Tag: health care reform

Cato on Health Care Reform

We are now facing some of the most sweeping changes health care has seen in decades. Reform is needed, but increasing government control over one-sixth of the economy and over important personal and private decisions – as many of the proposals aim to do – would harm American taxpayers, health care providers, and patients.

This week, the Cato Institute launched Healthcare.Cato.org, which highlights Cato’s contributions to the health care debate. The resources provided on the site provide in-depth analyses of health care issues and reform initiatives, and underscore the ways in which free-market reforms, increased consumer choice, and energized competition – not more government control – improve the quality and cost-efficiency of health care.

Please check back regularly for updates and new resources!

Update: The Cato Institute Conference on Health Care Reform will be Webcast live from 9:00-5:00 PM Wednesday.

Featured speakers:

  • Rep. Paul Ryan (R-WI)
  • Rep. Michael C. Burgess, M.D. (R-TX)
  • Rep. Jason Altmire (D-PA)
  • Karen Davenport, Director of Health Policy, Center for American Progress
  • Douglas Holtz-Eakin, Former Director, Congressional Budget Office, and Director of Domestic and Economic Policy for the McCain presidential campaign
  • Tom G. Donlan, Barron’s
  • Karen Tumulty, Time Magazine
  • Susan Dentzer, Health Affairs
  • John Reichard, Congressional Quarterly

Full schedule of events and Webcast, here.

What’s a Trillion Dollars Among Friends?

If you’re Barack Obama, money is no object. The national debt exceeds $11 trillion. We’ve had about $13 trillion worth of bail-outs over the last year. The deficit this year will run nearly $2 trillion. The Congressional Budget Office warns of a cumulative deficit of some $10 trillion over the next decade.

Now Obama-style health care “reform” will add another $1 trillion in increased spending over the same period. And the ultimate cost likely would be higher, perhaps much higher. Reports the Congressional Budget Office:

According to our preliminary assessment, enacting the proposal would result in a net increase in federal budget deficits of about $1.0 trillion over the 2010-2019 period. When fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges. At the same time, the number of people who had coverage through an employer would decline by about 15 million (or roughly 10 percent), and coverage from other sources would fall by about 8 million, so the net decrease in the number of people uninsured would be about 16 million or 17 million.

These new figures do not represent a formal or complete cost estimate for the draft legislation, for several reasons. The estimates provided do not address the entire bill—only the major provisions related to health insurance coverage. Some details have not been estimated yet, and the draft legislation has not been fully reviewed. Also, because expanded eligibility for the Medicaid program may be added at a later date, those figures are not likely to represent the impact that more comprehensive proposals—which might include a significant expansion of Medicaid or other options for subsidizing coverage for those with income below 150 percent of the federal poverty level—would have both on the federal budget and on the extent of insurance coverage.

Then there is the more than $100 trillion in unfunded Medicare and Social Security benefits.

Just who is going to pay all these bills?

Don’t worry, be happy.

Samuelson: Obama Would Increase, Not Reduce, Health Care Costs

Columnist Robert J. Samuelson, writing in this morning’s Washington Post:

It’s hard to know whether President Obama’s health-care “reform” is naive, hypocritical or simply dishonest. Probably all three. The president keeps saying it’s imperative to control runaway health spending. He’s right. The trouble is that what’s being promoted as health-care “reform” almost certainly won’t suppress spending and, quite probably, will do the opposite…

The president summoned the heads of major health-care groups representing doctors, hospitals, drug companies and medical device firms to the White House. All pledged to bend the curve. This is mostly public relations. Does anyone believe the American Medical Association can control the nation’s 800,000 doctors or that the American Hospital Association can command the 5,700 hospitals?…

The main aim of health-care “reform” being fashioned in Congress is to provide insurance to most of the 46 million uncovered Americans…But the extra coverage might actually worsen the spending problem.

How much healthier today’s uninsured would be with that coverage is unclear…

The one certain consequence of expanding insurance coverage is that it would raise spending…

It’s easier to pretend to be curbing health spending while expanding coverage and spending. Presidents have done that for decades, and it’s why most health industries see “reform” as a good deal.

The Co-op Cop-out

Faced with rising opposition to a so-called “public option” in health care reform, some Democrats are floating the idea of establishing health insurance “co-operatives” as an alternative. Opponents of a government takeover of the health care system should not be fooled.

A “co-op” can be defined as a business owned and controlled by its workers and the people who use its services, in this case presumably the people whom it insures. In that sense, government provision of some sort of legal framework or seed money to help establish health insurance co-ops seems relatively harmless but also relatively pointless. The U.S. already has some 1,300 insurance companies. Adding a few more would accomplish…what?

It is suggested that the “co-ops” would be nonprofits, and therefore would offer better service and lower costs. But many insurance companies, including “mutual” insurers and many “Blues,” are already nonprofit companies. Furthermore, states already have the power to charter co-ops, including health insurance co-ops. In fact, health care co-ops already exist. Health Partners, Inc. in Minneapolis has 660,000 members and provides health care, health insurance, and HMO coverage. The Group Health Cooperative in Seattle provides health coverage for 10 percent of Washington State residents.

If the new co-ops operate under the same rules as other nonprofit insurers, why bother?

And there’s the rub. Supporters of government-run health care have no intention of letting the co-ops be independent enterprises. In fact, Sen. Charles Schumer (D-NY) makes it clear, for example, that the co-op’s officers and directors would be appointed by the president and Congress. He insists that there be a single national co-op. And Congress would set the rules under which it operates.  As Sen. Max Baucus (D-MT) says, “It’s got to be written in a way that accomplishes the objectives of a public option.”

If a “co-op” is run by the federal government under rules imposed by the federal government with funding provided by the federal government, that is government-run health insurance by another name.

Kennedy’s Health Bill: A First Look

A draft of Sen. Ted Kennedy’s health care reform bill is finally available, and it is difficult to overstate how far he would move us to a government-run health care system. An initial read-through reveals among the key provisions:

  • An individual mandate, requiring that every American purchase a “qualified” insurance plan. (Sec. 161(a)) The mandate will be enforced through the tax code with Americans required to pay a penalty if they fail to comply.  In an extraordinary delegation of congressional authority, the Kennedy bill would give the Secretaries of Treasury and Health and Human Services the power to determine what this penalty should be. Individuals would be required to submit information on their insurance status over the previous year to the Secretary of HHS, along with “any such other information as the Secretary may require.” (Sec. 6055(b)(2) and (3)). Individuals who already have insurance could keep it. However, if they changed plans (or presumably changed jobs), their new insurance would have to meet the definition of “qualified.”
  • A “pay or play” employer mandate requiring employers to provide all workers with health insurance and pay a minimum amount of the premium, or pay a tax (Sec 162). Again, the amount of the new tax is left to the discretion of the Secretaries of HHS and Treasury. Some small employers would be exempt from the mandate, but the size of those firms remains TBA. (Sec. 3113(g)) Companies with fewer than 250 workers would be forbidden to self-ensure. (Sec. 2720)
  • A new federal bureaucracy, the Medical Advisory Council, which would determine what benefits will be required to be part of your “qualified” insurance plan. (Sec. 3103(h) and (i)). Lest anyone think Congress won’t get involved. The Council’s decisions can be disapproved by Congress if, say, they don’t mandate inclusion by a favored provider group or disease constituency. (Sec 3103(g)).
  • Massive new federal subsidies. Medicaid would be expanded to individuals earning 150 percent of the poverty level, and the federal government would pay all incremental costs of the increased enrollment. (Sec 152.) Single, childless adults would become eligible for Medicaid. Even more egregious, individuals and families with incomes between 150-500 percent of the poverty level ($110,250 for a family of four) would be eligible for subsidies on a sliding scale-basis.(Sec. 3111(b)(1)(A-G)).
  • Insurers would be required to accept all applicants regardless of their health (guaranteed issue) and forbid insurers from basing insurance premiums on risk factors (Community rating). There does not appear to be any exception for lifestyle factors, such as smoking, alcohol or drug use, diet, exercise, etc. Thus, not only will the young and healthy be forced to pay higher premiums to subsidize the old and unhealthy, but the responsible will be forced to pay more to subsidize the irresponsible.
  • A “public option” operating in competition with private insurance (Section 31__). How this plan would be funded, the level of premiums, etc. is left mostly TBA. In response to criticism, the Kennedy bill does require that the public plan pay providers 10 percent above Medicare reimbursement rates. (Sec 31__(B)). That would still allow for a considerable degree of cost-shifting to private insurance. And, we should recall that such promises are ephemeral. When Medicare began, proponents promised it would reimburse at the same rate as insurance. That promise didn’t last long.
  • States would be prodded to set up “gateways,” similar to Massachusetts’ “connector.” (Sec 3104(a)) If a state fails to do so, the federal government will set one up for them. (Sec. 3104(d)) The federal government would provide grants to states to help them set up these gateways. The amount of the grants is, you guessed it, left to the discretion of the Secretary of HHS. Gateways may also fund their operations by assessing a surcharge on insurers. Sec. 3101(b)(5)(A)/
  • A new federal long-term care program (Sec 171).

Kennedy does not include any estimate of how much his plan would cost, nor any proposal for how to pay for it.

More details will undoubtedly emerge, but it is very clear that the Kennedy plan would put one-sixth of the US economy and some of our most important, personal, and private decisions firmly under the thumb of the federal government.

The Economic Case for Health Care Reform

There’s an old Yiddish saying that, “If my bubba had wheels she’d be a trolley.” So goes the logic of the Obama administration in their paper released yesterday, “The Economic Case for Health Care Reform.” Their claim is that reducing health care costs would help the economy. Yes, if health care costs were reduced it would likely help the economy, though we should remember that the health care industry is part of the economy.

There is nothing in Obamacare, however, that will reduce costs. In fact, expanding coverage may cause costs to rise. One study by MIT’s Amy Finkelstein suggests that the prevalence of insurance itself has roughly doubled the cost of health care. So, if Obama succeeds in expanding insurance coverage, it’s very likely to increase the cost of care.

Take Massachusetts for example. Three years ago, Massachusetts governor Mitt Romney signed into law one of the most far-reaching experiments in health care reform since President Bill Clinton’s ill-fated attempt at national health care. Proponents promised the reforms would reduce health care costs, suggesting the price of individual insurance policies would be reduced by 25-40 percent. In reality, however, insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year. This is compared to a nationwide average increase of 5.7 percent over the same three years. Nationally, on average, health insurance for a family of four costs $12,700; in Massachusetts, coverage for the same family costs an average of $16,897.

In fact, since the bill was signed, health care spending in the state has increased by 23 percent. Thus, despite individual and employer mandates, the creation of an insurance connector and other measures that increase insurance regulations, Massachusetts has failed to bring costs down.

President Obama and Congressional leaders have endorsed expanding coverage in similar ways to Massachusetts. The proposals would undoubtedly make it easier for some people to get coverage, but would also raise insurance costs for the young and healthy, making it more likely they would go without coverage. This leaves two choices: revert to the individual mandate (President Obama opposed the mandate as a candidate) or increase subsidies to try to cut costs to young and healthy individuals, thereby adding to the already substantial cost of the proposed plans.

Ultimately, controlling costs requires someone to say “no,” whether the government (as in single-payer systems with global budgets), insurers (managed care) or health care consumers themselves (by desire or ability to pay). In reality, any health care reform will have to confront the fact that the biggest single reason costs keep rising is that the American people keep buying more and more health care.

The Health Care Battle Begins

Sen. Edward Kennedy (D-Mass.) has begun circulating drafts of his proposed health care reform legislation. Initial reports, including an op-ed in the Boston Globe by Kennedy himself, suggest that the bill will contain every one of the bad ideas that I outlined in my recent Policy Analysis on what to expect from Obamacare.

Among other things, the Kennedy bill will call for:

  • An employer mandate;
  • An individual mandate;
  • A so-called “Public Option,” a Medicare-like plan that will compete with private insurance;
  • The use of comparative-effectiveness/cost-effectiveness research to restrain costs;
  • Subsidies for families earning as much as 500% of the poverty level ($110,250 for a family of four).
  • Insurance regulation, including guaranteed issue and community rating. (He would also establish a Massachusetts-style Connector); and
  • Government-directed health IT.

There’s no indication yet of how much the plan would cost or how Sen. Kennedy plans to pay for it.

The bill will be formally presented to Senator Kennedy’s Committee on Health, Education, Labor & Pensions (HELP) sometime next week. Hearings could be held around June 10, and committee “mark up” could begin on June 17.

Senate Finance Committee chairman Max Baucus (D-Mont.) is expected to introduce his health care bill shortly before the Finance committee begins its scheduled mark up on June 10.

Meanwhile President Obama’s campaign apparatus is planning rallies and demonstrations around the country to build support for health care reform.

The battle over the future of health care in this country has begun.