Obamacare Extends Its Tentacles

The Institute of Medicine (IOM) has released its long-awaited report outlining criteria for the Obama administration to determine what medical services most health insurance policies will be required to cover starting in 2014.

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Since the federal government is mandating that people purchase health insurance and will spend trillions of dollars in taxpayer subsidies, it therefore must define what qualifies as an acceptable policy. Deciding what will be in this “essential benefits package” is going to be a long, painful process that the political system is ill-equipped to handle.

The IOM advisory panel didn’t specify down to the level of which tests and procedures must be covered — HHS will do that. Instead, the IOM urged officials to use the benefits offered by a typical small employer plan as the basis for the government plan.

That sounds like a reasonable start, but this is only the first shoe to drop for this particular Obamacare centipede. The IOM recommended that the Obama administration detail by next May which specific benefits should be required in order to give health plans time to prepare for the major rollout of insurance coverage the following year.

This is very new territory in which the federal government — not employers or individuals — will decide what private health plans must cover. The IOM says the treatments should be cost-effective and also “demonstrate meaningful improvement” over current services and treatments — a very high bar. The IOM recommended that if the services don’t meet these and other criteria, they could be excluded from the benefits package. And that, of course, will lead to another level of government rules.

This is just what the American people feared. Of course cost-benefit analyses are important — employers and others buying health insurance make those judgments every time they purchase a policy. But how many of us want the government to decide?

The IOM report sets out utopian goals: “The [package] must be affordable, maximize the number of people with insurance, protect the most vulnerable individuals, promote better care, ensure stewardship of limited financial resources by focusing on high value services of proven effectiveness, promote shared responsibility for improving our health, and address the medical concerns of greatest importance to us all,” said the report. One wonders why the government doesn’t wave a magic wand over Medicare and Medicaid to do this.

Defining an affordable premium target became a “central tenet” of the IOM committee because, the committee concluded, if cost is not taken into account, the essential health-benefits package will become increasingly unaffordable for both individuals and small businesses.

Fair enough. But the big question most Americans are likely to ask is whether they want government to be making these decisions or whether they want to decide for themselves.

Posted on National Review Online: Critical Condition, Oct. 7, 2011.

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As I travel across the country and speak to many different groups — physicians, researchers, hospital executives, health insurance brokers, state legislators, and others — it is becoming increasingly obvious that ObamaCare is failing even before it begins. The more information we get about its implementation, the clearer it is that the law will topple from its unsustainable costs and massive bureaucracy.

Innovators are saying they will be crushed by regulation, physicians will simply refuse to practice the cookbook medicine they believe the health overhaul law will compel, employers are in a virtual hiring freeze until they find out what their costs will be, states are balking at implementation, and even the administration is acknowledging that the long-term care Ponzi scheme — er, the CLASS Act — is “totally unsustainable.”

And a new report is only going to add fuel to the fires. The Institute of Medicine (IOM) Thursday released its long-awaited report outlining criteria for determining the “essential benefits package” which most health insurance policies will be required to cover, starting in 2014.

Since the federal government is mandating that people purchase health insurance and will spend hundreds of billions of dollars in taxpayer subsidies, it therefore must define what qualifies as an acceptable policy. This is going to be a long, painful process that the political system is ill-equipped to handle.

The IOM advisory panel didn’t specify down to the level of which tests and procedures must be covered — HHS will do that — but the IOM did urge officials to use as its basis those benefits offered by a typical small employer plan.

That sounds like a reasonable start, but this is only the first shoe to drop for this particular ObamaCare centipede. The IOM recommended that the Obama administration detail by next May specifically which benefits should be required in order to give health plans time to prepare for the major rollout of insurance coverage the following year.

This is very new territory in which the federal government — not employers or individuals — will decide. The IOM says the treatments should be cost-effective and also “demonstrate meaningful improvement” over current services and treatments. The IOM recommended that if the services don’t meet these and other tests, they could be excluded from the benefits package. And that will lead to another level of government rules.

This is just what the American people feared. Of course cost-benefit analyses are important — employers and others buying health insurance make those judgments every time they purchase a policy. But having the government decide?

The IOM report sets out utopian goals: “The [package] must be affordable, maximize the number of people with insurance, protect the most vulnerable individuals, promote better care, ensure stewardship of limited financial resources by focusing on high value services of proven effectiveness, promote shared responsibility for improving our health, and address the medical concerns of greatest importance to us all,” said the report.

Defining an affordable premium target became a “central tenet” of the IOM committee because, the committee concluded, if cost is not taken into account, the essential health benefits package will become increasingly unaffordable for both individuals and small businesses.

Fair enough. But the big question most Americans are likely to ask is whether they want government to be making these decisions or whether they want to make them themselves.

Small hr

Exploring an idea: State officials and health industry experts are struggling mightily about what to do about the health law’s requirement that they set up Health Insurance Exchanges.

A few states are fully onboard and ready to start gearing up their exchange machinery, others are still on the fence and are wondering what a federally operated exchange would look like, and others are absolutely determined to resist any effort to implement ObamaCare. As I reported recently, states across the board are unhappy with Washington because they are getting so little guidance about this monstrously complex undertaking. Whatever their position, virtually all are complaining about Obama administration regulators.

Missouri is in a quandary: I spoke last Friday to several hundred members of the St. Louis Association of Health Underwriters who are trying to help legislators figure out what to do. Missouri voters approved a ballot initiative protecting citizens from the individual mandate, but that wouldn’t bar the federal government from coming in to set up an exchange if the law is not repealed and upheld in the courts. Some think the state should set up a firewall against the Feds moving in.

I told them that they need to do what is right for Missouri and dare the Feds to tell them that’s not okay. The Obama administration is signaling “flexibility,” and it will be reluctant to confront states, especially in the coming presidential election year, to veto their efforts.

I recommended that they look for ways to facilitate a defined contribution model for health insurance — which is what a 21st century information age economy will need — and delegate as much to the private sector as possible.

The key is to create a vehicle to allow aggregation of premiums from several sources, including payments from individuals, from employers of two working spouses, possible tax credits, etc., and create a way for individuals and families to make their own selections of health coverage.

People and businesses will want a range of choices so they can decide the kind of health insurance they want and need. In a world of defined contributions for health insurance, states could determine the best mechanism to provide these functions. It could be a bank, a private exchange, or a trusted organization, such as a professional or employer association.

A state that does this would have a head start on the infrastructure that would be needed for market-based reform and could provide enough of a firewall to guard against the Feds should ObamaCare not be repealed.

Oklahoma has set up a coalition to argue for much the same thing.

I’d welcome your thoughts about how/whether this would work. I will highlight the top three recommendations and insights in a future issue of Health Policy Matters.

Small hr

States moving forward: New Jersey is showing the way in advancing its own reform. Gov. Chris Christie signed bipartisan health and pension benefits reform legislation in June that provides a vehicle for the state to provide more flexibility and choice in benefit design.

Starting next year, state and local governments will be able to offer a much wider array of health plans for their employees and expect to save $70 million next year, with greater savings in future years.

Government employees covered by state-run plans will have a choice of 15 health plans, for the first time including high-deductible health plans and health savings accounts. “We are delivering on our promise to provide relief to taxpayers, greater choice and flexibility to public employees to choose the plan that fits their needs, and a reformed health benefits system that is fair, affordable and sustainable,” Gov. Christie said.

For the first time, state and local government employees will pay a share of health care costs. Expect to hear cries that the burden is being shifted to workers, but this begins the process of public workers having health insurance that looks more like the policies that people in the private sector have.

This is an appropriate role for the state, as an employer, in offering more choices with greater responsibility for employees to make their own cost-benefit determinations.

CLIP OF THE WEEK

Grace-Marie Turner on the Mark Reardon Show

Grace-Marie visited the KMOX studio in St. Louis to discuss the health overhaul law with Mark Reardon.
Listen now >>

 

 

HEALTH REFORM

The Definition of Insanity
The Wall Street Journal, 10/04/11

The president is demanding that seniors fund his American Jobs Act
Douglas Holtz-Eakin, The Daily Caller, 10/05/11

Obamacare holding back the economy
Sen. Kay Bailey Hutchison, The Charlotte Observer, 10/07/11

U.S. Panel Says No to Prostate Screening for Healthy Men
Gardiner Harris, The New York Times, 10/06/11

Average Cost of U.S. Health Coverage per Employee is Expected to Cross the $10,000 Threshold for the First Time in 2012, According to Aon Hewitt
Aon Hewitt, 10/03/11

Crisis of the Uninsured: 2010 and Beyond
Devon Herrick, National Center for Policy Analysis, 10/06/11

Six Ways the Supreme Court Could Rule on Obamacare
Jeffrey H. Anderson, The Weekly Standard: The Blog, 10/03/11

2011 Health Insurance: Overview and Economic Impact in the States
America’s Health Insurance Plans, 09/28/11

PRESCRIPTION DRUGS

How the FDA Could Cost You Your Life
Scott Gottlieb, The Wall Street Journal, 10/03/11

NCCN Biosimilars White Paper: Regulatory, Scientific, and Patient Safety Perspectives
Scott Gottlieb, Journal of the National Comprehensive Cancer Network, 10/06/11

An ObamaCare Reform Law that Is a CLASS in Fiscal Irresponsibility
Sally C. Pipes, Forbes.com, 10/05/11

Cancer Care’s Rationers
The Wall Street Journal, 10/03/11

Events

Midwest Leadership Conference
Friday, October 07, 2011
3:10pm – 4:10pm
Bloomington, MN
Grace-Marie Turner will discuss “What to do with Health Care Beyond Repealing ObamaCare.”

Why ObamaCare Is Wrong for America
Frankford-Northeast Philadelphia Rotary Club
Tuesday, October 11, 2011
12:15pm – 1:30pm
Philadelphia, PA
Grace-Marie Turner will discuss the health overhaul law.

Why Obamacare Is Harming, Not Helping, Our Health Care System and Our Economy
The Heritage Foundation Event
Tuesday, October 11, 2011
12:00pm – 1:00pm
Washington, DC

The Cost Equation: Affordable, Efficient and High Quality Care for Improved Outcomes
National Journal LIVE Policy Summit
Wednesday, October 12, 2011
8:00am -10:30am Program
Washington, DC

Regulations, Costs, and Uncertainty in Employer Provided Health Care
House Education and the Workforce Committee
Thursday, October 13, 2011
10:00am
Washington, DC
Grace-Marie Turner will provide testimony at this hearing of the Subcommittee on Health, Employment, Labor, and Pensions.

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