The CLASS Act: This Is Confidence-Inspiring?
In the Daily Caller, I explain how the failure of ObamaCare‘s “CLASS Act” highlights the fatal flaws in the rest of the law:
As it turns out, CLASS collapsed even before its 2012 start date. The same thing happened when Obamacare imposed the same sort of price controls on health insurance for children in September 2010: the markets for child-only coverage collapsed in a total of 17 states, and are slowly collapsing in even more…
In the face of this setback, Obamacare supporters are naturally declaring victory. Jonathan Cohn of The New Republic sees “vindication.” Kevin Drum of Mother Jones proudly announces, “What happened here is that government worked exactly the way it ought to.” The Washington Post’s Ezra Klein instructs, “The CLASS experience should, if anything, make us more confident in the underlying law.” It’s hard to argue with such logic, but let’s try…
Obamacare inspires confidence in its supporters, then, because one part of the law throws a Hail Mary pass to prevent another part of the law from stripping Americans of the insurance that currently protects them from illness and impoverishment. Feel safer?
So if you’d like secure protection from illness and impoverishment, repeal ObamaCare. Or say your prayers.
Block-Granting Medicaid Is a Long-Overdue Way of Restoring Federalism and Promoting Good Fiscal Policy
This new video, based in large part on the good work of Michael Cannon, explains why Medicaid should be shifted to the states. As I note in the title of this post, it’s good federalism policy and good fiscal policy. But the video also explains that Medicaid reform is good health policy since it creates an opportunity to deal with the third-party payer problem.
One of the key observations of the video is that Medicaid block grants would replicate the success of welfare reform. Getting rid of the federal welfare entitlement in the 1990s and shifting the program to the states was a very successful policy, saving billions of dollars for taxpayers and significantly reducing poverty. There is every reason to think ending the Medicaid entitlement will have similar positive results.
Medicaid block grants were included in Congressman Ryan’s budget, so this reform is definitely part of the current fiscal debate. Unfortunately, the Senate apparently is not going to produce any budget, and the White House also has expressed opposition. On the left, reducing dependency is sometimes seen as a bad thing, even though poor people are the biggest victims of big government.
It’s wroth noting that Medicaid reform and Medicare reform often are lumped together, but they are separate policies. Instead of block grants, Medicare reform is based on something akin to vouchers, sort of like the health system available for Members of Congress. This video from last month explains the details.
In closing, I suppose it would be worth mentioning that there are two alternatives to Medicaid and Medicare reform. The first alternative is to do nothing and allow America to become another Greece. The second alternative is to impose bureaucratic restrictions on access to health care—what is colloquially known as the death panel approach. Neither option seems terribly attractive compared to the pro-market reforms discussed above.
Filed under: General; Government and Politics; Health Care; Tax and Budget Policy
ObamaCare’s ‘Medical Loss Ratio’ Regs Encourage Fraud, Unnecessary Medical Services
Yesterday, the U.S. Department of Health and Human Services issued regulations implementing ObamaCare‘s rule mandating that health insurers maintain minimum “medical loss ratios.”
Opponents of private health insurance have made a fetish of MLRs – a statistic that insurers developed to show investors the share of premiums they spend on claims. (“See? They call it a ‘loss’ when they pay for medical care — that proves they’re evil!”) So the opponents of private health insurance who crafted ObamaCare included a rule requiring carriers to spend at least 80 percent of premium revenue (large employers must spend 85 percent) on “your health care.” What could possibly go wrong?
The folly and false compassion of ObamaCare are on full display in the MLR regs, where government bureaucrats have evidently determined that unnecessary and harmful medical services, and even insurance fraud, are in fact good for patients. Okay, HHS bureaucrats don’t actually think that. But ObamaCare’s MLR regs include fraud prevention and utilization review among the administrative expenses on which carriers may spend no more than 20 percent of revenue (15 percent for large employers). That will effectively discourage insurers from policing fraud and conducting utilization reviews that protect patients from the expense and risks of unnecessary medical tests and procedures.
ObamaCare’s fatal conceit is that government bureaucrats can determine and deliver what is good for patients. Consumers will continue to feel the pain – costs will continue to rise and more insurers will flee the marketplace – until Congress gives up that conceit and repeals this law.
Filed under: Cato Publications; General; Government and Politics; Health Care
KFF/HRET Survey Part II: Isn’t This Good News, Too?
As I blogged earlier, yesterday the Kaiser Family Foundation and the Health Research & Educational Trust released their survey of employer-sponsored health benefits in 2010.
For most of this survey’s history, it included a very useful graph of the average growth rate of employer-sponsored insurance premiums. Here’s the graph from their 2007 survey:
(The grey and light-green lines represent year-to-year growth in overall inflation and wages, respectively.)
Unfortunately, 2007 was the last year that KFF/HRET included that graph in their annual survey. Had they included that graph this year, it would have shown an even more heartening moderation of premium growth:
A lot of things can drive premium growth. I discussed a couple of them in my last post. Some factors that could cause premium growth to moderate might not be all that welcome; if insurers dumped all their sick enrollees, for example. But absent dramatic evidence of that, isn’t this good news? And isn’t good news worth highlighting?
Great Moments in Government-Run Healthcare
Somebody sent me this story from the Drudge Report and I can’t resist the temptation to share. What really astounds me is not that a Swedish man sewed up his own leg after waiting for a long time in a hospital. Heck, I wouldn’t be surprised if things like that happened in all nations. The really disturbing part of the story is that the hospital then reported the man to the police. A classic case of “blaming the victim.” The bureaucrats in Sweden’s government-run healthcare system obviously were not pleased that he called attention to their failure.
A 32-year-old took the needle into his hands when he tired of the wait at Sundsvall hospital in northern Sweden and sewed up the cut in his leg himself. The man was later reported to the police for his impromptu handiwork. “It took such a long time,” the man told the local Sundsvall Tidning daily. The man incurred the deep cut when he sliced his leg on the sharp edge of a kitchen stove while he was renovating at home. “I first went to the health clinic, but it was closed. So I rang the medical help line and they told me that it shouldn’t be closed, so I went to emergency and sat there,” the man named only as Jonas told the newspaper. After an hour-long wait in a treatment room, he lost patience and proceeded to sew up his own wound. “They had set out a needle and thread and so I decided to take the matter into my hands,” he said. But hospital staff were not as impressed by his initiative and have reported the man on suspicion of arbitrary conduct for having used hospital equipment without authorization.
Federal Judge Denies Obama Administration’s Motion to Dismiss Virginia’s ObamaCare Lawsuit
From The Los Angeles Times:
RICHMOND, Va. (AP) — Virginia’s lawsuit challenging the Obama administration’s health care reform law has cleared its first legal hurdle.
U.S. District Judge Henry Hudson on Monday denied the Justice Department’s request to dismiss the lawsuit.
Virginia Attorney General Ken Cuccinelli claims that Congress does not have the authority under the Constitution’s Commerce Clause to require citizens to buy health insurance or pay a penalty.
The Virginia General Assembly passed legislation this year exempting state residents from the coverage mandate.
More than a dozen other state attorneys general have filed a separate lawsuit in Florida challenging the federal law, but Virginia’s lawsuit is the first to go before a judge.
Matlock’s Medicare Pitch Ruled Out of Order
FactCheck.org says that in an ad purchased with your tax dollars, actor Andy Griffith (a.k.a., the sheriff of Mayberry and Matlock) used a “weasel word” to mislead Medicare enrollees about how ObamaCare will affect them:
Griffith tells his fellow senior citizens, “like always, we’ll have our guaranteed [Medicare] benefits.” But the truth is that the new law is guaranteed to result in benefit cuts for one class of Medicare beneficiaries — those in private Medicare Advantage plans…
[T]he term “guaranteed” is a weasel word — a qualifier that sucks the meaning out of a phrase in the way that weasels supposedly suck the contents out of an egg. It may sound to the casual listener as though this ad is saying that the benefits of all Medicare recipients are guaranteed to stay the same — and that may well be the way the ad’s sponsors wish listeners to hear it. But what the administration is really saying is that only those benefits that are guaranteed in law will remain the same.
FactCheck.org neglects to mention that ObamaCare will weaken the guarantee behind those “guaranteed” benefits, too. Medicare’s chief actuary Richard Foster notes that ObamaCare ratchets down Medicare’s price controls, which will “possibly jeopardiz[e] access to care for beneficiaries.” That’s not to say that the old price-control scheme is any better than the new one. It just means that the Obama administration is being even less honest and more weaselly than FactCheck.org says.
And they’re dragging Matlock down with them.
Obamacare Complexity vs Free Market Simplicity
Free markets are characterized by voluntary exchange between buyers and sellers. Mapping that relationship is absurdly simply, as this image indicates.
Indeed, the only reason I even bothered to include that image was for purposes of comparison. Here is a new flowchart prepared for the Joint Economic Committee showing the healthcare system under Obamacare.
It’s worth noting, by the way, that the system already was a disaster even before Obamacare was enacted. In the health care sector, free markets are only allowed to operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a bad situation worse.
A Response to Gruber on RomneyCare & Health Care Costs
I just came across this letter to the editor of the Wall Street Journal from MIT economist Jonathan Gruber. I don’t know how to confine myself to just one of the letter’s many problems. So brace yourselves, here comes the fisk.
Joseph Rago’s article on Massachusetts health-care reform (“The Massachusetts Health-Care ‘Train Wreck‘,” op-ed, July 7) is exactly the type of selectively misleading use of facts upon which opponents of health-care reform have been relying over the past year.
No comment, other than remember the phrase “selectively misleading use of facts.”
Health-care reform in Massachusetts has covered 60% of the state’s uninsured, has done so at roughly the cost projected before reform was enacted in 2006, and remains overwhelmingly popular with the residents of the state.
Regarding coverage gains, Massachusetts officials used to claim that RomneyCare reduced the share of uninsured residents from around 10 percent to 2.6 percent. In a study released this year, Aaron Yelowitz (a former student and coauthor of Gruber’s) and I show why that figure is too low and why the actual figure is likely 5.1 percent or higher. The study on which Gruber relies — like all other such studies — neither mentions nor attempts to measure the problem that Yelowitz and I identified: uninsured Massachusetts residents appear to be responding to the individual mandate by concealing their lack of insurance, which would inflate the coverage gains. Since that study obtained results similar to our results for Massachusetts adults, that study’s estimate of a 60-percent reduction in the uninsured appears to be an upper-bound estimate, rather than a point estimate.
Regarding costs, I haven’t seen any updated numbers since the Massachusetts Taxpayers Foundation’s whitewash from May 2009. I’d like to see an updated, non-whitewashed report on actual spending and how it compares to the original projections, especially considering that in 2006, the Kaiser Family Foundation reported that Massachusetts “anticipates that no additional funding will be needed beyond three years.“ Updated figures would also allow us to judge how much RomneyCare spent per newly insured resident.
The state has seen a decline in its nongroup premiums of more than 50% relative to national trends…It reduced the costs to individuals of purchasing insurance…[an] enormous reduction relative to pre-reform…
Here’s where Gruber engages in his own “selectively misleading use of facts.” Yes, non-group premiums appear to have fallen for the 4 percent of residents in the non-group market — because RomneyCare shifted those costs to workers with job-based coverage.
It is true that reform has not slowed the growth of group health-insurance premiums, which have continued to rise at exactly the same rate as in the nation as a whole.
The first part of this sentence is an understatement; the second part is false. This report from the left-wing Commonwealth Fund shows that premiums in Massachusetts are growing faster than anywhere else in the nation. And the only study that has tried to isolate the effect of RomneyCare finds that it increased premiums for employment-based coverage by 6 percent (see cost-shifting, above).
Despite Gov. Mitt Romney’s claims, the Massachusetts reform was not designed to slow the growth of health-care cost growth.
It should be obvious by now that RomneyCare wasn’t designed that way. But it sure was sold that way. And so was ObamaCare. Any bets on how long before we hear apologists for both claiming that ObamaCare wasn’t designed to slow cost growth?
The PPACA also includes a series of changes that represent the best thinking about how to control costs, such as an independent rate-setting board for Medicare, pilots of innovative medical reimbursement approaches, and an end to the open-ended tax subsidy to the highest cost health insurance plans in the U.S. None of these is guaranteed to slow the rate of cost growth. But each is better than doing nothing, which was the alternative.
So the, ahem, best thinking on how to contain health care costs is (1) price and exchange controls set by (2) an unelected and unaccountable rationing board, plus (3) taxing health insurance. Bra-vo. Sure, Obama’s National Economic Council chairman Larry Summers says, “Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.” But when the alternative is nothing — nothing! — that means the bar for “best thinking” isn’t very high.
In the end, it is impossible to control health-care costs without first bringing as many citizens as possible into our health-insurance system.
As I blogged earlier today, it does not speak well of the Left’s approach to health care that in order to reduce wasteful government spending — or at least pretend to — they must first create more wasteful government spending.
Filed under: Cato Publications; General; Government and Politics; Health Care
Abortion, Third-Party Payer, and the Cost of Health Care
A major problem with America’s health care system, both before and after Obamacare, is the fact that consumers very rarely spend their own money when obtaining health care. Known as third-party payer, this problem exists in part because government directly finances almost 50 percent of health care expenditures. But even a majority of supposedly private health care spending is financed by employer-provided policies that are heavily distorted by a preference in the tax code that encourages insurance payments even for routine expenses. According to government data, only 12 percent of health care costs are financed directly by consumers. And since consumers almost always are buying health care with somebody else’s money, it should come as no surprise that this system results in rising costs and inefficiency. This is why repealing Obamacare is just the first step that is needed if policymakers genuinely want to restore a free market health care system (all of which is explained in this 4-minute video).
Unfortunately, many people think that market forces don’t work in the health care system and that costs will always rise faster than prices for other goods and services. There are a few examples showing that this is not true, and proponents of liberalization usually cite cosmetic surgery and laser-eye surgery as examples of treatments that generally are financed by out-of-pocket payments. Not surprisingly, prices for these treatments have been quite stable — particularly when increases in quality are added to the equation.
I just ran across another example, and this one could be important since it may resonate with those who normally are very suspicious of free markets. As the chart from the Alan Guttmacher Institute shows, the price of an abortion has been remarkably stable over the past 20-plus years. Let’s connect the dots to make everything clear. Abortions generally are financed by out-of-pocket payments. People therefore have an incentive to shop carefully and get good value since they are spending their own money. And because market forces are allowed, the cost of abortions is stable. The logical conclusion to draw from this, of course, is that allowing market forces for other medical services will generate the same positive results in terms of cost and efficiency.
None of this analysis, by the way, implies that abortion is good or bad, or that it should be legal or illegal. The only lesson to be learned is that market forces control costs and promote efficiency and that more government spending and intervention exacerbate the third-party payer crisis.
Restore Free Markets to Health Care
Eline van den Broek probably is not happy today since she was in South Africa watching her team lose a high-scoring (by soccer standards) battle with Spain, but she should be very proud of the new video she narrated that urges the repeal of Obamacare — and also points out some of the other reforms that are needed to restore a free market to the US health care system.
Her comments on how the American health care system was a mess even before Obamacare are particularly important and echo many of the points made by Mike Tanner and Michael Cannon.
ObamaCare Regs’ Effect on Uncompensated Care Overblown
An Obama administration “fact sheet,” released alongside the interim final rules for several of ObamaCare’s cost-increasing mandates, claims those mandates will reduce the “hidden tax” imposed by uncompensated care:
By making sure insurance covers people who are most at risk, there will be less uncompensated care and the amount of cost shifting among those who have coverage today will be reduced by up to $1 billion in 2013.
According to research by the Urban Institute, that “hidden tax” isn’t very large:
Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurers in the form of higher charges.
As the Congressional Budget Office repeatedly lectures Congress, “Uncompensated care is less significant than many people assume.”
Likewise, these mandates’ effect on uncompensated care will be less significant than the Obama administration would like you to think. Using data from the Centers for Medicare & Medicaid Services and a reasonable assumption of 6-percent annual growth, total private health insurance premiums in 2013 will be in the neighborhood of $1.1 trillion. So the administration is boasting that these mandates will reduce the 1.7-percent “hidden tax” imposed by uncompensated care to 1.61 percent.
Indeed, the whole of ObamaCare may not do much to reduce the “hidden tax” of uncompensated care. After Massachusetts enacted a nearly identical law, the Urban Institute reports, “high levels of emergency department (ED) use have persisted in Massachusetts. Specifically, ED use was high in Massachusetts prior to health reform and has stayed high under health reform.” A lot of uncompensated care comes in through the ED.
Finally, notice how a 1.7-percentage-point premium surcharge is a bad thing if President Obama is ostensibly rescuing you from it, but a good thing if he’s imposing it on you.
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