Tag: health reform

ObamaCare’s ‘Medical Loss Ratio’ Regs Encourage Fraud, Unnecessary Medical Services

Yesterday, the U.S. Department of Health and Human Services issued regulations implementing ObamaCare’s rule mandating that health insurers maintain minimum “medical loss ratios.”

Opponents of private health insurance have made a fetish of  MLRs – a statistic that insurers developed to show investors the share of premiums they spend on claims.  (“See? They call it a ‘loss’ when they pay for medical care – that proves they’re evil!”)  So the opponents of private health insurance who crafted ObamaCare included a rule requiring carriers to spend at least 80 percent of premium revenue (large employers must spend 85 percent) on “your health care.”  What could possibly go wrong?

The folly and false compassion of ObamaCare are on full display in the MLR regs, where government bureaucrats have evidently determined that unnecessary and harmful medical services, and even insurance fraud, are in fact good for patients. Okay, HHS bureaucrats don’t actually think that. But ObamaCare’s MLR regs include fraud prevention and utilization review among the administrative expenses on which carriers may spend no more than 20 percent of revenue (15 percent for large employers). That will effectively discourage insurers from policing fraud and conducting utilization reviews that protect patients from the expense and risks of unnecessary medical tests and procedures.

ObamaCare’s fatal conceit is that government bureaucrats can determine and deliver what is good for patients. Consumers will continue to feel the pain – costs will continue to rise and more insurers will flee the marketplace – until Congress gives up that conceit and repeals this law.

KFF/HRET Survey Part II: Isn’t This Good News, Too?

As I blogged earlier, yesterday the Kaiser Family Foundation and the Health Research & Educational Trust released their survey of employer-sponsored health benefits in 2010.

For most of this survey’s history, it included a very useful graph of the average growth rate of employer-sponsored insurance premiums.  Here’s the graph from their 2007 survey:


(The grey and light-green lines represent year-to-year growth in overall inflation and wages, respectively.)

Unfortunately, 2007 was the last year that KFF/HRET included that graph in their annual survey.  Had they included that graph this year, it would have shown an even more heartening moderation of premium growth:

A lot of things can drive premium growth.  I discussed a couple of them in my last post.  Some factors that could cause premium growth to moderate might not be all that welcome; if insurers dumped all their sick enrollees, for example.  But absent dramatic evidence of that, isn’t this good news?  And isn’t good news worth highlighting?

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Great Moments in Government-Run Healthcare

Somebody sent me this story from the Drudge Report and I can’t resist the temptation to share. What really astounds me is not that a Swedish man sewed up his own leg after waiting for a long time in a hospital. Heck, I wouldn’t be surprised if things like that happened in all nations. The really disturbing part of the story is that the hospital then reported the man to the police. A classic case of “blaming the victim.” The bureaucrats in Sweden’s government-run healthcare system obviously were not pleased that he called attention to their failure.

A 32-year-old took the needle into his hands when he tired of the wait at Sundsvall hospital in northern Sweden and sewed up the cut in his leg himself. The man was later reported to the police for his impromptu handiwork. “It took such a long time,” the man told the local Sundsvall Tidning daily. The man incurred the deep cut when he sliced his leg on the sharp edge of a kitchen stove while he was renovating at home. “I first went to the health clinic, but it was closed. So I rang the medical help line and they told me that it shouldn’t be closed, so I went to emergency and sat there,” the man named only as Jonas told the newspaper. After an hour-long wait in a treatment room, he lost patience and proceeded to sew up his own wound. “They had set out a needle and thread and so I decided to take the matter into my hands,” he said. But hospital staff were not as impressed by his initiative and have reported the man on suspicion of arbitrary conduct for having used hospital equipment without authorization.

Federal Judge Denies Obama Administration’s Motion to Dismiss Virginia’s ObamaCare Lawsuit

From The Los Angeles Times:

RICHMOND, Va. (AP) — Virginia’s lawsuit challenging the Obama administration’s health care reform law has cleared its first legal hurdle.

U.S. District Judge Henry Hudson on Monday denied the Justice Department’s request to dismiss the lawsuit.

Virginia Attorney General Ken Cuccinelli claims that Congress does not have the authority under the Constitution’s Commerce Clause to require citizens to buy health insurance or pay a penalty.

The Virginia General Assembly passed legislation this year exempting state residents from the coverage mandate.

More than a dozen other state attorneys general have filed a separate lawsuit in Florida challenging the federal law, but Virginia’s lawsuit is the first to go before a judge.

Matlock’s Medicare Pitch Ruled Out of Order

FactCheck.org says that in an ad purchased with your tax dollars, actor Andy Griffith (a.k.a., the sheriff of Mayberry and Matlock) used a “weasel word” to mislead Medicare enrollees about how ObamaCare will affect them:

Griffith tells his fellow senior citizens, “like always, we’ll have our guaranteed [Medicare] benefits.” But the truth is that the new law is guaranteed to result in benefit cuts for one class of Medicare beneficiaries — those in private Medicare Advantage plans…

[T]he term “guaranteed” is a weasel word — a qualifier that sucks the meaning out of a phrase in the way that weasels supposedly suck the contents out of an egg. It may sound to the casual listener as though this ad is saying that the benefits of all Medicare recipients are guaranteed to stay the same — and that may well be the way the ad’s sponsors wish listeners to hear it. But what the administration is really saying is that only those benefits that are guaranteed in law will remain the same.

FactCheck.org neglects to mention that ObamaCare will weaken the guarantee behind those “guaranteed” benefits, too.  Medicare’s chief actuary Richard Foster notes that ObamaCare ratchets down Medicare’s price controls, which will “possibly jeopardiz[e] access to care for beneficiaries.”  That’s not to say that the old price-control scheme is any better than the new one.  It just means that the Obama administration is being even less honest and more weaselly than FactCheck.org says.

And they’re dragging Matlock down with them.

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Obamacare Complexity vs Free Market Simplicity

Free markets are characterized by voluntary exchange between buyers and sellers. Mapping that relationship is absurdly simply, as this image indicates.

Indeed, the only reason I even bothered to include that image was for purposes of comparison. Here is a new flowchart prepared for the Joint Economic Committee showing the healthcare system under Obamacare.

It’s worth noting, by the way, that the system already was a disaster even before Obamacare was enacted. In the health care sector, free markets are only allowed to operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a bad situation worse.

A Response to Gruber on RomneyCare & Health Care Costs

I just came across this letter to the editor of the Wall Street Journal from MIT economist Jonathan Gruber.  I don’t know how to confine myself to just one of the letter’s many problems. So brace yourselves, here comes the fisk.

Joseph Rago’s article on Massachusetts health-care reform (“The Massachusetts Health-Care ‘Train Wreck’,” op-ed, July 7) is exactly the type of selectively misleading use of facts upon which opponents of health-care reform have been relying over the past year.

No comment, other than remember the phrase “selectively misleading use of facts.”

Health-care reform in Massachusetts has covered 60% of the state’s uninsured, has done so at roughly the cost projected before reform was enacted in 2006, and remains overwhelmingly popular with the residents of the state.

Regarding coverage gains, Massachusetts officials used to claim that RomneyCare reduced the share of uninsured residents from around 10 percent to 2.6 percent.  In a study released this year, Aaron Yelowitz (a former student and coauthor of Gruber’s) and I show why that figure is too low and why the actual figure is likely 5.1 percent or higher.  The study on which Gruber relies – like all other such studies – neither mentions nor attempts to measure the problem that Yelowitz and I identified: uninsured Massachusetts residents appear to be responding to the individual mandate by concealing their lack of insurance, which would inflate the coverage gains.  Since that study obtained results similar to our results for Massachusetts adults, that study’s estimate of a 60-percent reduction in the uninsured appears to be an upper-bound estimate, rather than a point estimate.

Regarding costs, I haven’t seen any updated numbers since the Massachusetts Taxpayers Foundation’s whitewash from May 2009.  I’d like to see an updated, non-whitewashed report on actual spending and how it compares to the original projections, especially considering that in 2006, the Kaiser Family Foundation reported that Massachusetts “anticipates that no additional funding will be needed beyond three years.“  Updated figures would also allow us to judge how much RomneyCare spent per newly insured resident.

The state has seen a decline in its nongroup premiums of more than 50% relative to national trends…It reduced the costs to individuals of purchasing insurance…[an] enormous reduction relative to pre-reform…

Here’s where Gruber engages in his own “selectively misleading use of facts.”  Yes, non-group premiums appear to have fallen for the 4 percent of residents in the non-group market – because RomneyCare shifted those costs to workers with job-based coverage.

It is true that reform has not slowed the growth of group health-insurance premiums, which have continued to rise at exactly the same rate as in the nation as a whole.

The first part of this sentence is an understatement; the second part is false.  This report from the left-wing Commonwealth Fund shows that premiums in Massachusetts are growing faster than anywhere else in the nation.  And the only study that has tried to isolate the effect of RomneyCare finds that it increased premiums for employment-based coverage by 6 percent (see cost-shifting, above).

Despite Gov. Mitt Romney’s claims, the Massachusetts reform was not designed to slow the growth of health-care cost growth.

It should be obvious by now that RomneyCare wasn’t designed that way.  But it sure was sold that way.  And so was ObamaCare.  Any bets on how long before we hear apologists for both claiming that ObamaCare wasn’t designed to slow cost growth?

The PPACA also includes a series of changes that represent the best thinking about how to control costs, such as an independent rate-setting board for Medicare, pilots of innovative medical reimbursement approaches, and an end to the open-ended tax subsidy to the highest cost health insurance plans in the U.S. None of these is guaranteed to slow the rate of cost growth. But each is better than doing nothing, which was the alternative.

So the, ahem, best thinking on how to contain health care costs is (1) price and exchange controls set by (2) an unelected and unaccountable rationing board, plus (3) taxing health insurance.  Bra-vo. Sure, Obama’s National Economic Council chairman Larry Summers says, “Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.” But when the alternative is nothing – nothing! – that means the bar for “best thinking” isn’t very high.

In the end, it is impossible to control health-care costs without first bringing as many citizens as possible into our health-insurance system.

As I blogged earlier today, it does not speak well of the Left’s approach to health care that in order to reduce wasteful government spending – or at least pretend to – they must first create more wasteful government spending.