RomneyCare Just Got $150 Million More Expensive
One of the ways Massachusetts officials have tried to temper RomneyCare’s cost overruns was by denying participation to legal immigrants. Last week, the Commonwealth’s highest court ruled that restriction violates the Massachusetts Constitution:
Massachusetts cannot bar legal immigrants from a state health care program, according to a ruling issued Thursday by the state’s highest court…
The ruling said that a 2009 state budget that dropped about 29,000 legal immigrants who had lived in the United States for less than five years from Commonwealth Care, a subsidized health insurance program central to this state’s 2006 health care overhaul, violated the State Constitution.
“This appropriation discriminated on the basis of alienage and national origin,” wrote Justice Robert J. Cordy of the Supreme Judicial Court, ruling that the action “violates their rights to equal protection under the Massachusetts Constitution.”…
State officials say they will abide by the decision, although they are not yet sure how to pay for the change.
“This decision has significant fiscal impacts for the commonwealth, adding somewhere in the range of $150 million in annual costs to what is already a very challenging budget,” said Jay Gonzalez, secretary of administration and finance.
No doubt their “pay for” will involve another unpopular minority.
Former Romney/Obama advisor Jonathan Gruber has written that RomneyCare was already costing the state $50 billion more than projected by 2009. Of course, supporters have been hiding RomneyCare’s costs (and exaggerating its benefits) all along.
Bryan Caplan Rates Jonathan Gruber’s ObamaCare Graphic Novel ‘Awful’
Over at EconLog:
Given my interest in health economics and graphic novels, I was initially hopeful about Jonathan Gruber‘s graphic novel, entitled Health Care Reform: What It Is, Why It’s Necessary, How It Works. But in all honesty, the book is awful. Gruber crafts his argument like a salesman, not an economic educator. He’s careful to avoid outright mistakes, and makes a couple of awkward disclosures. Yet he omits a long list of crucial, damaging points.
Caplan discusses 13 of them.
Ballot Initiatives Provide Underappreciated Election-Night Victories
Last week, I highlighted nine ballot initiatives that were worth watching because of their policy implications and/or their role is showing whether voters wanted more or less freedom. The results, by and large, are very encouraging. Let’s take a look at the results of those nine votes, as well as a few additional key initiatives.
1. The big spenders wanted to impose an income tax in the state of Washington, and they even had support from too-rich-to-care Bill Gates. The good news is that this initiative got slaughtered by a nearly two-to-one margin. I was worried about this initiative since crazy Oregon voters approved higher tax rates earlier this year. In a further bit of good news, Washington voters also approved a supermajority requirement for tax increases by a similar margin.
2. Nevada voters had a chance to vote on eminent domain abuse. This is an initiative that I mischaracterized in my original post. The language made it sound like it was designed to protect private property, but it actually was proposed by the political elite to weaken a property rights initiative that the voters previously had imposed. Fortunately, Nevada voters did not share my naiveté and the effort to weaken eminent domain protections was decisively rejected. This is important, of course, because of the Supreme Court’s reprehensible Kelo decision.
3. California voters were predictably disappointing. They rejected the initiative to legalize marijuana, thus missing an opportunity to adopt a more sensible approach to victimless crimes. The crazy voters from the Golden State also kept in place a suicidal global warming scheme that is driving jobs out of the state. The only silver lining in California’s dark cloud is that voters did approve a supermajority requirement for certain revenue increases.
4. Nearly 90 percent of voters in Kansas approved an initiative to remove any ambiguity about whether individuals have the right to keep and bear arms. Let that be a warning to those imperialist Canadians, just in case they’re plotting an invasion.
5. Arizona voters had a chance to give their opinion on Obamacare. Not surprisingly, they were not big fans, with more than 55 percent of them supporting an initiative in favor of individual choice in health care. A similar initiative was approved by an even greater margin in Oklahoma. Shifting back to Arizona, voters also strongly rejected racial and sexual discrimination by government, but they narrowly failed to approve medical marijuana.
6. Shifting to the local level, San Francisco, one of the craziest cities in America rejected a proposal to require bureaucrats to make meaningful contributions to support their bloated pension and health benefits. On the other hand, voters did approve a proposal to ban people from sleeping on sidewalks. Who knew that was a big issue?
7. Sticking with the ever-amusing Golden State, voters unfortunately eliminated the requirement for a two-thirds vote in the legislature to approve a budget, thus making it even easier for politicians to increase the burden of government spending. The state almost certainly is already on a path to bankruptcy, and this result will probably hasten its fiscal demise. Hopefully, the new GOP majority in the House of Representatives will say no when soon-to-be Governor Brown comes asking for a bailout.
8. The entire political establishment in Massachusetts was united in its opposition to an initiative to to roll back the sales tax from 6.25 percent to 3 percent, and they were sucessful. But 43 percent of voters approved, so maybe there’s some tiny sliver of hope for the Bay State.
9. Louisiana voters approved an initiative to require a two-thirds vote to approve any expansion of taxpayer-financed benefits for government employees. With 65 percent of voters saying yes to this proposal, this is a good sign that the bureaucrat gravy train may finally be slowing down.
At the risk of giving a grade, I think voters generally did a good job when asked to directly make decisions. I give them a solid B.
Your Health Insurance, Designed by Lobbyists
Christopher Weaver of Kaiser Health News has an excellent article in today’s Washington Post on the various government agencies that will now be deciding what health insurance coverage you must purchase, and how many of those decisions will ultimately fall to lobbyists and politicians:
For years, an obscure federal task force sifted through medical literature on colonoscopies, prostate-cancer screening and fluoride treatments, ferreting out the best evidence for doctors to use in caring for their patients. But now its recommendations have financial implications, raising the stakes for patients, doctors and others in the health-care industry.
Under the new health-care overhaul law, health insurers will be required to pay fully for services that get an A or B recommendation from the U.S. Preventive Services Task Force…[which] puts the group in the cross hairs of lobbyists and disease advocates eager to see their top priorities — routine screening for Alzheimer’s disease, diabetes or HIV, for example — become covered services.
And it’s not just the USPSTF that will be deciding what coverage you must purchase:
[P]lans must also cover a set of standard vaccines recommended by the Advisory Committee on Immunization Practices, as well as screening practices for children that have been developed by the Health Resources and Services Administration in conjunction the American Academy of Pediatrics. Health plans will also be required to cover additional preventative care for women recommended under new guidelines that the Department of Health and Human Services is expected to issue by August 2011.
The chairman of the USPSTF says the task force will try “to stay true to the methods and the evidence… the science needs to come first.” A noble sentiment, but as my colleague Peter Van Doren likes to say, “When politics and science conflict, politics wins.” Witness how industry lobbyists have killed or neutered every single government agency that has ever dared to produce useful comparative-effectiveness research. (You’re next, Patient-Centered Outcomes Research Institute!)
When government agencies are making non-scientific value judgments–e.g., are these studies reliable enough to merit an A or B recommendation? what should be the thresholds for an A or B recommendation? will the benefits of mandating this coverage outweigh the costs?–politics does even better. Witness Sen. Barbara Mikulski (D-Md) overruling a USPSTF recommendation when she “inserted an amendment in the [new] health-care law to explicitly cover regular mammograms for women between 40 and 50. ”
Speaking of value judgments, the one flaw in Weaver’s article is that it inadvertently conveys a value judgment as if it were fact. He writes that the mandate to purchase coverage for preventive services is “good news for patients” and that 88 million Americans “will benefit.” Whether the mandate is good news for patients depends on whether patients value the added coverage more than the additional premiums they must pay. (The administration estimates that premiums for affected consumers will rise an average of 1.5 percent. One insurer puts the average cost at 3-4 percent of premiums. Naturally, some consumers will face above-average costs.) Whether the benefits outweigh the costs is ultimately a subjective determination. (The best way to find out, as it happens, is to let consumers make the decision themselves.)
A Response to Jonathan Gruber on ObamaCare & Health Care Costs
In this week’s New England Journal of Medicine, MIT health economist and Obama administration consultant Jonathan Gruber responds to claims that ObamaCare will increase health care costs. Gruber acknowledges the Obama administration’s estimates that ObamaCare will increase health care spending, but compares that to the administration’s estimate that 34 million otherwise uninsured U.S. residents will obtain coverage under the law:
[B]y 2019, the United States will be spending $46 billion more on medical care than we do today. In 2010 dollars, this amounts to only $800 per newly insured person — quite a low cost as compared (for example) with the $5,000 average single premium for employer-sponsored insurance.
What a bargain! Of course, Gruber is being sneaky. The cost per newly insured person is not $800. It will be higher than $5,000. But only $800 of that cost will appear as new health care spending. The rest of that cost will be borne largely by people who already had coverage, but find their access to care reduced. These include Medicare enrollees who will receive fewer benefits through (or who will be ousted from) their private Medicare plans; Medicare enrollees who will have a harder time accessing care because some hospitals, skilled nursing facilities, home health agencies and other providers “might end their participation in the program,” according to the Obama administration; and maybe even some (currently) privately insured people who find themselves in Medicaid. (The administration itself says it is “probable” that ObamaCare “could result…in some of this demand being unsatisfied.”) Other costs include the economic growth and opportunity that is destroyed by ObamaCare’s tax increases, and the costs associated with trapping workers in low-wage jobs.
And that’s if everything goes as planned. Gruber remains convinced that future Congresses will not undo ObamaCare’s tax increases or downward adjustments to Medicare’s price controls, as Congress has consistently undone scheduled reductions in the prices that Medicare pays physicians. Gruber’s sometime employer — the Obama administration — itself contradicts his argument when it writes that the bulk of those reductions in Medicare spending are “doubtful” and “unrealistic.” Gruber inadvertently shows why critics are right to be skeptical about the tax increases and spending reductions when he writes:
The cuts in spending and increases in taxes are actually “back-loaded,” with the revenue increases rising faster over time than the spending increases, so that this legislation improves our nation’s fiscal health more and more over time.
The fact that the austerity measures had to be backloaded is a sign of their implausibility. If they were popular, they could take full effect tomorrow. But their implementation had to be delayed to head off significant political resistance — resistance that will express itself between now and when those austerity measures take effect.
On the broader issue of reducing the growth of health care spending, Gruber claims that ObamaCare “cautiously pursue[s] many different approaches toward cost control and stud[ies] them to see which ones work best.” Yet each approach is all but guaranteed to fail. The tax on high-cost health plans? Unlikely to survive. (But at least Gruber now admits it is a tax.) The rationing board designed to curtail each congresscritter’s ability to keep the money flowing to health care providers in their districts? Also unlikely to survive, for obvious reasons. Pilot programs experimenting with different government price and exchange controls? Even successful pilot programs get nixed. Comparative-effectiveness research? A pipe dream that fails every time the government tries it.
To the extent that these spending cuts fail to materialize, health care spending will rise, and deficits will deepen. Congress will need to impose additional tax increases, and/or find sneakier ways to ration medical care curb health care spending. Gruber’s Massachusetts enacted ObamaCare four years ago, and that’s exactly what state officials are doing.
Since President Obama signed this law, the Congressional Budget Office has announced that its cost, including the so-called “doc fix” and spending subject to appropriations, is already about $200 billion higher than previously believed. As I’ve written elsewhere:
ObamaCare would create new constituencies for government spending, hook existing constituencies on even more government spending, and promise implausible cuts in existing subsidies to constituencies that are highly organized and vocal.
Gruber gets chutzpah points for arguing that the same law would actually contain health care costs.
Lies, Damned Lies, and CBO Estimates
Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President’s proposal to further expand the federal government’s control over the health care system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to “drive down red ink:”
The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade – and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.
Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong, in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, health care providers, state and local politicians, etc.) will modify their behavior to become eligible for other people’s money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses.
If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That’s good for Washington and bad for the country.
Thursday Links
- Greece, here we come…. Congressional Budget Office estimates budget deficits will average nearly $1 trillion per year for the next decade.
- Matt Drudge re-titles a Cato op-ed: “Mob Tactics Used to Push Healthcare Through.”
- Daniel Griswold: “On trade, as on so much else, the populists have it wrong again. Free trade and globalization are great blessings to families across America.“
- Could Dennis Kucinich bring both sides of the aisle together to end the war in Afghanistan?
- Podcast: “Seventies Redux?” featuring John Samples, author of the forthcoming book The Struggle to Limit Government.
Before Administering the Lethal Injection, Dr. Obama Offers to Sterilize the Needle
In a letter to congressional leaders, President Obama wrote of his openness to including Republican proposals in his health care legislation.
Dropping a few Republican ideas into a government takeover of health care is like sterilizing the needle before a lethal injection: a nice thought, but the ultimate outcome is the same.
- Two of the four Republican ideas – federal grants to states that adopt medical malpractice liability reforms, and ratcheting upward Medicare’s physician-price controls – would increase government spending.
- The president’s health savings accounts (HSAs) proposal would merely loosen the noose around consumer-directed health plans.
- Undercover investigations in Medicare and Medicaid are likely to be as unsuccessful as past efforts to combat fraud.
This is not bipartisanship. President Obama is creating the illusion of bipartisanship while taking the most partisan route possible: forcing his legislation through Congress via reconciliation.
(Cross-posted at National Journal‘s Health Care Arena.)
HHS Bureaucracy Is Not up to the Task
One aspect of the health care debate that has not been sufficiently addressed is how the Department of Health and Human Services will handle all its new responsibilities given the massive fraud and abuse that already plagues its existing programs.
It seems that every week there’s a new report of government health care being bilked. Since what’s reported is typically only what is caught, one can only imagine how much isn’t being caught. Harvard’s Malcolm Sparrow, a top specialist in health care fraud, estimates that up to 20 percent of federal health program budgets are consumed by improper payments, which would be a staggering $150 billion a year for Medicare and Medicaid.
New York Times columnist David Leonhardt did raise the question this week of whether the HHS bureaucracy is up to the task. He notes that the president is yet to choose a nominee to head the HHS’s Centers for Medicare and Medicaid Services (CMS), and he suggests that “the lack of a Medicare nomination suggests that the White House is not giving enough attention to what will happen once Mr. Obama signs a bill.” Well that’s because most politicians are primarily concerned with getting accolades for passing bills, but don’t worry too much about how programs actually work.
As I mentioned in an earlier post on this subject, CMS is the reincarnation of a previous HHS bureaucracy with a poor reputation. David Hyman recounts in his book, Medicare Meets Mephistopheles, that in 2001 HHS’s Health Care Financing Administration became CMS in an attempt to rebrand the universally disliked HCFA. CMS Administrator Tom Scully told Congress in 2003:
The fact is, the health care market…is extremely muted and extremely screwed up and it’s largely because of my agency. For those of you who don’t follow CMS, which used to be called HCFA, we changed the name because it was so well loved. I always say it’s kind of like when Enron comes out of bankruptcy, they’ll probably change their name. So, HCFA—Secretary Thompson and I decided to confuse everybody. We changed the name to CMS for a couple of years so people wouldn’t realize we’re actually HCFA. So far, it’s worked reasonably well.
Oh sure, the president is promising that this time it will be different. But Leonhardt relates a story from former CMS administrator Mark McClellan that shows why the president’s promise will be impossible to keep:
[Mark McClellan] likes to tell the story of a Medicare demonstration project that Congress approved in 2003. Once the bill passed, officials had to devise the project’s details, decide how to measure the results and choose the locations. All of that took until 2009. The first round of projects — coordinating care across medical specialties, in Indiana and North Carolina — has only recently started. Years more will pass before the results are in.
Should Republicans Have Compromised to Produce a Less-Bad Healthcare Bill?
Writing for Forbes, Bruce Bartlett puts forth an interesting hypothesis that healthcare legislation could have been made better (hopefully he meant to write “less destructive”) if the GOP had been willing to compromise with Democrats:
Democrats desperately wanted a bipartisan bill and would have given a lot to get a few Republicans on board. This undoubtedly would have led to enactment of a better health bill than the one we are likely to get. But Republicans never put forward an alternative health proposal. Instead, they took the position that our current health system is perfect just as it is.
Bruce makes several compelling points in the article, especially when he notes that it will be virtually impossible to repeal a bad bill after 2010 or 2012, but there are good reasons to disagree with his analysis. First, he is wrong in stating that Republicans were united against any compromise. Several GOP senators spent months trying to negotiate something less objectionable, but those discussions were futile. Also, I’m not sure it’s correct to assert Republicans took a “the current system is perfect” position. They may not have offered a full alternative (they did have a few good reforms such as allowing the purchase of insurance across state lines), but their main message was that the Democrats were going to make the current system worse. Strikes me as a perfectly reasonable position, one that I imagine Bruce shares.
Let’s explore Bruce’s core hypothesis: Would compromise have generated a better bill? It’s possible, to be sure, but there are also several reasons why that approach may have backfired:
1. It’s not clear a policy of compromise would have produced a less-objectionable bill. Would Senate Democrats have made more concessions to Grassley and Snowe rather than Lieberman and Nelson (much less whether the “concessions” would have been good policy)? And even if Reid made some significant (and positive) concessions, is there any reason to think those reforms would have survived a conference committee with the House? Yet the compromising Republicans probably would have felt invested in the process and obliged to support the final bill — even if the conference committee produced something worse than the original Senate Democrat proposal.
University of Michigan Study Confirms Link between Financial Bailout and Corruption
Since Senators engaged in open extortion and bribery to enact Reid’s government-run health care plan, it is hardly newsworthy that Washington is riddled with corruption. But the magnitude of sleaze is probably far greater than most people realize. There is a new study from a couple of academics at the University of Michigan, who found significant relationships between lobbying and bailout money, as well as a greater chance of getting bailouts depending on a bank’s ties with either the Federal Reserve or key members of Congress. Hopefully, people across America will draw the obvious conclusion and realize that big government is inherently corrupting, as discussed in this video. Reuters has the details on this latest example of big government and malfeasance:
U.S. banks that spent more money on lobbying were more likely to get government bailout money, according to a study released on Monday. Banks whose executives served on Federal Reserve boards were more likely to receive government bailout funds from the Troubled Asset Relief Program, according to the study from Ran Duchin and Denis Sosyura, professors at the University of Michigan’s Ross School of Business. Banks with headquarters in the district of a U.S. House of Representatives member who serves on a committee or subcommittee relating to TARP also received more funds. Political influence was most helpful for poorly performing banks, the study found. “Political connections play an important role in a firm’s access to capital,” Sosyura, a University of Michigan assistant professor of finance, said in a statement. Banks with an executive who sat on the board of a Federal Reserve Bank were 31 percent more likely to get bailouts through TARP’s Capital Purchase Program, the study showed. Banks with ties to a finance committee member were 26 percent more likely to get capital purchase program funds.
The Pelosi Bill’s High Water Mark
Democrats are having difficulty corralling 218 votes for the Pelosi bill because Americans do not want government to be as big and as powerful as the House leadership does. Pro-life Democrats do not want a government so big that it can force taxpayers to fund abortions. Pro-choice Democrats do not want a government so big that it uses subsidies to restrict access to abortion coverage. Other Democrats don’t want a government so big that it turns the United States into a welfare magnet.
The American people don’t want the Democrats’ approach to health care generally. The more time the public has to digest ObamaCare, the more they dislike it:
And the Pelosi bill is the most expensive and extreme version of ObamaCare. Opposition will climb higher when the public learns the bill costs some $1.5 trillion more than Democrats claim.
Even a majority vote would not necessarily indicate majority support for the Pelosi bill. Rep. Jim Cooper (TN) and other Democrats are voting aye only because they want to keep the process moving – i.e., because this isn’t the vote that counts.
Win or lose, tonight’s vote will be the high water mark for the Pelosi bill.
(Cross-posted at Politico‘s Health Care Arena.)
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