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NRO’s health-care blog.

Humpty Dumpty Health Reform?



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Many of the deals that the White House has been cutting all year with health-industry leaders are starting to show the cracks and strains of political pressures in Congress.

While all the news in the last week focused on the Senate Finance Committee reporting out a ghost bill with one Republican vote, health reform is far from the finish line.

Sen. Ben Nelson (D., Neb.) said it best: “We just finished the first quarter,” he told Politico. “There are three quarters to play. The bench is worn out. The quarterback keeps getting sacked. And the crowd has about had it, too.”

Can all the czar’s horses and all the czar’s men (and women) put health reform together again? 

Here are some of the challenges they face:

·     Cost:  President Obama promised repeatedly during the campaign that the average American family would see $2,500 a year in savings from his health-reform plan.

Based upon two new studies out this week, he’s going to miss the mark by about $6,000.

PriceWaterhouseCoopers released a study last Sunday, commissioned by America’s Health Insurance Plans, which showed the cost of a family plan in 2019 would be $4,000 a year higher if reform passes. 

A second, more comprehensive analysis was released on Wednesday and showed basically the same thing. This one, commissioned by Blue Cross Blue Shield, was by Oliver Wyman, Inc. It said that a weakly enforced individual mandate, coupled with requirements that insurers sell to all applicants, would lead to premium increases of $3,300 for family coverage.

Further, small businesses will see their health costs rise 19% higher than if reform weren’t passed, forcing many to drop coverage for their workers.

Strike 1 in keeping President Obama’s campaign promises.

·     Universal coverage: Hospitals were promised that health reform would lead to near-universal coverage. Their deal is that they would accept cuts in federal payments if they could be sure that at least 94% of the people in the country have insurance to reduce their costs of treating uninsured patients. But according to the budget office, the Finance Committee’s proposal would cover only 91%. Not good enough, says Chip Kahn of the Federation of American Hospitals. 

But expanding coverage requires more subsidies, and more spending — and that’s tough when you need to keep the total cost of the bills under $1 trillion.

·    $900 billion, tops:  The Finance Committee used budgetary trickery to keep the cost of its bill under President Obama’s magic $900 billion over ten years. And there are more tricks to come.

But the $900 billion in added federal spending means nearly half a trillion dollars in new taxes (which begin right away while spending is delayed for several years). And it means $400 billion in cuts to Medicare and Medicaid.

And none of this includes the huge shifts in costs to American consumers and taxpayers. 

·     Tax increases:  The Joint Tax Committee says the excise tax on high-cost health plans will mean a family would pay as much as $1,600 more for its coverage if it didn’t move to a lower-cost plan. If they did, it would mean higher income and payroll taxes. On the middle class.

The $40 billion excise tax on medical devices, such as pacemakers and hearing aids, would be passed on to consumers in the form of higher premiums.

Speaker Nancy Pelosi is talking about a windfall profits tax on health-insurance companies, higher taxes on wealthy Americans, and even a value-added tax to pay for health reform. 

These taxes inevitably would fall on middle-income Americans. Which President Obama promised wouldn’t happen.

Strike 2.

·     Medicaid and the states:  Congress wants to expand Medicaid coverage to 133 percent of poverty.  But even with promises of early help, the nation’s governors are crying foul, saying that this is an unfunded mandate to provide expensive Medicaid benefits indefinitely.

·     No mandates.  President Obama also said that he didn’t want to mandate that people be forced to purchase health insurance: “It’s not that people don’t want insurance. It’s that they can’t afford it,” he said repeatedly during the campaign.

Strike 3 on keeping campaign promises.

And then there are the labor unions desperate for a government health plan to enroll millions of new health-care workers in their ranks. And young people who would pay up to 70% more for insurance. Seniors who could lose Medicare benefits and Medicare Advantage coverage. Catholic bishops who say they don’t believe the legislation bans payments for abortion. Blue Dog Democrats worried about deficit spending. And the American people who face taxes and penalties of $750 or more just for not buying insurance.

The 80-20 rule will prevail: The big players seem to agree on 80% of reform, but there is 20% that the various parties just can’t live with. And it’s a different 20% for each one. This deal is going to be incredibly difficult to hold.

The legislation would destabilize the health-insurance market, drive up costs, raise taxes, diminish the quality of care, retard innovation, and miss the opportunity for real reform that puts the private and public health sectors on a more sustainable financial track.

Let’s start this game over.

– Grace-Marie Turner is president of the Galen Institute.



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