Tag: Obamacare

Dear Health Care Journos, There’s Nothing Free about ObamaCare

The Obama administration announced yesterday its plans for implementing ObamaCare’s mandate that consumers purchase first-dollar coverage for preventive services.  The press release reads (emphasis added):

Administration Announces Regulations Requiring New Health Insurance Plans to Provide Free Preventive Care

Of course the administration would emphasize that consumers will pay nothing for these services at the moment of service, and elide the fact that this mandate will increase their health insurance premiums. The administration’s use of the word “free” is what we call spin.

What’s surprising–and more than a little disappointing–is that journalists and headline writers at major media organizations would repeat the administration’s spin, as if the government really is giving away free stuff:

  • New York Times: “Health Plans Must Provide Some Tests at No Cost…free coverage…free screenings…free preventive services…”
  • Los Angeles Times: “Healthcare law offers preventive care at no cost”
  • Politico: “New rules: Free preventive care…free under new federal guidelines.”
  • Reuters: “Healthcare overhaul mandates free preventive care…no extra cost to consumers…Medicare patients will have access to free prevention services…”
  • Wall Street Journal: “White House Unveils Free Preventative Services…services that will be free to consumers…free preventive care…free preventive care…”

Each use of “free” and “no cost” in these excerpts is false, even within its original context.  There’s no such thing as a free lunch. Everything has a cost.  No government can change that.  Mandating that insurers cover certain services does not magically make them free.  Consumers still pay, just in the form of higher health insurance premiums and lower wages.

The Wall Street Journal (in paragraph six), The New York Times (paragraph seven), Reuters (paragraph 16), and the Los Angeles Times (paragraph 19 or so) do mention that consumers will pay for this mandate in the form of higher premiums–but that doesn’t make the untrue stuff true.  It just makes the article internally inconsistent.  Moreover, the Los Angeles Times incorrectly suggests that the higher premiums would be offset by lower out-of-pocket spending.  (The change in premiums will be larger due to moral hazard and administrative costs.)  And Reuters mentions higher premiums only vaguely, and as if insurers would bear that cost.  Each article also repeats the administration’s spin that spending more on preventive care would reduce health care costs, without mentioning that the Congressional Budget Office and other health care researchers dispute that claim.

Journalists need to be very careful with terms like “free” and “no cost.”

Senators (Finally) Press Kagan about ObamaCare

Back in May, I suggested:

Senate Judiciary Committee members should be sure to ask Solicitor General and Supreme Court nominee Elena Kagan, during her upcoming confirmation hearings, whether she or her office played any part in crafting ObamaCare or the administration’s defense to the lawsuits challenging that law. If Kagan helped to craft either, that would present a conflict of interest: when those lawsuits reach the Supreme Court, she would be sitting in judgment over a case in which she had already taken sides…

If Kagan played a role in drafting ObamaCare or formulating the administration’s legal defense, and is confirmed by the Senate, propriety would dictate that she recuse herself from any challenges to that law that reach the high court.

Committee members didn’t ask her those questions during the hearings, as The Wall Street Journal explains. Fortunately, a letter to Kagan from all seven Republicans on the committee has (exhaustively) remedied that oversight.

Kagan has already told the committee she would recuse herself from any case in which she “participated in formulating the government’s litigating position.”  Given that she appears to take an expansive view of Congress’ power to regulate interstate commerce, the best possible outcome for opponents of ObamaCare would probably be for Kagan to join the Court but recuse herself from cases challenging that law.

That would also be the worst possible outcome for the administration.  In fact, universal coverage is so important to the Left that if Kagan would leave them with one less pro-ObamaCare vote on the Court, I wouldn’t be surprised to see President Obama withdraw her nomination.  He could then appoint someone as ideologically reliable as Kagan, but who could actually defend the president’s signature accomplishment.

This could get interesting.

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.

RomneyCare Unleashed Adverse Selection, As Will ObamaCare

The Massachusetts health care law that Gov. Mitt Romney signed in 2006, and the nearly identical federal law that President Obama signed this year, create perverse incentives that are causing health insurance costs to rise and could eventually cause health insurance markets to collapse. A report released yesterday by the Massachusetts Division of Insurance shows that process is well underway.

Massachusetts requires health insurance companies to sell to all applicants, and imposes price controls that require insurers to charge all applicants the same premium, regardless of their health status.  ObamaCare would do the same.

Those price controls have two principal effects on healthy people.  First, they increase the premiums that insurers charge healthy people (the additional premium goes to reduce premiums for sick people).  Second, they enable healthy people to wait until they are sick to purchase coverage.  Since insurers must take all applicants, and charge them the same premium, there is little or no downside to waiting until one gets sick to purchase coverage.

Those price controls also guarantee that when healthy people drop out of insurance pools, premiums rise for everyone who remains, which causes more healthy people to drop out, and do on.  Economists and actuaries call this an “adverse selection death spiral.”

The Boston Globe reports that the Massachusetts Division of Insurance found that in the wake of RomneyCare, many more healthy residents are purchasing coverage only when they need it:

The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long-awaited report released yesterday from the Massachusetts Division of Insurance.

The result is that insured residents of Massachusetts wind up paying more for health care…

The number of people engaging in this phenomenon — dumping their coverage within six months — jumped from 3,508 in 2006, when the law was passed, to 17,177 in 2008, the most recent year for which data are available.

In the hope of preventing this sort of gaming behavior, RomneyCare requires Massachusetts residents to purchase health insurance.  Yet that “individual mandate” appears not to be working, probably because the penalties for non-compliance are far less than the cost of the mandatory coverage.  Thus many residents decline to purchase health insurance, pay the penalty (or misrepresent their coverage status), and purchase health insurance only when they need medical care.

ObamaCare contains similar price controls and requires nearly all Americans to purchase health insurance by 2014.  Yet ObamaCare’s penalties for non-compliance are also far less than the cost of the required coverage for most people.

As goes Massachusetts, so goes the nation.

ObamaCare Is Undermining Economic Recovery, Job Growth

In a recent Wall Street Journal oped, Carnegie-Mellon economist Allan Meltzer explains how ObamaCare is delaying economic recovery:

Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth…

Mr. Obama has denied the cost burden on business from his health-care program, but business is aware that it is likely to be large. How large? That’s part of the uncertainty that employers face if they hire additional labor…

Then there is Medicaid, the medical program for those with lower incomes. In the past, states paid about half of the cost, and they are responsible for 20% of the additional cost imposed by the program’s expansion. But almost all the states must balance their budgets, and the new Medicaid spending mandated by ObamaCare comes at a time when states face large deficits and even larger unfunded liabilities for pensions. All this only adds to uncertainty about taxes and spending.

Meltzer concludes that the Obama administration is making the same mistake as FDR: “President Roosevelt slowed recovery in 1938-40 until the war by creating uncertainty about his objectives. It was harmful then, and it’s harmful now.”

For more on the harm caused by government-created uncertainty, read my colleague Tad DeHaven’s recent posts.

Business Roundtable: We Love/Hate Big Government

Regular readers of this blog know that big corporations often are enemies of free markets and individual liberty. So it is hardly suprising to know that the Business Roundtable, a lobby representing CEOs of major companies, supported the wasteful and ineffective stimulus program in 2009 and the bloated new health care entitlement in 2010. Big companies, after all, are quite proficient at working the system to obtain unearned wealth and to rig the rules against smaller competitors.
 
What is surprising, however, is that representatives of that organization now have the chutzpah to complain about a “hostile environment for investment and job creation.” Equally galling, the group has published a document called “Policy Burdens Inhibiting Economic Growth.” We’ve all heard the joke about the guy who murders his parents and then asks the court for mercy because he’s an orphan. The Business Roundtable has adopted that strategy, except this time taxpayers are the butt of the joke. Here’s an excerpt from the Washington Post report:

The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama’s closest ally in the business community, accused the president and Democratic lawmakers Tuesday of creating an “increasingly hostile environment for investment and job creation.” Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and “harm our ability … to grow private-sector jobs in the U.S.” …The final straw, said Roundtable president John Castellani, was the introduction of two pieces of legislation, now pending in Congress, that the group views as particularly bad for business. One, a provision of the administration’s financial regulation overhaul, would make it easier for shareholders to nominate corporate board members. The other would raise taxes on multinational corporations. The rhetoric accompanying the tax proposals has been particularly harsh, Castellani said, with Democrats vowing to campaign in this fall’s midterm elections on a platform of punishing companies that move jobs overseas. …Seidenberg polled the members of the Business Roundtable and a sister organization, the Business Council. The result was a 54-page document, delivered to Orszag on Monday, chock full of bullet points about actions taken or considered by a wide array of executive agencies, including the White House Middle Class Task Force and the Food and Drug Administration. We believe the cumulative effect of these proposals will help defeat the objectives we all share – reducing unemployment, improving the competitiveness of U.S. companies and creating an environment that fosters long-term economic growth,” Seidenberg wrote in a cover letter for the document, titled “Policy Burdens Inhibiting Economic Growth.”

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.