Tag: Obamacare

ObamaCare & Health Insurance Premiums: Out of the Frying Pan, into the Fire

During the (initial) congressional debate over ObamaCare, President Obama vilified Anthem Blue Cross of California for a 39 percent rate increase.  On Wednesday, the Hartford Courant reported that ObamaCare itself may increase premiums by similar amounts:

Health insurers are asking for immediate rate hikes of more than 20 percent in Connecticut for some plans, citing rising medical costs and federal health reform laws as reasons…

In what might appear to be an oddity, companies are citing a huge range of effects that the health care reform mandates will have on plan prices — from near zero to well over 20 percent. The reason is that among all the plans, some already deliver the provisions required by health reform, while others do not…

Anthem Blue Cross and Blue Shield in Connecticut, by far the largest insurer of Connecticut residents, said in a letter that it expects the federal health reform law to increase rates by as much as 22.9 percent for just a single provision — removing annual spending caps. The mandate to provide benefits to children regardless of pre-existing conditions will raise premiums by 4.8 percent, Anthem said in the letter. Mandated preventive care with no deductibles would raise rates by as much as 8.5 percent, Anthem said.

It was unclear how those separate factors would add up for Anthem’s plans, but those potential increases were all on top of rising medical costs.

If those increases are cumulative, ObamaCare could increase premiums for some Connecticut residents by more than 36 percent.

Compare that to what President Obama said in his weekly radio address on February 20:

The other week, men and women across California opened up their mailboxes to find a letter from Anthem Blue Cross. The news inside was jaw-dropping. Anthem was alerting almost a million of its customers that it would be raising premiums by an average of 25 percent, with about a quarter of folks likely to see their rates go up by anywhere from 35 to 39 percent

And as bad as things are today, they’ll only get worse if we fail to act… We’ll see exploding premiums and out-of-pocket costs burn through more and more family budgets.

It sure seems like President Obama promised that ObamaCare would make things better.  Instead, it pushed us out of the frying pan and into the fire.

HHS Secretary Katheleen Sebelius said that Anthem Blue Cross of California’s 39 percent rate increase “just doesn’t make a lot of sense to people across America.”  She said those “extraordinary” increases threaten “to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.”  Will she say the same about ObamaCare’s premium increases?  Or will she threaten to put Anthem Blue Cross and Blue Shield of Connecticut out of business for its insolence?

Avoiding the ‘U’ Word

I grow increasingly amused at how some people carefully avoid saying that ObamaCare is unpopular.

When Pollster.com aggregates all the various polls on ObamaCare’s popularity, it reveals that a plurality or majority of the public has consistently opposed the law since before the angry town-hall meetings of August 2009:

It’s no surprise when HHS Secretary Kathleen Sebelius avoids the U-word by saying stuff like, “We have a lot of reeducation to do.”  (To be clear, she’s talking about reeducating you, not herself.)

But it’s odd when a Washington Post news item describes the public as “profoundly ambivalent” toward the law. (According to Merriam-Webster, ambivalence means holding “simultaneous and contradictory attitudes or feelings,” “continual fluctuation,” or “uncertainty as to which approach to follow.”)  Or when Kaiser Family Foundation president and CEO Drew Altman tells NPR: “The public is split, has been split, and continues to be split.”

I guess those descriptions are true (though “continual fluctuation” and “uncertainty” seem like a stretch).  But they’re not very informative.  “Ambivalent” doesn’t tell you if one side dominates.  “Split” could accurately describe anything shy of unanimity.  “Opposed” or “unpopular” or “consensus” would convey so much more information. Why convey less?

Shifting the Blame for America’s Health Care Woes

I must be losing my touch. I’ve let nearly two months pass without responding to Ezra Klein’s defense of RomneyCare, ObamaCare, and other centrally planned health care systems.  (For those who want to get up to speed: his original post, my reply, and his response.)  So here goes.

Klein notes that he and I had each used flawed measures of RomneyCare’s impact on health insurance premiums in Massachusetts.  Fair enough.  But Klein ignores the study I cited by John Cogan, Glenn Hubbard, and Dan Kessler, which estimates that RomneyCare increased premiums in Massachusetts by 6 percent.  The CHK study has limitations, but it is the best estimate available.  I hope Klein addresses it.

Klein’s fallback position is that even if RomneyCare increases premiums, that’s not an indictment of the law because cost-control was not one of its goals.  Never mind that Mitt Romney boasted, “the costs of health care will be reduced.”  Klein knows political rhetoric when he sees it.  Yet he oddly sees no parallels between the phony-baloney promises of cost-control used to sell RomneyCare and the phony-baloney promises of cost-control used to sell ObamaCare – despite ample assistance from people like Medicare’s chief actuary and Alain Enthoven (“the American people are being deceived”).

Then Klein throws down his trump card:

[E]ven a cursory read of the evidence would show that whatever the drawbacks of central planning, it covers people at an extremely low cost. Romney Care’s cost problem is a result of pasting a coverage-oriented quick fix atop our insane health-care system. Compare its costs to the British system, the French system, the German system, or any other system, and whatever your conclusions, you won’t walk away unimpressed by the ability of centralized systems to cover whole populations for much less money than we spend.

Oy, where to begin?  First, Klein violates Cannon’s First Rule of Economic Literacy: he writes that centrally planned systems cost less, when what he means is that they spend less.

Second, the phrase “whatever the drawbacks of central planning” is some serious hand-waving.  Those “drawbacks” include (among other things): the Medicare program’s suppression of comparative-effectiveness research, error-reduction efforts, care coordination, and other delivery innovations; Canada’s human-rights violating Medicare system; and the suppression of untold innovations in health insurance and medical treatment by government price controls.  Other than a few drawbacks, Mrs. Lincoln…

Third, our “insane health-care system,” as I blogged previously, “is the product of the old raft of government price & exchange controls, mandates, and subsidies.”  Prior to ObamaCare, government already controlled half of all U.S. health care spending directly, granted control over another quarter to employers, and regulated health care more heavily than perhaps any other sector of the economy.  Klein and his fellow central planners can’t deny paternity.  Our “insane health-care system” is the product of central planning.

Finally, only a cursory read of the evidence could lead to the conclusion that central planning contains health care spending.  Klein posts the following charts and concludes that since all those (other) centrally planned systems spend less on health care than the United States, central planning must result in lower health care spending.

Photo credit: By Robert Giroux/Getty Images

But if that were true, then one would expect per-capita spending on elderly Americans – who have universal coverage through the centrally planned Medicare program – would not be far out of line when compared to how much other nations spend per elderly resident.  Yet the United States is just as far out of here as overall.  According to the OECD, the United States spends about twice as much per elderly person as Canada, and more than twice as much as Australia spends.  (Alas, I’m not cherry-picking; these are the only four nations for which the OECD provides recent data.)

Source: OECD, author’s calculations

(One could argue that the reason for this is that Medicare exists alongside the world’s largest (ostensibly) private health care sector, whose evils spill over into Medicare.  If that were the case, then moving all Americans into Medicare should reduce U.S. health care spending, bringing it back into line with other nations.  But consider that Klein and The New Republic’s Jonathan Chait both acknowledge that Congress had to throw $2 at the health care industry for every $1 that ObamaCare cut from future Medicare spending. How exactly could Congress move 250 million Americans into Medicare (which presumably would reduce overall spending), or reduce Medicare spending later, given those constraints?  How, exactly, would an independent rationing board survive the political dynamics that produce such outcomes? Prediction: it won’t.  The narrative that central planning contains health care spending just doesn’t hold water.)

Klein, The New Republic’s Jonathan Cohn, and others have taken a big step by acknowledging that RomneyCare is struggling.  When they shift the blame to “the American health care system,” however, they obscure what’s really happening.  As I closed my previous post: “RomneyCare and its progeny ObamaCare are attempts by the Left’s central planners to clean up their own mess.  If Klein and Cohn want to defend those laws, pointing to the damage already caused by their economic policies won’t do the trick.  They need to explain why government price & exchange controls, mandates, and subsidies will produce something other than what they have always produced.”

ObamaCare: a Downward Spiral of Rising Costs and Deteriorating Quality

Here’s my contribution to a “one-minute debate” on ObamaCare in the Christian Science Monitor:

The new health-care law’s mandates are already causing health insurance premiums to rise 3 to 9 percent more than they otherwise would. Its price controls are pushing insurers to abandon the market for child-only coverage and will soon begin rationing care to Medicare patients, partly by driving nearly 1 in 6 hospitals and other providers out of the program.

Starting in 2014, when the full law takes effect, things will get really ugly. ObamaCare’s “individual mandate” will drive premiums even higher – assuming the courts have not declared it unconstitutional, as they should. Because the penalty for violating the mandate is a fraction of those premiums, healthy people will wait until they are sick to buy coverage, driving premiums higher still. This is already happening in Massachusetts, which enacted a nearly identical law in 2006. ObamaCare’s price controls will force insurers to cover sick patients at artificially low premiums, guaranteeing that insurers will avoid, mistreat, and dump the sick, because that’s what the price controls reward. ObamaCare’s private health-insurance subsidies will expose low-wage workers to implicit tax rates higher than 100 percent, potentially trapping millions in poverty.

With real reforms like Medicare vouchers and large health savings accounts, and letting consumers purchase health insurance across state lines, a free market would reduce costs and improve quality through innovations such as integrated health systems, nurse-practitioner-staffed primary care clinics, telemedicine, and insurance that offers even sick patients a total satisfaction guarantee.

But until Congress or the courts discard ObamaCare’s mandates, price controls, and new entitlement spending, there is literally nothing that can arrest this downward spiral of rising costs and deteriorating quality.

The above link will also take you to a counter-point by Kavita Patel of the New America Foundation.

What If Cuccinelli Had Sent that Letter to Planned Parenthood?

The following analogy may help to explain why everyone should be troubled by HHS Secretary Kathleen Sebelius’ efforts to intimidate insurance companies who say unflattering things about ObamaCare.

Last month, Virginia Attorney General Ken Cuccinelli (R), issued an opinion that state regulatory boards already have the authority to impose additional regulations on abortion clinics.  Critics pounced, claiming that the measure could shut down 17 of the state’s 21 clinics. What if Cuccinelli responded with a letter threatening to investigate clinics that “misinform” the public about the costs of such regulation?

Sebelius’ Prior Restraint on Speech

Here’s something else to consider about HHS Secretary Kathleen Sebelius’ threatening letter to health insurers who dare to tell their enrollees about how much ObamaCare is costing them.

Sebelius threatened insurers for claiming ObamaCare will increase premiums by as much as 9 percent.  Yet there were no threats issued against the RAND Corporation when it estimated ObamaCare will increase premiums for young adults by an average of 17 percent beginning in 2014, or against Milliman Inc. when it likewise estimated premium increases of 10-30 percent for young adults.  The reasons for the disparate treatment are fairly obvious. Sebelius has less power over RAND or Milliman, and bullies always find it easier to pick on the unpopular kid.

But an equally important implication is that Sebelius knows that ObamaCare’s largest premium increases are yet to come.  Sebelius may be intimidating insurers now to prevent them from blaming those much larger premium increases on ObamaCare.

ObamaCare’s Threat to Free Speech

On Friday, I blogged about HHS Secretary Kathleen Sebelius’ letter to the health insurance lobby, in which she attempts to stifle political speech by using the new powers that ObamaCare grants her to threaten health insurance companies that claim ObamaCare’s coverage mandates are one cause behind rising premiums.  (Never mind that the insurers’ estimates – which project that ObamaCare will increase premiums in 2011 by as much as 9 percent – are in line with those put forward by HHS.)

Here’s a smattering of reactions from others.

  • The Wall Street Journal: “The Health and Human Services secretary…warned that ‘there will be zero tolerance for this type of misinformation and unjustified rate increases.’   Zero tolerance for expressing an opinion, or offering an explanation to policyholders? They’re more subtle than this in Caracas.”
  • Chicago Tribune: “President Obama’s health care reform plan, enacted in March, is not terribly popular with the American people…The administration can’t tell the public to stop grousing. It can, however, try to silence health insurers who have the nerve to say out loud what basic economic theory indicates…Apparently, harsh punishment is in store for anyone who refuses to parrot the administration line. But there is every reason to think this alleged libel is true.”
  • Tyler Cowen: “Nowhere is it stated that these rate hikes are against the law (even if you think they should be), nor can this ‘misinformation’ be against the law…[The letter] is worse than I had been expecting.”
  • Ed Morrissey: “Rarely have we heard a Cabinet official tell Americans to stay out of political debates at the risk of losing their businesses. It points out the danger in having government run industries and holding a position where politicians can actually destroy a business out of spite.”
  • Michael Barone: “Sebelius is threatening to put health insurers out of business in a substantial portion of the market if they state that Obamacare is boosting their costs…The threat to use government regulation to destroy or harm someone’s business because they disagree with government officials is thuggery. Like the Obama administration’s transfer of money from Chrysler bondholders to its political allies in the United Auto Workers, it is a form of gangster government.”
  • Eugene Volokh: “even if such action would be constitutionally permissible, it would be quite troubling, as would threats that seem to hint as such action: It would involve the Administration’s deliberately trying to suppress criticism of its policies, under a ‘misinformation’ standard that sounds highly subjective and politically contestable. (Consider [Sebelius’] reference ‘to our analysis and those of some industry and academic experts’ — what about the analysis of other industry and academic experts?) Perhaps I’m missing some important context here. But my first reaction is that this is ominous behavior on the Administration’s part, and seems to have both the intent and effect of suppressing criticism of the Administration’s policies — including criticism that simply expresses opinions the Administration dislikes, and makes estimates that it disagrees with, and not just criticism that contains objectively demonstrable ‘misinformation.’”

In The Wall Street Journal, economist Russ Roberts recently explained one of the main themes of Friedrich Hayek’s The Road to Serfdom:

When the state has the final say on the economy, the political opposition needs the permission of the state to act, speak, and write. Economic control becomes political control.

One need not agree with all of Hayek’s conclusions to see how ObamaCare is threatening political freedom.