ObamaCare Takes On More Water

How much of this can ObamaCare withstand before it sinks on its own?

SICKER EMPLOYEES COULD BE SHOVED OUT

Two University of Minnesota law professors write that ObamaCare actually provides incentives for “targeted employer dumping” of sicker workers into taxpayer-subsidized health exchanges.

The article, “Will employers undermine health care reform by dumping sick employees?” by Amy Monahan and Daniel Schwarcz, explains how companies could redesign their health benefit programs to make it more costly for sicker employees to stay with the company health plan and encourage them to opt instead for the exchanges.

Monahan and Schwarcz write that this “would expose these exchanges to adverse selection caused by the entrance of a disproportionately high-risk segment of the population into the insured pool.” They said that, “Not only would this undermine the spirit of health care reform, but it would jeopardize the sustainability of the insurance exchanges.” Yesterday NPR also had a good story about the threat.

In spite of this, senior HHS officials have said it would be a good thing for employers to “dump [their] people into the exchange,” and that Speaker Pelosi talked favorably about ObamaCare as a way “for businesses to be emancipated from health care costs because they have a way out or whatever works for them.”

The only problem is that it would NOT be good for sicker employees, who would surely have greater difficulty finding physicians to see them under what surely will be lower payment rates in the exchanges, and it would be bad for taxpayers, who will have a much bigger bill to pay for exchange subsidies.

FATAL FLAW

Congress made a serious drafting error in the health overhaul law when it said that subsidies could be delivered through state exchanges but not through any federal fall-back exchange. Michael Cannon of the Cato Institute wrote about this in The Wall Street Journal recently.

The Obama administration has been trying an end-run around the problem by ordering the IRS to simply say in its proposed regulations that the subsidies can be delivered through either type of exchange. This is a big issue because a growing number of states are refusing to create exchanges. If they don’t, the feds can come in and set one up, but they would be relatively useless if they can’t deliver subsidies.

Sen. Orrin Hatch, the ranking Republican on the Senate Finance Committee, this week blew the whistle on the proposed IRS rule.

In a letter to Treasury Secretary Tim Geithner and IRS Commissioner Doug Shulman, Hatch says the law is clear that only state exchanges can offer the subsidies, emphasizing that the administration doesn’t have the authority to go beyond the language of the law.

“…[C]ontrary to the clear wording of the statute, your proposed regulations suggest otherwise, extending the availability of premium credits to those participating in federal exchanges,” Hatch wrote. “I am concerned that if finalized, these rules would exceed your regulatory authority, violating the Constitution’s separation of powers.”

MORE LOST JOBS

A Michigan-based medical device company, Stryker, announced that it would be shedding “five percent of its workforce over concerns about the impending 2.3 percent medical device tax prescribed by” ObamaCare.

A press release from the Kalamazoo company noted that “the targeted reductions [i.e., layoffs]…are being initiated…in advance of the new medical device excise tax scheduled to begin in 2013” under ObamaCare.

With jobs creation the top priority of the American people, this is definitely not good news.

*****
Not dead yet: The House Energy and Commerce Committee has approved a bill to repeal the controversial long-term entitlement program — the CLASS Act — in ObamaCare, following the administration’s admission that the Ponzi scheme program is unworkable. This vote paves the way for the full House of Representatives to vote on repealing the entitlement program.

“[W]e must erase a program that we know will not work; a program that was never structured to work, and that we could never afford,” Committee chairman Rep. Fred Upton said. “I believe we have to start over on long-term care reform — an issue that will affect millions of Americans as they or a loved one need care.”

Three Democrats joined 30 Republicans on the committee to vote for repeal. But even though CLASS has been deemed unworkable by his own administration, the president has vowed to veto any repeal legislation.

If CLASS were left on the books and the president were to be re-elected, the secretary of HHS may be required to find a way to implement it next year. A Congressional Research Service study out this week said that: “Assuming that the Secretary takes no further action to comply with the CLASS Act’s statutory mandate to designate a benefit plan by October 1, 2012, the Secretary would appear to be committing a facial violation of the statutory requirement to designate such a plan.” The report continues: “…the Secretary does not appear to have discretion to decide whether or not to designate a plan by October 1, 2012.”

Given this, you might assume that HHS Secretary Sebelius would encourage the president to sign the repeal legislation lest she and her department face legal action for violating the law they worked so hard to enact.

*****
Medicare Disadvantage: The Obama administration is touting another government report that says enrollment in the popular Medicare Advantage program has continued to increase, reaching nearly 12 million by April 2011.

That means that more than one-fourth of seniors have voluntarily decided to enroll in the private plans in Medicare — plans that work on the premium support model. This is the heart of reform proposals offered by most of the commissions that have studied entitlement reform and by the House of Representatives in backing Budget Chairman Paul Ryan’s budget plan.

The administration says that the Government Accountability Office study shows the health law had little or no effect on Medicare Advantage enrollment in the first year after enactment of ObamaCare, even though the law takes $136 billion out of the program over the decade to help pay for its new health insurance subsidies.

But that is not the full story. The GAO report says that the Congressional Budget Office has predicted that the cuts would decrease enrollment by about 35% through 2019. The Office of the Actuary at the Centers for Medicare and Medicaid Services has found that the reduction in MA payments would eventually lead to those plans offering less-generous benefit packages.

HHS is trying to delay the loss of coverage and notified Medicare Advantage carriers in its annual “call letter” earlier this year of the surprising news that per-capita Medicare Advantage payments will increase by 1.6% for 2012. Given that PPACA requires the $136 billion in payment reductions to MA over 10 years, that will mean even more draconian cuts in the future — after the elections.

*****

CLIP OF THE WEEK

Health Care Reform Will Go to the Supreme Court

In this audio clip, AEI’s Tom Miller discusses federal power and states’ rights, the mandate to buy insurance, and the consequences of possible court decisions on KCRW’s To the Point.
Listen now >>

HEALTH REFORM

The Myth of Americans’ Poor Life Expectancy
Avik Roy, Forbes.com, 11/23/11

Is there no limit to Congress’s power?
George F. Will, The Washington Post, 11/18/11

Tax Reform Options: What Changes Would Generate The Greatest Growth For The Money
Stephen J. Entin, Testimony before the Joint Economic Committee, 11/17/11

Wal-Mart’s Entrance Into Health Care Is Great News for American Consumers
Sally C. Pipes, Forbes.com, 11/29/11

Just Say ‘No’ To New Health Insurance Taxes
Sally C. Pipes, Forbes.com, 11/28/11

Employers accelerate efforts to bring health benefit costs under control
Mercer, 11/16/11

Employer-Based Health Insurance Continues to Trend Down
Elizabeth Mende, Gallup, 11/11/11

Government Price Controls for Health Care: A Deficit-Reduction Strategy to Avoid
Kathryn Nix, The Heritage Foundation, 11/30/11

Congress should stop the coming medical billing fiasco
Jason D. Fodeman, The Examiner, 11/27/11

2011 State Physician Workforce Data Book
Association of American Medical Colleges, 11/11

MEDICARE AND MEDICAID

The Medicare Auction Design and Incentives for Research and Development
Benjamin Zycher, Ph.D., Pacific Research Institute, 11/21/11

The Second Stage of Medicare Reform: Moving to a Premium Support Program
Robert Moffit, Ph.D., The Heritage Foundation, 11/28/11

How to Think About Medicare Reform
Stuart Butler, Ph.D., The Heritage Foundation, 11/22/11

Support Builds for a Plan to Rein In Medicare Costs
Robert Pear, The New York Times, 11/24/11

STATE ISSUES

Indiana places a big bet on consumer-driven health insurance
Christine Vestal, Stateline, 11/17/11

What Iowa Voters Want in a Republican Nominee
Heather R. Higgins and Carrie Lukas, The Wall Street Journal, 11/19/11

INTERNATIONAL HEALTH SYSTEMS

Health at a Glance 2011: OECD Indicators
Organisation for Economic Co-operation and Development, 11/23/11

PRESCRIPTION DRUGS

The causes of drug shortages and proposals for repairing these markets
Scott Gottlieb, Testimony before the House Committee on Oversight and Government Reform, 11/29/11

As Firms Push Questionable New Drugs, Investment Declines
Peter J. Pitts, Investor’s Business Daily, 11/29/11

Events

New CMS Estimates of State-by-State Health Expenditures

Kaiser Family Foundation Interactive Webcast

Wednesday, December 7, 2011

12:00pm

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