Charade Continues with Obamacare’s HHS Mandate

In the Obama administration’s latest Friday info-dump, the Department of Health and Human Services (HHS) today released its final rule outlining a so-called accommodation for its coercive Obamacare mandate.

Like the administration’s multiple previous attempts to “fix” the mandate, this final rule doesn’t provide any workable or adequate solutions to the mandate’s trampling on Americans’ fundamental freedoms.

At the renewal of health-plan years, employers still will be forced to facilitate coverage of abortion-inducing drugs, contraception, and sterilization — regardless of religious or moral objection to one or more of these practices.

Since it introduced the HHS mandate in 2011, the Obama administration repeatedly has brought out the best in bureaucratic theatrics. Through press conference promises, campaign absurdities, and hundreds of pages of complicated regulatory jargon, the administration has relied on a campaign of smoke and mirrors to hide the mandate’s assault on religious liberty.

There’s only one problem: Courts aren’t buying the act. Today, more than 200 plaintiffs are involved in more than 60 lawsuits over the Obamacare mandate. Of the 28 lawsuits in which rulings have touched on the merits of the cases, federal judges have awarded 21 temporary halts because of the rule’s serious burden on the free exercise of Americans’ first freedom.

The administration’s latest regulatory antics to advance its anti-conscience mandate aren’t likely to get a standing ovation from federal judges either.

The so-called “accommodation” does not adequately address the mandate’s trampling on religious freedom and will still force religious non-profit organizations to abide by the mandate.

Only formal houses of worship and their integrated auxiliaries (a church-run soup kitchen, for example) are truly exempt. Countless religious employers — among them charities, hospitals, and schools — still will be forced to facilitate coverage of mandated drugs and services regardless of moral or religious objection.

These are the people who form the backbone of civil society. These are the people, motivated by deeply held beliefs, who get up every day to care for the sick, educate the next generation, and provide food, shelter and counseling for the most vulnerable Americans. Yet, these are the people whose religious liberty the administration refuses to adequately protect.

As a consolation prize for fitting the administration’s narrow requirements to receive an inadequate “accommodation,” HHS also announced that some of these Good Samaritans will have until January 1, 2014 to figure out how to get over their beliefs and get in line with the mandate.

For everyone else? The Obama administration remains unrelenting in its assault on fundamental freedoms.

Family businesses are given no protection whatsoever from the coercive mandate. Why? Because the administration argues that families who build businesses, create jobs, and grow the economy lose their right to religious freedom when they walk in the doors of their workplaces.

The HHS mandate forces these employers into an impossible situation: Violate their beliefs, face crippling fines of up to $100 per employee per day, or drop health care coverage altogether —  harming their employees and risking an annual fine of roughly $2,000 per employee per year after 2014.

Practically speaking, by the administration’s reasoning, faith is restricted to churches, synagogues, and mosques. Step outside the four walls of your home or place of worship and protection of your religious freedom ends.

Such picking and choosing of who gets to live out their faith in how they act and work isn’t consistent with the protection of religious freedom enshrined in our founding and defended in laws such as the federal Religious Freedom Restoration Act.

Try as it might to masquerade the mandate with today’s new rule, the Obama administration isn’t likely to convince the courts that it is serious about protecting our freedoms.

It could take the Supreme Court to ring down the curtain on the show, but this charade is in its final act.

— Sarah Torre is a policy analyst in the DeVos Center for Religion and Civil Society at the Heritage Foundation.

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Obamacare’s Big Question: What’s It Going To Cost Me?

Americans will be counting to determine whether health care costs change for them under the new law. | B.K. Bangash/AP

WASHINGTON — The cost of health coverage under Obamacare remains one the biggest mysteries of the nation’s health care overhaul.

But nagging cost questions will slowly be answered this summer as insurers and state officials set 2014 health plan rates for people who buy coverage outside of work or purchase it through small employers.

Those two coverage areas – the individual and small group markets – face the biggest rule and cost changes next year, when the main provisions of the Affordable Care Act finally kick in.

Early rate proposals around the country are a mix of steep hikes and modest increases. The numbers will change in coming months as state and federal regulators use their new authority under the health care law to review rate-hike requests of 10 percent or more and insurers vary their rate proposals based on competitors’ prices.

The new rates and rules for individual and small group coverage won’t directly affect roughly 84 percent of Americans with job-based health insurance – about 125 million people. But the changes will resonate throughout the health insurance universe and will go a long way toward shaping, and possibly changing, public opinion about Obamacare.

“This is a very, very big deal,” said Doug Holtz-Eakin, the president of the American Action Forum, a conservative research center. “The implications are enormous for the future of American health insurance, and its importance is not best measured by the fraction of people currently covered in the small group or individual markets.”

About 24.5 million people have small-group coverage through companies with 50 or fewer employees, according to federal estimates.

Just 15.4 million people purchase individual coverage, according to the nonpartisan Kaiser Family Foundation, a nonprofit health care research center. But that number will increase substantially next year, when premium tax credits become available to help people buy individual coverage through the new online insurance “exchanges” in October.

The individual, or "non-group," market is the most troubled sector. It’s known for high customer dissatisfaction and turnover, high coverage denial rates, lean benefits and premiums that are subject to frequent increases.

The health care law will engineer a complete makeover of individual coverage next year through a series of revisions that are designed to make newly issued policies more generous, accessible, affordable and transparent.

The new rules guarantee access to individual coverage regardless of current or past health problems, require each plan to cover at least 60 percent of costs and limit annual out-of-pocket costs such as co-payments and deductibles.

They also require beefed-up mandatory benefits, limit the amount that older plan members may be charged, outlaw annual benefit-spending limits and no longer allow insurers to vary rates based on a person’s gender, occupation or medical claims history.

Small group plans face the same changes, but they’re more likely to already meet some of the law’s new requirements, such as guaranteed access to coverage. So rate changes in small group plans won’t be as significant as those in the individual market, experts say.

The health law’s “individual mandate” requires all Americans to have health insurance beginning next year or face a fine. The law will bring insurers 25 million new customers over the next decade, according to federal estimates.

The law also requires that all individual and small-group health plans in 2014 cover 10 “essential health benefits,” including substance abuse services, pediatric dental and vision care, mental health treatment and other services often excluded from current policies.

Individual and small group policies that were in effect before the measure was signed into law in March 2010 – known as "grandfathered plans" – aren’t required to meet some of the new rules and consumer protections. Consumers in those plans who want the new protections will have to reinsure under new policies next year.

Premiums: Higher for some, lower for others

Experts say those improved benefits and the guaranteed availability of coverage will increase average premiums for healthy people in the individual market next year.

Those in poor health with the same coverage, however, very likely will see lower rates, on average, as their once-higher premium burden is redistributed among all enrollees. The law prohibits insurers from segregating higher- and lower-cost members into separate risk pools.

A provision that prohibits women from being charged more than men solely because of their sex will shift costs between men and women to eliminate gender variances in states that currently allow it.

New age-rating restrictions that limit older plan members from being charged more than three times as much as younger ones probably will increase individual and small-group premiums for young people and lower them for older people.

With or without the health care overhaul, most experts expect private health insurance premiums to increase next year because of the rising costs. Whether the new law exacerbates or moderates those increases depends on who’s answering the question, what states they’re talking about and which plan members would be affected.

“There are winners and losers in this,” said James O’Connor, a principal at Milliman, an actuarial consulting firm that deals with health care and insurance.

But in New Jersey, New York, Massachusetts, Vermont and, to a lesser extent, Maine, Washington and Oregon, those same individual-plan premiums might see little or no change and may even decline, O’Connor said. Coverage requirements and consumer protections in those states are already similar to what the new law requires.

Keep in mind that while the improvements in coverage will increase premiums for some, they also may lower out-of-pocket spending for deductibles, coinsurance and co-payments. Increased competition among insurers also will help keep premiums in check.

Rate shock

The prospect of higher premiums has fueled concerns about “rate shock,” in which large numbers of young people – who most likely face the largest premium increases – forgo individual coverage altogether and just pay the fine for violating the individual mandate. If that happens, rates would climb for everyone, experts say.

But tax credits available to individuals and families who earn 133 percent to 400 percent of the federal poverty level will help offset the higher premiums for individual coverage. In 2013, the tax credits would go to individuals who earn roughly $15,300 to $46,000 or to four-person families that earn roughly $31,300 to $94,200.

About two-thirds of people age 30 and under who have no coverage or are enrolled in individual coverage and who won’t qualify for Medicaid – the people most likely to face rate shock – would be eligible, according to estimates by Avalere Health, a health care advisory firm

The tax credits are available only for those who get coverage through the new state insurance exchanges. The amount of the tax credit – which is based on income – is revealed after submitting an online application. The money is sent directly to the applicant’s insurance company to be applied to the premiums.

Young adults who don’t qualify for the tax credit but can’t afford individual coverage will have access to “catastrophic plans,” with lower premiums.

Small group coverage

Individual circumstances will determine whether premiums rise or fall next year for people with small-group or small-employer coverage.

“Groups that are made up of younger, healthy males will tend to have higher rate increases than those groups who are unhealthy or are comprised mainly of older people,” O’Connor said.

And low-cost, small-group plans will see the greatest premium increases, “while those with the greatest decreases will be the high-cost groups,” according to recent congressional testimony by Cori Uccello, a senior health fellow at the American Academy of Actuaries.

The health care law requires that deductibles for small-group plans in 2014 not exceed $2,000 for individuals and $4,000 for families.

While people with individual policies and workers with small-group coverage will experience the biggest cost changes next year, the 125 million other Americans with job-based insurance won’t escape unscathed.

The law imposes taxes on the insurance, pharmaceutical and medical device industries to help pay for expanded Medicaid coverage and premium subsidies. Because they’re nondeductible, those taxes, or a portion of them, very likely will be passed on to all consumers with work-based coverage in the form of higher insurance premiums.

Other factors that will affect premiums next year include geographic cost differences, whether large swaths of employers decide to drop coverage, and the demographics and health status of people who do drop job-based insurance for individual coverage.

The wide range of possibilities underscores the difficulty insurers face in trying to synthesize the new rules, predict their effects and price their products competitively and accurately.

Earl Pomeroy, a former North Dakota Democratic congressman and state insurance commissioner, said insurance companies were facing “the most complicated rating challenge” that he’d ever seen.

“It involves the great unknown,” Pomeroy said. “New systems, new market structures and behavior responses from the population that will be impossible to predict."

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Pediatric Research Bill: Obamacare’s Road to Rationing?

Later this month, the House of Representatives could consider legislation regarding pediatric research.[1] Legislation regarding this issue (H.R. 1724) was first introduced in April, and a new version of the bill (H.R. 2019) was introduced in May.

Although largely similar, H.R. 1724 would require the director of the National Institutes of Health (NIH) to provide a justification for any existing grants studying health economics, and would prohibit new grants until “a federal law has been enacted authorizing the National Institutes of Health to use funding specifically for health economics research.”[2] Press reports indicate that H.R. 2019 excludes the restrictions included in H.R. 1724 “in order to please Democrats who favor the research.”[3]

This is a mistake. The House should ensure that H.R. 1724’s proposed restrictions on health economics research remain in any NIH-related legislation that comes to the House floor. To do otherwise would provide tacit approval to Obamacare’s road to government-rationed health care.

Proposed Restriction a Necessary Protection

The provision omitted from H.R. 2019 would have instituted an important and necessary protection on taxpayer-funded research on cost-effectiveness in health care. In recent years, the federal government has funded numerous such studies. For instance, a June 2011 Government Accountability Office report examining projects funded by the “stimulus” highlighted NIH grants studying the cost-effectiveness of various medical treatments, including:

“A Comprehensive Model to Assess the Cost-Effectiveness of Patient Navigation,”“Cost-Effectiveness of Hormonal Therapy for Clinically Localized Prostate Cancer;”“Clinical and Cost-Effectiveness of Biologics in Rheumatoid Arthritis,” and“Cost-Effectiveness of HIV-Related Mental Health Interventions.”[4]

Liberals Favor Cost-Effectiveness Research

Setting aside the wisdom of using taxpayer funds to examine the cost-effectiveness of various treatments, such research could eventually be used to deny patients access to certain kinds of care. Quotes from key policymakers reveal how some would use cost-effectiveness research as a way for government bureaucrats to block access to treatments that are deemed too costly:

Former Senator Tom Daschle (D–SD), President Obama’s first choice for Secretary of Health and Human Services, wrote in 2008 that “we won’t be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost effective. That means taking a harder look at the real costs and benefits of new drugs and procedures.”[5]In a 2009 interview with The New York Times, President Obama argued that “the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here.… There is going to have to be a very difficult democratic conversation that takes place.”[6]Former Medicare Administrator Dr. Donald Berwick, in his infamous 2009 interview, strongly argued in favor of taxpayer-funded cost-effectiveness research when stating that “the decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”[7]

Lawmakers have already expressed their desire to use cost-effectiveness research to restrict access to certain treatments. A report prepared by the House Appropriations Committee in 2009, discussing “stimulus” funding for the types of projects highlighted above, noted that thanks to the research funding, “those items, procedures, and interventions that are most effective to prevent, control, and treat health conditions will be utilized, while those that are found to be less effective and in some cases more expensive will no longer be prescribed.”[8]

Road to Rationing

Although research comparing the relative merits and costs of medical treatments may sound appealing, past experience has demonstrated that such research can, and often is, used as a blunt tool by governments to restrict access to certain kinds of care. At a time when genetic advances have opened the door to personalized medical treatments, Obamacare has moved health policy in the opposite direction, expanding the federal bureaucracy in an attempt to micromanage the health care system.[9]

Imposing the restrictions on cost-effectiveness research included in H.R. 1724 would represent a good first step in restoring the balance between federal bureaucrats and patients.

—Chris Jacobs is Senior Policy Analyst in the Center for Health Policy Studies at The Heritage Foundation.

[2]The Kids First Research Act of 2013, H.R. 1724, § 4.

[3]Newhauser, “Mindful of Previous Defeat.”

[4]U.S. Government Accountability Office, HHS Research Awards: Use of Recovery Act and Patient Protection and Affordable Care Act Funds for Comparative Effectiveness Research, GAO-11-712R, June 14, 2011, http://www.gao.gov/new.items/d11712r.pdf (accessed June 13, 2013).

[5]Tom Daschle, Scott Greenberger, and Jeanne Lambrew, Critical: What We Can Do about the Health Care Crisis (New York: Thomas Dunne Books, 2008), pp. 172–173.

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Obamacare's Rate Shock Hits The Buckeye State

Ohio Department of Insurance officials announced last week that average premiums in the Buckeye state would soar 88 percent once President Obama's health care law kicks in. (Photo: Thinkstock)

Ohio Department of Insurance officials announced last week that average premiums in the Buckeye state would soar 88 percent once President Obama's health care law kicks in. The news added fuel to an already raging debate over Obamacare's effect on insurance costs.

Ohio's insurance department disclosed that a total of 14 insurance companies had proposed rates on 214 plans to be offered through the federally run insurance exchange set to open on Oct. 1 and begin providing benefits in January.

"The department's initial analysis of the proposed rates show consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014," said Ohio's Lt. Gov. Mary Taylor. Specifically, the study showed that the average monthly cost of insurance would rise from $223 to $420.

Supporters of Obamacare were quick to dismiss the news, noting that Taylor was a Republican and arguing that the study was misleading. The New Republic's Jonathan Cohn, one of the most prolific defenders of the health care law, insisted that it wasn't fair to compare average premiums, because that doesn't account for differences in the quality of the plans.

For instance, he described that under the current system, one of the cheapest bare bones plans in Ohio costs just $29 per month, but could stick enrollees with annual out of pocket expenses as high as $25,000. Under Obamacare, out of pocket costs are capped at $6,350 for the cheapest "bronze" level plan.

But in his analysis, Cohn is doing what he often accuses critics of Obamacare of doing -- cherry-picking a plan that results in the most outrageous number to demonstrate a point -- in this case, $25,000 out of pocket costs. But even if we give up the idea of comparing average premiums, the announced Ohio rates don't present a pretty picture for Obamacare.

Ohio regulators also announced that, "Projected costs from the companies for providing coverage for the required essential health benefits ranged from $282.51 to $577.40 for individual health insurance plans." That means that the cheapest plan available under Obamacare in Ohio will be $282.51.

But according to a search of eHealthInsurance.com, a 26 year-old living in Cleveland, Ohio, could currently purchase an Anthem SmartSense Plus plan for $89.45 per month. That's less than a third of the cost of the lowest Obamacare rate, as reported by Ohio regulators, and the annual out of pocket expenses for the Anthem plan are $6,000 -- which is less than Obamacare's bronze option.

In fact, under the current system, the same hypothetical 26 year-old could purchase a Medical Mutual plan with a $2,500 annual out of pocket limit, for $188.41 per month -- still significantly cheaper than the least expensive Obamacare option.

Obamacare naturally drives up the cost of insurance because it requires insurers to cover those with pre-existing conditions and mandates that insurers offer a wide array of benefits, whether or not consumers want them. It also institutes a tax on health insurance.

To his credit, Cohn eventually acknowledges that, "Obamacare's requirements really will make insurance more expensive relative to what it would cost otherwise" meaning that some people will end up paying more.

In general, if the law works as intended, older and sicker Americans who qualify for subsidies will find it easier to obtain affordable health coverage, but younger Americans with lower health care costs who do not qualify for subsidies will end up paying more.

Through the individual mandate, the federal government is hoping to coax enough healthy Americans into buying much more insurance than they're likely to need, thus providing a windfall of profits to private insurers, who can then afford to cover sicker Americans.

Philip Klein (pklein@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @philipaklein.

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Oregon Study Throws a Stop Sign in Front of ObamaCare’s Medicaid Expansion

Today, the nation’s top health economists released a study that throws a huge “STOP” sign in front of ObamaCare’s Medicaid expansion.

The Oregon Health Insurance Experiment, or OHIE, may be the most important study ever conducted on health insurance. Oregon officials randomly assigned thousands of low-income Medicaid applicants – basically, the most vulnerable portion of the group that would receive coverage under ObamaCare’s Medicaid expansion – either to receive Medicaid coverage, or nothing. Health economists then compared the people who got Medicaid to the people who didn’t. The OHIE is the only randomized, controlled study ever conducted on the effects of having health insurance versus no health insurance. Randomized, controlled studies are the gold standard of such research.

Consistent with lackluster results from the first year, the OHIE’s second-year results found no evidence that Medicaid improves the physical health of enrollees. There were some modest improvements in depression and financial strain–but it is likely those gains could be achieved at a much lower cost than through an extremely expensive program like Medicaid. Here are the study’s results and conclusions:

We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression [by 30 percent], increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures…

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.

As one of the study’s authors explained to me, it did not find any effect on mortality because the sample size is too small. Mortality rates among the targeted population – able-bodied adults 19-64 below 100 percent of poverty who aren’t already eligible for government health insurance programs – are already very low. So even if expanding Medicaid reduces mortality among this group, and there is ample room for doubt, the effect would be so small that this study would be unable to detect it. That too is reason not to implement the Medicaid expansion. This is not a population that is going to start dying in droves if states decline to participate.

There is no way to spin these results as anything but a rebuke to those who are pushing states to expand Medicaid. The Obama administration has been trying to convince states to throw more than a trillion additional taxpayer dollars at Medicaid by participating in the expansion, when the best-designed research available cannot find any evidence that it improves the physical health of enrollees. The OHIE even studied the most vulnerable part of the Medicaid-expansion population – those below 100 percent of the federal poverty level – yet still found no improvements in physical health.

If Medicaid partisans are still determined to do something, the only responsible route is to launch similar experiments in other states, with an even larger sample size, to determine if there is anything the OHIE might have missed. Or they could design smaller, lower-cost, more targeted efforts to reduce depression and financial strain among the poor. (I propose deregulating health care.) This study shows there is absolutely no warrant to expand Medicaid at all.

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Uh-Oh! Building ObamaCare’s Health Exchanges Has Already Cost Double the Expected Amount

Credit: WhiteHouse.govHere’s another ominous sign for ObamaCare’s future: The Department of Health and Human Services admitted yesterday that setting up the law has cost twice as much as expected so far. And you can't really blame Republican opposition for the overrun: That’s just accounting for the cost of building exchanges in states that said they want to run them.

Here’s The Hill with the report:

The Health and Human Services Department (HHS) said in budget documents Wednesday that it expects to spend $4.4 billion by the end of this year on grants to help states set up new insurance exchanges. HHS had estimated last year that the grants would cost $2 billion.

The department also is asking Congress for another $1.5 billion to help set up federally run exchanges in states that do not establish their own.

Just because HHS is asking for the money, of course, doesn’t mean it’s going to get it. So if not, then what? The HHS has promised it will, er, do something—something!—to make it all work. But it won’t say what. At least not yet:

HHS Assistant Secretary for Financial Resources Ellen Murray punted Wednesday when asked about the consequences if Congress also denies the new request.

The department is "determined to make them work," she said of the exchanges.

A big chunk of the grant money doled out so far went to California. It has reportedly received $909 million in federal funding to build its exchange. But even with the hefty funding it's not going smoothly. The state's insurance regulators have warned that residents should expect "rate and market disruption" when the state's health insurance exchange opens. 

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Obamacare's Solyndra? Oversight Panel Expands Co-Ops Probe, Renews Document Demand To HHS

Citing worries that "taxpayers will lose a significant amount of the money," House Committee on Oversight and Government Reform officials are significantly expanding their probe of the $2 billion Obamacare loan program to fund new health insurance co-operatives to compete with established private-sector firms in 24 states.

Committee Chairman Rep. Darrell Issa, R-Calif., requested a lengthy list of documents in a March 25, 2013, letter to officials with eight of the groups starting co-ops. Together, the eight have received more than $657 million in low-interest loans that must be repaid at a future date.

The requested documents include details of how they've spent the federal funds to date and copies of "all documents and communications" their employees have exchanged with Obama administration officials in the White House and the U.S. Department of Health and Human Services.

Also signing the letter were subcommittee Chairmen Rep. Jim Jordan, R-Ohio, and Rep. James Lankford, R-Okla.

The co-op program is overseen by the Center for Consumer Information and Insurance Oversight in HHS.

The eight new co-op groups under the committee's focus are CoOportunity Health of Iowa; Maine Community Health Options; Louisiana Health Cooperative; Illinois-based Land of Lincoln Health Inc.; Kentucky Health Cooperative; Evergreen Health Cooperative in Maryland; Montana Health Cooperative; and HealthyCT in Connecticut.

The committee previously contacted Hospitality Health, based in Nevada and FreeLancers Insurance Co., which is establishing co-ops in New York, New Jersey and Oregon, bringing the total of co-ops being reviewed to 13 of the 24 to be established. The 10 groups establishing the 13 new co-ops have received $1.06 billion in federal loans.

In a second March 25 letter, the oversight committee leaders sternly reminded HHS Secretary Kathleen Sebelius that it had yet to receive any of the documents about the Obamacare co-op program requested from her last October in a letter signed by Issa and Rep. Trey Gowdy, R-S.C., chairman of the oversight panel's Subcommittee on Health Care, the District of Columbia, Census and the National Archives.

A Feb. 12, 2013, response signed by Marilyn Tavenner, acting administrator of the Centers for Medicare and Medicaid Services, or CMS, "took nearly four months to prepare" but "failed to provide any of the information the committee requested."

"We remain concerned that taxpayers will lose a significant amount of the money awarded through the co-op program," Issa, Lankford and Jordan said in the letter to Sebelius.

"According to the Office of Management and Budget, taxpayer losses are projected at 43.2 percent for the loans given out through the co-op program," they said, noting that the "mean average taxpayer loss for other non-educational loans made as part of the federal government's Direct Loan Program is 8.3 percent."

Sebelius was given an April 8, 2013, deadline and was told that "if the department does not produce the requested documents by this time, we will be forced to consider use of the compulsory process."

The compulsory process would include issuing a congressional subpoena, which the Obama administration would then have to decide whether to comply with the committee's request or challenge it in federal court.

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ObamaCare's California 'Home Run' Still A Strikeout For Young, Healthy

Under ObamaCare, modest-wage earners face a choice: Pay premiums they probably can't afford or pay a bit less for policies with deductibles so high it makes them queasy.

The good news is that the initial ObamaCare premiums for the California market, heralded by state officials last week as "a home run for consumers," do appear to be somewhat lower than outside actuaries had warned.

The bad news is that the design of ObamaCare's subsidies still threatens to keep the young and healthy uninsured, driving up premiums for everybody else.

Consider the options for a 20-something single individual who earns 250% of the poverty level, or about $29,000.

Under the cheapest silver-level plan, that individual would have to pay $181 per month (after a subsidy of $34) on after-tax monthly income of about $2,050.

Though the silver plan is meant to be affordable, it's hard to see how such an individual could spare such a sum after rent, food and gas, medical bills and other necessities. Yes, medical bills. That's because the standard silver plan in California comes with a $2,000 deductible.

The law's crafters were smart enough to realize that not everyone will find a silver plan affordable, so they created the bronze option. For a bit less, $137 a month (after subsidies), a 21-year-old can get bronze coverage. Yet while the price is more realistic, the deductible of $5,000 may be so high that young people wonder whether the price is worth the sacrifice.

More good news: Those under 30 will have yet one more option, buying catastrophic coverage. These policies come with an even higher deductible of $6,400, but they are less expensive.

But here's the final piece of bad news: Because such policies come with no federal subsidies, workers earning 250% of the poverty level would pay the exact same $137 a month out of pocket for the cheapest catastrophic coverage as they would for the cheapest bronze-level plan.

That, in a nutshell, is the biggest problem with ObamaCare's subsidy structure. There are no subsidies for young people to buy the coverage that they really need and can possibly afford.

As a result, many may opt out and be stuck paying a tax penalty.

Andrew Malcom is on vacation.

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ObamaCare's Free Preventive Services Aren't Free

Credit: National Institutes of Health Library / Foter.com / CC BY-NC-SA

As public support for ObamaCare slumps into a post-election decline, the Department of Health and Human Services is trying to convince people that they ought to like the law by noting that it’s already given free stuff to a whole bunch of people. An HHS news release this week brags that the “Affordable Care Act extended free preventive care to 71 million Americans with private health insurance” as well as 34 million Medicare Advantage beneficiaries—free benefits the agency says are giving Americans “more value” for their health dollars.

The problem is that the benefits in question are neither “free” nor likely to produce valuable savings. ObamaCare’s rules eliminated individual cost-sharing for a number of preventive services, but, as the administration admitted a few months after the law passed, at the cost of higher insurance premiums on average. It’s like a gym that suddenly makes all the drinks and snacks at its café “free”—but raises the price of membership. It’s not free. You’re just paying in a different way.

It’s not cost-saving as public policy either, despite initial Democratic hopes that it would be. In fact, most evidence shows that it increases health spending. That’s because eliminating cost-sharing increases utilization of preventive services; when there’s no immediate price to pay for using a service, people tend to use more of it. And as the Congressional Budget Office reported back in 2009, “the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall." In general, the CBO noted, researchers have found that “the added costs of widespread use of preventive services tend to exceed the savings from averted illness.”

For preventive services to have the largest benefits relative to costs, the CBO explained, the prevention efforts need to be narrowly targeted at only a few people who are likely to develop a particular ailment. The HHS claim that 105 million people took advantage of ObamaCare’s “free” services suggests that there was not much targeting involved. Instead, the law took a broad-brush approach that likely raised insurance premiums for many and perhaps most of the individuals affected. But I suppose “Affordable Care Act shifts costs and raises premiums for 71 million Americans with private health insurance” doesn’t make quite as good a press release.

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Obamacare’s Essential Benefits Regulation Creates Disparities Among States

The Department of Health and Human Services (HHS) has issued final rules for Obamacare’s essential health benefits (EHB) package, setting up yet another new source of conflict over Obamacare, this time among the states.[1]

HHS has adopted a “state benchmark plan” approach for setting the EHB package. The result of this decision is that the EHB package will now vary from state to state. While Administration officials tout this approach as offering less market disruption and more flexibility, it will also have the effect that some states will receive more in Obamacare subsidies than others.

This is because, in trying to implement one part of Obamacare, the Administration is tripping over another part of the law.

More State Benefit Mandates Equal More Federal Subsidies

Beginning in 2014, Obamacare requires all non-grandfathered health insurance plans in the individual and small group markets to cover the EHB package. The law also says that if a state imposes benefit mandates beyond those required by the federal EHB package, then the state must pay the extra cost for subsidizing those extra benefits in the exchange.

However, the HHS regulations implementing the EHB package specify that, at least for the first two years, the EHB package in each state will be determined by a benchmark plan, which for most states will be their largest small group plan.[2] Since those benchmark plans already exist and they already cover state-mandated benefits, those state benefit mandates will now be part of the “essential benefits” that insurers will have to cover. That, in turn, means that when insurers offer their policies in the exchanges, the cost of those state benefit mandates will be paid for with federal subsidies.

Of course, this design gives every state an incentive to add more benefit mandates, knowing that federal taxpayers will be picking up most of the tab. To prevent that, HHS drew a line in the EHB regulation that essentially “grandfathers” all state benefit mandates enacted before December 31, 2011. That means states will pay the additional cost only for any state benefit mandates enacted after 2011.

The effect will be disparities among states, as the package of “essential” benefits will be more generous in some states than in others. Of course, those differences will also be reflected in plan premiums.

Yet the amount paid by those receiving Obamacare’s exchange subsidies will not vary by state—despite individuals in one state receiving more generous (and more costly) coverage than individuals in another state. The reason is that the Obamacare subsidies are based on the recipient’s income, not the cost of the available coverage.[3]

The way the Obamacare exchange subsidies work is that the recipient pays no more than a specified percentage of income for coverage, with the rest of the premium picked up by federal taxpayers. The subsidies are tied to the second-lowest-cost silver plan (the reference plan) in the state’s exchange and will be set on a sliding scale.

For example, a couple at 250 percent of the federal poverty level (annual income of $37,825) will pay no more than 8.05 percent of their income—$2,383 (or $198 a month)—in premiums for the reference plan. That will hold true regardless of whether they live in a state where the premium for the reference plan is $10,000, one where it is $15,000, or one where it is $20,000.

Thus, in a state with a more generous—and therefore more expensive—EHB package, there will be a greater federal subsidization of premiums by Obamacare, creating inequalities among states. While it is true that in many cases the differences may be modest, those differences could be significant in cases where states require coverage for expensive treatments.

For example, the EHB package will require coverage for autism spectrum disorders in 24 states and for “applied behavior analysis based therapies” for autism spectrum disorders in another four states. However, in the remaining 22 states, those services will not be part of the required essential benefits. Similarly, the required essential benefit coverage will include bariatric surgery in four states, bone marrow transplant in five states, chiropractic care in 10 states, infertility treatments in nine states, and private-duty nursing in two states.[4]

EHB Controversy Exacerbated

Beyond cost, some of these benefit mandates are controversial for other reasons as well. For example, there are questions about the long-term value of bariatric surgery for obesity, particularly relative to patient risks. In the case of autism and related conditions, given that treatments consist principally of educational and behavioral therapies, it can reasonably be argued that they should be funded through social service programs rather than through acute care health insurance. In the case of infertility treatments, many individuals consider some of the procedures used to be immoral and thus strongly object to being forced to subsidize them through their health insurance.

Yet the Administration’s EHB regulation now effectively deems these and other controversial treatments to be “essential”—but only in those states that previously mandated them. Furthermore, the Administration’s approach exacerbates existing mandated benefit controversies by introducing the new dynamic of federal funding discrimination derived from a policy that freezes in place prior disparities among the states.

To understand how that could spark new conflicts over Obamacare, consider the example of infertility treatments. Infertility treatments will be part of the required essential benefit coverage in Illinois but not in any of the adjoining states of Indiana, Wisconsin, Iowa, Missouri, or Kentucky. If lawmakers in one or more of those adjoining states were to now mandate coverage for infertility treatment, their state’s taxpayers would have to cover the extra cost of the exchange subsidies. Yet in Illinois federal taxpayers will pick up the extra subsidy cost.

More Obamacare Consequences

Thus, the effect of this policy is to reward states that previously enacted excessive benefit mandates (driving up the cost of health insurance) while penalizing states that took a more restrained approach in the past (keeping health insurance more affordable).

It also means that if a hypothetical couple in the above example lives in one of the five states adjoining Illinois and wants coverage for infertility treatments, they can get it with federal subsidies by moving across the state line to Illinois.

Of course, HHS could eliminate these disparities by crafting a single national EHB package—which is what the architects of Obamacare intended and expected. Yet doing that would shift special interest lobbying over benefits from state capitals to Washington while also exacerbating other problems with Obamacare.

For example, Obamacare’s insurance rating rules will increase premiums. Yet a national EHB package would raise premiums even more in states that currently have fewer benefit mandates. Also, Obamacare’s “public utility” approach to regulating insurers will drive industry consolidation, resulting over time in fewer and larger health insurers.[5] A national EHB package would reinforce and accelerate that trend by further limiting the ability of insurers to differentiate themselves from their competitors.

Contrasting the coverage of prescription drugs in the Federal Employee Health Benefits Program (FEHBP) versus in Medicare illustrates why letting insurers design benefit packages in response to consumer demand and innovations in medical treatment is preferable to government benefit setting.

Since its inception in 1960, the FEHBP has been a very competitive market, with participating insurers allowed wide latitude in designing their benefit packages. Over time, prescription drug coverage in FEHBP plans became widespread and increasingly sophisticated in response to consumer demands and a changing pharmaceutical market. In contrast, adding drug coverage to Medicare literally took an act of Congress and occurred only in 2003.

Fundamental Error

Believing that politicians and bureaucrats will make better decisions than individuals and business is a fundamental error underlying the essential benefits and numerous other provisions in Obamacare.

There is simply no good solution to these problems short of Congress reversing its policy mistake of granting HHS benefit-setting authority. The better policy is to let consumer demand in a competitive market drive insurance benefit design.

—Edmund F. Haislmaier is Senior Research Fellow and Alyene Senger is Research Assistant in the Center for Health Policy Studies at The Heritage Foundation.

[2]Forty-one states and the District of Columbia plan to use their largest small group plan as the benchmark. See Appendix A of the final rule for the complete list.

[3]Patient Protection and Affordable Care Act of 2010, Public Law 111–148, and Health Care and Education Reconciliation Act of 2010, Public Law 111–152, Sec. 1401.

[4]Each state’s EHB benchmark plan and list of benefits can be found here: U.S. Department of Health and Human Services, Center for Consumer Information and Insurance Oversight, “Additional Information on Essential Health Benefits Benchmark Plans,” http://cciio.cms.gov/resources/data/ehb.html (accessed April 2, 2013).

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Oregon Study Throws a Stop Sign in Front of ObamaCare’s Medicaid Expansion

Today, the nation’s top health economists released a study that throws a huge “STOP” sign in front of ObamaCare’s Medicaid expansion.

The Oregon Health Insurance Experiment, or OHIE, may be the most important study ever conducted on health insurance. Oregon officials randomly assigned thousands of low-income Medicaid applicants – basically, the most vulnerable portion of the group that would receive coverage under ObamaCare’s Medicaid expansion – either to receive Medicaid coverage, or nothing. Health economists then compared the people who got Medicaid to the people who didn’t. The OHIE is the only randomized, controlled study ever conducted on the effects of having health insurance versus no health insurance. Randomized, controlled studies are the gold standard of such research.

Consistent with lackluster results from the first year, the OHIE’s second-year results found no evidence that Medicaid improves the physical health of enrollees. There were some modest improvements in depression and financial strain–but it is likely those gains could be achieved at a much lower cost than through an extremely expensive program like Medicaid. Here are the study’s results and conclusions:

We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression [by 30 percent], increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures…

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.

As one of the study’s authors explained to me, it did not find any effect on mortality because the sample size is too small. Mortality rates among the targeted population – able-bodied adults 19-64 below 100 percent of poverty who aren’t already eligible for government health insurance programs – are already very low. So even if expanding Medicaid reduces mortality among this group, and there is ample room for doubt, the effect would be so small that this study would be unable to detect it. That too is reason not to implement the Medicaid expansion. This is not a population that is going to start dying in droves if states decline to participate.

There is no way to spin these results as anything but a rebuke to those who are pushing states to expand Medicaid. The Obama administration has been trying to convince states to throw more than a trillion additional taxpayer dollars at Medicaid by participating in the expansion, when the best-designed research available cannot find any evidence that it improves the physical health of enrollees. The OHIE even studied the most vulnerable part of the Medicaid-expansion population – those below 100 percent of the federal poverty level – yet still found no improvements in physical health.

If Medicaid partisans are still determined to do something, the only responsible route is to launch similar experiments in other states, with an even larger sample size, to determine if there is anything the OHIE might have missed. Or they could design smaller, lower-cost, more targeted efforts to reduce depression and financial strain among the poor. (I propose deregulating health care.) This study shows there is absolutely no warrant to expand Medicaid at all.

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The Difficult Policy Choices of ObamaCare's Medicaid Expansion

credit: Gage Skidmore / Foter.com / CC BY-SAFlorida Governor Rick Scott’s decision to participate in ObamaCare’s Medicaid expansion reveals the tough politics of that choice: Scott is not only a Republican but a vocal critic of the health law who spent millions of his own money opposing its passage and vowed that his state never participate in any part of it. Yet last month, after facing pressure from hospital groups and others, he decided to go ahead with an expansion of Medicaid under the law anyway. But now he’s getting pushback on that decision: committees in both houses of the Florida legislature have either delayed or rejected his Medicaid proposal.

But it’s more than tough politics. It’s also tough policy. A new paper from Charles Blahous, one of Medicare and Medicaid’s public trustees and a senior research fellow at the Mercatus Center, sheds light on some of the difficult choices that states face in deciding whether or not to expand Medicaid.

Backers of the law have argued that the decision to expand Medicaid should be a no-brainer: The federal government, after all, is paying for 100 percent of the expansion through 2016, and then declining 90 percent by 2020. It’s free money, the argument goes. Why would states turn it down?

For one thing, expanding Medicaid isn’t cost free to states—even during the initial years when the federal government is paying for 100 percent of the cost of the coverage expansion. One reason is what’s known as the “woodwork effect”: Yes, the federal government will initially pay 100 percent of the cost of covering the newly eligible. But there are millions of Americans who were already eligible for Medicaid programs before ObamaCare passed—and yet weren’t enrolled. Thanks to the mandate and the enrollment push, many of those people will become covered following the expansion. And states will have to cover the tab for all of the previously eligible.

More broadly, even if the cost of participating in the expansion is low, it has to be considered in the context of the substantial increase in Medicaid spending that’s projected over the next few years—and the already high share of state budgets the program accounts for. As Blahous points out, the cost of Medicaid is equal to an average of about 24 percent of state budgets, and the bipartisan State Budget Crisis Task Force has warned that it is already “crowding out other needs.”

The Centers for Medicare and Medicaid Services, meanwhile, currently expects the state portion of the cost of Medicaid to grow by 158 percent over the next decade, should all states opt in to the expansion.

Credit: Charles Blahous

The federal government will be spending a lot more too. Here’s what that looks like:

Credit: Charles Blahous

The cost of the expansion also has to be considered in the context of the overall federal financial trajectory, which, needless to say, isn’t good. “Given the current state of federal finances,” Blahous argues, “it is unrealistic to assume that the federal government will make all future Medicaid payments now scheduled under law.” Shifting more costs to the states in the future, he says, is “virtually assured.”

Credit: WhiteHouse.govYou can already see this on the horizon. The Obama administration has implicitly admitted that the program’s costs are going to have to be reduced somehow: For the last few years, it’s been fighting a legal battle to ensure that states have an absolute right to cut the program’s reimbursement rates as low as they wish. The Obama administration’s position is that “there is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs.” This is in the health program that notoriously pays the lowest reimbursement rates in the nation.

For states, it’s the medium to long-term fiscal picture that presents the biggest worry. The long-term politics of federal budgeting make short-term state policy choices rather dicey: Who knows what Congress will do as the cost of government health programs rise and the already bad budget situation grows worse? Cost shifting to states may not be inevitable, but it's quite likely, which means that even if expanding Medicaid is essentially free now, it almost certainly won’t be in the future. 

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GOP Governor Turns To Faith To Explain Why He Supports Obamacare’s Medicaid Expansion

Ohio Governor John Kasich.

Ohio Gov. John Kasich is one of eight Republican governors who have so far said their state will participate in Obamacare’s Medicaid expansion. But as the Huffington Post points out, Kasich stands apart in one respect: Of those Republican governors, he is so far the only one to explicitly tie his decision to the values of his religious faith.

While he remains opposed to Obamacare as a whole, the Ohio governor indicated his support for the Medicaid expansion in his annual State of the State remarks last week, pointing to the public health insurance program’s potential to help care for the most vulnerable residents in his state:

The Bible runs [Kasich's] life “not just on Sunday, but just about every day,” he said in his annual State of the State address Tuesday.

“And I’ve got to tell you, I can’t look at the disabled, I can’t look at the poor, I can’t look at the mentally ill, I can’t look at the addicted and think we ought to ignore them,” he told the audience of about 1,700 lawmakers, state officials and other guests. […]

“Put it in your family,” Kasich said. “Put somebody that is in your family who becomes the wayward child. And they come home one day, they can’t get a job. Put it on your doorstep, and you’ll understand how hard it is.”

Kasich was raised Catholic and worships regularly in an Anglican church. For more than 20 years, he has met every other Monday with a small group of men to study the Bible. And he has written a book about how the experience has helped him in his search for answers.

That’s a theme in keeping with a broader push that’s been made in the expansion’s favor. Earlier this year, religious and community leaders in Ohio held a rally at Olivet Institutional Baptist Church in Cleveland, calling on their state to participate in the Medicaid expansion. And back in September, over 100 national, state, and local faith leaders released a statement employing Republican governors as a whole to accept the expansion. Sister Simone Campbell, the executive director of the Catholic social justice group NETWORK, said in conjunction with the release that, “My strong support of Medicaid expansion comes out of my pro-life stance because it is the right and moral thing to do.”

Florida Gov. Rick Scott (R) wasn’t as explicitly religious as Kasich when he announced his own support for Medicaid expansion, but he did come close. As the Huffington Post noted, Scott said his mother, who passed away last year, taught him that “America’s greatness is largely because of how we value the weakest among us.”

Because the federal government will fund the first several years of the Medicaid expansion, reports have estimated that Ohio will actually enjoy $1.43 billion in net fiscal savings to its state budget over the next eight years if it participates. And failing to expand Medicaid would actually cost the state about $8 billion in additional health care costs, largely because a higher uninsured population would mean greater spending on uncompensated care.

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ObamaCare's 'Baby Elephant'

On Wednesday Florida Republican Rick Scott became the latest GOP Governor to volunteer to shoulder some responsibility for ObamaCare, which has liberal sages gloating about a resistance-is-futile shift in the GOP. The media don't want to discuss the substance, only the politics, so allow us to report how the flippers are justifying their flips.

• Take the money or run. The Governors now expanding Medicaid are candid about their flight from their own fiscal principles: They want to take political credit for taking "free" money from Uncle Sugar and for appeasing the state hospitals lobbying for federal cash. The Health and Human Services Department will pay 100% of the cost of new beneficiaries, later 90%.

Indiana Governor Mike Pence spoke for the 13 Governors so far who reject this seeming windfall when he called it "the classic gift of a baby elephant," with the feds promising to buy all the hay for only the first few years. So Governors like Mr. Scott and Ohio's John Kasich are trying to inoculate themselves on the right by creating triggers or "sunsets" that would automatically rescind their participation in new Medicaid if—make that when—Washington reneges on funding.

They're only conning themselves. HHS can simply impose a blanket "maintenance of effort" rule that prohibits opting out—or any other change.

• The cost-shift trick. Then again, why would states want to drop out, when they claim that expanding Medicaid will lower health-care costs for businesses and individuals? So-called uncompensated care "drives up the cost of everybody's health insurance," Mr. Kasich said at a recent press conference. "When they visit these emergency rooms and cannot pay, we pay for them."

Hmmm. This is also the justification President Obama used to impose an individual mandate to buy coverage or else pay a penalty. Does Mr. Kasich now support that too?

And do these Republicans really think that private costs will fall by expanding a government program? Unlikely, since the federal statistics put the total amount of uncompensated care due to the uninsured at $12.8 billion—or less than 0.5% of health-care spending. The Ohio Hospital Association estimates its members provide $3.2 billion in uncompensated care—but $1.3 billion is Medicaid losses, more than bad debt or charity care. Ohio price controls are so onerous that hospitals lose 17 cents for every dollar they spend treating Medicaid patients.

• False flexibility. Mr. Kasich claims the feds are granting him the running room to reform Medicaid, on the basis of a late-night phone call from President Obama's consigliere. "I want to thank Valerie Jarrett today for being willing to work with us," he said. "Now I want to be clear to you: We don't know what the details of this are going to be yet. We don't know what the cost is going to be."

When Mr. Kasich is done counting his magic beans, he might look north to Wisconsin for a better Medicaid role model. Last week Scott Walker released an innovative reform that rejects the HHS bribe and will also test the department's putative "flexibility."

Under former Democratic Governor Jim Doyle, Wisconsin greatly expanded its BadgerCare Medicaid program, opening it to everyone earning up to two times the poverty line. Enrollment climbed 73% between 2003 and 2012, state spending increased 99% and proved so expensive that Mr. Doyle was forced to cap enrollment and put eligible people on a wait list.

Mr. Walker wants to roll back Medicaid to the poverty line and use the savings to open up new BadgerCare slots so the truly poor can use the safety-net program intended for them. (Imagine that.) Wisconsin would forgo the 100% federal magic money, because ObamaCare mandates that states expand Medicaid to 138% of poverty and also in this case end the waiting list, which would grow the rolls by another 32%.

The Walker plan would dump a lot of people onto ObamaCare's subsidized insurance "exchanges," though that would happen anyway. At least he would reduce one entitlement and insulate the Wisconsin budget from Washington uncertainty.

• The counsel of despair. Some Republicans are folding apparently because trying to stop ObamaCare is too hard. Though he "never liked the Affordable Care Act," said Governor Brian Sandoval, "I am forced to accept it as today's reality and I have decided to expand Nevada's Medicaid coverage." Now there's a statement of vaulting political ambition.

The reality is that ObamaCare remains deeply unpopular with the public and it will only get worse next year when individuals and small businesses are forced to buy coverage that is 20% or 30% more expensive than what they have. Some younger people will see premium shocks as high as 150% or 200%.

HHS will manage the exchanges in 32 states starting in October but has released only 19 pages of regulatory guidance. ObamaCare is so convoluted, and HHS so incompetent, that the entitlement may explode on the launchpad. Why any Governor would climb on to this ship is a political mystery, but then they have their bad reasons.

Printed in The Wall Street Journal, page 16 A version of this article appeared February 21, 2013, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: ObamaCare's 'Baby Elephant'.

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Hospices Reveal Obamacare’s Impact

Two hospice care centers are struggling to make ends meet, and Obamacare’s cuts to Medicare are to blame.

Hospices—health care facilities for the terminally ill—along with other Medicare providers are facing Medicare pay cuts. Of the $716 billion in payment reductions, hospice care was hit by a $17 billion payment cut from 2013 to 2022.

Now, contrary to all of the misleading claims, this effect is already beginning.

San Diego Hospice recently laid off 260 workers, closed a 24-bed hospital, and has recently filed for Chapter 11 bankruptcy. San Diego Hospice’s financial condition is attributed mainly to reduced Medicare reimbursement, fewer patients, and a federal audit that hurt the center’s reputation.

Another provider, Delaware Hospice, had to lay off 52 workers, citing lower federal reimbursement as the cause. “The decision,” said CEO Susan Lloyd, “is a direct result of a consequential decline in census and the need to position the organization to meet additional changes and challenges that the hospice industry anticipates with health care reform.”

“There’s a bit of a squeeze going on,” said Theresa M. Forster, vice president for hospice policy and programs at the National Association for Home Care & Hospice. “Hospices have to do more with less, and you can see how that could take its toll over time.”

If other Part A providers (e.g., hospitals, skilled nursing facilities, home health agencies, hospices), like these hospice centers, can’t withstand Obamacare’s $700 billion worth of cuts, how will seniors be able to access these services?

Remember how AARP, the liberals in the media, and the President insisted that Obamacare’s $716 billion in cuts to Medicare were “reforms that won’t touch your guaranteed Medicare benefits. Not by a single dime”?

Heritage had explained that financing Medicare benefits and seniors’ ability to access those benefits are inseparable—you can’t cut payment to services without affecting persons who depend on those services.

Recall that both the actuary of the Centers for Medicare and Medicaid Services and the Medicare trustees projected that Obamacare’s cuts would cause 15 percent of Part A providers to become unprofitable by 2019 and (if the reimbursement rates stay at Obamacare levels) 40 percent by 2050.

This is flawed and counter-productive policy. During tonight’s State of the Union address, it will be interesting to see if the President wants to double down on this approach. There’s a better way: harnessing the forces of competition. That will require serious structural reforms—as outlined in The Heritage Foundation’s Saving the American Dream—not just tightening price controls that put Medicare providers out of business.

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Obamacare’s Pressure Points

February 4, 2013 4:00 A.M.

President Obama’s reelection, along with the Supreme Court’s ruling last June on his signature health-care reform, may seem to have guaranteed that the Affordable Care Act (ACA) will remain the law of the land. But that could turn out to be the easy part of Obamacare. Implementing the ACA’s main provisions by January 1, 2014 — the date on which the law is to take full effect — presents a more grueling and protracted set of tests.

The next round of health-care-policy battles will play out not just before Congress but also in state capitals and health-care markets across the country. You could think of these fights as being like a martial-arts battle, in which various “pressure points” are attacked to produce significant pain, serious injury, or even temporary immobilization, not to mention an aversion to future fighting. Let’s take a closer look at the more painful pressure points in the ACA.

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1) Health exchanges. Nearly two-thirds of states still are not fully on board with running their own exchanges to offer the federally subsidized coverage dictated by the ACA. As many as 23 states would rather leave the daunting implementation process entirely in the hands of federal officials. Another ten may enlist as junior apprentices in largely federal-run “partnership” exchanges. But the White House desperately needs state governments to provide infrastructure and local-market experience as well as to take more of the political blame for the implementation fiascos ahead. Many states complain that the rules for exchanges are unclear, costly to administer, coercive, or all of the above. The federal government is supposed to set up exchanges in states that fail to do so, but, later next month, a federal district court in Oklahoma will begin to rule on arguments that directly challenge the authority of the federal government to distribute tax credits in federally run exchanges, which does not appear to be provided for in the text of the ACA.

2) Medicaid expansion. By one count earlier this month in The New England Journal of Medicine, 17 states have not yet agreed to expand their Medicaid coverage up to the ACA-designated 138 percent of the federal poverty level, A somewhat smaller number of states are officially opposed to the Medicaid expansion, and well under half of all states support it. The Supreme Court ruled that the Medicaid expansion must be optional, not a mandate enforced with penalties to states’ existing Medicaid programs. Many governors and state legislators doubt that the law’s initially generous federal funding will be sustainable within a largely unreformed, but expanded, entitlement program that already is straining their budgets. Existing Medicaid programs already fail to attract enough physicians because of their below-cost reimbursement policies.

3) Individual-mandate enforcement. The mandate that, beginning next year, requires almost everyone to purchase coverage meeting federal standards remains highly unpopular. Moreover, the tax penalties to enforce it are quite small compared with the premium costs of the required coverage. Many young and healthy individuals will therefore have a strong incentive to remain uninsured. Various exemptions (including those for the relative “unaffordability” of the premiums relative to one’s household income) will limit further the possibility of requiring coverage.

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Is the CBO Skeptical that ObamaCare's Insurance Exchanges Will Be Ready on Time?

In theory, ObamaCare's health exchanges will be up and running, enrolling new people before the end of the year. Fewer than half the states will be running their own exchanges, and so the Department of Health and Human Services has stepped in to run the rest. In recent months, however, a number of health policy observers have openly questioned the ability of the federal government to get ObamaCare's health insurance exchanges up and running by the end of the year. That might explain why HHS has been so willing to waive and extend exchange creation deadlines for state.

HHS insists that the federally run exchanges will be online on time, but it has also continued to delay state implementation deadlines in a way that could suggest the agency is not quite as ready as it claims to be. That makes the following passage from the new federal budget baseline published by the Congressional Budget Office this afternoon rather, well, interesting:

CBO and JCT [Joint Committee on Taxation] have slightly reduced their estimates of the rates at which people will enroll in the insurance exchanges or Medicaid as the expansion of coverage is implemented—a process that had already been anticipated to occur gradually. That change reflects the agencies’ judgment about a combination of factors, including the readiness of exchanges to provide a broad array of new insurance options, the ability of state Medicaid programs to absorb new beneficiaries, and people’s responses to the availability of the new coverage.

So is the CBO skeptical that the federal exchanges will be ready on time? That certainly seems possible, although the report does not specify whether it's uncertain about the readiness of federal exchanges as opposed to state exchanges, nor does it clearly indicate what its readiness concerns are.

HHS Secretary Kathleen Sebelius seems a bit concerned about the pace of implementation herself. At a health policy conference in Washington, D.C., yesterday, she declared ObamaCare the law of the land and asked for help making it work: "My challenge to all of you today, and actually my plea to all of you...is help us speed up the rate of change.”

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ObamaCare's Broken Promises

As the federal government moves forward to implement President Obama's Affordable Care Act, the Department of Health and Human Services is slated to spend millions of dollars promoting the unpopular legislation. In the face of this publicity blitz, it is worth remembering that the law was originally sold largely on four grounds—all of which have become increasingly implausible.

• Lower health-care costs. One key talking point for ObamaCare was that it would reduce the cost of insurance, especially for non-group insurance. The president, citing the work of several health-policy experts, claimed that improved care coordination, investments in information technology, and more efficient marketing through exchanges would save the typical family $2,500 per year.

That was then. Now, even advocates for the law acknowledge that premiums are going up. In analyses conducted for the states of Wisconsin, Minnesota and Colorado, Jonathan Gruber of MIT forecasts that premiums in the non-group market will rise by 19% to 30% due to the law. Other estimates are even higher. The actuarial firm Milliman predicts that non-group premiums in Ohio will rise by 55%-85%. Maine, Oregon and Nevada have sponsored their own studies, all of which reach essentially the same conclusion.

Some champions of the law argue that this misses the point, because once the law's new subsidies are taken into account, the net price of insurance will be lower. This argument is misleading. It fails to consider that the money for the subsidies has to come from somewhere. Although debt-financed transfer payments may make insurance look cheaper, they do not change its true social cost.

• Smaller deficits. Increases in the estimated impact of the law on private insurance premiums, along with increases in the estimated cost of health care more generally, have led the Congressional Budget Office to increase its estimate of the budget cost of the law's coverage expansion. In 2010, CBO estimated the cost per year of expanding coverage at $154 billion; by 2012, the estimated cost grew to $186 billion. Yet CBO still scores the law as reducing the deficit.

How can this be? The positive budget score turns on the fact that the estimated revenues to pay for the law have risen along with its costs. The single largest source of these revenues? Money taken from Medicare in the form of lower Medicare payment rates, mostly in the law's out-years. Since the law's passage, however, Congress and the president have undone various scheduled Medicare cuts—including some prescribed by the law itself.

Put aside the absurdity that savings from Medicare—the country's largest unfunded liability—can be used to finance a new entitlement. The argument that health reform decreases the deficit is even worse. It depends on Congress and the president not only imposing Medicare cuts that they have proven unwilling to make but also imposing cuts that they have already specifically undone, most notably to Medicare Advantage, a program that helps millions of seniors pay for private health plans.

• Preservation of existing insurance. After the Supreme Court upheld the constitutionality of health reform in June 2012, President Obama said, "If you're one of the more than 250 million Americans who already have health insurance, you will keep your insurance." This theme ran throughout the selling of ObamaCare: People who have insurance would not have their current arrangements disrupted.

This claim is obviously false. Indeed, disruption of people's existing insurance is one of the law's stated goals. On one hand, the law seeks to increase the generosity of policies that it deems too stingy, by limiting deductibles and mandating coverage that the secretary of Health and Human Services thinks is "essential," whether or not the policyholder can afford it. On the other hand, the law seeks to reduce the generosity of policies that it deems too extravagant, by imposing the "Cadillac tax" on costly insurance plans.

Employer-sponsored insurance has already begun to change. According to the annual Kaiser/HRET Employer Health Benefits Survey, the share of workers in high-deductible plans rose to 19% in 2012 from 13% in 2010.

That's just the intended consequences. One of the law's unintended consequences is that some employers will drop coverage in response to new regulations and the availability of subsidized insurance in the new exchanges. How many is anybody's guess. In 2010, CBO estimated that employer-sponsored coverage would decline by three million people in 2019; by 2012, CBO's estimate had doubled to six million.

• Increased productivity. In 2009, the president's Council of Economic Advisers concluded that health reform would reduce unemployment, raise labor supply, and improve the functioning of labor markets. According to its reasoning, expanding insurance coverage would reduce absenteeism, disability and mortality, thereby encouraging and enabling work.

This reasoning is flawed. The evidence that a broad coverage expansion would improve health is questionable. Some studies have shown that targeted coverage can improve the health of certain groups. But according to the Robert Wood Johnson Foundation's Economic Research Initiative on the Uninsured, "evidence is lacking that health insurance improves the health of non-elderly adults." More recent work by Richard Kronick, a health-policy adviser to former President Bill Clinton, concludes "there is little evidence to suggest that extending insurance coverage to all adults would have a large effect on the number of deaths in the U.S."

The White House economic analysis also fails to consider the adverse consequences of income-based subsidies on incentives. The support provided by both the Medicaid expansion and the new exchanges phases out as a family's income rises. But, as I and others have pointed out in these pages, income phaseouts create work disincentives like taxes do, because they reduce the net rewards to work. Further, the law imposes taxes on employers who fail to provide sufficiently generous insurance, with exceptions for part-time workers and small firms. On net, it is hard to see how health reform will make labor markets function better.

Some believe that expanding insurance coverage is a moral imperative regardless of its cost. Most supporters of the law, however, use more nuanced arguments that depend on assumptions that are increasingly impossible to defend. If we are ever to have an honest debate about entitlement spending, we will need to distinguish these positions from one another—and see them for what they really are, rather than what we wish they would be.

Mr. Kessler is a professor of business and law at Stanford University and a senior fellow at the Hoover Institution.

A version of this article appeared February 1, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: ObamaCare's Broken Promises.

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Obamacare’s Job-Killer

January 14, 2013 4:00 A.M.

‘I would like to black those days out — does that tell you how bad they were?” says Carl Schanstra, owner of a small Illinois parts-assembly firm. During the recession, his sales dropped by around 50 percent, and Schanstra was forced to take a calculated risk: He downsized considerably, reworked his business strategy, and invested his life savings to tide the manufacturing company through the hard times.

“We laid off 20 people in one day,” Schanstra tells National Review Online. “That day sucked. We got rid of some of the high-level management that was not functioning correctly, as well as our low-level people. We cut and cut and cut. And as the owner of the company, I went without a paycheck for over three months, several times throughout that period. You get to compound on that company’s traumatic experiences, and then add that you don’t have any personal income as well.”

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At first glance, it looks like Schanstra’s sacrifices paid off. Automation Systems Inc. is once again stable, and sales continue to rise. During the recession, the firm was housed in a leaky old building with a gravel loading dock and tarps aplenty to protect equipment when it rained. Three months ago, Schanstra was able to move into a much bigger, light-industrial new building.

But the company now faces a new problem because of the Obama health law. Automation Systems Inc. has expanded to include 37 employees today, and Schanstra says he wants to hire more — maybe as many as 200 or 300 in the next 10 to 15 years. But once the business crosses the 50-employee threshold, it will have to pay $40,000 in penalties, plus $2,000 for each additional employee. That’s because of the so-called employer mandate, a fee imposed on businesses that get too big without providing health care the federal government deems acceptable.

“The government has made it clear with the health-care law that the incentive is to have companies under 25 people, where we can get tax breaks,” Schanstra says. “The mid-range companies with the labor of 25 to 60 people — those companies are going to be impacted by this dramatically.”

Between 2007 and 2010, the U.S. lost 27,409 manufacturing firms, according to data from the Census Bureau, most of the losses presumably occurring during the recession. At its low point in June 2009, American manufacturing production was down about 21 percent from what it had been in December 2007. The manufacturing sector became a symbol for everything that had gone wrong: Why can’t the U.S. make things like it used to? Is the U.S. losing its global edge? Factory jobs were America’s hottest export, as the story went, and furrowed faces personified the trend.

President Obama took up the cause, setting a goal to double U.S. exports by 2015 and to create a million new American manufacturing jobs in the process. Early in the stimulus, politicians on the left pushed for federal aid and Buy America clauses. Most neglected to mention, of course, the regulatory burden and union wrangling that have made these companies less competitive than their global counterparts.

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ObamaCare's Health-Insurance Sticker Shock

Health-insurance premiums have been rising—and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare.

The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard—indeed, premiums are already reflecting it.

Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.

Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well). While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.

How do we know these requirements will have such a negative impact on premiums? Eight states—New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts—enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.

States won't experience equal increases in their premiums under ObamaCare. Ironically, citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest.

Many actuaries, such as those in the international consulting firm Oliver Wyman, are now predicting an average increase of roughly 50% in premiums for some in the individual market for the same coverage. But that is an average. Large employer groups will be less affected, at least initially, because the law grandfathers in employers that self-insure. Small employers will likely see a significant increase, though not as large as the individual market, which will be the hardest hit.

We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren't far behind. Those states will likely see a small increase.

By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases—somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.

While ObamaCare won't take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market.

Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher—a spread of about $5,500 per family.

Health insurers have been understandably reluctant to discuss the coming price hikes that are driven by the Affordable Care Act. Mark Bertolini, CEO of Aetna, the country's third-largest health insurer, broke the silence on Dec. 12. "We're going to see some markets go up by as much as 100%," he told the company's annual investor conference in New York City.

Insurers know that the Obama administration will denounce the premium increases as the result of greedy health insurers, greedy doctors, greedy somebody. The Department of Health and Human Services will likely begin to threaten, arm-twist or investigate health insurers in an effort to force them into keeping their premiums more in line with Democratic promises—just as HHS bureaucrats have already started doing when insurers want premium increases larger than 10%.

And that may work for a while. It certainly has in Massachusetts, where politicians, including then-Gov. Mitt Romney, made all the same cost-lowering promises about the state's 2006 prequel to ObamaCare that have yet to come true.

But unlike the federal government, health insurers can't run perpetual deficits. Something will have to give, which will likely open the door to making health insurance a public utility completely regulated by the government, or the left's real goal: a single-payer system.

Mr. Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Mr. Litow is a retired actuary and past chairman of the Social Insurance Public Finance Section of the Society of Actuaries.

A version of this article appeared January 14, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: ObamaCare's Health-Insurance Sticker Shock.

View the original article here