The Wages of Betrayal

By John Goodman Filed under Health Alerts on January 4, 2012

As we enter the New Year, I invite everyone to think back to the process by which we got ObamaCare. Remember the phrase, “If you’re not at the table, you’re going to be the lunch.” As it’s turning out, just about everybody who was at the table is turning out to be lunch after all.

Is anyone surprised at that? Are you surprised at the pre-Christmas announcement that agents and brokers under ObamaCare are going to be toast? What about the discovery that the administration is not a friend of doctors after all? Or that hospitals are fair game any time Congress needs more money? Or that the drug companies are next? What about the insurance execs who have already lost their jobs?

Can you imagine what would have happened if all these groups had stood on principle? What if they had stood with those being exploited instead of trying to line their own pockets with a few extra shekels at everyone else’s expense?

This is probably as good a time as any to reflect on Martin Niemöller’s poem:

In Germany they came first for the Communists, and I didn’t speak up because I wasn’t a Communist. Then they came for the Jews, and I didn’t speak up because I wasn’t a Jew. Then they came for the trade unionists, and I didn’t speak up because I wasn’t a trade unionist. Then they came for the Catholics, and I didn’t speak up because I was a Protestant. Then they came for me, and by that time no one was left to speak up.

Vote on possible lunch location change

Vote by January 20, 2012 by 5pm.

We have had complaints that Willie G’s does not have enough parking and people have to use valet. We had complaints that the room is not big enough. Given all of these problems we are not eager to change for a 3rd time in 12 months without putting this decision to the membership.

Feel free to vote, leave comments and/or come to the January 18th luncheon to voice an opinion.

For those of you not familiar with the Hess Club please go to http://www.hessclub.com

Thank you for voting and please know your board values your opinion.

Sebelius’ Masterful Muddle – By Robert Samuelson

WASHINGTON — When the history of the 2012 campaign is written, a special place may be reserved for Kathleen Sebelius, secretary of Health and Human Services and ex-governor of Kansas, who is doing her best to make the Affordable Care Act — aka, Obamacare — disappear as a political liability for the president. The most compelling evidence of this is her decision to delegate to states the final decision on defining “essential health benefits” for minimum health insurance coverage.

Some background: The ACA requires all Americans to have health insurance. But what’s acceptable insurance? Under Section 1302 of the ACA, the secretary of HHS is supposed to answer that question. It’s a fateful decision. By 2016, an estimated 35 million uninsured Americans will receive subsidized health insurance under the ACA through Medicaid or from policies purchased on state “exchanges,” according to the Kaiser Family Foundation. The package of essential health benefits would apply directly to their coverage. It would also apply to unsubsidized beneficiaries receiving coverage in the individual and small group insurance markets (small group usually means firms of less than 100 workers). All told, about 73 million Americans would be affected, estimates the Kaiser.

Defining essential health benefits poses a basic conflict. On one hand, everyone wants broad coverage; on the other, the broader the coverage, the more expensive policies will be — pushing government spending up (because government pays for the subsidies) and wages down (because employers will shift compensation from wages to fringe benefits).

Sebelius ducked this question by requiring each state to define essential health benefits based on existing policies in that state. Almost no one anticipated this. The ACA does not suggest it. Sebelius asked for advice from the nonpartisan Institute of Medicine (IOM). Its report talks of a national standard for essential health benefits, although it also notes that the ACA allows the secretary to provide state-by-state waivers beginning in 2017.

Politically, Sebelius’ decision is a masterstroke. One Republican criticism of Obamacare is that it imposes a “one-size-fits-all” straightjacket on health care. Mitt Romney — the ex-governor of Massachusetts and author of that state’s universal health insurance plan — has made this point repeatedly. President Obama can now retort: “No, we’ve left crucial decisions to the states.” He can also argue that Washington isn’t dictating “how medicine should be practiced.”

More generally, Sebelius has muddled the health care debate by splintering the argument over essential health benefits into 51 separate state-level debates immersed in highly technical issues. Under her approach, states must base their essential health benefits package on any one of 10 existing insurance plans. The choices include, for example, “the largest plan by enrollment in any of the three largest small group insurance products in the state’s small group market.” Got it? This isn’t likely to engage the masses.

It’s shrewd politics, but is it good policy? Administration officials make three arguments. First, the president has emphasized that the ACA is a federal-state partnership; delegating these choices to states reflects that. Second, basing a state’s essential health benefits on their existing insurance plans would minimize disruption. And finally, priorities vary by states. “Coverage that works in Florida may not work in Nebraska,” said Sebelius.

To which, there are reasonable objections. Medicare — the government’s largest health program — is national. The uniformity allows economies of scale. If Medicare, hypothetically, varied by state, its already huge costs would almost certainly be higher. The advantages of using existing plans may also be exaggerated, because the ACA mandates that some benefits not routinely included in most plans — eye care and dentistry for children, and mental health and substance abuse — be covered.

The larger problem is that Sebelius doesn’t deal with exploding health care spending. She ignored the report from the Institute of Medicine, which recommended that she define the essential health benefits package in a way that puts a ceiling on its costs. Sebelius delegated that unpopular choice to the states.

They will face conflicting pressures. The more coverage they include, the greater the subsidies from the federal government for the poor and near-poor who qualify for aid. It will be tempting to exploit the open-ended nature of these subsidies. The catch is that the millions of workers whose coverage isn’t subsidized will see the squeeze on their wages intensify, while their employers may be put at a disadvantage with less generous states.

The reality is that states can’t cure uncontrolled health costs. It’s a national problem that only the national government can solve. That’s why Sebelius’ approach is dubious. If spending continues unchecked, the IOM warned, there will inevitably be future cutbacks in health insurance coverage as government costs and private premiums become increasingly oppressive and intolerable.

ObamaCare Abominations – By John Stossel

 

President Obama says his health care “reform” will be good for business.

Business has learned the truth.

Three successful businessmen explained to me how Obamacare is a reason that unemployment stays high. Its length and complexity make businessmen wary of expanding.

Mike Whalen, CEO of Heart of America Group, which runs hotels and restaurants, said that when he asked his company’s health insurance experts to summarize the impact of Obamacare, “the three of them kind of looked at each other and said, ‘We’ve gone to seminar after seminar, and, Mike, we can’t tell you.’ I think that just kind of sums up the uncertainty.”

Brad Anderson, CEO of Best Buy, added that Obamacare makes it impossible to achieve even basic certainty about future personnel costs:

“If I was trying to get you to fund a new business I had started and you asked me what my payroll was going to be three years from now per employee, if I went to the deepest specialist in the industry, he can’t tell me what it’s actually going to cost, let alone what I’m going to be responsible for.”

You would think a piece of legislation more than a thousand pages long would at least be clear about the specifics. But a lot of those pages say: “The secretary will determine …” That means the secretary of health and human services will announce the rules sometime in the future. How can a business make plans in such a fog?

John Allison, former CEO of BB&T, the 12th biggest bank in America, pointed out how Obamacare encourages employers not to insure their employees. Under the law, an employer would be fined for that. But the penalty at present — about $2,000 — is lower than the cost of a policy.

“What that means is in theory every company ought to dump their plan on the government plan and pay the penalty,” he said. “So you don’t really know what the cost is because it’s designed to fail.”

Of course, then every employee would turn to the government-subsidized health insurance. Maybe that was the central planners’ intention all along.

An owner of 12 IHOPS told me that he can’t expand his business because he can’t afford the burden of Obamacare. Many of his waitresses work part time or change jobs every few months. He hadn’t been insuring them, but Obamacare requires him to. He says he can’t make money paying a $2,000 penalty for every waitress, so he’s cancelled his plans to expand. It’s one more reason why job growth hasn’t picked up post-recession.

Of course, we were told that government health care would increase hiring. After all, European companies don’t have to pay for their employees’ health insurance. If every American employer paid the $2,000 penalty and their workers turned to government for insurance, American companies would be better able to compete with European ones. They might save $10,000 per employee.

That sounded good, but like so many politicians’ promises, it leaves out the hidden costs. When countries move to a government-funded system, taxes rise to crushing levels, as they have in Europe.

Whalen sees Obamacare as a crossing of the Rubicon.

“We’ve had an agreement in this country, kind of unwritten, for the last 50 years, that we would spend about 18 to 19 percent of GDP (gross domestic product) on the federal government. This is a tipping point. This takes us to 25 to 30 percent. And that money comes out of the private sector. That means fewer jobs. This is a game-changer.”

He means it’s a game-changer because of the cost. But the law’s impenetrable complication does almost as much damage. Robert Higgs of the Independent Institute is right: If you wonder why businesspeople are not investing and reviving the economy, the answer lies in all the question marks that Obamacare and other new regulations confront them with. Higgs calls this “regime uncertainty.” It’s also what prolonged the Great Depression.

No one who understands the nature of government as the wielder of force — as opposed to the peaceful persuasion of the free market — is surprised by this.

The Future of U.S. Health Care

Amid enormous pressure to cut costs, improve care and prepare for changes tied to the federal health care overhaul, major players in the industry are staking out new ground, often blurring the lines between businesses that have traditionally been separate, says the Wall Street Journal.
• Hospitals are bulking up into huge systems, merging with one another and building extensive new doctor work forces.
• They are exploring insurance-like setups, including direct approaches to employers that cut out the health-plan middleman.
• On the other side, insurers are buying health care providers, or seeking to work with them on new cooperative deals and payment models that share the risks of health coverage.
• And employers are starting to take a far more active role in their workers’ care.
Such shifts have been gathering force for a while, but the economic downturn has accelerated the push for efficiency. The federal legislation may unleash additional demand for health care once it fully takes effect in 2014. Even if the Supreme Court unwinds part of the law, the changes occurring now aren’t likely to stop because the pressure to reduce the price of health coverage won’t go away.
The trends have crystallized over the past year in a series of high-profile deals and quiet, under-the-radar developments. For a close look at what they mean, the Wall Street Journal provides snapshots of five people — a doctor, a hospital CEO, an insurance-company official, a human resources executive and a patient — on the front lines as much of the $2.6 trillion U.S. health care industry tries to remake itself.
Their stories show where health care is trying to go. The picture wouldn’t be complete without a reminder of where it has been. Many of these same efforts were attempted in the 1990s, and they often failed. Experts caution that there are many signs the current flurry of activity could result in the same problems, with less margin for error in today’s unforgiving economic environment.
Source: Anna Wilde Mathews, “The Future of U.S. Health Care,” Wall Street Journal, December 12, 2011.

Effects of Health Insurance Premium Tax on Small Businesses and their Employees

The Patient Protection and Affordable Care Act (PPACA) signed into law in 2010 included, as one of its revenue-raisers, a health insurance (HI) premium tax structured as an annual fee on insurers beginning in 2014.  The tax, which will obtain a preset amount of revenue each year, applies to any U.S. health insurance provider as they provide services to corporations and households.  However, many researchers, including analysts at the Congressional Budget Office, recognize that in response to the tax many health insurance providers will pass their costs onto their subscribers, thereby placing a significant burden on businesses that provide health insurance to their employees, says Michael J. Chow of the National Federation of Independent Business.

• The tax is intended to collect roughly $90 billion in revenue through 2020, but the pass-on effect will impose this cost on employers and employees, with the bill coming to $5,000 per family.
• Estimates predict the tax will raise the premiums for employer-sponsored insurance by 2 to 3 percent.
• Studies indicate that those businesses that do not self-insure will be hardest hit, and with 75 to 85 percent of establishments with fewer than 500 employees opting not to self-insure, it becomes clear that those hit hardest by this policy will be small businesses.
• With small businesses taking on this significant financial burden, the HI premium tax is forecast to reduce private sector employment by between 150,000 and 249,000 jobs in 2021, depending on the rate of inflation.

The tax burden created by PPACA will fall hardest on small businesses, which is a particularly troubling fact for several reasons.  First, small businesses (unlike their larger counterparts), lack the current savings and access to capital necessary to smoothly transition into the tax.  Therefore, the tax will fall hardest on those least ready to bear it.  Second, because small businesses constitute such a large portion of the workforce, policies that cause their downturn can negatively affect the economy as a whole.

Source: Michael J. Chow, “Effects of the PPACA Health Insurance Premium Tax on Small Businesses and Their Employees,” National Federation of Independent Business, November 9, 2011.

Insurers ‘terrified’ of Supeme Court ruling on healthcare reform law

By Julian Pecquet – 11/22/11 05:00 AM ET

 

The insurance industry is terrified that the Supreme Court will strike down the individual mandate to buy insurance next year while leaving the rest of the healthcare reform law intact.

For insurers, the death of the mandate alone — one of many plausible outcomes in the blockbuster case — is the nightmare scenario, one Republican healthcare lobbyist told The Hill. 

“They’re terrified they’re going to be left holding the bag,” the lobbyist said.

In arguing for the mandate, the insurance industry points to the experiences of eight states that tried and failed to reform their insurance markets without one in the 1990s. They say the law’s requirements are unworkable unless everyone in the country purchases insurance.

But that argument might not sway the Supreme Court, which must decide the “severability” of the mandate from the law, along with a host of other legal and constitutional issues.

In an amicus brief filed last month with the high court, the insurance industry said keeping the law’s reforms in place without a mandate would create “widespread … instability in the insurance market and, over time, would substantially reduce access to affordable coverage.”

“The difference between … a mandate-less [health law] with market reforms intact, and without some or many of those market reforms is night and day,” America’s Health Insurance Plans (AHIP) said in the brief.

Insurers’ best-case scenario, one insurance lobbyist said, would be for the court to uphold the mandate. Barring that, the industry would rather see the whole law crumble.

“I’m not sure there’s a solution there that’s acceptable other than, it’s all or nothing,” the source said.

The healthcare law imposes a number of new rules on insurers, most notably a ban on rejecting people with pre-existing conditions or charging them more. It also created a mandate for buying insurance that the architects of the law said was aimed at getting millions of young, healthy people into the system to spread costs and prevent people from waiting until they’re sick to get insurance.

But opponents of the law decry the requirement to buy insurance as a dramatic expansion of federal authority that flies in the face of the Constitution.

AHIP is expected to file a brief with the Supreme Court early next year that spells out its position on the severability of the mandate. Several lobbyists told The Hill that the group is keeping silent for now in order not to upset either party. 

On the surface, the Obama administration and the insurance industry seem to have staked out similar positions. Both have told the high court that the mandate works hand in hand with other parts of the law and said the justices need to consider the issue of severability. 

But lobbyists said it would eventually become clear that insurers are not in complete agreement with the Obama administration, which declared as far back as last November that “the vast majority of the healthcare law’s provisions are severable from those challenged by plaintiffs.”

The Republican lobbyist said insurers would “be basically declaring war on the administration” if they argued the law must either stand or fall in one piece.

It’s not clear the industry has a choice, however.

The law contains numerous market reforms — limiting how much older people can be charged, requiring family plans to cover young people up to age 26, mandating coverage of a broad package of “essential health benefits” in state-based exchanges — that the administration argues can survive without the mandate. 

But insurers say sticking to those rules without a mandate would drive up the cost of premiums while leaving insurance plans as the villain, since the law requires plans to justify rate hikes of 10 percent or more.

“It’s clear to me that from the administration’s perspective, even if the mandate goes away … you’ll still have the boogeyman of the plans, because the plans will have to react accordingly,” the insurance lobbyist said. “The law was supposed to keep premiums down, so the administration is just going to start hammering the plans.”

Democrats have already made clear they’re not going to go out on a limb for the industry.

“Worst-case scenario, the mandate falls. No Democrat is going to shed a tear for the insurance industry on that,” Sen. Sheldon Whitehouse (D-R.I.) told The Hill recently. “My view is if the mandate falls, the insurance industry has to go and get it restored state by state, where everybody concedes it’s totally legitimate.”

Lobbyists dismiss as ridiculous the notion that governors are going to push the massively unpopular mandate.

Republicans, meanwhile, are unlikely to seek to strike the law’s most popular reforms without repealing the whole law. 

That leaves the industry stuck in the middle, and hoping for a favorable outcome from Justice John Roberts and company.

“I think they don’t want to [anger] one [side] or the other right now,” the insurance lobbyist said. “We’re in a divided-government situation, and the administration still has the ability to come and sort of sit on AHIP’s head if they want to. And I wouldn’t put it past them if the opportunity arose.”

States Squirm over Health Exchanges

For state governments, the coming Supreme Court ruling on health reform isn’t an abstract argument about the U.S. Constitution.  It’s a highly practical question about whether, when and how to proceed with one of the health law’s most important and complicated pieces: setting up health insurance exchanges.  Already facing political strife over implementation of health reform, some states are wondering if they should sit tight on exchange decisions until the court rules.  However, the timetable for their decisions is tight, and could significantly complicated last-second efforts by state legislatures if they choose to wait, says Politico.

• June 2012: The Supreme Court is expected to rule on health care, yet this is also the final month during which states can petition the federal government for grant money to fund their efforts to create an exchange.
• January 2013: The federal government will assess each state’s progress towards creating an exchange and will begin creating federally-run exchanges for those states that are unlikely to have exchanges completed in time.
• January 2014: Each state must have a fully functioning exchange, whether run by the federal or state government.

Many state legislators want to ignore the timetable and continue to put off the establishment of exchanges until the Court has ruled — two Midwestern governors have already declared their states won’t set up an exchange until that time.  And that idea is growing popular among powerful state legislators vigorously opposed to health reform.

Irrespective of the outcome, the dynamic between states and the federal government in creating exchanges has espoused a new source of states’ rights tension.  Many conservative lawmakers are balking at the idea of a federally-run exchange, with Kansas going so far as to send back a $31 million grant to build one.  Regardless, it is clear that much will remain undecided until the Court rules.

Source: Jason Millman, “States Squirm over Health Exchanges,” Politico, November 28, 2011.

The Effects of the Affordable Care Act on Work and Marriage

Though the Patient Protection and Affordable Care Act (ACA) is most often discussed in terms of its effects on health insurance and medical care costs, the ACA will have numerous effects in various facets of American society.  Specifically, its financial and taxing system will create incentives that perhaps the authors of the bill did not foresee, including that the average American worker will be discouraged from marrying and working in a wide range of circumstances, says Diana Furchtgott-Roth, a senior fellow with the Manhattan Institute.

The primary difficulty with this system is that it stipulates an individual’s premium payment toward their health insurance based on household income, failing to account for the circumstances of the family structure.

• This negatively affects incentives to marry because marrying (and the shared household that customarily follows) serves to combine the spouses’ incomes.
• When this combination moves a couple into a higher bracket of income (measured as a percentage of the poverty line) than the two people were in prior to marriage, it reduces the government’s assistance in paying for their health care significantly.
• Thus, the ACA’s premium payment rate structure makes marriage financially costlier.

Additionally, the ACA’s structure furthers this problem by reducing incentives to work — especially in married couples.  Upon getting married couples will undoubtedly notice that their health insurance premium will become significantly more expensive.  The difficulty with this situation is that many will respond by attempting to make less money, thereby moving the newlywed couple back into a lower bracket.  This drive can manifest itself in several ways, whether they be that one of the spouses no longer attempts to get a promotion or leaves the workforce altogether.

Source: Diana Furchtgott-Roth, “The Effects of the Affordable Care Act on Work and Marriage,” Testimony before the Subcommittee on Health Care, District of Columbia, Census and the National Archives of the House Committee on Oversight and Government Reform, October 27, 2011.

Anti-tax advocates, deficit busters collide over repeal of health law subsidies

By Julian Pecquet – 11/08/11 07:25 PM ET

A Republican bid to cast the repeal of the health law’s insurance subsidies as a “common-sense” way to reduce the deficit risks running afoul of conservative tax foes.

Rep. Denny Rehberg (R-Mont.) last month introduced legislation to repeal the law’s insurance tax credits and its Medicaid expansion, saying it would reduce the deficit by $1.3 trillion over 10 years. The bill would allow Republicans to dismantle the healthcare reform law without inflating the deficit, but anti-tax crusader Grover Norquist is raising concerns that eliminating the insurance subsidies could violate his Americans for Tax Reform ”Taxpayer Protection Pledge.”

Americans for Tax Reform tax policy director Ryan Ellis met with Rehberg staffers Tuesday, The Hill has learned, and told them the group is waiting to see what the nonpartisan Congressional Budget Office has to say.

“ATR does not pre-judge legislation without a score, which we don’t have,” Ellis said via e-mail.

ATR favors repeal of the entire health law, even though it would add about $124 billion to the deficit over the next 10 years, because full repeal is a net tax cut.

Rehberg has been making the case to his colleagues that the law’s $777 billion in insurance subsidies over the next 10 years shouldn’t qualify as tax credits because they don’t start until 2014. He has corralled 15 cosponsors so far.

“Eliminating these new entitlements would be the quickest, simplest, and most common-sense way to meet [the goal of reducing the deficit] because these are new entitlement programs,” Rehberg writes in a Dear Colleague letter inviting lawmakers to sign on to his bill. “Not one dime in benefits has yet been paid to any person under any one of these new government programs. If these are removed now, not one person will give up a current benefit.”

In an emailed statement, Rehberg accuses Democrats of being disingenuous for labeling the insurance subsidies tax credits in the first place.

“Only in Washington, DC can new spending programs be passed off as tax credits,” Rehberg told The Hill. “President Obama’s health care bill isn’t about providing tax relief, and anyone who says otherwise simply isn’t being intellectually honest. Providing tax relief means putting more money in the pockets of the hardworking taxpayer. Under President Obama’s massive new entitlement program, the Treasury gives this money directly to the insurance company that is providing the insurance.”