Health Costs to Rise Again Next Year

Reuters reports this morning on a study issued by PriceWaterhouseCoopers today, outlining projected trends in the growth of health spending for 2013.  The report predicts a medical cost trend increase of 7.5% in 2013.  As the Reuters story notes, this trend rate is “more than three times the projected rates for inflation and economic growth,” estimated at 2.4 percent and 2.0 percent next year, respectively.  The only piece of “good news” in the report is that employer premium costs may rise by “only” 5.5 percent – because employers will raise things like co-payments and deductibles to avoid passing on the full impact through premium hikes.

Recall that candidate Obama repeatedly promised premiums would go down by $2,500 – and would go down that amount by this year.  For instance, in a speech on February 27, 2008, he said that “We’re going to work with you to lower your premiums by $2,500 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.”  Today’s report – which shows costs and insurance premiums continuing to rise unabated – once again demonstrates how Obamacare is failing to live up to candidate Obama’s stated promises.

California Survey Provides a Vision of the Future Under Obamacare

The California Health Care Foundation released a survey of California Medicaid patients earlier today.  The press release regarding the survey highlighted the fact that a large percentage of enrollees have a favorable impression of the California Medicaid program – perhaps because Medicaid coverage comes with no premiums and no, or very little, cost-sharing.  However, a closer look at the survey data reveals that California Medicaid suffers from significant access problems:

  • More than two in five (42%) California adults in Medicaid had difficulty getting an appointment with a specialist, compared to 24% with private coverage.
  • Nearly half (47%) of all beneficiaries in poor health said it was difficult to find specialists accepting their insurance – a rate more than twice as high as those adults with other health coverage (23%).
  • More than one-third (34%) of all California Medicaid enrollees in excellent, very good, or good health were forced to make a trip to the emergency room in the past 12 months, compared to just 14% of those with other coverage.
  • More than half (55%) of all Medicaid enrollees in fair or poor health visited the emergency room at least once in the past year, compared to only one-quarter (25%) of those in poor health with other coverage.  The high rate of emergency room visits among Medicaid patients illustrates the problem with access to regular care in the Medicaid program, as patients are forced to utilize the more costly ER instead.

With access issues like this, it’s far from clear how the Medicaid program in California – to say nothing of other states – will be able to handle the nearly 26 million more individuals being added to the program by Obamacare.  The ranks of Medicaid beneficiaries facing severe access problems are only likely to rise in the coming years, as Obamacare adds yet more people to this broken program.

The Debt Young Americans Should REALLY Care About

Writing in today’s Washington Post, occasional columnist Bryan Lawrence analyzes the perilous financial state of Medicare.  He notes that while Americans think that their Medicare benefits are fully “earned,” in reality payroll taxes only cover about half the program’s cost:

Medicare is a transfer of wealth from younger to older Americans.  As long as the baby boomers were working and paying taxes, their large numbers made this transfer to their parents and grandparents affordable.  But the boomers began to retire last year.

Recent work by the Urban Institute calculates the amount of the transfer to an average retiree.  An American man retiring in 2011 could expect to receive Medicare benefits worth $170,000 (in 2011 dollars).  If he had worked from age 22 at the average U.S. wage each year, he would have paid Medicare taxes (plus interest) worth $60,000 (also in 2011 dollars).  So the average male worker retiring in 2011 will receive benefits worth almost three times what he paid in.  And the transfer to that retiree will be $110,000 from younger Americans, perhaps including his grandchildren….

Would Americans be as satisfied with Medicare if we were reminded each year about the hundreds of thousands of dollars that our retirement will cost our grandchildren?

That Medicare represents a massive transfer of wealth from the young to the old is a fact many Americans remain unaware of – but one that should cause future generations significant pause.  Even as the Administration attempts to manufacture a political conflict on student loans this election season, many younger Americans should also be worried about their share of trillions of dollars in entitlement debt – obligations that young people will face in the future, because today’s politicians do not have the courage to reform our outdated and unsustainable entitlement programs.

How 13.5 Million People Could Lose Their Current Coverage

America’s Health Insurance Plans is out this morning with its annual survey of Health Savings Account (HSA) eligible insurance plans.  The survey finds that as of this January, 13.5 million Americans are enrolled in insurance plans compatible with HSAs – an increase of more than 18% compared to January 2011.  What’s more, enrollment remains evenly distributed along age and gender lines, disproving the notion that HSA insurance policies favor the young and healthy.  And the survey also demonstrates that most HSA plan holders have access to tools, including price and quality data, that can make them better consumers of health care.

Unfortunately, Obamacare could quickly change all these positive developments.  Several provisions in the law, and accompanying regulations, will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans:

  1. Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered.
  2. Obamacare’s medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage.
  3. The Obamacare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards.  And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration’s approach, not all contributions into an HSA will count towards the new minimum federal standards – meaning some HSA policies will not be considered “government-approved.”
  4. The law also includes several new tax increases related specifically to HSAs and to consumer-directed health plans in general, several of which have already sparked controversy – and all of which violate the President’s “firm pledge” not to raise taxes on middle-class families.

Both individually and collectively, these provisions in Obamacare will have the effect of limiting access to new and innovative consumer-directed health plans like Health Savings Accounts.  Even as today’s study confirms that HSAs are gaining more followers, Obamacare’s looming threat means millions of Americans could lose access to these innovative and popular plans.

Nancy Pelosi Gets “Serious” about Obamacare

The San Jose Mercury News reports that at a town hall meeting yesterday, former House Speaker Nancy Pelosi said she expects the Supreme Court to uphold Obamacare: “I expect a 6-3 ‘aye’ verdict from the Supreme Court.”  This development is somewhat curious, as when asked about the constitutionality of an individual mandate three years ago, the then-Speaker incredulously replied, “Are you serious?

Apparently, Speaker Pelosi finally got serious herself.  The fact that even the House Speaker thinks three Supreme Court justices will find Obamacare unconstitutional shows that the law’s individual mandate is unprecedented and a significant intrusion on liberty – not the “slam dunk” case Pelosi previously thought it would be.  Some would only wish that the Speaker and her liberal allies had gotten serious about the Constitution BEFORE ramming through a massive, 2700-page health care law.

Peter Orszag Wants Bureaucrats, NOT Patients, in Charge

Writing in his weekly Bloomberg column this morning, former Obama Administration Budget Director Peter Orszag criticizes Republican efforts to cap spending as a way to reverse skyrocketing federal budget deficits.  In so doing, he cites one element of the 1997 Balanced Budget Act, signed by President Clinton, that has vexed the health sector for years:

A good illustration of how to do future deficit reduction the wrong way is the Sustainable Growth Rate formula for Medicare, which was enacted in 1997 to constrain payments to doctors.  The SGR places a broad cap on payments without addressing any of the reasons those payments are increasing.  If the cap is exceeded, payments are supposed to be simply cut across the board.  It’s much easier to slap a cap on spending than to get into the weeds of making policy changes to constrain that spending.  It generally doesn’t work, though.

Some may view Orszag’s criticisms of the sustainable growth rate as a bit rich, as Orszag himself was one of the prime architects of the effort to create a new “super SGR” as part of Obamacare.  Thanks to Orszag, Obamacare established the Independent Payment Advisory Board, a board of 15 unelected and unaccountable bureaucrats empowered to make binding rulings reducing Medicare spending.  And while the SGR applies only to Medicare physician payments, IPAB will enforce a new spending cap that will apply to ALL Medicare spending.

Orszag goes on to criticize the House Republican budget for implementing a premium support system for Medicare – even though premium support payments will rise by the same level as Medicare spending under Obamacare.  Why the different stance?  Because in Orszag’s view, the Republican plan doesn’t “get into the weeds of making policy changes to constrain” spending; in his view, policy makers must “make specific adjustments in the health care payment system to constrain costs.”

In other words, Orszag wants policy makers – read: “government bureaucrats” – to micro-manage the health care system, because he thinks that will control costs.  Giving patients the tools to control their own health care is a concept foreign to Orszag, and one he effectively criticizes in the article.  It’s yet more evidence of the dividing line between two philosophies of government that evidenced itself during the debate over Obamacare – one side wants patients in charge, while the other side is on the side of government.

Single Payer Dystopia

Late last week, Los Angeles Times columnist David Lazarus wrote an article about an impending piece of legislation to be introduced by Rep. Jim McDermott.  According to the column, the bill would allow states to receive federal Medicare and Medicaid funds to establish state-based single-payer health insurance systems.  The article provides background on California’s numerous prior attempts to establish single-payer health care in the state, and quotes liberal advocates as saying the McDermott legislation could finally result in the single-payer dreams becoming reality.

Unfortunately, there are a few flaws in this logic.  Such as California’s $16 billion budget deficit, which has prompted Gov. Jerry Brown to ask voters to approve massive tax increases.  And there’s also this unwelcome element:  “A draft of McDermott’s bill says that to receive federal funds, states would have to offer a health care plan with the same benefits as the most popular plan available to federal government employees.”  That plan would be the Blue Cross Blue Shield standard option plan, which in 2010 cost a whopping $6,458.88 for a single person annually – 34% more than the average single premium for employer-provided health insurance in California that year.

To sum up:  At a time when California still faces double-digit unemployment and massive budget shortfalls, liberals think the state can use existing federal dollars to cover 7 million uninsured, provide 34% richer benefits to those with insurance, and save the state money in the process.  Some might argue that position is taking “California Dreamin’” to an extreme.  Because given economic malaise, budget constraints, and a platinum-plated package of mandated benefits, the single-payer health utopia liberals seek would, for millions of California residents, quickly turn into a dystopia.  Or even a Fruitopia.

Friday Report Demonstrates Need for Medicare Reform NOW

On Friday, the Medicare office of the actuary released its alternative scenario to last month’s official trustees report.  The alternative scenario has been released every year since Obamacare was enacted in 2010.  According to the non-partisan actuary, the alternative scenario presents a more realistic projection of future Medicare spending levels because several key provisions in current law are not likely to be implemented – notably the 31 percent reduction in Medicare physician fees scheduled to take effect in January, and many of the major spending reductions in Obamacare, which the actuary (and most independent experts he consulted with) believes cannot be sustained over the long term.

As in prior years, the alternative scenario demonstrates how low payment levels will fall if Obamacare’s scheduled payment reductions take effect.  As many as 40 percent of all providers will become unprofitable by 2050, causing them to go out of business or stop treating Medicare patients.  And Medicare payment rates will plummet to about one-third the levels provided by private health insurance – levels so low they would likely convert Medicare into a second-tier form of health insurance with poor access to care.

This year’s alternative scenario includes a new section highlighting the unrealistic nature of the spending reductions called for by Obamacare’s Independent Payment Advisory Board (IPAB).  The IPAB is a board of unelected and unaccountable bureaucrats empowered to make binding rulings on how to keep Medicare spending below arbitrary, pre-set levels.  The actuary’s report indicates that imposing the IPAB’s scheduled cost reductions “would be quite challenging” – suggesting that this board could impose arbitrary cuts impeding access to care.

As noted in the chart below, Medicare’s 75-year shortfall is nearly 40 percent greater under the alternative scenario – $36.9 trillion, versus $26.4 trillion under a current-law model.  Under the alternative scenario, by 2080 Medicare alone will consume nearly one-tenth of American GDP, as opposed to 6.7% under the current-law model.

As we previously reported, the Medicare trustees report itself presents a bad enough picture about the unsustainable nature of America’s fiscal entitlements.  Friday’s release of the alternative scenario provides further support for reforming entitlements NOW – because even the best-case fiscal scenarios, as bad as they are, are likely far too optimistic.


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) $5.3 (0.6% of GDP) $9.7 (1.1% of GDP)
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) $20.5 (2.3% of GDP)
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) $6.8 (0.7% of GDP)
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) $36.9 (4.1% of GDP)


It’s About Propaganda. And Campaigning.

HHS this afternoon released another mass e-mail, entitled “It’s About Louisa.” The e-mail – which highlights the supposed value of Obamacare’s small business tax credit – claims it is part of “an initiative to educate Americans about new programs, benefits, and rights under the health care law.”

This e-mail raises several obvious concerns:

  1. This week’s GAO report on the small business tax credit – which includes quotes from business owners who didn’t claim the credit because it was too small, and too bureaucratic, to make a difference for their struggling firm – concluded the program was generally ineffective and cumbersome.  Will the Administration also “educate” people that a non-partisan watchdog agency concluded this “benefit” of the law was not particularly helpful to small businesses?
  2. Coming on the heels of Monday’s news that Porter Novelli received a new $20 million contract to promote Obamacare, it appears these “educational” efforts – at a time when the federal government faces trillion-dollar deficits – are curiously timed to publicize Obamacare while the President is running for re-election.  (Related question: How many of these “educational” campaigns will remain in place AFTER November 6…?)
  3. If HHS wants to “educate Americans” about the new “benefits” of the law, does the Administration also plan to “educate” Americans about the new tax increases under Obamacare?  For instance, will the IRS be writing homeowners to tell them they could owe new taxes on the sale of their homes once Obamacare’s latest round of tax increases takes effect in January?

Also of note, as part of this “educational” campaign, HHS is promoting a new “MyCare” hashtag on Twitter.  Which could result in many tweets such as these:

  • #MyCare is more expensive, because premiums haven’t gone down like #Obama promised.
  • I lost #MyCare, because I couldn’t keep my plan under @hhsgov regulations.
  • Raising taxes $500 billion won’t help #MyCare – it will just kill jobs.
  • As a senior, #MyCare will get worse – because #Obama raided Medicare to fund #Obamacare.

Tweets and e-mails aside, one simple fact remains:  On Obamacare, regardless of what the Administration is selling, the American people ain’t buying.

Obamacare’s Bait-and-Switch on Premiums — And Keeping Your Coverage

The journal Health Affairs is out this afternoon with a new study (subscription required) comparing health insurance currently offered in the individual market with the new federally-imposed requirements under Obamacare.  The study concluded that, when it comes to the individual market, nearly half of all policies currently being sold are not “Obamacare-compliant” – that is, they do not meet the new standards imposed by federal bureaucrats for all health insurance under Obamacare.

There are two obvious implications from this study.  First, it again confirms the fact that individuals will NOT be able to keep their existing health insurance.  The study itself admitted that “individual insurance coverage does not meet [Obamacare’s] Exchange standards for the majority of covered lives.”  And while Democrats may claim that individuals can keep their prior coverage, even liberals like Tim Jost have admitted that “eventually, if the [law] remains in effect, grandfathered [i.e., pre-Obamacare] plans will disappear.”

Second, premiums will skyrocket due to these new federally-imposed mandates.  The Congressional Budget Office previously concluded that Obamacare will RAISE individual market insurance premiums by an average of $2,100 per family.  Richer benefit packages would raise premiums by 27 to 30 percent – and these increases will be due in part to “the minimum level of coverage (and related requirements) specified in” the bill.  In other words, people will be paying more for health insurance because federal bureaucrats have told them their coverage is not “Obamacare-compliant.”

Recall that candidate Obama promised repeatedly that premiums would go DOWN by $2,500 per family under his plan, and that “you will not have to change plans.  For those who have insurance now, nothing will change under the Obama plan – except that you will pay less.”  Today’s survey again illustrates how Obamacare has inflicted a massive “bait-and-switch” on the American people – who will be paying higher, not lower, premiums for new government-mandated benefits under the guise of health “reform.”