The Better Solution for Our Health Insurance System: A Plan You Can Actually Keep

Sometimes, liberals and conservatives agree on a policy problem, but disagree strongly on the best solutions to that problem. Our health insurance system presents one case of such a disconnect between problems and solutions.

In the last Democratic presidential debate, hosted by CNN in March, Vermont Sen. Bernie Sanders said that the coronavirus pandemic made the “dysfunctionality of the current health care system … obviously apparent.” He elaborated in an April op-ed in Politico, in which he noted that “already, an estimated 9.2 million workers have lost their employer-sponsored insurance, and as many as 35 million people might lose coverage by the end of the crisis.”

Sanders makes a valid point: The pandemic does illustrate the shortcomings of our system of health coverage. But his single-payer health care plan — or even Joe Biden’s proposal for a (purportedly) voluntary government-run “option” in which individuals could enroll — would take the system in the exact opposite direction.

The dysfunctionality of the system exists largely because employers control most Americans’ health insurance. Most conservatives would therefore support letting individuals control their health coverage, rather than liberals’ plan to replace employer control with government control. Thankfully, the Trump administration has moved health policy in that exact direction, laying the groundwork for a movement toward more personalized insurance options.

The Problem: Employer-Provided Health Insurance

Sanders cited a study from Health Management Associates stating that as many as 35 million individuals could lose access to employer-sponsored insurance due to coronavirus-related layoffs. A revised paper, released in late May, did not specifically update estimates for the number of people losing employer insurance, but still showed significant coverage losses. Other estimates have indicated similarly large numbers of Americans losing their employer coverage.

The sudden job losses sparked by coronavirus lockdowns have illustrated one of the three major problems with employer-provided health insurance. Individually and collectively, these flaws have represented a problem hidden in plain sight for decades.

Lack of choice: The largest survey of employer-provided health insurance found that in 2019, exactly three-quarters of firms (75%) offered only one type of health insurance plan. In general, large firms offer more choices than small businesses, but even among the largest firms — those with more than 5,000 workers.

Because the employer and not the employee owns the insurance policy, workers often end up stuck with whatever plan their employer chooses. An individual who doesn’t want to enroll in an HMO, or whose doctors lie outside his or her employer’s provider network, might have few choices but to switch jobs or accept a plan that does not meet his or her needs.

In its first season, the U.S. version of “The Office” satirized this dynamic, when resident megalomaniac Dwight Schrute got charged with picking the office health plan — and let the power go to his head. While Americans don’t have to worry about contracting “Count Choculitis,” one of the fictitious diseases Schrute’s co-workers invented to needle him in the episode, they do face the very real worry that their employer’s choices and wishes regarding health care might not align with their own.

Flawed incentives: A conversation with one of my friends several years ago illustrated this problem. My friend said he loved the insurance plan his employer provided: “I can go to the doctor and it only costs me a $5 co-pay.”

I posed a thought experiment: What if your health insurance suddenly became taxable, and you had to pay $1,500 or so in taxes on that coverage? (At the time, a top-of-the-line plan cost about $6,000 for an individual, and I assumed a 25% state and local tax rate.) He responded immediately: “I wouldn’t want the plan — I would tell them to raise my co-pays and deductibles.”

That response illustrates the policy problem of employer-sponsored insurance: Everyone thinks they’re spending everyone else’s money. Employees don’t pay taxes on employer coverage; an IRS ruling during World War II, later codified by Congress, exempts employer-provided benefits from both income and payroll taxes.

All the incentives regarding employer-provided health care point in the wrong direction. Exempting employer coverage from taxation encourages individuals to take more compensation in untaxed health insurance benefits rather than taxable wages. Many employees don’t even realize that the employer’s share of the contribution for their coverage — which averaged nearly $15,000 for a family policy in 2019 — comes out of their own wallets in the form of lost wages.

All the flawed and misaligned incentives mean that the co-pay of “only” $5 my friend talked about years ago costs far more than that — to workers, employers and the economy as a whole. It’s one major reason why our health care system represents such a large, and rising, share of our economy.

Lack of portability: This issue arises because employers and not individuals own their health plans. As a result, when individuals lose their jobs, they also lose their health coverage. That dynamic results in the double whammy Americans have experienced during the pandemic, when workers lose their coverage at the same time they have unexpectedly lost their job — compounding families’ financial distress.

Lack of portability also exacerbates the problem of pre-existing conditions. Upon entering the workforce in their teens or 20s, most individuals have yet to develop a pre-existing condition like cancer or diabetes. But every time individuals switch jobs, they lose their employer-provided health coverage — making them vulnerable if they have developed a condition in the intervening time.

The worst kinds of situations occur when individuals must leave their jobs because they have become too sick to work. These patients face not one but two potential sources of financial ruin: They have lost their source of income, and face the prospect of astronomical medical bills without a means to fund them.

Cure the Disease, Not the Symptoms

In the past several years, Democrats have spent lots of time talking about the need to protect individuals with pre-existing conditions. But in focusing on pre-existing conditions, the left focuses on the symptom, rather than the underlying problem.

Remember: When Obamacare went into effect in January 2014, at least 4.7 million individuals received cancellation notices, according to The Associated Press. These individuals had plans that they liked, and wanted to keep — but the Obama administration wouldn’t let them. Politifact called the promise that Americans could keep their plan the 2013 “Lie of the Year,” and that lie affected many individuals who had developed, or feared that they would develop, a pre-existing condition. Let’s spare the notion that Democrats want to “protect” people with pre-existing conditions, when they “protected” millions of people right out of their coverage.

Liberals don’t talk about the underlying policy issue that creates the pre-existing condition problem — that people don’t own their own health coverage — because they don’t want people to own their own insurance. They want Washington to control health care decisions, not individual patients. It’s the classic example of former President Ronald Reagan’s nine most terrifying words in the English language: “I’m from the government and I’m here to help.”

But if individuals could buy an insurance policy upon joining the workforce — one that they owned, not their employer — and retain that policy from job to job for decades, most individuals could buy coverage well before they develop a pre-existing condition, and keep that coverage after they do so, the pre-existing condition problem would rapidly diminish. (Yes, a small percentage of Americans, most notably those born with congenital illnesses, develop pre-existing conditions very early in life, but other policy solutions can address this population.)

Trump Administration’s Solution

You wouldn’t know it, given all the carping and hostility from the left, but the Trump administration has put forward a very positive solution that answers the policy problems associated with employer-provided health coverage. It should increase portability in ways that help solve the pre-existing condition problem, while also providing additional choice and competition.

The administration’s policy, implemented through regulations finalized in 2019, allows employers to contribute funds to workers on a pre-tax basis through Health Reimbursement Arrangements. These HRAs allow individuals to purchase coverage that they own, not their employers — making the coverage portable from job to job.

The HRA concept provides wins for employers, employees and the economy as a whole:

• Employers get predictability when it comes to their health insurance offerings. By providing employees a fixed sum (say, $300 or $500 a month) into the HRA, they will not have to worry about changing plans from year to year, a sudden spike in costs because of a sick employee, or many of the other paperwork hassles associated with offering coverage.
• Employees get both choice and portability. They can select the insurance plan that best meets their needs — the doctors, deductibles and plan features that they want. Not only can they keep the plan when they switch jobs, the fact that they and not their employer chose the coverage in the first place will make them more likely to do so.
• The economy will benefit from individuals selecting the plans they want, rather than the plans employers select for them. Insurers will have to provide better, more customized plans that fit individuals’ needs, and employees will have incentives to make better choices to stretch the HRA dollars their employers provide them.

Ideally, Congress would amend the law regarding Health Savings Accounts, to allow individuals to use HSA dollars to fund health insurance premiums. Because HSA funds cannot pay insurance premiums in most cases under current law, the Trump administration had to use Health Reimbursement Arrangements (which are owned by employers) rather than Health Savings Accounts (which are always owned by individuals) to fund individual coverage.

Providing contributions via an HSA, as opposed to an HRA, would allow employees to control any unused employer contributions upon leaving a job. That way, individuals would not only have a source of coverage in the event of a layoff, they could develop a source of savings to pay for that coverage while unemployed. But until Congress acts, the Trump administration’s Health Reimbursement Arrangement regulations represent a tremendous step forward toward a more logical, patient-centered insurance system.

Empower Patients, Not Government

Coronavirus has made the problems with government control of health care apparent. As Joe Biden (of all people) noted in the March CNN debate, Italy has a single-payer system — and that nation had to ration access to ventilators, whereas the United States did not.

The pandemic has exposed the flaws in our health insurance system. But it comes just as the Trump administration has shown a better path forward. By empowering patients rather than government bureaucrats, Health Reimbursement Arrangements can help transform the coverage system into something that lowers costs and provides the care American patients prefer.

This post was originally published at the Daily Caller’s American Renewal blog.

We Should Move Away from Employer-Based Insurance, But NOT Towards Single Payer

The left continues to seek ways to politically capitalize on the coronavirus crisis. Multiple proposals in the past several weeks would replace a potential decline in employer-provided health insurance with government-run care.

One analysis released earlier this month found the coronavirus pandemic could cause anywhere from 12 to 35 million Americans to lose their employer-provided coverage, as individuals lose jobs due to virus-related shutdowns. Of course, these coverage losses could remain temporary in some cases, as firms reopen and rehire furloughed workers.

But these lefties do have a point: The United States should move away from employer-provided health coverage. It just shouldn’t rely upon a government-run model to do so.

Biden: Let’s Expand an Insolvent Program

Days after his last remaining rival, Vermont Sen. Bernie Sanders, dropped out of the race for the Democratic presidential nomination, former vice president and presumptive nominee Joe Biden endorsed a plan to expand Medicare. Biden’s statement didn’t include details. Instead, he “directed [his] team to come up with a plan to lower the Medicare eligibility age to 60.”

One big problem with Biden’s proposed expansion: Medicare already faces an insolvency date of 2026, a date the current economic turmoil will almost certainly accelerate. He claimed that “any new federal cost associated with this option would be financed out of general revenues to protect the Medicare trust fund.” But Biden didn’t explain why he would choose to expand a program rapidly approaching insolvency as it is.

Another problem for Biden seems more political. As this space has previously noted, in 2017 and 2018, the former vice president and his wife received more than $13 million in book and speech revenue as profits from a corporation rather than wage income. By doing so, they avoided paying nearly $400,000 in payroll taxes that fund—you guessed it!—Medicare.

It doesn’t take a rocket scientist to ask the obvious question: If Biden loves Medicare so much that he wants to expand it, why didn’t he pay his Medicare taxes?

Medicare Extra

Other liberals have proposals that would expand the government’s role in health care still further. Examining the impact of coronavirus on coverage, and analyzing a movement away from employer-provided care, Ezra Klein endorsed the Medicare Extra plan as superior to Biden’s original health-care proposal for a so-called “public option.” Towards the end of his analysis, Klein makes crystal clear why he supports this approach:

[Medicare Extra] creates a system that, while not single-payer, is far more integrated than anything we have now: A public system with private options, rather than a private system with fractured public options.

Medicare Extra, originally developed by the Center for American Progress and introduced in legislative form as the Medicare for America Act by Rep. Rosa DeLauro (D-Conn.), goes beyond the Biden plan. Both would likely lead to a single-payer system, but Medicare Extra would do so much more quickly.

Biden’s original health care plan would create a government-run “option,” similar to Medicare, into which anyone could enroll. Individuals could use Obamacare subsidies (which Biden’s proposal would increase) to enroll in the government-run plan.

Notably, Biden’s proposal eliminates Obamacare’s subsidy “firewall,” in which anyone with an offer of “affordable” employer coverage does not qualify for subsidized exchange coverage. Removing this “firewall” will encourage a migration towards the exchanges, and the government-run plan.

By contrast, Medicare Extra would go three steps further in consolidating government-run care. First, it would combine existing government programs like Medicare and Medicaid into the new “Medicare Extra” rubric. Second, the legislation would automatically enroll people into Medicare Extra at birth, giving the government-run program an in-built bias, and a clear path towards building a coverage monopoly.

Third, Medicare Extra would not just allow individuals with an offer of employer-sponsored coverage to enroll in the Medicare Extra program, it would require the employer to “cash out” the dollar value of his contribution, and give those funds to the employee to fund that worker’s Medicare Extra plan.

The combination of this “cash out” requirement (not included in Biden’s proposal) and the other regulations on employer coverage included in Medicare Extra would result in a totally government-run system within a few short years. After all, if businesses have to pay the same amount to fund their employees’ coverage whether they maintain an employer plan or not, what incentive do they have to stay in the health insurance game?

Let Individuals Maintain Their Own Coverage

Both Biden’s proposals and Medicare Extra would consolidate additional power and authority within the government system—liberals’ ultimate objective. By contrast, the Trump administration has worked to give Americans access to options other than employer-provided insurance that individuals control, not the government.

Regulations finalized by the administration last year could in time revolutionize health insurance coverage. The rules allow for employers to provide tax-free contributions to employees through Health Reimbursement Arrangements, which workers can use to buy the health insurance plans they prefer. Best of all, employees will own these health plans, not the business, so they can take their coverage with them when they change jobs or retire.

It will of course take time for this transition to take root, as businesses learn more about Health Reimbursement Arrangements and workers obtain private insurance plans that they can buy, hold, and keep. But if allowed to flourish, this reform could remove Americans’ reliance on employers to provide health coverage, while preventing a further expansion of government meddling in our health-care system—both worthy objectives indeed.

This post was originally published at The Federalist.

Hospitals’ Corona Cash Crunch Shows Problems of Government-Run Care

The coronavirus pandemic has inflicted such vast damage on the American economy that one damaged sector has gone relatively unnoticed. Despite incurring a massive influx of new patients, the hospital industry faces what one executive called a “seismic financial shock” from the virus.

The types of shocks hospitals currently face also illustrate the problems inherent in Democrats’ proposed expansions of government-run health care. Likewise, the pay and benefit cuts and furloughs that some hospitals have enacted in response to these financial shocks provide a potential preview of Democrats’ next government takeover of health care.

Massive Disruptions

The health-care sector faces two unique, virus-related problems. The lockdowns in many states have forced physician offices to close, or scale back services to emergencies only. The cancellation of routine procedures (e.g., dental cleanings, check-ups, etc.) has caused physician income to plummet, just like restaurants and other shuttered businesses.

While many physician practices have seen a dramatic drop-off in patients, hospitals face an influx of cases—but the wrong kind of cases. According data from the Health Care Cost Institute, in 2018 a hospital surgical stay generated an average $43,810 in revenue, while the average non-surgical stay generated only $19,672.

The pandemic has raised hospitals’ costs, as they work to increase bed capacity and obtain additional personal protective equipment for their employees. But as one Dallas-based hospital system noted, coronavirus’ true “seismic financial shock” has come from the cancellations of elective surgeries that “are the cornerstone of our hospital system’s operating model.”

This rapid change in hospitals’ case mix—the type of patient facilities treat—has inflicted great damage. Replacing millions of higher-paying patients with lower-paying ones will rapidly unbalance a hospital’s books. Changing patient demographics, in the form of additional uninsured patients and patients from lower-paying government programs, only compounds hospitals’ financial difficulties.

A Preview of Democrats’ Health Care Future

The shock hospitals face from the rapid change in their case mix previews an expansion of government-run health care. The Medicare Payment Advisory Commission noted in a report released last month that in 2018, hospitals incurred a 9.3 percent loss on their Medicare inpatient admissions. To attempt to offset these losses as hospitals treat coronavirus patients, Section 3710 of the $2 trillion stimulus bill increased Medicare payments for COVID-related treatment by 20 percent.

With respect to the single-payer bill promoted by Sen. Bernie Sanders (I-VT), neither the conservative Mercatus Center nor the liberal Urban Institute assumed the higher reimbursement rates included in the stimulus bill. Mercatus’ $32.6 trillion cost estimate assumed no increase in current Medicare hospital or physician payments, while Urban’s $32 trillion cost estimate assumed a 15 percent increase in hospital payments and no increase in physician payments. Raising Medicare reimbursements to match the 20 percent increase included in the stimulus bill would substantially hike the cost of Sanders’ plan.

Conversely, presumptive Democratic nominee Joe Biden believes his “public option” proposal, by making enrollment in a government plan voluntary, represents much less radical change. But his plan increases the generosity of Obamacare subsidies and repeals current restrictions prohibiting workers with an offer of employer coverage from receiving those subsidies—both of which would siphon patients toward the government plan.

In 2009, the Lewin Group concluded that a government plan open to all workers would result in 119 million Americans dropping their private coverage. Such a massive influx of patients into a lower-paying government system would destabilize hospitals’ finances much the same way as coronavirus.

Economic Cutbacks and Job Losses

Sadly, the coronavirus pandemic has allowed us to see what a rapid influx of lower-paying patients will do to the hospital sector. A few weeks into the crisis, many systems have already resorted to major cost-cutting measures. Tenet Healthcare, which runs 65 hospitals, has postponed 401(k) matches for employees. In Boston, Beth Israel Deaconess has withheld some of emergency room physicians’ accrued pay, a measure sure to harm morale as first responders face long hours and difficult working conditions.

This economic damage from a rapid change in hospitals’ payer mix echoes a study in the Journal of the American Medical Association last spring. That study concluded that a single-payer health care system paying at Medicare rates would reduce hospital revenues by $151 billion annually, resulting in up to 1.5 million job losses for hospitals alone. Robust enrollment in the government-run health plan Biden supports would have only marginally lower effects.

Hospitals, like the rest of our economy, will in time recover from the financial impacts of the coronavirus pandemic. But they may not bounce back quickly, or at all, from another expansion of government-run health care—a fact that hospital workers facing cutbacks, and patients needing care, should take to heart in November.

This post was originally published at The Federalist.

Joe Biden’s Obamacare Gaffe Points to a Larger Truth

In Iowa just before the New Year, former Vice President Joe Biden had an interesting response to a voter’s concerns about Obamacare. The voter said his father had lost his coverage when the law’s major provisions took effect in 2014, and the “replacement” plans proved far more expensive. Asked to apologize for what PolitiFact dubbed its “Lie of the Year” for 2013—that “If you like your plan, you can keep it”—Biden demurred by claiming the following:

There’s two ways people know when something is important. One, when it’s so clear when it’s passed that everybody understands it. And no one did understand Obamacare, including the way it was rolled out. And the gentleman’s right—he said you could keep your doctor if you wanted to, and you couldn’t keep your doctor if you wanted to, necessarily. He’s dead right about that.

On its face, Biden’s comments initially resemble House Speaker Nancy Pelosi’s “We have to pass the bill so that you can find out what is in it” gaffe. But in reality, they hint at a larger truth: the federal government has gotten so big and sprawling, nobody really understands it.

Pelosi’s ‘Kinsley Gaffe’

Just before Obamacare’s passage in March 2010, Pelosi made comments that conservatives have parodied for most of the ten years since:

Upon closer inspection, though, her comments centered on the political messaging about the law, rather than the underlying policy. She prefaced her infamous quote by noting that “You’ve heard about the controversies within the bill, the process about the bill.”

But in Pelosi’s view, the American people had not heard about the substance of the bill itself: “I don’t know if you have heard that it is legislation for the future.” She went on to talk a bit about preventive care measures contained in Obamacare, which in her view would lower health-care costs. She then gave her infamous quote about passing the bill “so that you can find out what is in it, away from the fog of the controversy.”

Pelosi’s statement still seems extraordinary. She admitted that, even with Barack Obama—who won the presidency in fair measure through his rhetoric—in the White House, more than 250 Democrats in the House, and 60 Democrats in the Senate, Obamacare had proven a political failure. Democrats had lost the messaging battle in 2009 and 2010, and could only hope that enacting the legislation and allowing Americans to see its purported benefits could turn the dynamic around.

But Pelosi’s comments said “we have to pass the bill so that you can find out what is in it”—emphasis on the second person. She still claimed to know the contents of the legislation, contra the recent claims of the vice president at the time.

So Much for ‘Experts’

On one level, Biden’s comments echoed Pelosi’s. He talked about “the way it was rolled out”—a likely reference to the messaging battles of 2009-10, the “debacle” of the exchange launch in late 2013, or a combination of the two.

But unlike Pelosi—who said the public didn’t understand Obamacare—Biden said that “no one did understand Obamacare.” One wonders whether the statement meant to inoculate Obama from accepting blame for his “like your plan” rhetoric, even though Obama himself apologized for misleading the public on the issue in late 2013.

Regardless, Biden’s rhetoric echoes the example of Max Baucus, at the time the chairman of the Senate Finance Committee. Asked shortly after the legislation passed whether he had read Obamacare prior to its enactment, he responded that “I don’t think you want me to waste my time to read every single word of that health care bill,” because “we hire experts” who are the only people who “know what the heck it is:”

Except that four years later, one of those “experts” who worked on Baucus’ staff at the time, Yvette Fontenot, admitted that when drafting Obamacare’s employer mandate, “We didn’t have a very good handle on how difficult operationalizing the provision would be at that time.” So, to borrow Baucus’ own phrase, even one of his self-appointed “experts” didn’t “know what the heck it is” either.

Why Expand a Government You Can’t Even Understand?

Biden’s comments once again reveal that the federal government has become too big and sprawling for anyone to understand. Yet he and his Democratic colleagues continue to push massive, multi-trillion-dollar expansions of government as part of their presidential campaigns. Sen. Elizabeth Warren goes so far as to claim that “experts” can fix just about everything that’s wrong with the world, even though Biden’s admission shows that they need to start by fixing the problems they caused.

As the old saying goes, when you’re in a hole, stop digging. That axiom applies equally to Biden’s propensity to put his foot in his mouth and Democrats’ desire to expand a government they do not understand.

This post was originally published at The Federalist.

Democrats’ Medicare Chutzpah

One little-noticed element in the “fiscal cliff” debate hasn’t attracted much attention – the glaring hypocrisy of Democrats when it comes to the Medicare program.  Last Thursday, Democrats in the House offered a motion to recommit spending reduction legislation (full text available here) that would have required HHS to disclose:

  1. The number of Medicare beneficiaries in such district…who, at any time during the ten-year period beginning on the first day of the first fiscal year that begins after the date of the enactment of this Act, will A) lose coverage under the Medicare program… or B) experience an increase in premiums, cost-sharing, or other out-of-pocket costs under such respective program as a result of the implementation of this Act; and
  2. The name and location of each hospital and nursing facility that would experience a reduction in payments under the Medicare program…as a result of the implementation of this Act.

It’s more than a bit rich for the Democrat leadership to offer such a motion, given that Obamacare:

  • Takes “half a trillion dollars out of Medicare” to pay for Obamacare’s new programs, according to none other than Nancy Pelosi;
  • Raises Part D premiums, according to the Congressional Budget Office, so that Big Pharma can benefit from its “rock-solid deal” struck behind closed doors with President Obama and Congressional Democrats;
  • Cuts Medicare Advantage by more than $300 billion, which will reduce the program’s enrollment by half and plan choices by two-thirds, causing millions of seniors to lose their current health insurance; and
  • Makes up to 40 percent of providers unprofitable over the long-term, according to the non-partisan Medicare actuary, potentially forcing providers “to withdraw from providing services to Medicare beneficiaries.”

The Medicare program is in dire need of reform to make it fiscally sustainable.  But no one should take lessons on entitlement “reform” from the crowd that – by its own admission – raided the Medicare program to pay for yet more irresponsible entitlement spending.

Up Next: Obamacare’s Thanksgiving Turkey

According to online sources, on Wednesday President Obama plans to pardon the White House turkey in an annual Thanksgiving ceremony.  But before that happens, later today Secretary Sebelius plans to serve the American people a turkey – more regulations implementing Obamacare.  Among the possible items on “Aunt Kathy’s” Thanksgiving menu:

Reading through all these mandates and requirements is enough to give anyone a serious case of indigestion, which explains why the Administration is releasing them so close to Thanksgiving.  They don’t want the American people to read the regulations implementing the bill, just like they didn’t want the American people to read the bill itself.  Thus the spectacle of a Cabinet secretary who sat idly by as an “author” of Obamacare admitted he hadn’t read it (because Democrats had to “make judgments very fast”) engaging in a real-life version of “Take Out the Trash Day” by dumping out massive – and costly – regulations two weeks after the election, and two days before a major holiday.  It does raise one obvious question: If Obamacare is so popular, why did these major regulations implementing Obamacare sit on a shelf until after the election?  What has HHS been hiding?

Then-Speaker Pelosi spoke the truth when she famously said we had to pass the bill to find out what’s in it.  That statement is just as true with the regulations implementing the bill as it is with the 2700-page measure itself.  But a general clue about what’s to come will arrive in the form of the entrée on many Americans’ tables this Thursday.

The Siren Song of the Left’s “Competition”

As previously noted, yesterday the Center for American Progress released its platform for altering entitlements.  In fairness, the paper does include some conservative ideas, most notably additional means-testing for Medicare beneficiaries.  But mainly the report demonstrates the fundamental difference between conservatives and liberals: Not only do liberals not believe in markets, they don’t understand (and/or don’t want to understand) how markets actually work.

Take for instance the CAP proposals that will supposedly “enhance competition based on price and quality,” such as the idea to “require health insurance exchanges to offer tiered insurance plans.”  On the face of it, the idea sounds reasonable enough – encourage plans to lower premiums by offering a variety of choices.  But the catch here – as in the rest of the CAP proposals – is that “competition” is government-defined, government-mandated, and government-prescribed.  For instance, if insurers want to offer, and patients want to purchase, less expensive insurance coverage that doesn’t cover all of Obamacare’s mandated benefits – and/or insurance purchased across state lines – both CAP and Obamacare would tax those who gain coverage through such means, because this “competition” is prohibited in liberals’ new health care utopia.

Then there’s the fact that the CAP report also includes numerous other proposals that involve expanding prescription drug price controls in various forms.  One may find it ironic – and ever-so-slightly contradictory – that a report supposedly focused on “enhanc[ing] competition” simultaneously expands government-dictated price controls.

Finally, CAP’s proposals for “competitive bidding” seem little short of comical for their ideologically-based hypocrisy.  The paper states that Congress should “use competitive bidding for Medicare Advantage” – but then just as quickly states that government-run Medicare itself should not compete.   And why doesn’t CAP want government-run Medicare to compete against private plans?  Because a paper co-authored by one of CAP’s own scholars released in September found that in many parts of the country, traditional Medicare can’t compete – it’s far too costly.  The study, outlined in an article in the Journal of the American Medical Association, found that private plans would be 9% cheaper than traditional Medicare under a competitive bidding proposal.

Mind you, the Left has no problems forcing seniors to pay more for private Medicare Advantage coverage, or forcing them out of their plans entirely – Obamacare’s cuts to the program will ensure both outcomes.  But when it comes to competitive bidding for government-run Medicare itself, CAP and others on the Left want nothing to do with such an idea, clinging instead to the shibboleth of government-run Medicare as a first step towards socialized medicine for all.  And that hypocrisy – competition for thee, but not for me – explains in a nutshell why liberal ideas such as those in the CAP paper are both unrealistic and ideologically dangerous.

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.

More Misinformation from the Obama Campaign

The President’s campaign is releasing a booklet this morning featuring the President’s re-election “plans.”  Unfortunately, many of them involve funny money and fuzzy math.  Take for instance the section on retirement security, which claims that Obamacare “strengthened Medicare by cutting overpayments to insurance companies and cracking down on billions in health care waste, fraud and abuse.  The President added eight years to the Medicare Trust Fund.”

There’s just one problem with these assertions – they aren’t true.  Take the claims about “waste, fraud, and abuse.”  First, Obamacare’s $300 billion in cuts to Medicare Advantage will reduce the program’s enrollment by half and plan choices by two-thirds.  Moreover, the non-partisan Medicare actuary said that Obamacare would have a direct impact on beneficiaries in traditional Medicare as well.  He has concluded that over the long-term, up to 40 percent of providers would become unprofitable due to Obamacare, and could “have to withdraw from providing services to Medicare beneficiaries.”  Earlier this month, an Alabama hospital took a different course – it decided to shut down entirely, due to the impact of Obamacare on its business model.

As to the claims that Obamacare extends the life of the Medicare trust fund, the Congressional Budget Office takes a dim view toward such statements.  The non-partisan CBO said that the Medicare reductions in Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – because those savings will be used to fund other unsustainable entitlements.  If the President wants to use the Medicare savings provisions to extend the life of the Medicare trust fund – and not to fund the new entitlements created by the law – the Congressional Budget Office previously estimated what the fiscal impact would be:  “A net increase in federal deficits of $260 billion” through 2019.

In 2010, President Obama himself admitted in an interview that Obamacare could not rely on double counting, when he stated that “You can’t say that you are saving on Medicare and then spending the money twice.”  The fact that the President is now reversing his own earlier claims shows how badly Obamacare has failed, and how desperate the President is to win re-election.

We Told You So…

From Alabama last night came word that a 124-bed hospital in Mobile will be shutting down – and that Obamacare is to blame for the closure.  Here’s what the CEO of the hospital system said in a statement:

We made this decision after evaluating the utilization of the facility, the healthcare needs of the community served by Infirmary West and determining how we could better utilize our resources to improve and expand health services in this area of our community…The passage of the ‘Affordable Care Act’ (Healthcare Reform), challenges hospitals and health systems to re-evaluate how to best allocate their resources to serve the needs of our community.

This development was entirely predictable – not only that, it was predicted.  Here’s what the non-partisan Medicare actuary said about Obamacare’s potential impacts not long after the law was passed:

Reductions in payment updates to health care providers, based on economy-wide productivity gains, are unlikely to be sustainable on a permanent annual basis.…Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries).  Simulations by the Office of the Actuary suggest that roughly 15 percent of Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.

And so it hath proved.