More Danger Signs

The White House is trying to spin the new report from Medicare chief actuary Rick Foster as only half bad because it concludes that, while the health overhaul law will cost more, it will cover more — 23 million people will remain uninsured (instead of 24 million previously estimated).

But looking at the details of Foster's report shows many, many danger signs of ObamaCare and how many of its promises will be broken:

  • People will lose coverage: About 14 million people will lose their employer coverage by 2019 as smaller employers terminate their plans and as workers who currently have employer coverage enroll in Medicaid.

  • Huge fines for companies: Businesses will pay $87 billion in penalties in the first five years after the fines trigger in 2014, partly because they can't afford to offer expensive, government-mandated coverage and partly because some of their employees apply for taxpayer-subsidized insurance.

  • Higher costs for consumers: Tens of billions of dollars in new fees and excise taxes will "generally be passed through to health consumers in the form of higher drug and devices prices and higher premiums."

  • A program that fails before it starts: The new CLASS Act long-term care insurance program will face "a significant risk of failure," resulting in "a very serious risk that the problem of adverse selection will make the CLASS program unsustainable."

  • Spending increases: The Patient Protection and Affordable Care Act (PPACA) will increase national health spending by $311 billion from 2010 through 2019. And instead of bending the federal spending curve down, it will move it upward "by a net total of $251 billion" over the next decade.

  • "Free-riders:" An estimated 23 million people will remain uninsured in 2019, roughly five million of whom would be undocumented aliens, and the remainder would be 18 million who choose not to be covered and pay the penalty.

  • Spending reductions are fiction: Estimated reductions in the growth rate of health spending "may not be fully achievable" because "Medicare productivity adjustments could become unsustainable even within the next ten years, and over time the reductions in the scope of employer-sponsored health insurance could also become an issue."

  • You can't keep your doctor: Fifteen percent of all hospitals, nursing homes, and other providers treating Medicare patients could be operating at a loss by 2019 and "possibly jeopardize access to care for beneficiaries."

  • Coverage but no care: A significant portion of those newly eligible for Medicaid will have trouble finding physicians who will see them, and the increased demand for Medicaid services could be difficult to meet.

This is an objective report by administration actuaries that shows this sweeping legislation has serious, serious problems.


No new taxes? Among the new taxes imposed by the law is a rarely mentioned, $14.3 billion a year tax on health insurance, effective in 2014. As Joint Economic Committee Republicans explain in a new report, the tax:

  • Will be mostly passed through to consumers in the form of higher premiums for private coverage.
  • Could cost the typical family of four with job-based coverage an additional $1,000 a year in higher premiums.
  • Will fall largely, and inequitably, on small businesses and their employees.


A Congressional Budget Office analysis released Thursday said the average cost of the penalty will be slightly more than $1,000 in 2016 and that the government will collect about $4 billion a year in fines from 2017 through 2019 after the fines are fully in force.


It's not that easy: The law stipulates that all insurance companies must allow "children" to remain on their parent's health plan until age 26 if the "child" is not eligible to enroll in an employer-sponsored health plan.

But imagine you are a major employer. How can you tell? Do you do an investigation of each of your tens of thousands of employees to find out if their kids have jobs — and jobs that provide health insurance? This could be a significant cost to employers and one of the many, many shoes yet to drop on this centipede of a law.


Let's get this right: Congress even failed to get health benefits right for itself, as we reported last week. The Office of Personnel Management put out a one-paragraph notice this week saying it was basically going to ignore the 13-page single-spaced report by the Congressional Research Service that questioned whether federal workers can still receive health benefits after the passage of ObamaCare. The OPM says it will continue to provide the coverage. So Congress may be the first to violate the impossible provisions of ObamaCare.

Now, The Daily Caller reports that the federal government may wind up imposing fines on itself as well. When the "535 lawmakers and the 15,000 or so people who work for them flood newly-created health insurance exchange markets, it's likely that some will apply for government subsidies, which in turn will trigger massive fines. Under the law, employers are subject to fines of up to $3,000 per person for each employee who receives government health care subsidies." This could mean fines for Congress alone of $50 million a year.

Major employers face the same threat, posing a huge risk for the future of employer-based health insurance. But they don't have a blank check to get taxpayers to pay the fine, like Congress does.


Recommended reading: Ramesh Ponnuru of National Review has written an excellent and detailed description of the next battles in the campaign to repeal and replace ObamaCare. It's an insider's guide to political and policy strategies moving forward.

And here's a memo that will send chills up your spine. It is a detailed timeline of the trigger points in the health overhaul law, released by Rep. Joe Barton, ranking member of the House Energy and Commerce Committee. The qualifier at the beginning of the long, long list is an indictment in itself, saying that "the lack of clarity, internal inconsistencies, and ambiguity in the text" of the health overhaul law make figuring it out almost impossible, even for people whose job it is to write legislation!

It's frightening to read this 53-page, single-spaced description of hundreds and hundreds of specific mandates in the bill, almost any one of which represent a major change to our health sector. Read it and see for yourself.


States in the driver's seat: The health overhaul law treats states like servants to the federal government, and they are fighting back.

For example, they are being told they must expand eligibility to Medicaid to all citizens with incomes up to 133% of poverty. They are being told they must set up exchanges that will be a mechanism for federal control over private health insurance. And the government is going to grab back revenue from rebates they demand from prescription drug companies.

This really is a federal takeover of health care. The law says that, beginning this year, HHS Secretar
y Sebelius has new authority to review any "unreasonable" increases in premiums for health insurance. Health insurance issuers are required to submit to HHS and to the state a justification for an unreasonable premium increase prior to implementing premium increases, and they must post this information on their websites.

As I testified before the Senate HELP committee this week, this requirement sets up a potentially dangerous battle between states and the federal government over how to hold down premiums — which are sure to increase because of ObamaCare — while states fulfill their duties to make sure insurance companies have the money to pay claims.

But the states have power to fight back.


  • They can refuse to set up the new high risk pools, especially the 34 states that already have their own. Medicare actuaries say Washington quickly will run out of money to fund these new pools anyway.
  • They can set up their own health insurance purchasing exchanges based on the lightly regulated Utah model and dare the feds to tell them their exchanges don't meet the federally micromanaged model that ObamaCare mandates by 2014.
  • They can continue to support efforts, especially constitutional amendments, to challenge the federal government's intrusion into the freedom of its citizens. The Florida Legislature voted Thursday to place a constitutional amendment on the ballot that would ban any laws that compel someone to "participate in any health care system." It requires a 60% vote to succeed. The legislation is modeled after the American Legislative Exchange Council’s Freedom of Choice in Health Care Act, which has been introduced or announced in 42 states.


Washington needs the states more than the states need the Feds to make this work. This is the time to make sure Washington knows who's in charge.



Grace-Marie Turner Testifies Before Senate HELP Committee

There are two clips this week: The first is the full HELP Committee hearing where Grace-Marie and other witnesses testified about federal health insurance rating authority; the second clip is a Galen Institute original video featuring Grace-Marie's summary of her testimony.

Grace-Marie's testimony begins at 58:25.


Protection from Unjustified Premiums

Grace-Marie Turner, Galen Institute
Testimony before the U.S. Senate Committee on Health, Education, Labor, & Pensions, 04/20/10

The Senate's latest proposal to give the federal government authority to review health insurance premiums and to impose penalties if they are deemed "unreasonable" is unlikely to succeed in lowering health insurance costs, Turner testfied. The National Association of Insurance Commissioners concludes this policy would be ineffective and could actually cause harm, saying it "would greatly increase the risk of insurer insolvency without providing additional protection for consumers." Capping premiums without recognizing the forces that are driving up costs would be like tightening the lid on a pressure cooker while the heat is being turned up.

Many of the problems the country is facing involving health costs could be addressed by encouraging innovations in care delivery and creative benefit offerings. For example, an increase in the use of wellness and health management programs helped employers hold cost growth to 5.5% in 2009, the lowest in a decade. It is crucially important that implementation of the new health reform legislation provide incentives for employers and health plans to continue these innovative approaches to controlling health costs.
Read More »

The New York Times also reported on the hearing.

Trying to 'Fix' the Costs of ObamaCare

Grace-Marie Turner, Galen Institute
The Daily Caller, 04/22/10

With the ink barely dry on ObamaCare, some in Congress recognize they must now focus on health costs, Turner writes. The law contains provisions sure to increase health insurance premiums, including $569 billion in new taxes on individuals, small businesses, drugs, medical devices, and insurance companies. These costs will be borne by consumers in the form of higher health insurance premiums. Experience in Massachusetts previews higher premiums, court battles between government and insurers, companies becoming insolvent, and people having fewer and fewer choices of affordable private coverage. Not exactly what the president promised with his health overhaul plan.
Read More »


Obama's Health Reform Isn't Modeled After Heritage Foundation Ideas

Robert Moffit, The Heritage Foundation
The Washington Post, 04/19/10

Bob Moffit, health policy director at The Heritage Foundation, writes a rebuttal to the president's claim that "the Obama health-care law 'builds' on the Heritage health reform model." Moffit writes that's true "only in the sense that, say, a double-quarter-pounder with cheese 'builds' on the idea of a garden salad … Americans should realize that it's not an attempt to share credit but a disingenuous effort to sell this unpopular law…We think this massive health law is abominable and should be repealed. And until Congress repeals it, lawmakers should starve this monstrosity of taxpayer funds."
Read More »

Hello Healthcare, Goodbye Marriage

Diana Furchtgott-Roth, Hudson Institute
RealClearMarkets, 04/22/10

For a bill that is supposed to make Americans healthier, the disincentives for marriage and work under the new health overhaul law are truly startling, Furchtgott-Roth writes. Beginning in 2013, when many of the bill's provisions take effect, Americans will find it more advantageous to stay single than to marry, even more so than under the current tax code. Single earners below 400% of the poverty line who receive premium credits to help them afford health insurance will see the credits shrink rapidly or disappear when they marry. Upper-income earners will face disincentives to marry and work based on the new Medicare taxes, which apply to singles earning $200,000 and joint filers earning $250,000.
Read More »

Nearly 4M to Pay Health Insurance Penalty by 2016

Stephen Ohlemacher
The Associated Press, 04/22/10

Nearly four million Americans — the vast majority of them middle class — will have to pay the new penalty for not getting health insurance when President Obama's health care overhaul law kicks in, according to congressional estimates released this week. The penalties will average a little more than $1,000 apiece in 2016, the Congressional Budget Office said in a report. The penalties will be collected by th
e IRS through tax returns. However, the IRS will not have the authority to bring criminal charges or file liens against those who don't pay. About three million of those required to pay fines in 2016 will have incomes below $59,000 for individuals and $120,000 for families of four, according to the CBO projections. The other 900,000 people who must pay the fine will have higher incomes. The government will collect about $4 billion a year in fines from 2017 through 2019, according to the report.
Read More »

Gaming the Health Insurance Mandate

Merrill Matthews, Council for Affordable Health Insurance and Institute for Policy Innovation
Investor's Business Daily, 04/19/10

Experience in Massachusetts, which implemented an individual mandate in 2006, shows that the disparity between the cost of expensive health insurance coverage and the fine for not getting it encourages individuals buying their own coverage to game the system by paying the fine and remaining uninsured until they need coverage, writes Matthews. From April 2008 to March 2009, 40% of the individuals who applied to Harvard Pilgrim, one of Massachusetts' largest health plans, stayed covered for less than five months. Yet claims were averaging about $2,400 a month, about six times what one would expect. Blue Cross and Blue Shield of Massachusetts has now confirmed it is experiencing similar problems. The company says that in 2009, 936 people signed up for three months or less and ran up claims of more than $1,000. Because the penalties in ObamaCare are even lower than in Massachusetts, expect the gaming to accelerate across the country.
Read More »


NHS Bars Woman After She Saw Private Doctor

Isabel Oakeshott
The Sunday Times, 04/18/10

A woman has been denied an operation by Britain's National Health Service after paying for a private consultation to deal with her severe back pain, the Times reports. Jenny Whitehead, a breast cancer survivor, paid £250 for an appointment with the orthopedic surgeon after being told she would have to wait five months to see him on the NHS. He told her he would add her to his NHS waiting list for surgery. She was barred from the list, however, and must now find at least £10,000 for private surgery or wait until the autumn for the NHS operation to remove the painful cyst on her spine. The case will reopen the debate over NHS policy towards patients who pay for some of their care privately.
Read More »


In a Tough Year, Employers Hold the Line on Health Benefit Cost Increases

Mercer, 11/18/09

Many employers feared that health benefit cost growth would spike in 2009 as employees, worried about keeping their jobs and health coverage, consumed more health services than usual. In fact, 2009 saw the lowest annual increase in a decade, as the average per-employee cost of health benefits rose 5.5% to reach $8,945 after four years of increases of just over 6%, according to Mercer's National Survey of Employer-Sponsored Health Plans. Other findings:

  • Small employers added consumer-directed health plans in 2009, helping to push up enrollment in these high-deductible plans to 9% of all covered employees.
  • Growth in use of wellness or health management programs accelerated as large employers look to hold down cost without cost-shifting.
  • The prevalence of employer-sponsored health plans remained unchanged in 2009, at 65% of all employers. Among large employers (500 or more employees), health benefits are nearly universal.

Read More »



Small Employers Lead CDHP Adoption in 2009

American Association of Preferred Provider Organizations (AAPPO), 04/14/10

Consumer-directed health plans (CDHPs) were the only type of health insurance plan in which enrollment grew in 2009, according to an American Association of Preferred Provider Organizations-sponsored analysis of the Mercer National Survey of Employer-Sponsored Health Plans. An estimated 23 million people were enrolled in CDHPs in 2009, up from 18 million in 2008 — an increase of 27%. Small employers moved into CDHPs in a significant way in 2009, with offerings rising from 9% to 15%. This increase was a direct result of smaller employees utilizing the cost savings inherent in CDHPs to reduce their overall health costs. The study also finds that, among all employers, 46% expected to offer a CDHP in the next five years either as the only plan offered or alongside other medical plans.
Read More »


Health Care in the Age of Hope & Change: What's Next?!
The Heartland Institute Webinar
Saturday, April 24, 2010
11:00am Eastern

Health Care Post-Op: What Businesses Large and Small Need to Know
US Chamber of Commerce Event
Monday, April 26, 2010
10:00am – 12:00pm
Washington, DC

Health Care Reform in America with Sally Pipes
Independence Institute Event
Monday, April 26, 2010
5:30pm – 7:30pm
Loveland, CO

The Law of the Land: Health Care Reform and Implications for Disparities in Health and Health Care
Massachusetts General Hospital Webinar
Thursday, April 29, 2010
12:00pm – 1:00pm Eastern

What's in There? The New Health Reform Law and Private Insurance
Alliance for Health Reform Briefing
Friday, April 30, 2010
12:00pm – 1:30pm
Washington, DC

ObamaCare: Historic, but Is It Constitutional?
Cato Institute Policy Forum
Wednesday, May 5, 2010
Washington, DC