Obamacare’s Pre-Existing Contradictions

The Huffington Post reported late Friday that, effective today, the Administration is ending a program giving $100 fees to insurance agents and brokers that refer customers to Obamacare’s new high-risk pool for individuals with pre-existing conditions.  Last May, the Administration instituted a $100 broker referral fee in an attempt to increase otherwise underwhelming enrollment in the high-risk pool program.  One individual active among insurance brokers provided an interesting explanation as to why the Administration discontinued the referral fee program: “They [i.e., the Administration] said enrollment’s up to where we want it to be, basically, and we don’t need your [i.e., brokers’] services anymore.”

According to the most recent data released by the Administration, 56,257 individuals with pre-existing conditions are enrolled in the federal high-risk pool program established under Obamacare.  Six states have enrollment of fewer than 100 individuals – the District of Columbia’s pool, for instance, has but 44 enrollees.  The current enrollment data do not come anywhere close to earlier projections – the Medicare actuary originally projected enrollment at 375,000 individuals in 2010, and Congressional Budget Office estimated up to 700,000 individuals would attempt to enroll in the program by next year.

Two key points follow from the underwhelming enrollment in the pre-existing condition coverage, and the Administration’s claims enrollment is satisfactory:

  1. It’s difficult for the Administration to argue that 129 million individuals have pre-existing conditions and “could be denied affordable coverage.”  The 56,257 individuals enrolled in the new federal high-risk pool as of February 29 represent only .04% of the total number of Americans the Administration claimed suffer from pre-existing conditions.
  2. Obamacare spends $2.6 trillion in its first decade of full implementation, largely to ensure that those with pre-existing conditions have access to coverage.  At this rate and based on these metrics – $2.6 trillion in spending, and 56,257 participants – the federal government will spend $4,621,647.08 per year for every person with pre-existing conditions newly enrolled in coverage.  That’s not just enough money to buy each person with pre-existing conditions a platinum-plated insurance policy – that’s enough to buy each one a small hospital.

That the Administration is content with high-risk pool enrollment of just over 50,000 persons with pre-existing conditions shows that the problem of individuals with pre-existing conditions is real, but not insurmountable.  More to the point, it doesn’t take a 2700-page, $2.6 trillion law the American people didn’t need or want – taking away the health coverage of millions in the process – to provide access to about 56,000 individuals with chronic or pre-existing conditions.

Flawed Medicaid Study Leads to Flawed Conclusions

On Wednesday, Bloomberg published an article regarding a new Bloomberg Government study surrounding state spending on Medicaid.  The study (subscription required) alleges that Medicaid costs are growing less than state budgets as a whole.  However, the study’s headline conclusion only examines state general fund spending on Medicaid, not overall state spending on Medicaid.  And the report admits that, if ALL state spending is taken into account, Medicaid spending grew significantly during the past decade:

The increase in state Medicaid spending over the past decade was greater if one includes what the state budget officers’ association calls “other state funding,” which it defines as “other funds and revenue sources used as Medicaid match, such as local funds and provider taxes, fees, donations, assessments”….If one includes spending on Medicaid from other state funds, Medicaid costs grew by 54 percent from 2002 through 2011, one-third more than total statewide expenditures excluding bonds.

In other words, the study’s major conclusion is incorrect; when examining ALL state spending, Medicaid expenditures have increased faster than those on education, corrections, transportation, etc.

The Bloomberg study attempts to justify its focus on general fund spending by stating that other forms of state spending are merely gimmicks designed by states to get additional federal matching funds.  It is true that both conservatives and liberals have opposed various provider taxes – where states raise taxes on hospitals and other providers, draw additional federal matching funds, and pass those matched funds right back to providers – as an abusive gimmick.  That is why the Bush Administration in 2007-08 proposed several major regulations attempting to crack down on these abuses – regulations which Democrats in Congress blocked through legislative action.

But what the Bloomberg study misses is the fact that new maintenance of effort mandates imposed by the Obama Administration have forced states to resort to provider taxes and other similar “gimmicks” as a way to mitigate the effects of Washington’s additional mandates.  Thanks to the mandates in Obamacare, states cannot raise co-payments, trim beneficiary rolls, or even engage in anti-fraud activities as a way to control rising Medicaid expenditures.  Because Obamacare has taken away states’ freedom to manage their own Medicaid programs in a way that could help contain costs, many states have resorted to provider taxes and other budgetary gimmicks to offset this Washington-mandated spending.  According to the Kaiser Family Foundation, 16 additional states have imposed new provider taxes on hospitals between 2009-2012 – actions which reflect states attempting to use any means necessary to alleviate the harmful effects of Obamacare’s at least $118 billion in unfunded mandates.

Some would argue the solution to this problem would involve Congress eliminating BOTH the Medicaid “tax gimmicks” AND the Medicaid mandates in Obamacare that have forced many states to resort to such gimmicks – not to assume that one washes out the other and there is no problem that needs addressing.  Therein lies the Bloomberg study’s critical flaw, in presuming that two Medicaid wrongs – new federal mandates, and the tax gimmicks states have used to mitigate the harmful effects of those mandates – somehow combine to create a policy right.

The REAL Story Behind Obamacare’s Failed Premium Promise

This morning the Kaiser Family Foundation released a report claiming individuals will receive $1.3 billion in rebates under Obamacare’s new medical-loss ratio regulations later this summer.  A Bloomberg article this morning, quoting analysts from Goldman Sachs, cites the number at $1.2 billion.  The Kaiser study – which stated rebates would average $72-127 for the small percentage of individuals who actually receive them – admitted that the overall rebate levels are “not particularly large in many instances.”

While these rebates represent a prime political opportunity for the President to claim Obamacare is “working” during his re-election campaign this summer, the rebates ignore the bigger story about Obamacare – which is the law’s significant failure to LOWER premiums for all Americans by $2,500, as candidate Obama repeatedly promised.  For instance, in a speech on February 27, 2008, he said that “We’re going to work with you to lower your premiums by $2500 per family per year.  And we will not wait 20 years from now to do it or 10 years from now to do it.  We will do it by the end of my first term as President.”  Likewise, in July 2008, Jason Furman – who remains a senior economic advisor within the Administration – told the New York Times that “we think we could get to $2,500 in savings by the end of the first term, or be very close to it.”

Yet as the below chart demonstrates, while candidate Obama promised that premiums would go DOWN by $2,500, they actually have gone UP by nearly as much – from $12,680 in 2008 to $15,073 in 2011, according to Kaiser data.  Multiply that nearly $5,000 difference (i.e., between the $2,500 premium reduction promised and the $2,400 premium increase received) by more than 100 million American households and you have a broken promise amounting to TRILLIONS of dollars to middle-class families around the country.

When compared Obamacare’s many trillions of dollars in promised premium reductions that did not arrive, a little over one billion dollars in medical-loss ratio rebates is a relative pittance to families struggling to pay their rising premiums.  Or, put another way, a $127 rebate won’t even begin to make up for the $2,400 in premium increases families in employer plans have faced just since Barack Obama was electedThat’s the real story of Obamacare’s failure to deliver.

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

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

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

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

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

Comparing Deficits: Medicare and Greece

In case you haven’t been watching the stock ticker closely today, most broader market indicators are down significantly, due once again to events in Europe.  Among these were today’s release of updated economic and fiscal data for members of the European Union released by Eurostat, the EU’s statistics agency.  The new data found that last year, Greece ran a fiscal deficit of €19.6 billion, or about $25.7 billion at current exchange rates.  Compare that to Medicare, which according to the trustees report ran an even greater deficit ($27.7 billion) in 2011.  In 2010, Medicare also incurred a larger fiscal deficit than the Greek government – Greece ran a budget deficit of €23.5 billion ($30.8 billion), whereas Medicare’s deficit was a whopping $32.3 billion.

As the chart below shows, the Medicare Hospital Insurance Trust Fund is scheduled to run deficits throughout the upcoming 10-year period – and every year thereafter.  And under the high-cost scenario (the pink bars in the graph), the Medicare trust fund would run out of cash in 2017, just five short years from now.

Given all this, it’s again worth asking: Where is the Democrat plan to stop all this fiscal bleeding?  Some liberals argue that America is not like Europe, and does not face an impending fiscal calamity.  But if Medicare is running larger deficits than the Greek government, and Senate Democrats refuse even to vote on a fiscal blueprint in the form of a budget, how will America NOT end up like the Greeks – facing an economic collapse brought on by unsustainable burdens of debt?

Key Points from Today’s Medicare Trustees Report

The official Medicare trustees report has now been posted online here.  Here’s a quick take about what you need to know in the report:

  1. Insolvency One Year Closer:  Contrary to predictions made in this space this morning, the insolvency date for the Medicare Hospital Insurance Trust Fund remains at 2024 – despite the 2% sequester cuts scheduled to take effect beginning in January.  In other words, if not for the sequester cuts insisted on by Congress, Medicare’s financial stability would have deteriorated even further.  As it is, we’re still one year closer to Medicare running out of IOUs to cash in to pay its bills (see #3 below).
  2. Obama Economy Making It Worse:  As the Associated Press noted, “Social Security’s finances worsened” – and Medicare’s finances did not improve, sequester notwithstanding – “in part because high energy prices suppressed wages, a trend the trustees see as continuing.  The trustees said they expect workers to work fewer hours than previously projected, even after the economy recovers.”  President Obama’s poor economic record is not only harming workers today, it will harm future generations – seniors in current entitlement programs that are less secure, and children and grandchildren forced to pay the bills for skyrocketing spending – for decades to come.
  3. Deficits as Far as the Eye Can See:  The report once again confirms that the Medicare program is already contributing to the federal deficit, will continue to do so throughout the coming decade, and forever thereafter.  Since 2008, the program has run cash flow deficits; this year’s deficit is expected to total $28.9 billion.  The only thing keeping the program afloat financially is the sale of Treasury bonds in the Medicare Trust Fund – and the redemption of those paper IOUs increases the federal deficit.
  4. Funding Warning:  For the seventh straight year, the trustees issued a funding warning showing that the Medicare program is taking a disproportionate share of its funding from general revenues, thus crowding out programs like defense and education.  While in theory this development should prompt the President to follow his statutory requirement to submit legislation remedying this funding shortfall, the White House has previously refused to do so – relying instead on a signing statement by President Bush to ignore the need for Medicare reform (and also breaking the President’s campaign promises in the process).
  5. Unrealistic Assumptions:  For the third straight year since the passage of Obamacare, the report features a statement of actuarial opinion by the non-partisan Medicare actuary (pages 277-279 of the report), who says “the financial projections shown in this report…do not represent a reasonable expectation for actual program operations.”  The actuary will again issue an alternative scenario for Medicare’s unfunded obligations that he views as more realistic, because the major source of Medicare payment reductions in Obamacare may not be sustained over a long period of time.
  6. Double Counting:  The actuary also previously confirmed that the Medicare reductions in Obamacare “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund” solvency date – rendering dubious any potential claims that Obamacare will extend Medicare’s solvency.  As Speaker Pelosi admitted last year, Democrats “took a half a trillion dollars out of Medicare in [Obamacare], the health care bill” – and you can’t improve Medicare’s solvency by taking money out of the program.
  7. Massive Tax Increases:  Today’s report again confirms that Medicare’s finances are also being bolstered by the extension of the health care law’s “high-income” tax – which is NOT indexed for inflation – to more and more individuals over time.  Page 30 of the report notes that “by the end of the long-range projection period, an estimated 80 percent of workers would pay the higher tax rate.”  As JEC recently reported, these tax increases are part of the $4 trillion in “revenue enhancements” over the next 25 years taking place thanks to Obamacare.  When Democrats talk about raising taxes to reduce the deficit, keep in mind that they have already raised taxes in a way that will harm middle-class families over time – and that those tax increases were used not to reduce the deficit but to pay for new and unsustainable entitlements.
  8. Seniors Losing Coverage, Part I:  Table IV.C1 of the report notes that millions of seniors will lose their current Medicare Advantage plans – enrollment is projected to fall from 13.5 million this year to 9.7 million by 2017.  However, thanks to the waiver/demonstration program announced by the Administration, and criticized by the Government Accountability Office in a report this morning, enrollment in Medicare Advantage will not begin falling until after the President has completed his re-election campaign.
  9. Seniors Losing Coverage, Part II:  Table IV.B10 of the report re-stated prior projections that enrollment in employer-sponsored retiree drug plans will fall from 6.8 million in 2010 to a mere 800,000 by 2016 – a drop of nearly 90%.  This rapid decrease in enrollment occurs thanks to provisions in Obamacare that raise taxes on employers who continue to offer retiree drug coverage.


Unfunded Obligation Projections for 75-Year Budget Window (2012-2086)

  2009 Trustees’ Report pre-Obamacare

(in trillions)

2011 Trustees’ Report (in trillions) 2011 Alternative Scenario (in trillions) 2012 Trustees’ Report (in trillions) 2012 Alternative Scenario (in trillions)
Part A (Hospital Insurance) $13.4 (1.7% of GDP) $3.0 (0.3% of GDP) $8.3 (0.9% of GDP) $4.8 (0.3% of GDP) Not Yet Released
Part B (Obligations less beneficiary premiums) $17.2 (2.2% of GDP) $13.9 (1.6% of GDP) $21.0 (2.4% of GDP) $14.8 (1.6% of GDP) Not Yet Released
Part D (Obligations less beneficiary premiums and state “clawback” payments) $7.2 (0.9% of GDP) $7.5 (0.8% of GDP) $7.5 (0.8% of GDP) $6.8 (0.7% of GDP) Not Yet Released
TOTAL $37.8 (4.8% of GDP) $24.4 (2.8% of GDP) $36.8 (4.2% of GDP) $26.4 (2.9% of GDP) Not Yet Released


GAO Study Exposes Bogus Obamacare Savings

Ahead of this afternoon’s release of the official Medicare trustees report, the Administration is out with its own “study” attempting to put a positive spin on Obamacare’s impact on Medicare.  The report claims that Obamacare will “save” $200 billion between now and 2016.  However, those claims are based on spending reductions that the non-partisan Medicare actuary believes “would become unsustainable and that Congress would likely override or modify them.”  If the spending reductions are not overridden, the actuary has stated that 15 percent of hospitals and other providers could become unprofitable by 2019, and up to 40 percent of providers could become unprofitable in the long term.

A Government Accountability Office (GAO) report released today makes this exact point – illustrating how the Obama Administration created an $8 billion Medicare Advantage demonstration program that overrides many of Obamacare’s cuts.   GAO found that this massive demonstration project “is at least seven times larger than that of any other Medicare demonstration conducted since 1995 and is greater than the combined budgetary impact of all of those demonstrations.”  According to GAO, the demonstration “precludes a credible evaluation of its effectiveness,” and is instead focused on shelling out money to temporarily undo much of Obamacare’s cuts – a whopping 71% of Obamacare’s Medicare Advantage cuts will be undone in 2012, compared to just 32% in 2013 and 16% in 2014. (Can anyone think of a reason why the Obama Administration might want to undo the Medicare Advantage cuts this year…?)  For all these reasons, as a New York Post op-ed this morning noted, the demonstration program looks suspiciously like a political attempt by the President to avoid angering seniors by cutting Medicare Advantage while running for re-election.

The GAO report proves how the Administration’s study is fundamentally flawed.  The Administration report assumes all the Medicare spending reductions will go into effect, but the GAO report illustrates how the Obama White House has already reversed one of the major spending reductions – the Medicare Advantage cuts – in order to fend off political dissent during the President’s re-election campaign.  The Associated Press previously reported on the Medicare Advantage demonstration last year, noting that the program “could head off service cuts that would have been a [political] headache for Obama and Democrats in next year’s elections.”  Even a former Democrat staffer who worked in the Clinton Administration admitted that the effort amounted to a political stunt: “It’s fair to say that [Medicare] could not tolerate dislocation, given the political climate.”

While Obamacare’s spending reductions are subject to alteration for political purposes, the new spending on the law’s massive new entitlements are sacrosanct, and virtually guaranteed to take effect if President Obama remains in office.  Of course, undermining the spending reductions while keeping the new spending would make the entire law, and Medicare itself, even more fiscally unsustainable than the status quo.  That’s why, when it comes to today’s dueling reports, don’t believe what the Administration says in its spin-laden study – look at what it already did to undermine politically unpalatable spending reductions.

What You Need to Know about Today’s Medicare Trustees Report Release

Later today the Medicare trustees will release their annual report on the state of the program’s finances.  The report is expected to show a slight improvement in Medicare’s solvency, due largely to the 2% Medicare provider cuts expected under sequestration beginning next year.  Three important points to bear in mind:


  • Republicans, NOT Democrats, were the ones who insisted on the spending reductions that led to today’s improvement in solvency projections.  Many believe the sequester is an imperfect mechanism for achieving spending reductions.  That said, if Congress had followed the Obama Administration’s initial guidance and rubber-stamped a $2 trillion-plus increase in the debt ceiling without any spending reductions, today’s report would have shown a worse financial predicament for Medicare.  Last year, Secretary Geithner and other Administration officials said it was “critical” and “imperative” that Congress raise the debt limit without being “held hostage” to spending reductions: “Our very strong view is that the debt limit should be passed as a clean, standalone bill.”  Yet today, Secretary Geithner and others within the Administration will try to spin how they are FOR today’s slight improvement in Medicare’s financial picture – without pointing out that they were AGAINST passing any spending reductions at all last year.  Some may find this flip-flop slightly hypocritical.
  • Conversely, in Obamacare Democrats chose to use Medicare savings NOT to reduce the deficit or improve Medicare’s solvency, but instead to create unsustainable new entitlementsSpeaker Pelosi said it best last year in an interview when she admitted that Democrats “took a half a trillion dollars out of Medicare in [Obamacare], the health care bill” to pay for more unsustainable new entitlements.  Even President Obama, in an interview with Fox News, admitted that “You can’t say that you are saving on Medicare and then spending the money twice.”
  • Today’s slight improvement in solvency notwithstanding, Medicare is on an unsustainable path, and needs fundamental reform NOW.  Some in the Administration and elsewhere may attempt to use the slight improvement in the program’s finances as an excuse to delay, or even eliminate, additional reforms to the program – which would be a grave mistake for America’s seniors.  The Congressional Budget Office’s March 2012 baseline shows Medicare will run budget deficits forever – this even after taking into account the impact of the 2% budget sequester.  That is not a record the trustees or Congress should attempt to trumpet – because what business would be proud of a balance sheet that shows cascading losses in perpetuity?  While Congress should be working NOW to reform the Medicare program, Senate Democrats are instead reaching the 1,100 day mark on their abdication of leadership, failing to pass a budget and take the tough choices needed to get our fiscal house in order.



We will of course have additional insights and analysis once the report is released later today.

Democrats Man the Obamacare Lifeboats

This week people around the world have been commemorating the centenary of the sinking of the Titanic.  The timing of this inauspicious anniversary seems rather appropriate, since, as The Hill notes this morning, Democrats have finally figured out that their 2700-page health care monstrosity hit a metaphorical iceberg with the American people, causing many to abandon ship:

Rep. Brad Miller (D-NC): “I think we would all have been better off — President Obama politically, Democrats in Congress politically, and the nation would have been better off — if we had dealt first with the financial system and the other related economic issues and then come back to healthcare.”
Rep. Dennis Cardoza (D-CA): Obamacare should have been done “in digestible pieces that the American public could understand and that we could implement.” (Keep this quote in mind the next time someone asks why Republicans don’t have a 2700-page Obamacare “alternative.”)
Rep. Barney Frank (D-MA): “I think we paid a terrible price for healthcare….I would not have pushed it as hard. As a matter of fact, after [Sen.] Scott Brown [R-Mass.] won [in January 2010], I suggested going back. I would have started with financial reform, but certainly not healthcare.”
Sen. Jim Webb (D-VA): “I’ll be real frank here…I think that the manner in which the health-care reform issue was put in front of the Congress, the way that the issue was dealt with by the White House, cost Obama a lot of credibility as a leader.”
Rep. Norm Dicks (D-WA): “It [Obamacare] did hurt us, there’s no doubt about it. The climate out there was really ugly because of it.”

Former Rep. Artur Davis (D-AL): “I think [Obamacare] is the single least popular piece of major domestic legislation in the last 70 years. It was not popular when it passed; it’s less popular now….I think the worst thing that could happen to Barack Obama’s reelection campaign would be if he had to spend four months this fall explaining what ObamaCare 2 would look like.”
Both individually and collectively, these quotes from Democrat Members of Congress bring to mind several key points.  First, whatever happened to “Those who voted for healthcare will find it an asset and those who voted against it will find it a liability?”  (Apparently these Democrats haven’t gotten word about the “Heck yeah, I like Obamacare” memo either.)  Second, with “friends” like this, does Obamacare really need enemies?  Not that the law is lacking for opponents, because – as Republicans have said all along, and events this week have proved – the only thing bipartisan about the 2700 page law has been the opposition to it.

Obamacare and Judicial Activism

Writing in the Wall Street Journal this morning, columnist Alan Blinder repeated familiar Democrat talking points about the Supreme Court and judicial activism.  Discussing the interplay between Obamacare’s individual mandate and the insurance “reforms” included in the law, Blinder asked “what happens if the justices void the mandate but leave the insurance reforms in place?  The answer is: We get incoherence.  Which, of course, is why you don’t want judges making economic policy.”

On this point, Blinder is half-right at least.  Judges should NOT make economic policy.  But the “solution” to the problem of judges not making economic policy should not involve blithe acceptance of a new and unprecedented mandate for individuals to buy a product as a condition of their existence, merely because Congress said the mandate was “essential” to make the law’s otherwise unsustainable new regulations work.

Rather, the position that does not involve judges making economic policy was one adopted by Republican senators in an amicus brief to the Court – namely, that if the Court strikes down the individual mandate, all of Obamacare must necessarily fall.  In the absence of such a ruling from the Court, the alternatives have ranged from the speculative – i.e., what parts of the law would be fiscally sustainable without the mandate? – to the seemingly absurd – Justice Breyer’s self-described “pipe dream” attempting to have lawyers argue what parts of Obamacare’s 2700-page Humpty Dumpty could be put back together again. (Because really, do we need MORE backroom deals involving Obamacare…?)

To Democrats mortified at the prospect of the Court striking down all of Obamacare, we can offer three helpful hints:

  1. If you want portions of the law to be severed if struck down, include a severability clause.  Democrats had every chance to do so – the House version of Obamacare included such language – but didn’t.  Liberals have absolutely no right to blame the Supreme Court if the Court decides to strike down the entire law, rather than trying to pick and choose which provisions to keep, in what would likely be a futile attempt to try and “fix” the mess Democrats themselves created.
  2. Read the bill.  While judges should in no event make economic policy, it’s somewhat difficult to argue that Congress is better placed to do so when multiple Members state publicly that reading the bill is a waste of time, because “we have to make judgments very fast,” and because “we hire experts” to read the bill instead.  Reading the bill is also helpful in ascertaining prior to passage whether a severability clause may be needed.  (See point #1 above.)
  3. If you ever again get tempted to pass a 2700-page bill the American people don’t support, just.  Don’t.  Thankfully, some Members of Congress may have already learned that lesson – the hard way.