Medicare Trustees Report Exposes Sanders’ Socialist Delusions

Many of the left’s policy proposals come with the same design flaw: While sounding great on paper, they have little chance of working in practice. Monday brought one such type of reality check to Sen. Bernie Sanders (I-VT) and supporters of single-payer health care, in the form of the annual Medicare trustees report.

The report once again demonstrates Medicare’s shaky financial standing, as the retirement of 10,000 Baby Boomers every day continues to tax the program’s limited resources. So why would Sanders and Democrats raid this precariously funded program to finance their government takeover of health care?

Medicare’s Ruinous Finances

Before even dissecting the report itself, one major caveat worth noting: The trustees report assumes that many of the Medicare payment reductions, and tax increases, included in Obamacare can be used “both” to “save Medicare” and fund Obamacare. In practice, however, sheer common sense suggests the impossibility of this scenario—as not even the federal government can spend the same dollars twice.

The last trustees report prior to these Obamacare gimmicks, in 2009, predicted that the Medicare Part A (Hospital Insurance) Trust Fund would become insolvent in 2017—two years ago. To put it another way, under a more accurate accounting mechanism, Medicare has already become functionally insolvent. Obamacare’s accounting gimmicks just allowed politicians (including President Trump) to continue to ignore Medicare’s funding shortfalls, thus making them worse by failing to act.

Even despite the double-counting created by Obamacare, the Part A Trust Fund faces significant obstacles. Monday’s report reveals that the trust fund suffered a $1.6 billion loss in 2018. This loss comes on the heels of a total of $132.2 billion in trust fund deficits from 2008 through 2015, as payroll tax revenues dropped dramatically during the Great Recession.

Worse yet, the trustees report that trust fund deficits will continue forever. Deficits will continue to rise, and by 2026—within the decade—the Trust Fund will become insolvent, and unable to pay all of its bills.

Replacing One Decrepit Program with an Even Worse One

In 2003, House conservatives included this mechanism in the Medicare Modernization Act, which requires the trustees to make an annual assessment of the program’s funding. If general revenues—as opposed to the payroll tax revenues that largely cover the costs of the Part A program—are projected to exceed 45 percent of total program outlays, this provision seeks to prompt a debate about Medicare’s long-term funding.

Compare this provision, which triggers whenever general revenues (i.e., those not specifically dedicated to Medicare) approach half of total program spending, with single payer. As these pages have previously noted, here’s what Section 701(d) both the House and Senate single payer bills would do to Medicare:

(d) TRANSFER OF FUNDS.—Any amounts remaining in the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act (42 U.S.C. 1395i) or the Federal Supplementary Medical Insurance Trust Fund under section 1841 of such Act (42 U.S.C. 1395t) after the payment of claims for items and services furnished under title XVIII of such Act have been completed, shall be transferred into the Universal Medicare Trust Fund under this section.

Both bills would liquidate both of the current Medicare trust funds—and abolish the current Medicare program—to pay for the new single-payer plan. But how do Democrats propose to pay for the rest of the estimated $32 trillion cost of their program? Sanders referenced a list of potential tax increases (not drafted as legislative language), but the House sponsors didn’t even bother to go that far.

This post was originally published at The Federalist.

Liberals’ Hypocrisy on Per Capita Caps

It was, to borrow from Arthur Conan Doyle, the dog that didn’t bark. In releasing the annual report on its finances, Medicare’s actuary last month found that the program would not trigger requirements related to the Independent Payment Advisory Board (IPAB) this year—or for several years to come. Although the Senate and House health-care bills avoided altering Medicare, the IPAB development—or non-development, as it were—should inject some important perspective into the legislative debate.

Many liberal critics of the Republican bills have attacked proposals to impose per capita caps on state Medicaid programs, while conveniently forgetting that Obamacare imposed similar spending caps on Medicare. In fact, Section 3403 of the law empowers IPAB—a board of unelected bureaucrats—to make binding recommendations to Congress reducing program spending if Medicare will exceed statutory limits for spending per beneficiary.

We Care More About Politics than Policy

Some Obamacare supporters claim that statutory restrictions on IPAB—in enforcing Medicare spending caps, the board may not change Medicare benefits or “ration health care”—will protect Medicare beneficiaries in a way that the current bills do not protect Medicaid recipients. But IPAB’s supposed “protections” have their own flaws. The statute does not define “rationing,” and then-Secretary of Health and Human Services (HHS) Kathleen Sebelius testified in 2011 that HHS would need to draft regulations to do so. But the Obama administration never even proposed rules “protecting” Medicare beneficiaries from rationing under the IPAB per capita caps—so how meaningful can those protections actually be?

When push comes to shove, few liberals can justify their support for per capita caps on Medicare, but opposition to similar caps in Medicaid. One day on Twitter, I posed a simple question to Topher Spiro, of the Center for American Progress (CAP): If the Republican proposals for per capita caps in Medicaid included the same beneficiary “protections” as IPAB creates for Medicare recipients, would he support them? I never received a substantive answer.

Therein lies the problem: Many critics of the Republican Medicaid proposals seem to prioritize political partisanship over policy consistency. Five years ago, CAP made very clear it supports IPAB’s per capita caps on Medicare spending, denouncing a 2012 legislative effort to repeal the board. But earlier this year, the organization denounced as “devastating” Republican proposals for per capita caps on Medicaid. So why exactly does this purportedly non-partisan organization support per capita caps when a Democratic Congress enacts them, but oppose similar caps proposed by a Republican Congress?

It’s Okay, It’s Just Hypocrisy

Democratic senators appearing with disability advocates at events to denounce spending caps for Medicaid fail to recognize that they voted for similar caps in Medicare, which provides health coverage to 9 million Americans with disabilities. Moreover, despite being in place for several years, the Medicare caps have yet to be breached. So how damaging is a policy that hasn’t affected Medicare beneficiaries in the slightest, and which Democratic lawmakers themselves have voted for?

In his Sherlock Holmes story “Silver Blaze,” Doyle wrote of the guard dog that didn’t bark because it was friendly with an intruder. Likewise, many liberal advocates and Democratic lawmakers are quite friendly with per capita entitlement caps, already having imposed such caps for Medicare. Particularly given the non-factor of such caps in the Medicare program in recent years, they should perhaps “bark” less in opposing similar caps in Medicaid. Both beneficiaries and taxpayers deserve better than opportunistic—and politically inconsistent—scaremongering.

This post was originally published at The Federalist.

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

Insolvency Date:  The insolvency date for the Medicare Hospital Insurance Trust Fund is 2029, one year later than last year’s report. However, remember that, if not for the double-counting in Obamacare (about which see more below), the Trust Fund would ALREADY be insolvent, as in 2009 — the last trustees report prior to Obamacare’s enactment — the trustees projected insolvency for 2017 (i.e., this year).

IPAB NOT Triggered:  Despite prior predictions, this year’s trustees report did NOT trigger a reporting requirement related to the Independent Payment Advisory Board (IPAB). In other words, Medicare spending over the relevant five year period (2015 through 2019) is not projected to exceed the per capita caps established for Medicare in Obamacare itself. Which makes one wonder — if per capita caps for Medicare haven’t yet bit, why are liberals objecting so loudly to per capita caps for Medicaid…?

A Brief Break from Massive Deficits:  For the first time in nearly a decade, the Medicare Part A Trust Fund did NOT run a deficit. However, the small $5.4 billion surplus did not even begin to overcome the $132.2 billion in deficits run by the Medicare program from 2008 through 2015.

Funding Warning:  For the first time since 2013, the trustees issued a funding warning showing that the Medicare program is taking a disproportionate share of its funding from general revenues, thus crowding out programs like defense and education. If a second warning is issued next year, the President will be required to submit legislation to Congress remedying the problem.

Unrealistic Assumptions:  As it has every year since the passage of Obamacare, the trustees issued an alternative scenario, because “absent an unprecedented change in health care delivery systems,” the payment reductions included in Obamacare mean that “access to, and delivery of, Medicare benefits would deteriorate over time for beneficiaries.”

Double Counting:  The actuary also previously confirmed that the Medicare reductions in Obamacare “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund” solvency date – rendering dubious any potential claims that Obamacare will extend Medicare’s solvency.  As Nancy Pelosi previously admitted, Democrats “took a half a trillion dollars out of Medicare in [Obamacare], the health care bill” – and you can’t improve Medicare’s solvency by taking money out of the program.

Will Medicare Premium Increases Be an Issue in November?

Buried in the Medicare trustees report released Wednesday are a few lines that could cause political controversy. “In 2017 there may be a substantial increase in the Part B premium rate for some beneficiaries,” the actuaries write—which means seniors will find out about increases shortly before Election Day.

Higher-than-expected Medicare spending in 2014 and 2015 set the stage for a large premium adjustment in 2016. But, notably, the absence of inflation thanks to the drop in energy prices last year meant that seniors receiving Social Security benefits did not receive an annual cost-of-living adjustment.

The Medicare statute has a “hold harmless” provision that prevents Part B premiums from rising by more than the amount of a Social Security cost-of-living adjustment. For most beneficiaries, the provision meant that in 2016, they received no such adjustment—but also did not pay a higher Part B premium. However, nearly one-third of beneficiaries—new Medicare enrollees, “dual eligibles” enrolled in both Medicare and Medicaid (in places where state Medicaid programs pay the Medicare Part B premium), and wealthy seniors subject to Medicare means-testing—do not qualify for the provision.

The New York Times noted last fall that the hold-harmless provision, by protecting most beneficiaries, exposed some to higher increases: “If premiums are frozen for 70 percent of beneficiaries, premiums for the other 30 percent must be raised more to cover the expected increase in overall Medicare costs. In other words … the higher Medicare costs must be spread across a smaller group of people.”

Congress, seeing a dynamic in which some seniors could face a nearly 50% increase in premiums, crafted a provision to forestall such a high and sudden spike. The Bipartisan Budget Act capped Part B premium increases for 2016, paid for by a loan from the Treasury that would be repaid by seniors in future years.

The legislative language used, however, allows premium spikes to come back with a vengeance. The Bipartisan Budget Act provided that the Medicare Part B “smoothing” provision would be renewed in 2017—but only if Social Security beneficiaries received no cost-of-living adjustment at all. The trustees report out Wednesday says that beneficiaries are projected to receive a very modest adjustment: 0.2%. Although that change is relatively small, it means that the “smoothing” provisions in last year’s budget deal do not apply—and, as the Wednesday Medicare report notes, premiums for some beneficiaries “need to be raised substantially,” up to nearly $150 per month.

Before the trustees’ report was released, some experts had predicted that a series of payment reductions by the Independent Payment Advisory Board (IPAB) under Obamacare would spark talk of “death panels” in political campaigns this fall. Spending levels did not require the board to convene, making that issue moot for now. But that doesn’t mean that Medicare won’t be an issue on the campaign trail. Democrats raised the Part B premium issue last year; expect to hear much more about it before November.

This post was originally published at the Wall Street Journal Think Tank blog.

For Presidential Candidates, Some Inconvenient Truths on Entitlements

News coverage regarding Hillary Clinton’s proposal to allow individuals under age 65 to buy into Medicare has focused largely on describing how her plan might work, or how it fits into her Democratic primary battle with socialist Bernie Sanders — the left hand trying to imitate what the far left hand is doing. But these political stories mask a more important policy paradigm: While Sanders and Clinton both want to expand Medicare, the program is broke — and neither Sanders, nor Clinton, nor Donald Trump have admitted that inconvenient truth, or have proposed any specific solutions to fix the problem.

Astute readers may note the verb tense in the preceding sentence. It’s not that Medicare will become insolvent in ten or twenty years’ time — it’s practically insolvent now. The program’s Part A (hospital insurance) trust fund lost a whopping $128.7 billion between 2008 and 2014, according to the program’s trustees. The Congressional Budget Office projected earlier this year that the trust fund would become insolvent within the decade.

But in reality, the only thing keeping Medicare afloat at present is the double-counting budget gimmicks created by Obamacare. In the year prior to the law’s enactment, the program’s trustees estimated that the Part A trust fund would become insolvent by 2017 — just a few short months from now. But within months after Obamacare became law, the trustees pushed back their insolvency estimate twelve years, from 2017 to 2029.

The trustees’ estimates notwithstanding, Medicare hasn’t become more solvent under President Obama — far from it. Instead, the Medicare payment reductions and tax increases used to fund Obamacare are simultaneously giving the illusion of improving Medicare’s insolvency. When former Health and Human Services secretary Kathleen Sebelius was asked at a congressional hearing whether those funds were being used “to save Medicare, or…to fund health care reform [Obamacare],” Sebelius replied, “Both.”

The Madoff-esque accounting schemes included in Obamacare do not improve Medicare’s solvency one whit. In fact, they undermine the program, because the illusion of solvency has encouraged politicians to ignore Medicare’s financial shortfalls until it’s too late.

And ignore it they have. Sanders has proposed a “Medicare for all” plan that a liberal think tank this week estimated would cost the federal government $32 trillion over ten years. Hillary Clinton has proposed creating another new entitlement — this one a refundable tax credit of up to $5,000 per family to cover out-of-pocket medical expenses, for which many of the 175 million Americans with employer-sponsored coverage could qualify. And Donald Trump has run ads, in states including Pennsylvania, claiming he will “save Social Security and Medicare without cuts.”

But none of them have provided specifics about how they would reform our existing entitlements to prevent a fiscal collapse and preserve them for current seniors and future generations. The collective silence might stem from the fact that Medicare alone faces unfunded obligations of $27.9 trillion over the next 75 years — and that’s after the Obamacare accounting gimmicks that make Medicare’s deficits look smaller on paper. Shortfalls that large will require making tough choices; greater economic growth will make the deficits more manageable, but we can’t grow our way out of a $28 trillion shortfall.

Reaction to Speaker Paul Ryan’s comments about Trump last week has largely focused on the latter’s tone and temperament in his presidential campaign. But if Ryan has stood for anything in Washington, it is fiscal responsibility and entitlement reform. Conversely, by claiming he can “save Social Security and Medicare without cuts,” Trump is effectively signing Republicans up for a $28 trillion tax increase to “save Medicare” — and more besides for Social Security. Little wonder, then, that the Speaker expressed his reluctance to endorse Trump; at their meeting today, they could well address this topic in detail.

Four decades ago, as Britain plunged into its Winter of Discontent, Prime Minister James Callaghan returned from a South American summit and denied any sense of “mounting chaos.” The next day, the Sun’s famous headline shouted “Crisis? What Crisis?” Clinton, Trump, and Sanders should take note. For while the remaining candidates for president seem more interested in creating new entitlements than in making existing ones sustainable, ultimately voters will not look kindly on those who fiddled while our fiscal future burned.

This post was originally published at National Review.

Little Reason to Celebrate about Medicare

Lost amid discussion of the Medicare trustees report and the additional four years until the program becomes insolvent is the fact that for the sixth consecutive year, Medicare’s hospital insurance trust fund paid out more in benefits than it generated in revenue.

Table III.B4 on Page 56 of the trustees report tells the tale. In 2013 Medicare’s hospital insurance (Part A) trust fund took in $251.1 billion in revenue while spending $266.2 billion. On top of this $15 billion loss, the losses from 2008 through 2012 were more than $105 billion. The 2014 loss is estimated to be $13.6 billion.

In total, Medicare Part A is projected to pay out $134.2 billion more than it took in from 2008 through 2014. And the trustees forecast that the losses will not be recouped: Trust fund balances will never recover to their pre-2008 levels largely because of long-predicted demographic changes.

Those who cite the projected 2030 insolvency date to argue that the program does not immediately need significant reforms ignore the fact that the same trust fund has run deficits for six straight years–is expected to for a seventh. Policymakers focused on a delayed insolvency date imply a strategy of managed decline for Medicare. The American people deserve real, lasting solutions.

This post was originally published at the Wall Street Journal Think Tank blog.

The Freedom and Empowerment Plan for American Health Care

A PDF of the full health care plan is available on the America Next website.

The Problem of American Health Care

By many measures, the American system of health care is the best in the world. It is a source of incredible innovation at the cutting edge of medical science, providing high quality care to people who need it. We have some of the best doctors, nurses, researchers, and provider systems on earth. When world leaders need complex surgery and lifesaving treatment, they fly to us. It is here, in America, where treatments are discovered, methods are improved, and diseases are cured.

But by all sorts of other measures, the American system of health care is the worst of both worlds – and that was true before Obamacare. For starters, it is extraordinarily expensive. This is partly because we aren’t interested in just managing pain, but in curing diseases; partly because market-warping government policies and regulations drive costs higher and incentivize monopolization over competition; partly because Americans have a limited choice of health insurance options; and partly because patients and providers are insulated from the true costs of health care services.

Imagine for a moment if other forms of insurance worked the same way as American health insurance does today. Say you arrive home one day and find that the lightbulb on your front porch has burned out. This happens every couple of months, and it’s predictable as clockwork – or a chronic condition. But because your homeowners insurance policy works like health insurance does, you can’t just drive to a store and buy a lightbulb, oh no. Instead, you have to call and set up an appointment with a highly-paid and highly-educated expert lightbulb specialist.

You go in the waiting room wait for two hours so the specialist can spend five minutes examining the lightbulb and telling you what new one you need to buy. The specialist used to be in a small practice, but now he’s in a big group, because there are all sorts of government regulations he has to deal with, and only big systems can afford to deal with them. He also has to overcharge your private insurer for this brief visit, because he spends a third of his time seeing people on government entitlement programs who dramatically underpay for his services.

The specialist gives you a nearly illegible prescription for a new lightbulb, but you can’t buy it just anywhere – your homeowners insurance has a network of stores, and going out of network means you’ll face penalties. You have to drive across town to an in-network hardware store, and then wait for someone to get the right lightbulb out of the back. You have no idea how much the lightbulb actually costs, or if it would be cheaper at the store ten minutes away – you just have a small co-pay for it, and the rest is covered by your insurer – or how much the specialist is paid to tell you which one to buy. And in a few months when the light burns out again, you’ll have to go through all of this all over again.

When you start to think about the American health insurance system in this context, you start to understand why things are so upside down when it comes to the costs of care. At each stage, everyone is insulated from costs, and most people have no incentive to shop and compare prices and services as they do in every other market. And government policies and sweeping regulations have only served to make it worse.

Health care represents one of the most complex arenas of public policy. It was an animating interest for me from a young age, in part because it is an area that touches every American during the course of their lives in profound ways. I worked at the U.S. Department of Health and Human Services, the National Bipartisan Commission on the Future of Medicare, and the Louisiana Department of Health and Hospitals.  During my lifetime, many attempts have been made to try and fix the broken aspects of our system, some more successful than others. President Obama’s health care law is just the latest in a long line of wrongheaded steps – but it is by far the worst yet.

As someone who believes in empowering patients and using market forces to improve American health care, I oppose President Obama’s law and believe we must repeal all of it—no matter what the conventional wisdom in Washington says. But we must also enact positive reforms to move our health system in the right direction, because the status quo of American health care and insurance is simply not defensible.

What the President said in the course of selling his signature legislation actually sounded good to me – it’s what he did that was awful. The President sold his law as a path to lower premium costs, promising that he’d cut them by $2,500 by the end of his first term. He said he wanted people to be able to keep their health plans and their doctors if they liked them. He said he wanted to bend the cost trajectory down while improving quality. I’m for all of that – but unfortunately that’s not what his law does.  At best the President was horribly naïve about how our health care system works, and how to reform it.  At worst he was deliberately untrue, and sold his government-centric plan as a “conservative” proposal because he knew the American people would never accept the truth.

We want to make sure that people have access to affordable high quality healthcare. We want to create a solid safety net for the poorest of the poor and the sickest of the sick. This is, according to President Obama, what he wants, too. But from my perspective, he never stepped back and really looked at what’s wrong with our system, and asked what we want it to look like if we can tear down the existing market-warping problems and start afresh.

America needs a health care system where it is easy for the consumer to be in control, and where government won’t get in between you and your doctor. Sometimes on the right we’re blind to the fact that health care bureaucracy isn’t just Medicare and Medicaid personnel – it also could be a big insurance bureaucrat, and they’re little better. At each point, this system of bureaucracy, monopolization, and the lack of price transparency serves to drive costs higher and higher for all of us. The most fundamental question in health care policy is: do you want the patient to be in control, working with their doctor and health care provider, or do you want a bureaucrat – whether from the government or your insurer – to be in control?

The left has its answer to this question: empowering government. Instead, we should be empowering patients. How should we go about doing that? Well, there are several things that have to change, steps that will push health care in this country toward being a true competitive marketplace, and which make providers understand once again that the individual patient is their customer.

Big changes never happen organically in Washington, and many of the big stakeholders were heavily invested in Obamacare just a few years ago. But as President Obama’s monopartisan program has stumbled, it presents the opportunity for conservatives to make the case for real reform. It is now obvious to everyone that his plan simply won’t deliver on the many promises he made along the way. And that’s because, from the beginning, his approach was wrongheaded. He trusted the government to fix the problems and get everything right, instead of trusting the American people to know what’s best. We shouldn’t make that mistake twice.

A Conservative Alternative

In the debate surrounding the Patient Protection and Affordable Care Act, more commonly referred to as Obamacare, conservatives have consistently faced one myth, perpetuated by President Obama himself and his political allies: That there is no alternative to Obamacare, and that opponents of the law have offered no solutions on health care themselves.

Nothing could be further from the truth.  In November 2009, House Republicans offered their alternative to Obamacare during a debate on the House floor; not a single Democrat voted for the legislation.[1]  One more recent compilation lists more than 200 pieces of health care legislation offered by conservative Members of Congress in 2013 alone.[2]  Conservatives have consistently proposed alternatives to Obamacare, and publicly advocated on their behalf, yet the President finds it easier to peddle untruths than to engage the American people on why his unpopular law is “better” than alternative reforms.

One reason President Obama fails to recognize conservative alternatives to Obamacare lies in a fundamental dispute about the root problems plaguing the American health care system.  Conservatives believe that the best way to improve access to health insurance coverage is to make that coverage more affordable.  Many conservatives may agree with then-Senator Obama, who stated during his 2008 presidential campaign: “I believe the problem is not that folks are trying to avoid getting health care.  The problem is they can’t afford it.”[3]

Candidate Obama may have talked like a conservative in his rhetoric highlighting health costs and opposing mandates, but President Obama has governed as a liberal.  Instead of tackling the root of the health care problem, and lowering costs first, Obamacare focused on spending trillions of dollars to expand health coverage, creating massive new entitlements in the process.  Rather than making health care more affordable for all Americans, Obamacare gave America a law it can’t afford to keep.  The law is fiscally unsustainable, its tax increases economically damaging, and its enshrinement of greater government control of every aspect of health care is more dangerous than some in Washington appreciate.

For these reasons and more, any conservative health reform must start with repealing Obamacare.  But conservative health reform must not end there.  Even prior to Obamacare, the status quo was, and remains, unacceptable.  Many Americans struggle every day with the high cost of health care, and Americans with pre-existing conditions cannot access the care they need.  America’s health care system does need reforms—but it needs the right reforms.

The policy solutions put forward by America Next in this paper focus on preserving what’s right with American health care, while fixing what’s wrong.  Fixing what’s wrong involves restoring one basic American principle—freedom—that has been eroded due to Obamacare  While it is wise for any individual to have health insurance coverage, Washington cannot—and should not—attempt to compel such behavior.

After restoring those freedoms, we can enact the reforms the American health system needs.  We focus first and foremost on reducing health care costs—because while most Americans want to buy health care and health insurance, many of them struggle to afford it.  We also work to preserve and strengthen the safety net for the most vulnerable in our society, including those with pre-existing conditions.  And we focus on enhancing patient choice, removing obstacles to portability and consumer selection, including many put into place by Obamacare itself.  These principles should form the foundation for true health reform—one that puts doctors and patients, not government bureaucrats, at the heart of all policy decisions.

 

Principle #1: Lowering Health Costs

When running for President in 2008, candidate Obama promised that his health plan would lower premiums—in fact, he promised on numerous occasions that his plan would reduce costs for the average family by $2,500 per year.[4]  Unfortunately, the law President Obama signed bears little resemblance to that campaign pledge.  Obamacare moves American health care in the opposite direction—raising health costs and premiums, not lowering them.  The non-partisan Medicare actuary has concluded that Obamacare will raise total health spending by $621 billion dollars in its first decade alone.[5]  Likewise, independent analysts at the Congressional Budget Office (CBO) concluded that Obamacare would raise premiums for those buying health insurance on the individual market by an average of $2,100 per year.[6]

The higher premiums due to Obamacare are discouraging many people from enrolling in coverage under the law.  A recent survey by analysts at McKinsey found that only 27 percent of Americans selecting insurance plans were previously uninsured—the group Obamacare intended to target for expanded coverage.[7]  The same survey found that half of those individuals who shopped for insurance coverage but did not select a plan cited affordability reasons in deciding not to purchase coverage: “I could not afford to pay the premium.”[8]  For many Americans, the measure dubbed the “Affordable Care Act” has proven anything but affordable.

Obamacare is raising health costs because its mandates and regulations force customers to buy health insurance products they may not want or need, merely because a government bureaucrat tells them they must.  Conversely, true reform would provide incentives for consumers to serve as smart health care shoppers, saving money by engaging in healthy behaviors and taking control of their health care choices.

Tax Equity:  When it comes to health insurance, today’s tax code contains two notable flaws.  First, it includes a major inequity: workers can purchase employer-provided coverage using pre-tax funds, but individuals who buy coverage on their own must use after-tax dollars to do so.  Second, because cash wages provided by an employer are taxable, but health insurance benefits are not taxed, no matter how generous the benefit, the tax code currently gives a greater value to health insurance than increases in cash wages.  This disparity has resulted in employers scaling back pay raises to help fund rapidly rising health plan costs.  The Congressional Budget Office has also noted that this disparity has exacerbated the growth in health costs, and that capping the tax subsidy for employer-provided insurance would help slow cost growth.[9]  Reforms could result in employers raising cash wages if their health costs grow more slowly over time.—and slowing the growth of health care costs would yield benefits for the broader economy.

A conservative health reform would transform the existing tax exclusion for employer-provided health insurance into a standard deduction for all forms of health insurance, regardless of where they are purchased.  First proposed in 2007, this concept was also recently introduced in legislative form in the House of Representatives.[10]  This proposal would not raise taxes; following Obamacare’s repeal, total government revenues would remain at pre-Obamacare levels.  In other words, this proposal would not repeal Obamacare’s tax increases, only to replace them with other tax hikes.

Under this model, the standard deduction would grow at higher rates initially, but as the other efficiencies take effect and the growth in health spending slows, the deduction would in time rise annually according to consumer price inflation.  Much as the current exclusion for employer-provided coverage applies to both income and payroll taxes, the standard deduction would apply towards income and payroll taxes as well.

These reforms would solve several problems with our current tax code.  The standard deduction would create equity between those who buy health coverage through their employer, and those who buy health coverage on their own.  In 2007, one analysis noted this change could reduce the number of uninsured Americans by 9.2 million.[11]  Over time, this policy might encourage more individuals to buy coverage independent of their employer plans, but such a change would likely be gradual and voluntary—as opposed to the millions of Americans who lost their existing health coverage last fall, because their plan did not meet Obamacare’s bureaucratic standards.

Just as importantly, the new standard deduction would contain in-built mechanisms to slow the growth of health costs.  Individuals who purchase insurance costing less than the amount of the standard deduction would still retain the full tax benefit from it—giving them reason to act as smart health care shoppers.  In addition, the slower growth rate of the deduction would give both insurance companies and consumers a greater incentive to maximize efficiencies in the health care system.  For decades, the tax code’s perverse incentives have accelerated spiraling health costs, but creating a standard deduction will help reduce costs rather than raising them.

State Health Insurance Program:  Although millions of Americans without access to employer-sponsored health coverage will benefit from the standard deduction for health insurance, some individuals with minimal tax liability—primarily those with incomes under about 150 percent of the federal poverty level—will receive little benefit from a tax deduction.  Instead, eligible individuals should receive an explicit government subsidy to purchase affordable health insurance.

This health reform plan proposes a pool of $100 billion in federal funding over the next ten years for states to subsidize affordable health insurance for low-income individuals and individuals with pre-existing conditions.  The funding would be provided to states with minimal restrictions:

  1. States must achieve measurable reductions in average health insurance premiums in the individual and small group markets, and must ensure that individuals have access to affordable health insurance—with premiums that do not exceed a defined percentage of that state’s median income.
  2. States must establish and maintain a form of guaranteed access for individuals with pre-existing conditions—a high-risk pool, a reinsurance fund, or some other risk transfer mechanism.  States could use some of their federal allotment to help fund the costs of covering high-risk individuals.
  3. Obamacare reduced disproportionate share hospital (DSH) payments by half to finance expensive, unaffordable health coverage; this plan would instead restore that funding to help fund more affordable health insurance options. [12]  In order to access state grants, states must direct this restored funding toward covering eligible populations, reducing the amount of uncompensated care provided by instead subsidizing health insurance.  States will receive about $10 billion per year in DSH funding; re-directing some of these funds would supplement the $100 billion provided by the federal government.[13]

This reform model relies on federalism to promote innovation in health care and health insurance.  The federal government sets key goals—keeping insurance premiums affordable, and expanding access to low-income individuals and those with pre-existing conditions—and allows states to meet those goals in the manner they believe will work best for their state.  For example, if a state wants to incorporate an account-like savings mechanism to promote healthy behaviors, as Indiana has done, it can pursue that option.

Empowering states with flexibility and freedom can be a powerful tool in reducing health costs.  Analyzing a similar proposal put forward as part of the House Republican alternative to Obamacare in 2009, the non-partisan Congressional Budget Office (CBO) found that state innovation grants, coupled with liability reform and other common-sense solutions, would lower small business health insurance premiums by 7 to 10 percent, and would lower individual health insurance premiums by 5 to 8 percent.[14]  This reduction is even more stark when compared to the premium increases CBO predicted will occur (and are occurring) due to Obamacare.  Overall, estimates suggest that, when compared to Obamacare, this state-based approach could reduce premiums on the individual health insurance market by nearly $5,000 per family.[15]

Washington has tried a top-down approach to health care; it hasn’t worked.  Allowing states to serve as laboratories of innovation could slow the growth in health insurance costs and premium increases.  In addition, the $100 billion in federal funding, coupled with the matching funds from state DSH payments, would expand health care access for low-income individuals who do not benefit from the standard insurance deduction and those with pre-existing conditions.  This state-based model, not more Washington mandates and regulations, represents the best route to true health care reform.

Health Savings Accounts:  One of the innovations over the past decade that has helped slow the growth in health care costs has been Health Savings Accounts (HSAs), which couple a high-deductible health plan with a tax-free savings account.  The high deductible plans provide lower premiums for consumers, who can then deposit the savings in their HSAs to use for routine health expenses.  And because funds in an HSA accumulate from year to year tax-free, they provide motivation for consumers to serve as smart purchasers of health care.

First made available in 2004, HSAs have grown in popularity; more than 15 million Americans are now covered by HSA-eligible health plans.[16]  Many are using tools provided by these plans to take better control of their health and health spending, seeking out preventive care, using generic drugs more frequently, and utilizing plan-provided decision support tools.[17]  These plans are also saving Americans money; in 2013, the average HSA plan provided by an employer cost $1,318 less per family than non-HSA plans—even after firms placed an average of $1,150 per family into the HSA to fund health expenses.[18]  A recent study found that more widespread adoption of HSA coverage could reduce health spending by as much as $73.6 billion per year.[19]

Obamacare moves in the opposite direction by placing limits on the effectiveness of HSAs.  For example, it prohibits the use of funds from an HSA to purchase over-the-counter medications without a prescription.[20]

Conservative health reforms should build upon the success of HSAs by offering new options to make HSA plans more flexible for patients and consumers.  Congress should allow HSA funds to be used to purchase health insurance in all cases, making it easier for consumers who save to fund their health coverage.  Another possible reform would create more flexible insurance policies, linking the size of the deductible for an HSA plan to customers’ account balances, incomes, or other assets; in this way consumers with sizable savings could choose coverage with an even lower premium in exchange for a higher deductible.  These changes would further accelerate a health coverage model that has already helped slow the growth of health costs for millions of Americans.

Greater Incentives for Wellness:  One of the few areas of bipartisan agreement during the Obamacare debate was a consensus around the “Safeway model”—namely, providing financial incentives for individuals and employees to engage in healthy behaviors.[21]  At the time, employers could vary premiums by up to 20% to reward participation in various wellness programs.  However, then-Safeway CEO Steve Burd noted that a 20% premium variation did not allow the company to recoup all the higher costs associated with unhealthy behaviors like smoking.

Congress can and should do more to enhance these innovative efforts to reduce health costs.  First, it can provide explicit statutory authority for premium variations of up to 50%.  It can also allow employers (or insurance companies selling individual insurance plans) to offer any financial incentives for healthy behaviors on a tax-free basis, by placing the money in new Wellness Accounts.  As with HSAs, the money in these accounts could then be used tax-free for health expenses, or withdrawn for other purposes.  This reform would marry two proven successes—HSAs and wellness incentives—turbo-charging efforts to slow the growth in health costs by encouraging Americans to engage in healthy behaviors.

Crack Down on Fraud:  Health costs have grown at a rapid rate at least in part due to widespread fraud in government health programs.  Unfortunately, a recent case in which 49 Russian diplomats were charged with fraudulently obtained Medicaid benefits—lying about their immigration status and income on application forms, even as they purchased goods from Tiffany’s and Jimmy Choo—is not an aberration.[22]  Several years ago, the New York Times cited expert analysis that as much as 40 percent of that state’s Medicaid spending was either questionable or outright fraudulent.[23]  The Medicare program for the elderly also faces widespread fraud—$60 billion per year, according to a 60 Minutes investigation.[24]

While the private sector has a series of programs and protocols in place to combat fraud, government health programs have traditionally lagged; their focus has been on paying claims quickly, whether real or fraudulent.  In recent years, some government programs have improved their efforts to combat fraud; for instance, Louisiana’s new Bayou Health managed care model built in robust savings from fraud detection, requiring plans participating in Bayou Health to crack down on suspicious transactions or face financial penalties.  But Congress should do more to end the current “pay and chase” model, which attempts to track down fraud after-the-fact, and enhance penalties for those who steal or traffic in Medicare patient numbers and other personal health information.

Price and Quality Transparency:  In many cases, consumers who wish to serve as “smart shoppers” of health care do not have the information to do so.  For far too long, price and quality transparency data have been lacking in the health sector, meaning patients face a dearth of information when they have to make potentially life-altering decisions about their care.  The good news is that these trends are slowly changing, and that transparency has provided consumers with useful, and powerful, information:

There is emerging evidence that when hospitals publish prices for surgical procedures, costs decrease without a loss of quality.  The Surgery Center of Oklahoma, for example, has been publishing its prices for various procedures for the past four years.  Because the center’s prices tend to be lower than those of other hospitals, patients started coming from all over the country for treatment.  In order to compete, other hospitals in Oklahoma began listing surgical prices; patients were able to comparison shop, and hospitals lowered their prices.[25]

Further efforts at transparency could help to reduce an estimated $105 billion paid in health costs annually due to uncompetitive pricing levels by medical providers.[26]  Just as importantly, patients could have more objective sources of information about doctors and medical treatments than recommendations from friends or acquaintances.  Online posting of price and quality data can easily lead to new Consumer Reports-type rating systems, which will empower patients with trusted data and provide providers an greater incentive to improve their quality practices.

 

Principle #2: Protect the Most Vulnerable

In trying to provide all Americans with health insurance, Obamacare may actually detract from efforts to protect those who need health care most.  The law provides a more sizable federal match for states to expand their Medicaid programs to childless adults than it does for states to cover their disabled populations.[27]  At a time when more than half a million disabled Americans are on state lists waiting to qualify for long-term supports and services, it is both uncompassionate and unfair for the Administration instead to focus on covering childless adults, most of whom are able to work or prepare for work.[28]

True health reform would focus first and foremost on targeting government resources to the most vulnerable in our society—protecting the safety net rather than stretching it past its breaking point.  These reforms would help individuals with pre-existing conditions, senior citizens, the disabled, and the unborn.  Making these populations the centerpiece of coverage efforts would meet one of Obamacare’s core goals—providing access for individuals with pre-existing conditions—without necessitating the upheaval caused by the President’s 2,700-page health law.

Guaranteed Access for Pre-Existing Conditions:  Obamacare was sold as a way to address the very real problem of Americans with pre-existing conditions—but the size of the problem did not warrant such a massive overhaul.  One estimate found that approximately 2-4 million individuals under age 65 may face difficulties purchasing health insurance.[29]  The Obama Administration has attempted to claim that up to 129 million Americans “could be denied coverage” due to pre-existing conditions.[30]   But when Obamacare created a high-risk pool to provide temporary coverage for those with pre-existing conditions, under 150,000 Americans ever enrolled in it[31]—far fewer than the 600,000-700,000 originally projected to seek enrollment in the program.[32]

Ironically enough, Obamacare has failed to deliver on its promise for individuals with pre-existing conditions.  The Administration froze enrollment in the law’s high-risk pools due to funding constraints,[33] and the unintended consequences of over-regulation meant that 17 states lost access to child-only health insurance plans.[34]  Some patients have also found that their Obamacare plans don’t include the specialists or hospitals they need; for instance, many plans do not offer access to advanced cancer centers.[35]

Conversely, conservative health reform would ensure that states have the incentive of funding to provide guaranteed access for Americans with pre-existing conditions.  Many states use various vehicles to cover these individuals—whether high-risk pools, reinsurance programs, or some other risk transfer mechanism.[36]  The incentive pool of federal dollars would allow states to determine the best mechanism for providing access to those with pre-existing conditions, and a stable source of funding for those endeavors.

Much of the case for Obamacare was made on the basis of an issue which effects a small portion of consumers: the challenge of pre-existing conditions. Since 1996, federal law included a requirement of guaranteed renewability in the individual health insurance market—so long as you paid for your policy, you were guaranteed the ability to renew your plan.  Policy cancellations—also called rescissions—were rare, and nearly always due to fraud, impacting according to some measures just four-tenths of one percent of the private individual market (which is itself just 10 percent of the insured marketplace).[37]  Though relatively small in number, the issue of pre-existing conditions raised concerns for many Americans—who feared that they, or someone they knew, would be affected if they developed an illness that made them uninsurable.

Obamacare was supposed to solve the problem of pre-existing conditions, but in many respects, the law actually made things worse.  It took away the coverage renewability guarantee, by forcing insurance companies to cancel the policies of millions of Americans. Even as they made the case that if you liked your plan you could keep it, those who favored the president’s legislation knew they were about to repeal the existing guaranteed renewability for millions of Americans. By doing this, Obamacare has completely disrupted the individual market, forcing many people who were satisfied with their coverage and the access they had to doctors and specialists being dumped into more costly and less comprehensive insurance simply because of Obamacare.

This lie should not be allowed to stand. Guaranteed renewability should ensure that patients have the ability to renew their coverage, regardless of their health status, so long as they have not committed fraud. Thus, people who maintain continuous coverage should be protected from premium spikes and have confidence their insurance will be there when they need it.

The central irony of Obamacare is that it hurt the very people it was supposed to help. For Americans signing up for new insurance, guaranteed renewability should offer peace of mind that their insurer cannot drop them merely for getting sick. For those Americans for whom access to guaranteed renewability contracts has been destroyed by Obamacare, the incentive pool of state dollars for more innovative approaches, coupled with greater flexibility for individuals leaving employer plans, will be there to help them get the coverage they need in a post-Obamacare system.

Premium Support:  Medicare faces a dire financial predicament.  According to the annual report by the program’s trustees—including members of the Obama Administration—the Part A trust fund financing hospital care will be insolvent by 2026.  In the short term, the program has taken a hit from the recession and slow economic recovery; the Medicare trust fund ran $105.6 billion in deficits during the years 2008-12.[38]  In the longer term, the outlook is even worse: Medicare faces 75-year unfunded obligations of at least $27.3 trillion, and even this estimate may understate the program’s liabilities, due to various budgetary and accounting gimmicks.[39]

Among the biggest gimmicks understating Medicare’s financial shortfalls is Obamacare itself.  In October 2011, Nancy Pelosi admitted what all Americans realize Democrats did as part of Obamacare: “We took a half a trillion dollars out of Medicare in…the health care bill,” to pay for that law’s new entitlements.[40]  Yet the Obama Administration utilized an “only-in-Washington” logic to argue otherwise, citing trust fund accounting to assert that the Medicare provisions in the law could be used both to “save Medicare” and to “fund health care reform.”[41]  There are two kinds of people in politics—those that want to fix Medicare and those who want to use it to score political points.  Sadly, Obamacare followed the latter course.  Current and future generations of seniors deserve better—they deserve true reform that makes Medicare more sustainable.

One bipartisan solution to Medicare’s fiscal shortfalls would give seniors a choice of plans, with the federal government providing a generous subsidy to purchase coverage.  This premium support concept was developed, and endorsed, by a bipartisan majority in a commission created by Congress and President Clinton, whose Executive Director was Bobby Jindal.[42]  The commission’s work was in turn endorsed by the Democratic Leadership Council.[43]  More recently, Rep. Paul Ryan, the Republican Chairman of the House Budget Committee, and Sen. Ron Wyden, the Democratic Chairman of the Senate Finance Committee, submitted a bipartisan health reform plan that included a premium support proposal for Medicare beneficiaries.[44]

The key feature of a premium support proposal is the ability of competition among health plans to bring down costs and provide better care to America’s seniors.  Former Clinton Administration official Alice Rivlin testified before Congress in 2012 that nearly nine in ten seniors live in areas where private health plans have costs lower than traditional, fee-for-service Medicare; under a premium support proposal, these seniors could save money by choosing to enroll in a private plan.[45]  Likewise, the Congressional Budget Office recently analyzed one premium support proposal, and found that it could reduce Medicare spending by $15 billion dollars annually, while also reducing overall out-of-pocket spending by beneficiaries by an average of 6 percent.[46]

As part of the transition to premium support, the traditional Medicare benefit itself should be modernized.  For the first time ever, Medicare should provide a catastrophic cap on out-of-pocket expenses—so that seniors would know their spending.  At the same time, Medigap insurance, which provides supplemental coverage of co-payments and deductibles for some seniors, should also be reformed, so that seniors would no longer be pre-paying their health coverage by over-paying to insurance companies.

Under Medigap reform, seniors’ premium costs would fall substantially.  A 2011 study by the Kaiser Family Foundation found that under one version of reform, Medigap premiums would plummet by an average of over 60%, from nearly $2,000 per year to only $731.[47]  Because less money from Medigap policy-holders would be diverted to administrative overhead, seniors would be able to keep their own money to finance their own health care.

Medigap reform not only lowers seniors’ premiums, it also lowers their overall health costs.  A 2011 Kaiser Family Foundation study concluded that “the savings for the average beneficiary” under Medigap reform “would be sufficient to more than offset his or her new direct outlays for Medicare cost sharing.”[48]  According to Kaiser, nearly four in five Medigap policy-holders would receive a net financial benefit from this reform – with those savings averaging $415 per senior each year.[49]

What’s more, modernizing traditional Medicare and Medigap would drive greater efficiency within the health care system.  The Congressional Budget Office estimates that this reform would make Medicare more sustainable for future generations, by as much as $114 billion in its first decade alone.[50]  As with premium support, this package of proposals represents a true “win-win:” Current seniors would save on their health expenses, while seniors-to-be would have greater confidence that the promises made to them can be kept when they prepare to join Medicare themselves.

For all these reasons and others, this modernization of Medicare carries broad support from across the political spectrum.  Bipartisan endorsers of Medigap reform include the Simpson-Bowles Commission,[51] the Rivlin-Domenici commission on debt and deficits,[52] Sen. Tom Coburn (R-OK) and former Sen. Joe Lieberman (D-CT),[53] and even President Obama’s most recent budget.[54]

Seniors deserve the potential savings and better care these reforms can provide.  Seniors’ plan choices would include some of the same options available to Americans under age 65, along with the traditional, government-run fee-for-service model, updated with new and more flexible options.  Likewise, future generations deserve the peace-of-mind that comes from knowing Medicare has been placed on a more sustainable path.  It is long past time for Washington to enact true Medicare reform.

Medicaid Reforms:  Despite Obamacare’s massive new regulations, some states have already acted to reform their Medicaid programs.  For instance, Rhode Island’s global compact waiver—in which the state received additional regulatory flexibility from the federal government in exchange for a cap on its Medicaid budget—has successfully slowed the growth of health costs in that state.  A 2011 Lewin Group report found that the global compact waiver “generated significant savings”—more than $50 million from the small state’s Medicaid budget—and did so not by reducing care, but by improving it:

The mandatory enrollment of disabled members in care management program [sic] reduced expenditures for this population while at the same time generally resulting in improved access to physician services.[55]

Since the Lewin study in 2011, Rhode Island’s success in managing its Medicaid program has continued.  The state has reduced its per capita Medicaid spending by more than five percent over the past three fiscal years, resulting in three straight years of minimal expenditure growth,  even as the state’s Medicaid caseload increased.[56]

These remarkable accomplishments come despite the Obama Administration’s efforts, not because of them.  The 2011 Lewin report notes that passage of Obamacare and the “stimulus” bill, both of which imposed new restrictions on state Medicaid programs, “had a profound impact” on the Rhode Island waiver, because “the flexibility sought did not always materialize.”  For instance, the original waiver gave Rhode Island the authority to assess modest premium charges for some beneficiaries, but the Obamacare mandates took this flexibility away.[57]

Other states have also acted to reform their Medicaid programs.  Louisiana has transitioned its Medicaid program toward a managed care model, named Bayou Health.  The program has furthered the goals of the Birth Outcomes Initiative, claims data for which reveal a reduction of 23,000 in statewide neonatal intensive care unit days paid by Medicaid—meaning more babies were carried to full term.

The Hoosier State’s Healthy Indiana Plan includes a personal responsibility component, and provides incentives to engage in wellness screenings, and imposes co-payments on beneficiaries who make non-urgent visits to the emergency room.  The plan also requires participants to make modest contributions to an account to fund their health needs, ensuring patients have incentives to manage their health spending and health care.  The financial requirements are not onerous; approximately 70% of beneficiaries consider the required account contributions just the right amount, and 94% of members report being satisfied or highly satisfied with their coverage.[58]  Yet, Obamacare could put this innovative plan out of business entirely, due to its Washington-imposed mandates on state Medicaid programs.[59]

Because the federal government provides states with at least a 1:1 match on their Medicaid expenses, states have a built-in incentive to spend more on Medicaid when compared to other state priorities like education, transportation, and corrections.  This open-ended entitlement drastically reduces states’ incentives to make efficient choices in managing their health care systems.  A more conservative approach should better align incentives to focus states’ efforts on improving care and reducing costs, instead of merely “gaming the system.”

Medicaid is not merely a fiscal failure, however. The error of Obamacare’s Medicaid expansion was to double down on a program whose health outcomes range from the marginal to the horrendous—the result of paying doctors pennies on the dollar and cramming Medicaid recipients into already overburdened systems. Compared to both those patients with private insurance and those without any insurance at all, Medicaid patients stay in the hospital longer, cost more while they are there, and yet are significantly more likely to die before they leave.[60] The recent Oregon Medicaid study, which offered real-world examples of Medicaid recipients compared to those who were not on the program, answered questions about just how significant the benefits of modern Medicaid are.[61] The study authors found that after two years, Medicaid “had no significant effect” on physical health outcomes compared to being uninsured.[62] Spending nearly half a trillion dollars a year on a program which is so ineffective is unacceptable and immoral.

More than two years ago, Republican governors presented a report laying out common-sense reforms to the Medicaid program—from modernizing benefit design to simplifying accountability to eliminating unnecessary requirements.[63]  While the Obama Administration has not implemented most of the report’s 31 separate suggestions, they represent a good place to start when it comes to updating this important program and prioritizing the actual health care of those who need a safety net.

The best way to reform Medicaid lies in a global grant approach, which empowers states with maximum flexibility in exchange for a fixed funding allotment from the federal government.  The allotment would be adjusted annually for inflation and eligible population growth, and could be adjusted if a state receives a sudden increase in its disabled population.  Rhode Island’s innovative waiver demonstrates how it can be done—and further illustrates that indexing the grant to inflation can be achieved without cutting benefits, or harming beneficiaries’ access to care.

States should have additional flexibility to manage their Medicaid programs in a manner that they believe best meets the needs of their citizens—while facing clear and simple accountability metrics from the federal government.  Rather than focusing on managing processes and completing forms, state Medicaid programs should emphasize improving outcomes.  In return, the federal government should revamp its accountability process to hold states to these higher standards.  Those who want to micro-manage states do so because they do not trust the people and their locally elected leaders.

Pro-Life Protections:  Among its many other flaws, Obamacare represents an intrusion on the moral values many Americans hold dear.  Contrary to prior practice, the law has seen federal tax dollars flow to fund health insurance plans that cover abortions.[64]  The law also forces many Americans to choose between violating the law and violating their consciences, imposing mandates on non-profit and other institutions that violate their deeply-held religious beliefs.  As a result, literally dozens of institutions nationwide have taken Obamacare’s anti-conscience mandate to court; the Supreme Court is scheduled to rule on the issue later this summer.[65]

Repeal of Obamacare will remove the law’s anti-conscience mandates, and the funding of plans that cover abortions.  But true health reform should go further, instituting conscience protections for businesses and medical providers, as well as a permanent ban on federal funding of abortions, consistent with the Hyde Amendment protections passed by Congress every year since 1976.[66]  There is much in health care about which Americans disagree, but protecting all Americans’ religious liberty should be one principle that warrants bipartisan support. The government should not force religious people to abandon their faiths in order to keep their doors open.

 

Principle #3: Portability and Choice

In an address to Congress in September 2009, President Obama attempted to sell Obamacare as offering consumers “competition and choice.”[67]  At least 4.7 million Americans—those who have already received cancellation notices due to the law—would beg to differ with the President.[68]  While the President offered a short-term concession—unilaterally waiving portions of Obamacare, and permitting some who lost health coverage to keep their plan until the 2016 presidential election—the cancellation notices are likely to continue for some time.  A 2010 Administration document admitted that more than half of all workers, and up to four in five employees in small businesses, would lose their pre-Obamacare health coverage.[69]

Obamacare undermines choice by dictating what type of insurance health plans must offer—and then dictating to firms that they must offer, and individuals that they must buy, this type of coverage.  Conversely, true health reform would smooth the problems of portability that occurred prior to the law’s enactment, while offering more personalized choices so consumers can buy the plan they want, not the plan a government bureaucrat tells them to purchase.

State Reforms to Expand Access:  For many decades, many states have held laws on their books that block access to care.  At least 36 states have certificate of need (CON) requirements, which force organizations to obtain clearance from the state before building new health care facilities.  In addition to the offensive nature of this approach—entities must ask government bureaucrats for permission to create a facility that will help patients—CON requirements have proven ineffective at their stated goal of reducing costs.  One recent analysis noted that states without CON requirements have significantly lower health costs than those states with certificate of need mandates.[70]  Congress repealed the law that created CON requirements nearly three decades ago; states can follow suit.[71]

Similarly, state licensing requirements can impose unnecessary burdens on medical practitioners, also limiting access to health care.  Given that the supply of doctors is not expected to keep up with projected demand, policy-makers should allow other medical professionals to utilize more of their expertise to provide more affordable and convenient care for patients.[72]  In 2011, the Institute of Medicine recommended that all professionals should be empowered to practice to the full scope of their professional training.[73]  States should modify their licensing requirements to remove artificial barriers impeding the ability to provide high-quality care.  States must also act prudently to protect patient quality and maintain high standards.  Doing so would expand access to care, allowing Minute Clinics and other similar entities to treat patients quickly and at lower cost than hospital emergency rooms or other sources of care.

Both certificate of need and artificial scope of practice restrictions sometimes prioritize the interests of incumbent members of the health system over the needs of patients.  In 2008, the Justice Department testified that CON laws “create barriers to entry and expansion to the detriment of health care competition and consumers.  They undercut consumer choice, stifle innovation, and weaken markets’ ability to contain health care costs.”[74]  Likewise, a seminal 2004 report on competition in health care by the Federal Trade Commission and Justice Department noted that scope of practice laws create anticompetitive risks, have raised costs, and limited mobility of medical providers, all for unclear benefits to health care quality.[75]  At a time when health costs remain high and access for vulnerable populations limited, states should act in both these key areas, initiating reforms that have the potential to reduce costs while simultaneously increasing access to needed care.

Better Access for Individuals Changing Employers:  The fact that so many Americans currently receive health insurance coverage through their employers means that individual health insurance plans have traditionally occupied a smaller segment of the marketplace.[76]  As a result, most individuals transition from one employer plan to another when they switch jobs.  However, moving from employer coverage to an individual plan can often prove more difficult and costly.

While not undermining the employer coverage that many Americans currently have and enjoy, conservative health reforms should also encourage policies that promote greater personal ownership of health insurance.  One key reform would allow individuals who maintain continuous coverage to purchase an individual health insurance plan of their choosing, eliminating the requirement that such individuals first exhaust COBRA coverage before accessing an individual plan.  These and other similar reforms will encourage Americans to purchase coverage they can take with them from job to job.

Cross-State Insurance Purchasing:  Because health insurance is regulated at the state level, many health insurance markets face two major problems.  First, in many states, one or a handful of insurers control most of the market for coverage, and these oligopolies tend to raise premiums.  Obamacare has not helped this trend, and in fact may have worsened it.  According to the New York Times, more than half of all counties in the United States have only one or two health plans participating in their states’ insurance Exchanges.[77]

Second, benefit mandates imposed by state legislatures force individuals to purchase more insurance coverage than they may need or want.  According to the Council for Affordable Health Insurance, states have imposed an average of 44 benefit mandates, each of which raises health costs.[78]  Individually, the mandates may not appear to raise premiums by a significant amount, but estimates suggest that collectively, benefit mandates impose hundreds of dollars in added costs to consumers every year.[79]

One solution to both these problems rests in Congress enacting legislation allowing consumers to purchase health insurance across state lines.  Consumers purchasing insurance across state lines would receive clear disclosures that their health coverage would be regulated by another state with respect to benefit mandates, solvency standards, and other similar requirements.  By using its constitutional authority to regulate interstate commerce, Congress could give consumers the power—a power they currently lack—to buy the health insurance plan that best meets their needs, regardless of the state in which that plan is offered.  Such a measure would give power from insurance company cartels back to consumers, make health insurance portable across state lines, and reduce the growth of premiums.

Pooling Mechanisms:  In addition to allowing the purchase of health insurance across state lines, Congress should also provide clear protections, similar to those provided in the Employee Retirement Income Security Act of 1974 (ERISA), for organizations that wish to establish multi-state insurance pools.  These organizations could be churches, fraternal organizations, trade groups for small businesses, alumni groups, or any other type of group with a common interest.  These groups should be permitted to band together and purchase health insurance for their members, providing coverage that fits members’ distinct needs while potentially reducing administrative costs.  Just as importantly, coverage obtained through these pools, unlike employer coverage, would be portable: Individuals would have and own their personal health policy, and would not need to change plans when they change jobs.

Lawsuit Reform:  In many states, medical liability problems present several problems for patients.  First, defensive medicine practices—doctors performing unnecessary tests due to fear of litigation—raise health costs, according to some estimates by more than $100 billion annually.[80]  Second, the seeming randomness of the legal system—in which some frivolous claims receive large awards, but some legitimate claims are dismissed—frustrates patients.  Finally, at a time when America already faces expected physician shortages, the legal climate discourages prospective doctors from pursuing medicine as a career choice.[81]  A recent study found that physicians spend more than 10% of their careers with an outstanding malpractice claim lingering over their practice.[82]  More than three in five physicians claim they or one of their colleagues may retire in the next three years due to frustration with the health care system—a fact likely exacerbated by an overly litigious culture.[83]

Enacting lawsuit reforms—including a cap on non-economic damages, restrictions on attorney contingency fees, discouraging frivolous lawsuits, and other common-sense changes—would reduce health care costs.  Because nearly half of all health spending is controlled by government, largely through the Medicaid and Medicare programs, Congress should take the lead in enacting lawsuit reforms in instances where the federal government is a payer of health services.[84]  If enacted, these changes could have a salutary effect on America’s physicians, just as the passage of tort reform in Texas encouraged more doctors to move to that state.[85]

Freedom for Seniors to Choose:  The doctor-patient relationship is the foundation on which our health care system should be based.  Unfortunately, government requirements often impede the ability for patients to choose the best option for their own care.  For instance, one law dictates that senior citizens may not make their own financial arrangements with their doctors if those arrangements contradict Medicare’s payment rates; any physician who does so is prohibited from receiving any reimbursements from Medicare for two years.[86]

Congress should restore the doctor-patient relationship by repealing this onerous requirement.  It should also restore the ability of Medicare patients to buy procedures on their own, provided seniors receive full disclosure from their physicians and medical providers for the costs of their care.  The Wall Street Journal reported that the number of doctors dropping out of Medicare nearly tripled between 2009 and 2012. [87]  Senior citizens should not have access to the physician of their own choosing—or to procedures their doctors recommend for them—violated due to arbitrary restraints imposed by federal bureaucrats.

 

Taken together, this package of reforms would accomplish the objectives the American people are looking for in their health care system—the objectives President Obama said his legislation would bring, but which Obamacare has not delivered.  Enacting policies that get the incentives right can reduce costs, even while protecting the most vulnerable and enhancing portability and choice for consumers.

The American people deserve true health reform—one that puts patients and doctors first, not government bureaucrats.  After repealing Obamacare, enacting America Next’s plan would point America’s health system in the right direction.

 

 

[1] Vote on Boehner Substitute Amendment to H.R. 3962, Affordable Health Care for America Act, House Roll Call Vote 885, 111th Congress, November 7, 2009, http://clerk.house.gov/evs/2009/roll885.xml.

[2] “Republican Study Committee Policy Brief: Members’ Health Care Initiatives in the 113th Congress,” November 25, 2013, http://rsc.scalise.house.gov/uploadedfiles/113th_112513_rsc_healthcare_menu.pdf.

[3] Remarks in Democratic presidential debate sponsored by CNN and Congressional Black Caucus Institute, January 21, 2008, http://www.cnn.com/2008/POLITICS/01/21/debate.transcript2/index.html.

[4] A video compilation of candidate Obama’s remarks on this issue from the 2008 campaign is available at http://freedomeden.blogspot.com/2010/03/obama-20-promises-for-2500.html.

[5] Gigi A. Cuckler, et al., “National Health Expenditure Projections: Slow Growth Until Coverage Expands and Economy Improves,” Health Affairs October 2013, http://content.healthaffairs.org/content/32/10/1820.

[6] Congressional Budget Office, Letter to Sen. Evan Bayh regarding premium effects of the Patient Protection and Affordable Care Act, November 30, 2009, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/107xx/doc10781/11-30-premiums.pdf.

[7] Amit Bhardwaj, et al., “Individual Market Enrollment: Updated View,” McKinsey Center for U.S. Health System Reform, March 2014, http://healthcare.mckinsey.com/sites/default/files/Individual-Market-Enrollment.pdf.

[8] Ibid.

[9] Congressional Budget Office, Key Issues in Analyzing Major Health Insurance Proposals, December 2008, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/99xx/doc9924/12-18-keyissues.pdf, pp. 84–87.

[10] The White House, “Affordable, Accessible, and Flexible Health Coverage,” January 2007, http://georgewbush-whitehouse.archives.gov/stateoftheunion/2007/initiatives/healthcare.html; Republican Study Committee, “The American Health Care Reform Act,” September 18, 2013, http://rsc.scalise.house.gov/solutions/rsc-betterway.htm.

[11] John Sheils and Randy Haught, “President Bush’s Health Care Tax Deduction Proposal: Coverage, Cost, and Distributional Impacts,” The Lewin Group, January 28, 2007, http://www.lewin.com/~/media/Lewin/Site_Sections/PressReleases/BushHealthCarePlanAnalysisRev.pdf.

[12] Patient Protection and Affordable Care Act (P.L 111-148), Section 2551.

[13] Congressional Budget Office, Medicaid baseline, May 2013, http://cbo.gov/sites/default/files/cbofiles/attachments/44204_Medicaid.pdf.

[14] Congressional Budget Office, analysis of House Republican substitute amendment to H.R. 3962, November 4, 2009, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/107xx/doc10705/hr3962amendmentboehner.pdf.

[15] Press release by House Ways and Means Committee Ranking Member Dave Camp, November 5, 2009, http://waysandmeans.house.gov/news/documentsingle.aspx?DocumentID=153186.

[16] America’s Health Insurance Plans, Center for Policy and Research, “January 2013 Census Shows 15.5 Million People Covered by Health Savings Account/High-Deductible Health Plans (HSA/HDHPs),” June 2013, http://www.ahip.org/HSACensus2013PDF/.

[17] America’s Health Insurance Plans, Center for Policy and Research, “Health Savings Accounts and Account-Based Health Plans: Research Highlights,” July 2012, http://www.ahip.org/HSAHighlightsReport072012/.

[18] Kaiser Family Foundation and Health Research and Educational Trust, “Employer Health Benefits: 2013 Annual Survey,” August 2013, http://kaiserfamilyfoundation.files.wordpress.com/2013/08/8465-employer-health-benefits-20132.pdf, Exhibit 8.8, p. 140.

[19] Amelia M. Haviland, M. Susan Marquis, Roland D. McDevitt, and Neeraj Sood, “Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually,” Health Affairs, May 2012, http://content.healthaffairs.org/content/31/5/1009.abstract.

[20] Patient Protection and Affordable Care Act (P.L. 111-148), Section 9003.

[21] Steven A. Burd, “How Safeway Is Cutting Health Costs,” Wall Street Journal June 12, 2009, http://online.wsj.com/news/articles/SB124476804026308603.

[22] Christopher Matthews, “U.S. Accuses Russian Diplomats of Medicaid Fraud,” Wall Street Journal December 5, 2013, http://online.wsj.com/news/articles/SB10001424052702303497804579240163174732486.

[23] Clifford Levy and Michael Luo, “New York Medicaid Fraud May Reach into Billions,” The New York Times, July 18, 2005, http://www.nytimes.com/2005/07/18/nyregion/18medicaid.html.

[24] CBS News, “Medicare Fraud: A $60 Billion Crime,” 60 Minutes, September 5, 2010, http://www.cbsnews.com/8301-18560_162-5414390.html.

[25] Lisa Rosenbaum, “The Problem with Knowing How Much Your Health Care Costs,” The New Yorker December 23, 2013, http://www.newyorker.com/online/blogs/elements/2013/12/price-transparency-health-care-costs.html.

[26] Institute of Medicine, The Health Care Imperative: Lowering Costs and Improving Outcomes—Workshop Summary, February 2011, http://www.iom.edu/reports/2011/the-healthcare-imperative-lowering-costs-and-improving-outcomes.aspx.

[27] Chris Jacobs, “How Obamacare Undermines American Values: Penalizing Work, Marriage, Citizenship, and the Disabled,” Heritage Foundation Backgrounder No. 2862, November 21, 2013, http://www.heritage.org/research/reports/2013/11/how-obamacare-undermines-american-values-penalizing-work-marriage-citizenship-and-the-disabled.

[28] Kaiser Family Foundation, “Waiting Lists for Medicaid Section 1915(c) Home and Community-Based Services (HCBS) Waivers,” December 2012, http://kff.org/medicaid/state-indicator/waiting-lists-for-hcbs-waivers-2010/#table.

[29] James C. Capretta and Tom Miller, “How to Cover Pre-Existing Conditions,” National Affairs Summer 2010, http://www.nationalaffairs.com/doclib/20100614_CaprettaMiller_Web.pdf, pp. 114-15.

[30] U.S. Department of Health and Human Services, Office of Planning and Evaluation, “At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans,” November 2011, http://aspe.hhs.gov/health/reports/2012/pre-existing/index.shtml.

[31] Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance Oversight, “Covering People with Pre-Existing Conditions: Report on the Implementation and Operation of the Pre-Existing Condition Insurance Plan Program,” January 31, 2013, http://www.cms.gov/CCIIO/Resources/Files/Downloads/pcip_annual_report_01312013.pdf.

[32] Congressional Budget Office, letter to Senator Mike Enzi (R–WY), June 21, 2010, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/115xx/doc11572/06-21-high-risk_insurance_pools.pdf.

[33] Department of Health and Human Services, Pre-Existing Condition Insurance Plan, notice of enrollment suspension, February 15, 2013, https://www.pcip.gov/Notifications/021513-ENROLLMENT_SUSPEND.html.

[34] Report by Senate Health, Education, Labor, and Pensions Committee Ranking Member Mike Enzi, “Health Care Reform’s Impact on Child-Only Health Insurance Policies,” August 2, 2011, http://www.help.senate.gov/imo/media/doc/Child-Only%20Health%20Insurance%20Report%20Aug%202,%202011.pdf.

[35] Ricardo Alonso-Zaldivar, “Concerns about Cancer Centers under Health Law,” Associated Press March 18, 2014, http://hosted2.ap.org/apdefault/3d281c11a96b4ad082fe88aa0db04305/Article_2014-03-18-Health%20Overhaul-Top%20Cancer%20Centers/id-d5acff9619ec4bc6aa875800d96fc270.

[36] Information on various state plans for covering high-risk individuals can be found on the website of the National Association of State Comprehensive Health Insurance Plans, www.naschip.org.

[37] John C. Goodman, “Rescissions: Much Ado About Nothing,” Kaiser Health News, May 13, 2010,    http://www.kaiserhealthnews.org/Columns/2010/May/051310Goodman.aspx.

[38] Centers for Medicare and Medicaid Services, 2013 Medicare trustees report, May 31, 2013, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf, TableII.B4, p. 58.

[39] Suzanne Codespote, memo from Office of the Actuary, Centers for Medicare and Medicaid Services, to Senate Budget Committee Ranking Member Jeff Sessions, June 3, 2013.

[40] Maria Bartiromo, “One-on-One with Nancy Pelosi,” CNBC interview, October 28, 2011, http://video.cnbc.com/gallery/?video=3000054002.

[41] Kathleen Sebelius, testimony before the House Energy and Commerce Committee hearing on “Fiscal Year 2012 HHS Budget,” March 4, 2011, video available at http://archives.republicans.energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8281.

[42] The National Bipartisan Commission on the Future of Medicare was chaired by Sen. John Breaux (D-LA) and Rep. Bill Thomas (R-CA); its work can be found at http://medicare.commission.gov/medicare/index.html.

[43] Testimony of David Kendall, Progressive Policy Institute Senior Analyst for Health Policy, before Senate Finance Committee hearing on “Modernizing Medicare,” May 26, 1999, http://dlc.org/ndol_ci04fb-2.html?kaid=111&subid=141&contentid=1790.

[44] Sen. Ron Wyden and Rep. Paul Ryan, “Guaranteed Choices to Strengthen Medicare and Health Security for All: Bipartisan Options for the Future,” December 15, 2011, http://budget.house.gov/uploadedfiles/wydenryan.pdf.

[45] Alice Rivlin, testimony before the House Ways and Means Health Subcommittee on “A Bipartisan Approach to Reforming Medicare,” April 27, 2012, http://waysandmeans.house.gov/uploadedfiles/rivlin_testimony_final_4-27-2012.pdf, p. 4.

[46] Congressional Budget Office, “A Premium Support System for Medicare: Analysis of Illustrative Options,” September 2013, http://www.cbo.gov/sites/default/files/cbofiles/attachments/09-18-PremiumSupport.pdf.

[47] Kaiser Family Foundation, “Medigap Reforms: Potential Effects of Benefit Restrictions on Medicare Spending and Beneficiary Costs,” July 2011, http://www.kff.org/medicare/upload/8208.pdf, Exhibit 2, p. 6.

[48] Ibid., p. 8.

[49] Ibid., p. 8.

[50] Congressional Budget Office, “Options for Reducing the Deficit: 2014 to 2023,” November 13, 2013, http://cbo.gov/sites/default/files/cbofiles/attachments/44715-OptionsForReducingDeficit-2_1.pdf, Health Option 7, p. 211.

[51] The Moment of Truth, report of the National Commission on Fiscal Responsibility and Reform, December 2010, http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf, p. 39.

[52] Restoring America’s Future, report of the Bipartisan Policy Center’s Debt Reduction Tax Force, November 2010, http://bipartisanpolicy.org/sites/default/files/BPC%20FINAL%20REPORT%20FOR%20PRINTER%2002%2028%2011.pdf, pp. 52-53.

[53] Overview of Coburn/Lieberman Medicare reform proposal, June 2011, http://www.coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=1ea8e116-6d15-46ba-b2e0-731258583305

[54] Office of Management and Budget, Fiscal Year 2015 Budget, March 4, 2014, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2015/assets/budget.pdf, pp. 31-32.

[55] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf.

[56] Testimony of Gary Alexander before the Congressional Commission on Long-Term Care, August 1, 2013, http://ltccommission.lmp01.lucidus.net/wp-content/uploads/2013/12/Garo-Alexander.pdf.

[57] Lewin Group, “An Independent Evaluation,” pp. 11-12.

[58] Indiana Family and Social Services Administration, Healthy Indiana Plan 1115 Waiver Extension Application, February 13, 2013, http://www.in.gov/fssa/hip/files/HIP_WaiverforPosting.pdf, pp. 19, 6.

[59] Mitch Daniels, “We Good Europeans,” The Wall Street Journal March 26, 2010, http://online.wsj.com/article/SB10001424052748704094104575144362968408640.html.

[60] Avik Roy, “The Medicaid Mess: How Obamacare Makes It Worse,” The Manhattan Institute, March 2012,  http://www.manhattan-institute.org/html/ir_8.htm

[61] Katherine Baicker, Sarah Taubman, Heidi Allen, Mira Bernstein, Jonathan Gruber, Joseph P. Newhouse, Eric Schneider, Bill Wright, Alan Zaslavsky, Amy Finkelstein, and the Oregon Health Study Group, “The Oregon Experiment – Effects of Medicaid on Clinical Outcomes” New England Journal of Medicine, May 2013, http://www.nejm.org/doi/full/10.1056/NEJMsa1212321

[62] The Oregon Health Insurance Experiment, http://www.nber.org/oregon/

[63] Republican Governors Public Policy Committee Health Care Task Force, “A New Medicaid: A Flexible, Innovative, and Accountable Future,” August 30, 2011, http://www.scribd.com/doc/63596104/RGPPC-Medicaid-Report.

[64] Sarah Torre, “Obamacare’s Many Loopholes: Forcing Individuals and Taxpayers to Fund Elective Abortion Coverage,” Heritage Foundation Backgrounder No. 2872, January 13, 2014, http://www.heritage.org/research/reports/2014/01/obamacares-many-loopholes-forcing-individuals-and-taxpayers-to-fund-elective-abortion-coverage.

[65] A full list of the court cases, and further information regarding them, can be found through the Becket Fund for Religious Liberty, http://www.becketfund.org/hhsinformationcentral/.

[66] Chuck Donovan, “Obamacare: Impact on Taxpayer Funding of Abortion,” Heritage Foundation WebMemo No. 2872, April 19, 2010, http://www.heritage.org/research/reports/2010/04/obamacare-impact-on-taxpayer-funding-of-abortion.

[67] President Barack Obama, remarks to a Joint Session of Congress on Health Care, September 9, 2009, http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-a-Joint-Session-of-Congress-on-Health-Care.

[68] Associated Press, “Policy Notifications and Current Status, by State,” December 26, 2013, http://money.msn.com/business-news/article.aspx?feed=AP&date=20131226&id=17219856.

[69] Interim final rule by Departments of Labor, Treasury, and Health and Human Services regarding grandfathered health insurance status, released June 14, 2010, http://www.federalregister.gov/OFRUpload/OFRData/2010-14488_PI.pdf Table 3, p. 54.

[70] Jordan Bruneau, “The Great Healthcare CON,” Foundation for Economic Education, January 15, 2014, http://www.fee.org/the_freeman/detail/the-great-healthcare-con#axzz2qbUCvcC2.

[71] There may need to be some very targeted consideration given to specific health care markets so dependent on government programs that taxpayers end up paying for unused capacity.

[72] Association of American Medical Colleges, Center for Workforce Studies, “Recent Studies and Reports on Physician Shortages in the U.S.,” October 2012, https://www.aamc.org/download/100598/data/.

[73] Institute of Medicine, “The Future of Nursing: Focus on Scope of Practice,” Report Brief, October 2010, http://www.iom.edu/~/media/Files/Report%20Files/2010/The-Future-of-Nursing/Nursing%20Scope%20of%20Practice%202010%20Brief.pdf.

[74] Joint Statement of the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission before the Illinois Task Force on Health Planning Reform, September 15, 2008, http://www.justice.gov/atr/public/comments/237351.pdf, pp. 1-2.

[75] Federal Trade Commission and Department of Justice, Improving Health Care: A Dose of Competition, July 2004, http://www.justice.gov/atr/public/health_care/204694.pdf, pp. 25-28.

[76] According to the U.S. Census Bureau, in 2012 170.9 million Americans were covered by employer-based insurance, compared with 30.6 million Americans covered by direct-purchase insurance (including various forms of supplemental coverage).  Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2012, U.S. Census Bureau, September 2013, http://www.census.gov/prod/2013pubs/p60-245.pdf, Table C-1, p. 67.

[77] Reed Abelson, Katie Thomas, and Jo Craven McGinty, “Health Care Law Fails to Lower Prices for Rural Areas,” New York Times October 24, 2013, http://www.nytimes.com/2013/10/24/business/health-law-fails-to-keep-prices-low-in-rural-areas.html.

[78] CAHI found a total of 2,271 benefit mandates enacted in 50 states and the District of Columbia.  Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2012: Executive Summary,” April 9, 2013, http://www.cahi.org/cahi_contents/resources/pdf/Mandatesinthestates2012Execsumm.pdf.

[79] One study found that benefit mandates raise premiums by an average of $0.75 per month, or $9 per year.  A state with the national average of 44 benefit mandates would therefore have raised premiums by an average of $396 annually.  See Michael J. New, “The Effect of State Regulations on Health Insurance Premiums: A Revised Analysis,” Heritage Foundation Center for Data Analysis Report No. 06-04, July 25, 2006, http://www.heritage.org/research/reports/2006/07/the-effect-of-state-regulations-on-health-insurance-premiums-a-revised-analysis, p. 5.

[80] U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health Care,” March 2003, http://aspe.hhs.gov/daltcp/reports/medliab.pdf, p. 16.

[81] Association of American Medical Colleges, “Recent Studies on Physician Shortages.”

[82] Seth A. Seabury, et al., “On Average, Physicians Spend Nearly 11 Percent of their 40-Year Careers with an Open, Unresolved Malpractice Claim,” Health Affairs January 2014, http://content.healthaffairs.org/content/32/1/111.full.pdf+html.

[83] Deloitte Center for Health Solutions, “Deloitte 2013 Survey of U.S. Physicians,” March 18, 2013, http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_chs_2013SurveyofUSPhysicians_031813.pdf, p. 3.

[84] Gigi A. Cuckler, et al., “National Health Expenditure Projections.”

[85] Joseph Nixon, “Why Doctors Are Heading for Texas,” Wall Street Journal May 17, 2008, http://online.wsj.com/news/articles/SB121097874071799863.

[86] Section 4507 of the Balanced Budget Act of 1997, P.L. 105-33.

[87] Melinda Beck, “More Doctors Steer Clear of Medicare,” Wall Street Journal July 30, 2013, http://online.wsj.com/news/articles/SB10001424127887323971204578626151017241898.

Rep. Roskam Op-Ed: Dim Prospects for Debt

In these uncertain economic times, many Americans are asking important questions about the nation’s finances. Why were taxpayers asked to finance a $700 billion bailout of Wall Street – with up to $750 billion more on the way, according to the president?

Is it appropriate for the government to own portions of our biggest banks? And what happens if all this “stimulus” spending doesn’t improve the economy? Even beneath these important questions, there’s another, more fundamental issue that also needs to be addressed: Who will bail out the institution that has been trying desperately to bail out the economy – the federal government?

Let me explain. The Troubled Asset Relief Program bill; various bailouts to financial institutions, such as Fannie Mae and Freddie Mac; and passage of the $792 billion “stimulus” bill designed to improve the economy will lead to a federal deficit for the current fiscal year of nearly $1.8 trillion – more than triple the previous record.

Think that math is daunting? The long-term math is much worse, as the federal government’s impending entitlement obligations will far outstrip the losses of any subprime lender. Medicare faces 75-year obligations of $36 trillion, according to the trustees’ latest report. Add in Social Security, and the total rises to $56 trillion. That amounts to $746 billion – more than the size of the original TARP bill – per year, every year, for three generations.

Of course, these deficits have meaning only if someone is willing to finance them – and in the future, investors may not be inclined to do so. With the global economy in turmoil, investors in recent months have turned to Treasury bonds to guarantee the safety of their investments. Five, 10 or 20 years from now, businesses in a stronger China and India or an aggressive Russia may not want to finance Americans’ pension and health care costs and might choose instead to diversify their portfolios elsewhere.

The results of a loss of confidence in the dollar could be catastrophic. A rapid fall in the dollar would raise the price of imports, sparking inflation fears. Rising interest rates would increase the federal government’s borrowing costs at a time of fiscal stress. Also, higher financing costs for homeowners could depress the nation’s real estate market once again. If you think the mortgage crisis of the past two years was bad, America’s fiscal crisis, left unchecked, could unleash a real estate crash of even greater proportions.

The mortgage crisis has laid bare one truth, unpleasant for politicians to state but accurate nonetheless: Over the past several decades, we as a nation have spent more than we could afford. Doubtless there were abuses within the mortgage industry, and some people likely were misled. But the fact remains that some Americans bought too much house, too much car, too many clothes or supplies for their budgets.

Changing those habits will require collective sacrifice, self-discipline – and yes, no small share of pain – but it is essential for the long-term health and stability of our economy and our nation.

Similarly, the federal government needs to reform its spending obligations to make sure our promises to America’s seniors align with our future economic resources. These actions should look to slow the growth of health care costs and tackle the difficult choices head-on.

Unfortunately, President Obama’s proposed budget actually would increase heath care spending – a poor way to control the explosion in health costs. Moreover, the explosion of federal debt in the budget plan – $3.2 trillion in the next two years alone – will hinder the federal government’s ability to take swift and decisive action reforming entitlement spending.

Some are convinced the best way to slow growth in costs and save Medicare is for the government to spend yet more money and create new health care entitlements. The logic of this reasoning escapes me: After all, who would try to lose weight by eating more? Instead, we should focus first on saving Medicare for seniors and using Medicare as a model to slow the growth of health costs nationwide rather than enacting new budget-busting programs – only for the government to impose controls on patient care a few years from now, when exploding entitlement costs bring the federal budget to its knees.

For good and for ill, the last Congress passed in record time a $700 billion bailout for financial institutions in an attempt to stanch the current economic crisis. I only hope the current Congress will act half as quickly to stop the bleeding on America’s entitlement crisis so future generations won’t end up wondering why we didn’t act when we could.

This post was originally published at The Washington Times.

Weekly Newsletter: July 28, 2008

Tobacco Bill Coming Soon

This week the House could consider legislation (H.R. 1108) granting the Food and Drug Administration (FDA) the authority to regulate tobacco, possibly under suspension of the rules. The bill would establish a new center within FDA to regulate tobacco products and assess tobacco companies more than $5 billion in “user fees” over the next ten years to pay for this regulation.

Some conservatives may be concerned by the regulatory regime the bill would establish, which would require an agency charged with promoting food and drug safety to regulate a product inherently unsafe and unhealthy. Some conservatives may also object to the multiple layers of regulation the bill would create, by leaving intact the Federal Trade Commission’s ability to regulate tobacco advertising and distribution and providing only limited pre-emption against additional state-based regulations and restrictions. Some conservatives may question whether the highly prescriptive restrictions in the bill— including advertising limitations on the use of color advertising and regulation of the font size of tobacco disclaimer warnings, all of which raise significant constitutional questions about their free-speech implications—constitute good public policy, particularly as the Congressional Budget Office estimates that H.R. 1108 will reduce smoking levels by only 2% over 10 years.

Lastly, some conservatives may object to provisions in the bill that could prompt an international trade dispute. Last week, HHS Secretary Leavitt wrote to Energy and Commerce Committee Ranking Member Barton about H.R. 1108, observing that, because the bill prohibits all tobacco flavorings except menthol, foreign countries which manufacture clove or other flavored cigarettes may take action against the United States for providing unfair and disparate treatment for a particular type of manufactured cigarette. As press reports indicate that H.R. 1108 may be considered under suspension of the rules, some conservatives may be concerned by the lack of procedural opportunities available to address this disparity, such that the United States can live up to its obligations under international free-trade agreements.

A Policy Brief on H.R. 1108 (as reported by the Energy and Commerce Committee) can be found here.

Democrats Ignore Medicare Funding Warning

Last week Democrats responded to the Medicare trustees’ finding that the Medicare program faces significant future funding shortfalls—by resolving to ignore the problem. The resolution concerned a provision inserted into the Medicare Modernization Act at the behest of the RSC, which provided for the President to submit, and Congress to consider under expedited procedures, legislation to remedy Medicare’s funding problems when the program is projected to consume more than 45% of its funding from general revenues (as opposed to the Medicare payroll tax and beneficiary premiums). The Democrat majority’s action turned off this funding “trigger” for the balance of the 110th Congress, preventing those who believe in entitlement reform from taking action to force a House floor vote on Medicare reform legislation.

Many conservatives may be disappointed by the actions of Congressional Democrats, which prevented the President’s reasonable and modest proposals for Medicare reform—means testing that would make wealthier individuals like Warren Buffett and George Soros pay $2 per day more in Part D prescription drug premiums and liability reform to reduce the costs associated with defensive medicine practices— from receiving a vote in Congress. Many conservatives may believe that solving Medicare’s $86 trillion in unfunded obligations—and a Hospital Trust Fund scheduled to be exhausted in little more than a decade—will not be helped by Democrats’ apparent eagerness to ignore the problem. However, when Democrats like Florida’s Alcee Hastings note that “the perceived problem with Medicare funding has already been addressed,” many conservatives may be concerned that this lack of awareness will only hasten the day when Medicare’s funding shortfalls jeopardize the viability of the program—and wonder what policy-makers will tell their senior constituents when it does.

There are RSC Policy Briefs related to the Medicare trigger: Legislative Background; Talking Points on Trigger; Questions for House Democrats; Size of Medicare Program; White House Trigger Bill; Medicare Trustees Report

Article of Note: Fuzzy Math

Last Wednesday the New York Times reported on the many financial discrepancies surrounding the health care plan of Sen. Barack Obama (D-IL). While Sen. Obama has been consistent in saying that his health plan would save every American family $2,500 per year, many observers have come to question the factual basis for a “best guess” assertion by his advisers early last year. Independent estimates, including those by the Congressional Budget Office, have questioned whether the savings from such initiatives as health information technology and chronic care management will materialize, particularly in the four-year timeline Sen. Obama has promised—such that even a statement by Obama’s own advisers backtracked from any assertions that the purported savings would materialize by a date certain.

Many conservatives may be skeptical of Sen. Obama’s claims, particularly as the liberal Commonwealth Fund released a report in December with a menu of options for savings that would by their estimates achieve a total reduction in spending of only 6% in 10 years. Some conservatives may also be concerned that, in an attempt to reduce health care costs—whether by 8%, 6%, or some lesser amount— Sen. Obama would rely first and foremost on imposing price controls on physicians, pharmaceutical manufacturers, and insurance companies, along with rationing care through a government-controlled comparative effectiveness institute. Many conservatives may believe that such bureaucratic restrictions would in the long run prove far more effective at growing the size of government than slowing the growth of health care costs.

Read the article here: New York Times: “Health Plan from Obama Sparks Debate

Rep. Hensarling Op-Ed: Democrat Medicare Bill Shortchanges Minorities

Over the last several weeks, I have heard from physicians rightly concerned that lawmakers had yet to pass legislation repealing a scheduled 10.6 percent reduction in their Medicare reimbursement rates. No doubt Congress should and will act soon, to preserve seniors’ access to physician care. This is critical for doctors, specifically primary care physicians, whom already face tremendously difficult challenges. But behind the scenes of the physician reimbursement debate lies an interesting paradox in the way Congressional Democrats protect wealthy seniors, while exposing large numbers of low-income beneficiaries whom the legislation purports to protect.

Nestled into the sprawling 278-page bill the House passed with limited debate are provisions that would expand eligibility for subsidy programs that aid low-income beneficiaries with Part B premium payments, deductibles, and co-insurance. Coupled with several proposals designed to increase outreach to low-income populations, the changes would cost hardworking Americans $7 billion over the next ten years.

Of course, budgetary rules require Congressional Democrats to pay for this expansion of the Medicare benefit. By listening to Senator Obama, you might assume that the likeliest culprit would be yet another tax on the wealthy. But that is far from it. The expanded subsidies for low-income individuals – as well as the physician reimbursement provisions and other related Medicare provisions – are paid for by cuts to Medicare Advantage plans that provide coverage to millions of seniors.

The paradox arrives in the discovery that Medicare Advantage plans disproportionately serve low-income and minority populations. Nearly half of all Medicare Advantage beneficiaries had incomes under $20,000; for Hispanic and African-American populations, that number rises to 70 percent. While policy-makers argue about “overpayments” to Medicare Advantage plans, many low-income seniors have come to appreciate – and rely on – the lower costs and increased benefits that these plans have provided. But as a result of the House-passed legislation, over 2 million seniors, including 1.8 million in private fee-for-service plans popular in rural areas with limited physician access, will lose their Medicare Advantage coverage.

To sum up: Congressional Democrats are cutting benefits for some low-income seniors – in order to extend benefits to other low-income seniors. All the while, proposals to increase Part D premiums for the wealthiest Medicare beneficiaries -think George Soros and Warren Buffett – languish in legislative purgatory.

There is a Machiavellian logic to Democrats’ apparent lack of appetite for Medicare means testing. If wealthier individuals become less dependent on the welfare state for their health benefits in retirement, political support for the popular program may wane. But when President Bush proposed to extend current means-testing of Part B premiums to the prescription drug plan as one way to alleviate Medicare’s funding woes, the New York Times considered this element of the President’s plan a “reasonable” proposal. If President Bush and the editorial board of the New York Times can both see the merits of this concept, there is little reason why Congress, in its infinite wisdom, should not see fit to include it in the Medicare bill.

Instead, the legislative product being considered constitutes, at best, an attempt at behavioral modification – forcing low-income beneficiaries away from plans run by “greedy” insurance companies – and at worst a perverse experiment in social Darwinism, pitting one group of vulnerable seniors against another in a competition for Medicare dollars. All this so Warren Buffett can avoid having his estimated $60 billion fortune decimated by paying an extra $2 per day for prescription drug coverage.

In March, the Medicare trustees issued their annual report, which noted that Medicare faces $86 trillion – yes, trillion – in unfunded obligations. The two best ways to stem this looming tide of debt are increased competition among private Medicare Advantage plans and proposals utilizing means-testing to dedicate scarce health care resources to the seniors who need them most. Yet the House bill undermines the former, while ignoring the latter.

While introducing Medicare legislation very similar to the bill the House passed, Senate Finance Committee Chairman Max Baucus decried efforts to “protect private insurance plans” that would “leave low-income beneficiaries behind,” arguing that his “balanced legislation” will prevent the latter while discouraging the former. I agree with Senator Baucus that his legislation is indeed balanced – it would ensure that a senior with $20,000 in income will continue to pay as much for prescription drugs as Ross Perot (or Senator Baucus himself). But in their ideological quest to undermine private insurance plans, Congressional Democrats are indeed leaving millions of beneficiaries on Medicare Advantage plans, many of them low-income, behind. Speaker Nancy Pelosi and House Democrats – Cutting coverage for beneficiaries while protecting billionaires.

This post was originally published at The Washington Times.