THE HCC BLOG

Underinsurance. The New Buzzword

POSTED one day ago BY HEALTH CARE COMPACT

“Uninsurance” -- the condition of not being insured -- is dead, killed by Obamacare, its supporters say.  However in its place is underinsurance.  “Underinsurance” is a term used to describe people who have insurance policy that falls way short of paying their medical bills so that they either forgo treatment or are financially ruined when they take it.

Vox’s Sarah Kliff, who has been a long time supporter of Obamacare calls the phenomenon ‘crummy insurance’. “If you ask any economist the main purpose of health insurance, the answer you'll probably get back is this: to protect against financial catastrophe.”  And many insurance policies aren’t doing that.

Yes, the free annual check-ups or discounted gym memberships that health plans sometimes offer are nice. But the real thing you're purchasing with your monthly premium is protection against financial ruin. You're paying for someone else to be on the hook for the big medical bills that can and will pile up in the case of serious illness or accident.’

Except, increasingly, insurance does not provide that type of protection. That's the main takeaway from a new Commonwealth Fund report on the "underinsured," or people who have health insurance that leaves them exposed to really big costs — and who appear to skip care due to the price.

Ever since Obamacare was rolled out pundits noticed that it wasn’t all it was cracked up to be.  Nancy Pelosi promised voters it would be something wonderful. But Elizabeth Rosenthal of the New York Times noticed that it left much to be desired.  She called it “insured but not covered”.  That was the first widespread mention of what Sarah Kliff calls ‘crummy insurance’ and what the Commonwealth Fund terms “underinsurance”.

Rosenthal described the travails of Karen Pineman of Manhattan whose insurance was canceled because it failed to meet Obamacare standards.  She bought an Obamacare policy with a higher premium, but that did not even begin to capture the full extent of its inferiority.  It was not only expensive, but the networks were narrow and the deductibles are high.

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.

Another liberal site, the Huffington Post, chimes in: “It's Not Just You -- Those Health Insurance Deductibles Are Getting Scary”.  High deductibles according to the Commonwealth Fund in a widely quoted study, are the biggest factor in turning insurance into “underinsurance”. The number of underinsured has doubled since 2003.  The number of “continuously insured adults with high deductibles has tripled”.

New estimates from the Commonwealth Fund Biennial Health Insurance Survey, 2014, indicate that 23 percent of 19-to-64-year-old adults who were insured all year—or 31 million people—had such high out-of-pocket costs or deductibles relative to their incomes that they were underinsured. These estimates are statistically unchanged from 2010 and 2012, but nearly double those found in 2003 when the measure was first introduced in the survey. The share of continuously insured adults with high deductibles has tripled, rising from 3 percent in 2003 to 11 percent in 2014. Half (51%) of underinsured adults reported problems with medical bills or debt and more than two of five (44%) reported not getting needed care because of cost. Among adults who were paying off medical bills, half of underinsured adults and 41 percent of privately insured adults with high deductibles had debt loads of $4,000 or more.

The biggest driver of deductibles is the high underlying cost of medical treatment.  When costs rise insurers pass them on to policy holders in the form of deductibles. Because Obamacare has failed to lower the rate of health care cost inflation the deductibles are rising to match.

The Commonwealth study showed that while “underinsurance” has risen for everybody, the hardest hit are those without group employer insurance.  A whopping 37% of people within individual policies have crummy insurance, almost double the 20% among those with employer-provided coverage.  This is important because the employer mandate and the “Cadillac tax” are moving increasing numbers of people out of the employer provided coverage category into individual coverage.

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Bruce Japsen at Forbes writes, “as employers look at ways to reduce health expenses, some are considering giving retirees contributions and sending them to the public exchanges under the Affordable Care Act.”  In other words, people are being sent away to buy “underinsurance”.

A new survey of large employers by Aon Hewitt (AON) shows two-thirds of companies are considering changes to their “pre-65 retiree health strategies” and 28% of them are considering eliminating retiree health coverage altogether. This escalates a trend over the last decade by major companies to cut health benefits to workers who retire before age 65 when government-funded Medicare coverage for the elderly kicks in.

Using a kind of verbal sleight-of-hand, Obamacare advocates who began by promising to save Medicare and Medicaid from bankruptcy have redefined success as increasing coverage -- insuring everybody.  Hence the ACA never ceases to regale the public with stories of people “being insured for the first time”.  What they don’t say is that in they’ve replaced “uninsurance” with “underinsurance”.  If 25% of the those holding Obamacare policies can’t access treatment because of high deductibles then they are effectively without insurance.  They are insured only in name.  They have insurance but “crummy” insurance.  They are insured but not covered.  They’ve got a meal ticket but they can’t eat.

That’s defining success down.

Medicaid Expansion Costs Blow Out

POSTED one day ago BY HEALTH CARE COMPACT

The departure of Andy Slavitt and his company, QSSI from the Centers of Medicare and Medicaid Serves (CMS) continues to make news. “In more bad news for Obamacare exchanges, QSSI, the information technology firm that manages the federally run Healthcare.gov unexpectedly quit,”  according to the Americans for Tax Reform, claiming he’d been awarded a “golden parachute”.

While QSSI has been credited with saving the federal exchange following its disastrous 2013 rollout, its relationship with the Centers for Medicare and Medicaid Services (CMS) has come under scrutiny for possible conflicts of interest. Andy Slavitt, formerly an executive at QSSI’s parent groups United Healthcare Group and Optum, was later made a senior advisor at CMS.

Slavitt was strangely allowed to pocket at least $4.8 million in tax-free income by indefinitely deferring capital gains taxes on the sales of millions in stock upon joining CMS. Slavitt was also granted a rare federal ethics waiver which allowed him ignore the one-year mandatory cooling off period and simultaneously be involved in contracting issues for Optum and United Healthcare while working at CMS.

But perhaps the Slavitt is hitting the silk not in order to escape from some ethical controversy but to merely avoid the firestorm that may soon engulf the biggest part of Obamacare: Medicaid expansion. Politco reports a blow-out in Medicaid expansion costs.  The program is costing much more than estimated. “Medicaid enrollment under Obamacare is skyrocketing past expectations, giving some GOP governors who oppose the program’s expansion under the health law an ‘I told you so’ moment.”

More than 12 million people have signed up for Medicaid under the Affordable Care Act since January 2014, and in some states that embraced that piece of the law, enrollment is hundreds of thousands beyond initial projections. Seven states have seen particularly big surges, with their overruns totaling nearly 1.4 million low-income adults.

The federal government is picking up 100 percent of the expansion costs through 2016, and then will gradually cut back to 90 percent. But some conservatives say the costs that will fall on the states are just too big a burden, and they see vindication in the signup numbers, proof that costs will be more than projected as they have warned all along.

The defenders of the program contend that the overruns are worth it. “Supporters of Obamacare say the enrollment surge might lead to some budget bumps down the road, but that the historic decline in the uninsured is a major achievement. In addition, they say the expansion is providing significant health and economic benefits to states that more than offset costs.”

In other words, the economic benefits from better health health make it all worthwhile.  But none of this answers the question of where the money is going to come from.  When all is said and done medicines have to be paid for, as do doctors and hospital facilities.  Saying it was “worth it” evades the question of who is going to pay the bills.

“Can we afford not to do this?” asked Audrey Haynes, secretary of Kentucky’s Cabinet for Health and Family Services under Democratic Gov. Steve Beshear. Kentucky under Beshear has fully implemented Obamacare, and it’s seen the second largest decline in its uninsured rate, after Arkansas.

But the money remains a concern not just for foes of expansion like Scott, but for GOP governors like Utah’s Gary Herbert who are trying to come up with some way for their states to expand. Herbert met with HHS Secretary Sylvia Mathews Burwell in late April and later voiced worries that any form of expansion could mean Medicaid consumes an even bigger chunk of the state budget starting in 2017.

“We’re trying to cover as many people as we can afford,” said Herbert, a Republican who supports expansion but has not yet managed to find the right mix of ACA expansion and conservative variants to bring his legislature on board. “Is it 90,000 or 110,000 people? I don’t know what that’s going to work out to be right now.” …

“If you’re spending twice as much on this program than expected, that’s twice as much money that’s being added to the national debt,” said Nicholas Horton with the Foundation for Government Accountability, a conservative think tank that has sought to highlight how much expansion enrollment has gone beyond expectations. Even if the states don’t pay nearly as much as the federal government for Medicaid expansion, he said, “You’re still going to spend more money overall. That’s still taxpayer money.”

Perhaps more to the point, the Medicare blowout is draining away funds for other traditionally liberal causes, other public service union cash cows.  The competition for money is creating problems within the Democratic party.  The clearest example is the Medicaid blowout’s effect on public education.  The Edvocate writes:

According to a new study, there is correlation between the rising cost of Medicaid and declined spending on higher education. Created by Moody’s Analytics for The National Commission on Financing 21st Century Higher Education, the study suggests that state budgets will constrict spending on higher education because of the high cost of Medicaid.

Because money from the Affordable Care Act will start to slow by 2020, many states will have to allocate more funds for Medicaid, which in turn will cause a decrease in discretionary spending.

So, many states that are struggling with budget deficits or have deeply cut funding for higher education will likely face more financial issues.

One of the hard economic truths is that there isn’t enough money for everything.  While health is doubtless important so is education, public safety, roads and bridges.  State Medicaid budgets can only blow out so far before it forces school closures and cutbacks to police, fire and roadway maintenance.  Above all, it will cause irreconcilable problems for the Democratic Party.  Inside Higher Education has the story from Chicago, President Obama’s hometown.

CHICAGO -- State tax revenues are up. But the next decade is looking rough, thanks largely to rising Medicaid costs. And public higher education will bear the brunt of tighter state budgets.

That's the central finding of a new study from the National Commission on Financing 21st Century Higher Education. The University of Virginia's Miller Center created the nonpartisan commission last year with funding from Lumina Foundation.

“Huge growth” in Medicaid spending is leading to a “tipping point” for public colleges, said Ray Scheppach, an economic fellow at the center. Scheppach presented the study's findings here this week at a meeting of the Education Writers Association.

State spending nationwide on Medicaid was 15.6 percent of overall state budgets in 2013. That spending will increase to 17.9 percent by 2024, estimated the report, which is based on projections from Moody's Analytics.

The increase in Medicaid costs will siphon away $60 billion more from state budgets over the next decade, according to the center, with the bulk of that diversion coming after 2020.

“That $60 billion would have been available to all discretionary spending, including education,” said Scheppach.

Clearly no amount of insistence that the overspending is worth it can overcome the problem that it will crowd out all other expenditures if left unchecked. “By 2020 increased state spending on Medicaid will outpace tax revenues. Higher education will be “crowded out,” according to the study, and allocations for public colleges will grow by less than 4 percent per year.”

The situation was particularly toxic for states like Illinois who had large public sector unions. Most of Democratic states were facing problems meeting unfunded pension payments.  A Medicaid Pacman on the loose inside the budget would crush all hope of paying the public sector pensions.

The report did not include pension liabilities as a mandatory spending item in its calculations. As a result, states with big unfunded pension obligations could see further slowing in higher education spending. Those states include Illinois, which faces as much as a $100 billion pension shortfall over the next 30 years.

Illinois's new Republican governor, Bruce Rauner, has proposed deep cuts to cope with the state's current $6 billion budget hole.

Democrats have criticized his proposed slashing, which includes cuts to higher education, saying it will hurt the state's neediest citizens.

Rauner wasn't shy in defending his budget plan while speaking here on Monday.

“We're going to bring financial discipline to our system,” he told the group of journalists.

The costs -- and benefits -- of Medicaid expansion accrue to the individual state depending on its decision to expand or not. One persistent myth surrounding the expansion debate is the argument that states which refuse to expand “lose out” on their share of the money which is then used by other states.  But as a group of researchers writing at Forbes notes, the Congressional Research Service says this is simply not so.

A recent report from the Congressional Research Service (CRS) confirms what many policy experts have known for some time: states that reject Obamacare’s Medicaid expansion aren’t sending that Medicaid expansion money to other states. Instead, that money is simply never spent.

This revelation is important because numerous governors and state lawmakers from across the country have used this argument to justify their support for expanding Medicaid through Obamacare. …

The new CRS report explains that this claim is bogus:

If a state doesn’t implement the ACA Medicaid expansion, the federal funds that would have been used for that state’s expansion are not being sent to another state. There is not a set amount of federal funding for Medicaid. Each state gets the federal funding necessary for their Medicaid program.

This explanation is pretty straightforward: if a state rejects expansion, they don’t get any expansion money. If a state does expand, they get expansion money. But one state’s actions have no relation to how much another state receives from the federal government because there is no pot of funding that’s being divvied up in Washington.

This means that states will bear the consequences of Medicaid expansion if they climb to unsustainable levels. There is no magic pot of free money which can be squandered without consequences.  Even the “free” Federal money isn’t “free”.  It eventually comes from the taxpayers.

As the Congressional Budget Office has repeatedly pointed out, states that reject Obamacare expansion are reducing federal spending. The Obama administration confirmed that rejected Medicaid expansion saved federal taxpayers at least $26 billion in 2014. If those states continue to reject Obamacare, federal taxpayers will spend $368 billion less on Medicaid expansion through 2022.

Does this mean that Medicaid expansion is bad? No.  The benefits they bring are real if they are sustainable. The trick for each state is to expand Medicaid to the degree to which it can be maintained.  The worst thing that could happen is for states to bloat their rolls to numbers they cannot realistically afford only to be forced to throw people off the program when it becomes evident it cannot be sustained.

Lost in the debate over “increasing coverage” are the issues which prompted people to propose “health care reform” in the first place: lowering the cost. As Kimberly Leonard of US News and World Report writes “Nearly 50 years after the programs were created, former agency heads say Medicare and Medicaid could be crippled by rising costs.”

It has been nearly half a century since President Lyndon B. Johnson signed Medicare and Medicaid into law, and while both continue to drive contentious debate among lawmakers, there is one point of agreement: The method of spending on these programs needs to change.

In a summit at Sidney Harman Hall in Washington, District of Columbia, former chiefs of government agencies responsible for the programs reflected on the law's passage and its future. The event was hosted by the LBJ Library, the Aspen Institute and the Robert Wood Johnson Foundation.

A major theme rippled through the discussions: As much as the programs have accomplished, their rising costs are concerning. President Barack Obama's health care law, the Affordable Care Act, aims to make changes to both programs, which together offer health care coverage to about 110 million Americans.

Obamacare was originally proposed as a solution to the unsustainably high cost of Medicare and Medicaid.  The idea was that it would “bend the cost curve”.  Yet somewhere along the line the entire project became about “expanding coverage”, which for the most part meant Medicaid expansion.  Obamacare’s increased coverage is largely Medicaid expansion.

In an absurd result Obamacare is now justifying its existence by expanding the very unaffordable program it swore to replace.  It has come full circle: Obamacare will save Medicaid and Medicaid will save Obama.  But the fact is the US government is no closer to the very question now vexing the states.  Medical treatment is a good thing, but who is going to pay for it?

Unforeseen Cost Increases

POSTED 3 days ago BY HEALTH CARE COMPACT

Pundits are struggling to explain why insurance premiums are rising under Obamacare rather than falling.  After all, it is the “Affordable Care Act”.  One theory is that the spike is a one off brought about by the sudden influx of pent-up demand though it will still remain high thereafter Elizabeth Whitman of the International Business Times explains:

Holland said costs were likely to go up because a high percentage of those who had newly bought health insurance through the Affordable Care Act needed expensive medical care that, until they bought insurance, had been delayed. As a result, health insurers were finding they had to spend more to cover the expensive medical bills, and because fewer younger -- and presumably healthier -- people had signed up for coverage, companies had smaller pool of funding to draw on.

The fundamental change in the risk pool caused by the influx of older, sicker individuals and the shortage of younger people meant that insurance premiums, having gone up, would remain elevated.  The International Business Times article says that the price pain has only just begun:

Those who think their current health insurance plans are too expensive should brace themselves for 2016, at least based on the recent predictions of one healthcare executive. Health insurance companies are likely to demand even more money in the coming year from people seeking to buy healthcare ....

"You cannot have every doctor in your network, very low copays, broad benefits and lower costs. It just can't work that way," Holland said, calling such demands, including for insurance companies to charge lower premiums or monthly fees that people pay for to have insurance coverage, "unrealistic." ....

Even as premiums might be about to go up, a study published Thursday by the consumer healthcare nonprofit group Families USA showed that one out of four adults who bought health insurance through exchanges created under the Affordable Care Act skipped necessary medical treatment because the care was too expensive. These adults had paid monthly premiums, some of them subsidized by the government, for health insurance but were nevertheless unable to afford the very care it was supposed to provide.

Casey Mulligan at the City Journal suggests that a number of unpleasant policy surprises still remain buried in Obamacare because of the “law of unintended consequences”.  He argues for example, that the ACA is causing unforeseen tax effects.

The ACA also has significant potential to affect the allocation of labor—and thus wages—throughout the U.S. economy, through its penalties for employers that don’t provide health insurance for their workers as well as through its subsidies for individuals to purchase health insurance (the latter of which is the subject of the King case).

Mulligan maintains that Obamacare, through its employer mandate, will depress wages in certain non-exempt industries causing workers to shift to exempted industries.  This in turn will cause a glut of labor in the exempted industries, thereby driving wages down.  Because Obamacare is a tax it will tend to raise the price of health care -- including insurance premiums.  Because it is applied unevenly, it will first press down on one industry and cause a ripple of changes in other industries until it smooths out, but at a lower level.

Because exchange subsidies are available only to persons not eligible for affordable employer coverage, the ACA requires that large employers either provide affordable coverage or pay a penalty, computed according to how many full-time employees they have. The law defines a large employer as one with at least 50 full-time-equivalent employees in the calendar year prior to the one in which it failed to provide coverage. (Part-time employees count toward full-time equivalents in proportion to their hours worked.) Unlike employee wages, the penalty is not deductible for the purpose of determining the employer’s business-income tax—and this fact, together with the law’s procedure for indexing the penalty to health-cost inflation, means that the employer penalty in 2016 (the first year in which it will be fully enforced) would be as costly as $3,163 per employee on the full-time payroll beyond 30 employees.

Because the cost of the penalty to their employer could cause a reduction in wages or even the loss of their jobs, workers at penalized employers would appear, at first glance, to be losers here. However, as workers leave penalized employers and compete for jobs at employers that do offer coverage (hereafter “ESI employers,” for “employer-sponsored insurance”), they drive down wages at these employers and mitigate some of the penalty’s effect on wages at employers that don’t offer coverage (hereafter, “non-ESI employers”). It would work something like this: among groups of workers earning roughly the same amount, the ACA penalty takes part of the pay of the non-ESI (i.e., penalized) sector. Employees leave the penalized sector to take advantage of the higher ESI-sector pay. The more employees who seek work in the ESI sector, the less ESI employers need to pay for them. At the same time, the more employees who leave the penalized sector, the more the penalized employers are willing to pay the employees who remain. Non-ESI employees, then, will be partially compensated for the penalty-free opportunities existing outside their sector. The newly depressed pay among ESI employees amounts to a hidden tax on these workers: the employer penalty reduces their pay, even though their employers don’t pay it. In effect, penalized employees escape part of their penalty by passing it on to ESI employees.

Because of the complexity of Obamacare, its  actual effect on the price level of insurance and health care is difficult to determine.  The architects of the ACA may have reckoned that it would raise the costs of medicine by only so much.  But they are now finding it has increased the prices more than they bargained for.

The result is that the Affordable Care Act is becoming its opposite: the Unaffordable Care Act.  Government intervention in the health care system caused unforeseen effects.  It may have slightly lowered the rate of uninsurance in America, but at a price no one in the end is willing to pay.

Why is a Major Healthcare.gov Contractor Quitting?

POSTED 3 days ago BY HEALTH CARE COMPACT

The Daily Caller focused its attention on a curious development in the management of Healthcare.gov.  The company that the administration had bent rules to hire was suddenly quitting.  Reporter Richard Pollock wrote:

QSSI, the politically-connected information technology firm that rescued the problem-plagued HealthCare.gov website unexpectedly announced Thursday that it is stepping down as prime manager.

The surprise departure of QSSI, the Columbia, Md.-based subsidiary of the IT health firm Optum and the health insurance giant United Healthcare Group, will raise new doubts about the future viability of the website for President Obama’s signature program, Obamacare.

Three IT companies will have managed HealthCare.gov in its brief two-year history once QSSI is replaced.

The key personality behind QSSI is Andy Slavitt.  Slavitt was a major figure in the health care industry but also politically connected to the Obama administration.  His role in industry gave rise to concerns that his involvement in Obamacare would create conflict-of-interest issues.

Alexander Bolton of the Hill reported in 2012 that “the Obama administration is relying heavily on outside contractors to implement a core component of healthcare reform as it races to set up a federal health insurance marketplace before 2014.  The fast-approaching deadline gives the administration little time to scrutinize private-sector partners for conflicts of interest.” [Emphasis mine]

The purchase of one of these contractors, Quality Software Services, Inc. (QSSI), by UnitedHealth Group, a major healthcare conglomerate, has sparked concerns about a potentially uneven playing field.

QSSI, a Maryland-based contractor, in January won a large contract to build a federal data services hub to help run the complex federal health insurance exchange.

It will be working with several other contractors, including CGI Federal, Inc., to create the technological architecture for the exchange.

The quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.

Not only was QSSI chosen to help fix the struggling Obamacare site but Slavitt was chosen to head the Centers for Medicare & Medicaid Services.  The Daily Caller continues:

He received a rare waiver from federal ethics rules at the time, which allowed him to be involved in contracting issues involving Optum and the United Healthcare Group.

When Healthcare.gov failed to operate properly in 2014, QSSI was upgraded from a small hub manager to a “senior adviser,” effectively making the firm the web site’s prime integrator. The promotion was made while Slavitt was still at Optum.

When Slavitt joined CMS, a little known loophole in government hiring practices permitted him to pocket $4.8 million in tax-free money when he joined the government agency.

Slavitt’s interlocking connections are described in a Bloomberg Business profile.  He is:

  • Chairman of Quality Software Services, Inc.

  • Interim Chief of Centers for Medicare & Medicaid Services since January 2015.

  • Principal Deputy Administrator of Centers for Medicare & Medicaid Services

  • Chief Executive Officer of OptumInsight a subsidiary of UnitedHealth Group since November 2006 and also served as its Chief Operating Officer from January 2005 to November 2006

Having taken so much trouble to hire this extraordinary executive and his company, why is it suddenly quitting? Inside Health Policy says that the company is staying on for seven more months until a replacement is found. “HHS approved a $23 million, seven-month contract extension with Quality Software Services, Inc., or QSSI, to continue its role as Healthcare.gov adviser until a successor is found, according to federal acquisition and procurement documents signed March 26.”

Some websites have suggested that the conflict-of-interest optics are making the relationship too hot to handle but the official reason, as reported by the Wall Street Journal, is that QSSI believes it has accomplished its mission.

WASHINGTON—The contractor tapped to rescue the flailing HealthCare.gov in the fall of 2013 declared its work finished Thursday and said it doesn’t plan to continue overseeing the website that sells subsidized insurance to millions of Americans as part of the federal health law.

“Having achieved the goal of making HealthCare.gov a stable and reliable platform for people seeking coverage, Optum will not rebid to continue the role of senior adviser,” said Matt Stearns, a spokesman for the company, the technology unit of insurer UnitedHealth Group. “Our job has been completed.”

The company believes that relinquishing its HealthCare.gov role will have give it more freedom to pursue other contracts, said Mr. Stearns. “By no longer acting as senior adviser to HealthCare.gov, Optum can seek to assist in other projects and leverage our ability to develop and operate large transactional systems that advance health care.”

However, the WSJ suggests this is not quite true.  Many major parts of Healthcare.gov remain unfinished, especially the all-important backend.

Many of the remaining technological challenges for the federal government are with the broader infrastructure supporting HealthCare.gov, and, in particular, back-end systems for transmitting sign-up information to insurers and state Medicaid programs. Consumers don’t see those parts, but the states and insurers that do say they’re still grappling with problems resulting from incomplete parts of the system.

Enrollment workers who have been using HealthCare.gov say their biggest challenges now come from the intricacies of its various rules for eligibility, not the performance of the site itself.

“You still have to understand how the law works,” said Elizabeth Colvin, director of Insure Central Texas.

Optum was “confident that HealthCare.gov will remain a stable and reliable platform” without its oversight, Mr. Stearns said. The company would continue to operate the site’s data services hub and identity management systems, as well as to work with states that had their own sites, he added.

One possible reason for QSSI’s departure could be the realization that Healthcare.gov will have to deal with collapse of the state Obamacare exchanges, half of whom are bankrupt.  The other complicating factor is a possible decision by the Supreme Court to disallow many of the subsidies currently being paid as King vs Burwell is heard by the justices.

All in all, Healthcare.gov may prove an unhealthy place to be in 2016 and Slavitt may have decided to quit while he was ahead.

TheRise of Deductibles

POSTED one week ago BY HEALTH CARE COMPACT

A nonprofit organization called Families USA, which received money to tout Obamacare, is engaged in a new and puzzling media campaign to label the president’s flagship program as inadequate. Lydia Mitts and Cheryl Fish-Parcham explain that one fourth of those insured under Obamacare still can’t afford medical treatment because the deductibles are too high.

The Affordable Care Act has increased access to health insurance and financial assistance for millions of Americans. But even with the new assistance that helps consumers pay their premiums and out-of-pocket health care costs, one-quarter of consumers who buy insurance on their own still have problems being able to afford needed care.

A separate study authored by Families USA says “simply having health insurance is no guarantee that consumers can afford to pay for health care. Health insurance involves different types of costs that consumers must pay out of pocket—ranging from a health plan’s deductible to copayments at a doctor’s office. These expenses add up, and research has shown that even nominal cost-sharing can deter people from getting needed care.  Unfortunately—as our study shows—for many Americans with non-group coverage, deductibles and other out-of-pocket costs are prohibitively high and are associated with many of these insured consumers forgoing needed health care.”

Their suggested solution is to compel or persuade insurers to “exempt” low income holders of Silver Plans from deductibles.

Insurers are choosing to design silver plans with upfront cost-sharing that is too high for lower- and middle-income consumers to afford. As we noted earlier, many insurers are offering silver plans that have high deductibles. In addition, many of these plans don’t help pay for even basic primary care and medications before the consumer pays the full cost of his or her deductible. This can make high deductible plans particularly problematic for lower and middle-income consumers.

Due to federal requirements that govern the way silver plans are designed, these plans must have higher cost-sharing for more extensive or complex medical care. However, insurers do have the flexibility to design silver plans that charge low cost-sharing for basic outpatient care like primary care visits, some prescription drugs, blood work, diagnostic testing, and secondary preventive services (services that help manage chronic conditions like diabetes or asthma).

The main ways insurers can do this is by exempting these types of services from the deductible (meaning that the health plan helps pay for these services even before the deductible is fully paid) and by charging low copayments for this type of care. Insurers also can design silver plans with low or no deductible.

Unfortunately, not enough insurers are taking advantage of that flexibility. This means that many lower- and middle-income consumers with silver plans may still struggle to get the basic care they need because they are not able to afford to pay the full cost of a doctor visit or medication out of pocket.

Families USA is clearly advancing the newest Obamacare narrative: it is failing because the insurers are too greedy.  With 25% of policy holders paying for mandatory insurance but getting no treatment despite that, it is perilously close to simply being a scam preying on lower income individuals.  Were it not for the compulsory nature of Obamacare it is doubtful that these “insured but not covered” individuals would waste their money on a policy from which they derived no benefit.

Ironically, this study bemoaning the lack of subsidies or other aids to ameliorate unaffordability comes as it emerges that tax credits were often carelessly disbursed to the wrong people. “The Senate's top investigative committee has launched an inquiry into the system that's supposed to ensure ObamaCare tax credits go to the right customers for the right amounts -- amid concerns that many Americans are getting inflated or improper subsidies.”

Sen. Rob Portman, R-Ohio, who is leading the investigation, says because of the confusion with the system, millions of Americans are learning after the fact they inadvertently got too much money and now owe the IRS hundreds.

"I'm concerned that the subsidy eligibility process is so complicated that many consumers believed they were receiving cheaper insurance coverage than they ultimately got," Portman said in a statement.  …

Portman also cited two investigations into the government's income-verification systems. The Government Accountability Office said in 2014 its investigators secured subsidies using false identities in 11 out of 12 undercover attempts. Also last year, an HHS inspector general report found the department "did not have procedures or did not follow procedures to ensure" against government overpayments.

Committee investigators also point to an analysis by H&R Block that found almost two-thirds of its filers receiving an ObamaCare tax credit owed the government at the end of the year. On average, those filers were required to repay more than $700 of their ObamaCare subsidies. The study found most customers claiming the credits were confused about the requirements.

The scale of the refunds is convincing proof that Obamacare’s subsidies are inaccurately targeted. That is because they are calculated on what a taxpayer believes his income will be for the coming year.  While a salaried middle class employee might be able to predict that amount with some accuracy, salaries being largely fixed or varying only within a narrow band, lower income people who rely on casual or part time or even seasonal employment will be hard pressed to name a correct figure.

Even as lower income Americans are hit with high deductibles the federal government continues to send subsidies to the wrong people, then spends even more money and effort to retrieve what they had mistakenly disbursed. The sheer waste that Obamacare represents is underscored by a report from the Hill that businesses -- the “group insurance” market which Families USA praises for having low deductibles -- are following suit in passing on the costs to their employees!

Nearly two-thirds of companies facing a new ObamaCare tax say they are changing their coverage to avoid the extra costs, according to a new survey.

The so-called Cadillac tax, which applies to healthcare plans above a certain expense threshold, is one of the most pressing changes still to come under ObamaCare, according to a survey of about 600 members of the International Foundation of Employee Benefit Plans.

Only 2.5 percent of companies that would be hit by the Cadillac tax starting in 2018 said they plan to pay the tax. A total of 62 percent of companies said they have already taken action or plan to take action to avoid it.

Most say they are shifting toward higher deductible plans, while others said they are reducing benefits, shifting more costs to employees or dropping high-cost plans altogether.

The one thing that Obamacare is undeniably achieving is raising deductibles for all, in both group and individual markets.

Bureaucratic Medicine

POSTED one week ago BY HEALTH CARE COMPACT

The government, having gained an unprecedented amount of authority over healthcare, is making increasingly detailed decisions about specific medical services.  Robert Pear of the New York Times describes how the White House has warned insurers to provide free contraception in all its forms to women under Obamacare.

The Obama administration on Monday put health insurance companies on notice that they must cover all forms of female contraception, including the patch and intrauterine devices, without imposing co-payments or other charges.

In the last month, the National Women’s Law Center and the Kaiser Family Foundation issued separate reports finding that insurers had often flouted a federal requirement to provide free coverage of birth control for women under the Affordable Care Act.

And contraception means “preventative services” for transgender individuals. “The new guidance was provided in a series of questions and answers issued jointly by the Departments of Health and Human Services, Labor and the Treasury.”  You may wonder what Treasury has to do with medical procedures, but that’s how it goes.

David C. Stacy, the government affairs director at the Human Rights Campaign, a gay rights group, welcomed the statement requiring coverage of preventive services for transgender people.

“A transgender man who has a need for breast cancer screening would be assured of getting that screening,” Mr. Stacy said. “A person who has transitioned from female to male may still have a high risk of breast cancer.”

No sooner had the government spoken on contraception than it was pronouncing on mammograms.  The Hill reports that the Department of Health and Human Service is considering issuing a regulation that “insurance companies will no longer have to cover biennial mammograms for women under age 50.”

As many as 17 million women under age 50 may no longer be covered for mammograms under potential new guidance from a federal advisory panel, according to a new study.

The Department of Health and Human Services is considering new guidance from an independent panel of medical experts that advises against regular mammograms for younger women if they are not at acute risk of the disease. …

A change in coverage would impact at least 17 million women between ages 40 to 49, according to an analysis by Avalere Health. A majority of those women are covered by employer plans, with about 1.2 million covered through ObamaCare exchanges and 1.1 million by Medicaid expansion.

The government has always been in the business of issuing guidelines.  What’s changed is that Obamacare has now changed the nature of guidelines to orders.  Chris Jacobs in the Wall Street Journal traces the rise of something called the Preventative Services Task Force and its involvement in the determination of mammogram treatment.

A draft recommendation from the U.S. Preventive Services Task Force last month echoes a similar recommendation made in the fall of 2009. Namely, the task force recommends mammogram screening every two years for women ages 50 to 74 but does not recommend universal screening before age 50: “The decision to start regular, biennial screening mammography before the age of 50 years should be an individual one and take patient context into account.”

That contradicts guidelines issued by the American Cancer Society and other groups for women in their 40s and is part of a long-standing debate about whether the benefits of early detection and treatment offset the costs, including false positives and additional radiation exposure.

Obamacare moved that debate from the clinical realm into the policy world by giving the task force jurisdiction over which preventive services insurers must cover. The law references the task force more than a dozen times. Any preventive service the task force grades “A” or “B” must be covered by private insurers, Medicare, and Medicaid without cost-sharing such as co-pays or deductibles. Because the draft recommendations give a “B” grade only to biennial screening between ages 50 to 74, insurers would not be required to cover mammograms for women younger than 50 or screenings more frequent than the every-two-years regimen recommended by the task force.

The mammogram controversy became so heated that it motivated Congress to do something even more absurd: legislate treatment.  Chris Jacobs continues: “In the end, the law explicitly instructed the Department of Health and Human Services to disregard the controversial 2009 guidelines, reverting instead to a prior series of recommendations that allowed for annual coverage of mammograms for all women 40 and older.”  But Obamacare left the power of the task force intact.

If, however, the task force re-issues the same recommendations later this year—as its April draft suggested–that would supersede all its prior reports, again raising questions about coverage of annual mammograms.

The mischief had been done.  The precedent had now been established for the bureaucratic practice of medicine. Those who wish to celebrate the power  of the administration to order free contraceptive coverage cannot now deny its authority to cancel mammograms.  The two-edged nature of bureaucratic medicine recall’s Gerald Ford’s famous observation in a speech before Congress. “A government big enough to give you everything you want is a government big enough to take from you everything you have.”

And bureaucracy is most responsive to public opinion.  One of the major op-ed pieces written in support of the decision to stop mammograms appeared in the Washington Post authored by Karuna Jagger. “Stop routine breast-cancer screenings. Science has shown they don’t save lives.”

Jaggar, the executive director of Breast Cancer Action, has no medical or scientific background to speak of. Her background is in nonprofits. Her education was in economic geography with a special emphasis on women, gender and sexuality. The fact that the debate over specific treatments is now debated in the Washington Post, when it is not otherwise being resolved by a law in Congress can only be regarded as bizarre.

Perhaps Sarah Palin was onto something when she observed that bureaucratic medicine would ultimately result in “death panels”. Ben Cosman of the Wire wrote disparagingly of Palin’s idea.

A "death panel," if you'll recall, is the idea that the Affordable Care Act, aka Obamacare, includes provisions that allows federal officials to evaluate and decide whether an individual is "worthy of health care." If these officials decide that someone is not worthy of care, the thinking goes, then they are essentially condemning the person to death. None of that's really true, of course.

Unless of course your death could have been prevented by a mammogram, now no longer available under Task Force guidelines.

The State Exchange Crash

POSTED one week ago BY HEALTH CARE COMPACT

The demise of Hawaii’s Obamacare exchange is a reminder that many of the state ACA markets are in trouble. Given that state exchanges are mere outlets for a standardized insurance, the role of these exchanges must surely come into question.

The Honolulu Star-Advertiser reports that the Hawaii Health Connector will immediately set in motion a contingency plan to shut down operations. The Health Connector will cease new enrollments this Friday, discontinue outreach services May 31, transfer its technology to the state by Sept. 30 and completely eliminate its workforce by Feb. 28.

Residents of Hawaii will have to re-enroll in the federal healthcare.gov exchange to ensure coverage next year. Migrating to healthcare.gov is estimated to cost $30 million.

Nearly $205 million in federal grants were awarded to build and operate the Hawaii Health Connector online marketplace.

The Aloha state follows Oregon into oblivion. As Investor’s Business Daily points out, the state exchanges have been plagued with disasters.

State-run exchanges were supposed to form the beating heart of ObamaCare. And the Obama administration dumped almost $5 billion in an effort to make it a reality.

The results have been a disaster.

Of the 37 states that received $2.1 billion in grants to establish an exchange, only 17 did so, and they got an additional $2.7 billion from the feds.

Of those 17, two went bankrupt in the first year. One of them, Oregon, had received a $60 million "early innovator grant." Residents of those states now use the federal Healthcare.gov site.

A memo from Health and Human Services' Inspector General Daniel Levinson warns that some of the remaining may be violating federal law in an effort to stay afloat.

At least Hawaii is only bankrupt -- for now.  By contrast, the Massachusetts Connector, the Bay State’s Obamacare exchange, is a crime scene. Michael Astrue of the Boston Herald writes that it now under investigation:

On Thursday Gov. Charlie Baker’s office confirmed that the U.S. attorney in Boston had issued subpoenas last January for documents from the Massachusetts Health Connector, the problem-plagued agency responsible for most of the state’s Obamacare implementation. Nearly a year ago on these pages I called for such action and questioned why federal investigations were already underway based on similar facts in Oregon and Maryland, but not in Massachusetts.

Even California’s mighty Obamacare exchange is broke. The Los Angeles Times writes, “after using most of $1 billion in federal start-up money, California's Obamacare exchange is preparing to go on a diet”. It had planned on charging a fee on every enrollee, but far fewer than expected showed up and its financial future is in serious doubt.

The recalibration comes after tepid enrollment growth for California during the second year of the Affordable Care Act. The state ended open enrollment in February with 1.4 million people signed up, far short of its goal of 1.7 million.

A number of factors contributed to the shortfall, but health policy experts said that some uninsured folks still find health insurance unaffordable despite the health law's premium subsidies.

Those pocketbook issues make holding the line on costs an imperative for state officials. Covered California can't draw on the state general funds, and its primary source of revenue is a $13.95 monthly fee tacked onto every individual policy sold.

For political reasons California has decided not to increase its fees.  The same can’t be said for Colorado.  The Denver Post writes that “the Connect for Health Colorado staff has recommended more than doubling the fee that insurers pay on each policy purchased on the exchange — a charge that is passed on to consumers.”

The state marketplace would increase the carrier fee from 1.4 percent to at least 3.5 percent of the premium charged on exchange health plans — the same rate charged through the federal exchange, under the recommendation made Monday.

For a consumer holding a $4,000-a-year health plan, the increase would be $84 a year. The estimated increase in revenue for the exchange would be about $5.8 million.

The staff also recommended Monday that the board increase the monthly assessment the exchange charges for each private insurance policy purchased on or off the exchange, from the current $1.25 to $1.80.

Taken together, it’s clear that one of the major pillars of Obamacare, the state exchanges, is very shaky.  Edmund Haislmaier argued that without real market liberalization, they were pointless. “Under the exchange regulations, states do not gain any meaningful flexibility or advantage by operating their own exchange, as opposed to leaving the exchange up to the federal government. States simply become the vendors of HHS for taxpayer-subsidized, government-controlled health plans.”

The real outcome of King vs Burwell shouldn’t be to force states to set up exchanges in order to access Federal subsidies but to call into question their whole purpose. Unless they are more than mere outlets for a commodity product, the state exchanges are probably best abolished.  Nina Owcharenko and Edmund Haislmaier of Heritage write,

On March 4, the Supreme Court will hear oral arguments in King v. Burwell—a case challenging the Obama Administration’s IRS ruling granting premium support subsidies to those enrolled in federal exchanges under the Affordable Care Act (ACA). While a ruling against the Administration would preclude paying those subsidies to individuals who obtain coverage through the federally run exchange, that would merely add one more effect to the ongoing complexity and cascade of adverse effects produced by the law’s complex and flawed design.

Congress and the states should therefore seize the opportunity and clear the way for patient-centered, market-based reforms to take root in the states. To start, Congress should devolve the regulatory authority over insurance back to the states. In anticipation of such an exemption, states should use their authority now to put in place their own policies governing insurance.

The states are either part of a decentralized, market-oriented solution or they are bankrupt.  In a way Obamacare will repeal itself.  Economics has already rolled back the state exchange component of the program.  Economics will roll back the rest of it eventually.  If something can’t go on -- it won’t.

It’s the Cover-up that Hurts

POSTED one week ago BY HEALTH CARE COMPACT

Senator Vitter is being painted as a villain for uncovering an alleged payoff to Republican staffers in the form of subsidies to their healthcare.  “The Louisiana senator's quest to deny his colleagues benefits wins him no friends on Capitol Hill,” writes Manu Raju of Politico.  He’s not going along to get along.

Within the chummy confines of the U.S. Senate, Vitter has emerged as one of the most disliked members. The second-term senator’s effort to kill the federal health care contribution, worth several thousand dollars to lawmakers and their staffers, is a big part of it. But the two-year drive, his critics say, symbolizes an operating style that Vitter’s critics complain is consumed with public relations, even for an ambitious member of Congress: speeding in and out of meetings, railing about issues on the Senate floor but doing little to execute behind the scenes, firing off news releases left and right. In an institution in which the inside game is critical, Vitter doesn’t even pretend to bother with it. …

A number of off-committee Republicans gripe that Vitter’s accusation that lawmakers are getting a sweetheart deal is unfair and misleading. If he succeeds, some of them say, more of their high-level aides will bolt Capitol Hill for lucrative jobs in the private sector.

Several GOP senators said privately that Vitter’s effort appears to be rooted in his campaign for governor.

“We all know why David’s doing this,” said a senior Republican senator who asked not to be named to speak frankly.

But the real question must be whether Vitter is telling the truth when he alleges that legislators and their staffers improperly accepted subsidies from the administration.  The basic facts do not seem to be in question.  Congress retained its subsidy by representing itself as a “small business”.

Before 2014, lawmakers and staff received federally subsidized health insurance, but an Obamacare provision proposed by Sen.

Chuck Grassley (R-Iowa) to force Hill employees onto the exchanges changed that. The White House responded by issuing a rule that allowed members and aides to keep their subsidy by enrolling in a D.C. small-business health care exchange — a move Vitter and critics blasted as an end run around the law.

Killing the subsidy could cost many lawmakers and staffers $5,000 or more annually. Federal coverage typically pays about 70 percent of premiums for employees, including lawmakers and staff, which is in line with what many large employers cover.

That Congress is a “small business” is clearly slightly disingenuous.  Whether it is actually dishonest is at issue.  Brendan Bordelon of the National Review notes that the storm is around Vitter’s  subpoena for the actual documentation of the application.

The rumors began trickling in about a week before the scheduled vote on April 23: Republican leadership was quietly pushing senators to pull support for subpoenaing Congress’s fraudulent application to the District of Columbia’s health exchange — the document that facilitated Congress’s “exemption” from Obamacare by allowing lawmakers and staffers to keep their employer subsidies.

The application said Congress employed just 45 people. Names were faked; one employee was listed as “First Last,” another simply as “Congress.” To Small Business Committee chairman David Vitter, who has fought for years against the Obamacare exemption, it was clear that someone in Congress had falsified the document in order to make lawmakers and their staff eligible for taxpayer subsidies provided under the exchange for small-business employees.

Clearly Vitter was playing with dynamite. To complicate matters, Vitter’s request for a subpoena put presidential candidate Rand Paul between a rock and a hard place.

With nine Democrats on the committee lined up against the proposal, the chairman needed the support of all ten Republicans to issue the subpoena. But, though it seems an issue tailor-made for the tea-party star and Republican presidential candidate, Senator Rand Paul (R., Ky.) refused to lend his support. And when the Louisiana senator set a public vote for April 23, Majority Leader Mitch McConnell and his allies got involved.

“For whatever reason, leadership decided they wanted that vote to be 5–5, all Republicans, to give Senator Paul cover,” one high-ranking committee staffer tells National Review. “So they worked at a member level to change the votes of otherwise supportive senators.” Four Republicans — senators Mike Enzi, James Risch, Kelly Ayotte, and Deb Fischer — had promised to support Vitter, but that would soon change.

Whatever the truth to Manju’s allegation of Vitter’s unpopularity with his colleagues, the Senator’s stand hit a sympathetic chord with conservative Republican voters, who are deeply suspicious of establishment Republicans.  A number of conservative groups are reportedly supporting Vitter.

A coalition of conservative groups want to make sure Congressional Republicans don't let up on the fight to eliminate what they call D.C.’s exemption from ObamaCare.

Heritage Action for America and Club for Growth are among a half-dozen groups that have joined a campaign called the “No D.C. Exemption,” according to a release shared first with The Hill. The effort is spearheaded by the right-leaning organization, the U.S. Health Freedom Caucus.

The groups are looking to drive up support for a two-year-long investigation into how members of Congress pay for ObamaCare, which has been led almost single-handedly by Sen. David Vitter (R-La.). …

“Our goal is to educate the public about the ObamaCare exemption and rally them in whatever is the best way to put pressure on members of Congress to support Vitter,” said Nachama Soloveichik, a spokeswoman for the group.   

The group was formed two weeks after Vitter’s panel — the Senate's Small Business Committee — denied his request to subpoena documents related to the investigation. …

“The group is launching the website on their own, but we’ve been working with a number of organizations explaining the Obamacare Exemption for Congress and how the fraudulent application was approved,” a spokeswoman for Vitter’s office wrote in an email.

The influential conservative columnist Mark Levin took Rand Paul directly to task for not helping Vitter, even suggesting the “blackmail” was somehow involved.  Because Paul is a declared presidential candidate the controversy has now gone mainstream. US News and World Report’s Peter Roff writes:

Paul does not have an explanation for his vote. Instead, according to an aide to the Kentucky junior senator, he wants it known that he "opposes allowing Congress to exempt themselves from any legislation. To that end, this month, he reintroduced his proposed Constitutional amendment to prohibit Congress from passing any law that exempts themselves. Sen. Paul prefers this option over a partisan cross-examination of Congressional staff."

It's a nice piece of political camouflage that cleverly evades the point. Congress is not exempting itself from the law; rather it has made a false declaration about the number of people who work there in order to obtain a subsidy to which the members and their staffs are not entitled.

In the end Obamacare may negatively affect Rand Paul’s presidential bid, not so much for what he did, but for obscuring what he did; proving Richard Nixon’s adage that “it’s the cover-up that hurts.”

The Big Dig of Insurance Projects

POSTED one week ago BY HEALTH CARE COMPACT

In the 1990s the term “Big Dig” -- a reference to vast highway tunnel project in Massachusetts begun in the late 1990s -- became synonymous with overpriced political corruption.  It was to public projects what the Titanic was to ocean liners.  Whenever one says “the Big Dig of” something, it communicates a fiasco of the highest order.

The Wall Street Journal reports that the Obamacare state exchange of Massachusetts is now being called the Big Dig of insurance projects.  It’s a catastrophe so bad that it is under investigation and may result in criminal charges for some, though as we will see, not for all.

The catastrophic ObamaCare rollout merely two years ago has disappeared into the distant political past, forgotten, with zero accountability for the taxpayer waste and disruption to individuals and business. Massachusetts may prove to be an exception.

Late last week the administration of Republican Governor Charlie Baker confirmed that the FBI and U.S. Attorney for Boston have subpoenaed records related to the commonwealth’s “connector” dating to 2010. This insurance clearinghouse was Mitt Romney’s 2006 beta version for ObamaCare’s exchanges, but updating the connector to comply with the far more complex federal law became a fiasco rivaling any of the other federal and state ObamaCare failures.

The target of the investigation hasn’t been disclosed. But the best autopsy of the connector mess is being published Monday by Boston’s Pioneer Institute think tank, where Josh Archambault reviews internal audits and whistleblower testimony he obtained. The evidence is damaging to both Massachusetts’s exchange contractor, CGI Corp., and the administration of former Democratic Governor Deval Patrick.

The story was broken by a think tank called the Pioneer Institute.  It alleges that Deval Patrick, some aids and the contractor performed incompetent, overpriced work in the development of the Obamacare state exchange of such poor quality that it never had any prospect of working.  Despite this fact, the Patrick administration appears to have concealed the lack of progress and shabby work in order to mislead the Federal government into continuing to fund the doomed project.

Mr. Archambault reveals years of third-rate technological work, disregarded deadlines, pervasive mismanagement, little outcome measurement and general bureaucratic incompetence. An outside auditor noted as early as 2012 that the “quantity and/or skills/experience level of project resources may be impacting the ability to complete project tasks within planned timeframes” and questioned if staff were “sufficiently knowledgable.”

A test before going public showed a 90% failure rate, and the new connector detonated on the launch pad. Some 320,000 residents attempting to gain coverage had to be dumped into a temporary “free” Medicaid program without any income eligibility determination. Pioneer pegs the total cost of the mess at around $1 billion.

CGI almost certainly broke its contractual obligations to Massachusetts, though Mr. Archambault notes that the project routinely attempted to conceal problems rather than fix them. High-level political appointees repeatedly misrepresented their progress to Health and Human Services officials, whether out of ignorance or perhaps to keep the federal ObamaCare-funding spigot flowing.

A number of heads rolled as a consequence of the debacle. “Earlier this year Governor Baker requested and received the resignations of four of the 11 members of the connector board, including MIT professor Jonathan Gruber, the ObamaCare architect who earned fame for mocking ‘the stupidity of the American voter.’”  

But one of the persons closely associated with the connector was promoted, possibly because he was familiar with what happened at the state level.

Kevin Counihan is the new Obamacare CEO, with the mission of making “sure that the federal insurance exchange, which suffered from crippling management failures last year, runs more effectively in the second year of Obamacare coverage expansion.”  He was also intimately connected with the Massachusetts Connector.  According to his profile in CMS (Centers for Medicaid and Medicaid Services):

Kevin Counihan joined the Department after most recently serving as the CEO of AccessCT, the state of Connecticut’s health insurance exchange.  As the AccessCT CEO, Kevin led the successful implementation of the state’s marketplace where enrollment exceeded expectations. Additionally, he was the Director of Marketing for the Massachusetts Connector during Massachusetts’ implementation of their health reform initiative.

In his role as Marketplace CEO, Kevin is responsible and accountable for leading the federal Marketplace, managing relationships with state marketplaces, and running the Center for Consumer Information and Insurance Oversight (CCIIO), which regulates health insurance at the federal level. Kevin has over 25 years of experience in the commercial health insurance industry. He is an experienced senior executive with more than three decades of success in business, marketing, operations, product development and strategic planning for health care organizations.

Boston.com writes that “Counihan, who consulted on insurance exchanges for 40 states before accepting a post as chief executive of Connecticut’s Health Insurance Exchange, is among more than a dozen former Massachusetts health officials cashing in on the need for their expertise.”

In one way or another, all were pioneers of the expanded coverage at the heart of the health care overhaul championed by former governor Mitt Romney. …

“The fingerprints of the Massachusetts Connector are clearly visible in the work going on everywhere,” said Jon Kingsdale, former executive director of the Connector Authority. Kingsdale has worked with 15 states in the past two years as managing partner in the Boston office of Florida-based Wakely Consulting Group. This week, he flew to Oregon to talk with representatives of 10 states about their exchanges.

In that capacity he would have become familiar with the whole gamut of state efforts. While Counhihan himself went on to manage the relatively trouble-free Connecticut website, one of the survivors of the massacre of state exchanges, the program has become a kind of national health insurance Big Dig.  Investors.com summarizes the state of play:

After spending billions on state-run ObamaCare exchanges, the federal government is only now writing clear rules on how that money can be spent, while half of the exchanges head toward bankruptcy. State-run exchanges were supposed to form the beating heart of ObamaCare. And the Obama administration dumped almost $5 billion in an effort to make it a reality.

The results have been a disaster.

Of the 37 states that received $2.1 billion in grants to establish an exchange, only 17 did so, and they got an additional $2.7 billion from the feds.

Of those 17, two went bankrupt in the first year. One of them, Oregon, had received a $60 million "early innovator grant." Residents of those states now use the federal Healthcare.gov site.

A memo from Health and Human Services' Inspector General Daniel Levinson warns that some of the remaining may be violating federal law in an effort to stay afloat.

ObamaCare told the states that they'd get plenty of federal money to help them set up their exchanges — but not run them. And starting this year, the state exchanges had to be self-financing — they had to pay their own way out of exchange fees or other funding sources.

The public has been told that the federal exchange, unlike those of the states, is now working well.  But it still remains to be seen whether the claimed success will hold up.  Deval Patrick told his constituents that the Connector was coming along well also.  However the truth when it emerged was the opposite of the claim.

Come Back insurance, Come Back

POSTED one week ago BY HEALTH CARE COMPACT

The exit of Assurant Inc from the Obamacare market was yet another sign that something was wrong with its insurance model.  The reason given by Assurant for leaving the business was instructive: the ACA market wasn’t insurance.

After expanding to do business on the Affordable Care Act’s exchanges last year, a Wisconsin-based health insurance company founded in 1892 has announced it will close its doors.

Assurant Inc. announced last week one of its subsidiaries, Assurant Health, an insurance company, will either be sold or shuttered after losing tens of millions of dollars this year. The decision comes 18 months after the implementation of the Affordable Care Act, and industry watchers argue Assurant Health’s end can be attributed to the new health care law.

“The health and employee benefits business segments possess differentiated capabilities in their respective markets, but we do not believe they can meet our return targets at the pace we require,” Alan Colberg, president of Assurant Inc., said in a statement. “While this is a difficult decision, we believe they would be strong assets for new owners that are focused more exclusively on health care and employee benefits.

In plain English, Ed Haislmaier, health policy expert at The Heritage Foundation, explained that selling on the Obamacare market is like being a Medicaid provider.

With respect to the Affordable Care Act, the skill set that an insurer needs to thrive in the Obamacare exchange market is different than the skill sets needed to thrive prior to the Affordable Care Act or in markets outside the exchange.  Most of the insurers offering coverage in the exchanges are used to operating in the individual and employer group markets. However, the exchange coverage design is a lot closer to Medicaid managed care than to traditional employer group coverage.

In a competitive insurance market providers can offer different products.  But in on an Obamacare market the products are pretty much standardized.  Haislmaier explains: “when the government standardizes any product, you’re going to end up with fewer producers. That’s because the effect of government standardization is to turn the product into commodity, which leaves little room for the supplier to show how its version is better than those of its competitors.”

In 2013 Haislmaier predicted that the state Obamacare exchanges would fail because they were pointless.  They were like different storefronts selling the same product.  “Under the exchange regulations, states do not gain any meaningful flexibility or advantage by operating their own exchange, as opposed to leaving the exchange up to the federal government. States simply become the vendors of HHS for taxpayer-subsidized, government-controlled health plans.”

Furthermore, there are huge costs for states that agree to set up an exchange. ObamaCare requires in 2015 that states setting up an exchange develop their own revenue source to fund the exchange operations. That could translate into state budgets devoting more stretched resources to the ObamaCare exchange, crowding out other vital programs like transportation and education, or creating new taxes for residents and businesses.

States that decide to forgo an exchange still face costs from Washington. HHS announced late last year that it would levy a 3.5 percent administrative fee on coverage sold through federally run exchanges. But when compared with the costs of running an exchange, estimates for opting out appear to be the cheaper option.

Meanwhile, choosing not to set up an exchange gets states off the hook for the exchange’s operational results. States that elect to operate an ObamaCare exchange signal they will take on responsibility for how well the exchange performs. And this comes as HHS is delaying the rollout of much-needed details on how the entire exchange program will operate. Each day without a roll-out ups the probability that the Obama administration will fail to get the exchanges open to the public by October.

Rather than rely on the federal government to succeed, states should hold back. If they aren’t satisfied with a federally run exchange, the law allows for states to come back and set up their own. So there is no rush to commit. Right now, it’s more practical for states to hold off on the exchange mania.

The 2013 prediction proved to be prescient.  By 2015 half the state exchanges were headed for bankruptcy. Lena Sun and Niraj Chokshi of the Washington Post reported that “nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.”  It was serious to be sure, but it should have not have been unexpected given the artificial nature of the exchanges.  

Perhaps one of the most nonpartisan critiques of Obamacare was by the Committee For Economic Development’s (CED).  The CED consisted of senior executives or recently retired CEOs of universities, pharmaceutical companies, insurers and think tanks, such as Bruce McLaury, the president emeritus of the Brookings Institution. The CED accounted itself one of the earliest supporters of health care reform.  But it had concluded that Obamacare, as written had become a caricature of the original ideas.

It has been clear for several decades that the cost of health care in the United States—for families, for businesses, and for government—has been spiraling out of control. At the same time, the nation has not received fair value for the sums that it has paid—and many Americans have not had insurance coverage at all. These failures of affordability, quality, and access led CED to develop our own ideas for market-based universal health insurance, using competition among private insurance plans driven by cost-conscious consumer choice to motivate improvements in quality at lower cost. Our most recent policy statement, released in 2007, provided highly detailed policy prescriptions.

In 2010, the US Congress and the president responded to this slow-moving health care crisis by enacting the ACA. The new law sought to address the same concerns that CED recognized in our policy statement of 2007. However, relative to our vision, we believe that the ACA does both too little and too much. It leaves the deficient core of the health care system—based on fee-for-service medicine, with all of its long-recognized perverse incentives—substantially intact and increases government involvement in the delivery of health care, injecting remote, one-size-fits-all rules into what we believe should be the individualized physician–patient relationship. We believe that this combination will not deliver all of the innovation and process improvement that the nation needs to achieve higher-quality, more affordable care. We recommend a different approach, more in line with a market-driven system, but with an appropriate, though smaller, role for the federal government to ensure healthy private-sector competition as fertile ground for quality and efficiency to grow.

The biggest problem with Obamacare’s policies were those identified by Haislmaier. Because the product was government standardized, the fact that it was sold in different places made no difference, for the benefit of the program came from the product, not from the way it was sold.  Moreover, the amount of subsidy a person would receive was obscured by a complex formula that often resulted in the necessity to refund the government at tax-filing time.  This made price information opaque, and without knowing the actual relative price of insurance, CED argued, no market would operate efficiently.

What CED recommended was “a system of universal refundable income tax credits, financed with broadly based taxes and usable

only for health insurance.”  A voucher, in other words. This voucher could be used to pay for any minimum standard insurance anywhere -- not just in a limited exchange.  In that way consumers would have known sum they could spend on healthcare anywhere.  And because insurance companies would be free to innovate, the consumers would have a variety of plans to choose from.

Companies could sell real insurance again. Maybe companies like Assurant could be induced to re-enter the market and not just a glorified type of Medicaid managed care.

The Curse of Obamacare

POSTED one week ago BY HEALTH CARE COMPACT

The sordid saga of the White House bribing a Republican legislature began with the desire to be exempt from Obamacare -- and ended with the legislature accepting.  It is a snapshot of all the worst things about Big Government.  As soon as the ACA was passed, high government officials began casting around for ways to avoid it.  The problem was optics.  It looked ugly for politicians to avoid eating the very dish they were forcing on ordinary Americans.

During the passage of the ACA, Sen. Chuck Grassley (R-Iowa) proposed an amendment forcing all members of Congress and their staffs to enter the exchanges.  The Democrats went along, probably because they could not be seen to be opposing it.  This created a problem, as the Heritage Foundation explains.

A provision in Obamacare stipulates that on January 1, 2014, Members of Congress and their staff will lose their current employer-sponsored health insurance provided through the Federal Employees Health Benefits Program (FEHBP). There is a deepening concern among Members of Congress that they will be forced to pay more for their health care than they do today—precisely the concern that animates millions of their constituents. Many in Congress are hoping that the Obama Administration will at least find a way for them to continue using their large, tax-free FEHBP employer subsidies to defray the cost of their new coverage. However, the Administration lacks statutory authority to pay those subsidies to plans outside FEHBP. Of course, Congress could keep its current health coverage by repealing Section 1312(d)(3)(D) of Obamacare. Yet, the political price for doing so is that Members of Congress must repeal the rest of Obamacare as well—so that their constituents are allowed to keep their health plans, too.

The loophole, or rather noose, which the Congressman were offered was an invitation to submit a fraudulent application under one of Obamacare’s 1,200 exemptions, one of which was for small business.  Brendan Bordelon of the National Review picks up the story.  The administration offered Congress a bribe, at least morally speaking.

The White House scrambled to find a way to allow congressional employees to keep those subsidies. In Washington, D.C., only the small-business exchange allowed them to do so. After secret meetings with House speaker John Boehner in 2013, President Obama instructed the Office of Personnel Management to allow Congress to file for classification as a small business, despite the fact that the law defines a small business as having no more than 50 employees and the House and Senate together employ tens of thousands.

Unfortunately, not everyone got the word. “To Small Business Committee chairman David Vitter, who has fought for years against the Obamacare exemption, it was clear that someone in Congress had falsified the document in order to make lawmakers and their staff eligible for taxpayer subsidies provided under the exchange for small-business employees.”

Vitter tried to get his committee to subpoena the application, certain he would find proof of dishonesty.  That should have been straightforward, since Republicans were in the majority.  But to their everlasting shame the Republican members closed ranks with their Democratic colleagues and refused to issue a subpoena.

When Vitter asked Republicans on his committee to approve the subpoena, however, he was unexpectedly stonewalled.  

With nine Democrats on the committee lined up against the proposal, the chairman needed the support of all ten Republicans to issue the subpoena. But, though it seems an issue tailor-made for the tea-party star and Republican presidential candidate, Senator Rand Paul (R., Ky.) refused to lend his support. And when the Louisiana senator set a public vote for April 23, Majority Leader Mitch McConnell and his allies got involved. “For whatever reason, leadership decided they wanted that vote to be 5–5, all Republicans, to give Senator Paul cover,” one high-ranking committee staffer tells National Review. “So they worked at a member level to change the votes of otherwise supportive senators.” Four Republicans — senators Mike Enzi, James Risch, Kelly Ayotte, and Deb Fischer — had promised to support Vitter, but that would soon change.

Senate staffers, according to a top committee aide, reported seeing Missouri senator Roy Blunt make calls to at least two Republican committee members, lobbying them, at McConnell’s behest, to vote no on subpoenaing the exchange. By the time the committee was called to quorum, Enzi, Risch, Ayotte, and Fischer voted no. …

“We deserve to know who signed that application, because they are robbing taxpayers,” says Michael Cannon, director of health-policy studies at the libertarian Cato Institute. The staffers who signed the fraudulent application, he says, “know who was directing them to do this. And so we have to follow the trail of breadcrumbs. This is the next breadcrumb, and whoever is farther up the trail wants to stop Vitter right here.”

That the criticism comes from the National Review and Cato is particularly telling. Other influential conservative publications like Powerline and Hotair have picked it up. The effects on the Paul candidacy will likely be not long in coming.  But the blowback will not be confined to him.  The conservative wing of the Republican Party is beginning to regard it as the Party of Betrayal, and if that impression persists, it will depress conservative voter turnout in 2016.  Radio spots are already being aired in Iowa hammering Paul on the issue.

The radio spot created by the conservative nonprofit American Encore will begin running in Iowa on Thursday. The 60-second ad pushes the state’s caucus-goers to “ask Rand why” he voted against subpoenaing a fraudulent congressional application to D.C.’s health exchange during an April 23 Small Business Committee meeting.

“Senator Rand Paul says Congress is a ‘small business’ and should get a special exemption from Obamacare,” the ad intones. “That’s crazy.” “Rand Paul actually voted to stop Joni Ernst and other Senate Republicans from finding out who in Congress signed off on this illegal and fraudulent Obamacare scheme,” it continues, urging listeners to tweet at the senator, call his congressional office, “or just ask him about it the next time he passes through Iowa.”

In the 2014 election cycle Obamacare claimed many victims among the Democratic incumbents.  It would be ironic if the last victims of the program should the Republican candidates for the presidency.

The Transformation of Primary Care

POSTED one week ago BY HEALTH CARE COMPACT

One of the inherent contradictions of the Affordable Care Act is the way it emphasizes primary care while creating problems for primary care physicians.  Medical News Today says Obamacare is changing the emphasis of American medicine from away from curing patients to preventing diseases.

Obamacare will result in wider public health benefits because of a greater emphasis on preventive medicine, according to research by the Centers for Disease Control and Prevention.

The Patient Protection and Affordable Care Act, which was brought into force by President Obama in 2010, will advance health not only by greater emphasis on prevention, but also by "reversing the historic division between public health and private health care services," according to the authors publishing in The Lancet.

That’s theory. But the Associated Press says there are indications that Obamacare is disincentivizing entry into primary care. It begins with an anecdote describing the travails of one patient who tried to see “her” primary care doctor -- a random strangercan be called that.

MIAMI (AP) — When Olivia Papa signed up for a new health plan last year, her insurance company assigned her to a primary care doctor. The relatively healthy 61-year-old didn't try to see the doctor until last month, when she and her husband both needed authorization to see separate specialists.

She called the doctor's office several times without luck.

"They told me that they were not on the plan, they were never on the plan and they'd been trying to get their name off the plan all year," said Papa, who recently bought a plan from a different insurance company. …

The Papas were among the 6.7 million people who gained insurance through the Affordable Care Act last year, flooding a primary care system that is struggling to keep up with demand.

The apparent reason for the shortfall is that primary care doctors are leaving the business.

A survey this year by The Physicians Foundation found that 81 percent of doctors describe themselves as either over-extended or at full capacity, and 44 percent said they planned to cut back on the number of patients they see, retire, work part-time or close their practice to new patients.

At the same time, insurance companies have routinely limited the number of doctors and providers on their plans as a way to cut costs. The result has further restricted some patients' ability to get appointments quickly. …

The Association of American Medical Colleges projects the shortage will grow to about 66,000 in little more than a decade as fewer residency slots are available and as more medical students choose higher-paying specialty areas.

For now, experts say most patients are receiving the care they need, even if they have to drive farther, wait longer or see a nurse practitioner or physician assistant rather than a doctor.

But eventually, unless things change, America will have fewer primary care doctors to go around.  To prepare for that eventuality nurse practitioners and other personnel are being groomed to take the place of doctors in certain roles. Healthline’s David Mills says that in five years the “doctor’s office” will have fewer doctors.

Driven by high healthcare costs, new technology, and an impending doctor shortage, the country’s medical industry may see its biggest changes since Medicare and Medicaid were approved in 1965.

“Doctors’ offices will still be around, but they are going to change dramatically,” said Kurt Mosley, vice president of strategic alliances for the Merritt Hawkins physician search and consulting firm. …

He said the Affordable Care Act is pushing some of these changes, but they also started before Obamacare was signed into law.

“We’re going to see an increasingly different landscape in the healthcare field,” Vance said. “It’s the continuation of a trend.” ...

At these centers, a nurse practitioner deals with issues for which people now go to their doctor or perhaps even the emergency room. The ailments range from a hacking cough to strep throat to a swollen wrist or an ear infection.

Margalit Gur-Arie writing at Kevin MD has perhaps the clearest explanation of why doctors are deserting the very field that Obamacare plans to put at the forefront of its efforts.  She explains that in the process of making primary care more efficient, it has been routinized to the point where the American medical profession no longer considers it “real” doctoring.  From a peer prestige point of view, all the ‘real’ doctors are in hospitals curing people, leaving all the second raters to man clinics taking blood pressure, jabbing needles and doing things no real elite physician should be doing.

As Obamacare is winding its way through a hellish bureaucratic labyrinth of its own creation, accompanied by cheers and boos from the blood thirsty spectator crowds, confusion, fear, trepidation, despair and exhilaration, are gripping America’s doctors all at once, because whatever else is accomplished in the next decade, medicine will never be the same. …

Dying in a hospital is now considered a failure of sorts, a preventable and costly mistake.  … So where does all this leave primary care? Primary care is now considered routine care; routine, like changing oil on an automobile. Sticking a needle in your arm so you never, ever die from a plague is no longer a miracle, just like switching the lights on, or flushing the toilet is no longer deserving of thought. Miracles only happen in hospitals now, and not very often either. Primary care doctors are increasingly banned from hospitals, and asked to stick with routine care and leave the complex stuff to their betters.

Handing over primary care duties to nurse practitioners has only emphasized the image of primary care as something ‘real’ doctors shouldn’t do.  By attempting to turn primary care into a form-filling, value-paid, industrial and efficient process, Obamacare has unwittingly turned this type of activity into the medical equivalent of working for the DMV.

Welcome to Lake Wobegon primary care where all patients come in correctly diagnosed and ready to be tracked. These things can be automated with the right technology and properly trained teams of workers, supervised by medical professionals providing spot checks and quality assurance. High tech and high deductibles will combine forces to turn routine primary care into the first medical service to become a retail product, with its Med Emporium, Osler 5th Avenue, and eventually, Hello Kitty Diabetes toolkits sold at Amazon.com. The question is no longer how to stop the train; the question is where primary care goes from here.

Gur-Arie argues that primary care can re-invent itself to regain its mojo. One way is to create a medical specialty out of being a generalist. “Grab the fluctuating 25% or so of patients that are most complex and be their comprehensivist.  Hospitals are routinely inventing specialties, from hospitalists to intensivists to nocturnists, to further fragment continuity of care and increase profits. It’s time to learn from the experts.”

Instead of waiting for the system’s other shoe to drop (on your head), proclaim yourself a specialist in the absolutely last remaining piece of what was once primary care. Instead of waiting for the system’s other shoe to drop (on your head), proclaim yourself a specialist in the absolutely last remaining piece of what was once primary care.

Fortunately, she argues, Obamacare makes word games easy to play. “With proper planning, you can collect the customary and usual fees for your greatly expanded panel, plus the special fees for comprehensive care, plus any shared savings you can generate from keeping these select folks out of hospitals and emergency rooms. You’ll have to do a bit of marketing and engage in some creative contract negotiations (get a lawyer), but the sky may very well be the limit.”

It’s not necessary to accept Gur-Arie’s cynical view to see the truth in much of what she says.  Perhaps Obamacare may be killing primary care by lavishing bureaucratic attention on it.  Or perhaps Obamacare is putting out of its misery something that hsould have long ago been turned into unapologetic “Med Emporium”.  Either way  the doctors are going away from primary care.  Only time will tell whether this is good or bad.

Can Accountable Care Organizations Save Obamacare?

POSTED 2 weeks ago BY HEALTH CARE COMPACT

One of the great cost-savings hopes of Obamacare is the idea of changing the payment for medical services away from fee-for-service, “where services are unbundled and paid for separately” to some kind of bundled payment, in which providers are paid on the basis of some measurable result.

Faced with mounting evidence that health care costs continued to mount, in spite of Obamacare, it’s advocates had hoped that managed care experiments, featuring a form of bundled payment, would make a breakthrough in terms of “bending the cost curve”.  Ezra Klein of Vox believes that the waiting has paid off and that Obamacare’s much hoped for cost savings might actually be at hand.

Obamacare took what an economist once described to me as the "spaghetti approach" to reducing health-care costs: throwing a bunch of different experiments at the wall and seeing what stuck.

Today, the law arguably had its first success: Medicare's independent actuary has certified that an Obamacare program has saved money — $384 million over the past two years, to be exact. And the Obama administration is now eying how to make this program bigger — and, ideally, generate even more savings.

The program is called the “Pioneer Accountable Care Organization” and Klein explains how it works.

The American health-care system by and large runs on what experts describe as a "fee-for-service" system. For every service a doctor provides — whether that's a primary care physician conducting an annual physical or an orthopedic surgeon replacing a knee — the doctor typically gets a lump sum of money.

American doctors aren't paid on whether they deliver that improved health. Their income largely just depends on whether they performed the surgery, regardless of patient outcomes. Their patient's knee could be good as new or busted as before at the end — but in most cases, that doesn't factor into the surgeon's ultimate pay.

These savings were supposedly made possible through the magic of bundled payments. The idea was simple. Baselines were devised for how much the treatment of a particular condition should cost.  If patients could be cured (as measured by accepted clinical criteria) for less than the baseline cost, then a provider participating in the Pioneer Accountable Care Organization could keep the difference.

In 2012, the Obama administration launched a plan to change that. The Pioneer Accountable Care Organization, or Pioneer ACO, rewards hospitals that deliver high-quality care at lower-than-expected costs — and punishes high spenders.

If hospitals in the Pioneer ACO program covered Medicare patients at lower-than-expected costs, they kept 70 percent of the savings in 2014 (the other 30 percent went back to the federal government). But if they spent more than expected, they would have to pay the feds back the difference.

Thirty-two hospital systems signed up to become Pioneer ACOs in 2012 (13 have since dropped out; you can read more about that, and what it means, here). And two papers reviewing the program's performance — published today here and here — are largely positive in their findings.

But the problems with this magic bullet are that it’s not magic.  “Accountable care organizations” have been around for a long time and their biggest weakness is what is called “adverse selection”.  If an accountable care organization can somehow select patients who can easily be cured (the so called “low-hanging fruit”) then it it can always earn a bonus.  On the other hand, organizations which are stuck with hard clinical cases will not be able to cure them for the baseline amount and will find themselves losing money.

The American Academy of Actuaries explains the problem succinctly. “The Affordable Care Act (ACA) and recent proposed regulations incorporate a concept that some health reform proponents have advocated for several years … Attribution, or the assignment of patients to a particular ACO, should be considered carefully. Risk is closely connected to various population characteristics. There is potential for adverse selection resulting from how populations are enrolled in these programs.”

The Pioneer ACO program compared the costs and outcomes of for-fee Medicare beneficiaries with those of the ACOs, as Susan London of Medscape reports.

David J. Nyweide, PhD, from CMS and the Center for Medicare and Medicaid Innovation, both in Baltimore, Maryland, and colleagues studied fee-for-service Medicare beneficiaries, comparing those who were aligned with the 32 Pioneer ACOs (675,712 in 2012 and 806,258 in 2013) with those in the same markets who were eligible but not aligned (13.2 million in 2012 and 12.1 million in 2013). As previously reported by Medscape Medical News, a separate analysis of year 1 data from the Pioneer ACOs also showed a modest reduction in spending.

In the current study, Dr Nyweide and colleagues compared the groups on the change in expenditures between a baseline period (2010-2011) and a performance period (2012-2013) and found that the ACO-aligned beneficiaries had smaller increases in total spending, determined from claims data, than the eligible beneficiaries.

But a closer inspection provided by Jeff Goldsmith of Health Affairs Blog shows much less rosy picture.  To begin with, only 40% of the providers participating in the Pioneer experiment earned bonuses.  Almost a third dropped out.  The biggest factor determining whether a provider earned a bonus or not appears to be -- you guessed it -- adverse selection.

On July 16, the CMS Innovation Center reported the first-year results for the Pioneer Accountable Care Organization program:  13 Pioneers, or about 40 percent of the participants, earned bonuses. The program saved Medicare a gross $87.6 million before bonus distributions, cutting the rate of growth in Medicare spending by 0.5 percent, from 0.8 percent to 0.3 percent annually.

However, nine of the 32 members dropped out and press reports hinted at a contentious relationship between the Pioneers and a well meaning but green and overtaxed CMS staff.  It was not an auspicious beginning for a program whose advocates believed would eventually replace regular Medicare’s present payment model. There immediately followed a blizzard of spin control from ACO “movement” advocates stressing the need for patience and highlighting first year achievements.

What was irritating about the Pioneer spin is it treated the ACO as if it were a brand new idea with growing pains. This studiously ignores a burned out Conestoga wagon pushed to the side of the trail: the Physician Group Practice demonstration CMS conducted from 2005-2010. The PGP demo tested essentially the same idea — provider bonuses for meeting spending reduction and quality improvement targets for attributed Medicare patients. …

the PGP results were extremely disappointing; only two of the ten participants were able to generate bonuses in each of the program’s five years, and one, Marshfield Clinic, earned half the total bonuses.  Managed care veterans like Geisinger Clinic and Park Nicollet earned bonuses in only three of their ten program years. Two other high-quality multi-specialty clinics had even rougher sledding, with Everett Clinic getting one year of bonus ($126,000) and Billings Clinic completely shut out.

The pattern in the first Pioneer year is remarkably similar.   While thirteen of the Pioneers earned bonuses, it appears from press reports that four of them generated 2/3 of the savings.   It is likely not coincidental that three of those four participants (Massachusetts General, Beth Israel Deaconess’ physician organization, and New York’s Montefiore) either run or practice at some of the most expensive hospitals in the country, in two of the country’s highest per capita Medicare spending markets.  Orchards full of low hanging fruit (e.g. very high levels of previously unexamined Medicare spending) appear to be an essential precondition of ACO success.

One of the oddest effects of the ACO model is that the hardest working providers are cursed to be sought by the sickest patients.  The better a hospital is, the more difficult are the cases brought to it. Better information about patient history too, plays a perverse role.  The more a hospital knows about a patient, the better it can predict whether he is “low hanging fruit” likely to provide a bonus.  Goldsmith writes:

Adverse selection combined with an inadequate risk adjustment methodology may have hurt these managed-care savvy Pioneers.  Organizations with great reputations for helping high-risk Medicare patients will differentially attract them.  One of the unfortunate learnings of the PGP was the vital importance of aggressive coding of patient acuity to offset selection effects.

And because they cannot proactively identify patients, particularly physician-centric Pioneer organizations will have trouble diverting them from hospitalization, or reducing the use of expensive out-of-network services.  It’s really tough to practice managed care without the patient’s knowledge or consent, or sharing some of savings with them — the fundamental flaw in ACO program design.

Does this prove ACO’s don’t work or that they are a bad idea. It does not.  But neither does the Pioneer ACO experiment demonstrate that it is the silver bullet Obamacare advocates claim that it is.

How Obamacare Cut ER Use?

POSTED 2 weeks ago BY HEALTH CARE COMPACT

News outlets carried partial results of a poll by the American College of Emergency Physicians (ACEP) showing that Emergency Room visits have increased despite the implementation of Obamacare. ER use was supposed to decline, not increase with the rollout of the Affordable Care Act. Data that showed ER use was increasing was noticed in late 2014.  A worried Olga Khazan at the Atlantic concluded that the phenomenon was real, but temporary.

The paper, from UCLA’s Center for Health Policy Research, found that ER use was higher among new enrollees in California’s Low Income Health Program, the state's Medicaid-like program.

However, it also found that the spike was temporary.

At first, the newly insured Californians used ERs at the relatively high rate of 600 visits per 1,000 people.

But between 2011 and 2013, their ER usage declined by nearly 70 percent, to 183 visits per 1,000 people. Their hospital admissions also declined by 79 percent.

But ER spike turns out not to be temporary.  The ACEP study itself contains a wealth of detail not reported in the papers.  First, it was based on a sample of 2,099 responses from all over the country.  The picture it paints if fascinating and complex.

To the question: Since January 1, 2014, when the requirement to have health coverage took effect in the Affordable Care Act, the volume of emergency patients in my emergency department has [trended]?” the clear trend is up.

Greatly increased

28%

Increased slightly

47%

Remained the same

17%

Decreased slightly

5%

Decreased greatly

0%

Not sure

3%

The first reaction of an Obamacare advocate would be to hypothesize that the rise in ER use is driven by states that did not expand Medicaid.  But this turns out not to be the case.   The question: “Since January 1, 2014, the volume of Medicaid emergency patients in my emergency department has [trended]:” in a way that suggests Medicaid patients are using the ER more!

Greatly increased

24%

Increased slightly

32%

Remained the same

19%

Decreased slightly

1%

Decreased greatly

0%

Not sure

24%

One factor throwing doubt on this result is the large number of  ER doctors who are not sure whether the patient is enrolled in Medicaid or not.  However, there is a strong signal in the poll which suggests that ER usage is genuinely climbing.  Why could this be?

One possibility is that the rise in ER use is highly correlated, and perhaps even caused by the increase in Obamacare premiums, the high deductibles and the narrow networks.  Faced with high out of pocket costs and inconveniently narrow networks, people turn to the ER.  The higher the out of pocket expenses, the narrower the networks, the greater the tendency to use the ER.

Another related item of information comes from this survey question: “Since January 1, 2014, the acuity of emergency patients’ injuries/illness in my emergency department has?”: suggests a more positive Obamacare effect.  People are coming coming with more “true emergencies” than routine problems because the severity of injuries observed appears to be slightly higher, though the effect is only suggested and not pronounced.

Significantly increased

14%

Increased slightly

30%

Remained the same

42%

Decreased slightly

10%

Significantly decreased

2%

Not sure

3%

One of the problems with crediting Obamacare with increasing the proportion of true emergency cases is that the effect may be due in part to other factors.  The survey looks at the effect of:

  • urgent care centers

  • retail clinics

  • telephone triage lines

  • primary care options

In the estimation of the doctors.  The factors most credited with reducing non-emergency patients are urgent care centers and primary care options in that order.  This suggests that insuring people has an effect on ER use, but not nearly as big as Obamacare supporters had hoped.

urgent care centers

23%

retail clinics

11%

telephone triage lines

15%

primary care options

21%

If Obamacare advocates are looking for a silver lining, they will find it in this survey result. “If federal subsidies for health insurance coverage were to be eliminated in your state, how do you think that would affect emergency department visits? (NOTE: the Supreme Court heard arguments in March 2015 and expects to announce its ruling in June — King v. Burwell — on whether low-income patients enrolled in a federal exchange are eligible for subsidies)”

emergency visits will increase

42%

emergency visits will stay the same

31%

emergency visits will decrease

10%

my emergency department will be at risk of closing

2%

not sure

16%

But this also confirms the hypothesis that the lack of money is the main driver of non-emergency ER use. Cutting the subsidy will have the same effect as raising the premium, or upping the co-pay or narrowing the network.

A RAND corporation study measuring the price elasticity of out-of-pocket expenses provides compelling evidence that mere coverage is insufficient when out of pocket costs are high. Abe Dunn in his paper Health Insurance and the Demand for Medical Care: Instrumental Variable Estimates Using Health Insurer Claims Data writes in his conclusion that people consume less health care when out-of-pocket costs are higher.

This paper focuses on a fundamental empirical problem in the health literature: measuring consumer responsiveness to out-of-pocket price … the demand estimates reveal that the consumerís response to out-of-pocket price is negative, significant and inelastic … Moreover, the movements in negotiated service prices are shown to be closely correlated with out-of-pocket prices, demonstrating a clear mechanism for how changes in negotiated prices ultimately affect consumers and medical care utilization

Significantly high chargemaster costs, even if not directly borne by the patient, ultimately affect his out-of-pocket expenses.  This has great implications for anyone who wonders what the effect of hospital and insurance consolidation under Obamacare will be.  As hospitals consolidate they create local monopolies and tend to increase the “negotiated service prices” which ultimately increase out of pocket costs.

Faced with those costs, patients go back to the ER.

Obamacare advocates have ceaselessly touted the “increase in the numbers of people insured”.  But it turns out to be much less significant than it seems, if the insurance high-deductible or expensive.  Ultimately what drives medical care access is price.  And Obamacare has been a champion at raising price.  The fact that this is partly borne by the taxpayer is ultimately immaterial.  In the aggregate, people will consume less health care under the ACA.

How to Cut Costs

POSTED 2 weeks ago BY HEALTH CARE COMPACT

Women’s advocacy groups have discovered that their access to “free” contraception is limited despite Obamacare’s guarantees.  The reason for the limitations is simple: cost. Sarah Ferris of the Hill writes:

Insurance companies are widely ignoring an ObamaCare rule that requires them to provide free or low-cost birth control, according to a report by the National Women’s Law Center.

Some insurance companies are still charging women out-of-pocket costs for birth control and limiting their coverage to only certain methods of birth control, both violations of the Affordable Care Act, according to the 22-page report to be released Wednesday.

But insurance companies will argue that unless there is some “skin in the game” resources will be overused.  And all resources are limited.  Thus, even while Obamacare advocates push states to expand Medicaid there is also a keen awareness than one can’t write a blank check. Jason Hart of the Ohio Watchdog writes that Ohio has burned through the money faster than expected.  “After Kasich expanded Medicaid unilaterally, a state panel approved $2.56 billion in Obamacare spending for the expansion’s first 18 months. The money was meant to last until July, but it ran out in February.”

Kasich’s Obamacare expansion cost $323 million in March — 84 percent greater than estimates revised just six months earlier.

Using monthly figures released by the Ohio Department of Medicaid, the Republican governor’s Obamacare expansion cost slightly more than $3 billion from January 2014 through March 2015.

Sally Pipes of Pacific Research quotes White House economist Jason Furman’s rueful summation of Obamacare’s costs.  “It could have been worse” referring to the program’s weakest point, the rise in deductibles. “According to the online insurance marketplace HealthPocket, deductibles shot up 42 percent during the health law’s first year, compared to those for plans available pre-Obamacare. Today, almost one in seven Americans spends 10 percent or more of his or her income on out-of-pocket costs like deductibles”.

Plans with high deductibles already dominate in many states. In Indiana, which uses the federally operated HealthCare.gov exchange, 24 of the 29 plans available have high deductibles — defined as at least $1,300 for individuals and $2,600 for families. In South Dakota, 31 of 38 plans do.

Next year will bring more of the same. A recent report from Modern Healthcare concluded that 60 to 80 percent of the plans sold in a given exchange market could have high deductibles.

In defense of Obamacare, Furman pointed out that deductibles were rising even before Obamacare was launched.  But that’s because costs were rising and -- to return to the example of the “free” but not free contraceptives -- cost considerations overrule legal promises.  When there’s not enough money to carry out a law, the law goes unenforced.  When the contraceptives promised by Obamacare are unfunded, well too bad.  Pipes continues:

These deductibles are squeezing ordinary Americans. According to a recent survey from the Commonwealth Fund, nearly half of all adults with annual incomes ranging from 100 to 399 percent of the poverty line — or about $12,000 to $48,000 — described their deductibles as “difficult or impossible to afford.” …

The benefit of a high deductible is usually a lower premium. But thanks to the many regulations and mandates under Obamacare’s Essential Benefit Plan, even premiums have skyrocketed.

Consider Florida. In 2013, a 30-year-old non-smoker could buy a mid-priced plan with a $2,600 deductible for $142 a month. This year, the cheapest “Bronze” plan — the least comprehensive coverage offered on the exchanges — will cost $198 a month and comes with a $6,500 deductible. That’s almost a 40 percent spike in the premium and a 250 percent uptick in the deductible since Obamacare became law in March 2010.

A “Silver” plan — the most popular on the exchanges — with a comparable deductible will run $263 a month in Florida. That’s nearly twice as much as before Obamacare.

Indiana is experiencing similar jumps in costs. A Bronze plan sold by Anthem Blue Cross and Blue Shield costs a 40-year-old non-smoker with a $35,000 salary nearly $200 a month in premiums after tax credits — despite an annual deductible of $6,300. That person would have to pay about 25 percent of his or her annual income in premiums and deductibles before the insurance kicked in.

These figures suggest that Obamacare’s touted increase in coverage is completely meaningless unless the cost problem is fixed, both in insurance policies or Medicaid expansion, What are the prospects for controlling costs? One of Obamacare’s initial hopes was that sheer expansion would lower costs.  Once everyone was insured, it was argued, people would seek medical care early and avoid the costs of late intervention.  But it didn’t work out that way.

Three in four emergency room doctors said patient visits have increased since the Affordable Care Act's requirement to have health insurance went into effect, in an email survey released Monday by the American College of Emergency Physicians.

That's not the news some healthcare advocates had hoped for. The thought was that by expanding health coverage to more people, they would get their ailments treated earlier by primary care doctors and could avoid visiting emergency rooms, which already struggle with an overload of patients.

"I think a lot of people shared our hope that when you gave people access to Medicaid, they would go to the doctor, get preventive care and not need to go to the emergency department," said Katherine Baicker, a health economics professor at Harvard. "That's a reasonable hope."

The reason for the rise in ER visits is probably cost. If people can’t afford the deductibles mandated by insurance they go to the emergency room instead.  Raise the cost of using insurance and people won’t use it.  The quest for cost reduction has driven planners back to that old standby: rationing.  Atul Gawande, a physician writes in The New Yorker that the problem with American medicine is that Americans use too much of it.

It was lunchtime before my afternoon surgery clinic, which meant that I was at my desk, eating a ham-and-cheese sandwich and clicking through medical articles. Among those which caught my eye: a British case report on the first 3-D-printed hip implanted in a human being, a Canadian analysis of the rising volume of emergency-room visits by children who have ingested magnets, and a Colorado study finding that the percentage of fatal motor-vehicle accidents involving marijuana had doubled since its commercial distribution became legal. The one that got me thinking, however, was a study of more than a million Medicare patients. It suggested that a huge proportion had received care that was simply a waste.

The researchers called it “low-value care.” But, really, it was no-value care.

Defense medicine has created an atmosphere in which everything must be treated, he argues, even when it might best be left alone.

Right now, we’re so wildly over the boundary line in the other direction that it’s hard to see how we could accept leaving health care the way it is. Waste is not just consuming a third of health-care spending; it’s costing people’s lives. As long as a more thoughtful, more measured style of medicine keeps improving outcomes, change should be easy to cheer for. Still, when it’s your turn to sit across from a doctor, in the white glare of a clinic, with your back aching, or your head throbbing, or a scan showing some small possible abnormality, what are you going to fear more—the prospect of doing too little or of doing too much?

Mrs. E., my patient with a five-millimetre thyroid nodule that I recommended leaving alone, feared doing too little. So one morning I took her to the operating room, opened her neck, and, in the course of an hour, removed her thyroid gland from its delicate nest of arteries and veins and critical nerves. Given that the surgery posed a greater likelihood of harm than of benefit, some people would argue that I shouldn’t have done it. I took her thyroid out because the idea of tracking a cancer over time filled her with dread, as it does many people. A decade from now, that may change. The idea that we are overdiagnosing and overtreating many diseases, including cancer, will surely become less contentious. That will make it easier to calm people’s worries. But the worries cannot be dismissed. Right now, even doctors are still coming to terms with the evidence.

Other people of a more consumerist bent will be troubled not that I gave her the choice but that she paid virtually none of the expenses incurred by it. The nature of her insurance coverage guaranteed that. Her employer had offered her two options. One was a plan with a high deductible and a medical savings account that would have made her pay a substantial portion of the many-thousand-dollar operation. And this might have made her think harder about proceeding (or, at least, encouraged her to find someone cheaper). But, like many people, she didn’t want to be in that situation. So she chose the second option, which provided full coverage for cases like this one. She found it difficult enough to weigh her fears of the cancer against her fears of the operation—with its risks of life-threatening bleeding and voice damage—without having to put finances into the equation.

Yet ultimately it was Mrs. E’s life to try to save or to try to waste, and she weighed the costs of her choice whatever its actual wisdom, by putting “finances in the equation”.  Ultimately rationing has to be part of the cost reduction approach, but when rationing is performed by the consumer himself the process ceases to be rationing and becomes choice.

Rising cancer rates have been an unfortunate byproduct of China’s growing industrialization and economic growth, and its incidence has outstripped the ability of the state to pay for it, especially in the rural areas.  Although 95% of the population was “covered” out of pocket expenses run from 20-70% of the cost of treatment.  This means that as a practical matter, a diagnosis of cancer means financial ruin. But fortunately for China, it’s system of fast and loose regulation has left room for improvisation. CNN featured a wonderful article on China’s “cancer hotels”.  These are shabby establishments which house the pitiable sufferers.

A shabby row of two-story buildings in west Beijing, a few hundred meters from one of China's top cancer treatment and research hospitals, they house untold misery.

Known locally as "cancer hotels," they provide a cheap, temporary accommodation for hundreds of patients in a country where a cancer diagnosis can be financially, as well as physically, devastating.

At night, sobs of agony can be heard as patients pace the hallways wracked with pain. Far from home, they come to seek treatment that they believe is unavailable in China's rural hinterland and smaller cities.

"I thought I was going to collapse when I heard the news," said Liu Dajiang, who cares for his wife.

They have used one of the modest guesthouses as a place to wait for chemotherapy, surgery and radiotherapy at the nearby hospital since her diagnosis with cervical cancer in September 2014.

Yet the good news is that many of the inmates of these “cancer hotels” are cured.  Their very cheapness makes it possible for rural cancer patients to travel to the best hospitals available.  Although they must often still sell their homes to pay for treatment, the shabbiness of the hostel and the loss of a home is a trade of they are willing to make to be cured.

Even though most county hospitals have cancer diagnosis and treatment capacity, some people believe the quality of care is better in cities, he said.

But their decision to head to prestigious hospitals was not always the best course of action, he added. …

Meng, the owner of the hotel, said he has met many patients who sold houses to fund their medical treatment.

"Most of them get cured, but others never come back (from the hospital)," said Meng, who declined to give his full name.

In 2010, Meng rented the building and renovated it into a 70-room hotel, with 10 communal bathrooms.

"The patients need nutritional supplements," he said. "They can make whatever they'd like to eat here. They can't do that at regular hotels."

The “cancer hotels” have effectively allowed Chinese medicine to deliver treatment at a much lower cost because it left part of the cost package to the market.  By contrast, an Western European system might have insisted on local treatment with the patient staying in a better hostel -- but with worse treatment.  The Chinese approach allowed the system to concentrate the relevant dollars on the parts that mattered: the medicine itself.

There are no perfect solutions.  But it is becoming abundantly clear that Obamacare as designed, will struggle to be sufficiently affordable.  It will never be cheap, until it makes medical service delivery and not power politics, the ultimate design goal.

The Rise of insurance Giants

POSTED 2 weeks ago BY HEALTH CARE COMPACT

Tom Murphy of the Associated press notes some insurance companies plan to turn a profit on Obamacare after gaining a better understanding of the market. “Several of the nation’s biggest health insurers have hiked earnings expectations for 2015 after blowing past first-quarter forecasts and heading into a much more stable future than they faced this time last year.”

The key to profitability was cutting costs, which companies believe to have done, though they worry that the new Obamacare customers might be holding back on treatment as they worked through their high deductibles plans, meaning the profits may drop at the end of the year.

Insurers also have a better understanding of how the law’s costs, which include fees and medical claims, affect their income statements. …

In addition to booking business gains, insurers also are keeping medical costs under control. That’s their biggest expense, and it continues to grow moderately, about as companies expected. Insurer profitability gets squeezed when medical costs grow faster than expected after they’ve set coverage prices.

That moderate cost growth could change by fall. People with high-deductible health plans tend to save bigger medical expenses for later in the year, after they’ve paid their deductibles and will have more of the bill covered by the insurer.

The big new business item for insurance companies however is Medicaid expansion. The Aetna company is one such example. “Though new membership from government run, so-called ‘public,’ exchanges under  the health law is just 2 percent of company business, Aetna is seeing a boom in Americans signing up to the expanded Medicaid program for the poor, which is another key part of the Affordable Care Act.”

During a 70-minute conference call with analysts and investors, Aetna chairman and chief executive Mark Bertolini said 45,000 of the company’s 79,000 new Medicaid health plan members in the quarter were related to “ACA expansion.” …

Revenues soared more than 25 percent to $14.5 billion compared to $11.5 billion in the year-ago on across-the-board gains in newly insured customers under the health law via exchanges, expanded Medicaid health programs for the poor and its Medicare Advantage business, which provides health benefits to seniors in contracts with the federal government. …

Aetna is already a big player on the government-run exchanges, offering health plans in 16 states and the District of Columbia. Aetna or its Coventry subsidiary are offering health plans on public exchanges operating in the District of Columbia, Oklahoma, Pennsylvania, Delaware, Iowa, Illinois, Kansas, Missouri, Nebraska, Utah and certain areas of Arizona, Florida, Texas, Virginia, North Carolina, Ohio and South Carolina, the company said.

The shift in business strategy was not without its cost.  Aetna abandoned the small business market to concentrate on the lucrative Medicaid expansion business, as Wendell Pott of the Huffington Post reports.

Several million previously uninsured Americans now have coverage because of Obamacare, but it could be argued that the people who have benefited most from the law -- at least financially -- are the top executives and shareholders of the country's health insurance companies.

Among those who apparently have not yet benefited much at all, at least so far, are owners of small businesses who would like to keep offering coverage to their employees but can no longer afford it. They can't afford it because insurers keep jacking their rates up so high every year that more and more of them are dropping employee health benefits altogether. …

Aetna at one point was especially aggressive in dumping unprofitable accounts. The Wall Street Journal reported in 2004 that as part of an effort to boost the bottom line, Aetna spent more than $20 million to install new technology that enabled it to "identify and dump unprofitable corporate accounts."

A financial analyst at Citigroup last month noted that the decline in small business accounts -- or group risk, as this book of business is known in the industry -- was especially notable at the country's nonprofit Blue Cross and Blue Shield plans. Citigroup's Carl McDonald noted that membership in the Blues' group risk business fell almost 1 million in 2014, a 6 percent decline. He suggested the possibility that "small group dumping has been more pronounced at the Blues than has been the case at most publicly traded plans."

It should be noted that the destruction of employer insurance is intentional.  One of the major goals of Obamacare is tear down employer-provided insurance and to replace it with insurance bought on exchanges, or Medicaid expansion. This conveniently coincides with the interests of insurance companies, and mostly the large ones.

The Washington Examiner’s Richard Pollock notes that “insurance companies with a small share of the health insurance market have virtually disappeared from Obamacare state health care exchanges, replaced by big-foot carriers that have traditionally dominated the market, according to a congressional watchdog study.”

The U.S. Government Accountability Office found in a study made public earlier this week that in 40 states the largest insurers either maintained or boosted their market share through the health exchanges established by the Affordable Care Act. The GAO analysis is the first federal study published focusing on how competition within the health insurance market has been affected by Obamacare.

The study also found that small-insurer offerings nearly vanished from the exchanges. In 2012, consumers in the individual insurance market on average could choose among 36 small-market company carriers in their state, each holding a market share of five percent of or less.

But by 2014 those consumers could on average choose from only three insurers in their state exchanges, a decline of more than 90 percent.

As noted elsewhere, the effect of Obamacare has been to create consolidations; mergers among hospitals for example and making it difficult for a private practice to survive.  It is also having the same effect in insurance. Sen. Tom Coburn, R-Okla., who requested the GAO study, told the Washington Examiner that ‘the GAO report provides evidence that the health care law’s burdensome requirements may be giving an unfair advantage to big insurers over smaller ones.’”

The GAO study according to the Hill “are a blow to the Obama administration, which has touted lower costs and more options for millions across the country under the healthcare law.”

The Tide of Red Ink

POSTED 2 weeks ago BY HEALTH CARE COMPACT

The most serious challenge facing the Affordable Care Act is it’s a money loss.  But that’s a feature, not a bug. One of Obamacare’s main objectives was to provide insurance to people who are too poor or perhaps too sick and old to afford it.  That meant from the very beginning it’s viability was premised, not on the possibility of self-sustainment by profit, but on the availability of taxpayer support.

Losing money isn’t the problem. Losing more money than its planners had reckoned with is.

As the Lena Sun and Niraj Chokshi of the Washington Post point out, almost half of all Obamacare state exchanges are about to go under.  Having run through their initial grants of taxpayer startup money, they are bleeding red ink and can’t on any further.  They are now contemplating the politically unthinkable, but economically inevitable: raise prices.

Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov, which now works smoothly.

The fundamental problem of the state exchanges is that enrollment -- relative to design expectations -- has been disappointing.  Not enough customers have come through the front door.  With too little business volume to break even, the state exchanges are bleeding money.

But for the recently completed open enrollment period, sign-ups for the state marketplaces rose a disappointing 12 percent, to 2.8 million people. That compared with a 61 percent increase for the federal exchange, to 8.8 million people, according to Avalere Health, a consulting firm. States with the smallest enrollment growth are among those facing the greatest financial problems.

The irony of King vs Burwell is that it is about the 37 states that refused to join this financial massacre.  Somehow, in the political calculus of Washington, it would have been better if everyone had booked passage on this monetary Titanic.  Tom Wolf, the Democratic Pennsylvania governor, having escaped financial death once, hopes to meet it the second time around.

Pennsylvania Gov. Tom Wolf told the Obama administration Friday his state would move to establish its own Obamacare marketplace if the Supreme Court invalidates vital subsidies in states that rely on the federal insurance exchange.

Mr. Wolf, a Democrat, said a contingency plan is needed because hundreds of thousands of Pennsylvanians rely on the exchange subsidies to afford health care under the Affordable Care Act.

“My letter does not mean that Pennsylvania must set up a state-based marketplace,” Mr. Wolf said. “However, it would be irresponsible not to have a plan in place to protect 382,000 people. I look forward to working with members of the legislature to advance this plan if necessary.”

But it’s not just the states who are losing money on their exchanges.  The insurance companies that sold policies through them are going to the cleaners too.   The Obamacare risk corridor program which was supposed to protect companies against possible losses for participating in a not-for-profit endeavor doesn’t have enough money to cover the damage.  It was always known that there would have to be some public support to make the scheme work.  But Obamacare’s architects underestimated how much money it would really lose.

There may be just $1 in the piggy bank to cover every $10 in claims at an Obamacare program designed to spread risk among insurers, Standard & Poor’s said.

The “risk corridor” program was designed to bolster plans that suffered losses on health-care insurance exchanges, in part by taking funds from those that turned a profit. It was one of three risk-sharing initiatives that help companies adjust to the Affordable Care Act.

Yet companies mostly did poorly in state marketplaces, leaving the amount insurers expect to pay into the program at less than 10 percent of what others expect to get out, S&P found. And a bill passed last year doesn’t let the government use its own funds to make up the difference.

“The only money they can use to pay the insurers who are on the downside is money coming in from insurers who are profitable,” S&P analyst Deep Banerjee said. Most insurers “ended up being on the loss side of the corridor. That’s why we are here.”

Just as with the states that are now contemplating increasing charges to make up for their “unanticipated” cost blowout, the insurance companies are contemplating similar rate increases.  Having set the rates low to make Obamacare a success the insurers want to raise the rates to make their money back.

April 26–The Obama administration promised it would cover financial losses for health insurance companies that were taking a risk by selling plans on the Affordable Care Act’s untested insurance marketplaces.

Policyholders could be the ones on the hook for losses in coming years, though.

Concern is growing among insurers, analysts and industry observers that the so-called Risk Corridor program set up under the 2010 health law to make selling Obamacare plans less risky for insurers — and entice carriers to keep their premium prices low — could backfire because it might run out of money.

Consumers would pay the difference in higher premiums because insurers will raise prices in later years if they have to cover earlier losses, experts said.

“There is a likelihood that premiums will go up” if insurance companies can’t recoup the money, said Deep Banerjee, an analyst with Standard Poor’s.

The need to save the state exchanges as well as the insurance companies, added to the effect of the Employer insurance tax will be a devastating flurry of punches to the chin of the American consumer.  The Obamacare planners got their sums wrong and created a system too expensive to be supported by any reasonable tax regime.

The Obama administration created a monster that it couldn’t afford.  It was fortunate in many ways that so many Republicans refused to go along.  Had they done so, the tide of ride ink would be even more devastating than it is. Whatever the Supreme Court decides in King vs Burwell, the final arbiter of Obamacare is economics. And it looks like it’s rendered its verdict.

The 2016 Repeal Budget

POSTED 3 weeks ago BY HEALTH CARE COMPACT

News that Congress has passed a budget mandating $5 trillion in spending cuts and repealing Obamacare at one and the same time proves less than impressive on closer inspection.  The clearest summary of what it actually does is provided by Romina Boccia, a fellow at the Heritage Foundation.

The 2016 more accurately cuts “$5.3 trillion from current Congressional Budget Office spending projections”.  In other words, it reduces the estimated spending but only by maintaining certain assumptions.  First of all, it keeps all of the huge tax increases of Obamacare so that the revenue flows remain the same. Plus it assumes optimistic economic growth will support the tax revenues.

The savings are achieved by mandating that the money will be saved without precisely spelling out how.  “The Senate does not endorse specific Medicare reform. Instead, the budget agreement asks the appropriate committees to develop the reforms needed to meet the savings target.” But it does provide general indications about how this may be achieved.

This might be achieved by transforming Medicare into a “premium support” program -- in other words, one which will provide credits to enable people to buy insurance on some market -- and increasing the age at which people become eligible for benefits.

In order to achieve the savings target, [Medicare] should be transformed into a premium support program that uses a defined-contribution model of financing within five years of the budget’s enactment. This would move Medicare in a fiscally responsible and patient-centered direction, benefiting both taxpayers and seniors.

In preparation for premium support implementation, [Congress should] increase the age of Medicare eligibility, modernize the Medicare benefit and means-test Parts B and D premiums for higher-income enrollees.

Other savings can be achieved through what Boccia called “budget gimmicks” which change the estimate of spending, but which will not likely change things in actuality.  As for the repealing Obamacare, it is just that, a repeal of the ACA, through a process called budget reconciliation.  Since Obama is almost certain to veto the bill, the budget does virtually nothing to change the mounting deficits or reduce health care costs.  As Boccia writes:

While full Obamacare repeal is an essential first step towards controlling growing health care entitlement spending and would pave the way for market-based and patient-centered health care reform that empowers individuals, it alone cannot balance the budget.

This budget agreement is a blueprint that includes several important reforms to balance the budget, but it also falls short in several areas.

Unless Congress enacts laws that implement its savings instructions, the budget won’t actually balance in 2024. Congress’s budget blueprint is an important start, but the country needs real legislative action from Congress to control growing spending and debt.

The defects in American health care delivery are largely of political creation.  From the World War 2 era price controls which created the employer-based healthcare insurance system, to “Certificate of Need” legislation that restricts the construction of hospitals, to artificial limits on physician education, to mandated uncompensated care in emergency rooms, to the political add-ons of Obamacare,  the American health care system resembles nothing so much as a Frankenstein monster made up of scavenged body parts.

The result is a system full of contradictions, being simultaneously the highest cost medical system in the Western world and its most innovative, producing 90% of all new medical developments. “Since 1966, Americans have received more Nobel Prizes in Medicine than the rest of the world combined. From 1989 to 2002, four times more money was invested in private biotechnology companies in America than in Europe.”

The challenge which Obamacare has so far failed to address -- and which the 2016 Congressional budget has not faced -- is how to preserve the best aspects of the American system while reforming the worst.  Kaiser Permanente, a $56 billion health insurance company that is morphing into an advance preview of Obamacare’s vision, emphasizes cost control through standardization. Erika Fry of Fortune writes:

Not only is it a hospital, it’s also an insurance company, a pharmacy system, and a doctor’s office with some 20,000 physicians. As FORTUNE wrote last summer, “that unusual structure looks a lot like an accountable-care organization as envisioned in the Affordable Care Act.”

It is also deeply suspicious -- for cost reasons -- of untrammeled innovation.  As CEO Bernard Tyson told Fry: what could stand in the way of progress is new drugs.

While technological innovation is leading to better patient outcomes in a number of medical conditions, there’s one area where Tyson says “progress” is part of the problem. That’s the new crop of “specialty drugs” that can run as much as $100,000 or more for a course of treatment. In some cases, these drugs are veritable godsends for patients with intractable ailments. (Take, for instance, Sovaldi, an $84,000 drug that can cure Hepatitis C—Tyson himself couldn’t bring himself to believe the claims until he’d seen the data.) Even so, when such wonder drugs are priced in the stratosphere, they can make the entire healthcare delivery system unsustainable. The prices aren’t just high, he says, they’re irrational. “Irrational pricing,” he explains, “is one in which a given price point has no rational explanation other than ‘Because we can.'”

And its instructive to realize that many of the changes espoused by Kaiser are similar to the kinds of changes that are envisioned for Medicare, where the emphasis is on the lower-cost delivery of standardized treatments to the consuming public.  The danger of course, is that it can go too far.  Any health care system based on bureaucratically mandated targets runs the risk of imposing both rationing and stagnation.  The much admired health care systems of Europe deal with rationing by increasing budgets each year.  And they avoid technological stagnation by free-riding on the reviled American system, which produces 90% of the innovation.

When money runs short, both shortages and stagnation overtake the system almost immediately as is happening to Venezuela.  The mismanagement of its oil industry has starved its socialistic health care system of cash.  As a result, everyone gets his ration of medicine on paper, but in actuality the pharmacies are bare.  USA Today reports that “the health minister unveiled a new national system that requires all patients to register their fingerprints at pharmacies. They will then be allowed to buy just a limited amount of medicines.” “Limited” means not enough.

Freddy Ceballos, who heads the Venezuelan Pharmaceutical Federation, blamed the shortages on the "Bolivarian" socialist government running national production — by private companies — into the ground, while also lacking the foreign currency to import medicines.

Innovation stops also.  Venezuela has now joined the ranks of Cuba as a country where all cars progressively grow older.  Car manufacturers have closed down their plants.  While there are enough vehicles for now, over time Venezuela, unable to import or build new stock will find itself resembling Havana, where all the models are from the 1950s.

The problem facing American health care reformers is to find some way to lower the cost of ordinary treatments for the majority of patients while still retaining a price unlimited market segment that will support innovation.

The Bridge From Obamacare

POSTED 3 weeks ago BY HEALTH CARE COMPACT

Greg Sargent of the Washington Post, who once believed that the Supreme Court would laugh any challenge to Obamacare subsidies out room now claims that a the Republicans would be ruined by a “big victory”. He reasons that consumers are now so dependent on subsidies that taking them away would be like amputating a leg.

The idea of trying to pass something before any Court ruling seems very far-fetched. But, while it is obviously true that a Court ruling would be a terrible outcome for Democrats, the mere existence of that possibility neatly captures the situation Republicans find themselves in: They openly rooted for a Court decision gutting subsidies. But now they don’t want to sustain political damage from millions losing insurance. So they are floating all manner of contingency plans that would require spending federal money to temporarily cover those millions. But it will anger conservatives if they spend federal money to expand health coverage, because they oppose that in principle and — perhaps worse — it could keep Obamacare going.

Grace Marie Turner, writing in Forbes, counters that Obamacare advocates didn’t mind canceling millions of people’s insurance on the way to making it “better”.  She compares Obamacare to a defective prosthesis that its creators installed in place of what they hacked off.  Of course it’s going to hurt to remove the prosthesis, but -- echoing the Obamacare advocates’ earlier arguments -- it’s gotta be done.  If Obamacare’s creators didn’t care about trashing the previous system, why should Obamacare’s repealers?

First, at least five million people were forced out of health insurance policies that they mostly liked and could afford because those policies no longer complied with the battery of mandates and regulations required by the “Affordable” Care Act.

Second, people are required by law to buy replacement policies. Those who didn’t comply with the individual mandate paid penalties averaging $1,130 this year, according to former CBO director Douglas Holtz-Eakin, now president of the American Action Forum.

Third, the new ObamaCare-compliant policies must provide a long list of health benefits deemed “essential” by the federal government – including free preventive care, maternity coverage, and habilative care. If an insurance carrier participates in the ObamaCare exchanges, policies they offer on the outside must mirror the ObamaCare policies, leaving consumers with few choices.

Everybody’s got a plan for spending the taxpayer’s money because nobody believes he smart enough to spend it for himself.  But the Republicans could actually score lasting political points if it replaced Obamacare with a system that allowed the consumer a little more choice.  Turner writes:

If King prevails before the Supreme Court, the Republican leadership in Congress needs to pass legislation to begin to clean up the mess that ObamaCare has made. To protect the coverage that people are receiving, leaders in the House and Senate have promised to pass legislation that would allow the subsidies to legally continue for an as-yet-undetermined period of time until new options could be available. Then they would free people in the 37 states from ObamaCare’s burdensome mandates and regulation and allow them to purchase more flexible health insurance policies of their choice approved by their states.

This is exactly what Senator Ron Johnson (R-WI) wants to achieve with his Preserving Freedom and Choice in Health Care bill, which has 29 co-sponsors. Johnson’s plan may not emerge as the plan ultimately adopted by the Republicans in Congress.  But it does indicate that a significant number of legislators have thought the problem through and have a distinct improvement over Obamacare in the works.

Other Congressional Republicans have proposed bills. However, Senator Johnson has moved the ball forward in the Senate by gathering 29 co-sponsors. Senator Johnson’s bill does not repeal and replace Obamacare, nor does he claim that it does. It is a bridge, or transition, to a post-Obamacare health reform. This is also necessary because the bill Congress passes in the wake of the Supreme Court stopping tax credits to millions of people must be one the president will sign without too much complaint.

The bill would restore the Obamacare tax credits in the 36 states, but only through August 2017, and only to people who are already enrolled. People who have not yet enrolled would be frozen out of Obamacare (unless they moved to a state with a state-based exchange).

It also repeals the individual and employer mandates to maintain coverage. Further, it eliminates the federal government’s power to define essential health benefits. It also specifies that people with employer-based benefits can maintain those benefits through December 2017.

The bill embraces both individual choice and political reality. Whether President Obama would sign it, under pressure, I cannot say. Nevertheless, a few things would improve the bill without necessarily making it less acceptable to the president.

First, Senator Johnson is right to restore insurance regulation to the states. However, “essential benefits” are not really what is driving up the cost of health insurance in exchanges. The single biggest factor is the age band of 3:1. This means an insurer cannot charge a 64-year old more than three times as much as a 19-year old. A more accurate age band would be about 5:1. Before Obamacare, this regulation was also within states’ power. Section 1201 of Obamacare gives this power to the U.S. Secretary of Health & Human Services, who dictated that it be 3:1. This power should be returned to the states.

Second, the confusion about exchanges is at stake in King vs. Burwell derives from the very existence of government-run exchanges. The government should no more run a health-insurance exchange than the Department of Transportation should run a car dealership. People should be able to buy health insurance from any broker or agent they prefer, in person or online, and claim their tax credit directly from the IRS.

These two items are easy lifts because they simply make the federal government stop what it is doing.

The most significant aspects of Obamacare replacement or bridge plans is that they provide immediate relief for the policy holders. By repealing the mandates and relaxing the requirements and by allowing actuarial realities to operate they will allow more rational products to be created.

But most important, they will return power to the states.  The unstated issue behind King vs Burwell, is the federal power grab that the ACA represents.  It is clearly not impossible, in fact is quite easy to draft an improvement to Obamacare.  That is what the ACA’s supporters fear the most.  Once they claimed the Supreme Court would never hear the challenge.  Now they claim Obamacare cannot be improved without disrupting insurance coverage for millions.  The former proved false.  So too may the latter.

Has Obamacare Empowered Smart Shoppers?

POSTED 3 weeks ago BY HEALTH CARE COMPACT

One of Obamacare’s benefits, according to its supporters, is that it has enabled “smart choices” among its users.  The Daily Kos, for example, lauds the fact that 29% of returning customers avoided the automatic re-enrolment process in favor of making a manual choice.  They call it “shopping for the best insurance deal”.

But as Jason Millman of the Washington Post pointed out, that is making a virtue out of a necessity because anyone who merely lets the program re-enrol will probably face a dramatic premium hike.  People must ‘smart shop’ not to get the ‘best insurance deal’ but to avoid being ruined by premium hikes. Millman writes:

So, here's why shopping around for health insurance becomes especially important. Looking at just the proposed rates for 2015 health plans in nine states, six of those states could see health plans lose their benchmark status in 2015. That means if people stay in those plans, their premium subsidy won't go as far. Of course, these are just proposed rates in just a few states that could still change — but this underscores how the exchange landscape could shift pretty dramatically year-to-year.

What the 29% statistic of the Daily Kos really describes is the percentage of people who dodged the bullet.  It means that 71% of the returning customers probably got a price hike.  John Goodman believed that Obamacare comparison shopping was a feature without a meaning. Writing in late 2014 he said “ideally, people should comparison shop – considering the differences in premiums, subsidies, and networks of the different plans. There’s only one problem. Intelligent comparison shopping is virtually impossible.”

Only two parameters really mattered Goodman argued. A low price and a broad network.  What Obamacare does is present the consumer with a choice of high priced plans and relatively narrow networks.  In that situation “smart shopping” has about as much meaning as gourmet dining in restaurant which only offers mediocre food.

Choosing among health insurance plans would be a herculean task, even for the IBM computer Watson. In addition to considering every illness that might afflict you, Watson, of course, would want to know the probability of you getting each one. It might base that judgment on a computer analysis of your genes. But even with that, Watson would need some metric for comparing doctors. That is, knowing that one doctor is better than another is not enough. We need to know how much better in order to make comparisons over thousands of doctors and thousands of diseases. Unfortunately, no such metric exists.

So instead of doing the kind of analysis that would stump even Watson, what are real world people actually doing? They are making choices based on one or two simple parameters and then they are sticking with that choice – come hell or high water. For example, healthy people are looking only at price. People with a serious health problem are trying to find a network that has a doctor they already trust. And that’s about it.

A recent study by the Kaiser Family Foundation studying consumer healthcare choice patterns appears to confirm Goodman’s surmise. It show that by and large, people find it too difficult to choose health plans on a technical level.  Instead they choose proxy indicators, just as Goodman deduced.  The study, titled “Few Consumers Use Information on Health Provider Quality or Price” said almost nobody looked at “data”, relying instead on “reputation” and “location”.

As the chart above [in the source article] shows, very small percentages of Americans say that they saw quality information comparing hospitals (13%) or doctors (10%) over the past 12 months. Of those who saw such data, the shares who said they used it were tiny: 4% for hospitals and 6% for doctors. Only 6% said they saw comparative price information for hospitals or doctors in the past year and only half as many say they used it.

There are many reasons consumers might not use comparative quality or price information. About eight in 10 people see a health professional each year, but not everyone goes to the hospital in a given year. Reputation and location may still dominate choice of providers. People may have established relationships with doctors and hospitals and may be less or uninterested in quality and price information, especially when a medical crisis calls for urgent decision-making. Some people are not online or are too busy working to compare data. Language barriers may impede some consumers. And pretty much everyone in the health-care sector agrees that the  ”state of the art” in the development of rigorous and reliable quality and price information has a long way to go.

So far, the growth of consumerism in health–with patients going online for medical information and empowering themselves to ask more from their medical providers–has not translated into widespread use of the provider quality and cost information available today. This suggests that employers and insurers may be the primary consumers of quality and cost information for the immediate future. But as cost-sharing grows so will the need for more useful information for consumers on provider quality and prices.

One area in which comparison shopping may be effectively used is in shopping around for specific services, especially when these must be shouldered as a co-payment. Zina Moukheiber of Forbes notes studies show that comparison shopping for laboratory tests and imaging held great potential for savings. Finding a cheap doctor, on the other hand, was much more difficult than finding a cheap x-ray.

Castlight analyzed the medical claims of 502,949 employees at 18 companies between 2010 and 2013. It focused specifically on laboratory tests (such as cholesterol), imaging (MRI, CT scans) and office visits to primary care doctors and specialists. Those who compared prices before receiving care had lower claim payments than those who didn’t: 14% less for lab tests, 13% lower for imaging, and 1% lower for doctor visits. Neeraj Sood, an author of the study, said savings were lower for office visits because price variations were smaller.

The Castlight company is marketing a cloud-based “transparency tool” designed to help people shop for various kinds of services within the parameters of their existing plans, including Obamacare plans.  The benefits of comparison shopping do not come from Obamacare itself -- Goodman seems to be right about that -- but in the context of a given plan. “The fact that employers are willing to pay for information provided by Castlight when their own health plans could provide it for free, is “the most damning indictment of the healthcare market’s opacity,” an article says.

Castlight describes itself as a “cloud-based platform for enterprises to manage their healthcare costs” that integrates many healthcare applications. Among them is its online transparency tool.  Employers can use it to help their employees shop for quality health services and value. The transparency tool is customized to each client employer’s health plan by using the claims data from that employer. ...

The fact that employers are willing to pay for information provided by Castlight when their own health plans could provide it for free, is “the most damning indictment of the healthcare market’s opacity,” stated a report published by Modern Healthcare. “It’s also a measure of the thirst for solutions that lift the veil over what is otherwise known to buyers in other industries–the price of services and products.”

The Covered California Debacle

POSTED 3 weeks ago BY HEALTH CARE COMPACT

The troubles of Covered California have focused attention on the practical aspects of Obamacare delivery.  The questions asked are how honesty and efficiently are health care policies delivered? Not very well in California, it seems. The danger signs, as usual, were red ink. The Orange County Register noted that California’s Obamacare exchange has blown through more than a billion dollars in federal grants and cannot continue to operate at a loss.

After two previous extensions, the open enrollment period for Covered California ends April 30. That deadline just might prove to be the tipping point for the state’s two-year-old health insurance exchange.

That’s because this is the year Covered California is supposed to become completely self-sustaining.

Indeed, there’s no more money coming from Washington after the state exhausts the $1.1 billion it received from the federal government to get the Obamacare exchange up and running. And state law prohibits Sacramento from spending any money to keep the exchange afloat.

That presents an existential crisis for Covered California, which is facing a nearly $80 million budget deficit for its 2015-16 fiscal year. Although the exchange is setting aside $200 million to cover its near-term deficit, Covered California Executive Director Peter Lee acknowledged in December that there are questions about the “long-term sustainability of the organization.”

Part of the problem, as a whistleblower explained, was that many things in Covered California were overpriced -- and the fact kept secret. It is alleged that no-bid contracts went to associates of Peter Lee.

An Associated Press report in 2013 found that millions in no-bid Covered California contracts went to firms with professional ties to agency Executive Director Peter Lee. At the time, a spokesman told AP that Covered California “was under pressure to move fast” to meet tight federal deadlines and “needed specialized skills.” Covered California would not answer our questions about potential conflicts of interest.

AP also found Covered California uniquely positioned to keep its spending details secret—“the most restrictive” among the 16 state exchanges with “authority to conceal spending on contractors performing most of its functions … potentially shielding the public from seeing how hundreds of millions of dollars are spent.”

People working for the organization were told to omit any mention of sensitive subjects from email or anything else that might leave a trail.

Aiden Hill’s introduction to the secretive culture at Covered California came in his first days on the job. He had just been hired to head up the agency’s $120 million call center effort when he emailed a superior April 18, 2013, and got a text message in reply:

Please refrain from writing a lot of draft contract language in government email … And don’t clarify via email … No email.

Later, concerned about contractor performance, Hill conducted an Internet search for “best practices” information to forward a superior. Afterward he got this text:

Aiden—Please stop using government email for your searches.

Efficiencies didn’t matter because after all, they were spending “government” money.  What mattered were enrollment numbers, since Covered California operated like a ‘marketing’ organization that was paid by enrollment volume. That number was increased to the extent possible so that when the federal funds were spent, the organization could pass on the costs of their inefficiencies to the policy holders.

[Whistleblower] Knauss’ once-cheerful blog has turned into a consumer chronicle of Covered California’s tribulations. He says the agency is masking its shortfalls because it is, in essence, a sales organization.

“I know their enrollment numbers aren’t right. They’re marketing themselves [to] generate fees.”

To some degree, state health insurance exchanges are forced to market themselves. After starting up using over a billion federal tax dollars, the law requires them to be self-supporting this year. To do so, Covered California collects commissions.

The agency wouldn’t answer questions on this topic, but previously indicated it planned to charge a 3 percent fee on premiums in 2014 and later hoped to reduce that to 2 percent. Because too few people enrolled, published reports say Covered California could not reduce its 2015 fee, and maintained it at $13.95 per person each month. …

More rate increases are ahead. A recent study found the vast majority of Covered California customers—84 percent—face premium hikes this year.

Covered California never broke even but its losses were concealed by the federal grant.  Only when that money was depleted did the actual situation become apparent.  The only way it can go forward is to charge its members more money.  Ironically, Peter Lee was hired after leading an effort that started with low prices to entice applicants but died when the economics wouldn’t work.

He was CEO at the Pacific Business Group on Health when the coalition pulled the plug on a different attempt six years ago.

Pacific Health Advantage — commonly known at PacAdvantage — cut employer costs in the early years, but was inadequately marketed and failed to enroll more than 5 percent of the small businesses eligible for the program. It died in 2006 after the three remaining health plans pulled out because the numbers weren’t big enough to share risk without higher rates.

One of the problems with Obamacare certain aspects of it are made artificially profitable by the government provision of subsidy. But on the whole it may not be sustainable. Like a flash in the pan it may burn brilliantly for a while have no staying power.  In the case of the recently closed Corinthian Colleges.  It was a for-profit-educational system.  “An Education Department inquiry revealed that Corinthian’s finances were in disastrous disarray. The company, which like other for-profits has seen a decline in enrollment since the end of the recession, had become almost entirely dependent on regular cash infusions from the government’s financial aid programs—$1.4 billion last year, or more than 80 percent of the company’s revenue—to keep the doors open at its 107 campuses.”

Like Obamacare, Corinthian’s educational product was pitched at low-income Americans.  According to California Atty. Gen. Kamala Harris,

The firm goes after "isolated," "impatient" individuals with "low-self-esteem," and who have "few people in their lives who care about them."

Then, according to her lawsuit, it plies these victims with bogus placement statistics and rosters of educational programs it doesn't actually offer. And it charges them premium tuition and fees to boot, often leading to their taking on student debt they can't possibly pay off with the lousy jobs they end up with.

Students were made to get loans, from which Corinthian’s fees were paid and sent off into the world deeply in debt but without any real education to speak of.  The New Republic noted that Corinthian had been saved by the intervention of Governor Jerry Brown, but that eventually it was dragged down by economics.

According to Senate investigators, two-thirds of students who enroll in Corinthian’s associate degree programs each year end up dropping out, as do more than half of all its students at its Everest, Heald, and Wyotech campuses. The median stay for students who withdraw is only three months. These students are typically left in debt without the training they need to get a job in the field in which they sought training.

So it shouldn’t come as a surprise that a large proportion of Corinthian’s students fail to repay their federal loans and end up in default.  … One admissions director told the AG’s office that this was the standard operating procedure at her campus, where, according to Reiter, the typical “admissions representative downplayed or concealed the significance of the employment disclosure by including it in a large stack of documents and saying, ‘just go ahead and sign this.’”

The lesson of Covered California is that a health care program cannot operate at a loss forever.  When those inefficiencies are caused by political networks and covered up by federal handouts the problem can grow to an incredible size before the disaster ultimately brings the system down.  Is Obamacare throwing patients a lifeline? Or is it asking them to stick their heads into a noose?

Bribes, Deals, Coercion and Still No Sale

POSTED 3 weeks ago BY HEALTH CARE COMPACT

Penalties, bribery, backroom deals and coercion are all methods used by the administration to establish Obamacare.  Take penalties. One of the most controversial instruments used by the administration to expand the adoption of the Affordable Care Act is the Individual Mandate, in which Americans have to buy a Obamacare policy to avoid being fined. This threat has driven millions of Americans to participate in the president’s flagship program.

But the stagnation of enrollments has convinced some analysts that this lash does not sting enough.  If Obamacare is to reach its enrollment targets, it has to increase the existing penalties substantially. “A new analysis from Avalere finds that the penalties associated with the individual mandate, which grow in 2015, might be too low to attract enrollment, particularly among middle-income, healthy individuals.”  A consumer who earns enough to exercise choice often simply passes it up.

The more a person earned the greater was the tendency to pay the fine and tell Obamacare to go away.  Caroline Pearson, the Vice President of Avalere notes that “individuals earning more than double the poverty” treat Obamacare like a nuisance:

Monthly health insurance premium costs are significantly greater than the individual mandate penalty for many potential exchange consumers in both 2014 and 2015, even after accounting for tax credit subsidies. However, individuals with incomes at or around the federal poverty level (FPL), $11,670 in 2015, will save money by purchasing insurance as opposed to paying the fine. Some individuals earning up to 200 percent of poverty will also save if they buy insurance, depending on their age and where they live.

“Insurance through exchanges is a good deal for individuals who are heavily subsidized, especially as the individual mandate penalty increases,” said Caroline Pearson, senior vice president at Avalere. “While the incremental cost of insurance becomes less significant as the mandate penalty grows, individuals earning more than double the poverty level may continue to forego coverage since paying the fine is still much more affordable than purchasing insurance.” …

Data released previously by Avalere found exchanges using HealthCare.gov had enrolled 76 percent of eligible individuals in 2015 with incomes between 100 and 150 percent of 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.

When penalties don’t work the administration tries bribes.  Michael Cannon at Forbes says the executive branch is openly bribing Congress by offering it artificially cheap and generous insurance that is unavailable to the general public.

The U.S. Constitution vests the legislative, executive, and judicial powers in separate branches of the government that are supposed to police each other. But what if one of those branches violates the law in a manner that personally benefits the members of another branch? That’s what has been happening since the day ObamaCare became law in 2010. For more than five years, the executive branch has been issuing illegal subsidies that personally benefit the most powerful interest group in the nation’s capital: members of Congress and their staffs. A decision today by the Senate Small Business & Entrepreneurship Committee not to investigate those illegal subsidies shows just how difficult it can be to prevent one branch of the government from corrupting members of another branch.

It’s a temptation that some Republicans have been unable to resist. And having succumbed, they don’t want to admit having done so. “The Senate's Small Business Committee on Thursday denied its chairman’s request to subpoena documents from the D.C. insurance marketplace, which he said would prove that some in Congress evaded ObamaCare rules.”

Sen. David Vitter (R-La.), the head of the committee, was demanding unredacted copies of health insurance applications used by members of Congress to enroll in the small-business exchange. Vitter has claimed that congressional staff falsified documents in order to allow members of Congress and their staff to receive subsidized insurance.

In a surprising vote, five Republicans joined the committee's nine Democrats to oppose the subpoena. That GOP group includes Sen. Mike Enzi (Wyo.), who had previously co-sponsored a bill with Vitter on the issue. Republican Sens. Jim Risch (Idaho), Deb Fischer (Neb.), Rand Paul (Ky.) and Kelly Ayotte (N.H.) also voted against the subpoena.

The biggest “incentive” offered by Obamacare is Medicaid expansion.  Governors which co-operate with the president are handed a large amount of federal money.  The temptation to take it has led some states into adopting contortions.  Governor John Kasich of Ohio, for example, has agreed to take the money provided that he can rebrand the Obamacare Medicaid program, in order to avoid appearing like he is cooperating with the administration.

He is one of the still-rare Republican governors who accepted the Medicaid expansion offered by the Affordable Care Act, after the Supreme Court allowed states to skip it. …

Kasich launched into a comparison between preventative health care and drug treatment. "Look, if we treat the drug addicted, like we do in our prisons, and we get in contact with them outside the prison, we don't think they're gonna be back in prison again," he said. "If you ignore them, the drug dealer's outside the prison waiting for them." This was his way of explaining that shunting money to Ohio was perfectly conservative. "Running our health care system from the top down is not working. We have programs in Ohio called value-based payments, where we say we ought to be working to keep people healthy. There ought to be total transparency in terms of what everything costs. We've done this with Medicaid."

The money might be enough for Kasich, but even the offer of billions of dollars cannot persuade other governors adopt it.  This is where good old fashioned political coercion comes in.  The liberal Vox media outlet looks on in approval as president Obama threatens to cancel other federal programs in Florida without an undertaking that the state will implement Obamacare.  Currently Florida has a targeted program to pay for the care of destitute and very sick patients.  However the president has announced he will suspend it unless they adopt his flagship program.

The White House is playing hardball with Florida: expand health-care coverage under Obamacare, or risk losing billions in federal dollars.

Florida currently receives just over $1.3 billion in federal Medicaid funds to help hospitals that rack up big unpaid bills by treating uninsured patients. Those funds run out on June 30.

For months, Florida and the White House have negotiated the possibility of an extension. But the Obama administration is now threatening to cut off those funds unless the state takes up a key provision of Obamacare that could expand coverage to hundreds of thousands of people in the state.

If the strong-arm tactic works, the White House may have found a model to use again and again to overcome one of the most significant remaining hurdles to Obamacare's goal of universal health-care coverage. That could mean millions more Americans could get covered.

The sheer variety of coercive tactics employed by the administration is a testament to how mediocre the product is. Obamacare has so far failed to win over a majority of consumers despite 5 years of nonstop promotion and or threats of punishment. The press keeps saying that ‘Americans love Obamacare’, but the reality is that the president has left no stone unturned to force people into it.

Bridge Repeal Via Section 1332

POSTED 4 weeks ago BY HEALTH CARE COMPACT

The uncertainty over how the Supreme Court may rule in King vs Burwell has forced many actors in the health insurance industry to consider backup plans.  The administration has made a big show out of publicly announcing they have no ready alternatives in case the Supreme Court strikes down the federal subsidies in states without exchanges. The latest “take it or leave it” signal was sent by IRS Commissioner John Koskinen, who told the Senate  that his agency does “not spend any time thinking” about the issue.

Republican lawmakers, who fear they are being set up as scapegoats if the insurance markets are disrupted by a court ruling are ironically the most active in crafting soft landings. One proposal would simply amend the laws to continue any current subsidies until 2017.

Yet another fallback position is being requested by the insurance industry itself. The American Academy of Actuaries petitioned HHS Secretary Sylvia Burwell to let companies file two sets of rates, one of which would assume the Supreme Court ruled against the subsidies.

When suggesting the secretary consider flexibility in rate filings, one option we initially outlined was that insurers could submit two sets of rates—one that reflects continued availability of premium subsidies in FFM states, and one that assumes subsidies are struck down. While that option was viable in February, it may be too late to implement such an approach because of rate filing deadlines if it has not already been done. Alternatively, we also suggested that insurers could refile rates in FFM states after the court’s ruling, if it strikes the subsidy provision. The secretary could still allow for this approach. As actuaries, our concern was and is driven by the threat of insurer insolvency, since 2016 filings for premium rate approvals have to be filed prior to the court’s ruling, and they may not be adequate to cover claims if their assumptions about subsidies don’t square with the post-ruling reality.

But the biggest danger that the administration’s “take it or leave it” policy invites is from the direction of a little known provision in Obamacare called Section 1332.  Starting in 2017, states will be allowed to modify Obamacare under “including alternatives that would represent a significant departure from the ACA's standards and requirements.”

The Origins of 1332 Waiver Authority. Federal authority allowing states to vary from the requirements of federal health coverage programs isn't new. Many states, for example, are using or have used waiver authority under section 1115 of the Social Security Act to carry out demonstration projects in Medicaid. States have used waivers to expand the use of managed care, cover individuals not otherwise eligible for Medicaid, and obtain federal matching funds for services and activities that Medicaid typically doesn't cover. …

The ACA's 1332 waivers are based on a provision in the Healthy Americans Act, health reform legislation that Senator Ron Wyden, a Democrat, introduced in 2007 and 2009 with then-Senator Robert Bennett, a Republican. Under the final version of section 1332, the HHS Secretary may waive certain ACA provisions dealing with the health insurance marketplaces, the subsidies available through the marketplaces, the requirement for individuals to have coverage or pay a penalty, and the "shared responsibility" requirement for employers with 50 or more full-time-equivalent workers.

This provision allows the States to change Obamacare in ways that the administration is now fighting to keep within the federal prerogatiave. Arkansas’ Governor Asa Hutchinson is planning to use Section 1332 in ways that change Obamacare substantially.  In a manner of speaking, the Section anticipates the desire of states to refuse federal subsidies, or use Medicaid expansion money for other uses, or even use Federal government funds to craft their own programs.  Obamacare is not the sacrosanct program which must be tightly controlled.  It’s own provisions provide for variation on the state level.

Arkansas’ new Surgeon General, Dr. Greg Bledsoe, says the legislative health care task force that begins its work in earnest this next week will be looking at a much wider swath of reform than just the private option. …

Gov. Hutchinson pushed state lawmakers to fund the private option through the end of 2016. The innovative and controversial program has led 230,000 enrollees into health insurance coverage, according to the latest statistics.

Hutchinson also convinced legislators to form a task force to recommend changes by the end of this year for ending the private option program by next year and to design a new marketplace for health care and insurance by the start of 2017.

Bledsoe sits on the 16-member legislative task force that meets Monday to begin that challenge. As a non-voting member, he’ll still be representing the Governor’s interests to the panel.

“I think this is a once in a generational opportunity to do this,” said Bledsoe, who added that a potential special session is “on the table” to ultimately address the task force’s recommendations.

A key reform driver that will quickly come up in discussion for the task force involves a federal waiver known as a 1332 waiver. It allows great flexibility within the Affordable Care Act, also known as Obamacare. In short, 1332 waivers allow states to:

  • Modify or eliminate the Individual Mandate component of the ACA

  • Modify or eliminate the Employer Mandate component of the ACA

  • Modify Benefits or Subsidies

  • Modify or eliminate Marketplaces and Health Plans

Paul Howard of the Manhattan Institute notes that King vs Burwell may actually act as a starting gun for wholesale Section 1332 state initiatives. He writes, “After King v. Burwell, Republicans’ Goal Should Be Federalism on Steroids”.  He suggests that Congress, rather than simply extending the old Obamacare subsidy regime, should create a framework for implementing Section 1332.  That would enable something like the Health Care Compact, or its conceptual equivalent, to sail through a provision in Obamacare itself.

Simple political realities make immediate goals of repeal-replace bills impossible. Instead, Republicans need a “bridge”: A solution to get them through a potential win in King that doesn’t leave Republican governors out to dry, but still allows serious health care reform.

One such bridge could come in the form of the so-called “State Innovation Waivers,” under section 1332 of the law, slated to begin in 2017. This little known element of Obamacare allows states to waive various parts of the law’s requirements including “essential health benefit” standards, requirements for exchanges, premium tax credits, and even the employer and individual mandates. In return, states receive a block grant of funding that would otherwise flow through Obamacare’s mechanisms.

States could combine these waivers and existing Medicaid waivers (so-called “section 1115 waivers”) to receive a block grant of funding that would encompass an even larger population, allowing bigger reforms. (Standardizing the combination of these waivers could appeal to both red and blue states.)

The catch is the administration’s bait-and-switch approach to the Medicaid expansion. While HHS has promised flexibility, very little has been offered so far, making governors hesitant to propose ambitious reforms.

The solution is simple: Congress should write flexibility directly into new legislation. Allow states to experiment with the flexibility of 1332 waivers, requiring “auto-approval” so long as reforms attain similar coverage and remain deficit neutral.

Of course such a framework would not constitute an Interstate Compact itself. But the slow crumbling of Obamacare, despite the administration’s determination not to yield an inch, is slowly producing its nemesis.

The Old Versus Obamacare

POSTED 4 weeks ago BY HEALTH CARE COMPACT

Thomas Edsall of the New York Times has an eye-opening explanation for why Obamacare is failing to gain decisive acceptance, in spite of the billions of dollars being spent to promote it.  He writes that for historical reasons, the elderly were the first recipients of welfare in the United States, through Social Security and Medicare.  By contrast, welfare was paid to people of all ages in Europe.

This historical artifact automatically has automatically put the elderly on a collision course with Obamacare.  Edsall writes that “in the zero-sum competition for federal dollars, the cost of major spending programs like the Affordable Care Act has to be made up by spending cuts elsewhere.”  As pointed out elsewhere, much of the funding for Obamacare comes from cuts to Medicare.

The Obama administration has reported that the Affordable Care Act will be financed in part by $716 billion in Medicare cuts over 10 years. Somewhat improbably, the administration also contends that cuts of this magnitude will not reduce services to Medicare beneficiaries.

The decline in support among the elderly in the United States for redistributive social spending stands in contrast to Britain, Germany, Sweden and Australia where Ashok, Kuziemko and Washington found that older people were more supportive of redistribution than those of working age. In most European countries, health care is guaranteed regardless of age, while in the United States, before the enactment of the Affordable Care Act in 2010, only the elderly were guaranteed health coverage through Medicare.

Obamacare has led, Edsall explains, to the surprising decline in support for redistribution.  He writes, “seniors, a group unique in having guaranteed health insurance during our sample period, may increasingly feel that expansions of redistributive programs could come at their expense.”

Despite its attempts at humor, Brian Beutler at the New Republic only manages to confirm Edsall’s conclusion.  He writes that only old people hate Obamacare and quotes a Kaiser Foundation poll to prove it.

According to the Kaiser Family Foundation, whose tracking poll is a touchstone for measuring public sentiment about Obamacare, the law is under water—barely. Forty one percent of respondents hold favorable views of the ACA, while 43 percent hold unfavorable views. But if you break it out by age cohort, you find that that two percent margin is entirely attributable to people who have aged out of the program.

Among 18- to 64-year-olds—the people who pay for the law, or are eligible for the law’s benefits, or might become eligible for the law’s benefits at some point in the future—Obamacare is breakeven. Forty two percent favorable, versus 42 percent unfavorable. Among those whose opinions we should generally ignore on this issue—old people—it’s a bloodbath. Only 36 percent view the law favorably, while 46 percent view it unfavorably.

Unfortunately for Beutler, everyone who votes -- not just the people who pay taxes -- gets a say in public policy.  And as Thomas Edsall shows, the population is aging at increasing rate.  This means that “those whose opinions we should generally ignore on this issue—old people” are going to become comparatively more numerous as time goes by.

The reason, as Edsall explains, is what Karen Eggleston and Victor Fuchs of Stanford University called the new demographic transition. During the 20th century, improvements in medicine, sanitation and food drastically reduced infant mortality and reduced premature deaths.  But in the 21st century preventable death rates among the young are as low as they can go.  The result is that gains in years of life added are concentrated among the old.  People are living longer. And that means people who hate Obamacare will become ever more numerous.

At the beginning of the twentieth century, in the United States and other countries at comparable stages of development, most of the additional years of life were realized in youth and working ages; and less than 20 percent was realized after age 65. Now, more than  75 percent of the gains in life expectancy are realized after 65—and that share is approaching 100 percent asymptotically. The choice of age 65 to illustrate this new demographic transition is somewhat arbitrary, but if we used 60 or 70 instead, the results would be qualitatively similar. ...

When the gains in life expectancy occur mainly towards the end of life, they contribute more to the age bracket that is traditionally mostly retired rather than to the age bracket in prime working years. Retirees are highly dependent on transfers from the working population for living expenses, including large consumption of medical care.

This is already affecting Democratic strategy.  They have been forced to restore funding to Medicare, through the massive “doc fix” which raises the pay of doctors serving that program.  Fighting the old is politically very expensive.  Edsall writes:

Eighty-two percent of voters support maintaining Social Security payments even if it means raising taxes, according to the National Academy of Social Insurance. More than two-thirds of poll respondents favor raising the $118,500 cap on income subject to Social Security taxation.

According to The New England Journal of Medicine, if a candidate were to call for cutting Medicare benefits, 58 percent of voters would most likely vote against him while only 12 percent would be more likely to vote for him.

On March 27, 46 Democratic senators voted for an amendment to increase and expand the scope of Social Security.

In the zero-sum game of public dollars increases for Medicare and Social Security mean cuts to Obamacare.  Dr. Ezekiel Emmanuel, one of the architects of the ACA is well aware of the fact that increasing American lifespans will doom Obamacare in the long run.  In an October, 2014 edition of the Atlantic, Emmanuel wrote an article entitled, “Why I Hope to Die at 75: An argument that society and families—and you—will be better off if nature takes its course swiftly and promptly”.

Americans seem to be obsessed with exercising, doing mental puzzles, consuming various juice and protein concoctions, sticking to strict diets, and popping vitamins and supplements, all in a valiant effort to cheat death and prolong life as long as possible. This has become so pervasive that it now defines a cultural type: what I call the American immortal.

I reject this aspiration. I think this manic desperation to endlessly extend life is misguided and potentially destructive. For many reasons, 75 is a pretty good age to aim to stop. …

What are those reasons? Let’s begin with demography. We are growing old, and our older years are not of high quality.  … But as life has gotten longer, has it gotten healthier? Is 70 the new 50?

Emmanuel invokes what is probably the most dangerous argument in civilization. He draws a chart showing that the old are useless. “Moreover, we need to ask how much of what “Old Thinkers,” as Harvey C. Lehman called them in his 1953 Age and Achievement, produce is novel rather than reiterative and repetitive of previous ideas. The age-creativity curve—especially the decline—endures across cultures and throughout history, suggesting some deep underlying biological determinism probably related to brain plasticity.”

Yes, and Soylent Green is people. At heart Emmanuel’s objections  are economic.  In a world without resource limits society will try to solve the aging process -- and the age-creativity “problem”.  Only because tax dollars are limited should we aim to live to 75.  If the population keeps aging, then Obamacare must compete with Medicare for those dollars -- and lose.

Taxes, Innovation and Prices

POSTED one month ago BY HEALTH CARE COMPACT

Behind every Obamacare tax credit is a tax.  That is unavoidable, because the money must come from somewhere. The biggest of its many taxes, the one on employer insurance, is now being phased in. It’s designed to kill company provided health care.  As Robert Wood writes in Forbes, the claim that you could “keep your insurance” was always a lie.

In 2010, House Speaker Nancy Pelosi urged passage of Obamacare so we could find out what’s in it. We found many new taxes, but in 2010, few worried about the Cadillac tax that was delayed until 2018. Besides, it would apply only to truly rich plans for the most elite. The numbers no longer seem so elite.

The tax applies to individual health plans worth more than $10,200 and family plans worth more than $27,500. They are hit with a whopping 40% excise tax. Former Obamacare adviser Jonathan Gruber gloated that rising medical costs would ensure that the Cadillac tax would all but eliminate tax deductible company provided health insurance. Mr. Gruber even said President Obama was in the room when the Cadillac tax lie was created.

Obamacare supporters might argue it was a lie in a good cause because after all, isn’t the “Cadillac” tax and impost on the rich to give to the poor?  Wouldn’t Robin Hood approve?  But the problem as many analysts have noted, is that since the tax applies to plans costing more than a fixed amount ($10,200 for individuals and $27,500 for families) inflation will ensure that in a few years, every employer plan will pass the Cadillac threshold.

Even plans that are not hit by the 40% tax in 2018 soon could be. After all, the Cadillac tax is linked to the consumer price index plus 1%. Medical and insurance costs are growing far faster, so more and more plans will be hit with the 40% each year. A survey by Mercer anticipates that one-third of employers will be hit by the tax in 2018, growing to 60% by 2022. It could be worse still.

And this is just want we know so far. It could be far worse. The IRS has already showcased how incredibly complex this tax will be, setting out approaches to the excise tax. Of all the taxes in the ironically named Affordable Care Act, none is more onerous, a whopping 40% on top of all other federal taxes. It is an excise tax, one of the most dreaded taxes there is. It sounds as if it taxes overly generous employer-provided health care plans for executives. …

In a very few years, the “Cadillac tax” will be a tax on all employer provided health benefits. The net effect, as Wood writes, is to reduce the total American consumption of health care.  Consumers use less of anything that is taxed because it costs more.

A reasonable response to the Cadillac tax is likely to be cutting of health insurance. Less generous coverage will presumably be provided. In large part, the result is likely to higher costs for employees, higher deductibles, and other add-ons that will harm employees. Doesn’t that go directly contrary to what proponents of the Affordable Care Act–including the President–represented? Like your plan, keep your plan?

But Obamacare advocates have an answer to that criticism too.  By giving consumers high deductibles and widening the gap between what the skimpy Obamacare policies cover and what treatment costs, it forces patients to make ‘smarter choices’.   Teresa Wang of Rock Health makes a virtue out of a necessity.

Being insured comes at a price—and it looks like individual consumers will be paying it. In 2013, out-of-pocket expenses grew 3.2% to account for 12% of national health spending, and this number is only expected to continue to rise with the abundance of high deductible health plans (HDHPs). Eighty-five percent of enrollees from the individual marketplace selected a HDHP. Individual plans with a deductible of at least $1,250 or a family policy with a deductible of at least $2,500 are considered HDHPs. This means an individual consumer is responsible for paying $1,250 out-of-pocket before insurance coverage kicks in. Given this cost sharing, there has been a significant change in purchasing behavior. Over 50% of the individuals who purchased insurance on Healthcare.gov this past year “shopped” around before purchasing their health insurance plan. Individuals are no longer passively receiving treatment and information from the healthcare system, and instead are incentivized to become actively engaged in decision-making processes. This may be a scary change for many patients, but the shift creates much needed tailwind to push healthcare up with the rest of the consumer-facing industries.

As individuals become accustomed to being responsible for out-of-pocket healthcare expenses, digital health companies can take advantage of the trend towards consumerism to educate and empower patients to make smarter purchasing decisions.

Wang’s argument may sound perverse, but it is entirely logical. “Being insured comes at a price” because Obamacare leaves the patient short of the actual amount needed to pay the bill.  What it does, says Wang, is create business opportunities for those who offer comparison shopping services.  For all of its socialistic architecture, Obamacare leaves one window partially open to market forces.  The market for gap services that Obamacare won’t pay for. The LA Times describes how lucky patients are now that they have to shop for bargains.

When Vicki Burns was told she needed total hip replacement surgery in 2012 she asked her local hospital for a cash price. She got a $79,000 estimate for the surgery.

A doctor advised her to research the fee that the hospital accepts from Medicare and use that as a starting point. Her husband gathered the data and tried to negotiate.

"They wouldn't even talk to him about it," she recalls.

Desperate for an alternative, the New Mexico couple took to the Internet and found a Tennessee website they liked called MediBid. For $4.95 a month or $25 for a year of unlimited requests, patients can post the medical services they need, and doctors bid for their business.

"I felt a little like I had been put on EBay or Craigslist," Burns says. "Within two days, I had two quotes." …

With rising out-of-pocket expenses, patients are increasingly demanding information about price and quality that historically has been unavailable.

Entrepreneurs, states and employers now offer such tools. A number of newly formed coalitions made up of insurers, pharmaceutical companies and other industry insiders are also vowing to push for the release of price information long held as trade secrets.

The whole purpose of Obamacare was always twofold. First, it was to make medicine more expensive for those with insurance thereby reducing demand; and second to tax people with employer insurance and transfer it to those who purchased it from Obamacare exchanges or received it through Medicaid expansion.  That met the income redistribution goals of the administration.

In a perverse way they believed it would also make the system more efficient. By increasing out of pocket expenses, Obamacare forces people who already have insurance to shop for gap services their plans won’t pay for.

Obamacare creates a two tier system.  On the one hand it fosters the rise of monopolies, as Marty Makary writes in the Wall Street Journal.  This part of the Obamacare reduces competition, which raises the “charge-master” costs.  That in turn “this translates into higher health-insurance deductibles and copays for insured Americans, and in the case of Medicare and Medicaid, higher taxes” which leaves everyone with less money, forcing them to make “smarter purchasing decisions”. What’s not to like?

During the 2008 financial crisis, “too big to fail” became a familiar phrase in the U.S. financial system. Now the U.S. health-care system is heading down the same path with a record number of hospital mergers and acquisitions—95 last year—some creating regional monopolies that, as in all monopolies, will likely result in higher prices from decreased competition.

Hospital consolidation, done properly in a competitive marketplace, can have positive effects. Multi-hospital conglomerates can quickly disseminate best practices and quality initiatives, for example. But competition and the choices it provides can also disappear.

Health-care conglomeration aligns with the Affordable Care Act, which created incentives for physicians and hospitals to work together in “accountable care organizations.” But an important and often forgotten prerequisite for this model is hospital competition.

Some see the dangers. In a rare move, Massachusetts Superior Court Judge Janet Sanders recently blocked Partners HealthCare—Harvard’s affiliated 10-hospital conglomerate and Massachusetts’ largest private employer—from acquiring three competitor hospitals. Judge Sanders argued that the expansion “would cement Partners’ already strong position in the health-care market and give it the ability, because of this market muscle, to exact higher prices.” This threat is even greater in rural areas where one hospital is often the only provider.

Today’s frenzy of hospital mergers and physician practice acquisitions is giving hospital systems even greater leverage to inflate opaque “charge-master” medical bills that even hospitals are sometimes unable to itemize sensibly. With no mechanism to allow free-market forces to keep prices in check, this translates into higher health-insurance deductibles and copays for insured Americans, and in the case of Medicare and Medicaid, higher taxes.

Viewed in this context, the competition “fostered” by leaving patients with no money has a significant downside.  While it may promote innovation at the margins it may stifle creativity at the core of health care delivery. Makary notes that consolidation is turning oncology into a chain-store franchise.

The Affordable Care Act did not repeal antitrust laws. The Federal Trade Commission prevailed in three litigated hospital mergers in the last three years, and in 2014 it won its first-ever litigated case challenging a health-system acquisition of a physician group. But these victories are few. The great majority of mergers occur with little if any public debate about how they will affect prices or patients.

U.S. Oncology, for example, boasts more than 1,000 oncologists in its network and serves nearly 20% of all U.S. cancer patients. In 2010 it was acquired by McKesson Corp., one of the largest U.S. drug distributors, in what some called a savvy move to get cancer doctors and the drugs they prescribe under the same roof. Specialty hospitals are also sprouting around the country, even franchising, exemplified by the rapid spread of the MD Anderson Cancer Center, which aims to have a center within three hours of every American. But is it wise to have one corporation in charge of cancer care for an entire state or region?

Advocates say such expansion brings standardized care and clinical trials to more of the population, but it also results in an undeniable homogenization that may limit options for patients. If management decides that its doctors can only use one chemo drug for a particular cancer, or if the central leadership elects to not adopt a new surgical technology system-wide, will patients be told about the other options?

The “standardized care” and “evidence based medicine” favored by Obamacare are close synonyms for formulaic medicine which are at the heart of value-based payments.  While this sort of of Tumors-R-Us approach can make delivering medicine to the public more economical, it also has a downside.  

The worst of all possible worlds, as Megan McArdle says in Bloomberg, is that Obamacare might create high cost standardized medicine, like fast food at Michelin 3 star prices. The high prices are already there. McArdle sees no evidence that Obamacare has made health care the slightest bit cheaper.

It was a sure bet that if health-care costs fell after the Affordable Care Act was passed, we’d see people writing articles about how the law had finally gotten health-care costs under control. And so it has come to pass, and so a number of readers have written me to ask whether this is actually true.

The short answer is that I’m far from convinced. For one thing, people seem to be awfully light on probable mechanisms, other than some changes to Medicare, some of which are still in the future, and none of which seems big enough to account for the decrease in cost growth. For another, when you look at the recent history of U.S. health-care spending, you see that the rate of growth started to moderate more than a decade ago.

But if the high costs are spent delivering standardized and “proven treatments” then innovation will not necessarily be encouraged. Unless there’s a selective demand for leading edge treatments is preserved standardized treatments will tend to purchase more of the same.  McArdle gives an actual example of innovation that probably relies upon initially high prices.

It might mean fewer health-improving, life-extending innovations, which is great for the bean counters but not so great for us fragile humans who would like to live longer, healthier lives. Even for the bean counters, it also presents a risk: that technological innovation will start to speed up again.

Here’s a good example of what I mean:

The 49-year-old woman had had three melanoma growths removed from her skin, but now the disease was spreading further. A several-centimeter-sized growth under her left breast went deep into her chest wall. Some of the tissue in the tumor was dying because of lack of blood flow.

Doctors at Memorial Sloan Kettering Cancer Center offered her an experimental combination of two drugs: Opdivo and Yervoy, both manufactured by Bristol-Myers Squibb, both among a vanguard of new medicines that boost the immune system to attack tumors. Three weeks later she came back for her second dose.

“She didn’t say anything and when I examined her, I said, ‘Wait a minute!’” says Paul Chapman, the doctor who was treating her. “She said,  ‘Yeah, it kind of just dissolved.’”

Bristol-Myers Squibb just announced that it was stopping a trial for Opdivo against non-squamous non-small-cell lung cancer -- because the drug was working so well that it was unethical to keep it from the control group. These are about the happiest words an oncologist ever hears. The drug does have some nasty side effects, but then so does advanced metastatic cancer; most patients will be willing to make the trade for these sorts of spectacular results.

Obamacare may reward pharmaceutical companies through volume purchases and yet stifle the pathways of innovation. The Wall Street Journal portrays the deal between big pharma and Obamacare as support for Obamacare in exchange for an undertaking not to interfere with drug development, trademarks, intellectual property and pricing.

Wow, the breakup between President Obama and his former corporate health-care partners must have been bad. The deal he cut with the pharmaceutical industry to pass ObamaCare didn’t even last as long as his Presidency. We can’t wait for the memoir.

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.

The White House wants to cut intellectual-property shelters for biologic therapies to seven years from 12, and to slash payment rates for hospital-administered medicines. Mandatory Medicaid “rebates”—which require drug makers to offer governments discounts from average drug prices—would be exported into the Medicare prescription benefit.

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.

Big pharma was double-crossed, something which it probably had coming.  The WSJ writes, with considerable schadenfreude that there is honor among thieves.

The crack political geniuses who should have seen all this coming—as their critics predicted—are Billy Tauzin, the Louisiana Democrat turned Republican turned chief pharma lobbyist, and Jeff Kindler,Pfizer’s then CEO. Both were ousted from their jobs in 2010 by the remaining capitalists on their corporate boards, though not before Mr. Tauzin that year banked $11.6 million in compensation that made him the highest-paid K Street man in the health debate. Four of the other five major pharma CEOs who participated in the White House negotiations have since resigned or retired.

In this double-cross lies a warning for the next CEOs and lobbyists who are deluded enough to trust Washington liberals. The mistake was letting the White House divide business by pitting one industry against another. Everyone still got devoured eventually. Business does better when it unites to fight destructive legislation.

It’s tempting to say the drug makers deserve their fate, except that the ultimate costs of their folly will be born by Americans who won’t enjoy the longer lives, fewer hospitalizations and less suffering that new therapies can bring.

But the ultimate victims are not the K Street lobbyists but the average worker.  In a few short years the American worker has seen his employer provided benefits taxed (“Cadillac”) and the premiums simultaneously rise.  He is now being insultingly exhorted to engage  “smart purchasing” decisions to eke out his remaining funds.  This, while hospital monopolies have grown to the point where anti-trust suits are being filed against the most egregious violators.  The population faces a slowdown in innovation as “proven” treatments are emphasized.

And the consumer is ironically being encouraged to thank Obamacare.  There’s a joke in it somewhere, but it is probably on the consumer as well.

As Far As It Goes

POSTED one month ago BY HEALTH CARE COMPACT

Underneath the outward triumphalism of Obamacare is a deep worry.  The signup campaign has hit a hard wall.   Six million eligible customers who have been threatened with penalties for not signing up sooner are staying away.  Newsmax reports that only “68,000 people have signed up for Obamacare during an extra enrollment period tacked on two months ago – a tiny fraction of the estimated 6 million who face a higher fine for going without coverage, The Hill reports.”

When the special period began in February, Jason Millman at the Washington Post wrote “millions more will now have extra time to sign up for Obamacare”.  Millions turned out to be 68,000.  Even then the administration must have sensed they were scraping the bottom of the barrel.

Administration officials said they didn't have any projections for how many people will sign up during this special enrollment period. "Our intention in doing this is not to increase numbers for numbers' sake," said Andy Slavitt, principal deputy administrator for the Centers for Medicare and Medicaid Services, the agency overseeing HealthCare.gov. "If there were people who were unaware of the fee, this is the way they become aware.

If Covered California can be regarded a microcosm of Obamacare, the reasons for the reluctance to sign up may be more easily understood.  Covered California has increased its enrolment by “a scant 1 percent increase over last year”.

“It’s a tiny fraction of the growth they were expecting,” says an official who helped implement the Affordable Care Act and examined California’s numbers.

As recently as last fall, the official says, California hoped to increase enrollment by 500,000 this year. But only an additional 7,098 have “selected a plan” for 2015.

“Their total enrollment is a step in the right direction but nowhere near what anyone thought it would be for the largest state in the country.” …

Another telling statistic is Covered California’s poor retention rate. Even though people are required by law to have health insurance, only 65 percent of Covered California’s 2014 customers reenrolled in 2015. The rest dropped off.

As Sally Pipes, President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute, points out Obamacare has admitted it is hitting a wall, in contrast to private insurance exchanges which are booming because the offering is better.

In March, Starwood Hotels said it would shift its 26,500 employees to a private exchange run by Towers Watson. IBM and Time Warner have done the same for their retirees. Employees at Walgreens, Sears, and Darden Restaurants also shop for their coverage in private exchanges.

Private exchange enrollment has reached 6 million customers — twice last year’s figure. Consulting firm Accenture expects it to double again in 2016 and reach 40 million by 2018.

By contrast, the Congressional Budget Office has repeatedly reduced its enrollment projections for Obamacare.

In March 2011, the agency forecast that the law would enroll 34 million people by 2021. This January, the CBO updated that estimate to 27 million people by 2025. Two months later, it revised that number to 25 million.”  

The general fate of Obamacare is beginning to parallel that of Covered California.  Avalere, which has studied Obamacare re-enrolments found that “Federally-facilitated exchange states reenrolled 78 percent of their 2014 enrollees in 2015, on average. In state-run exchange states , that percentage drops to 69 percent of 2014 enrollees. California, the state with the highest enrollment in 2014, only retained 65 percent of their 2014 enrollees”.  The slowdown has been noted by analysts, but few explanations have been convincingly offered.

"This is cause for concern," said Dan Mendelson, CEO of the Avalere Health Consultancy. "It marks a slowing of enrollment, although one we had anticipated in our modeling and expectations. States and the federal government need to invest significant resources to get the next tranche of exchange enrollment, and it isn't happening fast enough."

Chris Jacobs of the Wall Street Journal thinks he knows what Obamacare’s problem is: cost. “Has the effort peaked to sign up uninsured Americans for coverage? The announcement that the nonprofit organization Enroll America is laying off staff and redirecting its focus in the face of funding cuts comes amid inconsistent sign-ups during the second Affordable Care Act open-enrollment period and concerns about affordability.”

A recent New York Times analysis compared Kaiser Family Foundation estimates of potential enrollees with sign-up data from the Department of Health and Human Services. While some states that signed up few people in 2014 recovered during the 2015 open enrollment, other states lagged: “California, the state with the most enrollments in 2014, increased them by only one percentage point this year, despite a big investment in outreach. New York improved by only two percentage points. Washington’s rates are unchanged.”

Most states could not post consistent gains in both open-enrollment periods. An official from Avalere Health, a consulting firm, told the Times that she was “starting to wonder if we’ve overestimated the whole thing.”

A recent analysis from Avalere Health demonstrates why the enrollment push may have peaked. The percentage of eligible Americans signing up drops off significantly as income rises and federal subsidies phase out, suggesting that absent subsidies Americans find the exchange insurance products unaffordable or of little value. And if the carrot of federal subsidies has not resulted in expected enrollment, the stick—the mandate to purchase insurance—seems even less effective: The special open-enrollment period to accompany this year’s tax-filing season has resulted in 36,000 sign-ups in the 37 states using HealthCare.gov. But 4 million to 6 million people are expected to pay the mandate tax.

One possible reason Obamacare signups drop off as income rises is that when people can spend their own money (as opposed to buying a designated subsidized product) they choose something else. As Sally Pipes pointed out, consumers appear to prefer products offered on private insurance exchanges when they have a choice.  Jacobs writes:

The Congressional Budget Office (CBO) estimates that ACA enrollment will average 11 million individuals, with 8 million receiving subsidies. So far, enrollees reporting incomes above the threshold for subsidies are only 2% of uninsured individuals who have signed up, making it hard to see how the administration can reach CBO’s estimate of 6 million unsubsidized exchange enrollees in 2016. The fact that California, New York, and Washington state achieved only marginal enrollment improvements from 2014 to 2015 does not bode well for achieving CBO’s target of 15 million subsidized enrollees next year—a more than 50% increase from the 9.9 million individuals who qualified for subsidies in 2015.

The slowdown suggests that Obamacare has saturated the market which can be satisfied with its product.  The enormous amounts it has spent on promoting ACA policies are now at the point of diminishing returns.  It either improves the product (by offering cheaper insurance with wider networks) or accepts that this is as far as it goes.

Where Has All The Money Gone?

POSTED one month ago BY HEALTH CARE COMPACT

Thomas Edsall, a veteran journalist and academic at Columbia University, describes an interesting study published by two economists.  Obamacare has disillusioned the public on government-provided health care.  “With the advent of the Affordable Care Act, the share of Americans convinced that health care is a right shrank from a majority to a minority.”

Emmanuel Saez, an economics professor at Berkeley and one of the nation’s premier experts on inequality, is a co-author of a study that confirms this trend, which has been developing over the last four decades. A separate study, “The Structure of Inequality and Americans’ Attitudes Toward Redistribution,” found that as inequality increases, so does ideological conservatism in the electorate.

The erosion of the belief in health care as a government-protected right is perhaps the most dramatic reflection of these trends. In 2006, by a margin of more than two to one, 69-28, those surveyed by Gallup said that the federal government should guarantee health care coverage for all citizens of the United States. By late 2014, however, Gallup found that this percentage had fallen 24 points to 45 percent, while the percentage of respondents who said health care is not a federal responsibility nearly doubled to 52 percent.

This is counterintuitive, as Edsall himself points out.  Why should increasing income inequality sour the electorate on liberal policies?  Yet that is what the surveys show.

The author of the paper, Matthew Luttig, a Ph.D. candidate in political science at the University of Minnesota, found that while “numerous political theorists suggest that rising inequality and the shift in the distribution of income to those at the top should lead to increasing support for liberal policies,” in practice, “rising inequality in the United States has largely promoted ideological conservatism.”

One possible explanation is that the less money the voters have in their pockets, the less willing they are to support social programs which must be paid for by taxes.  What Obamacare has done is force people to buy insurance, through the individual mandate.  Moreover, this insurance has been rising in cost, reducing disposable income.  Obamacare has made Americans financially poorer just as it has made health care providers financially richer.  The effect has been to reduce enthusiasm for Obamacare, which the Gallup poll has measured.

CNN Money noted in late March that “Americans just aren't spending”. “The government reported Monday that personal consumption expenditures -- aka consumer spending -- rose just 0.1% in February. That follows two months of declines of 0.2%.”  The article conjectured that Americans must be saving, trying to replenish their bank accounts.

The problem was that Americans weren’t saving either.  Another CNN Money article of the same date reported, “roughly half of Americans are saving 5% or less of their incomes, including 18% that are not saving anything, according to a survey from Bankrate. Only about a quarter of people are saving more than 10% of their earnings.”

In mid-April, A. Gary Shilling, a New Jersey consultant writing in Bloomberg was asking “Where Have All the Consumers Gone?”  What was soaking up all the money?

Retail sales rose less than expected in March after declining for three consecutive months. Since the U.S. began collecting data in 1967, only twice has it seen three-month stretches of waning retail sales in non-recessionary times.

This is puzzling. Why would consumers spend less as the economy picks up steam? And why haven't consumers gone shopping with the one percent extra income that collapsing oil prices have handed them?

Shillings theory is that many more people had been pushed into low wage jobs and part time employment than had been heretofore realized.  One of the reasons for the shift to part time employment might have been Obamacare.  The smaller paychecks would reflect the shifting of health costs from employer health plans to employees.

What’s holding consumers back? Many economists blame severe winter weather, the usual scapegoat for disappointing retail sales. Yet according to the U.S. Commerce Department, people stuck at home didn't order heavily online, either.  

One explanation for consumer hesitancy came in March’s payrolls report, which showed that employers created an anemic 126,000 jobs. The preceding 11-month average had been a much higher 284,000 new jobs. Most of them, however, are in low-paying sectors such as retail trade and leisure & hospitality, rather than high-paying manufacturing, utilities and information technology. Also, recent layoffs in the energy sector are of mostly well-compensated workers.

Another reason consumers aren't opening their pocketbooks is that U.S. businesses are still cutting costs, and ultimately most costs are for labor compensation. With slow economic growth and almost no inflation, revenue growth has been limited. The robust dollar has made it hard for U.S. multinational companies to generate profits now that overseas corporate earnings translate into fewer greenbacks.

What's more, many employers are opting to hire part-time workers who can be paid less than full-timers and don't have to receive benefits. The net effect of these forces is essentially flat real wages and median incomes.

One tantalizing study by Deloitte in late 2014 suggested that the government economists had grossly underestimated what consumers spent on out-of-pocket health care costs by about $672 billion in 2012.  Insurance wasn’t picking up anywhere near the full cost of getting sick.  The study noted that “OOP expenses for health care account for almost twice as much as spending on new motor vehicles.”

Even though more consumers are gaining health insurance coverage, they are by no means insulated from the burden of health care costs. Consumers are paying more of their health plan premiums and experiencing higher out-of-pocket (OOP) cost-sharing for all types of health care services. Moreover, government estimates of health care spending do not take into account discretionary consumer spending on a number of products and services; Deloitte’s Hidden Costs Analysis shows these purchases add considerably to the total.

Government data shows rising OOP spending for consumers, but excludes some types of health-related items and services that can add significantly to the total amount and consumer share of spending.  … these “hidden costs” … account for almost one-fifth of total health care spending. …

About 65 percent of people obtaining coverage through marketplaces chose a Silver plan, which has actuarial value of 70 percent, meaning these members will have to pay the remaining 30 percent OOP in the form of co-insurance, deductibles, and co-payments. According to  a May 2014 Milliman report, members with a Silver plan will have 38 percent higher OOP costs compared with people who have employer coverage. The average deductible amount for a Silver plan is $2,907 for an individual enrollee and $6,078 for a family. This compares with  average deductibles of $1,135 for an individual and $4,079 for families with employer coverage in 2013.

Many people obtaining coverage through marketplaces are low income, so they are likely to be challenged by high health care costs at the point of service. Overall, eight in 10 enrollees will likely seek federal financial assistance in premium payments, which raises the question of whether they will be able to pay the OOP requirements for expensive health care when they need it. If not, they may forgo care; get care but not pay for the cost-sharing (leaving providers to try to collect the difference); or use other strategies from when they didn’t have coverage.

The under-measured out of pocket costs could be where the money has gone. The reason why consumer spending is flat is because there’s no money left over after paying for Obamacare, the individual mandate, the tax repayment  and above all, the out-of-pocket costs.

It would also explain why Obamacare remains so unpopular.  The government thinks it’s a steal, and it is.  But its the taxpayers who are getting robbed.

Florida vs HHS

POSTED one month ago BY HEALTH CARE COMPACT

The dispute between Florida Gov. Rick Scott and the White House over its reluctance to expand Medicaid in that state took a dramatic turn when the governor announced “he is suing the Obama administration as part of an escalating dispute over whether the state will expand Medicaid under ObamaCare”.  Scott accuses the administration of withholding money in order to force it to adopt Medicaid expansion under Obamacare, which he refuses to do.

Scott is objecting to the Obama administration linking the extension of separate federal money to help hospitals in the state care for the uninsured, known as the Low Income Pool (LIP), to the state’s decision on whether to expand Medicaid under the Affordable Care Act.

The Obama administration says the LIP funding will not be renewed in its current form after June. It says that the future of the program is "linked" to the decision to expand Medicaid, though it stops short of saying it is entirely dependent on it. Scott, on the other hand, wants the LIP funding but does not want to expand Medicaid.

In other words, unless Florida bows to the president’s will, it will not receive federal money promised it earlier. Scott is not only accusing the administration of coercion, but is also suggesting the administration is interfering with the legitimate prerogative of the states to chart their own course, citing a Supreme Court decision saying that states are free to choose.

Scott argues that the Obama administration’s linkage of the LIP funding to the Medicaid decision violates the U.S. Supreme Court’s ObamaCare ruling in 2012. In that case, NFIB v. Sebelius, the court gave states a choice on whether to expand Medicaid, arguing the federal government could not coerce states into it.

“The Court ruled that the President could not use ‘gun to the head’ approaches in pushing for Medicaid expansion,” Scott said.

The Obama administration made explicit the linkage of the LIP funding to the Medicaid decision in a Tuesday letter from the Centers for Medicare and Medicaid Services (CMS).

“Medicaid expansion would reduce uncompensated care in the state, and therefore have an impact on the LIP, which is why the state’s expansion status is an important consideration in our approach regarding extending the LIP beyond June,” Vikki Wachino, a CMS official, wrote in the letter to Florida.

The governor of Florida’s citation of NFIB vs Sebelius may be particularly significant, because that decision is now being cited in connection with the critical King vs Burwell case pending before the US Supreme Court.  Only last month, Scott Pruitt, the attorney general of Oklahoma, argued that withholding tax credits from insurance buyers in states which did not establish insurance exchanges was far less coercive than mandating Medicaid expansion.

In the hours since oral arguments, much of the talk has centered around Justice Anthony Kennedy’s suggestion that “from the standpoint of the dynamics of Federalism . . . there is something very powerful to the point that if [the challenger’s] argument is accepted, the States are being told either create your own Exchange, or we’ll send your insurance market into a death spiral.”

In other words, Justice Kennedy was asking, if Congress did in fact condition ObamaCare’s tax credits on a state having set up an exchange, does that amount to an unconstitutional coercion of the states? In short: no.

First, in the last ObamaCare case, NFIB v. Sebelius (2012), the Supreme Court said a statute is coercive only if it amounts to “a gun to the head” that “leaves the States with no real option but to acquiesce.” Here, we know that states had an option not to acquiesce in establishing health-care exchanges because they did not, as a matter of fact, acquiesce. Compare and contrast this with the Medicaid expansion at issue in NFIB v. Sebelius, where no state had refused the expansion, precisely because it was so coercive.

There is no merit to the argument that the states were unaware of the consequences of refusing to establish an exchange. Oklahoma, for example, where I am attorney general, sued the Internal Revenue Service months before making its decision to decline to set up an exchange, arguing that the ObamaCare tax credits and subsidies could not be given in Oklahoma. Oklahoma knew the consequences of its decision but was not coerced into cooperating with implementation of the Affordable Care Act.

Pruitt argues that the states knew up front that they might have to forgo tax credits and chose to do so with open eyes.  By contrast, Scott is asserting that Obama was rewriting rules after the fact to achieve a desired political outcome.  There was something of the same approach even in the state exchanges, according to the Competitive Enterprise Institute.

HHS moved quickly after the law was passed to help state governments develop the tax credit calculators needed to make tax credits available through state-based exchanges. Meanwhile, for nearly two years, it developed its own HealthCare.gov website without any effort to offer tax credits on the federal exchange or to develop a tax credit calculator for its site.

It was only after many states appeared to be leaning against setting up exchanges that the Obama administration changed course and began claiming that the Affordable Care Act allows tax credits for both state and federally facilitated exchanges. Only then did HHS begin developing a tax credit calculator for HealthCare.gov.

But as the deadline for states to set up their own exchanges drew near, they still needed a determination as to whether their residents would receive tax credits through federally facilitated exchanges if the states did not set up their own exchanges. This led to a standoff, as states did not want to decide whether to set up exchanges until they knew HHS’ decision, while HHS did not want to decide the federal exchange subsidy issue until it knew the states’ decisions. It was against this background that in January 2012 the seven states wrote to HHS, requesting a formal opinion on federal exchange tax credits.

What seems incontrovertible is that the administration is willing to use every tool at its disposal to pressure the states into adopting Obamacare, whether this takes the form of offering tax credits or withholding Low Income Pool funds.  Obamacare has relied on coercion for most of its successes: the individual mandate, the employer mandate, the insurance exchange subsidies and now, in Florida, by conditioning the release of some funds on the adoption of Medicaid expansion.

Closing The Gap

POSTED one month ago BY HEALTH CARE COMPACT

Despite the apparent confidence shown by the administration’s press releases on Obamacare, the program has never been in greater danger of collapse.  Greg Sargent of the Washington Post, who has consistently supported Obamacare describes the effort to get Florida to accept Medicaid expansion, a fight so desperate that it underscores the seriousness of the administration’s position.

You really should be paying attention to the ongoing battle over the Medicaid expansion in Florida. If supporters of Obamacare get their way, it could help weaken the blockade of opposition that conservatives have successfully used to stall the expansion in multiple states this year, after it seemed to be progressing last year.

Now there’s been a new development in the Florida battle: The Obama administration appears to be playing hardball with Florida governor Rick Scott, who opposes expanding Medicaid, sending him a new letter increasing the budgetary pressure on him to take the Medicaid expansion money.

The president himself is pressuring governor Rick Scott and has double-crossed him to do it.  Scott had negotiated with the administration to accept federal dollars to expand the high risk pool program to pay for the treatment of indigent Floridians.  But Obama, who needs to move Florida into the Obamacare medicaid expansion column, has reneged on the deal.

To catch you up, Florida had been in talks with the administration over expanding Mecicaid to 800,000 or more Floridians. But Scott recently reversed his previous support for the expansion. Scott did this because the federal government is close to nixing some of the billions in Medicaid funding for another program — the Low-Income Pool, or LIP — which funnels money to hospitals for low-income patients. Scott says this shows the feds can’t be trusted to honor their commitment under the Medicaid expansion. …

Now the Obama administration has sent a letter to the Scott administration, saying, in essence, that its position isn’t changing:  The best way to cover poor Floridians is through the Medicaid expansion, and the administration may phase out the LIP money. “Coverage rather than uncompensated care pools is the best way to secure funding for low-income individuals,” reads the letter, which reiterates all the fiscal arguments in favor of the expansion. The obvious suggestion is that the LIP money may not materialize, and accepting the expansion money is the best way to cover poor people and resolve the state’s broader budget battle.

The Scott administration fired back today, accusing the administration of trying to coerce the state into accepting the Medicaid expansion by linking it to the possibility of losing the LIP money. But the administration maintains that the LIP program was always intended to be time-limited, and its letter lists a number of long-running substantive objections it has had to the program.

It’s total war.  Marco Rubio, the most recent Republican to throw his hat into the ring for the 2016 presidential elections has made the repeal and replacement of Obamacare a central plank of his candidacy. “On Monday evening, in front of a cheering crowd, Florida Sen. Marco Rubio (R.) announced his candidacy for President of the United States. At times stirring, at times nervous, Rubio declared that one of the core planks of his policy platform would be to ‘repeal and replace Obamacare.’” Rubio’s replacement plan is very similar to Ted Cruz’s, another presidential hopeful who has vowed to repeal “every word” of Obamacare.  Here is a summary of its main points.

Three weeks ago, Rubio published an op-ed on FoxNews.com with his “three part plan for the post-Obamacare era.” The plan falls firmly within the conservative health wonk repeal-and-replace consensus. Obamacare offers tax credits—subsidies through the tax code—to buy costly, highly-regulated insurance products. The Rubio replacement, like many others, would offer such tax credits to purchase a broader selection of insurance plans and health savings accounts, across state lines.

These features are being touted by Republican candidates because they promise to provide better insurance at lower costs than Obamacare customers currently.  Although Obamacare has touted its expansion of insurance coverage, there is widespread dissatisfaction at the price and quality of what is provided. A recent article by Cliff Asness in the Wall Street Journal summarizes the perceived defects of the program: it expanded insurance but only through coercion and second, it costs too much.

The law’s cheerleaders tend to cite two main accomplishments. Both of them are irrelevant. … The first is to note triumphantly how health-care coverage has increased in five years. … The second trick is to trumpet that health-care costs are coming in lower than expected.

That more people would be insured was never in dispute. If you mandate that people buy something, penalize them if they don’t and give it away to some, more people will end up with it. The proper response to this is: Duh. …

The law’s supporters often note something like “while we can’t directly link the law to the cost savings . . . ” before immediately launching into an ode to ObamaCare.

There is no such link. Health-care inflation was falling well before ObamaCare and it seems to be a global phenomenon, though it is more pronounced in the U.S. than in other countries. This is not well understood, but ObamaCare’s link to it is based on proximity, not evidence.

Just how expensive health care is was the subject of an article in the Business Insider by Ed Yardeni.  He claimed that health care cost increases have basically soaked up all the additional cash in the economy.

The weakness in retail sales from December through February didn’t jibe with the strength in employment and consumer confidence. …  an inflation-adjusted basis, core retail sales (excluding autos, gasoline, and building materials) fell 1.3% saar during Q1.

What’s the problem?

It might be our health. American consumers now spend a record $8,066 per capita annually on health care. Thanks to Obamacare, we are all paying more to the piper. The out-of-pocket costs of health care have increased significantly, with higher premiums and co-pays and bigger deductibles.

Having insurance does little good if the coverage only partly compensates for price increases leaving a difference that can be called “the gap”.  A 'gap' is the amount is what a customer would actually have to pay for either for medical or hospital charges, over and above what he gets back from coverage.  Avik Roy notes that the Republican presidential candidates are talking up the promise of really affordable health care, one which will leave consumers with a smaller “gap”, but they will have to be careful not to repeat the mistakes of Obamacare.

On the whole, Rubio’s framework goes in the right direction. But there are a few things he’d need to tighten up in order to achieve real entitlement reform.

Per-capita caps have become popular in certain Republican circles as an alternative to block-granting Medicaid, because “block grant” has become a toxic phrase on the left, whereas per-capita caps were first proposed by a Democratic President. But per-capita caps could badly backfire on conservatives. They create a huge incentive for states to entrap more people into Medicaid, because states would receive more federal funding if more people sign up.

As John Goodman has pointed out, high-risk pools—another popular idea in certain GOP camps—creates as many market distortions as does Obamacare-style guaranteed issue for pre-existing conditions. “Price setting errors that government makes in the market for risk,” notes Goodman, “will invariably be worse than in just about any other market.” As with public-sector pensions, politicians will have a perverse incentive to expand high-risk pools, knowing that their successors will be stuck with the bill. And insurers will have a perverse incentive to deny even more people coverage, safe in the knowledge that the high-risk pools will pick up those denied customers.

The underlying dilemma is that the public demands efficient markets to reduce cost but also demands a safety net to provide coverage for all.  Rubio’s plan attempts to solve the problem by creating efficient markets for most, while providing high risk pools for some.  Obamacare has approached the problem by rolling high risk groups into the general pool making insurance more expensive for most, while making it cheaper for some. The evidence suggests that the Obamacare approach has traded too much cost for too little benefit.

Roy suggests that a means tested tax credit, coupled with a less regulated market might do the trick.

A key aspect of the Rubio plan is what it left out. The most important debate going on right now in conservative health policy circles is the question of how health insurance tax credits should be structured.

Obamacare’s tax credits are means-tested; i.e., the tax credits gradually recede in value as you go up the income scale. The Burr-Hatch-Upton replacement plan for Obamacare employs a similar approach, as does Transcending Obamacare. The difference between Obamacare and these replacement plans is that the replacement plans don’t force you to buy insurance using an individual mandate; also, the replacement plans liberalize the insurance market such that you can buy a very broad range of products, in contrast to the ACA.

Ultimately the Republicans will get a chance to try their alternative because Obamacare is killing itself under the weight of its high costs.  These pressures can be temporarily staved off with more subsidies, but ultimately the program will fail because its benefits aren’t worth the added cost and loss of personal liberty it entails.

The High Cost of Coverage

POSTED one month ago BY HEALTH CARE COMPACT

Two rival narratives, one pro and the other contra Obamacare, are being put forth by the opposite camps.  The advocates of the Affordable Care Act are emphasizing the reduction in the percentage of uninsured Americans.   Typical of these stories is one by CNN: “Nearly 90 percent of Americans have health coverage”.

Nearly nine out of 10 Americans now have health insurance, a sharp improvement from two years ago before Obamacare was put in place.

A poll by Gallup found that the uninsured rate among U.S adults declined to 11.9% in the first quarter, down one percentage point from the end of last year and an improvement from the 18% without insurance in the fall of 2013, when the Americans were first were able to sign up for coverage at state and federal exchanges.

This is the lowest percentage of Americans without coverage since Gallup started tracking the figure in 2008. Those without coverage was just under 15% at that time, then remained in the range of 15% to 18% before it started declining sharply two years ago. The law requiring most Americans to have coverage or pay a penalty took effect at the start of 2014.

The countervailing narrative emphasizes the fact that this increase has been paid for by taxes, levied under compulsion.  Typical of this narrative is a story written by Dan Mangan of CNBC.  It emphasizes the coercive aspect of the program.  To the claim “everyone has insurance”, it answers: everyone was forced to pay for insurance.

After years of hearing they will face a fine for failing to have health coverage, that bill is finally coming due for millions of Americans this tax season.

The Obamacare penalty, which relates to lacking coverage in 2014, is spurring some of those people to sign up for insurance this year to avoid paying an even bigger fine next year. But not nearly every one of the estimated 6 million people subject to the penalty this season is taking advantage of that second chance.

"The penalty next year is ridiculous," said Shelby Robertson, a 24-year-old massage therapist, who was motivated to finally sign up for a health plan after having her taxes done recently by H&R Block.

Robertson knew about the fine for not having insurance last year when she had her taxes done. But she hadn't realized that for the 2014 tax season—the first ever for the Obamacare penalty—it would be the higher of $95 or 1 percent of her taxable household income.

When her return was completed, Robertson learned she'd have to pay $190 in Obamacare fines—quite a bit more than she had expected.

Millions -- people who did not obey the injunction to buy Obamacare -- are going to face a tax penalty. Another edition of CNN Money says “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.”

Many more millions have simply been exempted from the penalty. “Another 15 million to 30 million people will request and be granted an exemption to the mandate by filing Form 8965. Those who aren't subject to the insurance requirement include undocumented immigrants, low-income Americans and those for whom insurance premiums were more than 8% of their household income.”  That’s the cost.  The benefit is that “between 4.5 million and 7.5 million taxpayers received subsidies for insurance premiums when they signed up for coverage on Obamacare exchanges.”  It’s a clear illustration that there’s no free lunch.

Natalie Villacorta and Erin Mershon of Politico says that the real story is why more people aren’t angry. “Obamacare’s first tax season includes all the elements needed to ignite a political firestorm. Yet with only days to go until the filing deadline, nothing’s burning.”

Americans are reckoning for the first time with the most unpopular part of the law — the individual mandate — and having to prove they’ve had health insurance or to cough up a penalty. As they’ve done their taxes, many people have learned they owe money because they underestimated income when buying subsidized coverage in 2014. Some have had to delay their returns because the government in February sent an inaccurate form on their subsidy total.

There’s been no real uproar, though. Beyond a short-lived flare of criticism after HHS acknowledged those inaccurate subsidy forms, conservatives who might have been expected to keep piling on have stayed relatively silent. Press releases protesting the mandate penalty have been few. …

“I’ve been surprised how quiet it’s been in the political realm,” said Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation. Although advocates feared a reprise of the anger that followed cancellation of many pre-Obamacare policies in fall 2013, “that really hasn’t happened.”

Perhaps one reason for the lack of overt anger is the constant messaging by the administration that resistance is futile.  The word is that Obamacare is a done deal.  It cannot be repealed or even struck down by the Supreme Court.  The Hill carried President Obama’s confident assertion that the court would uphold his law.  

President Obama said Monday expressed confidence that the Supreme Court will uphold a key portion of his healthcare law this summer.

“I’m confident in the Supreme Court applying its own rules of interpreting laws [and] will uphold the law,” Obama said in an interview with Portland, Maine, NBC affiliate WCSH. “It’s pretty clear cut.”

The high court is expected to rule on whether insurance subsidies can legally be distributed to people in states served by the federal insurance exchange, HealthCare.gov.

Faced with this message  of inevitability many taxpayers are probably just biting the bullet and sullenly paying up.  Still the lack of crowds in the street carrying pitchforks is no proof that Americans like paying penalties or filling out complicated tax forms.  The National Taxpayers Union Foundation measured how much grief millions of taxpayers are going through to give fewer millions a subsidy.  They calculated the cost of additional complexity caused by Obamacare.

This year’s new analysis of tax complexity from National Taxpayers Union Foundation (NTUF) found some startling lead figures: a $234 billion cost to the economy due to 6.1 billion lost hours of productivity and $32 billion spent out-of-pocket to comply with America’s insanely complicated tax system.

As always, there is much more to the story.

Since 2010, tax complexity costs have remained sky-high, at well over $200 billion each year. From fiscal year 2005 to 2013, the Treasury's paperwork burden rose from 6.4 billion hours to 7 billion hours never making up less than 74 percent of the burden imposed by all government agencies combined.

While last year’s (covering 2013) totals actually trended downward compared to the previous year (2012), there was little reason to believe that was the beginning of a trend toward continued relief. …

What does that mean for the future?

Looking deeper at NTUF’s research, there is one big reason to think this could be the beginning of a trend in the wrong direction: 3,322 pages of legal guidance for Obamacare (or the ACA) added to IRS.gov (1,077 pages of regulations, 1,377 pages of Treasury decisions, 669 notices, 100 revenue procedures, and 12 revenue rulings).

Essentially, Obamacare is coming home to roost.

So far, while it certainly contributed to rising complexity over the last tax year, Obamacare has not drastically increased costs under NTUF’s metrics.

Yet, it is inflicting new burdens on taxpayers, and this is bound to increase the burdens of tax complexity more than what has already been observed.

The evidence suggests that the benefits of increasing the number of persons “covered” by insurance by forcing them to pay, raising taxes on millions of Americans and obliging them to spend billions of man hours filling out complex forms is of dubious wisdom.  A pencil is a good thing; just as a hamburger is, but not if costs a thousand dollars.  Then you are not getting your money’s worth.  Obamacare remains a contentious issue because people are not getting their money’s worth.

The Case For Obamacare Repeal and Replace

POSTED one month ago BY HEALTH CARE COMPACT

Many of the problems that the ACA plans to fix were caused by government itself.  They arise from “solutions” contrived in an earlier whose distortions are now insupportable.  Employment based health insurance, which Obamacare is now trying to dismantle, had its origins in Franklin D. Roosevelt’s wartime policies.

During World War 2, the federal government introduced wages and price controls. In an effort to continue attracting and retaining employees without violating those controls, employers offered and sponsored health insurance to employees in lieu of gross pay. This was a beginning of the third-party paying system that began to replace direct out-of-pocket payments.

Bruce Bartlett, who was an economic adviser to Ronald Reagan explains how it happened. “On the eve of World War II, just 1.3 million people had hospital insurance in a population of 130 million people. During the war, the federal government established wage and price controls to contain inflation. But the demand for war materiel and the military draft created a labor shortage, and businesses looked for ways to compete for the limited supply of workers without being able to raise wages.”

President Franklin D. Roosevelt’s Oct. 3, 1942, executive order freezing wages provided an exception for insurance and pension benefits. Employers began offering such benefits as a de facto way of paying higher wages without violating the controls. In 1943, the Internal Revenue Service ruled that employer-provided health insurance was not taxable to the employee.

Employers took advantage of a provision in the existing tax code to get around the price controls. “The current tax treatment of health insurance is a byproduct of wage and price controls imposed by the Roosevelt Administration during the World War II era.”  Many conservative and liberal economists agree that it led to no end of mischief. In that sense Obamacare is Obama trying to undo Roosevelt. As the Heritage Foundation explains

The federal tax code currently excludes, without limit, the value of employer-sponsored health insurance from an individual's income for the purposes of both income and payroll taxes. This tax exclusion for employer-sponsored insurance is a huge, but hidden, tax subsidy.  The Joint Committee on Taxation estimated that value of the tax exclusion in 2007 was $246.1 billion in foregone income and payroll taxes. The exclusion represents the largest federal tax expenditure as well as the third largest health care expenditure, following only Medicare and Medicaid, the nation's two largest entitlement programs.

Health economists generally agree that this Roosevelt-era policy is poorly designed and has many perverse incentives. The employee exclusion is inherently unfair, inefficient, and inequitable.

It is unfair because only individuals with employer-sponsored insurance are able to receive tax relief, while individuals without access to such coverage typically pay for health insurance with after-tax dollars and, in effect, face a sizeable tax penalty. It is inefficient and inequitable because the largest tax benefits go to those who need them least; given the progressive structure of the tax code, the exclusion is regressive since it is worth less to taxpayers in lower marginal tax rates and more to those in higher marginal tax rates.

Therefore, if the goal is to extend coverage to the uninsured, the tax break is poorly targeted because it provides little or no tax relief to those with low incomes, who are least able to afford health insurance.

The tax treatment of health insurance also has the perverse effect of increasing health care spending and driving up costs by essentially lowering the effective price of employer-sponsored health insurance. The exclusion does encourage individuals to obtain insurance. But it also encourages many individuals to have more generous insurance than they typically need, because the higher the cost of the insurance and the higher the person's income, the bigger the tax benefit for the individual. …

Economists contended that overbuying health insurance fueled medical cost inflation, which raised health insurance premiums, which drove up the cost of employee compensation while pushing down cash wages.

In 1985, the Reagan administration proposed requiring workers to pay taxes on some health insurance benefits as part of tax reform. But the idea went nowhere in Congress.

In 2008, the Republican presidential nominee, Senator John McCain of Arizona, put forward an intriguing proposal to abolish the exclusion for health insurance and use the revenue to finance a $5,000 tax credit for families to buy their own health insurance.

In order to avoid the political problems of trying to start from a clean slate, the Obamacare solution was to lie about what is now called the “Cadillac Tax”. Economist Jonathan Gruber, who was instrumental in designing Obamacare was candid about the administration’s intention to tell a falsehood.  As CNN reported it was a tax on individual health insurance all along which was deliberately disguised as a tax on insurance companies.

Gruber said the only way those pushing for Obamacare could get rid of the tax subsidy for employer provider health insurance was to tax the more generous, or Cadillac, plans -- "mislabeling it, calling it a tax on insurance plans rather than a tax on people when we all know it's a tax on people who hold those insurance plans."

The second way was have the tax kick in "late, starting in 2018" and have its rate of growth tied to the consumer price index instead of to the much higher rate of medical inflation. Eventually, the 40% tax on the more expensive plans would impact every employer-provided insurance plan.

"What that means is the tax that starts out hitting only 8% of the insurance plans essentially amounts over the next 20 years essentially getting rid of the exclusion for employer sponsored plans," Gruber said. "This was the only political way we were ever going to take on one of the worst public policies in America."

By 2018, Gruber said, those who object to the tax will be obligated to figure out how to come up with the trillion dollars that repealing the tax will take from the U.S. Treasury, or risk significantly adding to the national debt.

This is obviously exactly what Obama told voters in 2009 he had "taken off the table." It is exactly a process to "eliminate the tax deduction that employers get for providing you with health insurance" that five years ago Obama noted would result in "a lot of employers then would stop providing health care, and we'd probably see more people lose their health insurance than currently have it."

As noted many times before, one of the goals of Obamacare is to raise the cost of health insurance to cut down on overconsumption.  This was done by by taxing the health care insurance thereby reducing demand. Unfortunately those falsehoods are now having consequences that may rival those caused by the original fix  Many people thought Obamacare meant “cheaper” insurance or even “free insurance”.  Little did they know it was the opposite.  Obamacare was a tax..  

One direct consequence of the Obamacare approach has been to complicate the tax process through a mixture of handouts, grab backs, breaks and tax increases.  The IRS is kept busy handing out money and taking it back in a kind of round robin of cash.  Tony Nitti, a tax policy expert, describes how hugely complicated tax filing has become.

Individuals who acquire insurance on an exchange, whether established by the state or the federal government (at least for the time being, but the Supreme Court will have the final say), are eligible to receive a tax credit – basically, a federal subsidiary of their insurance premiums — provided  their household income falls between 100% and 400% of the federal poverty line.

Seems simple enough. But as nearly one million taxpayers have learned, the administration of the premium tax credit by the federal government has caused one headache after another.

Allow me to explain.

In order to claim the premium tax credit, you need certain information from the exchange from which you purchased the insurance: i.e., your annual premiums, a hypothetical annual premium upon which the credit calculation is based (the second lowest cost silver plan premiums), and any advance credit you received. (The reconciling of the advance credit with the actual credit is an entirely different disaster posed by the premium tax credit, as discussed here.)

This information was required to be disseminated by the insurance exchange to the insured individual on a Form 1095-A, to be sent to customers no later than January 31, 2015. For the 14 states that set up their own exchange, the state exchange would produce the form. For the remaining 36 states, the federal government would prepare and send out Forms 1095-A to customers.

The states, by and large, have been successful in their reporting efforts. The federal government? Not so much.

First, on February 20, 2015, the Centers for Medicare and Medicaid Services announced that 800,000 individuals who purchased insurance from a federally-established exchange received incorrect Forms 1095-A. The primary problem was that the forms used hypothetical premium amounts (the second lowest cost silver plan) for 2015 rather than 2014, which would result in an improperly large credit for 2014.

By the time the mistakes were caught, 50,000 taxpayers had already filed their returns. As their first mea culpa, the IRS announced that those taxpayers would not be required to amend the returns, despite the fact that the premium tax credit was likely overstated. In addition, the IRS would not pursue any increase in tax caused by the overstated credit.

The remaining 750,000 taxpayers were instructed not to file their returns until they received corrected Forms 1095-A, which were promised to be delivered by early March.

Early March came and went, however, and it was soon discovered that there were additional problems with some of the ”corrected” Forms 1095-A, some “corrected” forms were never sent out at all, and some of the Forms 1095-A that were not part of the originally identified 800,000 incorrect forms contained errors.  As a result, the IRS announced that it was expanding its prior relief to any taxpayers who filed a return — or would file by April 15th — that computed a premium tax credit based on an incorrect Form 1095-A. These taxpayers would not be required to amend the return in the event they were subsequently notified of the incorrect Form 1095-A, and the IRS would not pursue the taxpayer for any excess deficiency resulting from the overstated credit.

Now we find ourselves in mid-April, with tax returns or six-month extensions due in a mere five days.

One extension after the other has been announced to give filers time to correct, but it has failed to satisfactorily correct things because new problems and complications are created in attempting to fix the old ones.  Now the biggest problem is that the Cadillac tax increase, so artfully delayed by Gruber’s advice is now upon the public. As Yevgeniy Feynman observes in Forbes, the tax burden is already making itself felt as employers anticipate it.

Forget King v. Burwell. In just three short years, one of the ACA’s only real cost control mechanisms takes effect – a 40 percent excise tax on high-value insurance coverage, dubbed the Cadillac Tax. Individual plans that cost more than $10,200, and family plans over $27,500 pay the 40 percent tax on benefits over those amounts. There’s a strong likelihood that without changes to current benefits, some of the burden will fall on state and local taxpayers.  And that’s a good thing.

The Cadillac Tax isn’t very popular – though it’s perhaps the most important reform plank in the ACA.  While conservatives hate Obamacare, the Cadillac Tax is a crude version of something they have long called for – a cap on the tax exclusion for employer-provided health insurance. Decried as a tax by liberals just a few years ago the Senate glommed onto the provision in 2009 as one of the few real revenue offsets in the legislation.

The promise of “if you like your plan you can keep your plan” was profoundly dishonest because the Obamacare strategy from the beginning was to abolish the employer-based health insurance via the Cadillac Tax.  The whole point of the Affordable Care Act was both to abolish the old employer-based system and to make health insurance more expensive.  Only thus could the demand for health care be reduced.

Private companies, Feynman notes, can only cope with the tax increase by slashing benefits or increasing pre-tax wages to restore some of lost value. Ironically public sector unions will be the most burdened by the Cadillac tax because gold-plated health benefits have long been a feature of union contracts. The pressure is now mounting on the administration to grant exemptions to unions to offset the effects of the Cadillac tax.

Unionized employers, especially those in the public sector, will have a much more difficult time avoiding the tax. For both private and public unionized employers, unions aren’t likely to back down easily, and will do what they can to avoid a significant reduction in benefits. Falling unionization rates in the private sector make this less of an issue for private employers however. Public employers, on the other hand – states and localities primarily – are still heavily unionized. This means that when contract negotiations happen, getting the benefit reductions necessary to remain below the Cadillac Tax threshold is much more difficult. …

The Cadillac Tax is rightfully designed to make plans that take advantage of an unlimited tax deduction prohibitively expensive. Without changes to benefits, state taxpayers and/or public-sector workers will bear the added costs.  Changes are necessary, and have been a long-time coming. Unions should see the coming sea-change as an opportunity to right-size benefits, and raise cash-wages for their members.

Unions cannot adapt as easily as private companies. The probable solution in many cases is that public sector will simply to conceal the benefits in order to push them below the threshold of the Cadillac tax.

The simple way, then, for states to push the cost of their plans below the threshold of the tax is to reduce plan generosity. Given the state of politics and rhetoric, this is, of course, easier said than done. But there are ways of making this transition a bit more palatable.

Generally speaking, it will have to involve making the tradeoff between wages and health care benefits more salient for public sector employees. In New York City, Mayor De Blasio’s deal with the city unions emphasizes this tradeoff, making contractual raises contingent on health care savings (though it’s turning out that some of these aren’t “savings” in the true sense of the word).

Nicole Gelinas describes how New York City public sector employees are “saving” on health care benefits and linking it to wage increases. They are creating “savings” by playing games with definitions.

Not to worry: The mayor and unions agreed to cut $3.4 billion in worker health-care costs over four years, starting with $400 million this year.

How’s that going? City Hall labor chief Bob Linn told the council last week the results are “great news.” Good thing he’s a labor chief, not a doctor.

It turns out that 65 percent of the “savings” from this year’s rounds aren’t really savings in the sense of controlling health-care costs.

More than a quarter — $108 million — comes from auditors rooting out people (ex-spouses, for example) who weren’t legally supposed to be on the city’s health plan in the first place (maybe you got a divorce, but didn’t tell the city). ....

When most of us think of cutting costs, we think: I spent $400 too much this month and I can’t afford it, so next month I’ll try not to spend that.

We don’t think: I spent $400 too much this month and I can’t afford it, so next month I’ll plan to spend $450 too much, and then “only” spend $425 too much instead.

But that’s what the city is doing.

Even with its planned savings, health-care costs for workers are still going up — they’re just going up by less than originally planned.

According to a presentation Comptroller Scott Stringer made in February, worker and retiree health-care costs will rise 31.6 percent over the next five years — from $5.2 billion this year to $6.8 billion in 2019.

Employee and retiree health insurance is still growing faster than anything else in the budget — twice as fast as salaries and wages. It’s just growing . . . less fast than it was supposed to.

And the unions have made sure: Heads they win, tails we lose.

The only best way out of this mess is to use a clean slate.  And this is exactly what the major Republican repeal and replace proposals do. John Goodman writes, “on the eve of the Supreme Court hearing of King v. Burwell, three House Republican leaders—Paul Ryan (WI), John Kline (MN), and Fred Upton (MI)—unveiled an important new alternative to Obamacare.”

The plan would do two important things: The proposal would abolish the individual and employer mandates to purchase health insurance, and it would give everyone purchasing insurance in the individual market a fixed-sum, refundable tax credit to buy health insurance of their own choosing.

This is of supreme importance.  The tax breaks that are now delivered through the Roosevelt-era legacy loophole will be replaced by a tax credit to every American.  It levels the playing field in principle and is far simpler than the Rube Goldberg apparatus now being run by Obamacare. According to Avik Roy, several of the Republican proposals, including the plan being pushed by Paul Ryan are means-tested, which means that bigger subsidies are provided to the poor. Most significantly the dizzying transfers of money that now characterize Obamacare will be replaced by a single tax credit.

Of almost equal importance is an idea proposed by Senator Ted Cruz. Cruz argues that with a tax credit in hand, consumers ought to be allowed to shop for insurance anywhere -- across state lines and without being restricted by numerous Obamacare requirements.  It would be portable (not tied to employment) and protected from cancellation.

Texas Sen. Ted Cruz suggested Wednesday that Americans should be allowed to buy health insurance across state lines in order to increase choices and drive down costs as a solution to the Affordable Care Act.  …

“All of these band-aid fixes that the President is pushing, that the Congressional Democrats are pushing won’t fix the problem,” Cruz said, and finally suggest something besides a “full repeal” as a solution to the health care problem.

“You know, the single best thing we can do is expand competition,” Cruz said, “What Obamacare does is decreases choices and drives up costs. It doesn”t make sense, and it isn’t working.”

A truly national market place, as Cruz puts it, would lower barriers to competition among entrants rather than restricting them, as is no the case with Obamacare.  This marketplace, combined with the single tax credit of Paul Ryan, would actually make sense.  It would put the American healthcare system on the sound path from which it deviated during the Roosevelt era.  Perhaps of equal importance, it would attempt to save money not by imposing a tax, which is what Obamacare is, but by fostering competition which can lead to efficiencies.

Obamacare is not the best of all possible words, but a horrible patch on a broken system.  It deserves replacement.

Deficit and Spend

POSTED one month ago BY HEALTH CARE COMPACT

Jake Novak of CNBC points out what is probably a painful truth.  The inner logic of Obamacare is to simultaneously expand insurance coverage while making health care itself more expensive.  At one and the same it provides theoretical access to health care while reducing the expenditure on medical treatment.

According to a new report from the Robert Johnson Foundation the U.S. will spend $2.5 trillion less on health care from 2014 until 2019 than had been originally estimated at the time the Affordable Care Act became law in 2010. The report isn't sure how much of a role Obamacare is playing in lowering these spending projections, yet it does believe it is doing something here along with the still weak economy and lower number of Americans currently employed.

By raising prices Obamacare lowers demand and less health care is supplied.  The Affordable Care Act achieves this by imposing a number of taxes, some $800 billion worth.  And as with all items that are taxed, demand is reduced.

It is a tax and like all taxes it's shrinking the revenues of the service or good it's taxing. In this case that service is health care and they call it "spending" to make it sound like it's good that it's going down. But notice how none of these studies discuss how the prices for health care are going down. That's because, they're generally not. If spending were going down because the cost of health care was going down, that would be good news. But that's the kind of good news only the free market can bring and sustain. Obamacare is still a tax that's reducing the amount of health care Americans are receiving. …

Think about it, the very high deductibles for many of the Obamacare plans are enough to keep away lots of people who should visit the doctor. The struggle millions of Americans are facing to find new doctors who accept the ACA plans they're now on is another great way to keep spending down.

As the chart from Heritage Foundation below shows, the big hits on the taxpayer wallet com begin in 2015 and rise steadily after that. Novak writes, “But if you think the Obamacare tax is effective at killing things now, you ain't seen nothing yet.” He adds:

 

obamacare-tax-hikes-680.jpg

 

That's because the mother of all Obamacare taxes hasn't even kicked in yet. That would be the so-called 40% excise "Cadillac tax" that goes into effect in 2018. That's the tax that's so high and affects more than just the best plans so severely that ACA guru Jonathan Gruber boasted it would just about kill off the whole tradition of employer-provided health insurance in this country.

In anticipation of the tax many companies are already passing on the costs to their employees. Bloomberg Business’ Zachary Tracer writes about how employers are sending their employees to look for their own insurance in anticipation of the Cadillac Tax.

While private exchanges help employers limit what they pay for health benefits, it’s not yet clear whether they help keep health-care costs under control, said Rich Birhanzel, managing director for Accenture Health Administration Services. If they don’t, workers could be responsible for an increasing share of their health-care costs over time.

So far, midsized companies have been the main users of private exchanges, Birhanzel said. He said he expects larger employers to increasingly use the portals as well, especially in preparation for a federal levy on high-cost health plans, dubbed the Cadillac Tax.

That 40 percent tax on costly health benefits, part of the Affordable Care Act, starts in 2018. It’ll initially hit family plans where premiums exceed $27,500 and individual plans costing at least $10,200.

Premiums for family coverage averaged $16,834 in 2014, up 3 percent from a year earlier and compared with $5,791 in 1999, according to the Kaiser Family Foundation. Workers picked up about $4,823 of the tab. A single person paid $1,081 of the $6,025 premium on average last year.

This price hike was intentional. As Michael Tennant of the New American writes, employer-subsidized healthcare (ultimately taxpayer subsidized from tax breaks) is blamed for encouraging overconsumption of care.  It is the root cause of America’s soaring health costs. The solution therefore, was to tax it.

Up to now, health insurance offered by employers has been exempt from income and payroll taxes, with the result that, until recent years, employers have offered increasingly generous policies. Since this has the effect of insulating employees from the cost of their healthcare, they tend to use more medical services than they otherwise would, driving up costs.

The solution to this problem under ObamaCare was not to slash income and payroll taxes to make wages more attractive than benefits. Instead, the ACA piled on yet another levy: an excise tax on employer-sponsored plans deemed too generous by the folks inside the Beltway. …

The tax was sold to the public under the pretext of socking it to corporate executives who were getting elite health benefits — hence the moniker “Cadillac tax” — without paying taxes on them. It was also called an excise tax, meaning it taxed insurance plans, not individual beneficiaries. But as the now-infamous ObamaCare architect Jonathan Gruber admitted in 2011, this was a deliberate deception: “It turns out politically, [the tax is] really hard to get rid of. And the only way we could get rid of it was first by mislabeling it, calling it a tax on insurance plans rather than a tax on people, when we all know it’s a tax on people who hold those insurance plans.” That “mislabeling,” Gruber later said, was concocted at Obama’s behest.

One might wonder why an Obamcare that will tax health benefits will also extend subsidies to other consumers.  The answer is simple: Obamacare aims to shift health consumption from the middle class, who in their view overconsume and subsidize insurance for the poor, who they believe underconsume.  It reduces the demand by some and increases the demand by others.  And it uses the IRS to do it.

But in the process government suffers frictional losses.  The transfer of income between groups is not lossless.  The overhead of an administering bureaucracy is required.  Thus, despite the fact that Obamacare is a huge tax it has actually increased the deficit because the rise in expenses has outrun the rise in revenue. Pete Kasperowicz of the Blaze writes:

The Congressional Budget Office reported Wednesday that the federal government saw a higher budget deficit in the first half of fiscal year 2015 compared to 2014, and said higher spending due to Obamacare is part of the reason.

CBO said the budget deficit was $430 billion in the first half of fiscal year 2015, a $17 billion increase. While there were several contributing factors to that increase, CBO said spending on Obamacare was a significant change from 2014 to 2015. … But because spending was higher than receipts, spending grew faster and led to a $17 billion increase in the budget deficit.

At it’s heart Obamacare is meant to be a tax-and-spend program.  It taxes the health care of higher income groups to reduce their health care consumption and subsidizes the health care of lower income Americans to increase their consumption.  That is the theory, anyway. But in reality it is a deficit-and-spend program.  Frictional losses and economic inefficiency mean that prices rise for everyone.  Health care premiums go up for the poor as well as the rich in ways that subsidies cannot offset.  In the end it makes everyone worse off.  Not just the upper income population, but the lower income individuals as well.

The Unaffordable Care Act

POSTED one month ago BY HEALTH CARE COMPACT

Obamacare’s next big political issue will be premiums. Although the program’s supporters have long emphasized “coverage” they have largely de-emphasized “affordability”.  This is ironic inasmuch as Obamacare is actually called The Patient Protection and Affordable Care Act.

However, as a study by the Heritage Foundation shows Obamacare premiums have been rising faster than the rate of inflation for two years running.  Most of the 2015 premium increases have been concentrated in the cheaper plans, making the price effect doubly painful.  Persons 27 years and younger have borne a disproportionate share of the hikes.  As Insurance Business America’s Caitlin Bronson writes:

In general, health insurance carriers have had to make up for lost ground after setting rates that were too optimistic—perhaps a consequence of the ACA’s directive that insurance actuaries use age slopes of 3:1, as opposed to the 5:1, 6:1 or 7:1 slopes insurers generally employ.

Stanley Sieniawski, president of InsureOne Benefits in Litchfield, Ohio, also believes allowing individuals to stay on their parents’ health insurance plans until the age of 26 has had “unintended consequences” on health insurance affordability for young people.

“The majority of individuals under the age of 26 are staying out of the individual market, and they’re the very people carriers want to offset the risk of older people buying coverage,” said Sieniawski, who works solely with the individual market in his practices.

“You’ve got a perfect storm whereby the insurance companies are not attracting risk either because they’re staying on mom and dad’s policy, they don’t believe the need insurance or even with subsidies, they are not able to afford it because of these rate increases.”

But driving away younger customers with high prices creates the risk that older customers will see their rates hiked also, without a sufficient base of healthier customers to absorb the risk.

The next group of people destined to feel the bite will be those currently have employer-provided group insurance.  Brian Faler at Politico writes that the coming tax on employer tax benefits will effectively raise the cost of insurance for millions of Americans.  Known as the ‘Cadillac tax’ “it’s one of the last big parts of the Affordable Care Act to go into effect — lawmakers delayed the levy until 2018 in part because it is so controversial — but companies are wrestling with it now as they plan employee benefits. Some are already negotiating with unions over benefits that could spill into 2018.”  Despite its luxurious sounding name the tax will affect middle-class Americans.

“This is going to have a life of its own as the clock ticks closer to 2018,” said Rep. Joe Courtney (D-Conn.), a critic of the tax.

Though the nickname suggests it will apply to a select few, experts say a majority of employers could eventually face the prospect of imposing what will be the first-ever tax on health care benefits.

The IRS began last month spelling out the nitty-gritty of how exactly the tax will work, though it left out many of the details employers say they need.

At issue is a 40 percent excise tax on the health benefits companies provide their workers above a certain threshold. In 2018, the tax will hit insurance and related perks valued at more than $10,200 for singles and $27,500 for families. So for family benefits worth $30,000, the tax would apply to the $2,500 that’s above the limit.

Taxing those benefits represents a major shift in generations-old tax policy.

Among the hardest hit will be organized labor and groups like teacher’s unions, sectors which are traditionally supporters of president Obama’s political party.  This the tax on health benefits is already roiling Democratic party ranks.

“Employers are coming to the table asking for cuts in benefits based on their preliminary projections around the tax,” said Shaun O’Brien, assistant policy director for health and retirement at the AFL-CIO, which backs repeal.

The National Education Association, which is also demanding the tax be rescinded, issued a report Thursday complaining it would disproportionately hit women and older workers.

“We continue to support the Affordable Care Act,” said Kim Anderson, senior director of the group’s Center for Advocacy and Outreach. But “the excise tax on high-cost plans can randomly and unfairly cause hardship to American workers and their families” and “Congress must repeal the excise tax.”

The failure of Obamacare to control costs is now beginning to sink in among its liberal supporters, who now understand that it consists of mandatory, expensive and mediocre insurance. Marcia Angell, writing in the New York Review of Books, now thinks Obamacare was a mistake. It should have been “single payer”, all along she says.  Referring to Obamacare Angell writes:

In 2006, my state of Massachusetts enacted legislation that closely resembles the new federal law and indeed served as its template. The Massachusetts law was originally promoted as a way to contain costs as well as expand coverage; the theory was that as people became insured, they would seek care from primary care physicians instead of in more expensive emergency rooms. But as costs continued to grow rapidly, the rationale changed. The new story is that the intention all along was just to get everyone insured and deal with costs later. Almost all Massachusetts residents now have health insurance, but premiums, deductibles, and copayments have increased, and some people have found they cannot afford to use their insurance. Massachusetts now spends more per capita on health care than any other state, and health spending consumes over half the current state budget, at the expense of nearly every other state function—including education, public safety, human services, and infrastructure. Clearly, while it’s possible to expand access to health insurance by pouring money into a wasteful system, eventually the costs are shifted to patients in one way or another, and other important social goods are neglected. …

The fundamental issue in the US health system is costs. After all, if money were no object, everyone could have all the health care he or she could possibly need or want. But money is an object, and sadly, the Affordable Care Act is a misnomer, because it’s not really affordable except in the short run. Yes, it has expanded access, but the costs will not be sustainable—unless deductibles and copayments are greatly increased and benefits cut. That is happening now, particularly in the private sector, where employers are also capping their contributions to health insurance. …

When Obama was a state senator in Illinois, he was on record as favoring a single-payer health system—that is, one in which the government ensures health care for all residents of the country and regulates the distribution of resources in a predominantly nonprofit system. That’s the sort of system every other advanced country has. Even after he became president, Obama acknowledged in a press conference on July 22, 2009, that a single-payer system was the only way to achieve universal health care.

It is quite clear that Obamacare is doomed.  What will finish it off isn’t the Republican Party but cost. The only question is whether it will be buried in the single-payer cemetery where rationed care will reign supreme or replaced by a more competitive market system.  But either way it won’t last.  No one will be able to afford it in the long run.

Obamacare and Taxes

POSTED one month ago BY HEALTH CARE COMPACT

The Daily Caller points out that Obamacare, apart from being a health insurance payment scheme, is also one of the biggest tax increases in recent American history, levying a total of $800 billion betweeen 2013-2022.   This is a reflection of arithmetical reality. The “free” federal money that goes into Medicaid expansion, or in grants to support exchanges and/or subsidies comes from taxes.

As the National Public Radio pointed out, “52 percent of people who enrolled in health insurance plans on the exchanges had to repay part of the subsidy they'd received to offset premiums. That's according to an analysis by H&R Block of the first six weeks of returns filed through the tax preparer.”  As the chart from Heritage Foundation below shows, the big hits on the taxpayer wallet com begin in 2015 and rise steadily after that.

 

obamacare-tax-hikes-680.jpg


 

One of the taxes due to kick in after the “low price introductory period” is the so-called Cadillac Tax.  Politico writes, “experts say a majority of employers could eventually face the tax on health care benefits.”  Obamacare was deliberately phased to “hook” people on subsidies and then present them with the bill for that “free money” in the end.

It’s one of the last big parts of the Affordable Care Act to go into effect — lawmakers delayed the levy until 2018 in part because it is so controversial — but companies are wrestling with it now as they plan employee benefits. Some are already negotiating with unions over benefits that could spill into 2018.

“This is going to have a life of its own as the clock ticks closer to 2018,” said Rep. Joe Courtney (D-Conn.), a critic of the tax.

Though the nickname suggests it will apply to a select few, experts say a majority of employers could eventually face the prospect of imposing what will be the first-ever tax on health care benefits.

The IRS began last month spelling out the nitty-gritty of how exactly the tax will work, though it left out many of the details employers say they need.

At issue is a 40 percent excise tax on the health benefits companies provide their workers above a certain threshold. In 2018, the tax will hit insurance and related perks valued at more than $10,200 for singles and $27,500 for families. So for family benefits worth $30,000, the tax would apply to the $2,500 that’s above the limit.

Taxing those benefits represents a major shift in generations-old tax policy.

It’s not just the rich who will be slugged with increases.  The poor and middle class will experience substantial tax increases, as the graphic below shows.  

impact-payroll-tax-680.jpg

 

However, much of those taxes will be redistributed to persons earning less than $50,000 per year making Obamacare the classic tax and spend program, but presented as health care.

tax-burden-income-680.jpg

 

The money will go not just to low income Americans but also to major corporations. The National Center for Policy Analysis notes for example, that insurance companies will despite denials likely be bailed out. Altogether, the CBO estimates that the ACA may add $300 billion to the deficit over the next decade.  The 800 billion dollar increase won’t be enough.

The eventual numbers depend on whether or the tax revenue projections of the program pan out.  Examining the effect on company bailouts only, the National Center for Policy Analysis showed that if the enrollment and demographic targets were not met the Treasury would be on the hook for Obamacare commitments. Any fall in expected revenues or any unforeseen increase in costs will lead to a deficit.  The NCPA wrote to say that the shape of things to come was already visible.

Indeed, the evidence suggests the exchanges are attracting older and sicker applicants than originally anticipated. For example, Express Scripts, the country’s largest provider of pharmacy benefits, analyzed medication utilization in the exchanges, finding:

“Approximately 1.1% of total prescriptions in Exchange plans were for specialty medications, compared to 0.75% in commercial health plans, a 47% difference.…Specialty medications now account for more than a quarter of the country’s total pharmacy spend.

“In total spend, six of the top 10 costliest medications used by Exchange enrollees have been specialty drugs. In commercial health plans, only four of the top 10 costliest medications were specialty.”

Specialty drug use is higher, says Express Scripts. For example, “more than six in every 1,000 prescriptions in the Exchange plans were for a medication to treat HIV. This proportion is nearly four times higher in Exchange plans than in commercial health plans.”

Further increasing claims costs, the 18- to 34-year-old “young invincibles” needed in the exchanges comprise only 28 percent of enrollees, almost one-third fewer than the 40 percent previously expected.

In addition, the reinsurance fund is financed primarily by a tax of $63 per insured person. However, HHS calculations assumed there would be approximately 191 million insured individuals, for revenue of $25 billion over three years.If there are significantly fewer insurees in 2014, revenues will fall short.

If the reinsurance fund raises less revenue than expected and 2014 medical claims in the exchanges are higher than HHS anticipates, the fund will fall short of satisfying insurers’ claims against losses. They will look elsewhere to be made whole. That “elsewhere” is the risk corridors.

One of the most worrying developments is that, despite repeated extensions of so-called special enrollment periods, the intake into Obamacare appears to have maxed out. Investor’s Business Daily writes, “Is ObamaCare Enrollment Already Hitting A Wall?”

Earlier this year, the Obama administration hoped to boost ObamaCare sign-ups by offering a special enrollment period for millions who didn't know about the individual mandate penalty until they filed their taxes.

They'd have until the end of April to buy a plan and avoid paying an even bigger ObamaCare penalty when they file taxes next year. At least one outside observer expected as many as 1.2 million to sign up.

But last week the administration admitted — buried in the middle of a press release — that a mere 36,000 had done so by the end of March.

It was another sign that enrollment could be hitting a wall, well before ObamaCare has signed up enough people to be sustainable. …

Exchanges needed to enroll up to 75% of their eligible markets, according to Kingsdale. But states are having trouble getting over the 40% mark.

Another report shows that ObamaCare is turning out to be a tough sell, even with subsidies.

Avalere Health broke enrollment down by income groups to see what share of each was signing up for ObamaCare. The exchanges are succeeding at signing up the near-poor, it found, but not the vast majority of others eligible for subsidies.

That is basically a warning that the program will have to operate on a budgetary deficit.  Obamacare is one of the biggest tax increases and redistribution programs in history.  But it may not reach the self sustainment and require not just the massive tax rise, but a growing deficit to keep it going.

How to Cut Costs According to Economists

POSTED one month ago BY HEALTH CARE COMPACT

So what does drive down medical costs if mere insurance expansion cannot? Megan McArdle, writing in the Insurance Journal tries to address this question head on. The one thing that appears to work is reducing demand for medical services is hard times.  The Great Recession drove down the increase in medical costs because people put off going to the doctor.

“What about price controls,” asks McArdle. “ Medicare has held the line on prices, but utilization is high, so costs grew anyway. Private insurers have held the line on utilization, but had little success at controlling prices, so costs grew anyway. Medicaid has controlled both, but it’s not clear that this is a sustainable strategy. It’s quite hard to find a doctor taking new Medicaid patients, precisely because the reimbursements are so low.” “Which leaves us with technological change,” she writes.  But in public medicine innovation is sometimes viewed as a villain.

Cost growth, the argument goes, is largely driven by innovation. Not necessarily good innovation — quite a bit of time was spent denigrating Proton Beam facilities (used for cancer treatment) that cost in the tens of millions of dollars and don’t seem to do patients much good, yet whose total number is set to double between 2010 and 2014. And this is where I started to get nervous. Most participants agreed that if you want to control costs, you need to stop third-party payers from paying for new technologies — particularly Medicare, which is not very discriminating, and which makes it hard for private insurers to deny a treatment that the U.S. government has thereby endorsed. Several people argued rather hopefully that the government could do this — and maybe even would do this, with moves, in Medicare and Obamacare, toward bundled payments and “Accountable Care Organizations.” But no one offered any reason to believe that the government, or the ACOs, would only shut down bad innovation.

It may seem counterintuitive to think of innovation as bad, but remember that innovation is often disruptive. When “health reformers” talk about “evidence based medicine” they are embracing the virtues “existing, accepted treatments” whose effects are known and whose costs can be brought down.  The conflict between evidence-based medicine and innovation is highlighted by an article in the British medical journal Lancet, which denounced a bill which would give doctors greater latitude to deviate from regular treatments when patients were terminal.

On Nov 13, 2014, 100 prominent UK oncologists signed a letter to The Times stating they “neither want nor need” the Medical Innovation Bill tabled by Lord Saatchi—an unelected individual with no professional medical or scientific training—that is currently making its way through the House of Lords. These oncologists join almost every prominent British medical association in condemning the Bill. In about 600 words, the Bill tables a series of sweeping indemnities, which would see medical professionals exonerated for not following “the existing...accepted medical treatments...if the decision to do so is taken responsibly”. As defined by the Bill, acting responsibly includes having “obtain[ed] the views of one or more appropriately qualified doctors in relation to the proposed treatment”, and taking full account of these views as “any responsible doctor would”. A doctor may only depart from accepted medical treatment if it is with the patient’s consent, and certainly not “for the purposes of research, or for any purpose other than the best interests of the patient”.  …

This information may not stop pharmaceutical companies from promoting their treatment to medical professionals. Doctors could end up prescribing drugs that hurt their patients, only to find later that the toxicities were known, but undisclosed. Not only would this cause otherwise preventable harm to patients (clearly at odds with the founding tenet of medicine to “do no harm”), but could cause immeasurable psychological pain for doctors who believed they were providing the best care for their patients. And who would pay for these drugs outside a specially designated funding mechanism?

The Lancet article argues against a system of medicine which might save a few desperately ill people, but the price of disrupting the efficient delivery of regular healthcare for the masses.  After all, in the words of the fictional Mr. Spock, “the needs of the many outweigh the needs of the few”. “Existing, accepted treatments” can be delivered more cheaply, in assembly line fashion.  By discouraging the disruptive effects of innovation, costs can be brought down.

McArdle says the case against ‘overtreatment’ has not been proved citing economist Joseph Doyle of the Massachusetts Institute of Technology, who showed, by comparing the outcome of people who had received more rather than less treatment for a given disease, that those who got more care did better. Overtreatment is not as bad as it is made out to be. In a world without resource constraints, a patient who did not respond to “existing, accepted treatments” could try experimental ones without ‘taking away’ from anyone else.

Economist Jonathan Skinner on the other hand has made up his mind. He believes innovation is empirically the bane of cost control. “It may surprise you to learn that economists agree on why the fiscal outlook for health care is so dismal: the cause is the continued development and diffusion of new technologies, whether it’s new drugs for treating depression, left-ventricular assistance devices, or implantable defibrillators.” What Skinner wants to know is why innovation raises prices more frequently in the medical industry than in other fields, where it tends to depress the price.

Technology doesn’t raise prices in other parts of the economy. Improvements in computers provide better products at lower prices, and automobiles are an equally good example: after adjusting for consumer price inflation, my 1988 Volkswagen Jetta would have sold new for $22,600, more than the list price of a brand-new 2013 model. And I’d take the 2013 Jetta any day; it’s a much better car (my old Jetta lacked even a lap belt). …

In research with Amitabh Chandra at Harvard’s Kennedy School of Government, funded by the National Institute on Aging, I have been puzzling over why advances in medical technology lead the U.S. to spend more per person on health care than any other country in the world (see “We Need a Moore’s Law for Medicine”). We came up with two basic causes. The first is a dizzying array of different treatments, some that provide enormous health value per dollar spent and some that provide little or no value. The second is a generous system of insurance (both private and public) that pays for any treatment that doesn’t obviously harm the patient, regardless of how effective it is.

The availability of money -- say from Federal subsidies -- plus innovation is a toxic combination, he argues, because it creates a market that is insensitive to price.  With big insurance or big government buying from big pharma the result is big prices.  Skinner suggests a solution.

The implications for innovation policy are twofold. First, we should pay only for innovations that are worth it, but without shutting out the potential for shaky new ideas that might have long-term potential. Two physicians, Steven Pearson and Peter Bach, have suggested a middle ground, where Medicare would cover such innovations for, say, three years; then, if there is still no evidence of effectiveness, Medicare would revert to paying for the standard treatment. Like many rational ideas, this one may fall victim to the internecine political struggles in Washington, D.C., where it’s controversial to suggest denying even unproven treatments for dying patients.

There’s yet another alternative, advocated by Robert Garboyes of the George Mason University.  His answer to Skinners question is to suggest that we put more control in the hands of individual consumers and doctors so that medicine responds to market forces and individual choice.  In that way, the market can reward cost-effective innovation, not some Medicare committee.

https://www.youtube.com/watch?t=238&v=z4GCQ3bGzcI

But none of this is likely to happen under Obamacare.  Obamacare is big insurance, big government and big prices.

Bending the Cost Curve Part 2

POSTED one month ago BY HEALTH CARE COMPACT

If providing subsidized insurance to the public does not encourage them to seek more preventive care or shift to healthier lifestyles and thereby cut costs, what else can be tried?  Rising health costs are a feature of nearly all health care systems, not just the American one.  The Guardian reports that Britain’s single-payer National Health Service will be in deficit unless it is recapitalized with new public money.

The problem is general.  The European Steering Group on Sustainable Healthcare noted that unless they could change patient behavior, medicine would have to be rationed due to the aging population. By 2050, 37 percent of the European population will be over 60 years old.  “The status quo in healthcare is no longer an option. If we want to continue with health service in Europe that’s of high quality – universally acceptable to everybody on the same basis without care to be rationed – then we have to transform in a radical way the way (that) we provide services, how we intervene with patients at an earlier stage and how we empower citizens to take more control and manage their own health.”  Single payer -- any payer -- could not continue to afford it.

The problem, as Australian health pundits note, is that medical treatment is getting expensive far faster than any other product in the economy, as measured by the CPI or consumer price index.  Describing the Australian health system Stephen Duckett and Cassie McGannon noted, “government health spending grew 74% over the past decade, far faster than GDP, which grew by 46% above CPI.”  The Australian researchers note that the aging population is not the sole cause of rising costs.  

Received wisdom is that rising health costs are all about demographic change, but this is not true. Together, population growth and the ageing population structure accounted for only a quarter of government expenditure growth above CPI since 2002-2003. A further 5% of the growth comes from health inflation growing faster than CPI.

The rest of the increase is due to people of all ages getting more and more expensive services per person. On average, a 50-year-old now is seeing doctors more often, having more tests and operations, and taking more prescription drugs, than a 50-year-old did ten years ago. The quality of the treatment they are getting has improved in many cases, and there are new treatments that did not exist in 2003.

There’s no reason to think that this trend will slow down in the next ten years without major policy reform. Government health spending now consumes an additional 1% of GDP compared to a decade ago; this is projected to increase to 2% in the next ten years.

Economist Austin Frakt, writing in the New York Times, believes that advancing technological possibilities are partly responsible for the explosion in cost. There are treatments available today that never used to exist.  The problem is, these new treatments are expensive.  Creating subsidized insurance will do nothing to reduce cost.  All it will achieve in cost terms, Frankt says, is make dollars available to pay for these expensive treatments.

Health economists have shown that both insurance expansion and technology drive health spending upward. A few studies have teased out a deeper relationship between the two: By increasing the market for health care products (like prescription drugs and medical devices), coverage expansion encourages investment in health sector research and development. And, depending on what technologies are subsequently brought to the market, this can lead to more costly, though often better, care.

By increasing coverage, the Affordable Care Act will expand the market for prescription drugs and medical devices, so we might expect growth in new products. For example, Daron Acemoglu and Joshua Linn, in a study published in the Quarterly Journal of Economics, found that a 1 percent increase in a drug category’s potential market size was associated with a 6 percent increase in the number of new drugs entering the market in that category.

Frakt’s argument is corroborated by Chris Conover writing in Forbes. Conover, in a convincing economic analysis argues that Obamacare’s claims to have cut or slowed down costs are unfounded.  Changes in medical costs have largely tracked the growth of the US economy, Once the effects of depressed economic demand are factored in, there is no benefit that Obamacare can claim.

Here we go again. What is it about Obamacare that inspires its fiercest supporters the cherry-pick evidence as proof it is “working”?  The latest entrant in this never-ending contest is Matt Phillips, who trumpets the news “Obamacare fixed U.S. healthcare inflation.”  If true, this would be no mean feat since as we’ll see, medical inflation has outpaced general inflation rather regularly over the past half century, sometimes by as much as 6 percentage points in a single year.  But as we’ll also see, giving Obamacare credit for the recent slowdown in health prices is quite a stretch for two reasons: first, it fails to account for the fact that this downward trend was clearly visible years before President Obama was even elected president; and second, it fails to account for what was happening to the general economy and general inflation during the same time period.

Conover’s last chart isolates medical inflation from general inflation. “When general inflation is high, so is medical inflation. No surprise there. So what really matters is the extent to which medical inflation is outstripping general inflation. My final chart shows what happens when we subtract general inflation from medical inflation.”  By doing this Conover arrives at a measure of “excess” medical inflation -- and finds Obamacare has done nothing to bend the cost curve with subsidized insurance.

This provides a more realistic (and I would argue, far less rosy) picture of Obamacare’s impact on medical inflation. Admittedly, there is a lot of year-to-year variation, but in this chart, we can see even more clearly that a general downward trend in gradually  diminishing “excess” medical inflation began well before President Obama’s arrival in the Oval Office. And since Obamacare was enacted, at best this metric has been flat. And at worst, one can detect a slight upward trend rather than a continuation of the downward trend that had been in place for at least a half decade for President Obama  took office.  It’s a rather sizable stretch to point to this chart and argue it is proof that Obamacare has whipped healthcare inflation.

All of these suggest that the only thing Obamacare can achieve is expanding insurance coverage.  Judging by the experience of Romneycare, it will do little to improve preventive medicine.  It will do nothing to bend the cost curve.  It’s fundamental effect is income redistribution rather than health improvement.   That might be a laudable goal in itself, but it is not the objective that Obamacare set out to reach.

Bending the Cost Curve Part 1

POSTED one month ago BY HEALTH CARE COMPACT

Since cost is at the heart of Obamacare -- or any other health insurance -- it’s useful to review how it pays for the medical treatment of the American population.  The presumption that it is enough to extend “coverage” to the population ignores two important factors.  How much treatment is actually provided and with what effect and secondly, what it costs.

Jason Millman of the Washington Post notes that a long term study of the Massachusetts health care system -- the so-called “Romneycare” after which much of the ACA was patterned -- reveals where the concept falls short.  In an article titled “Where Romneycare fell short — and what that could mean for Obamacare”, Millman notes that it didn’t save any more nor improve health in the hoped-for places.

You would probably expect that more people having insurance means better access to primary care, meaning fewer people who would be hospitalized for avoidable conditions. However, the rates of preventable hospitalizations were practically the same in the first few years of the Massachusetts health reform, the researchers found. Further, blacks and Hispanics continued to have higher rates of hospitalization, and the disparity gap didn't narrow in a meaningful way.

"Because the national reform is really closely based on the Massachusetts reform, the results are concerning," said McCormick, also a primary care physician with the Cambridge Health Alliance system. …

The findings, though, might emphasize deeper shortcomings in the health-care system that an insurance card alone won't fix. Out-of-pocket costs for doctor visits and drugs may be preventing many of the newly insured from affording necessary primary care that would have otherwise kept them out of the hospital. Patients may have a hard time finding a doctor. And there are socioeconomic factors at play, like fewer community resources and lower levels of literary and English proficiency among the uninsured.

The lesson is that cost, both in monetary and ease of access terms, always matters in healthcare provision.  Insurance is, after all, only a means of increasing the affordability of treatment.  Once out of pocket and network narrowness constraints grow past a certain point, it cancels the  effect of insurance.  You become “insured, but not covered”.

One of the ways in which public health advocates have tried to make care affordable is giving public dollars to patients who cannot afford treatment themselves. One approach was for government to create special “high-risk pools” of uninsurable people and buy insurance for them.  The Pre-existing Condition Insurance Plan (PCIP) was a program which preceded Obamacare. “In response to the problems of uninsurable individuals, 35 states set up high-risk health insurance pools over a 25 year span, from 1976 to 2009.  Across these 35 states, the national enrollment was 226,615 by December 31, 2011.”

These high risk pools were phased out by Obamacare, which merged them into the general into the general insurance pool by providing that no one with pre-existing conditions would be turned away.  However, in order to prevent the general population from fleeing the arrival of the high risk individuals, the ACA created penalties to force people to remain in Obamacare.  This is the infamous “individual mandate”. But as Bruce Japsen points out, forced membership is a feature in all schemes which attempt to force actuarially dissimilar people to remain in the same pool.

Whether it’s a penalty to pick a drug plan under Medicare or the new Republican proposal to replace the Affordable Care Act or the President’s health law alone, penalties abound for being uninsured.

A new analysis by the Urban Institute said “individual responsibility” requirements akin to the controversial individual mandate included in the Affordable Care Act requiring individuals to buy coverage or face a tax penalty also exist in other health reform proposals and existing health insurance programs.

Some, like the Medicare Part D drug coverage for seniors and Medicare Part B’s physician services for the elderly, have been in place for years. Another, a new Republican proposal to replace the ACA, also has its penalties.

The so-called “Patient Choice, Affordability, Responsibility, and Empowerment Act” or PCARE, proposed by Republican Rep. Fred Upton of Michigan and GOP Sens. Orrin Hatch of Utah and Richard Burr of North Carolina would “impose strong penalties on the uninsured,” Urban Institute health policy researchers Linda Blumberg and John Holahan wrote in their analysis out this week called, “the New Bipartisan Consensus for an Individual Mandate.”

Unfortunately the arrival of the high risk individuals together with all the punitive measures required to prevent low risk people from fleeing leads to rising costs.  Grace Marie Turner in Forbes describes the Faustian bargain in taking in people who can’t pay.  By making things cheaper for the uninsurable, it is necessary to make things more expensive for the holders of regular insurance with whom they are commingled.   Turner describes the administration’s attempt to make ends meet.  The “temporary Pre-Existing Condition Insurance Plan is running out of money, and the Obama administration has closed enrollment to any new applicants, saying it needs the money that is left to cover the medical costs of the 100,000 people already enrolled through the end of the year.”

And the costs are significant:  The average cost per enrollee in 2012 was $32,108 a year.  But the costs varied widely by state, from a low of $4,276 per enrollee to a high of $171,909. Some patients have annual claims as high as $225,000 per person.

The Administration had already tried cost-cutting measures:  It raised the maximum a patient would have to pay out of pocket from $4,000 to $6,250 a year, cut what it pays providers, and limited the number of pharmacies that can dispense specialty drugs through the program.  It didn’t work.

The copayment and narrow network make their appearance very early on as a cost-saving measure to offset rises from standardized ACA packages which often exceed and at other times fall short of the individual needs of the buyer.  Similarly, costs arising from young healthy people fleeing the pool and or old and infirm people who buy insurance only when they need it need to be diffused in some way.

Obamacare saves no money in and of itself.  The long term hope of its architects is that it could somehow change patient behavior to allow the medical system to treat them more cheaply. As Jason Millman points out, Romneycare failed to do that.

Boston University School of Medicine researchers, looked at every single such hospital admission in Massachusetts in almost two years before and after the state's health-care law was enacted. They compared the results to three control states — New Jersey, New York and Pennsylvania — that didn't have a similar coverage scheme.

You would probably expect that more people having insurance means better access to primary care, meaning fewer people who would be hospitalized for avoidable conditions. However, the rates of preventable hospitalizations were practically the same in the first few years of the Massachusetts health reform, the researchers found. Further, blacks and Hispanics continued to have higher rates of hospitalization, and the disparity gap didn't narrow in a meaningful way.

If Romneycare couldn’t “bend the cost curve” by providing subsidized insurance there is little hope that Obamacare can.  That will be the subject of Part II of this series.  Can managing technological innovation cut health care costs?

Standing in the Way of Innovation

POSTED one month ago BY HEALTH CARE COMPACT

Grace Marie-Turner says in Forbes that even if states wish to hurriedly establish an exchange in the aftermath of a ruling against the government in King vs Burwell many pitfalls await them, citing Oregon as an example.

Some states are considering setting up their own exchanges so billions of dollars in tax subsidies can continue to flow to their citizens, even though leaders in Congress have pledged to provide them other options.

These states might want to study Oregon’s experience with its state exchange before taking further action to establish an exchange.

Oregon, under then-Gov. John Kitzhaber, aspired to create a shining model for other ObamaCare exchanges, but instead, it became its poster child of dysfunction. After spending more than $300 million in federal taxpayer dollars, Oregon pulled the plug last year and decided to default to the federal exchange.

However in Marie-Turner’s discussion of what went wrong with Oregon  -- or Maryland, Nevada, Massachusetts -- largely misses an essential point.  Why should states create their own exchanges simply to implement a monolithic Obamacare?  Why re-invent the wheel when it is the same wheel?  State exchanges make conceptual sense only if there is substantial variety between the offerings.  Otherwise they wind up being like fast-food franchises, differently as to location but serving the same old menu.

Nearly every Republican alternative to Obamacare emphasizes an important role for the states; substantive roles which go far beyond merely serving as conduits for federal subsidies.  For example, Ted cruz’s Health Care Choice Act would “allow residents in one state the option to purchase a health insurance plan of their choice in any other state”.

The bill is cosponsored by Sens. John Barrasso (R-WY), Mike Crapo (R-ID), Marco Rubio (R-FL), and David Vitter (R-LA). Rep. Marsha Blackburn (R-TN) has introduced companion legislation in the U.S. House of Representatives, H.R. 543.

The primary reason given for this philosophy is to foster competition in insurance markets, something which Obamacare has notably failed to achieve. "This bill is a true market-based reform that will make health insurance more personal and affordable, giving consumers the freedom to select plans that fit their needs, anywhere from Alaska to Texas to Vermont," the Cruz camp said.

But there is another reason why 50 marketplaces -- rather than 50 outlets of the same franchise -- is more desirable than a single, one size fits all Obamacare.  It is fostering innovation.  Greg Doyel of the Indystar tells the hearbreaking story of patients with Lou Gehrig’s disease, or ALS. “Amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease and Charcot disease, is a specific disorder that involves the death of neurons … characterized by stiff muscles, muscle twitching, and gradually worsening weakness due to muscle wasting. This results in difficulty speaking, swallowing, and eventually breathing.”

Doyel says the tragedy is that patients, who usually have no hope of survival, are precluded from trying emerging cures because of a gigantic federal health bureaucracy. “Doctors and scientists are working on new drugs, new technologies to combat ALS, but they are racing time, and every day another 15 or 20 Americans die of ALS. This battle, it's impossibly difficult. And too often, the government and the insurance companies are standing in the way.”

There is hope – and for an ALS patient, hope is a miracle. But the FDA is taking too long to move on this hope, this chance, this only chance for Maureen to hold off ALS. It's a drug called GM604, it was made by small California company called Genervon Biopharmaceuticals, and it has shown encouraging results in limited testing. To date Genervon has tested GM604 on a few dozen patients and has reported a significant slowing of ALS' awful progression.

There are ALS patients who want to take GM604, and they want to take it right now, but a decision on its approval could be a decade away. Despite calls from ALS advocates and a massive email campaign to U.S. senators and an opinion piece in the New York Times, the FDA hasn't put GM604 on an accelerated track that could lead to a far quicker decision. And until the FDA approves it, Maureen can't take it.

"What does she have to lose?" Jim Burakiewicz says.

What does an ALS patient have to lose? Nothing.  But as Health Care Compact advocates have been pointing out all along, illogical policy is a byproduct of a governance problem.  Because ironically the states are willing to let people like the Maureen of Doyel’s article try new drugs, but the feds won’t let go.

There is a glimmer now, but the FDA stands in the way. Gov. Pence signed the right-to-try bill last week, making Indiana the ninth to pass the legislation. The law gives terminally ill patients the opportunity to try drugs that have cleared the first phase of the FDA process.

Without FDA approval, though, there are insurance companies that wouldn't cover it, making GM604 too expensive for most people.

The Hoover Institution’s Clint Bolick examines the whole question of whether the states ought not take bigger role in deciding health care policy and choosing delivery systems.  It is the scientific equivalent of the economic competition that Ted Cruz advocates.  Bolick calls it the “right to try”.

A measure beginning to sweep through the states is offering new hope to patients with terminal diseases and their loved ones. Called “Right to Try,” the statutes establish the right of terminally ill patients to access certain experimental drugs prior to final approval by the Food and Drug Administration (FDA). For many people, Right to Try can make the difference between life and death.

Nearly everyone has a loved one who has suffered a terminal illness. Their instinct is to fight, to find a cure or at least a way to extend life. The amazing leaps and bounds of medical technology often fuel that hope. But too often, our government places obstacles in the path of making the hope a reality. …

The widely acclaimed Hollywood film Dallas Buyers’ Club focused national attention on regulatory barriers the FDA has erected between promising drugs and the patients who desperately need them. But efforts at the federal level to reform and streamline the FDA’s drug approval process repeatedly have failed.

Right to Try shifts the reform focus to the states and reverses the presumption that potentially life-saving drugs should be available only after federal bureaucratic dictates have been satisfied. Developed by the Goldwater Institute, Right to Try gives terminally ill patients the right to access drugs prescribed by their doctors that have satisfied phase I—the safety phase—of the FDA approval process, so long as the manufacturer is conducting clinical trials.

Ironically, the legal basis for the “right to try” is the US Supreme Court on the “right do die”. The court “upheld Oregon’s “Right to Die” initiative against a federal pre-emption challenge. Attorney General John Ashcroft argued that the state law was pre-empted by the Federal Controlled Substances Act. In a 6-3 decision, the Court narrowly construed the federal law, acknowledging that regulation of medicine is traditionally entrusted to the states”.

Let’s read that again: “regulation of medicine is traditionally entrusted to the states”.  And that is why state exchanges and medical systems should be more than just expensive, redundant delivery systems for Obamacare, no better than a fast-food franchise.  The Hoover Institute paper continues:

Indeed, states are free to go beyond the federal Constitution in guaranteeing rights to their citizens. Right to Try is the most recent in a series of efforts designed to create a “federalism shield” against abuses by the federal government. Two other Goldwater Institute proposals have been widely adopted. The Health Care Freedom Act protects the right of individuals to choose their own doctors and to not be forced to participate in a health insurance system. It was used by states to give them standing to assert their citizen’s rights in challenges to Obamacare.

Obamacare is a bad idea because it delivers institutional medicine at Michelin Three Star prices.  High premiums, narrow networks, astronomical co-pays and last, but not least, “restricted formularies” are reasons why this program is doomed in the end.  Progress in both the technical and economic aspects of medicine is driven by competition, not by a giant bureaucracy named after the sitting president.

Those Health Care Payment Reforms

POSTED one month ago BY HEALTH CARE COMPACT

The word “reform” in any policy description usually means one should be careful about what follows next. Drew Harris of the Jefferson School of Population Health claims that Obamacare is saving Medicare a lot of money by instituting new and innovative payment systems that provide quality care for less. “This week, the Department of Health and Human Services, the federal agency overseeing the massive Medicare program, announced a significant change in the way it pays doctors and hospitals. The goal is to tie most payments (85 percent in 2016 and 90 percent in 2018) to the quality and value of care rather than to the number of services rendered. This is called value-based purchasing.”

Value based purchasing means paying according to some metric, instead of per service performed.  The HHS determines how should be paid for a given profile of treatment and the providers try to hit these targets.

Under Medicare’s new payment arrangement, providers are paid less, if at all, when the service doesn’t deliver the expected value or quality. They won’t be paid for redundant or unnecessary tests and may even be penalized if inadequate care results in additional costs. In 2008, Medicare stopped paying hospitals for the costs associated with treating “never events” -- occurrences that should never have happened, such as instruments left in after surgery or a patient falling out of bed.

Recently, Medicare started cutting payments to hospitals with high readmission rates—large numbers of patients coming back for additional treatment within 30 days of discharge. In 2013, nearly 14 percent of hospitalized Medicare patients were readmitted less than one month after discharge at an estimated cost of $17 billion.

Payment systems like this have been around for a long time.  One of their unintended consequences is to penalize medical facilities which treat the poor. The reason for this is simple. Payments are based on a computed normative value. Consider the curve below for purposes of illustration. The area shaded in blue are those which exceed the benchmark.  That shaded in red falls short of the benchmark.  The problem is that hospitals which serve the poor are often less than the best, which may mean that “under Medicare’s new payment arrangement, providers are paid less, if at all, when the service doesn’t deliver the expected value or quality.”

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Andrew Ryan writes in the New England Journal of Medicine that “after years of small-scale pilot projects, demonstrations, and experiments, the Affordable Care Act mandated that Medicare payment to hospitals and physicians must depend, in part, on metrics of quality and efficiency. The first program to do so is Hospital Value-Based Purchasing (HVBP), which began affecting Medicare payments to acute care hospitals in October 2012.”  But one of the things it does is increase disparities in care.  Johns Hopkins will almost always qualify for reimbursement. An inner city hospital might not, but that might be the only facility available.

At the same time, there are concerns that such programs could exacerbate disparities in care associated with race and socioeconomic status. Perhaps most compelling of these concerns is that, through the distribution of bonus payments and penalties to providers, these programs could expand the quality gap in the care provided to more affluent and less affluent patients. Lower-performing providers tend to care for poorer patients and have a larger share of patients from racial or ethnic minority groups than do higher-performing providers.  If these providers receive lower incentive payments or face payment penalties, they may be less able to fund quality-improvement initiatives — an effect that could, in turn, increase race- and income-related disparities in care.

Ryan examined actually payments and found that hospitals in low-income areas, simply by using race and income as a proxy variable, got paid less. This is particularly interesting because Obamacare is notable for its narrow networks.  If you are in a network with lots of providers in a low-income area they stand to collect less.

I used linear regression to estimate the relationship between the DSH index value and both outcomes among 2981 hospitals that were eligible to participate in the first year of HVBP and that had valid data on the DSH index. The analysis did not adjust for hospital characteristics because it focused only on whether hospitals caring for more disadvantaged patients performed worse in HVBP, not whether caring for more disadvantaged patients actually caused hospitals to perform worse in the program.

Hospitals with a higher DSH index value had significantly lower Medicare payment adjustments (P<0.01) in the first year of HVBP (see Panel A of the figure

Relationship between Hospitals' Disproportionate Share Hospital (DSH) Index and Payments in the First Year of Hospital Value-Based Purchasing.), which resulted in a significantly more negative expected financial impact (see Panel B of the figure).

John Graham argues in Forbes that the real driver of these new “reforms” is to make the sure the right people get paid first.  Graham examines the bipartisan “doc fix” of Medicare, which is designed to restore funding some of which went over to Obamacare.  The main thing it does is replace the year-to-year fee increase of doctors with a 10 year fix which will blow out the deficit.  Rather than increase the fees $15 billion a year, they’ll do $200 billion for ten years.

Congressional leaders from both parties have agreed on a long-term, so-called “doc fix” that claims to solve the problem of how the federal government pays doctors who treat Medicare patients.

Currently, Congress has a certain amount of money every year to pay doctors. This amount of money increases according to a formula called the Sustainable Growth Rate (SGR), which was established in 1997. The SGR is comprised of four factors that (by the standards of federal health policy) are fairly easy to understand. Most importantly, the SGR depends on the change in real Gross Domestic Product (GDP) per capita.

The Medicare Part B program, which pays for physicians, is an explicit “pay as you go” system. Seniors pay one quarter of the costs through premiums, and taxpayers (and their children and grandchildren) pay the rest through the U.S. Treasury. Therefore, it is appropriate taxpayers’ ability to pay (as measured by real GDP per capita) be an input into the amount.

The problem is the amount is not enough. If growth in Medicare’s payments to doctors were limited by the SGR, the payments would drop by about one-fifth, and they would stop seeing Medicare patients. So, at least once a year, Congress increases the payments for a few months. The latest patch (H.R. 4302) was passed in March 2014 and runs through March 31, 2015. It costs $15.8 billion.

The most interesting part of Graham’s article deals with how Medicare has met its increases by saving money from some other part of the system called offsets.  Over the past few years the Medicare budget people have balanced the books by “saving taxpayers more than $130 billion from health care programs. Reforms have included expansions of bundled payments, equalizing payments for the same services done at different sites of care, more accurate payments for hospital services, bringing payments to Medicare Advantage plans more in line with the costs of traditional Medicare, recapturing unintended Affordable Care Act (ACA) premium subsidies, and reduced overpayments for services like clinical labs and advanced imaging. And then some of the savings have come from extending health care cuts already in place.”

If that sounds a lot like Drew Harris’ reforms, it is because it is.  Graham writes, “no wonder stories of this SGR fix being a lobbyist-fest are already coming out. National Review’s John Fund reported that UnitedHealth Group has hired a former aide to Representative Steny Hoyer, who has succeeded in inserting a policy rider that would favor the insurer in the Federal Employees Health Benefits plan.”

Much of the offsets appear to be due to increased federal control of how doctors practice medicine. This is gussied up in fancy language about paying doctors for value. There will be more acronyms: “In addition to measures used in the existing quality performance programs (PQRS, VBM, EHR MU), the Secretary would solicit recommended measures and fund professional organizations and others to develop additional measures.”

Whether more acronyms will improve physicians’ performance is debatable. However, what is not debatable is that the Secretary of Health & Human Services, Sylvia Burwell, is satisfied with the power that current law (that is, Obamacare) already gives her over doctors. Just weeks ago, she announced:

…… a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018.  HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.

Get the picture?  Many of the reforms -- though by no means necessarily all of them -- are basically ways to control money.  As to whether it will save the taxpayer money or give the patient better care, that remains to be seen.

Did Obamacare Save 50,000 Lives?

POSTED one month ago BY HEALTH CARE COMPACT

Graham Kessler at the Washington Post argues that Obamacare really did prevent 50,000 statistical deaths. How, by insuring people?  No.  By changing the way some hospitals provide outpatient care. Kessler writes that the problem was to establish causality between the Partnership for Patients program and the claimed reduced deaths:

The 50,000-number is derived from a study, released on Dec. 2, 2014, by the Agency for Healthcare Research and Quality, an arm of the Department of Health and Human Services.

The study looked at the impact of the Partnership for Patients, a $460-million program funded by the health law which ties together 3,800 hospitals in 27 “health engagement” networks, with the goal of reducing ten categories of “patient harms,” such as adverse drug events, pressure ulcers and catheter-associated urinary tract infections. The networks work together to identify possible solutions to common problems and then circulate those ideas among the various hospitals, with the goal of reducing preventable hospital-acquired conditions (HACs) by 40 percent and 30-day hospital readmissions by 20 percent.

The study admits that “the precise causes of the decline in patient harm are not fully understood,” but notes that “the increase in safety has occurred during a period of concerted attention by hospitals throughout the country to reduce adverse events” though programs like the Partnership for Patients. So a key question is whether the impact is coincidental or the result of the ACA.

The majority of the preventable deaths arose from two categories of possible mismanagement: “it turns out pressure ulcers and adverse drug events are responsible for nearly 65 percent of the reduction in estimated deaths—20,727 fewer deaths from pressure ulcers and 11,540 from adverse drug events. So can we draw a straight line from the Affordable Care Act to those saved lives? Administration officials argue that is correct.”

So under the ACA’s Partnership for Patients, greater scrutiny of supposedly low risk drugs and better patient management was implemented in hospitals.

Similarly, to thwart pressure ulcers, hospitals began paying closer attention to repeatedly turning patients, providing more appropriate mattresses, applying moisture barriers and repeated toilet assistance and keeping track of nutrition and hydration. …

As our colleagues at PolitiFact noted, in-patient deaths were already declining before the Affordable Care Act was implemented. The Centers for Disease Control and Prevention found a 60,000 decline in patient deaths in the decade before 2010. This is not quite the same statistic, but it indicates that before the ACA was passed into law, progress was already being made in reducing deaths from conditions acquired in hospitals.

But officials say there is also little question that the half-billion dollars in ACA funding sparked significantly greater cooperation among thousands of hospitals

That is hardly a straight line.  That there is any line at all is disputed by others.  First, as to the money.  According to Dan Diamond of California Healthline, the true figure is a billion dollars, not $460 million.  That billion dollar figure is echoed by Modern Healthcare. Secondly, according to an article in the New England Journal of Medicine, the causality cannot be supported.  Peter Pronovost, M.D., Ph.D., and Ashish K. Jha, M.D., M.P.H. address the issue directly in the article, “Did Hospital Engagement Networks Actually Improve Care?”

Everyone with a role in health care wants to improve the quality and safety of our delivery system. Recently, the Centers for Medicare and Medicaid Services (CMS) released results of its Partnership for Patients Program (PPP) and celebrated large improvements in patient outcomes.But the PPP's weak study design and methods, combined with a lack of transparency and rigor in evaluation, make it difficult to determine whether the program improved care. Such deficiencies result in a failure to learn from improvement efforts and stifle progress toward a safer, more effective health care system.

CMS launched the PPP in December 2011 as a collaborative comprising 26 “hospital engagement networks” (HENs) representing more than 3700 hospitals, in an effort to reduce the rates of 10 types of harms and readmissions. The HENs work to identify and disseminate effective quality-improvement and patient-safety initiatives by developing learning collaboratives for their member facilities, and they direct training programs to teach hospitals how to improve patient safety. In a February 2013 webcast, CMS announced that the rates of early elective deliveries had dropped 48% among 681 hospitals in 20 HENs and that the national rate of all-cause readmissions had decreased from 19% to 17.8%, though it is unclear which HENs were included for each measure and what time periods were the pre- and post-intervention periods.

These numbers appear impressive, but given the publicly available data and the approach CMS used, it's nearly impossible to tell whether the PPP actually led to better care. Three problems with the agency's evaluation and reporting of results raise concerns about the validity of its inferences: a weak design, a lack of valid metrics, and a lack of external peer review for its evaluation. Though the evaluation of many other CMS programs also lacks this basic level of rigor, given the large public investment in the PPP, estimated at $1 billion, and the strong public inferences about its impact, the lack of valid information about its effects is particularly troubling. …

Beyond using a poor design, CMS did not use standardized and validated performance measures across all participating hospitals — further hampering inferences about the program's effects. To support engagement, CMS allowed each HEN to define its own performance measures, with little focus on data quality control. …

CMS also required HENs and participating hospitals to submit a large number of process measures of unknown validity. … CMS also required HENs and participating hospitals to submit a large number of process measures of unknown validity.

Graham Kessler gives the Obamacare claim a coveted “Gepetto” in its Pinocchio scale, which means the claim is “the truth, the whole truth, and nothing but the truth” even though this view does not appear to be shared by a prestigious medical journal. Note that the NEJM uses the billion dollar figure in evaluating the cost of this Obamacare success story -- and point out what massive waste of resources it was to blow a billion on something which cannot even be accurately measured.

The PPP involved an investment of nearly $1 billion to improve care — three times the annual budget of the AHRQ, the lead federal funding agency for implementation science, which often lacks resources for promising projects. With such a sizable investment, CMS could have supported a better evaluation. It could have randomized HENs or hospitals to receive interventions earlier or later; used standardized, validated measures across the HENs; built in basic data quality controls; and independently collected qualitative information alongside quantitative data to learn not just whether the interventions worked but also how and why they did, thereby advancing our understanding of the mechanisms and context of improvement science. These changes would have allowed the country to learn so much more.

The Washington Post “fact checking article” is of dubious value.  It may be the case that the Patient Protection program has benefited patients, but the methodology used makes it difficult to state the case.  Even if the claims are true it cost $20,000 per life saved to induce hospitals to be more careful about outpatient care.  While every life saved is something to be treasured Obamacare’s PPP is a helluva way to run a railroad.

Obamacare is Doomed

POSTED one month ago BY HEALTH CARE COMPACT

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

POSTED one month ago BY HEALTH CARE COMPACT

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 HealthCare.gov.”

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 HealthCare.gov 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.

1427290263_ExchangePlansbyIncome.jpg

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

POSTED one month ago BY HEALTH CARE COMPACT

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

POSTED one month ago BY HEALTH CARE COMPACT

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

POSTED one month ago BY HEALTH CARE COMPACT

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

POSTED about 2 months ago BY HEALTH CARE COMPACT

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.

 

Poll

Date

Sample

For/Favor

Against/Oppose

Spread

RCP Average

2/13 - 3/5

--

42.0

52.5

Against/Oppose +10.5

NBC News/Wall St. Jrnl

3/1 - 3/5

1000 A

37

44

Against/Oppose +7

FOX News*

3/1 - 3/3

1011 RV

38

58

Against/Oppose +20

Reuters/Ipsos

2/27 - 3/3

2348 A

46

54

Against/Oppose +8

Rasmussen Reports*

2/28 - 3/1

1000 LV

44

52

Against/Oppose +8

Pew Research

2/18 - 2/22

1154 RV

43

55

Against/Oppose +12

CBS News

2/13 - 2/17

1006 A

44

52

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.

kaiser_custom-70acc7eb0cf04fcc1b3c0df964a4132fd39090b1_t1200.png

 

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 million....it 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

POSTED about 2 months ago BY HEALTH CARE COMPACT

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

POSTED about 2 months ago BY HEALTH CARE COMPACT

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

POSTED about 2 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov.

“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

POSTED about 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov, 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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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 telegraph.co.uk, 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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov, 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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov. 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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov 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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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?

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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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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.

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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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED 2 months ago BY HEALTH CARE COMPACT

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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov 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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov 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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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 healthcare.gov. …

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 HealthCare.gov 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 HealthCare.gov 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 HealthCare.gov 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 HealthCare.gov 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 HealthCare.gov 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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov 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 Healthcare.gov. 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 Healthcare.gov 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

POSTED about 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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 HealthCare.gov 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.

 

17-obamacare-graph2.nocrop.w529.h408.png

 

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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 Vox.com 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

POSTED 3 months ago BY HEALTH CARE COMPACT

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 healthcare.gov 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

POSTED 3 months ago BY HEALTH CARE COMPACT

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 healthcare.gov 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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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.

Deductibles

Employer

Obamacare silver plan

$1,217

$3,453

 

Co-pays per visit

Employer

Obamacare silver plan

Primary care

Specialist

Primary care

Specialist

$24

$36

$28

$56

 

Drugs representative cost

Employer

Obamacare silver plan

Generic

Preferred

Generic

Preferred

$11

$31

$13

$47

 

Annual maximum ceiling on out of pocket

Employer

Obamacare silver plan

$3,011

$5,826

 

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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 healthcare.gov 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

POSTED 3 months ago BY HEALTH CARE COMPACT

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

POSTED 3 months ago BY HEALTH CARE COMPACT

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.

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