Humpty Dumpty Health Reform?

Many of the deals that the White House has been cutting all year with health-industry leaders are starting to show the cracks and strains of political pressures in Congress.

While all the news in the last week focused on the Senate Finance Committee reporting out a ghost bill with one Republican vote, health reform is far from the finish line.

Sen. Ben Nelson (D., Neb.) said it best: “We just finished the first quarter,” he told Politico. “There are three quarters to play. The bench is worn out. The quarterback keeps getting sacked. And the crowd has about had it, too.”

Can all the czar’s horses and all the czar’s men (and women) put health reform together again?

Here are some of the challenges they face:

·     Cost:  President Obama promised repeatedly during the campaign that the average American family would see $2,500 a year in savings from his health-reform plan.

Based upon two new studies out this week, he’s going to miss the mark by about $6,000.

PriceWaterhouseCoopers released a study last Sunday, commissioned by America’s Health Insurance Plans, which showed the cost of a family plan in 2019 would be $4,000 a year higher if reform passes.

A second, more comprehensive analysis was released on Wednesday and showed basically the same thing. This one, commissioned by Blue Cross Blue Shield, was by Oliver Wyman, Inc. It said that a weakly enforced individual mandate, coupled with requirements that insurers sell to all applicants, would lead to premium increases of $3,300 for family coverage.

Further, small businesses will see their health costs rise 19% higher than if reform weren’t passed, forcing many to drop coverage for their workers.

Strike 1 in keeping President Obama’s campaign promises.

·     Universal coverage: Hospitals were promised that health reform would lead to near-universal coverage. Their deal is that they would accept cuts in federal payments if they could be sure that at least 94% of the people in the country have insurance to reduce their costs of treating uninsured patients. But according to the budget office, the Finance Committee’s proposal would cover only 91%. Not good enough, says Chip Kahn of the Federation of American Hospitals.

But expanding coverage requires more subsidies, and more spending — and that’s tough when you need to keep the total cost of the bills under $1 trillion.

·    $900 billion, tops:  The Finance Committee used budgetary trickery to keep the cost of its bill under President Obama’s magic $900 billion over ten years. And there are more tricks to come.

But the $900 billion in added federal spending means nearly half a trillion dollars in new taxes (which begin right away while spending is delayed for several years). And it means $400 billion in cuts to Medicare and Medicaid.

And none of this includes the huge shifts in costs to American consumers and taxpayers.

·     Tax increases:  The Joint Tax Committee says the excise tax on high-cost health plans will mean a family would pay as much as $1,600 more for its coverage if it didn’t move to a lower-cost plan. If they did, it would mean higher income and payroll taxes. On the middle class.

The $40 billion excise tax on medical devices, such as pacemakers and hearing aids, would be passed on to consumers in the form of higher premiums.

Speaker Nancy Pelosi is talking about a windfall profits tax on health-insurance companies, higher taxes on wealthy Americans, and even a value-added tax to pay for health reform.

These taxes inevitably would fall on middle-income Americans. Which President Obama promised wouldn’t happen.

Strike 2.

·     Medicaid and the states:  Congress wants to expand Medicaid coverage to 133 percent of poverty.  But even with promises of early help, the nation’s governors are crying foul, saying that this is an unfunded mandate to provide expensive Medicaid benefits indefinitely.

·     No mandates:  President Obama also said that he didn’t want to mandate that people be forced to purchase health insurance: “It’s not that people don’t want insurance. It’s that they can’t afford it,” he said repeatedly during the campaign.

Strike 3 on keeping campaign promises.

And then there are the labor unions desperate for a government health plan to enroll millions of new health-care workers in their ranks. And young people who would pay up to 70% more for insurance. Seniors who could lose Medicare benefits and Medicare Advantage coverage. Catholic bishops who say they don’t believe the legislation bans payments for abortion. Blue Dog Democrats worried about deficit spending. And the American people who face taxes and penalties of $750 or more just for not buying insurance.

The 80-20 rule will prevail: The big players seem to agree on 80% of reform, but there is 20% that the various parties just can’t live with. And it’s a different 20% for each one. This deal is going to be incredibly difficult to hold.

The legislation would destabilize the health-insurance market, drive up costs, raise taxes, diminish the quality of care, retard innovation, and miss the opportunity for real reform that puts the private and public health sectors on a more sustainable financial track.

Let’s start this game over.

— Grace-Marie Turner is president of the Galen Institute.

Published in National Review Online: Critical Condition, October 19, 2009

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Cracks and strains: Many of the deals that the White House has been cutting all year with health industry leaders are starting to show the cracks and strains of political pressures in Congress.

While all the news this week focused on the Senate Finance Committee reporting out a ghost bill with one Republican vote, health reform is far from the finish line.

Sen. Ben Nelson (D-NE) said it best: “We just finished the first quarter,” he told Politico. “There are three quarters to play. The bench is worn out. The quarterback keeps getting sacked. And the crowd has about had it, too.”

Can all the czar’s horses and all the czar’s men (and women) put health reform together again?

Here are some of the challenges they face:

·         Cost: President Obama promised repeatedly during the campaign that the average American family would see $2,500 a year in savings from his health reform plan.

Based upon two new studies out this week, he’s going to miss the mark by about $6,000.

PricewaterhouseCoopers released a study Sunday, commissioned by America’s Health Insurance Plans, which showed the cost of a family plan in 2019 would be $4,000 a year higher if reform passes.

A second, more comprehensive analysis was released on Wednesday and showed basically the same thing. This one, commissioned by Blue Cross Blue Shield, was by Oliver Wyman, Inc. It said that a weakly-enforced individual mandate, coupled with requirements that insurers sell to all applicants, would lead to premium increases of $3,300 for family coverage.*

Further, small businesses will see their health costs rise 19% higher than if reform weren’t passed, forcing many to drop coverage for their workers.

Strike 1 in keeping President Obama’s campaign promises.

·         Universal coverage: Hospitals were promised that health reform would lead to near-universal coverage. Their deal is that they would accept cuts in federal payments if they could be sure that at least 94% of the people in the country have insurance to reduce their costs of treating uninsured patients. But according to the budget office, the Finance Committee’s proposal would cover only 91%. Not good enough, says Chip Kahn of the Federation of American Hospitals.

But expanding coverage requires more subsidies, and more spending -– and that’s tough when you need to keep the total cost of the bills under $1 trillion.

·         $900 billion, tops: The Finance Committee used budgetary trickery to keep the cost of its bill under President Obama’s magic $900 billion over 10 years. And there are more tricks to come. **

But the $900 billion in added federal spending means nearly half a trillion dollars in new taxes (which begin right away while spending is delayed for several years). And it means $400 billion in cuts to Medicare and Medicaid.

And none of this includes the huge shifts in costs to American consumers and taxpayers.

·         Tax increases: The Joint Tax Committee says the excise tax on high-cost health plans will mean a family would pay as much as $1,600 more for its coverage if it didn’t move to a lower-cost plan. If they did, it would mean higher income and payroll taxes — on the middle class.

The $40 billion excise tax on medical devices, such as pacemakers and hearing aids, would be passed on to consumers in the form of higher premiums.

Speaker Nancy Pelosi is talking about a windfall profits tax on health insurance companies, higher taxes on wealthy Americans, and even a value-added tax to pay for health reform. Clearly, she is scrambling. We have to assume that finding pay-fors is the main obstacle to a floor vote, now anticipated the first week in November.

And these taxes inevitably will fall on middle-income Americans, which President Obama promised wouldn’t happen.

Strike 2.

·         Medicaid and the states: Congress wants to expand Medicaid coverage to 133% of poverty. But even with promises of early help, the nation’s governors are crying foul, saying that this is an unfunded mandate to provide expensive Medicaid benefits indefinitely.

·         No mandates: President Obama also said that he didn’t want to mandate that people be forced to purchase health insurance: “It’s not that people don’t want insurance. It’s that they can’t afford it,” he said repeatedly during the campaign.

Strike 3 on keeping campaign promises.

Remember the 80-20 rule: The big players seem to agree on 80% of reform, but there is 20% that the various parties just can’t live with. And it’s a different 20% for each one. This deal is going to be incredibly difficult to hold.

And we haven’t even mentioned labor unions desperate for a government health plan to enroll millions of new health care workers in their ranks. And young people who would pay up to 70% more for insurance. Or seniors who could lose Medicare benefits and Medicare Advantage coverage. Catholic Bishops who say they don’t believe the legislation bans payments for abortion. Blue Dog Democrats worried about deficit spending. And the American people who face taxes and penalties of $750 or more just for not buying insurance.

The legislation would destabilize the health insurance market, drive up costs, raise taxes, diminish the quality of care, retard innovation, and miss the opportunity for real reform that puts the private and public health sectors on a more sustainable financial
track.

Not a good start.

*******

*Shell games: The White House and Senate Finance Committee severely criticized the Pricewaterhouse study, saying it didn’t include all of the subsidies people would get in its calculations. (And what magical source of money do they expect to draw on for the subsidies? Higher taxes and cuts in Medicare and Medicaid, of course.) Subsidized health care is not cheaper health care. It’s just a shell game that moves costs around -– and drives them higher.

The Oliver Wyman study, which was largely ignored by the White House and congressional leaders, did acknowledge the subsidies but said they wouldn’t be enough to offset the other market dislocations.

Strike 4.

*******

**Punting on Medicare: Senate Majority Leader Harry Reid has announced a devious scheme that would allow Congress to avoid paying for the $245 billion fix to Medicare payments to physicians in its reform legislation. Doctor payments are scheduled to plummet unless Congress acts, and the permanent fix is a big part of the cost of the House health reform bill.

Clearly Senator Reid crunched the numbers and figured out there is no way to keep the health reform bills under $1 trillion and still do the fix.

So here is his great idea to get around the $900 billion lid the president has set as the top cost for health reform: Just have Congress pass a $245 billion Medicare payment bill separately and add to the deficit. And dare Republicans to vote against it by adding a $250-sweetener to seniors' Social Security checks. Outrageous! The vote is scheduled in the Senate this coming Monday afternoon.

How on earth could President Obama sign this when he has promised to add “not one dime to the deficit”? That would be Strike 5.

Is this game over yet?

*******

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HEALTH REFORM

Health Reform: A Fiscal Fantasy Land

Joseph Antos, American Enterprise Institute
Forbes.com, 10/15/09

A careful reading of the evidence suggests that the Baucus bill will add as much as $376 billion to the federal deficit through 2019, Antos writes. And that figure understates the full impact of the bill on the federal budget. If the big-spending parts of the proposal started next year rather than in 2014, the fiscal damage would be much greater. If Congress passes an overly ambitious bill based on wishful thinking rather than realistic cost accounting, the country will face higher taxes, higher insurance premiums and demands for health care that cannot be satisfied. Read More »

The Baucus bill would impose nearly $400 billion in new taxes and fees, writes Douglas Holtz-Eakin of the Manhattan Institute. Nearly 90% of that burden would be shouldered by those making $200,000 or less. Read More »

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CBO Underestimates Cost of the Senate Finance Health Bill

Stephen J. Entin
Institute for Research on the Economics of Taxation, 10/12/09

The Congressional Budget Office letter to Chairman Baucus states quite clearly that CBO has not estimated the effect of the proposed legislation on overall national health expenditures, Entin writes. Without considering that total, there is no way to estimate the cost per unit of care and the effect of the bill on the federal budget. More fundamentally, there is no way to tell whether the bill achieves its most basic goal of increasing access to care. Read More »

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Testimony on the Effects of Health Reform Proposals on Women

Diana Furchtgott-Roth, Hudson Institute
Senate Committee on Health, Education, Labor and Pensions, 10/15/09

Although the leading Democratic health care reform bills in Congress intend to help women, they would leave all Americans, including women, worse off than they are at present, Furchtgott-Roth writes. First, everyone, including women, would pay more for health insurance. Second, the higher cost of health insurance premiums would lower cash wages for Americans. Third, those on government plans, such as Medicare and Medicaid, predominantly women, would receive worse care. Fourth, the economy-wide effects of health care reform mandates would discourage job creation and incentives to work by raising taxes. Read More »

A webcast of the hearing is available on the Senate HELP website.

Read more about health reform proposals on the Health Reform Hub >>

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HEALTH COSTS

2010 Health Care Cost Survey

Towers Perrin, 10/08/09

Employer adoption of account-based health plans (ABHP), such as health savings accounts, has risen significantly over the last five years, from 20% to 60% of companies, according to new data from
Towers Perrin, a global professional services firm. These plans provide both employers and employees with a clear cost advantage. Premium costs for ABHP plans average $8,927 per employee annually, which is 13% less than the average traditional plan, and unused account funds roll forward to defray future out-of-pocket costs. The study finds that 55% of high performing companies – versus 32% of low performers – say their ABHPs are successfully controlling employer costs, and 48% (versus 20%) say their ABHPs are successfully controlling employee costs. Read More »

Read more about health costs on the Health Reform Hub >>

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CONSUMERISM

Customer-Driven Medicine: How to Create a New Health Care System

Darrell M. West
The Brookings Institution, 10/09

A modern health care system would be based on mobile health, remote monitors, electronic medical records, social networking sites, video conferencing, and Internet-based recordkeeping, according to West, vice president and director of Governance Studies at Brookings. It would incorporate email reminders to take medicine, a NetFlix-style mechanism to rate experiences with doctors and hospitals, and websites that would make ratings publicly available to employers and other patients. Several policy changes are needed to modernize our health system to encourage personalized medicine, including reimbursement changes in insurance coverage, a focus on positive health outcomes, and rewards for good behavior by physicians and patients. Read More »

Read more about consumerism on the Health Reform Hub >>

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STATE ISSUES

Health Care Speechwriter for Edwards, Obama & Clinton Without Insurance Now

Wendy Button
Politics Daily, 10/08/09

A former speechwriter for John Edwards, Hillary Clinton, John Kerry, and Barack Obama describes losing her health insurance when she moved from Washington, DC to Massachusetts, which requires all residents have health insurance. In DC, Wendy Button’s monthly premium with an HMO was $225 a month. In Massachusetts, the cost for a similar plan is approximately $550. “My risk factors haven’t changed…There has been no change in the way I live my life except my zip code -– to a state with universal health care,” Button writes. Read More »

Cape Cod resident Wendy Williams is facing a similar situation. For the first two years of the mandate, the Williams’ IBM health insurance was seen as acceptable in the eyes of the state. This year, without informing the Williams’ directly, Massachusetts changed the rules in a way that made their bare-bones policy no longer acceptable. Unless they pay for a pricier policy they neither need nor want –- or enroll in a government-sponsored insurance plan –- they would have to pay $1,000 each year to the state in penalties. Read More »

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Mammograms and the New Jersey Governor’s Race

Merrill Matthews, Council for Affordable Health Insurance and Institute for Policy Innovation
The Wall Street Journal, 10/14/09

New Jersey has arguably the highest health insurance premiums in the country, Matthews writes. In the early 1990s, New Jersey passed legislation requiring insurers to accept all applicants, regardless of their health status (called guaranteed issue) and charge them all the same price (community rating). President Obama wants to do the same thing nationally. There were repeated warnings that such legislation would drive up health insurance premiums, but New Jersey legislators ignored those warnings. Today, New Jersey residents have relatively few health insurance options, and coverage is significantly more expensive than in most other states. Read More »

 

Read more about state issues on the Health Reform Hub >>

 

Events

2009 Legislative Leaders
Health Care Forum

American Legislative Exchange
Council
October 15–17, 2009
Raleigh, NC
Grace-Marie Turner will participate in a panel discussion on “ObamaCare: What It Means for Patients and Taxpayers” on Saturday, October 17.

Policy Boot Camp
Institute for Policy Innovation Event
Saturday, October 17, 2009
9:00 a.m. – 12:00 p.m.
Dallas, TX

Grace-Marie Turner speaking on the Sean & Frank Show
WCBM-AM Radio Broadcast
Monday, October 19, 2009
8:30 a.m.
Baltimore, MD

Medicare Advantage Oversight and Operations Conference
Centers for Medicare and Medicaid Services Event
Monday, October 19, 2009
9:00 a.m. – 6:00 p.m.
Baltimore, MD

QUEST: High-Performing Hospitals
Premier Inc. Event
Wednesday, October 21, 2009
8:30 a.m. – 10:00 a.m.
Washington, DC

Private Health Insurance Markets: Facts, Fables, and Fixes
American Enterprise Institute Event
Wednesday, October 21, 2009
9:15 a.m. – 11:15 a.m.
Washington, DC

78th Annual Education Conference
Catholic Medical Association
October 21-25, 2009
Springfield, IL
Grace-Marie Turner will participate in a panel discussion on health reform at 1:35 p.m. on Thursday, October 22.

Seventh Annual Insurance CEO Roundtable
Oregon Health Forum
Thursday, October 22, 2009
7:00 a.m. – 9:00 a.m.
Portland, OR

Expanding Health Care Coverage to all Americans
CQ-Roll Call Group Forum
Monday, October 26, 2009
8:00 a.m. – 11:00 a.m.
Washington, DC

 

 

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