Obamacare, Health Costs, and Jobs

Yesterday, the Brookings Institution released updated statistics on the role of health care jobs in the broader economy. The study’s findings provide interesting grist for the ongoing debate about Obamacare’s impact on jobs. Three theories follow from the data.

1. Obamacare Has Not Affected Health Care Jobs

The chart showing a steady-state rise in health care employment over the past decade illustrates this point perfectly. As costs continue to rise, and our society continues to age with the impending retirement of the baby boomers, health care employment has steadily grown.

But the fact that health care hiring has increased at virtually the same pace since 2003 demonstrates the law’s minimal to nonexistent effect on employment trends that preceded its enactment.

Brookings Institution

Brookings Institution

2. Obamacare: Little Effect on Health Care Jobs, Little Effect on Health Care Costs

Labor costs comprise one of the major components of health care spending. A report from the American Hospital Association last year found that labor costs were the largest single driver of health cost growth, accounting for more than one-third of the overall rise in hospital prices—a percentage that has remained fairly constant over time.

It’s therefore difficult to assert that Obamacare has permanently “bent the curve” on health costs if the largest driver of health costs—the labor force—has grown unabated. Rather, it seems more likely that the recent slowdown in costs stems largely from the recession and struggling families forgoing health expenses, as a recent Kaiser Family Foundation study concluded.

3. Not Reducing Health Costs = Reducing Non-Health Jobs

Nancy Pelosi’s infamous claim at the White House health summit that Obamacare would “create 4 million jobs–400,000 jobs almost immediately” wasn’t based on the health sector creating more jobs—in many respects, it was based on the sector creating fewer new positions.

A 2010 Center for American Progress report, the basis for Pelosi’s claim, asserted that Obamacare would create more jobs outside the health sector by slowing the growth of costs within the sector—essentially, a rebalancing of costs and jobs away from health care and toward other industries.

Of course, as other analysts have noted, the converse is also true: If health care jobs continue to grow—as they have since Obamacare’s enactment—those growing health costs will hinder the competitiveness of non-health industries, to say nothing of our massive entitlement deficits.

It’s why anyone who wants to preserve American economic preeminence should want health care growth to slow, even if it means that some new health care jobs aren’t created. It’s also why analysts should be worried that Obamacare hasn’t fixed that problem in the slightest.

This post was originally published at The Daily Signal.

Another Insurer Leaves California Market

The Los Angeles Times reports this morning on another disturbing Obamacare-related development in California:

The nation’s largest health insurer, UnitedHealth Group Inc., is leaving California’s individual health insurance market, the second major company to exit in advance of major changes under [Obamacare].

Due to UnitedHealth’s decision, thousands of individuals will be forced to find a new health insurance option. However, those options keep dwindling; as the article notes, today’s development comes just a few weeks after Aetna announced it was also pulling out of the California market, leaving nearly 50,000 California residents searching for new health coverage.

Even advocates of Obamacare could not hide their dismay about today’s development. As the Times article notes:

The departure of another big-name insurer raised concerns about the effect of reduced competition on California consumers. “I don’t think this is a good result for consumers,” said California Insurance Commissioner Dave Jones. “It means less choice, less competition and even more consolidation of the individual market with three big carriers.”

However, as The Wall Street Journal reported last month, these two California announcements could represent merely the leading edge of bad news for policyholders: “Insurance-industry experts say similar moves by other carriers in other states may emerge in coming months, as companies with limited market share decide to avoid the uncertainty tied to [Obamacare’s] changes.”

Recall that in 2008, then-Senator Obama promised that “for those who have insurance now, nothing will change under the Obama plan—except that you will pay less.” Recall too that the Obama Administration intends to use California as “proof that [Obamacare] is working.” Obamacare is working, all right—but not exactly as promised. A month’s worth of stories about skyrocketing premiums and thousands losing their health insurance demonstrates how Obamacare’s supposed “success story” is shaping up to be a significant failure.

This post was originally published at The Daily Signal.

Obamacare’s ACO Conundrum

Over the weekend, Bloomberg reported on the latest challenge to Obamacare: hospitals leaving one of the law’s signature attempts to contain health costs:

Almost a third of 32 hospitals and health systems involved in an experiment aimed at changing the way medical providers are paid may exit the program, a potential threat to [Obamacare’s] ambitious cost-saving goals.

According to a Medicare spokesman, nine hospitals and health systems participating in the “Pioneer” accountable care organization (ACO) pilot may leave the program outright—and four more “may join other accountable care programs that carry less financial risk.” This development comes three months after the Pioneers wrote to Medicare administrators asking for a delay in the program, claiming they were not yet ready to assume financial risk if patients’ costs rise more than projected.

One of the reasons hospitals are leaving the ACO program involves government red tape. In order to manage their patients most effectively, hospital systems want access to real-time medical claims data—but Medicare’s lumbering bureaucracy can provide information on health claims six months after the fact. As the CEO of one hospital organization told Bloomberg, “We’re asking for more agility than the system is really set up to produce.”

The other reason for the ongoing ACO struggles centers around the euphemistically termed “clinical control”—in other words, patients’ ability to see the doctor they want. The Bloomberg article notes that right now, hospitals in the ACO program “can’t forbid the patients from seeing doctors or other health providers who aren’t part of the Pioneer system.” Hospitals believe this restriction on their ability to manage patients has prevented them from containing costs as much as originally hoped.

Viewed from this perspective, the latest news on ACOs provides policymakers with a difficult choice: impose more restrictions on patients of ACO participants to choose their own doctors—limiting access to care in a way many HMOs did during the 1990s—or see this supposedly “innovative” care model fail to reduce costs as promised.

That’s not a choice seniors should have to face—and more importantly, they shouldn’t have to. In 2008, then-Senator Obama promised that “for those who have insurance now, nothing will change under the Obama plan—except that you will pay less.” This weekend’s Bloomberg story provides the latest evidence that, for millions of Americans, these promises will turn out to be empty.

This post was originally published at The Daily Signal.

Obamacare Shocker: Premiums Could Double

This morning’s Wall Street Journal published its own analysis of premiums under Obamacare, and its conclusions will prompt shock—rate shock—among those who need to buy health insurance under the law’s new exchanges next year:

Healthy consumers could see insurance rates double or even triple when they look for individual coverage under the federal health law later this year, while the premiums paid by sicker people are set to become more affordable, according to a Wall Street Journal analysis of coverage to be sold on the law’s new exchanges. The exchanges, the centerpiece of President Barack Obama’s health-care law, look likely to offer few if any of the cut-rate policies that healthy people can now buy, according to the Journal’s analysis.

The article goes on to provide specific examples of the kind of premium hikes many Americans may face under Obamacare:

Virginia is one of the eight states examined by the Journal and offers a fairly typical picture. In Richmond, a 40-year-old male nonsmoker logging on to the eHealthInsurance comparison-shopping website today would see a plan that costs $63 a month from Anthem, a unit of WellPoint Inc. That plan has a $5,000 deductible and covers half of medical costs.

By comparison, the least-expensive plan on the exchange for a 40-year-old nonsmoker in Richmond, also from Anthem, will likely cost $193 a month, according to filings submitted by carriers.

Liberals may argue that even though premiums may triple for some Americans, these individuals will be getting “better” insurance. But that’s not what then-Senator Obama promised—he said premiums would go down under his plan by $2,500 per family per year. Moreover, the Congressional Budget Office noted in 2009, well before the law passed, that premiums would go up in part because Obamacare forces individuals to buy more costly health insurance policies:

Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained. In particular, the average insurance policy in this market [i.e., on exchanges] would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits. Those expansions would reflect both the minimum level of coverage (and related requirements) specified in the proposal and people’s decisions to purchase more extensive coverage in response to the structure of subsidies.

Liberals’ response to the latest analysis of higher premiums is particularly telling. From the WSJ:

Tom Perriello, who voted for the law as a Democratic House member from Virginia and who now works for the left-leaning Center for American Progress, called the costs of premiums “a work in progress” and added, “Over the next few years, we should see that cost curve bend.”

In other words, premiums won’t go down any time soon. That admission from a lawmaker who helped ram Obamacare into law will likely prove cold comfort to millions of Americans facing higher premiums due to the measure next year.

This post was originally published at The Daily Signal.

Kathleen Sebelius: The Insurance Industry’s “Big Sister”

As the Administration gears up to sell Obamacare to the American people, it’s also gearing up its regulatory apparatus to strong-arm private companies.

The Hill reports that even though the Department of Health and Human Services (HHS) previously claimed that it would not try to negotiate rates with insurance companies, in reality HHS Secretary Kathleen Sebelius is doing just that:

“The department is working with state regulators to approach insurers whose rates come in significantly higher or lower than average to make sure their filings are correct,” a senior HHS official said.

So if insurance companies don’t offer the “correct” price, officials from HHS will tell them to come back and try again. Perhaps this is what Vice President Joe Biden meant when, just before Obamacare passed, he said that “we’re going to control the insurance companies.”

Obamacare relies on a series of strong-arm tactics to “control” prices—from price controls on insurance companies to a board of 15 unelected bureaucrats empowered to keep Medicare spending below an arbitrary target. But the real problem with Obamacare is that it forces individuals to buy more insurance than they might want or need, raising premiums in the process. No amount of top-down government controls—or “encouraging” insurance companies to offer the “correct” prices—can change that fact.

So while Secretary Sebelius and HHS continue their intrusive, government-centered tactics to try to offset the premium increases many Americans will see next year, there’s another concept the Administration should try. It’s called free markets and competition.

This post was originally published at The Daily Signal.

Donald Berwick’s Rationed Transparency

Dr. Donald Berwick is back in the public eye. The former administrator of the Centers for Medicare and Medicaid Services (CMS) has announced he will run for governor in Massachusetts.

Berwick first entered the public spotlight in April 2010, when President Obama nominated him for the CMS post. But Berwick never went through the regular confirmation process. Instead, the president granted him a surprise recess appointment that July.

The president renominated him in January 2011, but it became apparent that he could not garner enough votes for Senate confirmation. That December, Berwick resigned. Now, he is pursuing office as an elected, rather than an appointed, official.

Berwick’s short tenure at CMS was defined by a series of controversial statements he made before his appointment. He defended both Britain’s National Health Service and government rationing of health care. Most famously, in a June 2009 interview, he stated that “the decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open.”

After leaving CMS, Berwick said his comments were merely an attempt to argue for greater transparency in decision-making. “Someone, like your health-insurance company, is going to limit what you can get. That’s the way it’s set up,” he told the New York Times. “The government, unlike many private health-insurance plans, is working in the daylight,” he insisted. “That’s a strength.”

Unfortunately, Berwick himself, while head of CMS, went to great lengths to avoid transparency. He ducked reporters, in one instance even “exit[ing] behind a stage” to avoid press queries. Another time he went so far as to request a “security escort” to avoid questions.

Today, Berwick concedes his lack of transparency. According to a Politico report, he now “regrets listening to White House orders to avoid reaching out to congressional Republicans.”

The lack of transparency is endemic in the Obama administration. Case in point: the enactment of Obamacare. During his 2008 campaign, Barack Obama promised health-care negotiations televised on C-SPAN. Instead, we got a series of notorious backroom deals: the Cornhusker Kickback, the Louisiana Purchase, the Gator Aid.

“It’s an ugly process, and it looks like there are a bunch of backroom deals,” Obama feebly admitted in January 2010 — only to retreat again to the smoke-filled rooms two months later, where he cut the final deals to ram the legislation through Congress.

Obamacare is premised on the belief that government knows best. And those who share that belief all too often regard transparency and public accountability as inconveniences.

Consider the administration’s approach to regulating the proposed health-insurance “exchanges.” Obamacare requires state-based exchanges to “hold public meetings and input sessions,” but it fails to apply these same transparency standards to the federally run exchanges Washington will create in 33 states. The result: Many key questions remain unanswered.

Thus a law written in secret is being implemented in secret, with a maximum of opacity and a minimum of accountability from the administration.

This post was originally published at National Review.

Obamacare’s Shortcomings in Two Charts

Obamacare continues to fall short of the lofty predictions about it — and here are two new charts to prove it.

The charts, included as part of a Congressional Budget Office (CBO) presentation over the weekend, summarize the CBO’s cost estimates of the law in the three years since its passage. The charts show that in every instance, the CBO’s estimate of the number of uninsured has risen, as has the number of workers who will lose coverage under their existing employer plans:

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As the presentation notes, many factors affect the CBO’s cost and coverage estimates. Economic growth and the state of labor markets will determine whether individuals have access to employer-provided health care or qualify for subsidized insurance. In 2011, Congress twice changed provisions dealing with Obamacare exchange subsidies, impacting enrollment projections. And the Supreme Court’s June 2012 decision making Medicaid expansion optional for states reshuffled the number of people who might qualify for Medicaid or exchange coverage.

All that said, the CBO noted one other key change affecting its coverage estimates: “increased employer responsiveness to alternative options.” In other words, if workers can receive access to taxpayer-subsidized insurance through the exchanges, firms are more likely to pay a $2,000 penalty to the federal government rather than pay $10,000 or more to subsidize a family’s health insurance policy. If the trends the CBO identified accelerate when Obamacare takes full effect next year, the cost for federal exchange subsidies could rise by trillions more at a time when the federal government can ill afford more new spending and debt.

More workers losing their coverage and more Americans not gaining coverage—that’s not the health care “reform” President Obama promised.

This post was originally published at The Daily Signal.

Important Context on Next Year’s Premium Increases

The Associated Press yesterday published an article that at first appears to contain exciting and important news:

There’s good news for most companies that provide health benefits for their employees: America’s slowdown in medical costs may be turning into a trend, rather than a mere pause.

A report Tuesday from accounting and consulting giant PwC projects lower overall growth in medical costs for next year, even as the economy gains strength and millions of uninsured people receive coverage under President Barack Obama’s health care law.

As with many things in health care, however, if it looks too good to be true, it probably is. Only in the tenth paragraph does the full picture become clear:

PwC’s report forecasts that direct medical care costs will increase by 6.5 percent next year, one percentage point lower than its previous projection.

In other words, overall employer health costs in 2014 will rise by more than twice the rate of economic growth and nearly four times faster than overall inflation, based on recent Federal Reserve projections. Moreover, the PwC report notes that insurance premiums may rise even faster on insurance exchanges due to the massive uncertainty associated with Obamacare: “Insurers face the uncertainty of who will enroll—the sick, the healthy, or a combination of the two.”

The study also points out that consolidation in the health care sector has served to drive up prices: “Studies have shown that hospital mergers in concentrated markets can increase prices by more than 20%.”

The bottom line is clear: Then-Senator Obama promised that Obamacare would lower premiums by $2,500 for struggling American families. Today’s report from PwC puts President Obama even further away from living up to that promise.

This post was originally published at The Daily Signal.

Q: “Will Obamacare Encourage Fraud?” A: “I’ll Have to Think About That…”

As we learn more each day about what Obamacare will bring, a video that recently became available reveals another frightening turn. The federal government already struggles with fraud in many major programs such as Medicare and Social Security. What about the forthcoming Obamacare insurance exchanges?

Obamacare includes a “navigator” program of individuals paid by the government to encourage people to sign up for the exchanges.

A House Oversight Committee hearing from May 21 produced the following exchange with Gary Cohen, the director of the federal center charged with implementing health insurance exchanges under Obamacare:

Representative Paul Gosar: What will a navigator or assister do if an individual reports they are paid under the table?

[Long pause]

Gary Cohen: That’s a good question. I’ll have to think about that, and talk to folks.

That’s not the only good question about the navigator program; the House Oversight Committee sent a letter asking more questions. The Department of Health and Human Services has allocated $54 million to this Obamacare “outreach” effort, and yet the Administration has not answered basic questions, like whether navigators would have to pass a criminal background check. The video demonstrates that Obamacare navigators could end up encouraging tax fraud by failing to report individuals who are paid under the table.

In March 2010, Speaker Nancy Pelosi famously said we had to pass the bill to find out what’s in it. Apparently, three years later, even the people in charge of implementing Obamacare still don’t know what’s in the law, and how it will—or won’t—work.

This post was originally published at The Daily Signal.

What Obama’s Campaign Group Won’t Tell You About Obamacare

Organizing for Action, President Obama’s campaign group, is out this morning with its first advertisement promoting Obamacare. The ad claims to tell the “facts” surrounding the law, but here’s what it doesn’t tell you:

Claim: “Free Preventive Care for 34 Million”

Fact: Obamacare forces insurers to cover preventive services without a co-payment, but just because some services now don’t have a co-payment doesn’t mean they’re “free.” Mandates like the one surrounding preventive care are raising health insurance premiums. Earlier this month, CBS News reported that “Obamacare may cost more than experts previously thought, according to a survey of 900 employers.” What’s more, the preventive services mandate also forces religious organizations to violate their deeply held beliefs and provide employees with contraceptive products they find morally objectionable.

Claim: “$150 Average Rebate in 2012”

Fact: This talking point refers to Obamacare’s medical-loss ratio provision, which imposes price controls on insurance companies, forcing them to pay rebates to consumers if they do not meet Obamacare’s arbitrary standards. The Kaiser Family Foundation reported last year that rebates would be issued to plans covering 3.4 million people, or only about 1 percent of the population. The Kaiser report admitted that the rebates “are not particularly large in many instances.” While candidate Obama promised that premiums would go down by $2,500 by the end of his first term, the average employer premium has actually gone up by $3,065—from $12,680 in 2008 to $15,745 in 2012, according to Kaiser data.

Claim: “Up to 50% of Small Business Insurance Covered”

Fact: The ad claims that Obamacare’s small business tax credit—which funds a portion of health insurance premiums—is having a major impact. But a May 2012 Government Accountability Office (GAO) report found that only about 170,000 small businesses claimed the Obamacare tax credit—far less than expectations of up to 4 million trumpeted by supporters. The report also makes clear that the credit’s complexity and bureaucracy discouraged small businesses from applying for the credit. Here’s what tax preparers quoted in the GAO report said about the tax credit:

Any credit that needs a form that takes 25 lines and seven work sheets to build those 25 lines is too complicated.…

[Small business owners] are trying to run their businesses and operate and make a profit, and when you tell them they need to take two, three, four hours to gather this information, they just shake their head and say, “No, I’m not going to do it.”

In other words, bureaucracy, complexity, and regulations have stifled the small business tax credit—an apt metaphor for the law as a whole.

This post was originally published at The Daily Signal.