce Health Subcommittee, says federal officials are hiding a roughly 100-page document on the looming court case. The case, King v. Burwell, could cut off ObamaCare subsidies in three-quarters of states and potentially collapse the national marketplace.

Pitts confronted the head of the Department of Health and Human Services (HHS) about the plan, which he says is being circulated among senior officials, for the first time on Wednesday

HHS Secretary Sylvia Mathews Burwell said she does not know of a planning document.

Rumors about the fallback plan have been swirling around for some time, yet despite Secretary Burwell’s denials the statements from the Department have been too tightly parsed to be entirely categorial.  Insurance News Net said:

The Department of Health and Human Services as a whole is unaware of any such document, a spokeswoman said by email "on background." Under the department's rules, that means statements can only be attributed to a spokesperson and not an individual. "We know of no such document. As the Secretary said, we know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision."

But the secrets are not all on the Democratic side. The Washington Examiner reports that the GOP has its own secret plan to keep Obamacare subsidies going even if the Supreme Court rules against it.  It’s almost as if too much money, too many lobbies, and altogether too many promises have been made to stop the music now.

So Republicans are working on their own plan. "We're committed to helping the people who have been hurt by the healthcare law," said Republican Sen. John Barrasso, leader of the working group. "We're not going to help the law, but we're going to help the people, so they are not left in the lurch."

What that means is Republicans are going to find a way to continue paying subsidies to the estimated 7.5 million Americans who receive taxpayer-funded help to pay their insurance premiums through the federal Obamacare exchange.

Obamacare is a gravy train. And altogether too many people in Washington DC have hopped on hoping never to have to get off. However, they might settle for a gradual stop. The Wall Street Journal reports that “insurers and hospitals recently launched a lobbying campaign to persuade the court to preserve the tax credits and to press lawmakers to ensure an orderly transition if the justices don’t.”

In an op-ed article published in The Wall Street Journal on Thursday, Republican Sen. Ben Sasse of Nebraska called for an 18-month period of “temporary, transitional relief” if the court rules against the credits.

“Obamacare took these patients hostage. Conservatives have a duty to save them…Congress should offer individuals losing insurance the ability to keep the coverage they picked, with financial assistance, for 18 transitional months,” he wrote.

Aides to Mr. Sasse said he didn’t necessarily want to retain the tax credits in their current form.

The move is being debated privately by Republicans. Leaders, including House Ways and Means Committee Chairman Paul Ryan of Wisconsin and Senate Finance Committee Chairman Orrin Hatch of Utah say they aren’t ready to release plans.

But Sen. John Barrasso (R., Wyo.), who is working with Mr. Hatch and others on a GOP replacement plan, called it “a terrific idea. We want to protect the people, not the law.”

Sen. James Lankford (R., Okla.) said, “I do believe we have to have a bridge, but that needs to be part of a larger agreement.”

As a practical political matter the Republicans are probably looking for a way to kill Obamacare without offending too many of the interest groups which are sucking away at taxpayer money. There’s the insurance companies -- who are getting money from somewhere -- and there are the policy holder’s subsidies.

There’s also the taxpayer, but nobody really minds him.

King vs Burwell: the Propaganda Heats Up


It’s full-court press time.  Articles describing the vital necessity of Obamacare are flooding the zone in anticipation of King vs Burwell.  They run the register of notes from “the sky is falling,” to “resistance is futile, you will be assimilated.”  But their intent is identical.  They are preparing the “battlespace” for the decision, framing the public debate ever so subtly so as to influence the decision.

The “sky is falling” is the theme of a Guardian article which says, Chaos could ensue if the supreme court strikes down Obamacare.  “Eight million Americans risk losing their health insurance if the supreme court sides with opponents of the Affordable Care Act next week. The court will be hearing oral arguments in King v Burwell, the latest legal challenge to the act on March 4. If the court rules against ACA, chaos in the healthcare market could ensue. Fewer people with effective access to medical care could lead to an estimated 9,800 deaths per year. And many more would undergo needless suffering and financial calamity.”

Joshua Green at Bloomberg Politics has an almost identical message. “If the plaintiffs prevail, millions of people in 34 states who bought insurance on federal exchanges would suddenly lose the subsidies that make it affordable. Consequently, most would lose their coverage. A Rand study pegged the number at 9.6 million people, with premiums soaring 47 percent for those still able to afford them. ‘Everyone agrees this would be a cataclysmic hit to the insurance market,’ Michael Kolber, a health-care attorney at Manatt, Phelps & Phillips, said at a Feb. 13 Bloomberg Intelligence panel on King v. Burwell.”

Somewhat more highbrow is a piece from Abbe R. Gluck, professor at Yale Law School.  He argues that if King should win, then the Republicans would be Democrats.  The horror, the horror.

The Supreme Court, led by its conservatives, has spent the past four decades developing a set of legal rules to protect states from federal imposition. Those rules require Congress to provide unmistakably clear notice in the text of a statute before the Court will read a statute to intrude on the states. As read by the challengers, the ACA would completely violate these Court doctrines.

In fact, these very same state-protective rules were used by those who challenged the ACA in 2012—as well as by seven Justices in that case when they concluded the ACA’s Medicaid expansion was impermissibly coercive on the states. It is thus remarkable that the King challengers—formerly staunch federalists—have suddenly adopted an interpretation of the law diametrically at odds with these protections. They do not mention these flagship cases in their briefs, even though the consequences that their reading would impose on the states are far more intrusive—and come with no explicit warning in the statute—than those at issue in Medicaid expansion.

For comic effect there is the New York Times piece which argues that Obamacare is so bad that it’s good.  Margot Sanger-Katz says that people being bumped off plans or unable to renew because their premiums have skyrocketed are shopping harder -- and that’s good.

Those high rates of shopping and switching are unusual in public health insurance marketplaces. Other government programs that allow customers to shop for health plans have had switching rates close to 10 percent. Indeed, a key policy feature of the marketplace this year was an automatic renewal process, which kept people who did nothing enrolled in the same plan from last year.

There are clear advantages for some people in staying in the same insurance plan from year to year — mainly that you can stick with the same doctors and hospitals. But an Upshot analysis of data from the McKinsey Center for U.S. Health System Reform found that people who bought the most popular plans last year often faced substantial premium increases if they stayed put.

It’s not clear from the government’s report how many people who switched saved money by doing so. But the administration has said that more than 70 percent of all customers could save money by switching, so it’s likely that most of the switchers ended up in a cheaper plan. There may be other reasons to switch, of course — maybe some people didn’t like their plan. And even some of last year’s plans are experiencing some changes that could make them less attractive to existing customers, as a ProPublica analysis published in The Upshot highlighted.

The high switching rate, a surprise, remains a bit of a mystery to experts who study insurance markets. There are a few possible reasons more people than expected may have shopped. One is that Health and Human Services worked hard to encourage people to look again at other options. The customers shopping for insurance in the Obamacare marketplaces also tend to have lower incomes than those in previous public insurance markets, and insurance premiums make up a larger proportion of their incomes. Those factors may have made them more price sensitive and motivated to find the best deal.

This sort of approach is called making a virtue out of a necessity.  The information that “the administration has said that more than 70 percent of all customers could save money by switching” really means that 70% of policies can’t be renewed at the old price.  The cost has gone up and so people are out there looking for something affordable.  Ordinarily this would be bad news, but here it is presented as an incentive to find a better deal.

This is like finding your airplane ticket on the return leg has gone up and you are now shuttling from airline counter to airline counter in a desperate search to book passage home.  Do you think that’s good news?

We learn that these price increases have largely hammered the poor who were compelled to go out and do whatever it takes to get something they could afford. “The customers shopping for insurance in the Obamacare marketplaces also tend to have lower incomes than those in previous public insurance markets, and insurance premiums make up a larger proportion of their incomes. Those factors may have made them more price sensitive and motivated to find the best deal.”  Is that good news?

Why sure it is, if you’re an advocate for Obamacare.

Yet for all the happy talk about how little chance a challenge to Obamacare has; for all the upbeat depictions of people desperate for an affordable deal, the ACA has one implacable foe: cost.  Unless Obamacare is repealed, it will simply bankrupt both the government and its policyholders.  Economics is an issue that goes beyond the legal doctrines cited by professor Gluck.  It goes to the quality of the product and its price.

The fact is Obamacare is overpriced, mediocre insurance that the government can’t afford to subsidize, and that violates American’s basic rights.  Recently, H&R Block reported that 52% of all those who received subsidies last year have to pay it back in whole or in part. Even today it is unaffordable.  In the long haul there’s not a prayer.

The assertion that cutting off the “free money” to the states suffers from the defect that the money isn’t free. In fact, it often comes from the same people who get the subsidies. Chaos could ensue if the Court upholds Obamacare.  That is probably more true than the chaos resulting from striking it down.

Costs Do Matter


Ezra Klein at Vox now concedes that Obamacare is not slowing down the cost increases in healthcare, something the ACA initially promised to do.  When Klein was still at the Washington Post in 2010 he wrote that Obamacare would cost a lot up front after which it would bring down costs.

In other words, 2014 is a one-time increase in spending level as we get 30 million new people covered. After 2014, costs grow more slowly than they would without the health-care reform bill. And as some of you know, the major spending controls, like the excise tax and the Medicare board, only really start in 2018, so we can expect spending to slow even more in the years beyond this projection. And that, of course, is exactly what the Congressional Budget Office found when it looked at the bill on a longer timeframe.

So, the nickel version: Spending goes up in 2014 because we're covering 30 million new people and then down after that because we're controlling costs in the system.

But now in 2015 Klein asks: who says health care costs are important? Gone is the argument that Obamacare will control costs.  In its place is the assertion that costs aren’t really that important.

Though it often seems no one agrees on anything, both parties agree that the biggest problem in American health care is cost. The closest thing Republicans have to a health-care plan — Rep. Paul Ryan's budget — is focused on cutting costs. Now leading Democrats tell Sarah Kliff that now that Obamacare is up-and-running they're going to turn their attention to cost. It's as if the point of having a health-care system is to spend less on it.

But both parties are wrong. Cost is not the biggest problem in America's health-care system. Value is. And cutting costs may actually be counterproductive.

To see why, consider two possible futures for American health care:

  1. The federal government passes a law making all health-care services illegal. Systemwide costs drop to zero.

  2. Researchers at the National Institutes of Health invent a pill that, if taken daily, guarantees a healthy life until the age of 168. The pill is expensive, and giving it to every American requires raising health-care spending to 34 percent of GDP.

Does anyone prefer #1? Anyone? Bueller?

But Klein’s thought experiment is absurd.  One place that has actually made some health care services illegal - and only private health insurance at that - is Canada. “Six of Canada's ten provinces used to ban private insurance for publicly insured services to inhibit queue jumping in order to preserve fairness in the health care system.”

Even if US government spending on health care went to zero, people would still be able to buy insurance privately or through their employers - just like before Obamacare.  They might form health care sharing groups such as those run by religious groups.  Or they might go to Walmart clinics like they do now.  And as for #2, any hypothetical miracle pill would probably come from American pharma.  It’s private medicine that’s innovative.

In case you're wondering, the league tables look like this: the US leads in the discovery of approved drugs, by a wide margin (118 out of the 252 drugs). Then Japan, the UK and Germany are about equal, in the low 20s each. Switzerland is in next at 13, France at 12, and then the rest of Europe put together adds up to 29. Canada and Australia put together add up to nearly 7, and the entire rest of the world (including China and India) is about 6.5, with most of that being Israel.

But while the US may be producing the number of drugs you'd expect, a closer look shows that it's still a real outlier in several respects. The biggest one, to my mind, comes when you use that criterion for innovative structures or mechanisms versus extensions of what's already been worked on, as mentioned in the last post. Looking at it that way, almost all the major drug-discovering countries in the world were tilted towards less innovative medicines. The only exceptions are Switzerland, Canada and Australia, and (very much so) the US. The UK comes close, running nearly 50/50. Germany and Japan, though, especially stand out as the kings of follow-ons and me-toos, and the combined rest-of-Europe category is nearly as unbalanced.

One of the reasons - though not the major reason - why Obamacare hasn’t made health care more affordable is because it is subsidizing quacks. As Andrew McCarthy points out:

Under the so-called Affordable Care Act, the federal government will recognize and subsidize a great deal of hokum, things like naturopathic medicine and acupuncture that have no scientific basis, that have been clinically shown to be useless or worse, and that are rooted in rank mysticism, from the “qi” energy that acupuncturists claim to manipulate—and which does not, technically speaking, exist—to the “innate intelligence” underpinning chiropractic theory—which does not, in fact, exist, either. As endless peer-reviewed scientific studies document, this stuff is pure quackery. …

Senator Harkin successfully campaigned for ACA provisions that would forbid “discrimination” against any practitioner of purported healing arts who is licensed. Many states, California prominent among them (quelle surprise!) license practitioners of superstitious hokum, including naturopathic “doctors” and acupuncturists. There are many reasons for this: One is that superstitious hokum is extraordinarily popular, and the state desires to keep an eye on its practitioners; a second is that California is, as advertised, full of lunatics and the entrepreneurs who service their lunacy; the third is that reasons Nos. 1 and 2 combine to generate revenue for the state, which will—in what must be the most perfect example of progressivism in practice—yank your license to practice medically null but voguish Eastern mysticism in the state of California for failure to pay your crushing California taxes.

Even allowing for McCarthy’s literary ebullience his point is a valid one.  How can Ezra Klein talk about “value” in an program which reimburses “qi” energy?  At any rate, cost is not an irrelevant consideration in the delivery of any economic good.  Think Progress cites an actuary who argues, probably correctly, that insurers will have to raise premiums if the Supreme Court invalidates subsidies that are being paid by the federal government.  In other words Think Progress is saying that cost matters.

In an early warning of what will happen if the Supreme Court backs a legal attack on the Affordable Care Act, the American Academy of Actuaries sent a letter to Secretary of Health and Human Services (HHS) Sylvia Burwell on Tuesday asking Burwell’s department to permit insurers to raise premiums if the justices vote to defund much of the law. According to the letter, a decision against Obamacare threatens many insurance companies’ “solvency,” unless those insurers are able to raise premiums in the wake of such a decision. Needless to say, if an insurer becomes insolvent, that endangers its customers’ ability to pay for their health care.

Of course it does. Cost matters very much indeed in every purchase decision we make. It would not be unfair to point out that subsidies are derived from taxes collected from the same pool, sometimes from the exact same people the subsidies are doled out to.  According to H&R Block, 52% of customers have had to pay back Obamacare subsidies to some extent or the other.  

The more efficient a system is, the more money is available for actual medicine.  However it is quite obvious by now that Obamacare is really about massive quantities of paper shuffling in which insurers and taxmen - not doctors - are the principal actors.  That is why it is raising costs.  Ezra Klein may want to move the goal posts by saying that “costs do not matter” now that Obamacare is playing out exactly the way its critics predicted, but sadly, for Ezra Klein, rhetoric and wishful thinking are no match for reality.

The Story Behind Obamacare’s Passage


The sordid background to Obamacare came into closer focus as newspapers wondered aloud why industries like “big pharma” weren’t getting behind the faltering program.  After all the billions they had received they could at least get behind the president. The liberal Mother Jones asked: “Why Is Big Pharma Financing a Conservative Group Trying to Destroy Obamacare?”  Author Stephanie Mencimer went on to explain the Faustian bargain.

During the contentious battle to pass the Affordable Care Act, the pharmaceutical industry was a crucial partner of President Barack Obama. Big Pharma sank $150 million into an ad blitz promoting the Obamacare bill and spent millions lobbying for its passage. Backing health care reform was a no-brainer for the drug manufacturers; they stood to reap billions in revenues as a result of expanded health care coverage. Yet all of this makes one of Big Pharma's alliances highly curious: It has bankrolled the libertarian think tank trying to demolish Obamacare.

The Washington-based Competitive Enterprise Institute has been the driving force behind two high-profile anti-Obamacare lawsuits, including King v. Burwell, which will be heard by the Supreme Court in early March.

The implication was that having been bought, Big Pharma should stay bought. Mencimer details some of the ‘understandings’ that went on behind the scenes.  In exchange for support, they would be protected from competitive and cheaper drugs.

This was the deal Big Pharma cut during the legislative battle over Obamacare: The pharmaceutical companies agreed to support the law and accept about $80 billion in cost-cutting measures over the next decade, and the White House granted the industry lucrative concessions to protect its profit margins. These industry-favoring measures include provisions preventing the government from negotiating lower drug prices for Medicare and Medicaid and blocking Americans from importing cheaper prescription drugs from abroad. Those concessions were costly to taxpayers and consumers, but they were part of the grand bargain hammered out between the White House and Big Pharma. This accord ensured the industry would use its formidable lobbying clout to pass Obamacare—not destroy it.

People would pay more, but it was all for the grand cause of government-run medicine. What was in it for pharma was sales. So far Obamacare has helped push sales in ADHD drugs to astronomical levels.  Another article from Mother Jones by Luke Whelan explains that ADHD drug revenues are up almost $13 billion. The stimulants, which are major component of the medication, are now being pushed on adults.  It’s no longer just speed for kids.  It’s uppers for their parents.

One major reason for ADHD drug revenue's recent growth within the United States is health care reform. The Affordable Care Act (ACA) and Medicaid now require insurance providers to cover mental-health services, including behavioral disorder assessments and treatments. The Department of Health and Human Services reports that this expansion of mental-health benefits will affect more than 60 million people, including 27 million who were previously uninsured.

With more people assessed and diagnosed, Scheffler expects an increase in ADHD treatment to follow. According to his analysis of data from the Centers for Disease Control and Prevention (CDC), around 70 percent of children diagnosed with ADHD are prescribed medication in the United States. ACA and Medicaid also cover ADHD medication costs, which can set consumers back more than $200 a month (PDF).

The industry report cited another reason for the increase in the sales of ADHD medication: the addition of formal guidelines for diagnosing adults with ADHD in the most recent edition of the Diagnostic Statistical Manual of Mental Disorders (DSM). The American Psychiatric Association (APA), which publishes the DSM, added specific descriptions of adult ADHD symptoms for the first time, putting to rest lingering beliefs that ADHD was only a childhood condition. It also determined that only five symptoms from the DSM's symptom list need to be present to diagnose someone 17 years old or older, compared to six symptoms for children.

"Adult diagnosis is skyrocketing," Hinshaw says. A 2014 report released by prescription drug management company Express Scripts calculated that the number of adults using ADHD medication increased more than 50 percent from 2008 to 2012. The IBISWorld report expects this number to continue growing "at a rapid pace" through 2020. This year, adults older than 19 will make up approximately 44 percent of the ADHD medication market, the report says. (The ADHD rate among children plateaued at around 11 percent of school-age children in 2011.)

Medications for nausea should also be in high demand by anyone reading these revelations.  The cold, calculating swap of taxpayer dollars to sell drugs to children in exchange for political power must rank as one of the most cynical and brutal maneuvers in politics.  The Obama administration sold the rights to everything - even to the tax forms.  Better yet, they portrayed themselves as altruistic into the bargain.  Remember, it was for the children.

The Daily Caller reports how H&R Block is being handsomely rewarded with tax business in exchange for supporting Obamacare during its inception. “H&R Block Helped Shape Obamacare, Now Set For Gigantic Payday”.  Richard Pollock writes:

Five years ago, a bevy of high-priced H&R Block lobbyists worked on the tax preparation company’s behalf to shape the Affordable Care Act.

And this April 15, those efforts are set to pay off in a big way for the company.

H&R Block is well positioned to earn more than $100 million in additional fees from low-income Obamacare enrollees as they face the daunting challenge to properly file this year’s complicated health-related tax forms.

Consumers are familiar with H&R Block’s massive “Get Your Billions Back” ad campaign that includes direct appeals to Obamacare recipients who will have to file health information on this year’s IRS tax forms.

The giant tax preparation firm understood from the very beginning how complicated Obamacare would be, and was determined to cash in on it.  By supporting this Byzantine and convoluted “health care” program, H&R Block assured itself of steady stream of agonized taxpayers seeking to escape the penalties, forced to pay handsomely for the service of getting their forms readied.

H&R Block’s decision to seek windfall profits from the Obamacare law also has riled some of its competitors, which are instead providing free help to low-income enrollees in filling out the complex tax forms.

Ryan Ellis, the tax policy director at Americans for Tax Reform and a former H&R Block senior preparer told TheDC that the company hopes to profit from the plight of Obamacare enrollees and those without health insurance who, for the first time, will have to file special tax forms related to their health-care coverage.

It’s like a hospital releasing a virus to drum up business for itself.  The same H&R Block notes that more than 52 percent of those “who enrolled in insurance via the state or federal Marketplaces paying back a portion of the Advance Premium Tax Credit (APTC). The average amount paid back is $530, decreasing the tax refund on average by 17 percent.”

The taxpayers are paying back those ballyhooed “subsidies!”  And H&R Block is charging to figure out what they owe.  The taxpayers are being cooked in their own juice.  It is little wonder that Obamacare has so much clout.  It purchased the support of industry and lobbyists by making backroom deals with those who it supposed to regulate.  Obamacare is an enormously cynical arrangement which is using the power of money to get its way, which is exactly how Washington, D.C. likes it.

Is the Establishment Afraid of Fighting Obamacare


A number of news stories suggest that the establishment is closing ranks around president Obama.  Sarah Ferris in the Hill writes that while “dozens of groups, from Americans for Tax Reform to the National Association of Manufacturers, cheered the move” to repeal Obamacare, the Chamber of Commerce did not.

“The U.S. Chamber is forced to live in the reality that President Obama will veto any wholescale repeal effort of his signature health care law. It is therefore our focus to give the business community meaningful relief where we can from this onerous law,” a spokeswoman for the chamber, Blair Latoff Holmes, said.

The other bellwether is a speculative piece in Reuters by Lawrence Hurley saying that Chief Justice Roberts may once again save Obamacare they way he did by voting for the individual mandate.  “Three years ago, Supreme Court Chief Justice John Roberts cast the tie-breaking vote in a ruling that saved President Barack Obama’s signature healthcare reform. As the high court prepares to weigh another challenge that could shatter Obamacare, a review of Roberts’ recent votes and opinions suggest he could again sway the case the government's way.”

The conservative challengers in the case aim to persuade Roberts and the other eight justices that the federal government has overreached by providing tax subsidies to millions of people in 34 states that didn't create their own insurance exchanges.

Their argument will revolve around wording in the 2010 law that insurance would be provided through exchanges “established by the state,” which they argue rules out a federal role.

But in several key cases in recent years Roberts has voted in ways that could favor the government's arguments. He has raised concerns about upsetting the balance between federal and state law, particularly when there is ambiguity in a law's wording. He has also recognized the need to consider the overall context of a law, not just an isolated phrase.

In both cases the argument is similar.  The establishment is apprehensive about opening the Pandora’s box of fighting an obstinate president, and afraid of rocking the boat as they depend on taxpayer dollars doled out by the federal government, and the prestige the cronyism brings them.  And so, it is obvious that the establishment has moved from fighting against Obamacare - for something better - to neutrality on the matter, to now advocating for the status quo.  This is yet another reason to get health care decisions out of Washington, D.C., and out of the hands of people who care only for their own power and position.

The Punishment for Failure


Those who thought that Jonathan Gruber, who was nightly in the news some months back, had finally made if off the front pages, will be surprised to learn that he’s back.  The Associated Press writes:

MONTPELIER, Vt. — A Massachusetts Institute of Technology health economist who made national headlines last year for talking about “the stupidity of the American voter” was a target Monday in a report from the Vermont state auditor saying the economist may have padded his bills to the state.

Auditor of Accounts Douglas Hoffer said he referred his findings on Jonathan Gruber and his contract with the state to Attorney General William Sorrell. Hoffer said Gruber’s invoices billed Vermont $100 per hour for the work of a research assistant — 1,000 hours in 10 weeks.

The accusation is small change in a trillion dollar issue but it illustrates the ferocity with which the issue has been fought.  Individual reputations and lives have been caught up in the Obamacare controversy like pork in a meatgrinder. It is of more than passing interest to note that the state which stuck the knife into the MIT economist was Vermont, the bluest state in the union.

Perhaps it has not quite forgiven him for speaking out of turn about Obamacare and by his indiscretions providing its opponents with numerous laugh lines and sound bites all to the detriment of the program.  Gruber was fired by Vermont late last year.

Embattled former ObamaCare adviser Jonathan Gruber has been booted from his healthcare consulting gig in Vermont, according to reports on Wednesday.

Gruber had a $400,000 contract with the state, where he was charged with helping to create a single-payer system. But he has faced fierce criticism over the last two weeks for recently unearthed comments saying the “stupidity of the American voter” and a “lack of transparency” aided ObamaCare’s passage.

Gov. Peter Shumlin’s (D) decision to end Gruber’s contract reverses his own statement on Tuesday, when he said Vermont needed Gruber to finish the plan by January.

But losing a $400,000 gig may not have been punishment enough.  Now Vermont is going through his reimbursements with a fine tooth comb. Which only goes to show what lies in store for those who have failed the great leader in his dauntless enterprise.  The lesson will not be lost on anyone else who is thinking of blabbing before an audience.

The Stork is Unwelcome


The bureaucratic character of Obamacare was demonstrated by the difficulty of adding a newborn to family coverage.  A health system designed to explicitly cover abortions had no easy way of dealing with births.  The Associated Press writes, “It's Really Hard To Add A Baby To Obamacare”.

The Obama administration confirms there is no quick and easy way for consumers to update their coverage under the new health law for the birth of a baby and other common life changes.

With regular private insurance, parents just notify the health plan. Insurers still must cover new babies, officials say, but parents will also have to contact the government at some point later.

For now, the website can't handle new baby updates, along with a list of other life changes including marriage and divorce, a death in the family, a new job or a change in income, even moving to a different community.

The difficulty adding children to the plan stood in stark contrast with the almost unbreakable mandate to provide for birth control and abortions.  Recently, the Hobby Lobby company had to go all the way to the Supreme Court to oppose the contraception mandate. “The 5-4 decision, in favor of arts-and-crafts chain Hobby Lobby and one other company, marks the first time the court has ruled that for-profit businesses can cite religious views under federal law. It also is a blow to a provision of the Affordable Care Act which President Obama's supporters touted heavily during the 2012 presidential campaign.”

The GAO also reported that “in a sample of 18 insurers nationwide, all but one allowed women to pay for abortions through their healthcare plans, regardless of whether they are receiving federal subsidies, the Government Accountability Office found after a seven-month investigation.”

It’s easy to abort or prevent babies under Obamacare.  To add them to a health insurance policy, not so much.

Anatomy of a Glitch


Two recent pieces of news have put Obamacare IT back in the news.  The first was a report that a “glitch” was responsible for sending 800,000 wrong tax forms out to taxpayers. “Or, as one government health source put it, ‘an intermittent defect in code’ that may cause tens of thousands of people to have to re-file their taxes.”

The major glitch, which officials announced Friday, is yet another embarrassment for the Obama administration — and another obstacle for people trying to work their way through the confusing first tax season under the Affordable Care Act.

Hundreds of thousands of taxpayers will have to wait for at least a few weeks to get corrected versions of the form, called the 1095-A. And up to a few million Americans probably have to log onto to find out if their form was among the botched many.

HealthCare.Gov used 2015 insurance prices when it was supposed to do math with 2014 numbers. The subsidies themselves were right, federal officials said as they revealed the mess. But the tax paperwork was not.

More than a piece of paper is at stake here. The snafu immediately reopens the door to GOP jabs about competence and the unwieldiness of the big government health care law. And it comes as many taxpayers are learning for the first time that they face penalties for being uninsured or a tax bill if they overstated their income and got too big a subsidy.

How does one get an intermittent defect in the code?  If the code is correct it is always correct.  If it is defective -- which means it does not work for a certain percentages of situations -- it is defective pure and simple.  But never mind that.  Let us proceed to second piece of news about Obamacare IT.  In late January, the AP noted that Obamacare code on inspection showed it was sharing customer data with third parties.

The federal ObamaCare exchange has been sharing data about enrollees with private companies for advertising and data performance purposes, raising fresh questions about the privacy protections in place on the site.

The Associated Press reported Tuesday evening that the information shared with companies can include specific data such as a person's age, income, smoking habits, pregnancy status and ZIP code, as well as their computer's IP address, which can be used, in part, to identify their name and location.

Officials defended the flow of data to private firms, saying it is meant to improve the consumer experience and cannot be used by companies for private gain.  …

The Associated Press report was published hours before President Obama's State of the Union address Tuesday night, where he made a push to protect personal data online through cybersecurity action.

“If we don’t act, we’ll leave our nation and our economy vulnerable,” he said. “If we do, we can continue to protect the technologies that have unleashed untold opportunities for people around the globe.”

What links these two reports is an article by Peter Suderman in Reason, which says that despite the promises made during its catastrophic 2014 launch, Obamacare’s backend remains unfinished.  The backend is the code which performs the business logic, secures the data and feeds information to the browsers accessing it.  If the backend is still a work in progress it would go a long way toward explaining why wrong forms are being mailed out and sheds light on the culture which permits client information to so cavalierly be passed to third parties.

Suderman explains what having an incomplete back-end means:

These incomplete back-end systems were not minor add-ons. They were a critical part of the federal exchange. A government spec sheet from early 2014 warned that "failure to deliver" the payment functionality "by mid-March 2014 will result in financial harm to the Government. If this functionality is not complete by March 2014, the Government could make erroneous payments to providers and insurers.” The fate of the health insurance industry, the document said, was on the line.

We’re now two months into 2015. The second open enrollment period is, at least officially, over. And the systems still aren’t complete.

Instead, insurers are handling calculations manually, sending spreadsheets to the administration, and transferring funds based on those calculations. As Politico, which has consistently provided the best reporting on the outstanding problems with the exchange, reported earlier this week, payments are still being handled via what is essentially a manual workaround, the same workaround that has been used from the beginning. And at this point, Politico reports, “there’s no clear date for when the automatic process will replace it.” That sounds suspiciously like a warning that it could be a long time, if it happens at all.

Politico’s report focuses on the ways that the workaround is time consuming and expensive for insurers. No doubt it is. But it is also potentially quite expensive for the public. As that spec sheet warned, without an automated system in place to calculate the exact payments due to insurers under the labyrinthine rules regarding individual subsidies and broader insurer backstops, there’s a significant risk that the federal government will pay more than it actually owes. Right now, in essence, the insurers are handing the administration bills that cannot easily be checked or verified, and the administration is simply paying the tab, whatever it is.

The last sentence by Suderman should be restated as, “and the taxpayers are simply paying the tab, whatever it is.” The Reason article continues and details the astronomical cost.

All together, building the website cost in excess of $2.1 billion, according to a September 2014 Bloomberg News analysis. This is a $2 billion website—and not only does it still not fully work, almost a year and a half after it was supposed to have been complete, its failures are likely still costing us money.

The phrases “glitch” and “improving the user experience” may simply be PR phrases for incompetence.  Politico reports there has been a lot of effort devoted to sweeping the dirt from out of the public eye.  A lot of attention to appearances. But the dirt is there under the carpet and nobody knows what snakes, creepy-crawlies and bugs are living there.

“You’re not going to find a lot of customer-facing issues,” one insurance industry official said. “It’s more like you lift up the hood, and that’s where the problems are.”

“All of these things, it’s sort of the cost of doing business right now. And it’s not cheap,” the insurance official added, referring to the ongoing administrative expenses of doing so much of it by hand.

The dirt is where nobody is supposed to notice it, until it the squirmy things living there rise up and send out broken forms.  “Oh it’s a glitch,” and the system rumbles on.

A Teaching Moment


The way The Blaze puts the wacky situation is: “Obama Scrambles to Spare People from Obamacare Taxes”.  The subject of the article is the clamor of “advocates” to extend the enrollment period or create exemptions from deadlines and fines the law itself created. Think of it as hitting the “undo” button on your computer. If ever there was a case of people talking to themselves this is it.

Pressure is building on the Obama administration to give uninsured people a second chance to sign up for ObamaCare before they are slapped with a fine.

People without insurance in 2015 will pay a fine of $325 or 2 percent of their income, whichever is greater, during next year’s tax season.

Democrats and several advocacy groups argue that people without insurance don’t realize they’re in danger of taking a significant economic hit.

“Millions upon millions of people are unaware about these penalties,” Ron Pollack, the executive director of the nonprofit group Families USA, said in a briefing Wednesday.

Pressure from Families USA. That would be the same Families USA that received a million dollar grant to talk up how wonderful Obamacare was back in 2013, as Time reports.  Now the same people are now saying: wait.  Don’t let this wonderful program which happens to be a tax disaster descend on millions.

Families USA has received a $1 million grant from the Robert Wood Johnson Foundation, which it will use to collect and distribute to the media personal stories of those who have benefited from the new health insurance exchange rolled out by the Obama Administration October 1. The announcement is good news for the President, who has been widely criticized for the horrible launch of the online marketplace …

The unsolicited donation will “significantly expand” the story bank, which is already over 950 strong, Pollack says, and allow the organization and its partner GMMB, a communications firm, to hire six new positions in Washington, DC. Pollack says that Families USA will be providing new stories for the media and others who are interested “before the month is over.” “We have a bunch of stories that are in the hopper for vetting,” adds Pollack.

The Blaze story continues: “It’s the second time in two years that the administration has extended enrollment under Obamacare. A year ago, officials said they’d give people more time to sign up because of the several glitches that the website was having.”

This time the “glitch” was in the design of the law itself. People are confused by the compexity of the penalties.  “Peter Lee, the executive director of California’s exchange, said he has seen “thousands of cases of consumers who literally walked across the street from a tax adviser” to enroll in his state’s exchange.” Nobody can keep the timelines straight, not even the administration.

Serves ‘em right, says an editorial from the Washington Post, which sees the situation as a “teaching moment” for the public, because fortunately, the government is going to give the miscreants another chance.

As Americans fill out their tax forms over the next several weeks, millions are in for a shock. Those who lacked health insurance last year but could afford to buy it will have to pay $95 or 1 percent of income — whichever is greater — to the government.

This is the first tax season in which people are being hit with Affordable Care Act penalties. Unsurprisingly, opinion polls show that many uninsured don’t yet understand the health care law’s deadlines, subsidies and fines. To many, the penalties will come as a very unwelcome surprise. …

Thankfully, the Obama administration will reopen health insurance markets from March 15 to April 30. Though many people won’t be able to avoid one penalty, at least they will have the option of avoiding another next tax season. This is a good idea that should have been part of the schedule to begin with, and HHS has the legal flexibility to make it happen. …

An extension will allow the government to turn this April’s shock into a useful learning moment rather than just a punitive exercise. The administration should now consider proposals for a permanent calendar change, aligning the opportunity to buy coverage with the incentives to purchase insurance that tax season brings.

It’s mighty generous of the administration to lobby itself to defer penalties that it, itself promulgated.  Especially since the same administration has made a hash of the tax filing process for Obamacare policy holders.  Politico reports that Obmacare programmers used the wrong year to compute the sum on forms the government sent out, thereby invalidating it.  This means the wrong forms were sent out and tax returns can’t be filed without the right ones but the new forms -- assuming there are no more glitches -- won’t be ready for some time.  It’s a perfect Catch-22.

The 800,000 Americans who’ve just gotten erroneous tax forms for their Obamacare subsidy can blame a glitch in that used the wrong year’s data for the calculations.

Or, as one government health source put it, “an intermittent defect in code” that may cause tens of thousands of people to have to refile their taxes.

Precisely how and where that mistake was made is still being investigated. Whether it was a coding error or greater technological flaw, it’s only the latest sign that still has deep troubles despite a second enrollment season that went far more smoothly than the first.

The major glitch, which officials announced Friday, is yet another embarrassment for the Obama administration — and another obstacle for people trying to work their way through the confusing first tax season under the Affordable Care Act.

Hundreds of thousands of taxpayers will have to wait for at least a few weeks to get corrected versions of the form, called the 1095-A. And up to a few million Americans probably have to log onto to find out if their form was among the botched many.

HealthCare.Gov used 2015 insurance prices when it was supposed to do math with 2014 numbers. The subsidies themselves were right, federal officials said as they revealed the mess. But the tax paperwork was not.

This has thrown a wrench into the financial plans of many Americans.  The Politico story continues and describes the effects of this “glitch” on people’s lives.

CMS said that “[a]s soon as we discovered the error, we immediately began examining who was affected, how to communicate about the error, and how to make the corrections process as simple as possible for consumers … We are focused on making sure that every Marketplace consumer understands how taxes and health care intersect and if they need to get a corrected form, the steps they need to take.”

Deputy Administrator Andy Slavitt said all of the affected individuals are being notified by phone and email and will receive corrected forms early next month. About 50,000 of those 800,000 Americans have already filed their taxes based on the wrong subsidy amount. The rest are being asked to hold off until they get the right information.

CMS said that people who need to file immediately should contact its call center or use an online tool at to identify the correct cost of the benchmark plan on which their subsidy is based.

That’s little consolation, suggested Mark Ciaramitaro, vice president of health care services at H&R Block.

“The unfortunate reality is that for many of these impacted taxpayers, the tax refund could be the single largest financial payout of the year,” he said. “For those who have not filed, through no fault of their own, they are being told to wait to file a tax return, further delaying access to their tax refund.”

A Republican Congressman ranted that it was lies, lies and more lies, one piled upon the other, as the program staggered from disaster to disaster.  Of course a political opponent would say that, but the delays and “glitches” seemed to add credence to his accusations.  After all, even Families USA is complaining.

Like most Republicans in the U.S. House of Representatives, Rep. Jim Jordan of Champaign County  is no fan of the Affordable Care Act.  And like most Republicans in the U.S. House of Representatives, he has voted dozens of times to repeal provisions of the health insurance law he calls "Obamacare."

"Obamacare was a bad bill, sold deceptively to the American people, and we've been having buyer's remorse ever since," said a statement Jordan released after a repeal vote on Feb. 3.

"From the beginning, what President Obama told Americans about his health care law proved false," said Jordan, who chairs a House Oversight and Government Reform Subcommittee on Health Care, Benefits and Administrative Rules. "In many cases, you couldn't keep your plan if you liked your plan; you couldn't keep your doctor, if you liked your doctor; the Obamacare website didn't work smoothly; the Obamacare website wasn't secure; health insurance premiums did not go down by an average of $2,500 for families.

If this snafu is a “useful learning moment” in the phrase of the Washington Post, who is it who should be learning?  Is it the harassed public who are running like rats from tax preparer to Obamacare navigator?  Or is the administration bureaucrats who created such a masterpiece that it is urgently petitioning itself for relief?

It’s a teaching moment for someone, but unfortunately, there is little openness to learning.

The Tax Train Wreck


What a mess.

There’s no other term for the current Obamacare tax woes. Yesterday California admitted that it had sent the wrong tax forms to 100,000 people.  You might ask, why do taxes have anything to do with health care?  The answer is that the administration designed it to work that way.  Now it emerges that not 100,000 but 800,000 people have been sent the wrong tax documents nationwide. That is one person out of every five who may have received a subsidy.

This adds up not only to tax trouble, but trouble for Obamacare. Incredibly, federal health officials are attributing this huge number of erroneous forms to “a coding error” and an “intermittent” problem, as if a mistake of this magnitude could be caused by a few typos.

The statements sent to taxpayers from are used to determine whether tax credits were the correct amount. The credits are pegged to the cost of premiums in a consumer’s area as well as to income for the past year. Consumers who received too large a credit must reimburse the government, and those who received too little can claim additional money when they file their taxes.

The forms contained an incorrect value for the local premium, which affects other calculations, the officials said. The government is notifying those who received an incorrect statement.

It is very difficult for consumers to know on their own whether the local premium listed on the statement, known as a 1095-A, is incorrect. Some 50,000 people appear to have already filed their taxes using incorrect statements, federal officials estimated, and a Treasury Department official said the IRS was reviewing what to do about them. The 750,000 who haven’t yet filed are being told to wait until they get corrected statements.

Federal health officials have attributed the problem to a coding error that caused some forms generated in January to include local premium data for 2015, not 2014. They said it was intermittent, and not concentrated in one part of the country."

The Wall Street Journal points out that the code used for constructing the forms used the wrong year. “Here’s where things went awry this filing season. Some forms 1095-A included the monthly premium amount of the second lowest cost Silver plan for 2015 instead of 2014. Yes, you and I know that while it’s 2015, we’re filing our 2014 tax forms – but somehow that got lost at Those folks reported amounts for the wrong year which is why the form needs to be corrected. You’ll see the potentially incorrect amount on Part III, Column B of form 1095-A.”

No subtle error this. What is worse, the feds cannot in many cases send out the correct form until March.  And because one can’t file taxes without the right form, those who were counting on a tax refund now find their finances blocked by the snafu. The WSJ article adds, “here’s the bad news (as if that’s not bad enough already): those corrected forms should be available by early March, not in the next day or so. March. And since the information could potentially affect tax credits and therefore, tax refunds, taxpayers who received the bad tax statements are being asked to wait to file 2014 federal income tax returns.”

The New York Times argues that with so many problems being encountered and with penalties looming over the heads of millions of people who don’t even know they are headed their way, the enrollment period should be extended - by months! “Sign-ups were supposed to close this month, but the Health and Human Services Department announced Friday that it would reopen the marketplaces in 37 states for six weeks in March and April. The goal is to make sure that people who are learning about the deadlines and tax penalties for the first time won’t be shut out of coverage — and forced to pay a penalty — for a second year.”

The Times sadly cites the law’s shortcomings as the reason for this expedient and notes that Obamacare advocates have been clamoring for changes, as if the advocates hadn’t written the law themselves.  In fact Obamacare passed without a single Republican vote.  All of these shortcomings were written in by Obamacare’s architects.

The department’s decision reflects two realities: 1) Confusion about how Obamacare works remains very high. Several surveys have shown that many of the uninsured don’t understand that there are deadlines for coverage, penalties for failing to get insurance, or financial assistance that might make insurance affordable. 2) There’s a basic mismatch between enrollment season and tax season that interferes with the incentive structure of the law. The punishment for not being insured last year comes too late to sign up for this year. That means that without the special period, many people would have been doomed to pay two years’ worth of penalties.

Ironically, in spite the declaration of Valerie Jarrett that Obamacare’s sacred provisions are non-negotiable, the administration is itself the party which is changing it all the time.  And now NYT says the changes aren’t enough.  The desperation is palpable. The fallout for sending two year’s worth of penalties in the mail to voters who didn’t know the penalties existed must have set the administration’s teeth to chattering.

The Wall Street Journal delivers a restrained condemnation of the absolute disaster now unfolding.

We keep reading that ObamaCare is working beautifully—a liberal reverie interrupted only by those moments when the law is not. The latest arrived Friday, featuring another political exemption from the individual mandate.

This tax-filing season is exposing Americans for the first time to the ObamaCare command to buy health coverage or else pay a penalty—or pay maybe, kind of, to some extent. The White House carved out vast exceptions to the mandate last year to assuage its unpopularity, but a few saps are still discovering they must pay 1% of their gross income or $95, whichever is higher, for going uninsured. This remains unpopular, and thus we get calls for more regulatory improvisation. …

It is either a measure of ObamaCare’s complexity or public disrepute, or both, that the White House felt panicked enough to let off even more people from the mandate leash. The list of broad categories of mandate exemptions has reached 29 and counting, to wit: People can opt out because their state did not expand Medicaid; or if they could not use during its catastrophic 2013 launch; or if ObamaCare cancelled their old plan; or simply if they believe the new plans are too expensive. The “hardship” exemption application even includes a write-in option.

Exemptions by the score and extensions by the brace of months are the tangible signs of panic.  There is an urgent need to fix problems as they are being discovered.  But the wholesale dispatch of 800,000 wrong tax forms provokes real doubt over the basic competence of the system.

Readers will recall that the Obamacare computer system has been dogged by scandal from the first.  It was found to be sharing client data with third party providers.  A major Obama insurance participant recently lost 80 million records to Chinese hackers.  The rollout of the website last year became a epic joke.  For health officials to now claim that  800,000 erroneous records were mailed due to a coding error  strains credulity.

Where was the quality control?  Who did the data testing?  How could such a gigantic number of goofs remain undetected until the envelopes were mailed?  All that is certain is that it will muddle on until some series of events puts the whole trainwreck out of its misery.

The Devil In the Details


The devil in every scheme, it is said, is in the details.  Nowhere is this truer than in the Affordable Care Act.  The sheer complexity of this mammoth system is forcing march and counter-march among the multitudes who have been forced to buy it, and among the army of bureaucrats tasked with enforcing it.  Deadlines are announced, only to be extended - and extended again.  

The Washington Post has announced that yet another Obamacare rule affecting small business has been delayed in order to avoid the hardship it would cause.

In the latest in a long string of delays in enforcing the rules under the health care overhaul, the Internal Revenue Service and Treasury Department announced on Wednesday that they will wait until summer to start enforcing financial penalties on small businesses that provide so-called Health Reimbursement Arrangements to their employees.

Under HRAs, employers provide spending accounts that their workers can use to cover a portion of the cost of buying individual health plans. The arrangements, which give employers a tax-free means to help pay for their workers’ health costs, do not comply with insurance standards in the Affordable Care Act, commonly known as Obamacare, according to Treasury guidance issued in the fall of 2013. Consequently, employers who elect to continue offering HRAs could be fined as much as $100 per day per employee.

According to American Action Forum “the justification for the IRS’ decision to limit the availability of these plans is that while HRAs are considered ‘group plans’” for purposes of the ACA, the health benefits offered (effectively none, because the employer offers only reimbursement) do not satisfy other requirements of the ACA; specifically, the IRS states that these plans violate the Essential Health Benefits provision of the ACA, as well as the prohibition on spending caps on these mandatory benefits.”

In other words Obamacare thinks HRAs aren’t good enough and so restricts their use by levying a fine forcing you to buy one of the ACA’s own products.  Except in this case the product is unavailable so check back next year.

Officials also hinted at the fact that the new online health insurance exchanges set up under the law, which were meant to give small businesses more choices and more affordable health insurance options, haven’t quite delivered.

“The market is still transitioning and the transition by eligible employers to SHOP Marketplace coverage or other alternatives will take time,” they wrote.

And when you finally get one of these new “affordable care” products you may find it isn’t affordable and not very good either.  According to Julie Appleby of Kaiser Health News and CNN Money, one shouldn’t count on Obamacare to save one from medical bankruptcy. The basic problem, according to CNN is that the policies have to leave the consumer short in order to be cheap. If the policy actually paid for your medical care the premium would be higher than acceptable.  So the insurance companies advertise a low sticker price then riddle their policies with loopholes to welsh on the patient.  The policyholder thinks he or she is covered until they get the bill.

After Pam Durocher was diagnosed with breast cancer, she searched her health insurer's website for a participating surgeon to do the reconstructive surgery.

Having done her homework, she was stunned to get a $10,000 bill from the surgeon. …

"I panicked when I got that bill," said the 60-year-old retired civil servant who lives near Roseville, Calif.

Like Durocher, many consumers who take pains to research which doctors and hospitals participate in their health insurance plans can still end up with huge bills. …

Consumer advocates say the sheer scope of such problems undermine promises made by proponents of the Affordable Care Act that the law would protect against medical bankruptcy. …

Insurers defend the move to smaller networks of doctors and hospitals as a way to provide the low-cost plans that consumers say they want.

If regulators required them to fully cover charges by out-of-network doctors, that could reduce "incentives for providers to participate in networks" and make it harder to have adequate networks, America's Health Insurance Plans,  and the insurers' trade group.

Blue Cross Blue Shield Association wrote in a joint letter to the National Association of Insurance Commissioners (NAIC).

It would also raise premiums.

Raising the premiums would make it obvious that Obamacare is not affordable.  To keep the illusion from collapsing, the ACA tries to keep the premium price down - though it has been unsuccessful at that too - and conceals the fact that the meal ticket doesn’t buy much of a meal.

Some states have taken other steps to protect consumers:

• Colorado insurers must pay non-network medical providers their full charges, not discounted network rates, for care at in-network hospitals.

• In Maryland, insurers must pay for "covered services," which includes emergency care, but the state sets standardized payment rates.

• Starting in April, New Yorkers won't face extra bills for out-of-network emergency care, when an in-network provider is unavailable or when they aren't told ahead of time that they may be treated by a non-participating provider. Instead, the bills must be settled in arbitration between the providers and the insurance companies.

But it is all a closing of barn doors after the horse has bolted.  The States have to put in place protections against the abuses that Obamacare has enabled.  All they can do is hand out life preservers on the Titanic.  Meanwhile many small businesses are struggling with the mind-boggling delays and changes of the law.  The Washington Post article above describes their plight:

In regards to the rules in the health care law, the delay is nothing new for employers. Most notably, the Obama administration has several times pushed back the start of penalties for business that do not provide adequate health insurance to their employees, first pushing the entire deadline back one year and then last year announcing an even more gradual, tiered (by company size) rollout.

A year earlier, the administration instituted a one-year delay in enforcing rules requiring companies to report their health insurances costs on employees’ tax forms. Officials also delayed additional rules requiring owners to provide equal coverage to all of their employees, and they later postponed fines on health plans that don’t meet certain coverage criteria in the law.

At this point, the small business community has had about enough of the temporary reprieves and is calling for permanent solutions.

But it is not just small businesses that are in disarray. Even individuals who have bought Obamacare plans are finding themselves sinking in bureaucratic quicksand.  Only today Covered California sent 100,000 taxpayers the wrong Obamacare tax form, setting off a scramble to send new forms out.  This is potentially problematic because unless the correct forms are filed the IRS will start levying fines.

SACRAMENTO, Calif. (AP) -- California's health exchange apologized Thursday for sending about 100,000 incorrect tax forms last month to people who purchased private coverage, a mistake that could delay tax filings or force households to amend their taxes.

Covered California acknowledged that it sent out inaccurate coverage information on 1095-A forms and is in the process of sending out revised forms, said spokesman James Scullary. …

The mistake brings another headache for people struggling to understand the new tax penalties. The federal health care reform law requires most people to have insurance or face a tax penalty that increases each year.

The penalty for a person who makes $40,000 a year will increase from $299 in 2014 to nearly $600 in 2015. And a family of four with that same income would see fines increase from $500 to nearly $1,000.

The exchange said many of the mistakes on the tax forms were related to number of months a household had coverage. For example, the 1095-A form may have stated that a family had coverage from April through September, but the family was covered from April through October.

The state sent email and postcard notices to people who received the incorrect forms to let them know they would be receiving new forms. All updated forms should be sent out in the next few weeks, Scullary said.

Anyone who received a wrong tax form but has already filed their tax return is being advised to consult a tax professional.

These unfortunates may have to pay the tax professional to undo the mistake caused by filling out the wrong form sent to them by the government.  They may even be so unlucky as to have to pay the tax professional only to file it late and pay the penalty all the same.  If they are truly unlucky they may find that the insurance policy they purchased at such effort includes nobody in their network who can treat them.

It is complications like this that are referred to as the “devil in the detail.”  While the proponents claim Obamacare works like a dream, most of the people that are forced to live under it, know that it feels more like hell.

The Obamacare Bomb and Backlash


Jason Millman at the Washington Post warns of a possible political backlash if millions of Obamacare insurance policy holders suddenly find they have to pay back the subsidies they received in the last enrollment period.  The word subsidy connotes a gratuity. Consumers are about to find out Obamacare subsidies are like a loan which you have to pay back.

… a new round of political headaches could just be beginning for the administration.

That's because it's tax season, and many Americans could soon be getting an unwelcome surprise that they owe the government a penalty for skipping health insurance coverage.

Up to 6 million Americans are expected to pay a penalty for not having coverage in 2014, according to recent Obama administration projections. The 2014 penalty for this tax season is $95, or 1 percent of family income — purposefully on the weaker side to let people adjust to this new coverage scheme. Most of the uninsured won't actually face the penalty because they'll qualify for an exemption, either related to their inability to afford coverage or some other hardship.

But it's likely that a lot of people who will have to pay don't know it yet. Despite the unpopularity of the individual mandate and the high-stakes Supreme Court case over it three years ago, there's still limited awareness of the penalty among those who could risk triggering it. Nearly half of uninsured Americans weren't aware of the penalty, and almost as many don't realize the law offers financial help to purchase coverage, according to a Harris Poll survey in the fall.

That means millions of people won't learn they'll have to pay the penalty until they file taxes this year, and at that point, it will have been too late to buy 2015 coverage since the enrollment deadline was Feb. 15. The minimum individual mandate penalty more than triples this year, rising to $325, or to 2 percent of income.

"It's the fact that if you didn't apply by Feb. 15, you have no way of escaping the penalty in 2015," said Stan Dorn, a senior fellow at the Urban Institute. "It's not something that a lot of people have necessarily thought through."

This has led directly to appeals from Democratic officials to extend the Feb 15 deadline in the hopes of minimizing the numbers of people who will be slugged by the penalty. California for example, is mulling extending the deadline to April 15 - two months - in order to avoid this potential backlash.  

Extending the enrollment deadline creates a perverse incentive to ignore the deadline.  John Tozzi of Bloomberg Business notes that because the effectivity of policies is reckoned from the deadline, shifting the “last day” means that insurers may be on the hook for more individuals than they reckoned with.

Giving people another two months to enroll for coverage would raise the risk for insurance companies that some people will wait to buy insurance until they need it. That's called adverse selection, and it's why health plans have limited open enrollment windows to begin with. If you could buy coverage all year round, some people would wait until they get sick to sign up, and there might not be enough healthy people paying into the risk pool to cover the costs.

"It takes somewhere from three to seven healthy people to make up for one unhealthy person when it comes to cost," says Jim O'Connor, principal and consulting actuary at Milliman. There's no telling what mix of sick and healthy people would sign up if the deadline were extended. While extra time raises the risk of adverse selection, O'Connor says, the tax penalty "might shake up some of the healthy people" who would have otherwise not enrolled. "It does have some potential for increasing costs," he says, though it would likely be a "manageable change."

But there is another, less publicized reason why enrollments are being extended.  In spite of all the happy talk about soaring Obamacare “sign-ups,” many of these fail to actually pay a premium.  The actual number of enrollees is a much lower number than signups. And there are disturbing indications - from an actuarial point of view - that many of those coming on board are elderly and infirm.

Jed Graham of Investor’s Business Daily notes that “with ObamaCare's second-year sign-up period now in overtime, it looks like paid enrollment will — barring a miracle — finish even further short of forecasts than it did in 2014.”  Significantly, young people are joining at even an lower rate than the already dismal percentages for last year.  Forty percent of the population is rated as young.  But only 24% are joining up.  This means that the people coming on board are older and sicker than the general population.

Even assuming that the 11.4 million sign-up figure announced with fanfare by the Obama administration grows by several hundred thousand during a weeklong extension, the final tally is on pace to dip below 11 million once nonpayers (15% of last year's total) are winnowed out. The Congressional Budget Office had projected 12 million at the start of 2015. ...

Officials haven't specifically said they're using the special extension because of a shortfall in young-adult sign-ups, but that might be a motivation. Data through mid-January showed that just 26% of the nearly 7.2 million people who signed up via were in the 18-to-34 age group vs. 28% during last year's open enrollment.

Minnesota, the only state disclosing its demographic mix for 2015, said 18-to 34-year-olds account for 24% of the total, below last year's 24.3%. That result may have been affected by low-cost insurer PreferredOne's decision not to offer subsidized plans on the exchange this year.

Young adults represent about 40% of the potential exchange pool. Analysts expect second-year enrollment to be somewhat younger and healthier relative to first-year enrollees, both because of the ramping up of the individual mandate and because those most in need of health care had reason to be among ObamaCare's early adopters.

Time is winding down for the exchanges to get the young and healthy on board.

Obamacare advocates are still pushing the narrative that it’s working. New York Magazine’s Jonathan Chait mounted a quixotic  defense of its cost, questioning allegations that the costs have risen. He takes particular aim at Stephen Moore, an economist at the Heritage Foundation.  Here is a sample of his rebuttal.

Moore’s argument is so incoherent that it is hard to follow, but let me try to explain. Higher health costs is not the same thing as higher federal spending on health care. Health-care costs is how much we pay for our treatments (which happens to be much more than what people in other countries pay).

The idea of “bending the curve” is that, in addition to simply paying for the cost of covering the uninsured, Obamacare would try to tame the long-term trend toward health-care inflation. That is not only happening, it is happening in a far more dramatic way than even the most optimistic advocates predicted. Medical costs are rising at the slowest rate in half a century:

Then Chait inserts this chart as proof of his argument that costs have fallen.  But the reader will note that Obamacare is now only into its second enrollment period and therefore the declines which Chait trumpets actually occurred before the ACA and most of it during the Bush administration!  How could it be due to Obamacare?  The proofs of success are thin indeed.




In actuality, arguments such as Chait’s are trumped by the simple market test.  Is the product selling?  The short answer is obviously not.  And that is why Obamacare exchanges, like department stores which have not met their sales targets,  are progressively extending the trading hours.  When a store announces it will close at 6 pm, then extends to 10 pm and is now open till midnight, and still cannot meet customer targets - like the young people quota - no amount of “explaining” by Jonathan Chait can be persuasive of success.

Obamacare is a bomb and people are running for the bunkers to avoid the backlash.

Obamacare Enrollment Much Lower Than Touted


Cost continues to hammer at the Affordable Care Act and it is affecting acceptance.  Avik Roy has dug down into the 2015 enrollment touted to be at a record high and and found that signups have actually slowed down by 54% over last year’s disastrous Obamacare opening.  The reason: cost.  People can’t afford it and are resisting joining.

Last night, the White House tweeted that “about 11.4 million Americans are signed up for private health coverage” through Obamacare’s insurance exchanges. President Obama claims that this figure proves that his health law is working. But once you unravel the spin, what the latest numbers show is that the pace of enrollment in Obamacare’s exchanges has slowed down by more than half. If previous trends hold,  Obamacare exchanges have enrolled slightly more than 5 million previously uninsured individuals: a far cry from 11.4 million.

Roy examines these numbers points out that not everybody who “signs up” enrolls; to enroll is to pay the premium. Since only 84% of those who “sign up” actually pay, the number of people actually enrolled is much lower.  Further, Roy nets out those who had previous insurance from those who enrolled.  His conclusion: “Obamacare Exchanges Will Gain Only 3 Million Enrollees In 2015”.  That is the number of newly insured.

Why did enrollment slow down so much in Year Two? A few reasons.

First, Obamacare’s exchange-based plans are really expensive, even if you partially benefit from the law’s subsidies. In a 3,137-county study we published last year, I and two Manhattan Institute colleagues found that underlying premiums had increased by 49 percent in the average county for people shopping on Obamacare’s exchanges. (You can visit our interactive map and find out how your county stacks up.)

Second, a lot of people who signed up in Year One didn’t stick around during Year Two. For some, this could be a result of changing economic circumstances: for example, a new job with employer-sponsored health insurance. For many others, however, it’s a result of dissatisfaction with the value and quality of Obamacare-based coverage.

In plain language, Obamacare is meeting resistance because it terribly expensive even with subsidies.  Since half of those who received subsidies last year now having to pay some or all of it back, those taxpayer-funded subsidies are not all they are cracked up to be; less a gift than a loan.

Why so expensive?

Dr. Jeffrey Singer gives an example rising from his own experience.  Writing in the Wall Street Journal, Singer says he and other doctors are spending much more time filling out records than before.  Doctors see fewer patients and consequently are tempted to charge them more for less time.  They have become HHS bureaucrats, and as with all bureaucracies, the cost of doing business rises.  Doctors are no different. Add bureaucracy to the mix, and to stay afloat, they must increase prices for the patients they still have time to see.

A 2014 survey by the industry group Medical Economics discovered that 67% of doctors are “dissatisfied with [EHR] functionality.” Three of four physicians said electronic health records “do not save them time,” according to Deloitte. Doctors reported spending—or more accurately, wasting—an average of 48 minutes each day dealing with this system.

That plays into the issue of higher costs. The Deloitte survey also found that three of four physicians think electronic health records “increase costs.” There are three reasons. First, physicians can no longer see as many patients as they once did. Doctors must then charge higher prices for the fewer patients they see. This is also true for EHRs’ high implementation costs—the second culprit. A November report from the Agency for Healthcare Research and Quality found that the average five-physician primary-care practice would spend $162,000 to implement the system, followed by $85,000 in first-year maintenance costs. Like any business, physicians pass these costs along to their customers—patients.

Then there’s the third cause: Small private practices often find it difficult to pay such sums, so they increasingly turn to hospitals for relief. In recent years, hospitals have purchased swaths of independent and physician-owned practices, which accounted for two-thirds of medical practices a decade ago but only half today. Two studies in the Journal of the American Medical Association and one in Health Affairs published in 2014 found that, in the words of the latter, this “vertical integration” leads to “higher hospital prices and spending.”

The bureaucratic bloat goes beyond the doctor’s office. It runs straight into tax time. “Those who purchased coverage through ObamaCare's exchanges will get a lot more ornery come tax time this spring. They'll have to fill out a new and extraordinarily complicated form — the instruction booklet runs 21 pages — that directs them to do things like ‘add allocated amounts across all allocated policies with amounts for non-allocated policies from Forms 1095-A, if any, to compute a combined total for each month.’"

Here’s the catch.  Form 1095-A is only now being mailed out.  You can’t really do your taxes until you get it. And many don’t have it.

"It's not optional," said Lautigar … a CPA and franchisee of H&R Block in Chattanooga. "I've been doing taxes for 20 years, and this is easily by far the biggest change and the most complicated process to add to tax return since the late 1980s. It's a whole new world."

The problem is that many people are rushing to file their taxes, unaware that they need to include forms that may not arrive in the mail until early February.

"The majority of these people do not even know it's coming," Ridge said. "Our biggest, loudest message is, 'Wait for 1095-A. Don't do your taxes without it.'"

The Obamacare maze has been a windfall for tax preparers, like H&R Block. Securities analyst Gil Luria believes Obamacare “would yield as much as $104.25 million in additional revenue for the company this year.”  Medical debt is not something one associates with a person “covered” under Obamacare.  But as Marisa Torrieri at Forbes writes higher costs, coupled with high deductibles and premiums mean that you will often walk away from a hospital owing money - even if you’re insured.

Exacerbating the issue is that even if you upgraded your insurance coverage this year—or plan to do so before open enrollment season ends in a few days—there are many factors at play when it comes to health care costs that it’s nearly impossible to predict what your expenses (or debt) could add up to. ....

In only the second year of the Affordable Care Act, the average premium for individual health plans bought on the open market rose by 5.4% to $389 per month, according to data from Pricewaterhouse Coopers.

And those who had job-based coverage didn’t escape the bite, either. The Kaiser Family Foundation reports that premiums for employer-sponsored health plans have increased by 26% over the past five years, while the average employee deductible has risen 47% since 2009. …

“And a lot of consumers are having to go with a much higher deductible than they used to, or they’re getting underinsured [to save money],” says Pat Palmer, founder of Medical Recovery Services, a firm that helps consumers analyze their health care bills for inaccuracies. “A family may have to get a $10,000 deductible just to afford their premiums, but they’re stuck with the bill [if something bad happens].”

Not only has the Affordable Care Act failed to rein in costs, it has added to them.  The result is Obamacare is simply recycling taxpayer money into the hospital system.  It’s not helping consumers as much as inflating the bills and giving patients a little extra to pay the bloat.  

The American Interest notes the case of Iowa Obamacare seller CoOpportunity Health.  The more policies it sold the deeper in the hole it got.  “The New York Times reports on what happened next:”

Its success apparently helped doom it. CoOportunity’s many customers needed more medical care than expected, according to Nick Gerhart, Iowa’s insurance commissioner, and it had priced its plans too low. After taking control of the co-op in late December, Mr. Gerhart decided last month that it could not be saved and asked a court to liquidate it. The co-op, he said at the time, faced more than $150 million in liabilities. That left its customers scrambling for new coverage, and providers wondering if millions of dollars in outstanding claims would ever get paid.

As John Tozzi writes in Bloomberg Business, you have to insure people who don’t need it to make the policy work.  “‘It takes somewhere from three to seven healthy people to make up for one unhealthy person when it comes to cost,’ says Jim O'Connor, principal and consulting actuary at Milliman. There's no telling what mix of sick and healthy people would sign up if the deadline were extended. While extra time raises the risk of adverse selection, O'Connor says, the tax penalty ‘might shake up some of the healthy people’ who would have otherwise not enrolled. ‘It does have some potential for increasing costs,’ he says, though it would likely be a ‘manageable change.’”

Obamacare policies can be money losers even for insurance companies. The only way to escape the bankruptcy which overtook CoOpportunity is to raise premiums, narrow the networks and increase the deductibles.  In other words sell mediocre insurance to carry those with pre-existing conditions. This is exactly what many insurers are doing.  Is it any wonder that, after the spin is peeled away, Obamacare enrollments are actually slowing down?

The fundamental problem with the Affordable Care Act is that it has not significantly increased competition, nor made health care delivery markedly more efficient.  It has not “bent the cost curve,” but instead has just thrown a slug of money at the problem and imposed massive bureaucratic costs besides.  The arithmetic is beginning to drag it down.  The biggest enemy of Obamacare isn’t the Republicans.  It is economics and common sense.

Why Medicaid Expansion is Not More Popular


Margot Sanger Katz of the New York Times wonders why the Red States can’t be bought off by “free federal money” when by her reckoning they should be.  There’s no explaining it, except through an irrational aversion to progress amounting to a bigotry against change.

In places where the uninsured rate plummeted this year, Republicans still scored big electoral victories.

Arkansas, Kentucky and West Virginia — states that saw substantial drops in the proportion of their residents without insurance — all elected Republican Senate candidates who oppose the Affordable Care Act. Control of the West Virginia state House of Delegates flipped from Democrats to Republicans. And Arkansas elected Republican supermajorities to both houses of its legislature along with a Republican governor, a situation that could imperil the Medicaid expansion that helped more than 200,000 of its poorest residents get health insurance.

Katz was not alone.  President Obama himself was also wondering why more birds didn’t emerge to eat out of his hand.

Obamacare would be working well if more Republicans were like Ohio Gov. John Kasich, President Obama told in an interview released Monday.

“The good news is that in dribs and drabs, much as was true with the original Medicaid program, you’re starting to see Republican governors and Republican state legislatures realizing that, ya know, ‘We’re cuttin’ off our nose to spite our face — we got an ideological objection to us helping our own constituencies and our own healthcare systems,'” Obama said.

“To their credit, you got folks like John Kasich in Ohio and (Gov. Rick) Snyder in Michigan and now, most recently, the governor up in Alaska and others who are saying, ‘Ya know what, this is the right thing to do, let’s go ahead and expand it.'”

It’s a well-known fact, according to Nicole Kaeding of Cato Institute, that “governors love federal funding.” “Democratic and Republican governors alike are showing their penchant for ‘free’ federal dollars by supporting expanded Medicaid roles in their state. Republicans governors—who often say they dislike Obamacare—are in many cases pushing their legislatures to expand Medicaid to take advantage of this windfall.”

The birds see the nuts and seeds spread on the ground and are drawn to them. Republican governors commonly disguise “collaboration” with Obama by contriving a local brand version of Medicaid expansion to conceal the fact.  Sometimes they get to peck at the seed.  At other times political forces drive them away.

GOP Governor Bill Haslam in Tennessee announced that he would support Medicaid expansion. His administration promoted the plan by saying, “Insure Tennessee will leverage the enhanced federal funding which will pay for between 90 and 100 percent of the cost and in doing so will bring federal tax dollars Tennesseans are already paying back to the state.”

To help minimize the state’s contribution and maximize federal funding, Haslam decided to expand the state’s health provider tax. Under a provider tax, a state agrees to increase Medicaid reimbursements to the providers paying the tax, such as hospitals. The higher reimbursement level draws a higher federal contribution. So state politicians and hospitals win, but federal taxpayers lose.  

In this case, luckily, Tennessee’s legislature denied Haslam’s  expansion attempts.

Governor Mike Pence in Indiana is pushing for Medicaid expansion, dubbing the program “Healthy IN Plan 2.0.” Governor Pence received an “A” in our Fiscal Policy Report Card on America’s Governors last year for his tax-and-spending restraint. But his decision to expand Medicaid to include working-aged, able-bodied, childless adults sends a very different signal.

Governors Pence and Haslam aren’t the only two Republicans wanting to expand Medicaid. Wyoming Governor Matt Mead said that by rejecting Medicaid expansion the legislature is “rejecting $120 million dollars meant for Wyoming.” Governor Gary Herbert of Utah has said that Medicaid expansion allows “Utah [to bring] taxpayer dollars back to our state.” More than 10 Republican governors support Medicaid expansion, many using this same sort of rhetoric.

When you come right down to it, almost nobody says “no” to money.  But of course everybody knows “free money” isn’t really free.  It is actually your own money and the bill will come back to bite you. So some politicians stay away notwithstanding the temptation. Kaeding writes about this phenomenon and why it is important:

These governors justify their actions by claiming that it will return tax dollars to their states. But Medicaid spending is not a fixed pie. The more that each state expands its program, the more that the nation’s taxpayers will be hit.  Federal expenditures are funded based on the matching percentage. It’s not true to say that if Tennessee doesn’t expand, that the money goes to California. Instead, if Tennessee doesn’t expand, then the money isn’t spent and taxpayers keep more of their earnings.

As I’ve discussed before, expanding Medicaid is also a risky proposition for state budgets, which some Republican governors do not seem to understand. They boast their fiscal conservatism, but their recent actions on Medicaid expansion come at the expense of a larger burden on the nation’s taxpayers.

The bribe has not worked as well as intended in part because there is enough grassroots opposition to Obamacare to remind the Republican governors that these dodges are transparent.  The answer to Margot Sanger Katz’s question about why Red States and voters still won’t take the money is that they are much smarter than Ms. Katz thinks they are. Most of the electorate understands that they will pay for the “free money” out of their own pockets anyway, and that the “free money” always comes with federal strings attached.

The Republican governors, for their part, have refused after making the cynical calculation that because Obamacare is doomed they will inevitably share its fate if they board. And even rats won’t go down with the Titanic, not if they can help it.  Medicaid expansion dollars are only one part of the equation.  Obamacare also has certain inherent liabilities that politicians are eager to avoid.  The Cadillac Tax is one, as Fox News reports:

A national business group representing the nation’s large employers reported Wednesday that companies desperate to avoid a 40 percent ObamaCare “Cadillac tax” are finding ways to shift the costs to workers.

The so-called “Cadillac tax,” now four years away, will affect health plans that spend more than $10,200 per worker.

“The excise tax, when it hits in 2018, will affect both employers and employees,"said Brian Marcotte, president of the National Business Group on Health.

Employees will get incentives to reduce costs through such arrangements as wellness programs, including losing weight or stopping smoking.

Meanwhile, employers are shifting workers into plans with higher deductibles, just as ObamaCare does in the health care exchanges, and using health savings accounts to help defray the costs.

Another cost saver, Marcotte added, is to increase premiums for spouses who have access to other plans.

Take it and you will be damned. Bribes are always tempting, but they will be refused if they’re not worth running a foreseeable risk.  Getting on the Obamacare wagon is a definite risk.  Most of those who voted for it were evicted from office.  The Republican governors know this.  They may be attracted by the money, but the intelligent and principled ones will stay their hand, knowing that to grasp the bills is to accept the dire consequences.

The Immutable and Ever-Changing Obamacare


The Affordable Care Act has reached a critical crossroads.  On the one hand the White House has signaled that it will not allow any modifications to the law.  But on the other hand the same White House is furiously changing the law and is under even more pressure from Democratic lawmakers to alter it further.

Standing like a stone wall against Obamacare change is Valerie Jarrett, who declared that the president will not see his handiwork amended.

In an interview on NPR's "Morning Edition," Jarrett was asked if there is "anything that you can name" in the law that the administration would be willing to compromise on. "That's kind of a theoretical question," Jarrett responded. "When you say 'compromise,' no, we're not willing to compromise on providing access to affordable healthcare for all Americans." …

"You can't cherry pick," she said. "You can't just say, 'Yes I want everybody covered if they have a pre-existing condition, but no I'm not going to require everybody to have coverage.' The numbers don't work that way."

But cherry-picking was exactly what Congressional Democrats were urging the president to do. They wanted exceptions and extensions to the individual mandate penalties at the heart of the law. Without more exceptions and extensions millions of Americans woiuld have to pay large penalties in accordance with Obamacare provisions and that spells political poison.

WASHINGTON (AP) -- The official sign-up season for President Barack Obama's health care law may be over, but leading congressional Democrats say millions of Americans facing new tax penalties deserve a second chance.

Three senior House members told The Associated Press that they plan to strongly urge the administration to grant a special sign-up opportunity for uninsured taxpayers who will be facing fines under the law for the first time this year." …

The three are Michigan's Sander Levin, the ranking Democrat on the Ways and Means Committee, and Democratic Reps. Jim McDermott of Washington, and Lloyd Doggett of Texas. All worked to help steer Obama's law through rancorous congressional debates from 2009-2010.

The lawmakers say they are concerned that many of their constituents will find out about the penalties after it's already too late for them to sign up for coverage, since open enrollment ended Sunday.

That means they could wind up uninsured for another year, only to owe substantially higher fines in 2016. The fines are collected through the income tax system.

This year is the first time ordinary Americans will experience the complicated interactions between the health care law and taxes. Based on congressional analysis, tax preparation giant H&R Block says roughly 4 million uninsured people will pay penalties.

Up to half of those who received subsidies may have to pay them back in whole or part.  This means trouble and the only way out is to change the rules on the fly.  The regime of exceptions is in such flux that last minute reprieves could not be communicated to tax preparers and software in time to mitigate the anger of those being slugged by fines.  

The administration is thus caught in a dilemma.  On the one hand it wants to hold a hard line against any Republican attempt to change so much as a line in the law, yet on the other hand the administration itself is compelled to alter it all the time --  sometimes so quickly that no one can keep up -- in order to avoid political disasters of its own making.

As tax season begins conflicting rules over the tax penalties for Obamacare are plunging millions into confusion, especially the working poor who are not eligible for subsidies but do not make enough to afford a new healthcare insurance policy. The confusion has left millions scrambling for ways to avoid fines they cannot afford. …

Adding to the confusion, the federal government is creating new exemptions to help those who fall in the gap, but many tax preparers may be unaware of the new rules.

The quickly evolving rules may also be absent from some online tax programs that many use to file.

The trouble with all these ad hoc changes, as health insurance professional Patrick Paule notes, is that it multiplies rather than reduces the problems of the law. Paule lists five legal ways people are now scamming Obamacare caused by imperfections in the current statute.  Most of these exploit the enrollment period -- the very period which the Democratic lawmakers want extended.  By extending the period or adding exceptions, the operation of the law becomes even more complicated than it already is.  

To see this clearly, let us examine one representative legal dodge which Paule describes, the so-called “Buy Nine, Get Three Free” loophole.

Under Obamacare’s individual mandate, you can go 90 days without insurance before you have to pay any amount of the individual shared-responsibility tax. When combined with open enrollment that runs from mid-November to mid-February, this 90-day window allows individuals to hold off on paying premiums in December, January, and February. They can then submit a new application at by February 15 and begin coverage on March 1.

Of course, this assumes you stay healthy. However, because Obamacare also allows a 90-day grace period, if you become ill or injured during that time, you have the ability to pay the back premiums and there’s no lapse in coverage.

What happens when you extend the open enrollment period, as Democrats Levin, McDermott and Doggett have asked?  It could create unintended consequences that no one quite understands. Does“Buy Nine, Get Three Free” become “Buy Eight, Get Four Free” under extended enrollment?

And remember there are four more loopholes that Paule enumerates.  Obamacare is on the one hand represented by Jarrett as an immutable, majestic legal structure.  But in reality, the law is being made up as it goes along, so that it resembles a house of cards delicately piled one on the other.  Moving one card could cause the entire structure to become unstable.

As if to make matters more interesting a number Republican governors have, like Jarrett, sworn not to alter Obamacare -- in order to kill it!  An upcoming case in the Supreme Court may prove that the law is unworkable as written because of what the Democrats call a “typo”.

(Reuters) - Five Republican state governors say they will not rescue a crucial part of Obamacare if it is struck down by the Supreme Court, underlining the prospect for a chaotic aftermath to a ruling that could force millions of Americans to pay much more for coverage or lose their health insurance.

The Supreme Court is due to hear opening arguments in the case known as King v. Burwell on March 4, marking the second major challenge to President Barack Obama’s Affordable Care Act (ACA) after the justices ruled in 2012 against a claim that it was unconstitutional. The latest case tests the tax-credit subsidies at the core of Obamacare.

In its ruling expected by June, the high court could bar the federally run insurance marketplace from providing the subsidies in at least 34 states. That could throw the insurance system into turmoil as states respond in starkly different ways.

In response to Reuters' queries, spokespeople for the Republican governors of Louisiana, Mississippi, Nebraska, South Carolina and Wisconsin said the states were not willing to create a local exchange to keep subsidies flowing. Republicans argue that Obamacare is unacceptable government intervention that raises costs for consumers and businesses.

Should the US Supreme Court rule against the government in King vs Burwell, the ACA could still be saved by what Brian Beutler of the New Republic called a “one sentence” to undo the so-called error. “If Congress were to pass a one sentence bill affirming what everyone knows, it would moot the case, and thus end the uncertainty.”  Alternatively, the Republican governors could work around a possible Supreme Court decision by patching things up on their own. In either case the Republicans would have to change the unchangeable law in order to save it. In a supremely ironic strategy, the Republicans could bring down Obamacare simply by not changing it and letting it collapse under the weight of its unremediated defects.

But this is silly. No law can be simultaneously immutable and constantly changing at the same time.  Obamacare is just a law, and laws get amended or repealed all the time.  Efforts by the administration to raise this statue to the level of a constitutional provision or bedrock legal doctrine can only create the absurdities we see now.

The reality is that Obamacare has become the subject of a power struggle between two conflicting political principles in American life.  It has become a kind of litmus test that has divided and will continue to divide the political landscape. It has all the potential of being frozen into a standoff.  In that  gridlock, every health policy holder will be frozen into dysfunction.

The only feasible way out of the dilemma is to take the problem out of Washington.  If health care decisions were left to the states then some actual progress would be possible.  This is what the Health Care Compact proposes. The HCC alternative will look increasingly better the longer gridlock continues.  Health policy is trapped by Washington’s madness.  Only by leaving the asylum is there any hope for progress.  That means the Health Care Compact is the last best hope of truly affordable health care.

Obamacare the Healthcare Edsel


Obamacare has launched an unprecedented promotional campaign in the last weeks of its open registration.  The best known effort is a video that features President Obama making faces at himself in the mirror, pretending like he can’t correctly pronounce the word “February,” and taking a bunch of selfies with a selfie stick.  The ad was yet another attempt to attract younger people into his program.  CBC characterized it as a video that is “found exclusively on Buzzfeed's Facebook page,” and “essentially Obama's humour-infused way of promoting while reminding young Americans of the upcoming Feb. 15 Obamacare enrollment deadline.”

But that’s not all.  Obama’s team also invoked God, and took out space in church bulletins to push its health care exchanges.

In an effort to sign up as many consumers as possible for insurance under the Affordable Care Act (or Obamacare), the Obama administration has gone to extraordinary lengths to partner with churches and other faith-based groups, even publishing sample church bulletin inserts, flyers, and scripts for announcements, as well as "talking points." These materials are part of the "Second Sunday & Faith Weekend of Action Toolkit," which is available on the website of the Department of Health and Human Services (HHS).

No stone has been left unturned. The government has already spent $700 million promoting Obamacare, and this last surge of spending is still aimed at attracting “the young invincibles” who continue to hold out from the Affordable Care Act.  As the Wall Street Journal points out, young Americans just aren’t that into the President’s signature legislation.

The White House also teamed up with Electronic Sports League, the online gaming group, for a public service announcement. Meanwhile, the health law’s backers are holding events at colleges, bars that feature rock bands and cafes in Ohio, Illinois, Pennsylvania and other states.

Ahead of the main sign-up deadline on Sunday, the Obama administration appears on track to reach its overall goal of enrolling between 9 and 10 million people in health plans through the federal and state exchanges by the end of this year. But the administration will likely have a way to go to get the number of 18 to 34-year-olds and Hispanics that supporters of the law ultimately hope to reach.

In fact, despite the gimmicks, the promotions do not seem to have budged the needle insofar as young people are concerned. “The mix of enrollees is remarkably similar to last year,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. The fundamental problem the administration faces is that Obamacare is a rip-off for the young, who are seen in actuarial terms as cash cows to pay for the expenses of the elderly and uninsurable.

In other words, they don’t get value for their money. As CNBC pointed out in early 2014, the Obamacare system blatantly overcharges this age group. President Obama’s Rube Goldberg Machine is simply not the kind of insurance most of them would want in a rational world.

Obamacare could require far too much expense and provide too few benefits for the percentage of healthy young-adult enrollees to rise, according to a new analysis.

Consumer price comparison site NerdWallet said its analysis suggests that healthy younger adults who go without insurance could on average spend up to five times less on health care than those who sign up in Affordable Care Act plans.

The site predicts that, despite a legal mandate to obtain coverage, many young adults will remain uninsured in 2014 because it is cheaper for them to pay their medical bills than to buy insurance.

However, they are the kind of clients Obamacare needs, because young people rarely get sick, meaning they use fewer health care resources. Therefore, their premiums are pure gravy.  The more young people, the more gravy. This fact is what really accounts for the reluctance of this demographic to sign up, gimmicks or not.  

Recently Cornell University was in the news when its students protested the imposition of a $350 penalty on all who refused to join the university’s $2,352 health plan -- even if they already had insurance. It was Obamacare in microcosm and this time it was too glaring to hide. The young are beginning to see themselves as “wallet fodder” whose only value to the administration is whatever money can be squeezed out of them.

Advertising can promote products but it has limits. Students of Madison Avenue will may recall the ill-fated debut of the Edsel automobile.  Although heavily promoted, it bombed because word went around that the car was a turkey.  From that point onward, no amount of glaze, basting, cranberry sauce, or stuffing could sell the Edsel.

In November 1956, Ford settled on a name for its new line of mid-priced automobiles: It would be called the Edsel, after the son of the firm’s founder. Launched the following September, the Edsel was an utter flop, and has since become an exemplar of a product gone wrong, of how seemingly omnipotent firms and advertisers can be laid low by grass-roots consumer antipathy.

Documents held by the Hagley Library help make sense of the Edsel debacle. Two months after the Edsel’s launch, Ford hired Ernest Dichter, then the nation’s leading market-research analyst, to help the company determine how to increase sales. Dichter's frank assessment, laying out the extent of the Edsel’s troubles, offered only a few glimmers of hope for the company.

The Edsel, he bluntly told Ford, suffered from "a bandwagon in reverse" with a "quite negative” word-of-mouth campaign. Edsel owners seemed not only unenthusiastic but even embarrassed by their choice. "I guess I just don’t talk about my cars much," one told Dichter, but "it seems I talk even less since I got an Edsel." Another complained that if he told others about buying an Edsel, "they make a wisecrack and that’s it."

Obamacare is an Edsel. Despite all efforts to promote it, consumers have come to realize it’s everything its critics predicted. To top it all off, the Obamacare mandates are enforced by the IRS, i.e. America’s favorite, most trusted government agency.  Even the Washington Post, which is a notorious cheerleader for Obamacare, could hardly find anything better to say about it other than “win some, lose some.”  Describing the plight of the “29ers” - people forced into part-time employment by Obamacare’s rules - all the Post could muster was the deeply philosophical observation of, “meh.”

All policy changes create winners and losers. If some part-timers lost hours, other members of the labor force probably benefited: Specifically, workers formerly locked in to full-time jobs by their need for employer-provided health insurance have been freed to find other employment situations that better suit their families’ needs, since they can get coverage on new exchanges. In other words, their overall welfare improved, even as their work and wages may have declined.

Never mind that the Post completely misses the point that every iteration of intrusion by the federal government into health care policy creates a new cycle of winners and losers, upending real people’s lives every time it the feds step in.  That is what happens in the real world when federal bureaucrats and politicians take control of an individual’s private health care choices.  Remember, the Obama administration and all of the law’s supporters breathlessly told us that the promise land lay just around the corner.  No more expensive insurance.  No more uninsured people.  No more being at the mercy of insurance companies.  No more losers.  We would all belong in the winners circle this time.  This time would be different. Except when it wasn’t.  No matter what sort of weird, indifferent response super-supporters like the Washington Post give for the anemic response to Obamacare, the truth is that when a program is as fundamentally flawed as Obamacare, no amount of hip advertising, Presidential selfies, or Pajama Boys are going to fix it.

The Economics of Loss


Merrill Matthews at Forbes notes the parlous condition of the cooperatives that attempted to write Obamacare policies. The idea was to cut the greedy insurance companies out of the equation.  The cooperatives then proceeded to lose money.  It is doubtful whether many will survive.

As the Washington Post explains, “The co-ops differ from traditional insurers in their nonprofit status, consumer focus and organizational structure; they will be governed by boards controlled by policyholders.” …

S&P writes: “All but one of the [23] co-ops included in our study reported negative net income through the first three quarters of 2014. … Most co-ops’ weak operating performance is a result of high medical claims trend and not enough scale to offset administrative costs. … In fact, nine of the co-ops (including CoOportunity Health) reported a MLR [i.e., medical loss ratio; the claims compared to premiums] of 100% or more through September 2014.”

In short, the co-ops are leaking money faster than an Obama green energy project, or Obama’s student loan program. Some are even spending more on claims than they’re receiving in premiums—the MLR—and that’s before any administrative costs.

The Daily Signal reports that these coops cost the taxpayer an average of more than $17,000 per enrollee. “More than 500,000 people enrolled in health plans offered by nonprofit insurance companies created under the Affordable Care Act. And with the co-ops receiving an average of $108.7 million from the federal government, taxpayer-backed funding per enrollee topped $17,000.”

The Health Republic Insurance of Oregon coop spent $44,297 taxpayer dollars per enrollee.  And they’re still going broke. Modern Healthcare reports that the Oregon cooperative is performing worse than a recently closed Iowa cooperative.

Last month the Iowa Insurance Division ordered the closure of CoOportunity, one of 23 not-for-profit co-op insurance companies funded by the Affordable Care Act. The healthcare law created the co-ops as an alternative to the politically charged public option and to foster competition in the individual marketplaces. …

Eleven co-ops—Arches Health Plan in Utah, Colorado HealthOP, Community Health Alliance in Tennessee, Consumers Mutual Insurance of Michigan, Evergreen Health Cooperative in Maryland, Health Republic Insurance of Oregon, HealthyCT in Connecticut, Land of Lincoln Health in Illinois, Meritus Health Partners in Arizona, Minuteman Health in Massachusetts and Nevada Health CO-OP—had net loss-to-surplus ratios that were worse than CoOportunity's. That means their net losses represented a larger portion of their remaining funds compared with CoOportunity's, as of Sept. 30.

What this suggests is that Obamacare operates at a loss.  Without ancilliary forms of business to make money “downstream” or in related services, they are selling below the cost of goods. The more enrollees the cooperatives bring in, the deeper in the hole they go.  Scott Gottlieb notes that some of the big insurance companies are also going to lose money unless they get bailed out through the “risk corridor” program.

Some of the biggest health insurers are baking faulty math into their earnings forecasts by factoring in payments from Uncle Sam that may never materialize.

At issue are risk-sharing arrangements contained in Obamacare that are meant to help offset losses insures might take as the program gets started. Collectively, these programs have become known as “the three Rs” because of their three elements.

The first component is risk adjustment — a mechanism for transferring funds from plans that enroll low-risk members to plans that attract high cost enrollees. The second piece is a reinsurance scheme. The government will cover a percentage of the losses for high cost enrollees whose medical bills fall above a certain threshold.

It’s third element – the risk corridors — that’s likely to cause the earnings woes.

The idea here is to share the financial risk with Uncle Sam. If the actual medical claims for any individual Obamacare plan fall above or below 3% of some target amount, then the health plan will keep all the gains or losses itself. Here’s the rub. For anything outside that threshold, Uncle Sam will split the money with the health plan, essentially capping their upside and protecting their downside. Specifically, for the first 5% of gains or losses, the government will split it 50/50 with the plans. For anything above that, the government will take 80% of the extra gains or losses.

But these bailouts are going to be challenged in court and by the new Republican majority. Anything that upsets the gravy train will cause catastrophe, because without taxpayer dollars the insurance companies will lose money just like the cooperatives.  Obamacare is a net financial loser. Gottlieb writes that the simple problem is that everyone involved in it needs a bailout because it is not internally turning a profit.  

The controversial wrinkle is this: By the estimation of many, the program was intended to be budget neutral – basically paying for itself by transferring money from insurers that made profits to those that did not. The problem was that there weren’t enough Obamacare plans making money to fund the kitty. So like many other parts of Obamacare, the President re-interpreted the rules, and said that the risk corridors could be funded off taxpayer money that was skimmed from other programs. In other words, the monetary obligations would become open ended.

Thus the only way to keep the cooperatives or insurance companies from losing money is to make sure the taxpayers lose money -- through higher taxes, so the bailouts have to go on forever.  It is either that or raise the premiums or narrow the networks.  It’s that simple.  The kind of store Obamacare is sold through doesn’t matter.  The product itself is sold at a loss. The more you sell, the more you lose.

Recently Cornell University evoked the problem of Obamacare in miniature when it decided it had to charge students who opted out of the university health care system a penalty, even if they already had insurance.  The reason the university gave was cost.  The costs were too high to support unless they raised prices.  This is exactly the dilemma of the Affordable Care Act. It can’t continue without either a perpetual bailout or constantly rising prices.

The Revolt Against Healthcare Costs at Cornell


Cornell students followed in the footsteps of the Harvard faculty, who recently felt the financial lash of Obamacare personally.  Readers will recall the uproar in Harvard after previously generous health benefits were reduced by the so-called Cadillac Tax.

The problem students at Cornell faced was ‘noncompliance’ with a new standard.  The students protested when told they either had to join the University’s $2,532 Student Health Insurance Plan or pay a $350 penalty -- even if they already had previous insurance.  Some pundits argued the new impositions were brought about by Obamacare.

Skorton said in the Feb. 5 statement Cornell’s health services funding has been “strained” in light of rising health insurance costs. Additionally, students will have a $10 co-pay for visits to the campus’ health center, Gannett.

The rise of health insurance costs is a perpetual trend in the marketplace, and the rising costs specifically at Cornell are a secondary result of the Affordable Care Act, Ed Haislmaier, a health policy researcher at the Heritage Foundation, told The College Fix in an interview.

“From a health policy analysis, [Cornell] has a health center that offers more than a nurse,” Haislmaier said. “They are in the healthcare delivery business now, and that is a fixed cost.”

Cornell’s argument is that many of the student’s health insurance policies are not up to standard -- an argument also put forward by the Affordable Care Act to cancel older insurance policies.  “Dr. Janet Corson-Rikert, associate vice president for campus health and director of Gannett Health Services, pointed to many students with high-deductible plans or with health networks that work well in their hometowns, but do not provide the same coverage while in Ithaca,” said the Ithaca Journal.

The University did not connect its new expenses to Obamacare but argued its health facility had gradually been falling into debt.  “The university said it racked up debts over the years by increasing services at Gannett Heath Services. To pay for the expanded services, Cornell said it relied first on gifts and reserves, and then funds borrowed internally to cover costs.”

Without those investments — and the fee to be instituted in the fall — certain services would have been cut, or students charged more at the time of care, according to Murphy. Those alternatives were unacceptable, she said.

The new funding model relies on continued use of central university funds while extracting more contributions from students. Those with SHIP coverage will contribute more through their premiums, along with the upfront fee paid by the approximately 70 percent of undergraduate, 30 percent of professional and 10 percent of graduate students not enrolled in the plan.

The most interesting aspect of Cornell’s new policy is that it charges people to opt of out its system. It’s an like charging people who don’t want to eat an in a restaurant a fee for not eating there. It resembles the Individual Mandate of Obamacare where people are forced into the system to make its cost model work.

But the Individual Mandate is licit because the Supreme Court ruled it a tax. Since government has the power to tax, it can impose the mandate.  The question is where Cornell gets a power to tax, considering that it is not a government.  The argument of both Obamacare and Cornell seem to be “we have to increase the fees or we can’t afford to give you free health care”.  This is an absurdity. Nothing in “health care reform” seems to have reduced the cost of service delivery.  On the contrary, it has apparently increased them.

Under these circumstances, how can “Affordable Health Care” be affordable?  And how can students, who are famously impecunious, ever survive the requirement to meet the expectations of the health bureaucrats?

Blaming Staples for the 29ers


President Obama has discovered the 29er phenomenon and has decided to blame the victims for it.  The term is explained by economist Casey Mulligan, who blogs at the New York Times.  In early 2014 Mulligan wrote:

A “29er” refers to someone working 29 hours per week, the maximum that an hourly employee can work and still be considered part time by the federal government, as defined under the Affordable Care Act.

Before 2014, when the new federal definition took effect, Census Bureau data suggest that hardly anyone worked exactly 29 hours a week: about one in 1,000. Only six in 1,000 worked 26 to 29 hours a week. …

Part-time employees do not create a health-insurance requirement or a penalty for their employer, which gives large and small employers an incentive to reduce at least some employees’ hours to 29 hours. A number of employers plan to do exactly this.

But the incentives are not limited to penalty avoidance by employers, and began this month. Employees in families with income of less than 400 percent of the poverty line will lose access to generous federal subsidies if they make themselves eligible for employer health coverage by working full time at an employer that offers coverage to such employees.

Andy Pudzer, who runs the Carl’s Jr restaurant chain wrote in January of 2015, “among the Affordable Care Act’s many economic and political disruptions, the law has unintentionally encouraged employers to convert full-time jobs into part-time jobs.”

Obamacare has caused millions of full-time jobs to become part-time, imposed a tax on lower-income workers who cannot afford it, forced millions of people out of insurance they liked, restricted access to doctors for millions of others, and created an enormous bureaucracy that discourages our doctors and nurses while suppressing health-care system innovation.

Even Politifact agrees the 29er phenomenon is real, although Louis Jacobson tries to say it only affects hundreds of thousands, not millions.  So what does president Obama do? He blames people for being affected by his policies.  Kevin Williamson at the National Review argues that you can’t blame people for obeying the Law of Supply and Demand:

Staples, which is in the process of acquiring former rival Office Depot, became a topic of national conversation this week when Barack Obama, speaking to Buzzfeed, denounced the company for allegedly chopping part-timers’ hours in response to the Affordable Care Act, a.k.a. Obamacare, which requires that firms pay for health insurance for employees putting in more than 30 hours a week. At the end of 2013, Staples put out a policy informing managers that no part-timer should be scheduled for more than 25 hours a week; Buzzfeed, which is big on the Dickensian-state-of-Staples-employees beat, claims that “Staples Threatens to Fire Staff for Working More than 25 Hours a Week,” but that isn’t exactly right, either: One store manager did post a notice making that threat, but that’s not the same thing as a corporate policy. Staples claims — unpersuasively — that this is a decade-old, pre-ACA rule, even though Staples “talking points” distributed to managers in 2014 identify it as a new policy. Staples is pretty clearly drawing a line in the managerial sand here, and part-timers are going to be on the less-than-25-hours side of it. …

Demand curves slope downward. Which is to say, if you raise the price of something, people will be inclined to consume less of it. Those with a choice in the matter – say, a large office-supply chain with a mess of low-skilled part-time employees who are basically as interchangeable as toner cartridges in the greater scheme of office-supply things – will in fact consume less. If the thing that is getting more expensive is manpower, it will cut employees’ hours, circulate a lot of those dopey “do more with less” memos, and look for labor substitutes, like the banks did with those ATMs that haunt President Obama’s imagination.

Obama can damage the Staples brand by calling them misers.  But Walmart has done the same thing.  The difference is, Walmart is too big to make a public example of.  If the president damages Walmart, he could step on too many toes.

Wal-Mart is among the last of its peers to cut health insurance for some part-time workers. In 2013, 62 percent of large retail chains didn't offer health care benefits to any of its part-time workers, according to Mercer, a global consulting company. That's up from 56 percent in 2009.

Wal-Mart has been scaling back eligibility for part-time workers over the past few years, though. In 2011, Wal-Mart said it was cutting backing eligibility of its coverage of part-time workers working less than 24 hours a week. And then in 2013, it announced a threshold of 30 hours or under.

Wal-Mart, like most big companies, also is increasing premiums, or out-of-pocket costs that employees pay, to counter rising health care costs.

The chain of events that caused the 29er phenomenon began in Obama’s office.  It began with him.  Now “you can’t make an omelet without breaking eggs” and if so Obama should simply own up to the 29er phenomenon as a necessary cost on the road to progress.  But he can’t turn around and blame other people for his own policies.

Oh wait, he did just that.

Lousy Insurance


The Achilles’ Heel of Obamacare was, is and will be cost.  The trouble is that Affordable Care isn’t affordable .  CNN’s Money distills a Kaiser Family Foundation study comparing Obamacare with employer health care. The conclusion is clear but dismaying. “Deductibles, co-payments, and drug payments are higher under the average Obamacare silver-level plans -- the most popular -- than employer policies, according to a CNNMoney comparison of reports by Kaiser Family Foundation and Health Research & Education Trust.”


The only thing that Obamacare is better than is nothing.  “To be sure, having Obamacare coverage is often better than being uninsured, especially if you rack up big bills through a major illness or accident.”  Compared to employer health insurance the ACA’s metal plans are decidedly lackluster.



Obamacare silver plan




Co-pays per visit


Obamacare silver plan

Primary care


Primary care







Drugs representative cost


Obamacare silver plan










Annual maximum ceiling on out of pocket


Obamacare silver plan




Bloomberg notes that all Obamacare plans, except its super-premium platinum product are markedly inferior to employer based insurance.  The most affordable ACA plans offer the least actual cover. “For a bronze plan, the insurer is meant to cover 60 percent of the cost of essential health care, on average, leaving beneficiaries to cover the rest. For silver plans, it's 70 percent; for gold, 80 percent; and for platinum plans, 90 percent. As a result, premiums are generally lowest for bronze plans and highest for platinum.”

Bronze plan holders are even more inferior than the silver plans used for the comparison above.  

The result is that for many Obamacare policyholders coverage is scant.  You can be “covered” yet unable to see a doctor -- sometimes literally because to save money networks can be impractically sparse.  John Goodman cites these examples cited by Elizabeth Rosenthal of the New York Times:

When Karen Pineman of Manhattan sought treatment for a broken ankle, her insurer told her that the nearest in-network doctor was in Stamford, Connecticut – in another state.

Alison Chavez, a California breast cancer patient, was almost on the operating table when her surgery had to be cancelled because several of her doctors were leaving the insurer’s network.

When the son of Alexis Gersten, a dentist in East Quogue New York, needed an ear, nose and throat specialist, the insurer told her the nearest one was in Albany – five hours away.

When Andrea Greenberg, a New York lawyer, called an insurance company hotline with questions she found herself speaking to someone reading off a script in the Philippines.

Aviva Starkman Williams, a California computer engineer, tried to determine whether the pediatrician doing her son’s 2-year-old checkup was in-network, the practice’s office manager “said he didn’t know because doctors came in and out of network all the time, likening the situation to players’ switching teams in the National Basketball Association.”

Of course the people who have the bronze and silver plans are often the same people who will really need good coverage should they get seriously sick.  Yet they are precisely the same group who have this shabby coverage.  The young are greatly overcharged and there is something disturbing about the president hawking his product to the young by hamming it up for promotional material in the oval office.  Obama is targeting the poor to sell them shoddy goods, like a carnival huckster enticing rubes into an faked exhibition to fleece them.

What is astonishing is how poor the product is, even after the huge amounts of money spent stuffing it with subsidies and startup funds.  The Daily Mail wrote that it cost $50,000 for every American covered. The Daily Signal described the enormous amounts of taxpayer funds spent on trying to provide Obamacare through cooperatives:

More than 500,000 people enrolled in health plans offered by nonprofit insurance companies created under the Affordable Care Act.

And with the co-ops receiving an average of $108.7 million from the federal government, taxpayer-backed funding per enrollee topped $17,000.

This ranged from a low of $1,588 in Iowa to a whopping $44,297 per person in Oregon.  For that kind of money one would expect caviar and champagne, not macaroni and cheese with a high deductible.  This is not surprising given the level of money wasted. The Office of the Inspector General of the Department of Health and Human Services released a report entitled: Federal Marketplace: Inadequacies in Contract Planning and Procurement. It found:

  1. CMS did not adequately plan for the Federal Marketplace contracts (page 10)

  2. Only two of the six key contracts underwent CMS Contract Review Board oversight prior to award (page 12)

  3. CMS’s procurement decisions may have limited its choices for selecting Federal Marketplace contractors (page 13)

  4. When awarding two key Federal Marketplace contracts, CMS did not perform thorough reviews of contractor past performance (page 16)

  5. For five of the six key contracts, CMS chose a contract type that placed the risk of cost increases solely on the Government (page 17)

  6. CMS estimated a total contract value of $464 million for the key contracts at the time of award (page 18).  The true value has doubled and is still rising.


CMS originally estimated the contract value for the 6 key contracts to be $464 million. As of early 2014, CMS had updated the estimated value of these contracts to $824 million. The updated contract value more than tripled for the FFM1 contract awarded to CGI, from $58 million to $207 million.28 In addition, the value for the DSH contract more than doubled, from $69 million to $180 million. The remaining 4 contract values increased between 1 and 54 percent.

There is no mystery to why the Obamacare product is so poor despite the billions lavished on it.  It’s a candy store for contractors insurance companies, bureaucrats and lobbyists. It is the very epitome of a feeding trough for politically connected hogs.  Corrupt government programs tend to become even more corrupt over time.  But Obamacare has started off with enough wastage to raise the question of just how much worse it can get.

Kansas Democrats Try to Repeal HCC


If being attacked that opponents is the sincerest form of acknowledgement, the Health Care Compact idea is being acknowledged in Kansas. It was one of 9 states which started to form a compact in late 2014.

Kansas, Missouri and seven other states have signed on to a movement that would wrest regulation of most of the nation’s health care insurance systems from the federal government.

Those state legislatures want to be part of a proposed interstate health care compact. The compact would let participating states use federal funds – in the form of block grants – to design and operate their own Medicare, Medicaid and other health care programs, except for the military’s.

Critics say the idea is unworkable and faces long political odds. Indeed, states need Congress to approve any interstate compact.

But now James J. Ward (D) of Kansas has filed a bill to repeal Kansas health care compact initiative. It has now been joined by a successor initiative, this time joined by a number of Democratic legislators.

Louis E. Ruiz (D)*, Tom L. Burroughs (D), John Carmichael (D), Pam Curtis (D), Dennis Highberger (D), Harold Jay Lane (D), Jarrod Ousley (D), Melissa A. Rooker (R), Anna M. Tietze (D), Ponka-We Victors (D), Kathy A. Wolfe-Moore (D)

It has been referred to Committee on Health and Human Services on 2/4/2015.  But this development shows it is now being taken seriously and not being dismissed.  In a way this is good news for the initiative because the HCC is now being noticed -- and is consequently becoming a target.

Too Late To Lose King vs Burwell


James Taranto catches the feeling of despair felt by Obamacare advocates as the Supreme Court date for hearing King vs Burwell approaches. As this site has often argued, first its supporters argued that no court would hear it.  Then the goal posts moved to no court would decide in favor of King.  It subsequently became the argument that the Republicans would not dare win for fear of angering millions. It was even argued that the Supreme Court’s legitimacy would evaporate if it held against Burwell.  Most recently plaintiff King himself has been accused as a right wing maniac.  Taranto writes:

If the law is on your side, the juridical adage goes, argue the law. If the facts are on your side, argue the facts. If neither the law nor the facts are on your side, pound the table.

Supporters of ObamaCare have reached the stage of pounding their heads on the table. …

Over at the New York Times , Linda Greenhouse weighed in last week with a piece that was dyspeptic in the original sense of the word. Unable or unwilling to digest the plaintiffs’ argument, she simply gagged on it.

“Greenhouse fails even to mention the government’s stronger, though ultimately unpersuasive, argument that the statute is ambiguous,” lawyer Howard Slugh, whose firm has filed a brief in King v. Burwell, notes in an entertaining rejoinder at National Review Online. “Instead, she insists that the plaintiffs’ reading of the statute is utterly frivolous.” She claims that the justices “all agree on how to interpret statutory text”—and that they all agree with her.

She ends by instructing the justices (her emphasis): “Read the briefs. If you do, and you proceed to destroy [sic] the Affordable Care Act nonetheless, you will have a great deal of explaining to do—not to me, but to history.” As Slugh understates: “It takes a lot of chutzpah to admonish the Supreme Court in such fashion.”

NRO’s legal blogger, Ed Whelan, makes one obvious point: “It’s difficult not to conclude that Greenhouse thinks, rightly or wrongly, that the Left’s efforts to intimidate Chief Justice Roberts in the first Obamacare case worked and are worth repeating.”

Taranto goes on to enumerate veiled threats to act extralegally or creatively.  The object is always the same: to prevent the unreasonable unthinkable outcome of a loss to King from occurring. Perhaps the most telling sign was the adamant refusal of Sylvia Burwell to explain if there was a Plan B in case the court held against the government.

The situation reminds one of the start of World War 1 where railway timetables made mobilization, once begun, unstoppable.  They were like intercontinental bombers which once launched, could not be recalled.

In 1969 AJP Taylor published his book War by Timetable.   In it, he argued that railway timetables played a key part in starting the First World War.

Mobilising millions of men was a hugely complicated job.   Every country used the railways, and spent years working out how to get all those soldiers and all their supplies to where they needed to be - eg the Schlieffen Plan took nine years to devise (1897-1906).

So every country had only one Plan   - the Russians had 'Plan A', the French 'Plan 17'; and it was too much to devise another one!

So, when the crisis came - although it didn't fit the situation that these Plans envisaged - every country had to go ahead and implement their Plans because they had no other plans of what to do, and it was too late to make a new one.   The Tsar HAD to order a general mobilisation, even though he only wanted to mobilise against Austria.   And when, on 1 August, Kaiser Wilhelm tried to pause the German mobilisation, his generals told that he couldn't; 11,000 trains were on the move, and war could not now be stopped.

The same appears to be true of Obamacare. With the massive plan entrained, the administration believes it’s too late to stop now.

Liberating the Insurance Markets


John Goodman in Forbes argues that Obamacare has turned insurance into something like the NBA, with rotating teams of players in provider networks.  He relates the New York Times story of people who find their networks absurdly inconvenient.  In one case an operation is scheduled and has to be reshuffled when some members of the team drop out of the network. He asks why insurance companies should treat their customers so.

The answer he gives is that Obamacare insurance are doing everything they can to fob off sick patients and attract healthy ones. There’s an economic reason for this.  In casualty insurance the sales pitch is always “we pay”.  In health insurance the sales pitch is “we want healthy clients”.

If the health insurers followed the lead of the casualty insurers, their ads would focus on what could go wrong and how good they are at treating the problems. After all, why do you need health insurance? Because you might get cancer, heart disease, or some other expensive-to-treat condition. And when that happens, you would like to be in a plan that give you access to the best doctors and the best facilities for your condition.

But in fact, this is what you never see in a health insurance commercial in Washington, DC. There is never a mention of cancer, heart disease, diabetes, AIDS or any other serious health condition.  Instead, what you see are pictures of young healthy families. The implicit message is: if you look like the people in these photos, we want you.

What explains the difference between the health insurance and casualty insurance markets? In the latter people pay real prices that reflect real risks. In the former, no one is paying a premium that reflects the expected cost of his care. The healthy are being overcharged so that the sick can be undercharged. So insurers try to attract the healthy and avoid the sick.

Goodman’s point is that the ridiculously narrow networks are a direct result of the structure of Obamacare. “The healthy are being overcharged so that the sick can be undercharged. So insurers try to attract the healthy and avoid the sick.”  The trick he argues, is to align the incentives.  To do this, insurance has to be freed from the Obamacare exchanges in some way, and the method he describes looks strikingly similar to the health care compact. “In a previous Forbes post I argued that we can denationalize and deregulate the exchanges. And by instituting “health status insurance” we can have a market with real prices that gives real protection to people with pre-existing conditions.”

Denationalizing and deregulating the Obamacare exchanges would involve removing the mandates, charging risk-related prices to most and providing separately for the uninsurable and indigent.  One way to reduce the pure welfare burden of the uninsurables is to institute what John Cochrane called “health status insurance”, which essentially insures against becoming uninsurable. “Health-status insurance covers the risk of premium reclassification, just as medical insurance covers the risk of medical expenses.”

In any event, a deregulated market would be much easier to implement under a Health Care Compact regime than under the monolithic structure of Obamacare.  If health care reform is to have any chance, Obamacare has to go.

The Health Care Compact Moves Forward in Montana and Ohio


The Health Care Compact took another step forward in Montana as Nancy Balliance R-MT  filed MT HB348, “An Act authorizing an interstate health care compact; directing the governor to join the compact and providing a contingent effective date.”  The text of the bill calls for the establishment of an “interstate advisory health care commission” under the HCC boilerplate concept.

A very similar bill has been filed in Ohio, OH HB34.   It too stipulates an “interstate advisory health care commission” and seeks approval from the United States Congress. The Ohio bill has many more sponsors. Terry R. Boose (R)*, Wes Retherford (R)*, John Becker (R), Louis W. Blessing Jr. (R), Louis W. Blessing III (R), Andrew O. Brenner (R), Jim Buchy (R), James Butler (R), Harry James Butler (R), Margaret Conditt (R), Ronald Edward Hood (R), Steven Wayne Kraus (R), Ronald Maag (R), Kristina Daley Roegner (R), Mark J. Romanchuk (R), Andrew M. Thompson (R)

There have been no significant reactions from the press as yet, probably because the bills are in the early stages.  But these developments show that the Health Care Compact is moving from a notional idea to an actual part of the movement to replace Obamacare with something better.

The Health Care Compact Strikes Back


As controversy continues to swirl around Obamacare, with attention focused on the forthcoming King vs Burwell suit in the Supreme Court, legislators in different states are quietly laying the groundwork for solutions using the underlying principle of the Health Care Compact as a guide. Specifically, they are using the idea that people are better off when decisions are made closer to home. State Senator Brian Kelsey of Tennessee has authored a pair of bills aimed at opening up the insurance market for residents of the state by removing artificial restrictions on the purchase of insurance.  

Sen. Brian Kelsey, R-Germantown, is proposing two bills to reform the state's health care infrastructure in the wake of Insure Tennessee's defeat.

Under one bill, Kelsey is proposing to allow Tennesseans to buy insurance plans that are for sale on insurance exchanges in other states. The open border approach - which would require agreements between states, according to the bill - would widen the breadth of plans from which Tennesseans could choose, Kelsey said.

Kelsey, who also is sponsoring a bill that would prevent Tennessee from establishing its own exchange, wants to see Tennesseans have access to the most affordable health care regardless of where the insurance plan is offered - and regardless of whether Tennesseans send money out of state to buy the plans.

"I'm concerned about getting Tennesseans the most affordable plan for their budget. That's more important to me than protecting insurance companies' bottom line," Kelsey said.

Federal regulators don’t care about, or understand, what Tennesseans need. Conversely, a State Senator like Brian Kelsey, is closer to his constituents and knows that they will benefit from having access to more insurance choices than are currently offered within the state. There was a recent attempt to expand Medicaid in Tennessee, which would have further empowered federal bureaucrats to make even more health care choices for Tennessee residents. The bills that Kelsey has proposed are a response to that failed attempt. While Medicaid is based on the faulty notion that health care is made more affordable by application of federal subsidies (and subsequently, federal mandates), the Health Care Compact is designed to actually reduce cost and increase choice. Kelsey wants to bring the decision-making back home to Tennessee, where it belongs. In his view, customers should be able to shop wherever they can get a good deal, not artificially restricted to a particular, government-mandated marketplace.

Though there are differences in standards and networks due to the current structure of state insurance, and some in the health care industry have questions about these proposal might work, Sen. Kelsey and others are trying to move health care in Tennessee in the right direction.

A cross-border approach raises a bevy of questions and concerns, health care industry professionals say. "We are evaluating the proposed legislation," said a spokesman for the Tennessee Department of Commerce and Insurance, which licenses health insurance companies in the state. Insurance companies are governed state by state — there is no federal agency that regulates insurance — so an insurance company could offer a plan from out of state and that may not necessarily meet Tennessee standards.

Insurance companies with plans for sale in other states that opened to Tennessee residents would have to make sure Tennessee-based doctors were in their network, Kelsey said. He wants to see Tennesseans have broader access to choices but remains opposed to creating a state-run exchange if the King vs. Burwell case at the U.S. Supreme Court finds that tax credits are not available on the federal health insurance exchange. ...

The increased number of plans will make plans more affordable even if credits on the federal exchange are no longer available, he said. "My goal is to address the health care problem in Tennessee and America by going the opposite way of Obamacare," Kelsey said. "That's why I'm advocating both strategies at the same time: to attack Obamacare in the U.S. Supreme Court and to offer conservative reform to health care.

Further details illustrate how the Health Care Compact’s fundamental approach can be used to boost competition. The key, in this case, is a personal health savings account “which is designed to give enrollees more choices and encourage them to make better healthcare decisions.”  Kelsey also drafted a resolution that directs Congress to authorize states to design their own models of Medicaid reform by receiving funding as block grants.

The senate bill would allow TennCare recipients to use a PHA to purchase a benefit coverage plan from an array of options approved by the Bureau of TennCare, ranging from the conventional safety net of limited benefits to full-service benefit plans.  The range of options must provide a broad continuum of consumer flexibility including, but not limited to, managed care organizations, self-directed plans, and medical home networks.  Plans offered as options would directly compete for the enrollee’s business.

A recipient could choose to use the full amount of the PHA to purchase comprehensive or partial coverage plans.  If the enrollee selects a plan with rates that are lower than the total amount of the PHA, then they could retain any balance of the PHA to spend on healthcare related items.  Unused balances would roll forward to the next quarter.  If the enrollee ceases to be eligible for medical assistance, a portion of the unused balance of the PHA could be used for health care expenses or to purchase health insurance.  Unused funds would revert to the state after 12 months or immediately upon the death of the enrollee.

“Personal Health Accounts encourage good health choices by consumers and gives them skin in the game,” added Kelsey.  “This approach would truly provide reform of our healthcare system in Tennessee.”

The idea of using a health care compact has been attacked by Obamacare advocates as something akin to nullification.  But in truth, interstate compacts have long been used as a tool to facilitate and reduce the costs of commerce between the states.  As Obamacare continues to flounder, with its Byzantine system of subsidies, taxes, and giant bureaucracies, and costs are too high, it becomes increasingly clear that the future of health care reform lies in simplification.  The health care compact idea provides good platform for eliminating artificial impediments to efficient markets.

Possible replacements are now under consideration in the new Republican Congress, and they ought to include simplifying measures such as the Health Care Compact itself.  The best alternative for the grotesquely bloated Obamacare is a system based on the simple and obvious notion that the closer we all are to the decision-making, the more likely it is that the decisions will actually reflect the health care we each want and need.

Panic over King vs Burwell


Joshua Green of the New Republic thinks the Republicans “secretly hope” that the Supreme Court will save Obamacare.  He argues that if the courts cut off federal subsidies there will be an immediate outcry for their restoration and the Republicans are too stupid -- for want of a better word -- to figure out a way to hand out replacement subsidies.

The outcry for a fix will be broad, sustained, and lockstep, but it will meet wildly different audiences. Everyone in the GOP primary field will face extensive pressure to treat an adverse decision as an opportunity to get rid of the law altogether, but some of them will be governors or former governors who won’t be as amenable to using constituent suffering to leverage an unrealistic political goal. Republican Senate candidates from the above-mentioned Wisconsin, Ohio, and Florida, but also from Pennsylvania, New Hampshire, Illinois and elsewhere, will quickly see their political fortunes become entwined with the cause of fixing Obamacare.

As chaos grows, it will be tempting for these Republicans to claim that they and the broader right bear no culpability. Obama and Obamacare did this to them. But that message won’t wash outside of precincts where antipathy to the president already runs extremely deep. Elsewhere it’ll be drowned out by a simple but forceful argument, promulgated by people with much larger megaphones—and by the fact that everything was basically OK until five Republican-appointed Supreme Court justices intervened. Unlike Republicans, the team of organizers, lawyers, and political operatives who have banded together to save the ACA have adopted a strategy that precludes them from discussing their political contingency planning. But it stands to reason that Obama and Clinton would both lay the damage at the feet of those justices, and the party on whose behalf they had acted. The ruling would create a hydra of loyal but politically disengaged Obama supporters, consumer groups, health care providers, and other actors, none of whom will be satisfied with Republican excuse-making and inaction.

This is pure wishful thinking.  Obamacare overturned the status quo ante and disrupted millions of insurance plans without batting an eye.  But they were Democrats who are entitled to do such things.  Republicans of course, have no such right.  But the argument is false in its premise.  Obamacare will be replaced by any number of plans now being considered, including some which will devolve the health care issue to the states.

However Green’s article is also battlespace preparation.  King versus Burwell, which was once dismissed as a case which would never reach the Supreme Court, before it was a case that could never win in the Court, has gradually become a case the Republicans don’t dare win.  That’s quite a promotion in status.

Obamacare’s advocates fear a loss and therefore they are readying public opinion for an apocalyptic narrative.  When the subsidies are ruled upon, your healthcare will be “taken away from you”.  That will inevitably be true of some, but it will hardly be the apocalypse the ACA advocates warn against.

Obamacare is in trouble and its advocates are panicked.

Leaving Money on the Table


Dan Mangan of CNBC tries to solve a mystery.  Why are people “leaving Obamacare money on the table”.

The federal government is willing to shoulder a share of the medical costs with millions of people, but many of them are still saying, "Thanks, but no thanks."

A new analysis reveals that nearly 14 million people next year could get financial help to pay out-of-pocket costs if they enroll in Obamacare health plans, a new analysis finds.

That federal aid, known as cost-sharing reductions, can reduce the amount people pay in deductibles, co-payments, co-insurance and maximum out-of-pocket costs that they incur when they go to the doctor or hospital. Those costs are the share of services not covered by a person's health plan.

But large numbers of the relatively low-income people—nearly half of whom live in the South—who are eligible for that aid are not taking advantage of it, even though it could save them an average of $479 in health costs annually.

The same question has been asked of Red State governors with regard to Medicaid expansion.  Why don’t they take the “free” government money offered to them by the federal government? No answers are really offered, but a related mystery may shed some insight on the problem.

Why don’t Latinos like Obamacare?  Why don’t they take the “free” money?

Hispanics represent about a third of the nation’s uninsured, and for a number of reasons, signing them up has been harder. According to the latest government statistics, as of Jan. 16, two months into the current open enrollment period, just 10 percent of those who had enrolled in the 37 states served by are Latino, only slightly up from 7 percent during the first few months of last year’s enrollment, despite a concerted effort to reach them.

Are they stupid like Republicans?  Or is it the case that they are smarter than Obamacare architects give them credit for.  Mexicans are familiar with the corrupt, deceitful nature of their own government.  Anything pushed by the federales even the American Federales must have a hook in it.

As for Republican politicians, some have yet to be convinced there is such a thing as “free” government money.  Unlike well educated Democrats, they suspect that “free” money actually comes from taxpayers, as Soylent Green came from people and therefore they are reluctant to take it, knowing anything too good to be true has got to have a catch.

And then there’s the fact that Obamacare imposes lots of procedures and costs that just aren’t worth $479. Government bureaucrats think they can get people to eat out of their hands, even though all birdseed originally comes from the people themselves.

The Unlamented Obamacare


Professor Julian Zelizer, who wrote a book titled The Fierce Urgency of Now: Lyndon Johnson, Congress and the Battle for the Great Society, a glowing account of Lyndon Johnson’s achievements, writes that decades from today Republicans will look on Obamacare with the same fondness that people regard Medicaid.  In Amazon’s introduction to his book, Johnson was responsible for:

The passage of the Civil Rights and Voting Rights Acts; the War on Poverty program; Medicare and Medicaid; the National Endowments for the Arts and the Humanities; Public Broadcasting; immigration liberalization; a raft of consumer and environmental protection acts; and major federal investments in public transportation. Collectively, this group of achievements was labeled by Johnson and his team the “Great Society.”

There was also Vietnam, but the Great Society, especially the War on Poverty left such a wonderful legacy that Zelizer claims:

It is possible to imagine that several decades from now, when a Democratic president sends a proposal to Congress that would require cuts in the Affordable Care Act, a right-wing activist will say: "Get your government hands off my Obamacare!"

It is possible to imagine anything, but since Obamacare was in the first instance designed to cure the unsustainably excessive spending of Medicare and Medicaid, not to mention abolish Employer-based health insurance which was the legacy of Franklin Roosevelt is not likely.  Barack Obama set out to ‘cure’ the achievements of Lyndon Johnson and FDR.  It is somewhat ironical for Zelizer to imagine people objecting to someone curing the cure of the cure.

But he might be right.  The first instinct of Washington is to pile Pelion on Ossa; to fix any unsustainable expensive program by throwing more money at it.  The only problem to continuing this indefinitely is that government eventually runs out of other people’s money.

So while Zelizer may imagine someone waxing sentimental over Obamacare, it is less than likely.  The congressmen who voted for it have for the most part lost their seats to an outraged electorate. True masterpieces improve with age.  Programs like Obamacare, which never had any quality to begin with, only corrode into junk.

Several decades from now a left-wing activist will say: “get this jalopy off the road.”

The Emergence of the “Hell No” Coalition


The intimidation game continues as Obamacare advocates continue to insist that resistance to the program is futile while its opponents vow to repeal every single word of it. If Medicaid expansion is a vote of confidence in the immortality of Obamacare, two recent state rejections must therefore indicate some believe it is not long for this world.

(Reuters) - The Wyoming Senate on Friday rejected a bill that would have supported the state's expansion of the Medicaid program for the poor under President Barack Obama's healthcare reform law, effectively shutting the door for the remainder of year.

Opponents of the measure in the Republican-dominated state senate voiced concerns about possible complications with its implementation, and argued that increased health spending would add to the federal debt.

A companion bill in the state's House of Representatives was pulled from committee as well on Friday.

This follows a similar rejection in Tennessee. “A plan to expand Medicaid to cover an additional 280,000 low-income Tennessee residents failed in a key committee vote Wednesday, bringing a quick end to a long debate spearheaded by Gov. Bill Haslam (R).”

But after all that work, it took just over two days for the state Senate Health and Welfare Committee to vote, by a 7 to 4 margin, against Insure Tennessee. … Legislative leaders don’t expect the Medicaid expansion proposal to return during the regular session, which begins Monday.

Medicaid expansion was seen as a way to bribe Red States into participating in Obamacare. But events in Wyoming and Tennessee suggest that some politicians have stopped sitting on the fence.  In their considered view it is no longer worthwhile hitching their wagon to a falling star.

Obamacare advocates are dismayed at the emergence of what they term the “hell no” caucus against the president’s signature health plan.  They are calling it “irrational” to refuse money.  The Washington Post writes:

Just when you thought there was some hope for the nearly 4 million people Republican leaders are denying access to health coverage across the country, the “hell no” caucus struck back. Conservative Indiana Gov. Mike Pence (R) concluded negotiations with the Obama administration last week to expand Medicaid in his state. “Indiana Medicaid Expansion May Tempt Other GOP-Led States,” declared one headline. “Will Mike Pence tip the GOP scales on Medicaid expansion?” asked another.

Not in Tennessee, where the state legislature on Wednesday repudiated an expansion plan that its GOP governor, Bill Haslam, has been pressing forward for months. This isn’t just bad for the people who will continue going without Medicaid in Tennessee. It also exposes how deeply irrational the anti-Obamacare frenzy is in certain sectors of the GOP, with staunch opposition remaining even when popular conservative leaders try to push in a more reasonable direction. And it’s a bad sign for what might happen if the Supreme Court rules against the Obama administration in its latest Affordable Care Act case.

The Obamacare advocates had estimated that by this time the voters would be “hooked” on Obamacare subsidies and that the Red States would fall, one by one, to the siren song of lucre.  Never did they believe that they would lose the mid-term elections so badly over this precise issue; that the Supreme Court would actually be hearing a challenge to the legality of the subsidies nor that a “hell no coalition” would gather force as time went on.

Obamacare is becoming the administration’s RMS Titanic.  It has struck the iceberg of unaffordability and down by the bow.  Despite the service of free drinks and the playing of the band, the passengers are taking to the lifeboats.  They will not be back.

Damn the Data Torpedoes!


The true scope of the consumer data breach at the health insurer Anthem became glaringly evident as more details came in. “The lawsuits against Anthem Inc. have already started rolling in” in connection with the loss of the records of up to 80 million records.

The health insurer revealed this week it had been hit by a data breach that may have exposed up to 80 million customers’ personal information.

While no credit card or medical data was stolen, the hackers made off with names, birth dates, addresses, salary data and most importantly, Social Security numbers. …

Anthem customers in California and Alabama have filed suits alleging the company didn’t properly secure their data or notify them promptly enough following the discovery of the attack, legal news outlet Law360 reported.

In fact other health insurers may be as vulnerable, if not more vulnerable than Anthem. The standards for the health industry do not include the requirement to encrypt data.

WASHINGTON (AP) — Insurers aren't required to encrypt consumers' data under a 1990s federal law that remains the foundation for health care privacy in the Internet age — an omission that seems striking in light of the major cyberattack against Anthem.

Encryption uses mathematical formulas to scramble data, converting sensitive details coveted by intruders into gibberish. Anthem, the second-largest U.S. health insurer, has said the data stolen from a company database that stored information on 80 million people was not encrypted.

The main federal health privacy law — the Health Insurance Portability and Accountability Act, or HIPAA — encourages encryption, but doesn't require it.

Ordinary encryption may have been a dubious defense anyway against the sophistication of the attacker, now believed to be China. “New York (AFP) - Data on as many as 80 million customers at US health insurance giant Anthem was stolen by hackers, officials confirmed Thursday, in a cyberattack investigators have reportedly linked to China.”

The cyberattack is just the latest exposing personal information on millions of people in the United States, triggering calls for companies to beef up their data defenses.

"Cyberattackers executed a very sophisticated attack to gain unauthorized access to one of Anthem's IT systems and have obtained personal information relating to consumers and Anthem employees who are currently covered, or who have received coverage in the past," a statement from the second-largest US health insurer said.

Anthem’s defenses are probably stronger than Obamacare’s, of which it is a participant.  Concern over the vulnerability of health data was raised on Capitol Hill.

The mammoth data breach at health insurer Anthem Inc. has given new life to concerns about whether information shared with federal healthcare websites is safe.

“That was one of the first things I thought about,” Senate Homeland Security and Governmental Affairs Committee Chairman Ron Johnson (R-Wis.) told The Hill.

Experts suggested the Anthem attack could be a preview of larger scale attacks on the vulnerable data highways of Obamacare.  Data is no longer segregated into islands but is connected over networks, creating a potential bonanza for an attacker.

The unprecedented scale of the Anthem hack, which exposed the personal data of up to 80 million customers, has shown that these links present a potential vulnerability in the healthcare system.

“We’re not talking with healthcare organizations as standalone entities anymore,” said Christopher Budd, a security expert with TrendMicro. “They’re interconnected.”

Health insurers like Anthem market and sell their plans on the federal- and state-run healthcare exchange websites, creating data flows between the two sources.

“Those are basically roadways that attackers could be using,” Budd said.

Obamacare itself has opened the data stream to third parties, ringing alarm bells everywhere. The Electronic Frontier Foundation writes:

The Associated Press reports that–the flagship site of the Affordable Care Act, where millions of Americans have signed up to receive health care–is quietly sending personal health information to a number of third party websites. The information being sent includes one's zip code, income level, smoking status, pregnancy status and more.

EFF researchers have independently confirmed that is sending personal health information to at least 14 third party domains, even if the user has enabled Do Not Track. The information is sent via the referrer header, which contains the URL of the page requesting a third party resource. The referrer header is an essential part of the HTTP protocol, and is sent for every request that is made on the web. The referrer header lets the requested resource know what URL the request came from. This would for example let a website know who else was linking to their pages. In this case however the referrer URL contains personal health information.

In some cases the information is also sent embedded in the request string itself, like so:;src=4037109;

type=20142003;cat=201420;ord=7917385912018;~oref=https://www. smoker=1&parent=&pregnant=1&mec=&zip=85601&state=AZ&income=35000& &step=4?

This is probably a much weaker level of security than Anthem’s.  The vulnerability of Electronic Health Records in the face of a manifest threat is undeniable.  However at present the political imperative to ‘make Obamacare a success’ trumps every danger.  The administration is proceeding in the style of Admiral Farragut: “damn the torpedoes, full speed ahead!”  But president Obama is not Farragut.  The result may be different.

Why King vs Burwell Matters


A measure of the intensity -- some would say desperation -- with which the political environment to the court challenge King vs Burwell is being prepared has been the spate of attacks, both personal and legal, which have been mounted against the individuals who brought suit.  It is as if the defenders of Obamacare were not content to argue their case strictly according to law, although they assured readers that the legal arguments would be laughed out of court, but to employ every trick in the book, and then some.

Greg Sargent opens with his portrayal of Gregory King, the “King” in King vs Burwell.  Sargent leads with quote from Politico depicting him as a figure seething with hatred and irrational resentments.

The man who could cripple Obamacare isn’t shy about telling the world that he thinks the president is an “idiot,” posting altered images of the First Lady in Middle Eastern clothing and expressing his hatred for the “Democraps” who enacted the health care law.

David M. King, 64, is the lead plaintiff on the Supreme Court case that challenges the government’s right to grant tax subsidies to millions of Americans in certain states to make health insurance more affordable. When the case is argued on March 4, King — friendly, with graying hair and a mustache — will become the public face of King v. Burwell, the most significant threat to the Affordable Care Act since the 2012 Supreme Court case that put the law’s individual mandate on the line.

A pity, Sargent says, because King himself may soon qualify for a check from the government and therefore hardly claim injury!  Therefore King’s claim to standing is thin at best and darkly motivated at worst.

A couple points about this. First, it’s fascinating that King is less than a year away from qualifying for Medicare. As it happens, Politico reports that two of the other four challengers are 64 and 63, also putting them very close to qualifying. Remember, this lawsuit is all about the plaintiff’s objection to being subjected to the individual mandate’s requirement that they get insurance. The plaintiffs are claiming injury because Virginia is on the federal exchange, which, they say, means they should not be getting the subsidies which are necessary under the law to require them to get insurance under the mandate. Yet three of the challengers are very close to having the mandate canceled for them by Medicare. (One, it should be noted, is 56 years old.)

Three reporters from the Wall Street Journal take the same tack, saying that since King served in Vietnam, he could avoid the objectionable provisions of Obamacare by sheltering with the VA system.

The plaintiffs have persuaded courts to hear their case on the grounds that the subsidies allegedly harm them by subjecting them to the law’s requirement to carry insurance or pay a penalty. Without the subsidies, insurance would be too expensive for them, they contend, thus making them exempt from having to pay the fine for lacking insurance.

But Mr. King could avoid paying that fine or any insurance premiums because, according to him and his attorneys, he served in the Army in Vietnam. That qualifies him for medical coverage with no premiums through the Department of Veterans Affairs, benefits and legal experts say. In an interview at his home here, Mr. King said he had been to a VA medical center and had a VA identification card, which typically serves as proof of VA-care enrollment.

Legal experts say the fact that Mr. King could avoid paying the penalty for lacking insurance by enrolling in VA coverage undermines his legal right to bring the case, known as “standing.” The wife of a second plaintiff has described her husband on social media as being a Vietnam veteran. The government previously questioned the standing of a third plaintiff on the grounds that her income may exempt her from paying the penalty for lacking insurance, but a lower court didn’t address the issue.

None of this directly touches upon the legal merits of the case, but it prepares the battlespace.  Even the Supreme Court is not immune from the pressure of public opinion and if King can be portrayed odiously enough, it can only weaken the entire case.  The WSJ itself observes:

Standing issues with these three plaintiffs don’t jeopardize the case, legal experts say, because only one plaintiff needs standing for the suit to proceed before the court. Instead, they could create skepticism about the strength of the challengers’ case and highlight the difficulty of finding plaintiffs to show the health law’s subsidies harm Americans, these experts say.

The point Sargent seems to be making is that nefarious forces are behind this case.  There is no real injury involved to anyone, it is a simple case of political vendetta.  And being a possible political put-up job, he indirectly exhorts reporters to go out and dig deeper into what must be a steaming pile of conspiracy.

All of this adds to the general circus-like atmosphere that is increasingly enveloping this lawsuit, and once again raises the question: Why, given how high the stakes are for this lawsuit, isn’t it getting more attention from the top-shelf reporters at the major news organizations?

There seems little doubt that these are but the opening salvos on the plaintiffs. Stay tuned for more exposes as opponents try to build ‘skepticism’.

Anyone who has followed King vs Burwell over the past months will be aware of its remarkable transformation from the case that would never be heard by the USSC, to the case that didn’t have a chance of winning, to a case caused by a mere typo in the law and lastly -- but perhaps not finally -- to a case hatched by Republicans in a back room.

The tremendous asymmetry in resources between four individuals, albeit aided by conservative pressure groups, and the massive federal government is hardly ever mentioned.  The David-and-Goliath aspect of this clash has been avoided at all costs.  Yet apart from this unnoticed fact the elephant in the room is hardly ever mentioned.  A significant number of voters hate Obamacare.

The promise to repeal Obamacare catapulted the Republicans into control of both Houses and into a large number of state houses.  For Sargent to suggest that these four plaintiffs have no standing to challenge Obamacare may not play well with a public who may seen these plaintiffs as proxies for themselves.  King vs Burwell is the challenge on behalf of all those voters who said “enough” to Obamacare.

Sargent may try to whistle past the graveyard and pretend that everybody likes Obamacare despite the clear results of the midterm elections, but the truth is that many, perhaps the majority of Americans, have a real problem with the law.  That is the reason why King vs Burwell, not because of some perverse confluence of errors, but because people angry, up in arms even, with Obamacare. The ACA’s proponents have ignored this discontent from the first.

King versus Burwell is not even the end.  It is only the beginning.

The Anatomy of a Double Cross


The Wall Street Journal’s Review and Outlook suggests there’s been a falling out among thieves.  It argues that president Obama has double-crossed Big Pharma by promising them certain concessions in exchange for supporting Obamacare, which he later reneged upon.

In 2009 Big Pharma agreed to contribute $80 billion towards ObamaCare, largely by expanding the Medicaid discount to 23.1% from 15.1%. They also agreed to mark down prescriptions for seniors by 50% above a certain level. Mr. Obama wants to raise that to 75%.

In return the White House agreed to spare the drug companies from central planning such as allowing the Health and Human Services Department to “negotiate” lower drug prices. But that was then. The budget now claims to be “deeply concerned with the rapidly growing prices of specialty and brand name drugs” and, sure enough, it rescinds the price-fixing reprieve.

The problem of course was that Obamacare turned out to be much more high cost than anticipated.  Instead of bending the cost curve it has actually added to the price of delivered care.  This left the administration in a political bind.  They had to reduce the price to to consumers somehow.  And the only way to do it was to go back on their deal.

Price controls are now being prepared.

Remember the business line, circa 2009, that if you weren’t at the ObamaCare table you were on the menu? Well, Big Pharma sat at the table, gave Mr. Obama what he wanted, and is now back on the menu as the cheese course. …

The news is that Mr. Obama’s new budget proposal for 2016 reneges on the quid pro quo that some of the dumber drug makers cut in return for supporting ObamaCare in 2009. That transaction was supposed to buy political protection against the left-wing wish list of price controls, weakened patents and other extortion that Mr. Obama now endorses in his budget.

No one should feel sorry for big pharma.  They saw Obamacare for what it was, a division of spoils among those who designed it.  But the first rule of division among conspirators is to watch your back.  Big Pharma turned its back on the president and now that the program is under severe cost pressure, they will be the first to go.

The Return of the Second Stringers


Nothing says how much the administration values Obamacare clients as in the care they take to send the very worst. The IRS is beefing up its staff to handle the load presented by the health care program.  But their intake consists of the less than ideal.

Rehiring is for someone you want back, not someone who was a problem. But the IRS may be different from your average employer. So suggests a new report by the Treasury Inspector General for Tax Administration. The watchdog report says the IRS rehired hundreds of former employees with prior substantiated conduct or performance issues.

The Inspector General identified hundreds of rehires despite prior substantiated conduct or performance issues. Some were serious. They ranged from unpaid taxes, unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct. The Treasury Inspector General for Tax Administration concluded that the rehires pose increased risks to the IRS and taxpayers.

But having created a maze of tax regulations concerning health care it’s clear the administration needs more hands to process the paperwork. Compelled by the circumstances it is understandable that they should turn to old hands, who despite their shortcomings, nevertheless know the ropes -- perhaps too well. “The IRS has a difficult and important job to do,” writes Robert Wood. “But it isn’t clear that most of the problems with the agency are budgetary.”

Indeed they are not.  The problem is mostly to do with putting the bureaucracy in greater charge of health care.

Yes, Obamacare Can Be Replaced


The mirror-imaging of Obamacare advocates was on full display in Jonathan Cohn’s Huffington Post article “An Obamacare 'Replacement?' Don't Believe The Hype”.  It basic argument is that stupid Republicans could never craft an intellectual castle as lofty as the one the Obamacare architects built.  He writes:

Congressional Republicans want Americans -- especially the nine on the Supreme Court -- to think the GOP can do in less than five months what it took Democrats decades to achieve: enact comprehensive health care reform legislation. But given that Republicans have been unable to reach consensus on much beyond repealing Obamacare in the last five years, that’s an ambitious timeline.

It’s the Voice of Central Planning.  Cohn cannot conceive of policy reform built on simplification; on letting people do what they want rather than doing what they are told. If a person thinks about most anything in his life that actually works, he will find that almost none of it is managed, administered or controlled by the government.

Only Obamacare advocates could think that health care cannot be delivered without them. But in reality they have merely added a layer of bureacracy onto the health care system without actually adding resources to the equation.  Obamacare doesn’t supply doctors.  It is simply a giant machine for moving money around -- at a huge frictional cost.

The Obamacare Replacement Plans Enable HCC-like Approaches


Senate Finance Committee Chairman Orrin Hatch (R-Utah), House Energy and Commerce Chairman Fred Upton (R-Mich.) and Sen. Richard Burr (R-N.C.) have proposed an immediate alternative to Obamacare should the Supreme Court decide against the government in King vs Burwell.

Under the senators’ plan, individuals would no longer be required to buy healthcare coverage and employers would no longer be required to offer it. People who already have government insurance through Medicaid would be given tax credits to buy private plans, and upper-income families would no longer qualify for financial help.

The most important aspect of the trio’s plan is that it would allow consumers to buy a much wider range of plans than is currently available on the Obamacare exchanges. “Under our plan, every American will be able to access a health plan, but no American is forced to have health insurance they do not want,” their proposal read.

Dr. Scott Gottlieb and Tevi Troy think that de-linking assistance from insurance products could open the floodgates to a de facto replacement of Obamacare.

One of the most meaningful reforms would be to lift the heavy federal regulation of which insurance products can be sold in the exchanges, allowing insurance regulation to revert to the states. Congress can stipulate that any state operating its own exchange can allow any health plan that previously met its insurance requirements (pre-ACA) to be offered, either on or off its own exchange. Republicans could allow this provision to sunset so they could pursue broader reforms later.

This would reintroduce competition in the design of health plans, instead of forcing consumers into the Washington-designed plan imposed in the exchanges. Right now, the only thing that varies among ObamaCare’s different metal plans (bronze, silver, gold) is the cost sharing. The actual benefits—the narrow doctor networks and closed drug formularies—are basically the same.

Best of all the dergulation would make it possible to meet the objections of King vs Burwell to exchanges, because vouchers would liberate the delivery of subsidies from the exchanges.  The administration’s job will simply be to mail people a check.  The states -- and the Feds if they want -- can run their own exchanges.

States can take some unilateral latitude of their own, by explicitly coupling such a workaround to a looser interpretation of when the ACA’s tight regulation of state-based insurance products will kick in. They can dare the Obama team to cut off subsidies if states choose to take a relaxed view on the regulatory strictures, such as which mandated benefits must be included in a health plan, or how much cost-sharing can be allowed.

The best outcome would be for Congress to explicitly link any Obama administration “fix” to a regulatory setup that lets governors regain control of their state insurance markets. Congress could then couple it to indefinite extensions of other arbitrary waivers, such as the mandate on employers with more than 50 “full time” workers that they must provide coverage at work. It was set to begin in 2014. The White House delayed its full implementation until the end of the president’s term, thus skirting the economic cost.

Developments are creating the groundwork for a Health Care Compact type solution.  The sheer unwieldiness of Obamacare is creating a demand for simpler, subsidiary solutions.  The need to quickly segue into alternative arrangements in the wake a collapse in the ACA subsidy system is driving things towards governance reform.

Now is the time for a more concerted effort to build alliances with the various movements to replace Obamacare.  So far Democrats have been lulled into the false belief that only a Republican-designed monster bureaucracy can replace a Democrat-designed monster bureaucy.  It has never occurred to them that the ultimate endgame may be no monster bureaucracy at all. Just checks paid to people to help them afford the care they choose.

Death and Taxes


The intimate connection between the IRS and Obamacare was confirmed by a pair of news stories.  The first, from the Daily Signal, reports that the IRS is asking for a $67 M budget increase and 483 more employees to implement the administration’s flagship health program.

President Obama released his $4 trillion budget proposal for fiscal year 2016 this week, which includes $13.9 billion for the Internal Revenue Service. The agency asked Congress for close to $2 billion more for operations than last year—a 16 percent increase.

The billions of dollars will help the agency bolster its staff by adding more than 9,280 full-time employees. The proposed jump in employment at the IRS is an 11 percent increase from 2015.

To enforce the 46 new tax provisions of the Affordable Care Act specifically, the IRS asked for $67 million. That will cover 483 new employees related to Obamacare’s implementation."

The second story, from Forbes, concerns proposed new regulations which will permit the denial of passports to those who owe money to the IRS.  At present the trigger amount for denial is a $50,000 debt.  As Forbes writes, “a $50,000 tax debt is easy to amass today. … In that sense, the you-can’t-travel idea seems extreme. Some commentators noted that a far smaller sum of unpaid child support can trigger similar passport action.”

A failure to meet the individual mandate or refund the government might conceivably put one over the top.  The accretion of tax rules highlights the growing linkage between the tax agency and the implementation of social policy.  There are said to be two inescapable things in life: death and taxes.  Obamacare may not be able to prevent death, but it can make sure you know about taxes.

Cruz, Jindal Warn Against Fraternizing with the Foe


Hopes that Obamacare repeal efforts can be easily saved defeated by backroom dealing were dashed  by two warning shots fired across the bows of the Washington GOP establishment by the party’s conservative wing.  Both Ted Cruz and Bobby Jindal, contenders of the votes of the conservative bloc, warned that the GOP wasn’t returned in the midterms simply to roll over and play dead.

Cruz said:

The Senate should use reconciliation and “every procedural means possible” to repeal Obamacare. asked Cruz, “Given that the Senate enacted Obamacare in a reconciliation measure that required only 51 votes, would you support repealing Obamacare with only 51 votes?”

“Absolutely,” Cruz responded. “If it can be passed with reconciliation, it can be repealed with reconciliation. And we need to use every procedural means possible to fight to stop the train wreck that is Obamacare.”

“I believe in 2017 a Republican president will sign legislation repealing every word of Obamacare.”

Bobby Jindal was even more cutting and direct in his warnings. “If the whole point of this [2014] election was simply to give John Boehner and Mitch McConnell nicer offices, let’s give ‘em back,” Mr. Jindal said during an anti-Common Core event at Washington’s Mayflower Hotel.

“Right now you’ve got an attempt by many in this city to say, ‘Well, we can’t really repeal Obamacare,” Mr. Jindal said. “Never mind all the rhetoric, never mind all those promises we made on the campaign trail, it would just be too difficult… My message to Republican leaders, the Republican Party, Republican elected officials, do what you promised you were going to do when you asked us to vote for you. Second, don’t become just cheaper Democrats. We don’t need Democrat Lite.”

The shots at the Capitol’s GOP leaders are aimed at an audience of conservative activists hungry for action – to repeal the loathed health care law, snuff out the Common Core education standards, and fight the culture war many conservatives fear they are losing.

For this audience, Mr. Jindal condemns “elites,” whom he identifies as virtually any official aimng to implement President Barack Obama’s health care law or the Common Core standards, or those trying to reduce the size of soda cups in New York City.

“In my mind, the elites are those that think they know how to live our lives better than us,” Mr. Jindal, who graduated from Brown University and was a Rhodes Scholar, told reporters after his remarks. “President Obama has been a leader of that way of thinking, but there are many on the left, Secretary Clinton is included, that also share that mindset. I think that’s antithetical to the American experiment in self-governance and trusting the American people to make their own decisions.”

This threat from the flank promises to turn any attempt at easy accommodation by the GOP leadership into struggle for party leadership.  Any Republican who aspires to become president in 2017 will have his work cut out for him without the support of the factions which Cruz and Jindal lead.

This means that the fight over Obamacare will be the serious one that Democratic strategists have long denied was even possible.

Tennessee Kills Medicaid Expansion


The defeat of Republican Tennessee Gov. Bill Haslam’s alternative plan to expand Medicaid under Obamacare can be interpreted as an act of political calculation.  Members of his own party shot down an attempt “with Haslam negotiating with federal officials for months on an approach that included conservative policy elements. But Insure Tennessee always faced significant obstacles in getting legislative approval, and it was killed even though hospitals had agreed to cover the state’s share of the costs.”

Even though Haslam said that his plan, “Insure Tennessee is not Obamacare”, “some Republicans were also skeptical of Haslam’s contention that the state wouldn’t be saddled with costs from expansion.”

Republican Rep. Jeremy Durham pointed out that the White House previously proposed lowering the provider taxes states can levy and that Tennessee’s Sen. Bob Corker has called for eliminating them.

“The idea that there would be no state dollars [involved], I just don’t find that realistic,” Durham said Tuesday.

It may also be that the Republicans have estimated that Obamacare is sinking like the Titanic and want no part of the voyage. If the Republicans believed Obamacare had a future they would have hedged their bets through Insure.  Whether they are right in distancing themselves from it or not remains to be seen.

Stolen Data


News that health insurer Anthem Inc had been hacked, leading to the loss of 40 million client records including “names, birthdays, social security numbers, street addresses, email addresses and employment information, including income data” is sure to raise concerns about how secure the Obamacare electronic health record system will be.

The FBI had warned last August that healthcare industry companies were being targeted by hackers, publicizing the issue following an attack on U.S. hospital group Community Health Systems Inc that resulted in the theft of millions of patient records.

Medical identity theft is often not immediately identified by patients or their provider, giving criminals years to milk such credentials. That makes medical data more valuable than credit cards, which tend to be quickly canceled by banks once fraud is detected.

Security experts say cyber criminals are increasingly targeting the $3 trillion U.S. healthcare industry, which has many companies still reliant on aging computer systems that do not use the latest security features.

The Los Angeles Times says “the data breach comes at a crucial time for Anthem. The company is trying to sign up thousands of people in Obamacare.”  Obamacare itself is sharing policyholder data with third party providers, a practice that was cut back only after an outcry arose.

Health officials are scaling back the amount of consumer data shared with private companies amid privacy concerns for consumers on the federal ObamaCare exchange.

The Obama administration made changes to the website that limit the amount of data available to third parties for marketing or analysis, The Associated Press reported Friday afternoon.

A Republican congresswoman has charged this is proof that Obamacare is selling patient data.

Rep. Marsha Blackburn (R-TN) laid out in an exclusive interview with Breitbart News at the Iowa Freedom Summit the biggest coming scandal of 2015: That the Obama administration is allowing corporations to data mine from

“We finally have confirmation—I had anecdotal evidence on that when started up,” Blackburn said. “They denied, denied, denied. Now we have confirmation that yes, indeed, that what has done is allowed data mining. What we’re trying to find out now—and we’re investigating—did they make money? Did they sell your data? Who got the money? What pool did that money go to? Did that come back into taxpayer funds? Or, have companies been given free access?”

Blackburn, the vice chairman of the House Energy and Commerce Committee, said congressional hearings are in the works right now, too. “Absolutely, you’re going to see hearings on this,” she said, “because the federal government first and foremost has to protect your data.”

This may prove to be untrue, but it doesn’t mean that the government can’t lose data accidentally or become a victim itself. Obamacare has put out a tender to vendors to build a National Data Warehouse, gathering all the eggs as it were, in one basket.  Although the federal government will doubtless assure consumers that the data will be protected, they cannot possibly guaranty it.  After all, Edward Snowdown stole many of the secrets of the NSA.  It is hard to believe that Obamacare data will be secured more tightly than classified info at NSA. Putting all the data in a single warehouse means that if a hacker gets in, he gets everything.

Striking Down Obamacare Won’t Cause a Constitutional Crisis


Linda Greenhouse argues in an op-ed piece in the New York Times that a Supreme Court decision finding against the government in King vs Burwell “would change the nature of the Supreme Court” from a fair arbiter to a wrecker.  She believes this even though until recently she thought the government would lose.

But the new Affordable Care Act case, King v. Burwell, to be argued four weeks from now, is different, a case of statutory, not constitutional, interpretation. The court has permitted itself to be recruited into the front lines of a partisan war. Not only the Affordable Care Act but the court itself is in peril as a result….

To reject the government’s defense of the law, the justices would have to suspend their own settled approach to statutory interpretation as well as their often-stated view of how Congress should act toward the states. …

Readers of this column may recall my expression of shock back in November when the court agreed to hear King v. Burwell. A three-judge panel of the federal appeals court in Richmond, Va., had unanimously rejected the challenge to the law, and the plaintiffs’ appeal didn’t meet the normal criteria for Supreme Court review. A defeat for the government — for the public at large, in my opinion — seemed all but inevitable.

While I’m still plenty disturbed by the court’s action, I’m disturbed as well by the defeatism that pervades the progressive community. To people who care about this case and who want the Affordable Care Act to survive, I have a bit of advice: Before you give up, read the briefs. (Most, although not all, are available on the website of the American Bar Association. ) Having read them this week, I’m beginning to think for the first time that the government may actually prevail.

But the real danger to Obamacare isn’t an ideological court.  All political parties and justices have ideologies -- for many it’s their reason for existence.  The major problem with Obama is money.  Behind all the talk about statutory interpretation is one salient fact.  Without subsidies Obamacare is unsustainable.  Greenhouse would readily agree based on her column.

If the Supreme Court agrees with the challengers, more than seven million people who bought their insurance in the 34 states where the federal government set up the marketplaces, known as exchanges, will lose their tax subsidies. The market for affordable individual health insurance will collapse in the face of shrinking numbers of insured people and skyrocketing premiums, the very “death spiral” that the Affordable Care Act was designed to prevent.

What is less obvious is that even with subsidies Obamacare is unsustainable.  Medicaid expansion in the states and subsidies are ultimately appropriations questions.  Thus even if the Supreme Court holds for the government, the operation of reality and arithmetic may doom it anyway.

Greenhouse’s argument about taking the statute in context goes far, but not far enough.  Money is important.  Striking down Obamacare subsidies won’t cause a Constitutional Crisis unless declaring an unaffordable bill constitutional does.

The Supreme Court Attempts to Break the Tie


Michael Cannon of Forbes creates a compendium of legal arguments, both pro and contra, for King vs Burwell in the Supreme Court.  The case is to decide whether the Federal Government can pay subsidies to Obamacare policy holders in states which have refused to establish an exchange.

The existence of case illustrates how narrow the margin for the ACA actually -- and how inflammatory it has become into the bargain. Laws which are passed without bipartisan support are only as stable as the width of their voting base.  Without bipartisan support, bills like Obamacare will be perceived as a diktat.

To a large extent the mere fact that the Supreme Court may have the decisive role to play in Obamacare’s creation is an admission of how few Obamacare’s political margin really is.  The political system is stalemated, with the Republicans holding the legislature the Democrats the White House.  They are therefore looking to the Supremes to block the tie.

But it will it work? No matter which way the USSC goes the divisions over government’s role are revealed to be deeper than ever.  In retrospect president Obama managed, whether intentionally or otherwise, to exacerbate the debate over the scope of the state in American life.  The source of Obamacare’s great controversy lies in that it is a proxy for a fundamental philosophical division of opinion in American life.

Josh Earnest Refuses to Talk About the Individual Mandate


White House Press Secretary Josh Earnest appeared not to support a Treasury Department estimate that up to 6 million American might find themselves paying more tax money to Uncle Sam as a result of the Obamacare they bought.  Earnest said:

"I don't think it is accurate to suggest that millions of people are going to get a tax bill as a result of this," Earnest said in response to a question Tuesday about the millions of Americans who will pay a tax penalty for not having health insurance in 2014. "The vast majority of Americans, more than three-quarters of Americans, are just going to have a box to check on their tax form to confirm that they've had health insurance. And so the impact that we are talking about here is very small and for the vast majority of people has been very positive."

Tax questions about Obamacare make the administration uncomfortable.  A New York Times article suggests that the unintended consequence of Obamacare’s tax provisions are so severe the administration is considering ‘exempting’ more people from them to avoid the political fallout.  The article begins:

Obama administration officials and other supporters of the Affordable Care Act say they worry that the tax-filing season will generate new anger as uninsured consumers learn that they must pay tax penalties and as many people struggle with complex forms needed to justify tax credits they received in 2014 to pay for health insurance.

The White House has already granted some exemptions and is considering more to avoid a political firestorm.

Little wonder then that Josh Earnest attempted to downplay the penalties, even though millions will be hit by them.  No one likes to admit the authorship of a debacle.  Taxes and medical costs are the Achilles Heel of the Affordable Care Act.  Not even the president has figured out a way to pay for a free lunch -- without paying for it.

Obamacare Advocates Scoff at Repeal


The “months long” campaign against Obamacare has begun according to Reuters, with a vote by Congress directing committees to craft a replacement.  The scope of the intended demolition is the entire edifice.

Defying a White House veto threat, lawmakers voted 239-186 on a measure to eliminate the complex web of federal subsidies, insurance reforms, taxes and regulations that have extended health coverage to millions of Americans since the Affordable Care Act became law in 2010.

President Obama has publicly vowed to veto legislation and the Republicans do not have the numbers to override a presidential veto.  The Washington Post’s Dana Milbank, in an op-ed piece, calls it an exercise in futility, emphasizing the lack of heat and passion in the vote to repeal. But that is because the real action is expected later.

Greg Sargent, blogging in the Washington Post thinks the Republicans “would make it easier for the Supreme Court to side with the challengers and gut subsidies” and endanger the whole edifice of Obamacare.

Meanwhile, as Brian Beutler reports, a new brief filed by public health scholars predicts thousands of deaths could result from a decision gutting subsidies for millions. Now, perhaps the Justices won’t factor in such potential consequences — or the likely failure of Republicans to offer any alternative for all or some of those people — as they make their decision. But as noted above, even conservative and Republican critics of the law appear to think they just might.

Given that only a few months ago, Obamacare’s advocates scoffed at the idea that the challenge to the law would ever reach the Supreme Court, the idea that it is now under existential threat now sounds like whistling past the graveyard.  It suggests ACA advocates had made a fundamental miscalculation in the odds in the law, just as they made a blunder in politics, believing Obamacare would win them the gratitude of the electorate -- which it did not as the 2014 midterm elections showed.

The Obamacare advocates are bluffing with their contrived confidence.  Obamacare is under real threat and its poor economics suggests that it ultimately cannot survive.

Truly Unaffordable Care


High costs continued to be the weak point of the Affordable Care Act. Rachel Garfield and Katherine Young of the Kaiser Family Foundation completed a study of those who remained uninsured, despite the offer of the metal plans in Obamacare.  They found the plans offered unaffordable even with the subsidies.

Nearly three in ten (29%) uninsured adults who applied for ACA coverage said they did not obtain that coverage because they believed it was too expensive. Many who cited cost barriers were ineligible for financial assistance under the ACA and would have faced the full cost of Marketplace coverage. However, more than four in ten who cited cost as a reason for not enrolling in coverage were eligible for financial assistance. Many appear to be eligible for tax subsidies, but they may have still found Marketplace coverage to be unaffordable even with subsidies.

Not only are the costs of Obamacare blowing out, but even with 15 tax increases and the bailouts of insurance companies people simply can’t afford the product.  In fact the underlying health care product got even more expensive under Obamacare, though this increase was disguised as higher deductibles and narrower networks.  But now it seems that even with deductibles Obamacare is simply unaffordable.

This can only mean Obamacare is doomed.  A program can survive opposition from the rival political party, but it can never survive financial infeasibility.  Obamacare got its sums wrong and will perish, not from politics, but from economics.

More Alternatives to Obamacare Emerge


Louisiana Governor and Republican stalwart Bobby Jindal fired a shot across the bow of GOP congressionals when he denounced plans to replace Obamacare with a watered-down version of itself.  He averred to proposals aimed at raising taxes by only half the amount that the Affordable Care Act has raised them.  In the matter of taxes, Jindal writes:

The law is chock full of them — no fewer than 18 revenue raisers totaling over $1 trillion through 2022.Yet several alternative proposals being discussed by Republicans don’t actually repeal the law’s tax increases. Instead, they repeal the law’s tax increases, only to replace them with new revenue hikes. So, rather than raise taxes by more than $1 trillion, as Obamacare did, these plans raise taxes by perhaps, say, “only” $500 billion.

This puts Republicans in the positions of being “cheap” Democrats, or Democrat-lite. We’ll raise taxes — but just … less than Obamacare. We’ll spend hundreds of billions on new entitlement programs — but just … less than Obamacare.

The talking points put forward by the administration project this exact seductive scenario.  Republicans ‘must’ save or change Obamacare -- by tweaking it.  They have no ‘responsible’ alternative but to fund it, etc. Jindal says that at least some congressional Republicans are planning exactly that.

Jindal has put forward a plan of his own called America Next.  It contains some of the ideas espoused by Paul Ryan, but has a slightly different way of implementing a voucher.  Both plans aim at putting health-money in the hands of consumers.  Jindal’s plan appears more oriented toward block grants.  

The scope of both plans is beyond this article to compare. However the emergence of competing Republican plans signals the start of serious competition for an Obamacare replacement within the greater conservative world.  The Jindal plan, with its emphasis on money given the states given “with minimal restrictions” aligns somewhat with the Health Care Compact.

Obamacare is foundering.  Jindal argues that it must be buried, not just bureaucratically, but intellectually repudiated into the bargain.  In order to achieve that its successor cannot afford to be some kind of weakened form of the Affordable Care Act. The time is right for simplification; the opportunity is here for the HCC to assert itself.

Tax Time Debacle


A New York Times article suggests that the unintended consequence of Obamacare’s tax provisions are so severe the administration is considering ‘exempting’ more people from them to avoid the political fallout.  The article begins:

Obama administration officials and other supporters of the Affordable Care Act say they worry that the tax-filing season will generate new anger as uninsured consumers learn that they must pay tax penalties and as many people struggle with complex forms needed to justify tax credits they received in 2014 to pay for health insurance.

The White House has already granted some exemptions and is considering more to avoid a political firestorm.

An administration official observed: “Mark J. Mazur, the assistant Treasury secretary for tax policy, said up to six million taxpayers would have to ‘pay a fee this year because they made a choice not to obtain health care coverage that they could have afforded.’”  But how would Mark Mazur know what a person might have afforded?  Certainly he would be assisted in that determination by models, estimates, statistics and the like.  But Mazur can never actually know the preferences of every consumer or what pressing expenses might at that very moment take a higher priority than enrolling in Obamacare.  The Individual Mandate is a coercive instrument employed by a paternalistic government that seriously believes it knows how better to spend an individual’s money than the individual does.

Many people awarded insurance subsidies for 2014 did not realize that the amount would be reviewed and recalculated at tax time in 2015.

Consumers are sure to have questions, but cannot expect much help from the tax agency, where officials said customer service had been curtailed because of budget cuts.

The 2015 filing season could be the most difficult in decades, officials said. Ms. Olson said new paperwork resulting from the Affordable Care Act would probably exacerbate problems with customer service, which “has reached unacceptably low levels and is getting worse.”

“The I.R.S. is unlikely to answer even half the telephone calls it receives,” she added. “Taxpayers who manage to get through are expected to wait on hold for 30 minutes on average and considerably longer at peak times.”

Timothy S. Jost, an expert on health law at the Washington and Lee University School of Law who supports the Affordable Care Act, said: “It will be very easy to find people who are unhappy with the new tax obligations — people who have to pay a penalty, who have to wait forever to get through to somebody at the I.R.S. or have to pay back a lot of money because of overpayments of premium tax credits.”

And they would be unhappy for a good reason.  Supporters of the Act might argue that consumers are being unreasonable in their outrage, but a glimpse at the byzantine forms they must complete must generate some sympathy for the poor taxpayer.

The calculations will be relatively simple if all members of a household had coverage for every month of 2014. They can simply check a box on their tax return. But lower-income people often have changes in employment, income and insurance. If any members of a household were uninsured in 2014, they must fill out a work sheet showing coverage month by month, and they may owe penalties.

To claim tax credits, consumers need to fill out I.R.S. Form 8962, which includes a matrix with 12 rows and six columns — a total of 72 boxes, to compute subsidies for each month. Most taxpayers use software to prepare returns, and that will simplify the process, officials said.

The system as designed is bureaucratically regressive.  It is hardest upon the poor and the casually employed.  But that should be expected from a program that penalizes people who “made a choice not to obtain health care coverage that they could have afforded.” The government stands ever-ready to spend your money, not the way you see fit, but the way Obamacare’s architects believe is rational.

Obamacare’s Unknown Tax Burden


Even though the total cost of each additional Obamacare enrollee has been estimated to be $50,000, nobody really knows for sure what the program will cost.  It isn’t that agencies like the CBO have refused to predict it, it is that they can’t. Americans for Tax Reform looks at a recent Congressional Budget Office report and find this gem about the the 15 tax increases which are part of the law. (Emphasis mine)

Those estimates address only the insurance coverage provisions of the ACA and do not reflect all of the act’s budgetary effects. Because the provisions of the ACA that relate to health insurance coverage established entirely new programs or components of programs and because those provisions have mostly just begun to be implemented,CBO and JCT have produced separate estimates of the effects of the provisions as part of the baseline process. By contrast, because the provisions of the ACA that do not relate directly to health insurance coverage generally modified existing federal programs (such as Medicare) or made various changes to the tax code, determining what would have happened since the enactment of the ACA had the law not been in effect is becoming increasingly difficult. The incremental budgetary effects of those noncoverage provisions are embedded in CBO’s baseline projections for those programs and tax revenues, respectively, but they cannot all be separately identified using the agency’s normal procedures. As a result, CBO does not produce estimates of the budgetary effects of the ACA as a whole as part of the baseline process.

This reflects the essential unknowability of what will be spent.  As the paragraph above notes, the CBO is in terra incognita.  Hence, nobody really knows how much of a tax increase Obamacare has plunked down on the taxpayers.  The benefits of Obamacare are so far, hypothetical.  What it is going to cost is also nebulous.

This should be borne in mind the next time it is described in glowing terms.

King vs Burwell May Not Matter


The New Republic hinted that administration might have a few aces up its sleeve if the Supreme Court rules that subsidies to Obamacare policy holders cannot be paid to states which have not established an exchange. “It is thus not in their interest to betray any suggestion that they’re working on contingency plans—legal, political, legislative, administrative—and thereby alert the Court that it would not be inviting Armageddon by ruling for the plaintiffs. Even as the absence of contingency planning would amount to a stunning dereliction of duty.”

Nevertheless the implication is that the administration can find some way to work around the subsidy problem -- probably by delivering the same funds via another method.

But while Obamacare’s advocates are unable to talk about their own contingency plans, they are full ideas about how the Republicans can let them off the hook. The Huffington Post writes: “Some wording in one section of the law is the source of the dispute -- an ambiguity that Congress could fix with a simple, one-line correction.”

In their estimation the Republicans could never craft a magnum opus equivalent to Obamacare’s in just a few months.  The Huffington Post engages in mirror-imaging when it says:

But drawing up a health care bill can't really be done "quietly" -- or quickly. The debate over the Affordable Care Act dragged on for more than a year in Congress. And that was just the final stage of a process that had unfolded over roughly a decade, during which time liberal intellectuals and interest groups hashed out different ideas for how to write legislation and then how to build a political coalition that could pass it. It took such a long time because devising even narrowly tailored health care legislation requires coming to grips with difficult trade-offs -- and then dealing with politically powerful constituencies that might not like them.

It has never occurred to them that simplification, rather than feature-for-feature replacement might be the Republican goal.  The Orange County Register rightly identifies the real threat to Obamacare as stemming, not from some provision of the law, but from the lack of money. As the cost of the ACA and its associated taxes and penalties come to the fore, it becomes increasingly difficult to see it as sustainable.

We think there are ample grounds, including the report this past week by the nonpartisan Congressional Budget Office, which estimates that the health law will cost the federal government a net $1.35 trillion from 2016-25.

That vast sum will reduce the ranks of the uninsured by 24 million to 27 million, according to CBO. That works out to a cost of $50,000 per person, which puts the fritters to the canard advanced by supporters of the Affordable Care Act that the law has significantly reduced the per capita cost of health care.

Then there was the estimate this past week by the Treasury Department that as many as 6 million Americans will have to pay an Obamacare tax penalty this year because they were uninsured in 2014. The penalty is 1 percent of income above a certain threshold – for instance, $20,000 for a couple.

Even if the Republican congress let the administration off the hook with a “one line correction”, it is hard to see how the government can keep paying these subsidies at a sufficient level to make a cost-effective difference in health care. In that case the administration has no contingencies in the event of a loss in King vs Burwell, or even a victory for that matter.

Ryan, Upton and Kline


Rep Paul Ryan has been put in charge of crafting a Republican alternative to Obamacare.  It is an indication that the GOP sees the vote to repeal Obamacare as doomed to fail from a presidential veto.  The Republican alternative to be drafted by Ryan’s committee, represents the follow-on attack in what appears to be a repeal and replace strategy.

A trio of Republican committee chairmen will immediately get to work on drafting the party’s ObamaCare backup plan, House Majority Leader Kevin McCarthy (R-Calif.) announced Friday.

The working group is forming one day after McCarthy announced the House would vote next week to fully repeal ObamaCare, marking the first repeal vote of the GOP-controlled Congress.

McCarthy said Friday that the party “recognizes that full repeal requires a thoughtful replacement strategy.” …

In addition to Ryan, the two other chairmen shaping the ObamaCare alternative will be Energy and Commerce Committee Chairman Fred Upton (R-Mich.), and Education and the Workforce Committee Chairman John Kline (R-Minn.).

Ryan’s appointment commits the GOP to a fairly radical overhaul strategy, since he has gone on record as saying that Obamacare is “beyond repair”.  “You can't fix a fundamentally broken law; you've got to replace it. That's why Congress can't save Obamacare with a few tweaks, despite what its defenders say. No quick fix can correct the main flaw: The law takes power away from patients and hands it to bureaucrats.”

Some indication of the approach that Ryan will prefer is given in his extensive writing on the subject, notably his Path to Prosperity template, which basically reduces the government’s role in medical care provision to supplying a voucher which customers can then use to purchase the insurance of their choice.  There are a few other provisions to take care of the inuninsurables, but fundamentally it attempts to dismantle the entire historical edifice of Medicare and special tax benefits in favor of a largely uniform voucher system.  Here is a summary of Ryan’s thinking as described in Wikipedia.

Medicare: Starting in 2022, the proposal would end the current Medicare program for all Americans born after 1957 and replace it with a new program (still called Medicare) which uses a voucher and would increase the age of eligibility for Medicare:

Starting in 2022, the age of eligibility for Medicare would increase by two months per year until it reached 67 in 2033.

After 2022, the current Medicare program ends for all people who have not already enrolled. People already enrolled in the current Medicare program prior to 2022 would continue to receive the program. New enrollees after 2022 would be entitled to a voucher to help them purchase private health insurance.

Beneficiaries of the voucher payments would choose among competing private insurance plans operating in a newly established Medicare exchange. Plans would have to insure all eligible people who apply and would have to charge the same premiums for enrollees of the same age. The voucher payments would go directly from the government to the private insurance companies that people selected.

The voucher payments would vary with the health status of the beneficiary. For the average 65-year-old, payment in 2022 is specified to be $8,000, which is approximately the same dollar amount as projected net federal spending per capita for 65-year-olds in traditional Medicare in that year.

Each year, the voucher payments would increase to reflect increases in the consumer price index (average inflation) and the fact that enrollees in Medicare tend to be less healthy and require more costly health care as they age. They would not increase by the higher, healthcare inflation rate.

The voucher payments to enrollees would also vary with the income of the beneficiary. The wealthiest 2% of enrollees would receive 30 percent of the premium support amount described above; the next 6% would receive 50 percent of the amount described above; and people in the remaining 92% the income distribution would receive the full premium support amount described above.

Eligibility for the traditional Medicare program would not change for people who are age 55 or older by the end of 2011 or for people who receive Medicare benefits through the Disability Insurance program prior to 2022. People covered under traditional Medicare would, beginning in 2022, have the option of switching to the voucher system.

The proposal would modify Medicaid as follows:

Starting in 2013, the federal share of all Medicaid payments would be converted into block grants to be allocated to the states. The total dollar amount of the block grants would increase annually with population growth and with growth in the consumer price index (average inflation).

Starting in 2022, Medicaid block grant payments would be reduced to exclude projected spending for acute care services for elderly Medicaid beneficiaries.

States would have additional flexibility in designing their programs.

Ryan’s plan has been criticized as cutting government spending on health, which it does. Those who favor the plan believe that by putting power back in the hands of consumers the excessive medical costs of the last decades may at last be trimmed.  However that may be, the plan that the trio of chairmen will propose may differ significantly from Ryan’s earlier thinking, but Path to Prosperity may give some notion of the starting point.

Obama’s Legacy, the Bill is in the Mail


A number of financial time bombs are ticking deep within the bowels of Obamacare.  The first, as John Graham points out, are the possibly unrealistic estimates of the CBO of the total program costs, arising from a higher than predicted subsidy rate and the reliance on historically low rates of health spending.

Medicaid savings in the January 2015 projection are due to 10 percent to 15 percent reductions in costs per beneficiary. The same holds for the $51 billion of savings due to lower subsidies to health insurers in Obamacare exchanges. CBO notes that cost increases in private and government health plans have been significantly slower than anticipated in previous years, and assumes this will continue. Nobody can fully explain the slower rate of health spending in recent years, but consumer-driven health plans and the Great Recession explain much of it.

This challenges CBO’s long-term projections: CBO now projects real (inflation-adjusted) growth in Gross Domestic Product (GDP) of over two percent per annum though 2025, so it appears imprudent to expect health spending to continue to increase at a recessionary pace. Another challenge is that CBO projects that only 75 percent of enrollees will receive subsidies in 2015 and 71 percent in 2025 (p. 122). However, 87 percent received subsidies in 2014.

The second are the possibly illegal risk sharing arrangements that the ACA has with insurance companies. These are described by Scott Gottlieb. All of them have the effect of putting the taxpayer on the hook for company losses.  The fourth is the one that Gottlieb doesn’t mention: what if the government runs out of money?

At issue are risk-sharing arrangements contained in Obamacare that are meant to help offset losses insures might take as the program gets started. Collectively, these programs have become known as “the three Rs” because of their three elements.

The first component is risk adjustment — a mechanism for transferring funds from plans that enroll low-risk members to plans that attract high cost enrollees. The second piece is a reinsurance scheme. The government will cover a percentage of the losses for high cost enrollees whose medical bills fall above a certain threshold.

It’s third element – the risk corridors — that’s likely to cause the earnings woes.

The idea here is to share the financial risk with Uncle Sam. If the actual medical claims for any individual Obamacare plan fall above or below 3% of some target amount, then the health plan will keep all the gains or losses itself. Here’s the rub. For anything outside that threshold, Uncle Sam will split the money with the health plan, essentially capping their upside and protecting their downside. Specifically, for the first 5% of gains or losses, the government will split it 50/50 with the plans. For anything above that, the government will take 80% of the extra gains or losses. …

The controversial wrinkle is this: By the estimation of many, the program was intended to be budget neutral – basically paying for itself by transferring money from insurers that made profits to those that did not. The problem was that there weren’t enough Obamacare plans making money to fund the kitty. So like many other parts of Obamacare, the President re-interpreted the rules, and said that the risk corridors could be funded off taxpayer money that was skimmed from other programs. In other words, the monetary obligations would become open ended.

Obamacare’s costs have probably been underestimated.  When the bill comes due Obama may be long out of office and thus escape personal blame.  But he will leave posterity his “legacy” together with a pile of IOUs to pay for it.  There will be no escape from his bills.

Sink or Swim


Yevgeniy Feyman argues in Forbes that in a kind of operation of the law of unintended consequences, Obamacare’s infliction of high costs on the American public will lead to market reform.  Americans accustomed to ‘letting insurance pay for it’ will find that insurers aren’t going to pay of much and therefore drive a hard bargain. Feynman believes this will be good for everyone in the end.

Post-Obamacare, the new normal for millions of Americans will be high deductible health plans (HDHPs), narrow provider networks, and more complex cost-sharing schemes. The Obama Administration may not call it consumer-driven health care, but that’s what it is.

So it’s time to begin thinking about how patients will navigate a health care system in transition from historically generous low-deductible plans with broad networks and volume-based payment systems, to HDHPs with very skinny provider coverage.  Patients will be expected to shop around, but the information necessary to make informed decisions in the post-Obamacare world is still largely inaccessible.

No one will be spared.  Even traditionally generous employer-provided insurance will be beaten down by Cadillac taxes and employer mandates, so everyone will be watching the dimes. But the good news is that this will force consumers to shop around for deals.  After all, they couldn’t afford treatment if they didn’t.

Some inpatient coinsurance rates were as high as 50 percent, even after the deductible has been met. Moreover, you’d be hard-pressed to find a plan without a four-tiered formulary, with different levels of cost sharing for generic, preferred brand, non-preferred brand, and specialty drugs – with coinsurance rates as high as 75 percent for some specialty tiers.

This isn’t necessarily a bad thing. To limit unnecessary utilization, or to divert patients to more cost-effective treatments, insurers are experimenting with a broad range of tools that include coinsurance, network, and tiered benefit designs. But without appropriate information, patients will be left alone in the dark, stumbling blindly through the maze of American health care. And it appears that good information is still lacking….

Of course, the employer-sponsored market still offers much more generous protection than the individual market – with or without Obamacare. To understand how entrenched ultra-high-value insurance has been, just look at the reaction of Harvard faculty to the addition of cost-sharing in their health insurance plans. …

But thanks in part to overall trends (rising health care costs) as well as Obamacare’s Cadillac Tax, even historically generous benefit packages will either be reduced or will demand more contributions from employees.

So now we have patients facing deductibles, coinsurance, tiered benefit designs, narrow networks, and all sorts of other utilization management tools. But for these tools to be effective (and serve their purpose, rather than simply dissuading patients from using healtcomes critical. 20 percent coinsurance for a CT scan might be 20 percent of $500 or $2,000 depending on where it’s done. And unfortunately, though the information might be out there, it’s far from clear that patients are aware of it, or would take advantage of it.

But seeing as they have to -- for lack of money to do anything else -- then surely they will.  Feynman’s analysis coincides with an observation already made on this site:  that one purpose of Obamacare was to increase the cost of medical care so less of it would be used. This is already happening.  Everyone is “covered”, but by a blanket so small and threadbare that an “informed consumer” to use Feyman’s phrase, must choose which part of his anatomy to warm.

There is no doubt that people will spend their healthcare dollars more carefully when things are so expensive.  But is it really fair to call such a policy a success?  It is a success, but in the sense of a policy that casts everyone into the sea so that everyone is in a position where he must either sink or swim.

Will you swim? Or will you sink?

The December Premium Skippers


Some time ago insurance companies warned that the grace period provision of Obamacare would allow scheming customers to avoid paying their last insurance bill, because companies were prohibited from denying benefits to those who were only 30 days in arrears.  The fear was that some customers would skip their December bill and simply enrol in a new plan come January.

That fear has now materialized.

Early returns for ObamaCare's fourth quarter are in, and it appears clear that paid enrollment levels took a dive.

That's not a surprise. As IBD noted back in December, "there is good reason to suspect that people will take advantage of ObamaCare rules to skip their final payment of the year without consequence." …

ObamaCare exchange customers who have a choice of carriers can stiff one and make a switch in the new year. Many had an incentive to do so this year because many of the most popular plans raised prices and were undercut by competitors.

Score one for the little guy? Not so fast.  Insurance companies are likely to compensate by charging other people a little more to make up for the people who skip the bill.  Ultimately the consumer will pay for the generous “grace” period mandated by the government.

There’s no free lunch and never was.

Boehner Readies For Assault


John Boehner says he’s going to pull the trigger on Obamacare.  Didn’t say he’d hit it though. The Hill reports the speaker will unveil a new plan to comprehensively replace the ACA, in addition to holding a vote to repeal it now.

Speaker John Boehner (R-Ohio) is pushing back against new criticism that the Republican Party lacks a plan to replace ObamaCare, even as it renews its effort to repeal the law.

“There will be an alternative, and you will get to see it,” Boehner told Fox News's Bret Baier in an interview that aired Wednesday night.

Leaders of the three House committees that oversee healthcare policy are currently “working together to craft, what we believe, what would be a better approach with regard to healthcare for the American people,” Boehner said on “Special Report with Bret Baier.”

The three-term Speaker also defended his party’s decision to hold another ObamaCare repeal vote next week.

By placing D-Day in the future Boehner is suggesting that they are still working on the real assault.  That will involve dangers of its own, the biggest being that a new comprehensive plan may simply be a Republican one-size-fits-all version of the Democrat one.  It may be just as unwieldy a behemoth as the monster it seeks to replace.

It would be far better if the Republicans merely passed a governance framework, as envisioned by the Health Care Compact, in order to break up the problem into manageable chunks.  The biggest source of health policy failure has been Federal government intervention.  It will not be free of it until governance of the problem is devolved to the states.

Squeezing Into the Obamacare Corset


Like a plump woman trying to fit into a corset, the managers of Obamacare find themselves trying to keep bloat they themselves created from escaping its restrictions.  Jason Millman at the Washington Post writes that insurers are trying to claw back mandated benefits by expanding the fine print.

One of the greatest promises of the Affordable Care Act is that if you are sick or get sick, health insurers can no longer charge you more or avoid covering you altogether. They have to provide coverage to anyone who wants it, and they're not allowed to cherry pick healthier customers over sick customers.

But patient groups say they've spotted an alarming trend of some health insurance plans designing drug benefits to purposefully keep out sicker, costlier patients. It's currently the subject of a federal complaint, and a new study offers evidence this is happening across the country.

Here's how advocates say this works. Rather than reject coverage for sick patients altogether, some insurers are placing high-cost medications for chronic conditions into the highest-priced tiers of the drugs they cover, which would force patients to pay potentially thousands of more dollars out of pocket for essential medications.

This is especially true of persons suffering from chronic diseases requiring expensive treatments, like HIV patients. This is how it works.

Douglas Jacobs, who is pursuing degrees in public health at the Harvard T. H. Chan School of Public Health and medicine at the University of California, San Francisco, and also the lead author of the study, suggests that some insurers are dissuading HIV patients from enrolling due to high-cost HIV drugs.

Usually, insurers get a person to complete a set of forms, provide a list of covered drugs and out of pocket costs for steering patients to medicines or generic drugs for which an insurer has already negotiated a favorable cost. Ben Sommers, the co-author of the study, suggests that forms can be designed in a way that discourages people with pre-existing medical conditions.

The study analyzed 48 Obamacare, or ACA, policies across 12 states in the country with the help of the federal marketplace. The study found that in 2014, 12 policies placed all HIV drugs covered under the policy, which required consumers to pay at least 30 percent of the cost. Some insurers did not cover the HIV drugs.

People in these plans had to pay three times the average cost per HIV drug in comparison to customers in other plans.

The Washington Post suggests the government will try to fix the problem by prohibiting the practice.   But this seems unlikely to work.  It stems directly from the failure of the program to cut costs.  Absent real economies, insurance companies are simply forced to transfer money from one set of policy holders to other.  By mandating the treatment of people with pre-existing conditions, Obamacare created a financial commitment that could only be met by raising premiums on healthy people, raising taxes or skimping on benefits.

The Obama administration recently said it would consider it a form of discrimination if a health plan put "most or all" drugs treating a specific condition at the highest levels of cost, a development that Schmid of the AIDS Institute said he was encouraged by. In a letter to health insurers last month, CMS said it might review exchange plans to determine whether insurers designed plans with high out-of-pocket costs for certain conditions, including bipolar disorder, diabetes, HIV, rheumatoid arthritis and schizophrenia.

The fat policylady won’t fit in the Obamacare corset.  Her failure to lose weight means that the fat bulges which are compressed in one place, pop out in another.  The only short-term answer, given her failure to diet, is to buy a bigger corset. This will take the form of expanding the budgetary limits on how much the taxpayer can spend to support the new costs.

Treating a person with HIV is as expensive as ever.  Given that such patients cannot be charged the full value of their insurance because pre-existing conditions are discriminatory, some form of subsidy must be found to make up the difference.  The bigger bill means the hat has to be passed around yet again.

Voters may choose to pay more, but politicians who have promised the public something for nothing dread the prospect of having to tell the truth.  The truth is that bringing patients with pre-existing conditions into the system may be a laudable goal, but it’s not free.  Nothing is free. Pay up, taxpayer. Pay up.

Sick Leave Is Paid For By—You!


Why not? If government is going to pay for it. A poll finds that 2 in 3 Oregon voters support sick paid leave of the sort being pushed by President Obama nationally.

When asked by telephone whether they would “favor or oppose a proposal to require all employers in Oregon to provide 7 paid sick days to their employees,” 67 percent of likely voters said they would favor or strongly favor the proposal, while 23 percent said they would oppose or strongly oppose it. The share that strongly supported the idea was more than three times as large as the share strongly opposed.

That is only a half measure.  The plan President Obama is proposing for federal workers includes paid parental leave too. “President Obama two weeks ago called on Congress to enact that benefit–which would be paid “administrative” leave that would not be charged against either sick leave or annual leave time–while separately ordering agencies to advance up to six weeks of paid sick leave for those purposes under existing authority.”

Who doesn’t want paid leave?  Who doesn’t want parental leave? If pollsters had asked respondents in Oregon if they were in favor of 70 days paid sick leave, close to a hundred percent would have said, “yes”.  The only ones who might have said “no” are those who wonder whether the employers might try to recover the costs by trimming wages or benefits in other areas.

Long instinct will have warned them how in this wicked world there is rarely something given for nothing.  Sooner or later the bill will arrive. And that instinct would be correct, says Tim Worstall at Forbes.  He points out that a lot of companies already pay for sick leave because hey have calculated it as part of the package of attractions they want to offer.  By forcing companies that don’t offer sick leave to mandatorily offer it, the result will probably be pay cuts.

He writes that compensation packages are capped by what the employer can afford to offer.  Increase one “benefit” and you will shrink other benefits, including wages, as the company struggles to make it add up.

To an employer hiring someone has a cost. The closest approximation to that we have in the economic statistics is “total labour compensation.” That’s the wages they get paid, of course, but also all of the benefits that go with the job. Paid maternity leave, paid sick leave, pension contributions, health care insurance, taxes paid on employing someone (for example, the employer contribution to FICA taxation) and so on. We have to add all of these together to get what is the total cost to an employer of having an employee. And it’s this number that interests the employer as well. They will have some pretty good idea of how much they can make by employing someone and if that total compensation is higher than those earnings then that person isn’t going to get hired (or remain so).

In particular, mandated sick leaves will eat into any future wage increases.  If you get a raise via a sick leave, you probably won’t get the wage rise you might have otherwise.  Now some people would prefer to have the paid sick leave.  But then you might have figured that into your choice when you applied for a job.

But one way or the other there’s no free lunch.  There never was.

The Return of the Native


The Wall Street Journal notices that the firm most responsible for the Obamacare website’s failed roll out is back. They have been rewarded, apparently, for doing a lousy job.  The WSJ is outraged, but are they surprised?

So what does it take to ruin your reputation around Washington these days? The question comes to mind after learning that one of the capitol’s most corrupt bureaucracies has decided to hire one of its most incompetent contractors—and the answer explains a lot about accountability in government.

Only days after the Internal Revenue Service announced that it would throttle back tax-season customer service in retaliation for modest budget cuts, the House Ways and Means oversight subcommittee discovered that the agency had an active $4.46 million contract with CGI Federal. You may recall that company as the same outside website-builder-for-hire that was the lead designer for the ObamaCare website rollout fiasco of 2013.

CGI’s ineptitude was too much even for the Health and Human Services Department, which defenestrated CGI in January 2014. Several states followed. In a letter to the IRS on Friday, Illinois Republican Pete Roskam deadpans, “I am concerned that just months after the HHS and Massachusetts firings, the IRS selected the same contractor to provide critical technology services related to the administration of the Patient Protection and Affordable Care Act.”

In other words, the IRS isn’t merely buying CGI’s services but, yes, rewarding the company with a new health-care consignment. Mr. Roskam is requesting more information about this consolation prize, and well he should. The law’s convoluted income-reporting provisions will make filing for people who receive insurance subsidies a special ordeal.

Surely the WSJ staff must have been sagacious enough to realize that firms like CGI are very competent, except that their skills are not the sort which are described in the job specification.  CGI can work within the system, which itself incompetent.  It can be said to be “competently incompetent”.  It fits right into Obamacare.

They were only banished for show.  Now, as anyone would have expected, it’s time for the return of the native.

Rich Government, Poor Government


One of the most interesting things about the administration is that it can be both rich and poor at the same time.  For example, the government is desperate to save money on military health care. “(AP) — U.S. officials say an independent commission is recommending broad changes to the military's retirement and health care systems that could save more than $20 billion over the next four years.”

That’s because they can’t afford it’s rising costs. But at the same time the administration touts the lavish subsidies it has poured into Obamacare premiums.  “Here. Here. Take these subsidies,” it seems to say. In fact the Washington Times says the president wants to completely liberate himself from any spending ceilings and let ‘er rip.

WASHINGTON (AP) - President Barack Obama will seek to bust through spending limits for both domestic and defense programs, the White House said Thursday, negating the effects of across-the-board cuts agreed to by both Democrats and Republicans and signed by Obama into law. ...

The brazen proposal from the president, two months after voters booted his party from control of Congress, reflected the White House’s newfound confidence on the economy. Obama’s aides believe that improving conditions give Obama credibility to push his spending priorities unabashedly - despite the fact that Republicans still believe government spends far too much.

Federal deficits, gas prices and unemployment are all falling, while Obama’s poll numbers have crept upward. The president has been newly combative as he argues it’s time to ease the harsh measures that were taken to help pull the economy out of recession.

How can the government be both rich and poor at the same time?  The answer to the puzzle is that government is “rich” whenit wants to buy support from voters. Then it is “poor” when it needs to find the tax revenues to pay for its wealth.  If it cannot find tax revenue it simply pays a captive group, like the military, less.  It then the uses the “savings” to provide benefits for new voters, like amnestied immigrants.  Once the immigrants are firmly in the bag, then they too will be taxed or subject to economies as the Big Tent moves its show elsewhere.

That is how government can be both rich and poor at the same time.  It is “rich” to those it wants to pull into the tent.  Once they’re in the door suddenly they’re poor.

Obamacare’s Program of Redistribution


The connection between taxes and money is shown by two articles, each dealing with the one of two sides of the Obamacare coin. CNN says that up to six million taxpayers will finish up paying a tax penalty to government for not buying an ACA policy.

Some 3 million to 6 million Americans will have to pay an Obamacare tax penalty for not having health insurance last year, Treasury officials said Wednesday. It's the first time they have given estimates for how many people will be subject to a fine.

The penalty is $95, or 1% of income above a certain threshold (roughly $20,000 for a couple). So you could end up owing the IRS a lot of money.

Take a married couple with $100,000 in income - their bill comes to $797, according to the Tax Policy Center ACA penalty calculator.

The penalty for remaining uninsured rises to the larger of $325 or 2% of income in 2015.

Thirty million more would have paid tax penalties except that they have been granted exemptions -- for the time being -- by the government.  But it’s not an extension, it’s a reprieve.  When the reprieve runs out, they too will have to walk the walk to the payment window.

As many as 6 million people are estimated to be subject to tax fines for failing to have health insurance last year, a top federal tax official said Wednesday.

But an estimated 30 million other people who also lacked health coverage will avoid those penalties because they have an exemption, the official said as the Obama administration highlighted efforts to help people deal with the first tax season to feature the effects of Obamacare.

Another federal official also warned that people who fail to sign up for health insurance coverage for this year shouldn't count on getting an extension past the Feb. 15 deadline for doing so.

It’s easy to see why tax is one side of the Obamacare coin.  Ever increasing taxes are needed to pay for the other face of the coin: ever increasing subsidies. Californians alone received $3.2 billion in subsidies from the government.

Californians received $3.2 billion in Obamacare premium subsidies during the rollout of the federal health law last year.

That federal aid went to about 800,000 California households, state officials said Monday. Those individuals and families paid $1.1 billion in premiums themselves, meaning for every dollar they spent the federal government paid an additional $3 to their health insurer.

Nearly 90% of enrollees in the Covered California exchange qualified for financial help based on their income. The average monthly subsidy was $436 per household, according to the state …

The taxpayer subsidies are a linchpin of the Obama administration's effort to make health insurance more affordable for millions of Americans. Individuals earning up to $46,000 annually and families of four making up to $94,000 qualified for assistance.

Health policy experts said the fact that subsidies covered such a large share of Californians' premiums suggests that most people who signed up in the first year of the Affordable Care Act were lower income.

That “free” money has to come from somewhere. To raise it, Obamacare has to tax even state and local governments.  Reuters  says “the state of Ohio filed a lawsuit on Monday that claims Obamacare tax assessments against state and local governments for public employee health plans are unconstitutional.”

The suit by Attorney General Mike DeWine involves the federal government’s power under the Affordable Care Act’s Transitional Reinsurance Program to levy taxes against health insurance companies and certain employers who offer self-insured group health plans.

The U.S. Department of Health and Human Services (HHS) has said it is assessing this tax on state and local governments for their public employee health plans, DeWine’s office said. DeWine said this would destroy the balance of authority between the federal government and the states.

There’s no way the federal government can match 3 dollars for every one dollar of subsidy unless it recovers the cost from somewhere.  Since all money eventually originates from taxpayers, the “free” money really represents dollars recycled from one wallet to another, an illusion whereby the public is served at their own expense by politicians who pretend the money comes from somewhere else.

Aaron Blake of the Washington Post says this chimerical largesse makes it almost impossible to repeal Obamacare. A  “poll, from the Kaiser Family Foundation, shows that 64 percent of people say they would want Congress to re-expand the subsidies to all beneficiaries of the Affordable Care Act, if the Supreme Court voids some of them.”

And as the debates over reforming Social Security and Medicare show, once you start giving people government benefits, it becomes very difficult to take them away.

Democrats would relentlessly drive home the idea that Republicans would be trying to take away people’s health-care subsidies. From there, it would be up to Republicans to make the case that letting Obamacare implode is a holier goal than restoring those subsidies.

The law is still not popular, but as this poll shows, the repeal movement isn't exactly a majority. And the opponents who say it should be scaled back could certainly still be on board with restoring the subsidies.

This sets up a situation in which people face increasing taxes so that they may receive “free money” to buy an overpriced, narrow networked, high deductible insurance plan. Some might argue that the illusory benefits are real because they force people to buy things they would, in their irresponsibility, never purchase. The Columbus Dispatch tells this anecdote about a person who benefited from Medicaid expansion.

Life took an unfortunate turn for Ben Ertel last year.

He was working at the University of Cincinnati Medical Center when his antidepressants stopped working and he fell into a major depression. He quit his job.

Searching for health insurance a few months later, Ertel, 29, learned he qualified for Medicaid under Ohio’s expansion of the tax-funded health-care program.

“I went from paying more than $1,000 for medical bills and medications each month to $250,” Ertel said at a Statehouse news conference yesterday. “The best part was, with the stress of keeping up with the bills gone, I was able to take a course and take my state test for a nurse’s aide license.”

A month later, he had a new job, and starting on Dec. 1, health coverage through his employer.

And now that Ertel has a job he’ll be taxed, to pay for the subsidized care of someone who has still or perhaps never will make it out of the dumps.  Some like that arrangement, but there should be no mistake. The heart of Obamacare is redistribution.  It is a money pump from people who earn to those who don’t.

Obamacare Missing Its Targets


Politico says Obamacare has successfully failed to reach the 38% of Young Invincibles it set out to enrol in Obamacare, having triumphantly reached 26% of the number instead.  Considering the fact that young people are paying inordinately into the ACA insurance pool, it argues, this is victory indeed.

That optimism contrasts with the earliest concerns, which included fears that many millennials would pay little attention or decide to forgo coverage because of other expenses such as cellphones or Netflix subscriptions. Plenty of Obamacare critics predicted the latter. They warned that having too few young, presumably healthy people in insurers’ risk pools — to balance out the health care costs of an older, typically sicker population — would throw plans into a “death spiral.”

Moving Obamacare’s goalposts is now the primary source of its success. Investor’s Business Daily notes that the number of people who will lose their employer health insurance will far exceed initial estimates.

The CBO now expects that 10 million workers will lose their employer-based coverage by 2021.

This finding stands in sharp contrast to earlier CBO projections, which at one point suggested ObamaCare would increase the number of people getting coverage through work, at least in its early years.

The budget office has, in fact, increased the number it says will lose workplace coverage every year since 2011.

The ACA shows every sign of being a program in trouble.  It is over-budget and not meeting its targets.  Perhaps it is not as bad as the worst case scenarios, but it is far from reaching its own rosy ambitions.

Congress Schedules First Total Assault on Obamacare


The first congressional vote to repeal Obamacare is scheduled to take place in the first week of February, according to Fox News.

The vote comes as Republicans have debated how to address the controversial health care bill. GOP lawmakers are facing rising pressure from conservative groups and activists to go big in their efforts to dismantle the law, but the party is stuck in an internal debate over how far they can go, and whether undoing it piecemeal is a preferable course of action....

Party strategists have questioned whether aiming for full repeal is worth the effort, when President Obama would surely veto.

Thus the vote is as much of a test of strength among groups within the Republican party as it is between the GOP and president Obama.  It will define just what kind of coalition can be built among Obamacare opponents.  But it is also a probing attack against the ACA’s defenses.

Outwardly the administration is talking a confident game.  But inwardly they know that Obamacare is in trouble, and they too have declared the intention to hold the tenuous line of veto.  Repeal is attack to the maximum.  Veto is defense to the maximum.  The battlefield will look very different after the first onset next week.

Full Spend Ahead


It was said that the hallmark of the British upper classes was that they never talked about money and never thought about anything else.  American liberals, by contrast, always talk about money but never give a thought to where it will come from.  That is truer than ever. Even though Obamacare is on track to cost twice as much as president Obama predicted it would, its advocates are already laying plans to expand it, practically without limit.

Chris Jacobs of the Wall Street Journal’s Washington Wire says “last week, the advocacy group Families USA attempted to change that, releasing its ‘Health Reform 2.0’ agenda of how to expand on Obamacare.”

The Families USA paper includes a full—and costly—wish list of new spending programs related to the law, including:

* Fixing the “family glitch,” in which families are ineligible for federal insurance subsidies if one member of the family has an offer of “affordable” employer-sponsored health coverage;

* Extending funding for children’s health insurance, a program that Obamacare funded only through September;

* Increasing federal cost-sharing subsidies—raising the amount of subsidies, currently provided to families with incomes under 250% of the federal poverty level, so as further to reduce deductibles and co-payments, and potentially raising the income cutoff for subsidies;

* Making permanent an increase in Medicaid reimbursement rates included in Obamacare that expired on Dec. 31, 2014;

* Extending coverage to immigrant populations (the report does not specify whether such coverage should also apply to the undocumented); and

* Increasing federal premium subsidies. Amending the current subsidy set-up in this way would necessitate two changes to current law, both of which would require an increase in federal spending. Congress would need to repeal the provision, set to kick in after 2019, scheduled to reduce the subsidies’ annual rate of growth; then lawmakers would have to pass the subsidy increase that Families USA advocates.

*The proposal also contains numerous mandates on insurance plans—for instance, to cover adult dental care, all forms of pediatric care, and expand access to provider networks.

Who’s going to pay for it?  That’s a little detail the advocates have skipped. But fixing the “family glitch” alone would cost $50 billion more per year. There is some talk about price controls, but nothing firm.  Which is par for the course.  In reality that attitude Obamacare’s architects seem to have taken is: talk about saving money but spend it like hell.

To the question: is it sustainable?  The answer is, “nobody’s stopped us yet?”

It’s a Bargain


The Los Angeles Times’ David Lauter writes that Obamacare will be cheaper than expected, citing reductions in premiums. “President Obama's healthcare law will cost about 20% less over the next decade than originally projected, the Congressional Budget Office reported Monday, in part because lower-than-expected healthcare inflation has led to smaller premiums.”

One of the biggest sources of saving is non-participation in Medicaid expansion. That brings the estimate down to $1.35 trillion.

The budget office, noting that its estimates of the law's costs have dropped repeatedly, said the smaller price tag was "attributable to many factors." Two of the largest were "the slowdown in the growth of healthcare costs" and the Supreme Court's decision in 2012 to allow states to opt out of expanding the Medicaid program for the poor.

About half the states have so far declined to expand Medicaid to all impoverished adults, as the law allows. Because the federal government pays the cost of that expansion, the states that have declined have held down federal spending.

At first glance this seems at variance with published reports that Obamacare will actually cost $1.9 trillion, as the Daily Mail reports.  It is certainly different from the president’s own estimate, as seen on the White House website, putting the cost at $0.9 trillion. The discrepancy arises because the counts do not tally the same thing.

The CBO report explains the difference in the tallies. Appendix B shows that the actual cost of Obamacare is $1.9 trillion as reported by the Mail.  However, after the CBO report says that after the government collects the individual penaltes, the employer penalties, the Cadillac Tax and other taxes, then the net cost after new taxes is $1.35 trillion -- Lauter’s figure.

Amount billions $



Penalty payments by uninsured people


Penalty payments by employers


Excise tax on high premium insurance plans


Other revenues




The Los Angeles Times piece makes it sound like the nation is getting a bargain. But in reality the nation is paying $1.9 trillion. It is “only” $1.35 trillion because of an accounting trick which represents the $639 billion as already collected. It’s a bargain in the same sense that you are “only” being charged the outstanding balance for stuff you’ve paid a deposit on.

Obamacare’s Giant Price Tag


Cost continues to be the weakest point of Obamacare.  The full details of that cost are only now emerging. Philip Klein of the Washington Examiner cites a CBO report concluding that the actual cost of the ACA was not the “around 900 billion” cited by the president, but more than double. Nearly 2 trillion dollars.

When Obama pitched the healthcare law to Congress, he said it would cost "around $900 billion" over 10 years. But his statement was misleading because the way the law was designed, the major spending provisions didn't kick in until 2014. This meant that 10-year estimates at the time the law was passed in 2010 were artificially low, because they included four years (2010 through 2013) in which spending was negligible.

The new CBO analysis finds that between fiscal years 2016 and 2025, spending on the law's expansion of Medicaid will cost $920 billion and insurance exchange subsidies will cost nearly $1.1 trillion. The major spending provisions, taken together, will total $1.993 trillion.

This does not include the non-subsidized premiums that are being paid by the policy holders themselves.  It represents the amount of money the taxpayer is putting into Affordable Care.  In exchange for this expenditure, how many people are helped?  A little arithmetic shows it to be 23 million people.

The CBO also said it expected the law's exchanges to cover 21 million by the end of the 2016 fiscal year and for Medicaid to cover an additional 13 million — gains that it projects will be partially offset by a reduction of 11 million people in employer or other existing coverage.

That can be calculated easily as 21+13-11=23 million persons.  The cost per person is therefore 2 trillion divided by 23 million or about $87,000 per person.  The benefits purchased for this gigantic sum are questionable.  The core problem with Obamacare is that it does not seem to be value for money.  Rather it appears to be an overpriced boondoggle.

Fee For Service vs Capitation


Bruce Japsen at Forbes describes the next phase in the ACA’s medical reform program -- this time specially designed not to increase coverage but to reduce cost. “The Obama administration will push Medicare payment rapidly away from fee-for-service medicine within four years, outlining a plan to have half of all Medicare dollars paid by to doctors and hospitals via “alternative” reimbursement models by the end of 2018.”

Vox calls it the “White House's radical new plan to change how doctors get paid”.  There is nothing new or radical about it.  Anyone who was encountered a “set menu” at a restaurant or ordered a “value meal” at a fast food outlet knows the concept.  Currently doctors and hospitals bill according to fee-for-service.  This is the restaurant equivalent of a la carte ordering.  At a fast food restaurant you can think of it as ordering items separately.

What Obamacare wants to do is bundle the services into packages, something that is already happening but which they want expanded. Japsen writes: “Currently, just 20 percent of payments from the Medicare health insurance program for the elderly are paid via alternative payment models like bundled payments, patient-centered medical homes and accountable care organizations, a rapidly emerging care delivery system that rewards doctors and hospitals for working together to improve quality and rein in costs.”

It sounds reasonable enough.  Most of us know that ordering a “value meal” is generally cheaper than constituting the same thing by individual item. The resemblance is so great that even the terminology used is similar to fast food. “The whole system is moving towards value-based payments,” says Vox.  You know, like a “value meal”.

The “value meal” idea is also not new. It is called capitation.  When you cater a wedding or other event, you charge by the number of guests and provide “fullness” in the same way that hospitals are supposed to provide “wellness”.  But the catch is this. Capitation or bundling does not by itself provide value. It only provides value if there is competition among providers.

You can be clipped by a caterer just as well as in a dishonest a la carte restaurant. To see this, remember that food in prisons is also provided on a bundled basis, but food in prison is not necessarily any good.  In fact it is terrible because the prisoner cannot simply go elsewhere to eat.  The reason value meals at fast food restaurants are cheap is because if you don’t like the value meal at McDonald’s you can go down the block to Burger King, or perhaps get the set meal at a Chinese restaurant.  It is competition, not the mode which creates the economies.

Recently the Australian medical association examined the question of whether capitation improved preventive care in New Zealand.  The conclusion: “there has been no discernable increase in preventive care services by GPs paid an annual fee to look after the health of their patients, according to the New Zealand Medical Association.”

Under arrangements introduced in New Zealand in 2002, GPs derive half their income from capitation payments, with the remainder fee-for-service payments which, under the Kiwi system, include hefty patient co-payments of around $45 to $50 per visit ($17 for disadvantaged groups).

Blended arrangements are in fact a common sight at restaurants.  At Burger King you can order a Whopper Value Meal or order the Whopper by itself.  It’s a blended menu.  Compare this to what the ACA has in store. Vox writes:

The Affordable Care Act also created Accountable Care Organizations: larger groups of doctors that band together and take a lump sum of money to care for a specific group of patients, much like what the White House wants lots of providers to do under this new plan.

This could benefit the patients.  It could reduce costs.  But it will not by itself do so.  The medical catering service Vox enthuses over is only as good as its implementation.  In fact it contains a hidden danger. Obamacare has been building up monopolies by encouraging the consolidation of providers -- the larger groups of doctors that band together and take a lump sum of money to care for a specific group of patients.  This reduces competition.

The reason why value meals in the food industry are cheaper is primarily not because of the bundling, but because they are in competition with other establishments.  Without competition bundled food is prison food.  Who’s for prison food?



Justin Haskins tells what is disparagingly referred to as an anecdote: his unpleasant experience at the hands of Obamacare.  The story begins with him trying to buy insurance and finding himself paying a higher rate than he used to.

“I’m sorry sir,” the polite customer-service agent said. “There’s nothing I can do. You’re either going to have to enroll in Medicaid or you’re going to have to pay the full health-insurance rate.”

“The rate you quoted earlier?” I asked. “That’s nearly 30 percent higher than my current insurance bill, I just can’t afford it.”

“You’ll have to pay the full rate, yes,” the agent replied.

“I don’t understand,” I explained. “I have plenty of money to pay you a reasonable rate, but I can’t afford to pay the same rate a millionaire would be asked to pay. Why can’t I just receive a partial subsidy? I’m willing to pay more than what Medicaid offers.”

“Sir, that’s just not how the system works.”

Right. That’s not how ObamaCare works; it doesn’t work at all.

Haskins’ problem was that he was a young graduate student and metal plan premiums are tough on the young, who have to be soaked to pay for the old and the uninsurable.  As described elsewhere, the “young invincibles” have had to pay extraordinarily more so that favored other groups can receive a subsidy.

Haskins didn’t want to be on Medicaid, which he saw as welfare. So he bought a short term plan while he sought another option. Then it occurred to him that anecdotes -- of which he was one -- when multiplied enough became statistics.  Obamacare was driving away the young, if he was any indication of the trend.

The reason is obvious. If young, healthy people — the group that the American Enterprise Institute’s Scott Gottlieb and Kelly Funderburk say is being “ripped off” by ObamaCare rates — opt out of the ObamaCare exchanges, the exchanges will collapse in a “death spiral” because not enough healthy folks will be paying in to make up for the less-healthy ones, who need more care.

My experience perfectly highlights the insanity of the Affordable Care Act. It forced me — a paying, insured, well-educated, healthy American — out of the coverage I’d had, then tried to push me into Medicaid.

The program wouldn’t let me pay more when I offered to pay a higher rate to stay out of Medicaid, and it provided only one other option: paying the highest rate available for insurance I didn’t use once in 2014.

Rather than take the easy route and enroll in Medicaid, I paid my own way with a private plan of my choosing. Now, instead of being rewarded for saving taxpayer money, I’m being punished with a fine of at least $95. What a country!

There is a tendency among Obamacare’s advocates to dismiss these as isolated occurrences; to assure themselves that on the whole their program is well loved and even helpful.  They will be blind until the last.  People are not stupid, and they know when they are being ripped off.

The Deep Seated Resentment Against Obamacare


Even though Obamacare advocates have assured anyone who will listen that the Republican’s “have learned Obamacare is unrepealable”, Dr. Ben Carson appears not to have heard the news.

Ben Carson on Saturday delivered a forceful defense of conservatism, arguing for dramatically scaling back the federal government and saying that he wouldn’t support Obamacare even if it worked. …

Carson said that the U.S. should cut its government by “attrition” — not replacing any federal employees that retire in the next 4-5 years. The resulting smaller government would mean that “they don’t have time to stick their noses in people’s business,” he said, to applause.

On the Affordable Care Act — which Carson has on several occasions compared to slavery — the famous former surgeon said he opposed any government intrusion in health care. “Even if it worked, I would oppose it,” Carson said of Obamacare. “It doesn’t.”

Neither Carson nor Cruz -- who swore to repeal ‘every word’ of Obamacare -- are stupid men. Doctors and Senators are rarely idiots.  Both men probably understood the deep wellsprings of resentment and dissatisfaction which the ACA advocates affect not to understand, or if they understood them, believe will pass.

This has led Obamacare’s advocates to adopt a the strategy of stonewalling until the storm passes.  Every criticism of their pet medical program is met with unyielding resistance and threats of veto.  They cannot bring themselves to see the resentment is real, and they will underestimate it to their peril.

Is the Obamacare Part-Time Effect Real?


Louis Jacobson of Politifact tries to assign a degree of believability to the assertion by the CEO of the Carl’s Jr restaurant chain that 'Obamacare has caused millions of full-time jobs to become part-time'.  In the end Jacobson finds that it probably true that many people have been pushed down into part-time jobs, but it might not be millions.  Just a few hundred thousand, and therefore only half-true.

The statistics, in this case, are inadequate to either prove or disprove that "millions" of Americans have seen their job go from full-time to part-time due to the law. That number is possible, but unsupported. That said, there’s evidence suggesting that hundreds of thousands of workers may have seen their hours cut as the law’s impact began to be felt. That’s not "millions," but it’s not insignificant either. On balance, we rate the claim Half True.

One study that tried to answer the question empirically was Leslie Muller’s ACA Small Employer Survey from the Grand Valley State University.  The scope of the study was confined to small firms in West and Southwest Michigan.  The summary of its findings are:


1. Only a quarter of small firms that offered health insurance in 2013 and 2014 plan on continuing to  

offer plans in 2015 and 2016. .  

2. Of those offering plans in 2014, 75% plan on offering insurance in 2015. Half of these firms plan  

on offering plans in 2016.  

3. Sixteen percent of firms are uncertain as to whether they will offer insurance in 2015; 28% are  

unsure about 2016.  

4. Of those companies not offering plans in 2015, 68% plan on sending employees out to the public  

exchange to buy individual health insurance.  


1. 87% of firms have already or are considering increasing the cost share of insurance costs borne by  

the worker.  

2. 73% have or are considering shifting costs by using a high deductible health plan (HDHP).

3. 67% have or are considering shifting costs by changing prescription drug coverage.


1. 46% have or are considering limiting or reducing new hiring

2. 28% have or are considering reducing their overall workforce.

This suggests a far higher level of damage than Jacobson is willing to admit and may be much closer to  Carl CEO Andy Puzder’s estimate, which Jacobson cites.

Puzder provided some anecdotal evidence from his own sector -- restaurant chains -- that suggests a plausible case for "millions."

Many restaurant chains, he noted, are operated as franchises. In his own company’s case, 230 franchisees own 73 percent of the company’s 2,920 restaurants in the United States; the company itself owns the rest. While the parent company employs about 20,000 people, its domestic franchisees employ many more -- about 55,000. And industry leaders like McDonalds and Burger King have more franchises and franchise employees.

The disparate nature of franchise ownership makes it difficult to calculate the number of workers who may have had their hours cut. Based on his own experience at his company and the conversations he’s had with other industry CEOs, Puzder thinks it’s reasonable (but, he acknowledges, unscientific) to assume that 20 percent to 25 percent of their operational employees have had their hours cut to under 30 per week due to the employer mandate.

But more importantly, the Grand Valley State University study captures a whole host of cost cutting measures which are not even part of Jacobson’s fact checking.

Elizabeth Warren unwittingly gives credence to Puzder’s claims when she denounces the attempts to shift the definition of full time work back to 40 hours as “corporate welfare”.

Warren said that the bill effectively shifts the burden away from companies and onto taxpayers.

"This bill is corporate welfare," Warren said at a hearing held by the Senate Committee on Health, Education, Labor & Pensions. "Big corporations would get to cut health benefits for millions of workers, and push people out of their employer insurance plans. Some of those people will lose their health insurance all together. Others would be pushed onto federal programs, expanding the reach of Obamacare, and taxpayers would get stuck with the tab."

The costs have increased dramatically and companies, especially small firms, are attempting to escape them. This is well borne out by the Grand Valley State study.


1. Only a quarter of small firms that offered health insurance in 2013 and 2014 plan on continuing to  

offer plans in 2015 and 2016. .  

2. Of those offering plans in 2014, 75% plan on offering insurance in 2015. Half of these firms plan  

on offering plans in 2016.  

3. Sixteen percent of firms are uncertain as to whether they will offer insurance in 2015; 28% are  

unsure about 2016.  

4. Of those companies not offering plans in 2015, 68% plan on sending employees out to the public  

exchange to buy individual health insurance.  


1. 87% of firms have already or are considering increasing the cost share of insurance costs borne by  

the worker.  

2. 73% have or are considering shifting costs by using a high deductible health plan (HDHP).

3. 67% have or are considering shifting costs by changing prescription drug coverage.

So yes, they are trying to “shift” the costs.  But where did these costs come from to begin with? What Warren misses is that some or most of these costs are a consequence of Obamacare itself. They were created by the very program she is supporting. Employers are scraping the same amount of butter over more toast.  

What Warren wants is for companies to come up with more butter so that more toast can be buttered to the previous degree of richness. This actually constitutes a tax increase, though Warren won’t say that.  Naturally companies will try to escape the increase by embarking on economies -- exactly what Puzder says they’re doing.

Nobody now seriously argues that Obamacare has reduced the costs of health care. In fact, Ezra Klein of Vox proudly claims that only the Democrats had the political courage to admit you needed more money to ‘solve’ the health care problem -- an irony since Obamacare was supposed to cut the amount of money needed to begin with.

But now that more money is required -- true apparently and not half true -- it is hardly fair to point the finger of accusation at those who have to bear the increases.  Obamacare is a job killer, or at least, a job disincentivizer.

“Every Word”


Them’s fighting words.  Although the public has been assured for months -- by Democrats -- that the Republicans have given up on repealing Obamacare, some Republicans at least have given the contrary impression.

DES MOINES, Iowa –  Conservative heavyweights joined with up-and-comers in hammering President Obama Saturday over everything from the health care law to his immigration policies as they played to a sold-out Iowa crowd in what amounted to the opening bell of the Republican presidential campaign. …

“The most important tax reform we can do is abolish the IRS,” Texas Sen. Ted Cruz told the fired-up audience.

The firebrand senator compared the EPA to a locust and got a huge reaction when he demanded to “repeal every word of ObamaCare.”

I guess that means Cruz wants to repeal Obamacare.  At least it would seem.

That Third Party Data Sharing


The saga of the reported sharing of client data by Obamacare with third-parties continues apace.  After the Associated Press broke the data sharing arrangement it was reported that the offending code had been removed. CNN, which earlier reported on the sharing said the code had been expunged.  But apparently CNN spoke to soon.

Earlier this week, the government came under fire after the Associated Press showed that was relaying users' personal information, such as zip code, income level, pregnancy status and whether or not you are a smoker.

That information was being shared with Google (GOOG), Twitter (TWTR, Tech30), Yahoo (YHOO, Tech30) and other companies that track people online, like the advertisement display service DoubleClick.

The evidence was on the website code itself.

But on Friday, CNNMoney read the code and found that was no longer relaying personal information to DoubleClick and others. …

But health officials would not explain why DoubleClick, a company in the advertising industry that already tracks people's browsing habits, should be allowed to know whether users smoke or are pregnant.

For its part, Google told CNNMoney it doesn't desire your personal health information anyway.

"We don't want and don't use that kind of data," said Andrea Faville, a Google spokeswoman. "And we don't allow DoubleClick systems to be used to target ads based on health or medical history information."

The data sharing’s only been scaled back. The Hill reports:

Health officials are scaling back the amount of consumer data shared with private companies amid privacy concerns for consumers on the federal ObamaCare exchange.

The Obama administration made changes to the website that limit the amount of data available to third parties for marketing or analysis, The Associated Press reported Friday afternoon. …

"We believe that the use of these tools are common and represent best practices for a typical e-commerce site," Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, said in a statement shared with The Hill.

Apparently the policy remains to share the client’s data, the only question being how much. This is about as disturbing as giving a vendor direct debit rights over your account on the assurance that he will withdraw your money only according to “best practice”. It’s an assurance without substance. But then the whole program might be.

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