Tag: price controls

Obamacare’s Sweetheart Deal for Massachusetts

A bunch of rural hospitals are upset about a provision of Obamacare that benefits Massachusetts above all other states. Forgive the bureaucratese, but you really have to read the Medicare Price Control Payment Advisory Commission’s description to appreciate the situation:

Among the proposed wage index reclassifications or exceptions granted to hospitals for FY2012, the rural floor exception triggered in the state of Massachusetts will have a large impact on hospital payments. Beginning in FY 2012, the conversion of Nantucket Cottage Hospital from a critical access hospital to an IPPS hospital will trigger the rural floor wage index exception for the 60 urban hospitals in the state of Massachusetts, increasing wage indexes for these hospitals from an average of 1.16 in FY2011 to 1.35 in FY2012. Nantucket Cottage Hospital is a rural island hospital, which has 15 inpatient beds and serves approximately 150 Medicare inpatients per year. This hospital will become the only rural IPPS hospital in the state of Massachusetts. As a result of this change in one small hospital’s status, and the subsequent change in the wage index, payment rates for urban hospitals in Massachusetts will increase by 8 percent, or by more than $200 million in FY 2012. These extra payments will be made budget neutral at the national level, and therefore all hospitals—including rural hospitals—will absorb the financial loss.

Got that? One small, rural, island hospital in Massachusetts changes its Medicare status, and—presto!—the other 60 Massachusetts hospitals suddenly qualify for an extra $200 million in Medicare subsidies. Land of the free! A letter from several state hospital associations complains the amount is actually $367 million per year. The best part: Medicare scrounges up that $200-$367 million by reducing subsidies to other states. Thus the nasty letter from the lobbyists for non-Massachusetts hospitals.

Cato adjunct scholar David Hyman writes about this dynamic in his excellent satire, Medicare Meets Mephistopheles:

Geographically based envy has also precipitated a “formula fight” among the states, complete with litigation, coalitions of aggrieved states and senior citizens, coverage in newspapers and editorials, and statements from concerned legislators… [C]ertain state medical societies have been particularly insistent that their states are being shortchanged by the Medicare program. These interest groups have had great success in persuading their elected representatives to change Medicare’s reimbursement formulas, so the Medicare money train unloads their “fair share.”

I’ve written before about how Romneycare solidified layers of corruption whereby Massachusetts officials (with the complicity of the Bush administration) bilked taxpayers in the other 49 states. It turns out that Obamacare also has a sweetheart deal for Massachusetts. Who knew Romneycare and Obamacare had so much in common?

ObamaCare—The Way of the Dodo

In the latest issue of Virtual Mentor, a journal of the American Medical Association, I try to capture the multiple absurdities that make up ObamaCare. An encapsulation:

During the initial debate over ObamaCare, House Speaker Nancy Pelosi (D-CA) famously said, “We have to pass [it] so you can find out what’s in it.” One irreverent heir to Hippocrates quipped, “That’s what I tell my patients when I ask them for a stool sample.” The similarities scarcely end there…

ObamaCare supporters are ignoring the federal government’s dire fiscal situation; ignoring the law’s impact on premiums, jobs, and access to health insurance; ignoring that a strikingly similar law has sent health care costs higher in Massachusetts; ignoring public opinion, which has been solidly against the law for more than 2 years; ignoring the law’s failures (when they’re not declaring them successes); and ignoring that the law was so incompetently drafted that it cannot be implemented without shredding the separation of powers, the rule of law, and the U.S. Constitution itself. Rather than confront their own errors of judgment, they self-soothe: The public just doesn’t understand the law. The more they learn about it, the more they’ll like it…

This denial takes its most sophisticated form in the periodic surveys that purport to show how those silly voters still don’t understand the law. (In the mind of the ObamaCare zombie, no one really understands the law until they support it.) A prominent health care journalist had just filed her umpteenth story on such surveys when I asked her, “At what point do you start to question whether ObamaCare supporters are just kidding themselves?”

Her response? “Soon…”

(For more proof that ObamaCare supporters can draw from an apparently bottomless well of denial, see this article by Politico.)

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.

From This Morning’s Health Care News

Indiana learns just how much flexibility states have when administering federal health care programs.

A Medicare pilot program bearing a striking resemblance to ObamaCare’s “accountable care organization” program turns out to be a flop.

Newsflash: Medicare’s Soviet-style price controls get the prices wrong.

Why Ryan-Rivlin Beats ObamaCare on Costs — and Spending

Washington Post blogger Ezra Klein asks of Rep. Paul Ryan’s (R-Wisc.) Medicare voucher proposal (co-authored with former Congressional Budget Office director Alice Rivlin):

Why are the cost savings in his bill possible, while the cost savings in the Affordable Care Act aren’t?…when it comes to the ACA, Ryan firmly believes that seniors will quickly and successfully force Congress to reverse any reforms that degrade their Medicare experience. That’s a fair enough concern, of course. What’s confusing is why it isn’t doubly devastating when applied to Ryan-Rivlin.

Set aside that Klein violates Cannon’s First Rule of Economic Literacy: Never say costs when you mean spending.  And that he uses the word “affordable” to describe ObamaCare.

There are two reasons why the Medicare spending restraints in the Ryan-Rivlin proposal are more likely to hold than those in ObamaCare.

First, ObamaCare’s restraints amount to nothing more than ratcheting down the price controls that traditional Medicare uses to pay health care providers.  Structuring Medicare subsidies in this way – setting the prices that Medicare pays specific providers – makes it very difficult to lower those prices, because the system itself creates huge incentives for providers to organize and lobby to undo those restraints.  As I explain more fully in this op-ed from September 2010, Medicare vouchers would change that lobbying game by reducing the incentives for provider groups to expend resources in the pursuit of higher Medicare spending.  That gives the Ryan-Rivlin restraints a much better shot at surviving.  (Seriously, it’s a pretty cool feature.)

Second, Klein predicts a backlash against Medicare vouchers because he says it amounts to “giving seniors less money to purchase more expensive private insurance.”  The notion that Medicare is less costly than private insurance is pure, uninformed nonsense.  Medicare and a “public option” are attractive to the Left precisely because such programs hide the full cost of their operations from enrollees and taxpayers.  It is a virtue of vouchers that they would reveal to Medicare enrollees the actual prices of the coverage and services they demand, because that information will spur enrollees to be more cost-conscious when selecting a health plan and consuming medical services.  That, in turn, will force insurers and providers to compete on the basis of cost to a degree never before seen in this nation, competition that will generate the sort of cost-saving innovations that Jim Capretta discusses here.

Both of these reasons boil down to the truism that nobody spends other people’s money as carefully as they spend their own.  We’ll make a lot of progress in this country when the Left realizes how much damage they’ve done by ignoring that truism.

Aetna Exits Colorado’s Individual Market

According to the Denver Business Journal:

A spokeswoman for Aetna confirmed Monday that the insurer will no longer sell new individual-market health insurance policies in Colorado and will terminate current policies held by state residents no later than July 31, 2012.

Aetna had already announced that it will no longer sell child-only coverage or small-group coverage in the state.   Colorado is one of 34 states where insurers fled the market for child-only coverage as a result of ObamaCare.  Colorado took steps to try to stabilize its child-only market, and is considering requiring insurers to sell child-only coverage as a condition of selling coverage directly to adults.

Aetna isn’t commenting on whether ObamaCare played a role in its decision.   Aetna customers will have to switch plans by July 31, 2012.

One for the Annals of Rent-Seeking

An article at HealthPolicySolutions.org (“a project of the Buechner Institute for Governance at the School of Public Affairs at the University of Colorado Denver”), about how ObamaCare is causing Colorado’s child-only health insurance market to implode, contains this startling admission by the top lobbyist for Colorado’s health insurance companies:

“Requiring all the carriers to sell this sort of plan creates a level playing field,’’ said Ben Price, executive director of the Colorado Association of Health Plans. “This is one of those unusual situations where we’re asking for more competition. If everyone else is in the market, the risk is spread across the entire market. Each company can afford to take on more risk.”

Catch that?  A lobbyist who admits that his job is to restrict competition, effectively stealing from consumers for the benefit of his clients!  How refreshing!

Wait, it gets better.

The legislation he’s advocating would tell any carrier that wants to sell insurance directly to Colorado consumers that they must also sell child-only coverage – despite the losses that ObamaCare’s price controls are likely to cause them in that sub-market.  The legislation would actually reduce competition in Colorado’s individual market, because it would place an additional (and costly) requirement on market entry.

In other words, this guy is so good at his job, he keeps lobbying for less competition even when says he isn’t.  Bravo, sir.  Bravo.