Let the Individual Mandate Die

In May New Jersey imposed a health-insurance mandate requiring all residents to buy insurance or pay a penalty. More states will feel pressure to follow suit in the coming year as the federal mandate’s penalty disappears Jan. 1 and state legislatures reconvene, some with new Democratic majorities intent on “protecting” Obamacare. But conflicts with federal law will make state-level health-insurance mandates ineffective or unduly onerous, and governors and legislatures would do well to steer clear.

While states can require citizens to purchase health coverage, they will have trouble ensuring compliance. Federal law prohibits the Internal Revenue Service from disclosing tax-return data, except under limited circumstances. And there is no clear precedent allowing the IRS to disclose coverage data to verify compliance with state insurance requirements.

Accordingly, mandates enacted in New Jersey and the District of Columbia earlier this year created their own coverage-reporting regimes. But those likely conflict with the Employee Retirement Income Security Act, or ERISA, which explicitly pre-empts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” The point is to protect large employers who self-insure workers from 50 sets of conflicting state laws.

No employer has used ERISA to challenge Massachusetts’ 2006 individual mandate, which includes reporting requirements, but that doesn’t mean it’s legal. Last month a Brookings Institution paper conceded that “state requirements related to employer benefits like health coverage may be subject to legal challenge based on ERISA preemption.”

A 2016 Supreme Court ruling would bolster such a challenge. In Gobeille v. Liberty Mutual, the court struck down a Vermont law that required employers to submit health-care payment claims to a state database. The court said the law was pre-empted by ERISA.

Writing for a six-justice majority, Justice Anthony Kennedy noted the myriad reporting requirements under federal law. Vermont’s law required additional record-keeping. Justice Kennedy concluded that “differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability.”

Justice Kennedy’s opinion provides a how-to manual for employers to challenge state-level insurance mandates. A morass of state-imposed insurance mandates and reporting requirements would unnecessarily burden employers with costs and complexity. It cries out for pre-emptive relief.

Unfortunately, policy makers have ignored these concerns. Notes from the working group that recommended the District of Columbia’s individual mandate never mention the reporting burden or ERISA pre-emption. And in August the federal Centers for Medicare and Medicaid Services approved New Jersey’s waiver application that relied in part upon funding from that state’s new individual mandate, even though money from the difficult-to-enforce requirement may never materialize.

States already cannot require federal agencies to report coverage. This means their mandates won’t track the 2.3 million covered by the Indian Health Service, 9.3 million receiving health care from the Veterans Administration, 8.8 million disabled under age 65 who are enrolled in Medicare, 9.4 million military Tricare enrollees and 8.2 million federal employees and retirees.

If a successful ERISA challenge also exempts some of the 181 million with employer-based insurance from coverage-reporting requirements, state insurance mandates become farcical. States would have to choose between mandates that run on the “honor system”—thus likely rife with cheating—or taking so much time and energy to verify coverage that administration becomes prohibitively expensive.

States should take the hint and refrain from even considering their own coverage mandates. But if they don’t, smart employers should challenge the mandate’s reporting requirements. They’d likely win.

This post was originally published at The Wall Street Journal.

Are the Heritage Foundation’s Politics Betraying Its Policy?

When Ronald Reagan used the axiom “Trust but verify,” he meant conservatives should closely monitor organizations and individuals to ensure that their deeds comport with their words. This axiom should apply to a health-care plan that a group the Heritage Foundation leads will unveil this week. While the group’s website claims its plan would “restore a properly functioning market in the health care sector to lower costs,” Heritage’s own policy analysis suggests otherwise.

Specifically, the Heritage plan would in no way alter what Heritage research describes as the biggest drivers of Obamacare’s “seismic effects on insurance markets.” Nor does the Graham-Cassidy health care bill, the legislative basis for the new effort. In fact, a recent version of the bill further undermines the purported “flexibility” that Graham-Cassidy promises to states, making it even less consistent with the federal principles Heritage invokes in lauding the measure.

Pre-Existing Condition Rules Drive Premium Increases

The largest effect on premiums consists of a cluster of [Obamacare] insurance access requirements—specifically the guaranteed issue requirement and the prohibitions on medical underwriting and applying coverage exclusions for pre-existing medical conditions under any circumstances. This cluster of regulations collectively accounts for the largest share of premium increases.

The paper discusses at length how these provisions “appear to have had the greatest effect on premiums,” raising rates for the young and healthy to subsidize the sick. While Obamacare supporters hoped the individual mandate would compel enough healthy individuals to offset those costs, high numbers of people chose to pay the mandate tax or received exemptions from the tax.

“The net result was a constellation of rules that repelled relatively healthy people and attracted those who could reasonably expect their medical bills to exceed their premiums—which Obamacare’s individual mandate simply failed to counteract,” Heritage’s report says.

Rhetoric versus Reality on Graham-Cassidy

After analyzing how the pre-existing conditions provisions proved the prime driver of premium increases, the March Heritage paper claims Graham-Cassidy provides the solution, calling it “a conceptual framework for empowering states to repair or ameliorate much of the market dislocation resulting from Obamacare.”

Leaving all those regulatory requirements in place might sound good, but—just as the March Heritage paper noted—it causes major policy problems:

Insurance companies are required to sell ‘just-in-time’ policies even if people wait until they are sick to buy coverage. That’s just like the Obama plan. There is growing evidence that many are gaming the system by purchasing health insurance when they need surgery or other expensive medical care, then dropping it a few months later.

Those words were written in 2010 to describe the effects of Massachusetts’ health care law, but they apply just as equally to the Heritage plan, and the Graham-Cassidy bill, in 2018. Surprisingly, then, they came from another member of the group that is releasing the plan this week.

Despite these organizations’ own prior statements opposing these costly insurance requirements, the plan released by Heritage and others would leave them in place at the federal level, hamstringing states’ ability to manage their own insurance markets—and belying the supposed goal of devolving power away from Washington.

The Bill Is Getting Worse

Unfortunately, however, the revised draft takes major steps that would undermine states’ ability to create multiple risk pools. Language on page 31 would reduce the block grant allotment for states maintaining multiple risk pools, by a percentage not yet specified. Other new provisions on pages 44 and 45 of the revised draft would allow states to create multiple risk pools only if they follow a series of bureaucratic parameters—parameters that a future Democratic administration would likely use to quash any state’s attempt to establish or maintain multiple risk pools.

Not Flexible, Not Federalism

Even as the Graham-Cassidy bill moves further to the left, Heritage seems insistent on chasing it ever leftward. The bill never addressed what Heritage itself called the prime drivers of premium increases. Now a more recent version further erodes the little flexibility that earlier drafts gave to states.

As I wrote more than one year ago, Republicans can choose to leave the status quo intact on Obamacare’s major regulations, or they can choose to keep their promise to voters to repeal the law. But they cannot do both. It comes down to a binary choice that simple. And Heritage has chosen a path that would effectively break the promise of repeal.

This post was originally published at The Federalist.

State Insurance Benefit Mandates

Background:  Since the 1960s, state legislatures have considered—and adopted—legislation requiring health insurance products sold within the state to cover various products and services.  These benefit mandates are frequently adopted at the behest of disease groups advocating for coverage of particular treatments (e.g. mammograms) or physician groups concerned that patients have access to specialists’ services (e.g. optometrists).

A recent survey by the Council for Affordable Health Insurance found that as of 2007, states had enacted a total of 1,961 mandates for benefits and services—an increase of 60 (more than one per state) when compared to the 2006 total.[1]  The number of state mandates varies from a low of 15 in Idaho to a high of 64 in Minnesota.  However, because employer-sponsored health insurance is pre-empted from state-based laws and regulations under the Employee Retirement Income Security Act of 1974 (ERISA), benefit mandates do not apply to employers who self-fund their health insurance plans; thus state mandates primarily affect policies purchased in the individual and small group markets.

Costs and Impact on Take-up Rates:  The cost and impact of benefit mandates on health insurance premiums have been the subject of several studies in recent years.  For instance, the Heritage Foundation prepared an analysis suggesting that each individual benefit mandate could raise the cost of health insurance premiums by $0.75 monthly.[2]  Although the cost of a single mandate appears small, the aggregate impact—particularly given the recent growth of benefit mandates nationwide—can be significant: For instance, Massachusetts’ 43 benefit mandates would raise the cost of health insurance by more than $30 monthly under the Heritage analysis.

In July, the Commonwealth of Massachusetts released its own study on the impact of state benefit mandates, which was compiled as a result of the health reform law enacted under Gov. Mitt Romney.  The report found that in 2004-05, spending within the Commonwealth on mandated benefits totaled $1.32 billion—or 12% of health insurance premiums—prior to the introduction of a prescription drug benefit mandate likely to increase premium costs further.[3]  Because some of these benefits (e.g. diabetes coverage) likely would have been provided even in the absence of the state mandate, the report calculated that the marginal costs of the mandates could range as high as $687 million—or more than 6% of health insurance premium costs.[4]  The report also noted that some benefit mandates, such as those requiring bone marrow transplants for breast cancer, are ineffective, in part because the mandated benefits no longer match the recommended standard of care, and went on to recommend an ongoing review of the necessity of mandated benefits.[5]

A further level of analysis on the impact of higher premium costs, specifically those associated with benefit mandates, on the number of uninsured Americans, finds some correlation between the costs related to benefit mandates and rising numbers of uninsured.  Some estimates suggest that every 1% increase in premium costs has a corresponding increase in the number of uninsured by approximately 200,000-300,000 individuals nationwide.[6]  Because rising costs are associated with the introduction of a specific new benefit, the price elasticity associated with the mandate will tend to vary based on the benefit’s perceived usefulness—for instance, a single 20-year-old would be more likely to drop coverage if an infertility benefit mandate increased premium costs than would a married couple trying to conceive.  However, based on the studies above, it is reasonable to say that likely several hundred thousand, and possibly a million or more, Americans could obtain coverage if unnecessary benefit mandates were eliminated—and millions more Americans currently with insurance could receive more cost-effective coverage.

Legislative Proposals:  Various legislative provisions introduced in current and prior Congresses attempt to reform state benefit mandates through a variety of mechanisms.  The Health Care Choice Act (H.R. 4460) by Rep. John Shadegg (R-AZ) would permit individuals to purchase health insurance plans across state lines, which would give individuals living in states where benefit mandates have driven up the cost of insurance the opportunity to purchase more affordable policies.  The legislation could have the secondary benefit of encouraging states to avoid imposing new mandates and to re-think their current mandates, so as to make their policies more affordable and attractive to the citizens of their state—who otherwise may take the new opportunity to purchase coverage elsewhere.

Other options to reform state benefit mandates include Association Health Plans (AHPs) and Individual Membership Associations (IMAs), which would allow small businesses and individuals respectively the opportunity to band together to purchase health insurance.  In so doing, the associations would be exempted from state-based laws regarding mandated coverage of particular services or diseases.  Some conservatives may believe that these types of association plans may deliver value as a result of the pre-emption of the often costly benefit mandates.

A third option, first proposed by Sen. Judd Gregg (R-NH) in a 2004 Senate report and recently drafted into legislative language by Rep. Jeff Fortenberry (R-NE) as H.R. 6280, would require states to permit insurance carriers to offer mandate-free policies alongside their existing menu of coverage options.  As a result, consumers could choose whether to purchase a plan that offers richer coverage or a plan that might offer better value by targeting the type of benefits provided.  Some states, most recently Florida, have already taken steps in this line, passing legislation permitting lower-cost policies that may not offer the full menu of mandated benefits; Massachusetts offers such policies, but only to young adults aged 19-26.

Conclusion:  Although the types of benefit mandates imposed by states can vary from the duplicative (e.g. cancer coverage already provided by virtually all plans) to the costly (e.g. in vitro fertilization) to the frivolous (e.g. hair prosthesis), some conservatives may view them collectively as a failure of government.  In some respects, behavior surrounding state benefit mandates represents a case of moral hazard, whereby benefits (to particular disease or provider groups) are privatized, while costs—in the form of higher insurance premiums—are socialized among all payers.  Although some states have acted recently to study the cost effects of imposing so many benefit mandates, or to offer mandate-free or “mandate-lite” health insurance options to their citizens, the allure of appealing to a particular constituency group—as opposed to the interests of all individuals whose premiums will increase upon imposition of a mandate—often proves too difficult for policy makers to resist.

Although well-intentioned, some conservatives may view the groups who advocate for benefit mandates as operating from fundamentally flawed logic: that individuals should go without health insurance entirely rather than purchase coverage lacking the “consumer protection” of dozens of mandates.  In addition, some conservatives note that the prospect of increasing the number of uninsured through such methods may precipitate a “crisis” surrounding the uninsured, increasing calls for a government-run health system.  In short, many conservatives may believe individuals should have the “consumer protection” to purchase the insurance plan they desire—rather than the “protection” from being a consumer by a government which seeks to define their options, and raise the cost of health insurance in the process.

 

[1] Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2008” and “Health Insurance Mandates in the States 2007,” available online at http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf and http://www.cahi.org/cahi_contents/resources/pdf/MandatesInTheStates2007.pdf, respectively (accessed July 19, 2008).

[2] Michael New, “The Effect of State Regulations on Health Insurance Premiums: A Revised Analysis,” (Washington, Heritage Center for Data Analysis Paper CDA06-04, July 25, 2006), available online at http://www.heritage.org/Research/HealthCare/upload/CDA_06-04.pdf (accessed July 19, 2008), p. 5.

[3] Massachusetts Division of Health Care Finance and Policy, “Comprehensive Review of Mandated Benefits in Massachusetts: Report to the Legislature,” (Boston, July 7, 2008), available online at http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/mandates/comp_rev_mand_benefits.pdf (accessed July 19, 2008), p. 4.

[4] Ibid., pp. 5-6.

[5] Ibid., p. 6.

[6] See, for instance, Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs Web Exclusive April 5, 2008, available online at http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.143/DC1 (accessed July 19, 2008), and Government Accountability Office, Impact of Premium Increases on Number of Covered Individuals is Uncertain (Washington, Report GAO/HEHS-98-203R, June 11, 1999), available online at http://archive.gao.gov/paprpdf2/160930.pdf (accessed July 19, 2008), pp. 3-4.

Health Insurance Connectors and Exchanges

History and Background:  The 2006 Massachusetts health reform act signed into law by Republican Gov. Mitt Romney contained several concepts designed to expand insurance coverage and access.  These ideas included a health insurance “Connector,” which would allow employees at businesses not offering coverage to their workers to purchase insurance on the same tax-free basis as those covered under a group insurance plan.[1]  Because the Connector’s structure ensures that participants would be eligible for the federal tax subsidies provided to employer-sponsored coverage through the use of cafeteria plans (also named Section 125 plans after their location in the Internal Revenue Code), the state-based program provides a “back door” way to equalize the tax treatment of health insurance in the absence of federal legislation to do so.

Public vs. Private:  Although one of the more innovative concepts behind the Massachusetts plan, some conservatives may view the Connector as one of the least necessary.  While the head of a leading organization supporting the Massachusetts plan called the Connector concept “fairly unprecedented in US insurance history” for its ability to allow individuals to comparison shop between and among plans online, the private marketplace has provided that service to consumers for over a decade.[2]  Companies like eHealthInsurance, created in 1998, and Revolution Health have served for years as online insurance clearing-houses, enabling and empowering consumers to compare the features of plans offered in their area and select a plan best meeting their needs.

Given the private marketplace’s willingness to offer services comparable to the Massachusetts Connector, some conservatives may therefore view its creation as a symptom of two larger problems: the inequitable tax treatment of health insurance by the federal government and costly regulations imposed by state governments.  In an attempt to encourage younger individuals to take the step of buying insurance coverage, the Connector does sell streamlined benefit packages to 19-26 year-olds at lower costs—but some conservatives may believe that these individuals, and all Massachusetts residents, would be better served by more comprehensive insurance reform that repeals costly benefit mandates entirely, rather than loosening them only for certain populations under certain conditions.

Likewise, while the Connector concept provides an innovative way to extend current-law tax incentives for the purchase of health insurance to all individuals, some conservatives may be concerned that, should such an idea extend to other states, such a development would have the effect of perpetuating a system that depresses cash wages, encourages over-consumption of care, and results in hundreds of billions of dollars of tax subsidies annually—more than $168 billion in FY09, and more than $1.05 trillion over the next five years.[3]  Were the tax subsidies reformed, and the state benefit mandates streamlined, pre-empted, or eliminated, some conservatives may believe that the need for a government-run bureaucratic entity such as the Connector to administer health insurance plans would be minimized.

Legal Issues:  Although the Connector received significant attention from both the press and policy-makers at the time the Massachusetts plan was unveiled, some within the insurance community have raised potential concerns about the implications of super-imposing the Connector purchasing model on the existing legal framework for health insurance.  The National Association of Health Underwriters has released a paper raising several questions about the ramifications of Connector-based coverage, including whether Connector-purchased policies meets the current definition of group health insurance under applicable federal laws.

It is also possible that state-based health insurance Connectors, whether in Massachusetts or other states, could have provisions interfering with language in the Employee Retirement Income Security Act of 1974 (ERISA) pre-empting “any and all state laws insofar as they may now or hereafter relate to any employee health benefit plan.”[4]  Given the potential legal scrutiny, as well as the implications for individuals who may need to transfer their Connector-based coverage to another state or employer, some conservatives may urge caution with any state efforts to enact other versions of Massachusetts’ creation.

Connector vs. Regulator:  The relative novelty of the Connector concept has resulted in several attempts in the two years since the Massachusetts plan was first adopted to capitalize upon its perceived success by creating similar sounding models in other states and venues.  However, these models often vary widely in their structure and approach, with the major differences lying in the extent to which the Connector or Exchange represents an attempt by a bureaucratic entity to use its collective purchasing power to regulate or otherwise influence private insurance markets.

Sen. Barack Obama’s health care plan would establish a National Health Insurance Exchange, to allow individuals who do not wish to purchase coverage through his proposed new public health insurance program a choice of privately-run plans from which to buy a policy.  However, the language of his proposal makes clear that the Exchange would perform a highly active role as both a facilitator of coverage and a regulator of those plans participating in it:

The Exchange will act as a watchdog and help reform the private insurance market by creating rules and standards for participating insurance plans to ensure fairness and to make individual coverage more affordable and accessible….Insurers would have to issue every applicant a policy, and charge fair and stable premiums that will not depend upon health status.  The Exchange will require that all the plans offered are at least as generous as the new public plan and meet the same standards for quality and efficiency.  Insurers would be required to justify an above-average premium increase to the Exchange.  The Exchange would evaluate plans and make the differences among the plans, including the cost of services, transparent.[5]

The clear language of the Obama plan may give some conservatives pause that a purported health insurance “Exchange” will in fact serve more as a regulator than a mere facilitator for the purchase of insurance policies, imposing additional mandates and controls on carriers that will stifle the innovation of new insurance products and raise the cost of coverage.  Some conservatives may also be concerned that the Obama plan could in time turn into a government-run monopsony, where the Exchange as the largest and/or sole purchaser of health insurance would use its power to dominate the insurance marketplace, imposing arbitrary and damaging price controls on plans as a precondition to their participation in a venue where many Americans would seek to purchase coverage.

By contrast, several Republican Senators produced legislation (S. 1886) last year with language ensuring that state-based Connectors serve only as a purchasing tool and not as a blunt instrument to allow the federal government to intervene in health insurance markets.  The legislation provides that the health insurance tax credits created under the bill would be refundable (i.e. extended to those individuals with tax liability less than or equal to the amount of the credit) only in the case of policies purchased through a state-based Exchange.  Title II of the legislation establishes strict parameters on the actions that an Exchange may take with respect to insurance policies offered through it, prohibiting the Exchange from setting prices, imposing additional benefit mandates or guidelines, or restricting participation for any state-licensed plan.  The legislation also provides the opportunity for health insurance plans or other third parties to contract with states to organize the exchange, rather than forcing states to spend additional taxpayer resources to create something readily available in the private marketplace, as occurred in Massachusetts.

Conclusion:  Although a significant element of the Massachusetts reform law, some conservatives may believe that the Connector’s creation achieved little in practice that the private marketplace was not already working to develop—namely, an easy method for individuals to find, compare, and purchase health insurance plans.  While the tax advantages of purchases made through the Connector (as opposed to on the individual market) cannot be denied, the advisability of using the Connector as anything more than a stopgap solution until Congress debates and passes fundamental tax reform—including reform of the inequities of the tax treatment of health insurance—may be questioned.  Moreover, Internal Revenue Service guidance released last August found that individual health insurance policies purchased through tax-free Section 125 cafeteria plans established by employers need not be acquired solely by means of a Connector mechanism to receive favorable tax treatment, raising additional questions as to whether an additional state-based bureaucracy for the purchase of health insurance is necessary or desirable.[6]

To the extent that Connector-like mechanisms provide additional information and transparency to potential purchasers of health insurance, some conservatives may support these efforts as one way to replicate the information and advice which individuals may previously have received solely from employers.  However, to the extent state or federal lawmakers seek to utilize the Connector concept in an attempt for government to dominate the private insurance marketplace, many conservatives may oppose these efforts as antithetical to the principles of freedom and likely unworkable in practice.

 

[1] While the Massachusetts Connector also offers access to state-subsidized Commonwealth Care plans for low-income individuals, references to “Connectors” in this paper speak solely to mechanisms that facilitate the purchase of unsubsidized insurance from the private marketplace.

[2] Statement of John McDonough, Executive Director, Health Care for All, Alliance for Health Reform briefing on “Massachusetts Health Reform: Bragging Rights and Growing Pains,” (Washington, DC, May 19, 2008), available online at http://www.allhealth.org/briefingmaterials/Transcript-1219.pdf (accessed July 1, 2008), p. 9.

[3] Table 19-1, Estimates of Total Income Tax Expenditures, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2009, available online at http://www.whitehouse.gov/omb/budget/fy2009/pdf/spec.pdf (accessed July 1, 2008), p. 302.

[4] 29 U.S.C. §1144a.

[5] “Barack Obama’s Plan for a Healthy America,” available online at http://www.barackobama.com/issues/pdf/HealthCareFullPlan.pdf (accessed July 1, 2008), p. 4.

[6] Internal Revenue Service Notice of Proposed Rulemaking issued August 6, 2007 and available online at http://edocket.access.gpo.gov/2007/pdf/E7-14827.pdf (accessed July 1, 2008).  Language relating to reimbursement of individual health insurance premiums is in proposed 26 CFR §1.125-7(m) at pp. 43952-53.

Weekly Newsletter: June 9, 2008

Committees Continue to Spar over Tobacco Tax Legislation

Congress’ return last week brought no end to a simmering jurisdictional dispute that has delayed consideration of legislation (H.R. 1108) designed to regulate tobacco products under the auspices of the Food and Drug Administration (FDA). In April, House Ways and Means Committee Chairman Rangel wrote to Speaker Pelosi requesting a sequential referral of the bill, on the grounds that the “user fee” assessed on tobacco companies in the legislation exceeds the funds directed from that fee to tobacco enforcement activities at FDA, making the legislation a general revenue raising (i.e. tax) bill under Ways and Means’ jurisdiction.

Many conservatives will view Chairman Rangel’s letter as confirmation that, notwithstanding the statements of Energy and Commerce Committee Democrats and a finding within the bill text of H.R. 1108, the proposed “user fee” is in fact an excise tax on tobacco companies to offset the expected loss of revenue resulting from FDA regulation. Some conservatives may view this tax increase as one of several concerns associated with H.R. 1108, which would impose onerous regulatory restrictions—including those on tobacco companies’ free speech rights to market and advertise their products—in the interest of protecting the public health. Some conservatives may question the wisdom of legislation requiring the FDA to regulate tobacco, particularly given the concerns raised by Congressional Democrats themselves about the FDA’s inability properly to regulate products currently within the agency’s remit.

The RSC will weigh in with conservative concerns on the tax and other issues as the legislation moves forward.

Revised Wyden Bill a Perpetual Tax-Raising Machine

Last month, the Congressional Budget Office (CBO) released a letter that could have a significant impact on any potential discussion of health care reform in the 111th Congress. In it, CBO gave a preliminary opinion that comprehensive health legislation introduced by Sen. Ron Wyden (D-OR), the Healthy Americans Act (S. 334), could be scored as budget-neutral, subject to certain conditions. In general, the bill would replace the current system of employer-provided health insurance with a “managed competition” model, whereby insurance coverage meeting a series of regulatory standards is provided through state-based pools, with a mandate on all individuals to purchase coverage and subsidies for low-income individuals and families.

Many of the bill’s potential funding sources—including a tax on all employers to pay for their employees’ insurance costs—have been well-publicized. Less advertised however were the revised bill specifications which CBO took into account when scoring the Wyden proposals. Specifically, the bill proposed to mandate coverage at least as good as that currently provided in the Blue Cross Blue Shield Standard option in the Federal Employee Health Benefits Program (FEHBP)—a generous benefit package 15% higher than the average cost of all employer-sponsored plans—with the amount of the mandate rising in future years to reflect economic growth in the gross domestic product (GDP). However, the revised specifications also note that the tax subsidy for purchasing health insurance will be indexed in future years to growth in the Consumer Price Index (CPI). Thus, under the Wyden plan, if future economic growth exceeds inflation—as it has in every year since 1992—Americans would be forced to buy more insurance but would not receive an equivalent tax subsidy to purchase that richer benefit package, leading to tax increases that would spiral over time.

On top of the many existing problems with the Wyden bill—a mandatory tax on employers, an individual mandate to purchase coverage that could prove problematic to enforce, increased regulation on insurers, and the requirement that all carriers provide coverage for abortion procedures—some conservatives may find this new perpetual tax increase most objectionable of all. While many conservatives support measures designed to control the currently uncapped tax expenditure for employer-sponsored health care as a way to slow the growth of health care costs, many of these same conservatives may have concerns about the implications of an individual mandate to purchase insurance—particularly one that could lead to automatic tax increases in future years for millions of Americans.

An RSC Policy Brief on the implications of an individual mandate can be found here.

Articles of Note: Health Insurance in Massachusetts a Fine Thing

A study on the influential Massachusetts health plan released last week indicated that beneath the political harmony that yielded a statewide “universal coverage” law two years ago, fissures loom. While health insurance coverage has increased significantly, the biggest growth in new coverage has come from low-income individuals accepting free or heavily subsidized plans provided by the Commonwealth. On the other hand, nearly 100,000 individuals paid a fine on their 2007 taxes for lacking health insurance in spite of the new mandate to purchase coverage.

Many conservatives may not be surprised by the study’s findings, particularly given the unnecessarily high cost of health insurance premiums in Massachusetts due to over-regulation. Faced with a penalty for non-compliance of $219 in 2007 and an average monthly premiums in excess of that amount, some individuals may make a rational choice to pay a fine of several hundred dollars per year rather than purchase coverage costing several thousand dollars—particularly because Massachusetts state regulations allow individuals applying for insurance after contracting an illness to receive the same premiums as those who applied when healthy. Conservatives would view the Massachusetts data as symptomatic of the problems associated with both enforcing an individual mandate and the high cost of health insurance derived from over-regulating insurance markets.

In addition, some conservatives may be concerned by a quote in The Washington Post from the head of a group that advocated for passage of the Massachusetts law: “Nobody knew what this was going to cost in the beginning.” At a time when the federal government faces unfunded obligations of nearly $86 trillion associated with the Medicare program alone, many conservatives may consider it unwise for the federal government to follow Massachusetts’ lead in enacting another expansive government entitlement without solving the underlying problems associated with the growth of health care spending.

Read the articles here.

Weekly Newsletter: May 12, 2008

War Supplemental Attempts to Override Medicaid Fiscal Integrity Regulations

News reports surfaced in recent days that House Democrats will attempt to attach to the wartime supplemental appropriations bill provisions of legislation (H.R. 5613) that would impose moratoria on several proposed regulations issued by the Centers for Medicare and Medicaid Services (CMS) to restore fiscal integrity to the Medicaid program. Other reports also suggest that much of the increase in Medicaid spending on anti-fraud oversight, inserted into the legislation at the behest of Energy and Commerce Committee Ranking Member Joe Barton (R-TX), will not be included in the appropriations measure.

In addition to the concerns many conservatives may have about unnecessary domestic spending provisions being attached to a bill funding troops in harm’s way overseas, some conservatives may also be concerned by congressional actions to block regulations that respond to more than a dozen Government Accountability Office (GAO) reports released since 1994 highlighting the various ways states have attempted to “game” the Medicaid program and increase the amount of federal matching funds received. The history of these abuses has prompted the Administration to threaten a veto of any measure attempting to block CMS’ attempts to restore the fiscal integrity of the Medicaid program.

Reports also suggesting that the Senate version of the supplemental may attempt to pay for part of the costs associated with the Medicaid regulations by enacting additional restrictions on physician-owned hospitals. Some conservatives may therefore be concerned that Senate Democrats are attempting to override critical regulations to restore integrity to the Medicaid program—and paying for the moratoria by enacting bureaucratic restrictions that will stifle an important source of innovation in health care.

RSC Briefs on the federal-state Medicaid relationship can be found here, here, here, and here.

An RSC Policy Brief on physician-owned hospitals can be found here.

Ways and Means Hearing Scheduled on HSAs

This Wednesday, the House Ways and Means Health Subcommittee will hold a hearing designed to undermine the growth of Health Savings Accounts (HSAs). The hearing comes on the heels of a Government Accountability Office (GAO) report requested by Subcommittee Chairman Pete Stark (D-CA) that Democrats used to assert that HSAs are nothing more than a tax shelter for wealthy individuals.

Some conservatives may be strongly skeptical of the Democrat conclusions, particularly as the GAO report utilized tax data from a year when the number of HSA policy-holders was one-sixth its current level. In addition, many conservatives may applaud the data demonstrating that individuals are building real savings in their HSA accounts to use for health expenses—money that consumers, not insurance companies or government bureaucrats, can control and spend for health care needs. These data on the amount of savings accumulated by HSA holders fly in the face of statements by Subcommittee Chairman Stark that HSAs are “woefully inadequate” as a means to provide health care coverage.

What is clear is that HSAs have proved tremendously popular in the four years since their introduction. America’s Health Insurance Plans recently reported that more than 6.1 million individuals are covered by HSA-eligible insurance, and that enrollment in HSA plans had increased by 35% during 2007 alone. Given the widespread adoption of this new consumer-directed product, and its impact on reducing the growth of health care costs, many conservatives may object to any Democrat proposals to eliminate HSAs or make them unattractive through unnecessary bureaucratic regulations.

An RSC Policy Brief providing background on HSA enrollment can be found here.

Articles of Note: Washington’s Other Health Care Mess

Two articles in The Washington Post in the past week highlighted growing opposition to a measure designed to provide universal health care in the District of Columbia. The proposed program, similar to one enacted in Massachusetts two years ago, would impose an individual mandate on all individuals to purchase health insurance coverage, and would expand public insurance subsidies for those individuals not eligible for current government-run health care programs.

Much opposition has centered on the new taxes necessary to finance the expansion of government-run health care—a doubling of the District’s tobacco tax, a new tax on Health Maintenance Organizations, and an increase in taxes on all health insurance premiums. The health insurer with whom the District had expected to contract for the program has also expressed reservations about its willingness to participate.

Advocates of the District’s health care plan face the same obstacles that have plagued the Massachusetts experiment: unpopular new taxes that can stifle economic growth, an individual mandate that can prove difficult to enforce, and few controls on spiraling health care costs that form the root cause of many access and coverage shortcomings in the current system. Some conservatives would therefore advise District leaders that, rather than establishing a new entitlement program with unknown future obligations, policy-makers would be best advised to reform health care markets to create the kind of consumer-oriented innovations that can slow the growth of health care costs, thereby increasing affordability of coverage.

Read the articles here: “Speakers Express Division on Bill to Mandate Health Care Coverage
Provider, Doctors May Pull Out of Program

An Individual Mandate to Purchase Health Insurance

Background:  Proposals requiring all individuals to obtain health insurance coverage date to the debate surrounding President Clinton’s health reform package in the early 1990s.  Supporters of an individual mandate often utilize two linked arguments in favor of this approach to health care reform.  First, an individual mandate promotes personal responsibility, ending the “free rider” problem whereby individuals who choose to go without health insurance pass on their costs to various publicly-funded safety net programs in the event of a medical emergency.  Second, some advocates of insurance “reforms” such as guaranteed issue and community rating—which require health insurance carriers to disregard applicants’ health status when extending offers of insurance—accept that placing such restrictions on carriers in the absence of a mandate to purchase insurance would only encourage individuals to “game” the system by waiting until they become sick to submit an insurance application.

Recent Proposals:  An individual mandate regained national prominence when then-Gov. Mitt Romney (R-MA) signed into law a comprehensive health reform plan in April 2006.  The mandate formed one of the bill’s central planks, which, when coupled with expansions of Medicaid and various low-income subsidies, was designed to achieve universal coverage within the state.  Although Romney had initially proposed that individuals be permitted to post a bond in lieu of proof of insurance coverage, the Legislature excluded this alternative from the final package.

In the time since enactment of the Massachusetts plan, some states (most notably California) have also studied the creation of a health insurance mandate, as have several federal policy-makers.  In January 2007, Sen. Ron Wyden (D-OR) reintroduced the Healthy Americans Act (S. 334), co-sponsored by Sen. Robert Bennett (R-UT), and introduced in the House as H.R. 3163 by Rep. Brian Baird (D-WA).  Section 102(a) of the legislation requires all individuals to enroll in a Healthy Americans Private Insurance plan, unless the individual is covered under Medicare, other federal coverage for servicemen or veterans, or has a religious objection to purchasing health insurance.  The bill also defines a minimum benefit standard for insurance coverage, requiring all policies sold in compliance with the individual mandate to include health benefits actuarially equivalent to the benefit package offered in the Blue Cross Blue Shield Standard option in the Federal Employee Health Benefits Program (FEHBP) as of January 1, 2007.

The Democratic presidential candidates have both supported mandates to purchase health insurance, although the scope of their respective mandates has become a subject of widespread debate during the primary season.  Sen. Hillary Clinton’s platform will require all individuals “to get and keep insurance in a system where insurance is affordable and accessible,” consistent with “promoting shared responsibility.”[1]  By contrast, Sen. Barack Obama’s plan “will require that all children have health care coverage,” but does not advocate a mandate for all individuals—although he has indicated an openness to consider one in the future should large numbers of adults choose not to purchase insurance.[2]  Although Clinton and Obama have promised all individuals access to insurance plans that would be “at least as good as” and “similar to” FEHBP coverage, respectively, neither candidate has elaborated on whether individuals (or children) with employer-sponsored or other coverage would need to maintain a benefit package equivalent to FEHBP standards in order to comply with the federal mandate.

Scope of the Mandate:  Key to determining the effectiveness of any health reform plan incorporating an individual mandate is the minimum level of coverage required to comply with the mandate.  In Massachusetts, a Connector Board comprised of various stakeholders decided that minimum creditable coverage for purposes of the mandate would include a maximum deductible of $2,000 per individual; prescription drug coverage will be required for plans beginning in 2009.  However, this mandated benefit package was not without consequences: As many as 15-20% of the uninsured were exempted from the mandate due to affordability issues—a number projected to increase in coming years—while more than 160,000 insured individuals could lose their creditable coverage when the prescription drug component of the mandate takes effect next year.[3]

During the Democratic presidential primaries, neither Sens. Clinton nor Obama have offered a comparable level of detail about the intended scope of their mandates.  However, their frequent repetition of the mantra that all Americans deserve coverage equivalent to Members of Congress could result in a threshold similar to the Wyden-Bennett bill’s Blue Cross Blue Shield FEHBP Standard plan.  But unstated in their rhetoric is the fact that the $431 monthly premium charged for this plan during 2007 exceeds by more than 15% the average cost of group health insurance in the same year, according to the non-partisan Kaiser Family Foundation.[4]  Thus, despite the promises made in her health plan that families who like the coverage they have now can keep it, adopting the FEHBP standard as part of Sen. Clinton’s individual mandate could force many Americans to drop their existing coverage.

Apart from the costs associated with subsidizing an FEHBP-like benefit package for low-income families, some conservatives may have concerns about the implications of such coverage with regard to controlling health care costs.  Utilizing the low-deductible, high-cost plans common in FEHBP could prove antithetical to slowing the growth in health spending, as the third-party payment and first-dollar coverage in such plans tends to encourage beneficiaries to over-consume coverage, particularly for routine expenses.  Furthermore, Massachusetts Institute of Technology professor Jonathan Gruber, a key member of the Connector Board that defined Massachusetts’ mandate, notes that a mandate linked to the FEHBP standard would “rule out high-deductible plans…it would make it very difficult to design one that would qualify.”[5]  Conservatives may be concerned that the millions of individuals and businesses who have utilized Health Savings Accounts (HSAs) to build savings and reduce their premium costs could be forced to find new coverage, potentially increasing costs for business and creating additional disruption in insurance markets.

In addition to requiring an overall level of coverage, a federal mandate could include prescriptions on the types of benefits plans must offer and individuals must purchase.  Although economists such as Mark Pauly of the Wharton School of Business have advocated for an actuarial equivalence model—whereby individuals subject to the mandate would have to purchase benefits equal to a certain dollar level, but carriers could remain innovative in creating benefit packages as they see fit—previous experience from the federal and state levels suggests that such a “hands-off” scenario is unlikely to emerge.[6]  For instance, section 113(b)(3) of the Wyden-Bennett bill requires carriers to make coverage for abortion services available, troubling many conservatives.  Similarly, influence from disease and medical specialty groups in recent years has led to the enactment of nearly 2,000 various state benefit mandates—in 2007, the number of mandates grew at the rate of more than one per state.[7]  On the federal level, the nearly 700 clients registered to lobby on Medicare coverage and reimbursement issues for various constituencies provides some inkling of the way in which health care groups could attempt to influence the construction of a federal health insurance mandate.[8]

Enforcement:  Equally important in determining the effectiveness of an individual mandate are the penalties for non-compliance, and the enforcement mechanisms designed to ensure all individuals purchase and retain coverage.  Sen. Clinton recently suggested that enforcing her mandate might involve “going after people’s wages,” consistent with the Massachusetts health reform proposal that uses the tax code to implement and enforce the mandate.[9]  However, recent experience suggests that enforcing an individual mandate may be neither easy nor clear-cut.

Although the Massachusetts individual insurance mandate is too new to yield much data about its effectiveness, a recent Health Affairs article analyzed previous examples of state and federal mandates to examine their impact.  While the article cites Census data demonstrating that Hawaii—which has had a “pay-or-play” mandate requiring many employers to provide health insurance since the 1970s—has a comparatively low rate of uninsurance, nearly one in ten Hawaiians still lack coverage—and “employment appears to have shifted toward sectors that are not subject to the mandate.”[10]  In addition, state-by-state enforcement of automobile insurance mandates is spotty at best; despite a mandate to purchase automobile insurance, California has more uninsured motorists than uninsured individuals, while the two states lacking mandates have shown rates of uninsured motorists well below the national average.[11]

The practical details of creating a bureaucracy to implement and enforce an individual mandate for health insurance could yield similarly questionable results.  Data matching and coordination among dozens of insurance carriers large and small, tens of thousands of employers, state agencies providing public insurance coverage or pooling options for their citizens, the Internal Revenue Service (IRS), and a new federal agency charged with enforcing the mandate would likely require a level of efficiency heretofore unseen from the federal government.  The years of logistical difficulties for employers associated with the rollout of the “basic pilot” system of employee verification could provide some indication of what individuals subject to a health insurance mandate could face upon its introduction.

Conclusion:  Although some health policy-makers have come to view an individual mandate to purchase insurance as the key step in achieving universal coverage for all Americans, this “single bullet” solution could in practice prove largely unworkable.  No initiative featuring an individual mandate has proposed an enforcement mechanism covering the approximately 12 million illegal immigrants, as many as two-thirds of whom lack health insurance, for whom a federal mandate would likely be ineffective.[12]  Moreover, at a time when recent IRS estimates indicate that individuals underreport their taxes by nearly $200 billion annually, or more than 18% of all individual income taxes, the concept of enforcing a health insurance mandate through the tax code, as Sen. Clinton has suggested, appears a dubious proposition at best.[13]

Some conservatives may also be concerned about two policy “solutions” that have frequently been attached to an individual mandate—“pay-or-play” requirements on business and guaranteed issue and community rating provisions on insurance carriers.  Although Sen. Clinton’s plan claims to exempt small businesses from a requirement to provide health insurance or finance their employees’ coverage, her plan, like the Obama plan and the Wyden-Bennett bill, would impose new taxes on employers that could have a significant negative effect on economic growth.  In addition, all three proposals would require insurance carriers to accept all applicants, and charge all applicants the same premium for insurance coverage.  While the concept of ending “insurance company discrimination” against less healthy people sounds politically appealing, some conservatives might question whether and how charging smokers with lung cancer or other individuals with behaviorally-acquired diseases the same insurance premiums as their healthier counterparts comports with the concept of “personal responsibility” advanced by advocates of an individual mandate.

The broader concerns surrounding an individual mandate focus on its significant new intrusion by the state into the lives of all Americans.  In critiquing the proposals by Sens. Clinton and Obama, former Clinton Administration Secretary of Labor Robert Reich conceded as much, noting that a mandate is “to many Americans, the least attractive [aspect] because it conjures up a big government bullying people into doing what they’d rather not do.”[14]  Secretary Reich’s description of an individual mandate closely mirrors that of F. A. Hayek, who in his landmark work The Road to Serfdom discussed the inherently arbitrary nature of central government planning and the ways in which its growth tends to undermine personal liberty and freedom.  Some conservatives, reflecting anew upon Hayek’s warnings more than half a century ago, may believe that “bullying” the American people into purchasing health insurance, to the extent to which such a mandate would actually be effective, is inconsistent with a belief in individual liberty.

 

[1] “American Health Choices Plan,” available online at http://www.hillaryclinton.com/issues/healthcare/americanhealthchoicesplan.pdf (accessed March 14, 2008), p. 6.

[2] “Barack Obama’s Plan for a Healthy America,” available online at http://www.barackobama.com/issues/pdf/HealthCareFullPlan.pdf (accessed March 14, 2008), p. 5.

[3] Jonathan Gruber, “Massachusetts Health Care Reform: The View from One Year Out,” (Washington, DC: Paper Presented at the Cornell University Symposium on Health Care Reform, September 2007), available online at http://www.epionline.org/downloads/hc_symposium_Gruber.pdf (accessed March 16, 2008), pp. 14-17.  See also Laura Meckler, “How Ten People Reshaped Massachusetts Health Care,” The Wall Street Journal 30 May 2007, available online at http://www.allhealth.org/briefingmaterials/WSJ-MAConnector-941.pdf (accessed March 16, 2008).

[4] Kaiser Family Foundation, “Employer Health Benefits: 2007 Annual Survey,” available online at http://kff.org/insurance/7672/upload/76723.pdf (accessed March 15, 2008), p. 2.

[5] Quoted in Shawn Tully, “Why McCain Has the Best Health Care Plan,” Fortune 11 March 2008, available online at http://www.allhealth.org/briefingmaterials/Fortune-Tully-1122.pdf (accessed March 15, 2008).

[6] Mark Pauly, “Is Massachusetts a Model at Last?” AEI Health Policy Outlook No. 1 (January 2007), available online at http://www.aei.org/publications/pubID.25372,filter.all/pub_detail.asp (accessed March 16, 2008).

[7] Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2008” and “Health Insurance Mandates in the States 2007,” available online at http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf and http://www.cahi.org/cahi_contents/resources/pdf/MandatesInTheStates2007.pdf, respectively (accessed March 15, 2008).

[8] Heritage Foundation analysis of Lobbying Disclosure Act reports filed with the Senate Office of Public Records.

[9] Quoted in “The Wages of HillaryCare,” The Wall Street Journal 8 February 2008, available online at http://online.wsj.com/article_print/SB120243891249052861.html (accessed March 15, 2008).

[10] US Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2006,” available online at http://www.census.gov/prod/2007pubs/p60-233.pdf (accessed March 15, 2008), p. 24; Sherry Giled, Jacob Hartz, and Genessa Giorgi, “Consider It Done? The Likely Efficacy of Mandates for Health Insurance,” Health Affairs 26:6 (November/December 2007), available online at http://www.allhealth.org/briefingmaterials/HealthAff-Glied-1118.pdf (accessed March 15, 2008), p. 1614.

[11] Cited in Glen Whitman, “Hazards of the Individual Health Mandate,” Cato Policy Report 29:5 (September/October 2007), available online at http://www.cato.org/pubs/policy_report/v29n5/cpr29n5-1.pdf (accessed March 15, 2008), p. 10; Giled et al., “Consider it Done?” p. 1615.

[12] Dana Goldman, James Smith, and Neeraj Sood, “Legal Status and Health Insurance among Immigrants,” Health Affairs 24:6 (November/December 2005), pp. 1640-1653.

[13] Internal Revenue Service, “Tax Gap Update: February 2007,” available online at http://www.irs.gov/pub/irs-utl/tax_gap_update_070212.pdf (accessed March 16, 2008).

[14] Robert Reich, “The Road to Universal Coverage,” The Wall Street Journal 9 January 2008, available online at http://online.wsj.com/article_print/SB119984199293776549.html (accessed March 16, 2008).

Weekly Newsletter: April 21, 2008

Full House to Vote on Overriding Medicaid Fiscal Integrity Regulations

This Tuesday, the full House is scheduled to vote on legislation (H.R. 5613) that would impose moratoria on several proposed regulations issued by the Centers for Medicare and Medicaid Services (CMS) to restore fiscal integrity to the Medicaid program. The bill will be considered under suspension of the rules, which limits debate and requires a 2/3 vote for passage. Some conservatives may be concerned that a bill costing more than $1.5 billion is scheduled to be considered under such an expedited process normally reserved for naming of post offices and other smaller pieces of legislation.

In addition, some conservatives may remain concerned by congressional actions to block regulations that respond to more than a dozen Government Accountability Office (GAO) reports released since 1994 highlighting the various ways states have attempted to “game” the Medicaid program and increase the amount of federal matching funds received. The history of these abuses has prompted the Administration to threaten a veto of any measure attempting to block CMS’ attempts to restore the fiscal integrity of the Medicaid program.

Because HR 5613 only places a moratorium on further administrative action until April 2009, the stated cost of the legislation is $1.65 billion. However, some conservatives may be skeptical that Congress would ever let this moratorium be lifted, and thus may be concerned that passage of the legislation ultimately could result in the nullification of approximately $16-18 billion in proposed savings—which, though significant, will lower federal Medicaid spending by just over 1% over the next five years.

In December 2005, 212 Members of Congress—all Republicans—voted to reduce Medicaid spending by less than $4.8 billion as part of the Deficit Reduction Act. If these moratoria remain intact, some conservatives may be concerned that Congress will have more than undone the modest savings which a Republican-led Congress enacted over sharp Democrat protests.

RSC Policy Briefs on the federal-state Medicaid relationship can be found here and here.

Democrats Pass Restrictions on Health Savings Accounts

The full House last week passed legislation that would enact new restrictions on Health Savings Accounts (HSAs) as part of broader tax legislation (HR 5719). The legislation requires all HSA account holders to independently verify the qualified nature of medical expenses for all withdrawals, subjecting those transactions not substantiated to income taxes. This language prompted the White House to threaten a Presidential veto of the bill, which the Office of Management and Budget argued “would impose new administrative burdens on the trustees of HSAs…[that] could undermine efforts by employers, individuals, and insurers to reduce health care costs and improve health outcomes by empowering consumers to take greater control of health care decision-making.”

The bill passed by a 239-178 vote, but only after the Republican motion to recommit failed on a 210-210 tie. This vote on the motion to recommit was extended after the motion’s proponents had received a majority of votes cast after the allotted 15-minute vote time.

The outlook for action in the Senate is unclear, and the threat of a Presidential veto on these HSA restrictions looms as well. However, the RSC will continue to weigh in on the need to protect the important consumer-driven health programs which Republicans have succeeded in establishing in recent years.

An RSC Policy Brief discussing this issue can be found here.

Specialty Hospital Provisions Possible Farm Bill Offset

As conferees attempt to reach agreement on a farm bill reauthorization, some Democrats have introduced a potential new offset: Restrictions on physician-owned specialty hospitals. This particular offset has already been proposed twice by House Democrats to pay for expansions of the government’s role in health care—the first as part of legislation (HR 3162) placing millions of children on government-funded health insurance rolls, the second in legislation (HR 1424) that would increase health insurance premiums by forcing employers and insurance carriers to cover such mental health disorders as caffeine addiction and jet lag.

Some conservatives may be concerned that this provision—which, because it was included in neither the House nor Senate versions of farm bill legislation, is outside the scope of the conference—would undermine and stifle the innovative practices developed at physician-owned hospitals in order to pay for additional farm subsidies. Some conservatives may also be concerned that the Congressional Budget Office (CBO) scoring assumptions regarding these provisions remain in dispute, yet the Democrat majority is considering using “savings” that may or may not exist in order to finance additional government aid to the agricultural sector.

An RSC Policy Brief discussing specialty hospitals can be found here.

Article of Note: Free Health Care Isn’t Cheap

This week, Gov. Deval Patrick (D-MA) delivered the budgetary verdict on Massachusetts’ novel health reform act passed in 2006—and the statistics raised into question whether and how long the lauded Massachusetts experiment can be sustained. Only about half of the state’s estimated 600,000 uninsured have gained access to coverage since the Massachusetts law imposed an individual mandate to purchase health insurance. Moreover, many more individuals than expected claimed free or reduced-cost plans available through the state’s Commonwealth Care program, creating a $153 million budget gap for the program’s first year of operation—and aides admit that future years face similar funding difficulties.

Gov. Patrick has proposed a $1-per-pack increase in cigarette taxes in order to finance the shortfall created by rising enrollment in government-funded health insurance. This comes on the heels of reports that 748 employers have already been taxed a total of $6.6 million in “assessments” for failing to provide health insurance to their employees.

Some conservatives may not be surprised by the rising health care costs associated with Massachusetts’ plan, and may be concerned by the increasing reliance on additional taxes to finance the program. The state’s many benefit mandates and insurance regulations have consistently resulted in insurance premiums amongst the highest in the nation, and higher taxes on businesses and individuals will do nothing to control skyrocketing health care costs. Instead, many conservatives may support additional reforms to decrease costly regulations and reform the state’s health care market, reducing the growth of health care costs by empowering consumers to make wise choices about their health options.

Read the article here: “Universal Health Care to Cost Massachusetts More than Was Budgeted