News on Containing Costs Goes from Bad to Worse

The employer benefits firm Mercer released its annual survey of health plans today, and for those wishing to “bend the curve” on health costs, the results were not promising.  Mercer’s survey concluded that employers’ health costs will rise 4.1% this year, and even more (5.0%) next year; if firms do not take steps (e.g., raising co-payments, etc.) to control spending, costs would rise by a whopping 7.4% in 2013.  Recall that four years ago, candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  Not only has that premium reduction not happened – premiums have risen by $3,065 since Barack Obama was elected President – but cost increases continue to grow unabated.

In fact, today’s Mercer study suggests one way Obamacare will accelerate the growth of health costs – by limiting usage of consumer-driven health plans.  The survey notes that an “enrollment shift” to consumer-driven plans – which have more than tripled in popularity since 2007 – has “helped to hold down overall cost increase[s].”  Consumer-driven plans help to slow cost growth because average costs are nearly $2,200 lower per year than traditional health insurance costs.  Unfortunately, several provisions in Obamacare will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans – therefore raising, not lowering, health costs.  Three separate provisions in the statute, and regulations implementing the law, will reduce access to HSA 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.”

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.  Not only will these onerous regulations prevent many Americans from keeping the plans they have and like – by limiting access to consumer-directed health plans, Obamacare will also raise, not lower, health costs for many Americans.

No Magic Bullet to Control Entitlements

Speaking at an event this morning regarding the Center for American Progress’ new health and entitlement manifesto (about which more later), former Obama Administration official Zeke Emanuel claimed that controlling health costs by itself would cure America’s fiscal woes: “I think this is the legacy for the president because if he can get healthcare costs under control, everything changes….This really is the big kahuna for his legacy going forward.”

It’s a nice assertion – but it’s also flat wrong.  The Congressional Budget Office’s long-term budget outlook includes a chart (attached below) demonstrating that, over the next 25 years, demographics count for at least half – and as much as three-quarters – of projected increases in spending on Medicare, Medicaid, Social Security, and Obamacare insurance subsidies:

What this analysis means is that, even if the growth of health costs does manage to slow (both CBO and the Medicare actuary think Obamacare’s cost reductions will not be sustainable in the long-term), slowing health costs alone won’t solve Medicare’s financial problems.  Put another way, Medicare needs structural reform NOW – because nothing else can save the program.  Emanuel’s incorrect comments notwithstanding, it’s a lesson policy-makers in both parties would be wise to heed.

Obamacare’s War on Women

We noted this morning’s Wall Street Journal article outlining the many companies that are reducing the hiring of full-time workers due to Obamacare’s impending employer mandate.  But while the impact of Obamacare on jobs is well-known, perhaps less known is the fact that women will be hit hardest by Obamacare’s job cuts.

Because Obamacare’s mandate hits low-wage workers hardest, studies have demonstrated that women are disproportionately likely to be affected by the mandate.  For instance, in 2007 Harvard Professor Kate Baicker published an analysis examining the impact of one type of employer mandate.  Her work demonstrated that, under the scenario modeled, millions of low-wage workers would be “at substantial risk of unemployment” – and that the workers at risk “tend to be disproportionately low-education, minority, and female.”

Over the past several months, Democrats have spent countless hours drumming up charges of a Republican “war on women,” based on supposed attempts to restrict access to contraception.  But studies like the Baicker paper confirm that the real “war on women” is being waged by Democrats – whose policies will restrict access to jobs for hard-working females.

We Told You So: Companies Hiring Fewer Full-Time Workers

The Wall Street Journal has a must-read article this morning highlighting one of Obamacare’s effects – companies are replacing full-time workers with part-time employees to avoid the law’s soon-to-be-imposed $2,000 employer mandate penalty.  Because full-time employees working more than 30 hours will incur a penalty while part-time workers will not, many firms are in the process of shifting their workforce, as the article outlines:

Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.  Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week.  That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul, said Chief Executive Chris Russell.  The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.  “The tendency is to say, ‘Let me fill this position with a 40-hour-a-week employee.’”  Mr. Russell said. “I think we have to think differently.”…

CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, began two months ago to hire part-time workers to replace full-time employees who left, said Andy Puzder, CEO of the Carpinteria, Calif., company.  CKE, which is owned by private-equity firm Apollo Management LP, offers limited-benefit plans to all restaurant employees, but the federal government won’t allow those policies to be sold starting in 2014 because of low caps on payouts.  Mr. Puzder said he has advised Mr. Romney’s campaign on economic issues in an unpaid capacity.

Home retailer Anna’s Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the health-care law isn’t repealed, said CEO Alan Gladstone.  Mr. Gladstone said the costs of providing coverage to all 1,100 sales associates who work at least 30 hours a week would be prohibitive, although he was weighing alternative options, such as raising prices….

Benefits consultants said most retail and hotel clients have explored shifting toward part-time workers.  Those industries are less likely to offer health coverage now, and if they do, the plans typically are too skimpy to meet the minimum-coverage requirements.  “They’ve all considered it,” Matthew Stevenson, a workforce-strategy principal at Mercer.  In a July survey, 32% of retail and hospitality company respondents told the consulting firm that they were likely to reduce the number of employees working 30 hours a week or more.

Not only is this response predictable – it was predicted, and not just by Republicans but by non-partisan experts.  Here’s what the Congressional Budget Office wrote more than two years ago about the Obamacare mandate taxes:

Those penalties…will, over time, generally be passed on to workers through reductions in wages…However, firms generally cannot reduce workers’ wages below the minimum wage, which will probably cause some employers to respond by hiring fewer low-wage workers.  Alternatively, because firms are penalized only if their full-time employees receive subsidies from exchanges, some firms may instead hire more part-time or seasonal employees.

CBO also said that “the expansion of Medicaid” and the health insurance subsidies “will encourage some people to work fewer hours or to withdraw from the labor market.  In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work.”

Two years ago, Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  It turns out what’s in Obamacare is exactly what non-partisan experts said – provisions that will cost jobs and harm the American economy.

Joe Biden’s Obamacare Joke

The Washington Post reports that yesterday, Vice President Biden made interesting comments in Florida during a discussion about Obamacare:

After it’s all over, when your insurance rates go down, then you’ll vote for me in 2016.

The pool report from the event claimed that Biden “of course, said it in a joking manner.”  Indeed he must have, because the idea that insurance premiums have gone down thanks to Obamacare is a joke of the first order.  Candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  The Obama campaign also promised that that those reductions would occur within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected President.

To sum up: We don’t know whether or not the Vice President was joking about a 2016 campaign in his future – but we definitely know that his comments about Obamacare lowering insurance rates are a laugher.

The REAL Fright Night: Obamacare’s Scary Impact on Americans

In an interview with the Des Moines Register last week, the President claimed that “Obamacare turns out not to be the scary monster that the other side has painted.”  Many may disagree, because on this Halloween day, it’s clear that the legislation includes several “monstrous” provisions likely to wreak havoc on the American people, their jobs, and their health care:

“Count Tax-YOU-lots:”  This creature will suck the life out of the American economy, by imposing $1 trillion in job-killing tax increases on all Americans—taxing people who can’t afford to purchase government-forced insurance, taxing businesses who want to hire new workers, taxing small businesses, even taxing health benefits.

Weird Scientists:  Bureaucrats working for a new comparative effectiveness institute, funded by a tax on health benefits, could publish the protocols needed to deny patients access to life-saving treatments on cost grounds.  In addition, the law’s Independent Payment Advisory Board (IPAB) will make binding rulings on how to reduce Medicare spending below an arbitrary cap.

Frankenstein:  Refers to the dozens of bureaucracies created by the legislation—to say nothing of the difficulties for patients to receive actual treatment—all in the name of health care “reform.”

A Ghoulish Czar:  By one count, Obamacare includes nearly 2,000 commands using the words “The Secretary shall”—allowing the federal government, in the form of the HHS Secretary, to intervene in all manner of personal health care choices taken by millions of Americans.

However, while creating new and frightful government bureaucracies for the American people, Democrats have managed to include sweet treats for themselves and their liberal allies:

  • Senate Democrats received goodies for parochial interests, including a mine in Libby, Montana;
  • ACORN and Planned Parenthood could be eligible for enrollment and outreach grants as “navigators;” and
  • AARP’s popular Medigap policies are not subject to the same pre-existing condition restrictions or price controls placed on all other private insurance plans—thus allowing the organization to continue to receive hundreds of millions of dollars in “kickbacks” by overcharging seniors for coverage.

While Halloween may come and go, many may be concerned that the monsters created in Obamacare will stay—causing permanent fright for all Americans forced to live under Democrats’ government takeover of health care.

Liberals Should “Cut” Out Their Medicaid Nonsense

Paul Krugman’s Monday New York Times column featured a typical rant – typical not least because it’s just plain wrong.  He talks about the “savage cuts” associated with conservative proposals to block grant Medicaid – except the “cuts” don’t actually exist.

Don’t believe me?  Well, take a look at this chart from the Kaiser Family Foundation’s study on Medicaid, issued last week.  The red line below illustrates the supposed “cuts” associated with block grant proposals – and shows that such “cuts” don’t actually exist, because Medicaid spending will increase each and every year under a block grant:

What’s particularly striking about the above chart is that the Kaiser study modeled a block grant proposal that was less generous than Governor Romney’s plan – the House-passed budget linked the growth of the block grant to inflation, whereas Governor Romney’s plan links the growth of Medicaid to inflation plus one percent.  So the Kaiser researchers, even as they claimed that their modeling was based on a plan “similar to Governor Romney’s,” cherry-picked (false) assumptions in order to portray block grants in the worst possible light.  This partisan hackery also explains why the Kaiser study uses the term “cut” no fewer than 60 times in one 22-page paper – even though both the House-passed budget and Governor Romney’s proposal do NOT reduce Medicaid spending in absolute terms.

Appearing before Congress last year, Secretary Sebelius testified that the Administration believes Obamacare did not “cut” Medicare – it merely slowed the program’s growth rate.  If that’s the case, the Secretary, the Administration, and their liberal allies should adopt a truly novel concept – consistency – and not argue that a slowdown in Medicare’s growth rate under Obamacare is not a “cut,” while a slowdown in Medicaid’s growth rate is a “cut.”

Obamacare’s “Scary” Impact on the Middle Class

In an interview with the Des Moines Register released yesterday, the President claimed that “Obamacare turns out not to be the scary monster that the other side has painted.”  That’s an interesting claim, given that under Mr. Obama’s own standards, Obamacare has failed to deliver on its promises to lower costs.

Candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  The Obama campaign also promised that that those reductions would occur within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected President.  In other words, the President’s broken campaign promise has cost every American family an average of $5,565 per year – yet the President doesn’t think Obamacare is “scary”.

If President Obama truly doesn’t believe that forcing struggling families to pay an additional $5,000-plus in health care premiums because Obamacare failed to deliver is “scary,” then it’s worth asking how out of touch this President has truly become.

Another Reason to Oppose Obamacare’s Taxes

An interesting article at the Atlantic’s website last week noted that the Supreme Court’s ruling that Obamacare’s mandate is a tax doesn’t just violate the President’s “firm pledge” not to raise taxes – it could also undermine Obamacare itself.  Based on research in behavioral economics, George Washington University professor Naomi Schoenbaum concludes that calling the mandate a “tax” and not a “penalty” means fewer Americans are likely to comply with it:

If the mandate is framed as a tax, this could cut in several directions, all of which would reduce health insurance coverage.  It could lead people to suspect that others are neither paying the tax nor purchasing health insurance, leading them to try this strategy themselves.  Or, given that purchasing health insurance is several times more expensive than paying the tax (which, in 2014, will be only $95 or 1% of income), people might decide to pay the tax rather than purchase the more expensive health insurance.  And this phenomenon can build on itself: once an impression of low compliance with the mandate is forged, fewer people will comply, further reinforcing the low compliance impression, and so on.

In either situation, the tax label could lead significantly fewer Americans to purchase health insurance than the penalty label would. The success of Obamacare depends crucially on people buying health insurance under the mandate rather than making a payments to the government….The only way to keep costs from skyrocketing or insurance companies from dropping out of the market, or both, is either to get more healthier, cheaper folks to join the insurance pool, or have them pay an equivalent dollar amount.  With the tax frame, though, individuals are less likely to buy health insurance.  And the mandate as currently structured forces them to pay only a small amount for the failure to do so.

The article argues that the difference between the mandate as a “tax” and the mandate as a “penalty” will have a major impact on compliance with the law – with the mandate’s tax status making it more likely the law will be undermined.  But in its re-estimate of the health care law in light of the Supreme Court’s ruling, the Congressional Budget Office said the ruling that the mandate was a tax and not a penalty did not change its assumptions about compliance with the mandate at all:

CBO and JCT’s original assessment of the effects of the coverage requirement was strongly rooted in comparisons with other taxes and penalties, drawing heavily from the academic literature on tax compliance.  In earlier estimates, CBO and JCT expected that individuals would perceive the mandate as a requirement to purchase insurance or pay a penalty tax administered by the Internal Revenue Service.  Because the Court upheld the constitutionality of that arrangement, CBO and JCT continue to expect similar behavioral responses to the insurance requirement.

Put another way, the Atlantic piece emphasizes how CBO’s score of Obamacare – by assuming strong compliance with the unprecedented individual mandate – is an optimistic, and possibly unrealistic, prediction of how the law will be implemented and enforced.

The Chart Barack Obama Doesn’t Want You to See

The flyer released by the Obama campaign this morning includes some soothing rhetoric on health care.  It starts out by noting that “Before President Obama took office, the average cost of health care premiums was growing three to four times faster than inflation.”  But the flyer doesn’t mention the rest of the story – the promise Barack Obama made repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  The Obama campaign also promised that that those reductions would occur within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected PresidentEarlier this month, the New York Times noted that “in the 2008 campaign, Mr. Obama often told voters that he would lower premiums by $2,500 a year per family ‘by the end of my first term as president.’  It has not happened…”

When even the New York Times admits that the President’s key promise on health care “has not happened,” it’s a very clear sign that Obamacare has failed to deliver.  And not even the Obama campaign’s gauzy brochures can hide that fact.