Critical Condition

NRO’s health-care blog.

Mitt Romney’s Illogical, Terrible Health-Care Address


Mitt Romney just gave a more articulate defense of Obamacare than President Obama ever has. He continues to believe that the individual mandate is a good idea, despite the fact that the “free-rider” problem is a myth. His effort to make a distinction between Romneycare and Obamacare was not persuasive: If anything, he convincingly made the opposite case, that Romneycare and Obamacare are based on the same fundamental concept.

In recent months, Romney has claimed that Romneycare was a specific solution for the specific needs of Massachusetts. But in his remarks, he did not name one specific aspect of the Massachusetts health-care environment that is unique to that state. If there are no important differences between the Massachusetts health-care system and that of other states, why shouldn’t he believe that Romneycare should be the model for every other state?

Indeed, here is what Romney wrote in the Wall Street Journal on April 11, 2006, the day before he signed his signature health-care legislation:

How much of our health-care plan applies to other states? A lot. Instead of thinking that the best way to cover the uninsured is by expanding Medicaid, they can instead reform insurance.

The final straw, for me, was when Romney said that “there’s not a lot that I want to borrow from France and Switzerland.” I’m with him on France, but Switzerland (despite its own individual-mandate issues) has the most market-oriented health-care system in the developed world. I would love to borrow Switzerland’s exceptionally low levels of state-health spending, which they manage to achieve while providing universal coverage and high-quality care. Their tax rates aren’t shabby either.

— Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co., and blogs on health-care policy at The Apothecary. You can follow him on Twitter at @aviksaroy.

Romney: Individual Mandate = “What I Believe Is Right”


In his much-heralded health-care address in Michigan today, former Massachusetts governor (and Republican presidential hopeful) Mitt Romney made news by offering . . . absolutely nothing new.

Rather than admit that Romneycare was a mistake, Romney once again defended the individual mandate he imposed in Massachusetts, calling it “what I believe is right for Massachusetts.” Why? Because Massachusetts had a free-rider problem. Never mind that all states have a free-rider problem. (So why is it not the solution for other states, too?)  Never mind the indications that Massachusetts’ free-rider problem is getting worse not better, under Romneycare. His defense of his individual mandate was indistinguishable from those delivered by countless Obamacare zombies.

It’s almost as if Mandate Mitt is keeping the hypocrisy alive because he’s afraid no one will pay attention to him once it’s gone. The only novelty I saw was when he admitted that Romneycare has become a political liability. Not enough of one, evidently. So here we go again:



Misguided on Medicaid


One of the major innovations in the House 2012 Budget Resolution is a plan to give states much greater flexibility in running their Medicaid programs through block grants.

Yet today, a new study was released by the Kaiser Family Foundation, with researchers from the Urban Institute, that is highly critical of the plan. The study concludes that if Obamacare were repealed and states were given block grants for Medicaid, state spending would increase between 45 and 71 percent to offset the loss of federal dollars or 44 million people would be without coverage as a result of the changes.


Rhode Island has proven that block grants can work to protect enrollment and to save taxpayers money. Giving states greater flexibility is the key to greater efficiency in Medicaid spending so states can modernize their programs to fit the needs of their citizens and match the resources available in the individual states.

States are currently ensnared in federal red tape and must go through time-consuming and bureaucratic appeals to Washington to get permission to make changes. This leads to waste, inefficiency, and a program that relies on the crude tools of price controls to try to rein in spending. Obamacare did little or nothing to reform what is arguably the worst health care program in the country — and the largest, with more than 50 million people enrolled. It pays doctors so little that Medicaid’s rich benefit package is little more than a paper promise for care.

Rhode Island received an early block-grant waiver in January of 2009. In exchange for significantly more flexibility in managing its Medicaid program, it received an aggregate budget of $12.075 billion dollars through 2013. The state had — and has — the latitude to preserve coverage and services for those with the greatest need and to re-tool benefit packages to ensure coverage for the maximum number of beneficiaries within established budget constraints.

State officials were confident that with the ability to operate the program with less onerous federal rules, they would not exceed the cap.

They were right. The rate of growth in Medicaid spending was cut in half from over 8 percent to 3 percent in the first 18 months the program was in operation. At its current expenditure rate, Rhode Island is on track to only spend approximately $9.3 billion of the allotted $12.075 billion.

“Rhode Island shows that more money is not the solution,” according to former Rhode Island health and human services secretary Gary Alexander. “The answers are comprehensive reform and freedom from onerous federal mandates.”

The Kaiser report gives virtually no consideration to the important efficiencies that could be gained by better managing and coordinating care for the 20 percent of patients who consume 80 percent or more of Medicaid’s resources. States closer to their citizens have demonstrated in Rhode Island, Vermont, and elsewhere that significant improvements in care are possible while saving taxpayers money if the federal government will allow them the freedom to make their programs more efficient.

The Kaiser report assumes that spending for Medicaid continues to rise at the rate of 8.2 percent a year. And it assumes that nearly 76 million people will be on Medicaid under current law. We cannot afford this rate of spending for a program that is going to swell to 76 million or more.

At some point, we must recognize the reality that change is not only inevitable but essential. The question is whether or not the political leaders closest to the people will be able to make finely tuned changes or whether the program remains rigid and inflexible, requiring more and more cuts to provider payments as fewer and fewer Medicaid recipients are able to find physicians to see them.

An Unshocking Report


HHS released a report today with the not so shocking news that uninsured patients who are hospitalized end up leaving a large portion of their bills unpaid. According to the study, “uninsured families can only afford to pay in full for about 12% of the admissions to hospital (hospitalizations) they might experience.” The report has received a fair bit of play in the media, including this item from USA Today.

Presumably, HHS thinks this helps make the case for the unpopular Obama health law. As USA Today put it, “Health and Human Services released the report as the White House defends the federal health care law passed last year.” But everyone, right and left alike, recognizes that what is known as “uncompensated care” for the uninsured is a huge burden. The question is what to do about it, and the new and expensive law calling for mandates coupled with subsidies for people earning up to 400 percent of the poverty line is not the correct approach.

This comes on the same day that a panel of three 4th Circuit judges in Virginia — all three Democratic appointees — have heard arguments on the constitutionality of the individual mandate. According to Bloomberg, the Obama administration defended the mandate by arguing that, “Congress has broad power to regulate the health-care market.” No word yet on what they will rule, but the odds of this particular panel overturning the mandate seem pretty remote. This makes the case in the 11th Circuit, which will review Judge Roger Vinson’s decision overturning the entire health-care law, even more important.

Medicare’s Actuaries Say Obamacare Vouchers Could Be Tied to the CPI


Yesterday, I posted a detailed explanation of how Obamacare would index vouchers provided through the state exchanges. This was a follow-up to my original column on this and other subjects from last week.

But, detailed though yesterday’s post was, there’s still more to this story.

To recap from the beginning: The president and his allies have been attacking House Budget Committee chairman Paul Ryan’s Medicare reform plan for indexing, on an annual basis, the “premium support credits” provided to future program entrants to the consumer price index (CPI).

These attacks seemed more than a little hypocritical to me. After all, didn’t Obamacare do exactly the same thing? Section 1401 of the law requires the “premium credits,” or vouchers, provided through the state exchanges to be adjusted in the years after 2018 “to reflect the excess (if any) of the rate of premium growth … over the rate of growth in the consumer price index.” That would seem to mean that beneficiaries getting insurance through the exchanges would pay for cost growth above the CPI, and the government’s contribution toward the premium would grow with the CPI. Further, this adjustment is only to occur in years when the aggregate cost of the premium credits and cost-sharing subsidies in the exchanges exceed 0.504 percent of GDP.

It turns out, however, that the law is written so poorly and ambiguously that other conclusions might be reached about what the words of the law actually mean. That seems to be the case with the Congressional Budget Office, as its cost projections for premium credits in the exchanges grow at a rate above the CPI in the years after 2018, even though CBO believes that aggregate spending will exceed that threshold of 0.504 percent of GDP.

So, as I explained yesterday, it would appear that CBO is assuming a different adjustment is applied, which would have the effect of scaling back the government’s contribution below health-cost growth — and for some people, even below CPI growth — but on average somewhat above it.

But what about the actuaries who run the numbers for the administration? How do they see things?

First, they expect that the aggregate-spending condition won’t be met. In other words, the CPI-based adjustment to the premium credits doesn’t become operative in their projections because they see spending on the credits and cost-sharing subsidies coming in below 0.504 percent of GDP. After 2018, they assume the effect of this threshold will be to index the government’s contributions toward premiums to GDP growth.

But what would happen if their cost projections are wrong and aggregate spending did exceed 0.504 percent of GDP?

If that were to occur, they believe the law would require indexation of the vouchers provided by the government in the exchanges to the CPI — the exact same policy that is under so much attack in the Ryan plan. And, let’s be clear, it wouldn’t take much of an adjustment in cost projections for the actuaries to assume this indexing provision will go into effect in 2019 and future years.

So, yes, those who are attacking the Ryan Medicare plan have a serious problem. They, starting with the president, have made a huge political issue of how that plan indexes the government’s contribution for Medicare coverage. But their own experts believe Obamacare, under certain conditions, does exactly the same thing.


A Clarification on the Indexation of Obamacare’s Vouchers


In my column last week, I asserted that the premium subsidies provided in Obamacare’s state exchanges would be tied over the longer run to consumer inflation.

The story is actually much more complicated than that, and requires additional explanation. (Fair warning: What follows is very technical.)

The way the law (see page 111) works is that it sets a limit on the percentage of income a household must pay for premiums when it is getting insurance through the state-based exchanges. In 2014, the government’s contribution is determined by subtracting the maximum contribution required from a household from the total premium required for the second-lowest-cost “silver plan.” The percentages of income used to set limits on household premium payments are to be adjusted in the years after 2014 based on factors specified in the law.

What are those factors? From 2015 to 2018, the law says that the percentages “shall be adjusted to reflect the excess of the rate of premium growth for the preceding calendar year over the rate of income growth for the preceding calendar year.” This provision is written poorly and imprecisely. What does it mean to “reflect” the excess of premium growth over income growth? How exactly are the percentages to be adjusted? The law does not specify a mathematical formula. It just says that an adjustment shall be made.

Common sense would indicate that this adjustment is intended to prevent household contributions from becoming an ever smaller share of the total premium. Income is expected to grow less rapidly than health costs. If the percentages of income required for premium payment by households were held constant, the share of the premium paid by households would fall over time (and, conversely, the government’s share would rise). This adjustment is clearly intended to keep the proportion required from households and the government roughly constant over time and prevent the government’s contribution from rising even faster than health costs.

After 2018, the law says that, in addition to the adjustment made to reflect premium growth in excess of income, the percentages shall also be adjusted

to reflect the excess (if any) of the rate of premium growth estimated under subclause (I) for the preceding calendar year over the rate of growth in the consumer price index for the preceding calendar year.

Again, the law doesn’t say how the percentages are to be adjusted, or on what basis. Nor does it define what it means to “reflect” premium growth over the CPI.

One reasonable interpretation is that this second adjustment is intended not to maintain proportionality between the government and households over time but to require households to pay for premium growth in excess of consumer inflation. That would mean limiting the government’s contribution to growth in the CPI, and adjusting the household percentages accordingly to ensure full payment of the balance. This approach would have the virtue of some underlying logic. Household premiums would be adjusted to “reflect” the excess of premium growth over the CPI, which looks to be the objective of the provision.

But, apparently, that is not how the provision is being interpreted by congressional scorekeepers. The Congressional Budget Office’s cost projections show the exchange subsidies growing, on a per capita basis, at a rate that is just below 5 percent annually from 2019 to 2021 — which is above its long-term annual inflation assumption of 2.3 percent, but certainly well below historical health-cost growth rates.

What other way of making this second adjustment is possible? It might be that CBO is assuming an entirely different way of “reflecting” the excess of premium growth over the CPI on household premiums (although CBO has not issued any kind of official explanation of how it is interpreting this provision). An example can help illustrate what might be going on. Suppose premium inflation is 7 percent, and CPI growth is 2.3 percent. CBO could be assuming that the initial adjustment (premium over income growth) requires household premiums in the exchanges to rise by 7 percent. In addition, the second adjustment then requires premiums to rise by the excess of 7 percent over 2.3 percent (or 4.7 percent). Thus, household premiums would be required to rise by a total of 11.7 percent under this example. The percentages of household income used to set premiums would be adjusted accordingly to hit these new premium requirements.

Note that this method doesn’t make a lot of policy sense. It effectively double-counts health inflation in the beneficiaries’ premium payments. Premium growth rates already include health inflation above the CPI; adding the excess of premium growth over the CPI to premium growth simply counts health inflation twice.

Note also that doing the calculation this way means the government’s contribution will grow at widely varying rates, by income. In all cases, the government’s contribution will grow at a rate below health-cost inflation. And, in some cases, the government’s contribution will actually fall below CPI growth. For instance, if the total premium for coverage in an exchange is $18,000 in 2018, and if health inflation is 7 percent and the CPI is 2.3 percent, the government’s contribution would fall below the CPI for any household that was paying at least $9,000 toward the total premium in 2018.

There’s an additional complication. The law states — in a provision called “the failsafe” — that this additional adjustment to reflect premium growth over the CPI will only apply in years (after 2018) in which “the aggregate amount of premium tax credits under this section and cost-sharing reductions under section 1402 of the Patient Protection and Affordable Care Act for the preceding calendar year exceeds an amount equal to 0.504 percent of the gross domestic product for the preceding calendar year.

CBO assumes that spending on the subsidies and cost-sharing credits will (“probably”) exceed the threshold, and therefore the additional adjustment is operative (see p. 35 of The Long-Term Budget Outlook).

The chief actuary of the Medicare program, however, has stated (see p. 5 of this analysis) that his office estimates the aggregate spending on the credits will be just barely above the 0.504 percent of GDP threshold in 2018. Consequently, according to the actuaries’ projections, the government’s vouchers in 2019 and beyond would rise roughly in concert with GDP, not the CPI.

To sum up: My column asserted that Obamacare’s exchange vouchers would be tied to consumer inflation. That is apparently not CBO’s interpretation of what the law requires (based on a review of CBO’s current cost projections), although the law is so vague and imprecise that alternative interpretations are certainly possible. The larger point of the column remains valid regardless. Critics of Rep. Paul Ryan’s Medicare plan are on the warpath about vouchers for private insurance falling below baseline expectations of cost growth. The same accusation can be leveled against Obamacare’s vouchers. Indeed, some Obamacare participants would get vouchers that grow at less than the rate of the CPI. And even assuming this apparent interpretation of what the law requires, it is easy to see how all households in Obamacare’s exchanges would be facing double-digit premium increases each and every year after 2018 if health costs continue to rise as rapidly in the future as they have in the past.

Time to Get Serious about Medicaid


No wonder the White House sharply criticized Rep. Paul Ryan’s Medicaid budget proposal. Judging from the policy outline administration officials released last week, they seem to be unaware of the national Medicaid crisis — or unserious about addressing it.

This crisis is driven by several factors: unsustainable spending growth at the federal and state levels, the massive crowd-out of private coverage, perverse incentives that discourage work and retirement planning, and cost-control mechanisms such as low provider-payment rates that limit access for enrollees and contribute to Medicaid’s low quality of care.

Here’s a point-by-point diagnosis of the White House’s Medicaid proposal:

First, the proposal would replace the current federal matching formulas for Medicaid and the Children’s Health Insurance Program (a Medicaid offshoot) with “a single matching rate for all program spending that rewards states for efficiency and automatically increases if a recession forces enrollment and state costs to rise.”

Reaction: The White House offered no specifics on whether the federal match will increase or decrease, or whether it will incorporate all new enrollees that Obamacare brings into the program. This obscures the fundamental problem of the open-ended federal reimbursement for state Medicaid spending, which is at least 50 percent for every state and around 75 percent for the poorest states. As a result, states pass most of the cost of their programs to taxpayers in other states and create inefficiently large programs.

Rewarding states for efficiency is a nice phrase that means nothing without specifics. Moreover, fixed federal allotments (a central element in Ryan’s plan) are the best tool to promote efficiency in Medicaid, as it would encourage states to be much more cost-conscious than they are now.

Second, the White House proposal “would clamp down on states’ use of provider taxes to lower their own spending while not providing additional health services through Medicaid.”

Reaction: The Medicaid provider tax is perhaps the only tax where the payer (hospitals and nursing homes) actually wants to be taxed. The reason: the state taxes the provider and then spends the original tax revenue on the provider. Meanwhile, the state can leverage the amount spent on the provider for additional federal matching funds. This means the state can increase spending on Medicaid solely at the expense of federal, but not state, taxpayers.

So the provider tax allows states to spend more on Medicaid than they would spend if states banned these taxes. And this makes the White House condemnation of the provider tax logically irreconcilable with its opposition to reforming the open-ended reimbursement.

The provider tax is just a symptom of the way the federal financing of Medicaid plays out. If states received fixed allotments for their programs, they would not have any reason to institute these absurd provider taxes.

Third, “[T]he President has called on the National Governors Association (NGA) to make recommendations for ways to reform and strengthen Medicaid, and the framework will consider the ideas that its Task Force produces.”

Reaction: Finding what governors want is easy; in most cases they want more federal money and more flexibility to redesign their programs free from federal rules and mandates. Washington’s role is to make appropriate trade-offs between the governors’ wishes and the interests of Medicaid enrollees and federal taxpayers.

President Obama will likely oppose any efforts to repeal the Obamacare Medicaid expansion, and he opposes changing the open-ended federal Medicaid reimbursement. That leaves him with no room to propose meaningful reform that will put Medicaid on a sustainable footing.

Fourth, “The President also supports reform of Medicaid to incentivize more efficient, higher quality care for high-cost beneficiaries, including those who are eligible for both Medicaid and Medicare.”

Reaction: Everyone supports this. It’s a platitude, not a proposal. How does the White House envision achieving these goals and creating better coordination between Medicare and Medicaid?

The fundamental structure of the programs makes coordination difficult, and the Obama administration seems unserious about tackling real entitlement reform. Currently, incentives to better coordinate care between Medicare and Medicaid are lacking, since taxpayer bailouts are an all-too-easy fix for poor management.

Despite its current problems, Medicaid would have been better off without Obamacare and its enormous expansion of the program. In 2014, states must enroll every individual who resides in a household below 138 percent of the federal poverty level into Medicaid. Analysts at both the Congressional Budget Office and the Centers for Medicare and Medicaid Services estimate that this will increase annual spending on the program by around $100 billion.

This expansion will massively expand the welfare state by up to 25 million non-disabled adults. The vast majority (82 percent, a recent economics paper estimates) of working adults eligible for the expansion currently have private coverage and will simply replace it with Medicaid. And states will have very little incentive to pursue cost-effective methods for the expansion population, since federal taxpayers will pick up 100 percent of the costs in 2014-2016 and at least 90 percent thereafter.

In contrast, Rep. Ryan, with support from numerous governors, has laid out a commonsense plan for comprehensive Medicaid reform. His plan replaces the current open-ended federal reimbursement of state Medicaid spending with a fixed allotment to each state. This will prevent states from passing the bill of unsustainable Medicaid spending to future generations through increased federal borrowing. To help states better manage their programs and tailor them to their individual state characteristics, Ryan’s plan also allows states greater flexibility from federal mandates and more freedom from federal oversight.

Since Obamacare worsens Medicaid’s problems, real Medicaid reform begins with repealing Obamacare. While repealing Obamacare’s Medicaid expansion will prevent the current Medicaid crisis from worsening, policymakers must also adopt reforms to make the program better for enrollees and taxpayers. So far, Ryan’s proposal is the only serious one on the table.

Brian Blase is a policy analyst at the Heritage Foundation’s Center for Health Policy Studies.

The Blindness of Alan Blinder


It is simultaneously amazing and distressing that an economist who has risen so high in his profession could be such a lousy economist. But that is the only hypothesis that can explain Alan Blinder’s screech today in the Wall Street Journal, “Paul Ryan’s Reverse Robin Hood Budget.” Apparently, Paul Ryan’s plan to rationalize entitlement spending for the long term and reduce the burden of federal debt without a tax increase is the “worst” among the available options.

Why? Because (1) the value of the Medicare “vouchers” (premium subsidies) will be eviscerated by the rising cost of health-care services. Will there be no salutary effect of improved individual incentives on cost growth? Blinder fails to tell us, although the very first question that any economist ought to ask is how a change in incentives will affect supply-and-demand dynamics. Blinder seems not to have entertained the question; in his apparent view, cost growth in medical care simply is a constant, like the speed of light, and an increase in the marginal cost of medical care actually paid by patients will have no effect on demands. He has been in (or of) the Beltway far too long.

(2) Blinder seems enamored of Obamacare’s “cost-containment” measures — a more accurate description of them would be “price controls and top-down rationing.” Medicaid patients already have substantial difficulty seeing primary-care physicians, and Medicare patients are being forced along that path; the rationing that will result from the comparative-effectiveness review process and the IPAB bureaucracy in Obamacare will reduce spending, but that is very different from reducing costs. The federal government has interest groups rather than patients; less spending combined with less service means higher true costs for patients. Period.

(3) “Medicaid … is a lifeline for the poor.” Really? In California — always a canary in the coal mine of leftist policy — primary-care physicians receive something on the order of $20 (or less) from MediCal for an office visit, an amount insufficient for the cost of the office staff during a visit. And so MediCal patients, again, have great difficulty getting appointments; or the doctors are forced to see them for increasingly short periods of time. So much for the claim that “universal coverage” will reduce the pressures on the emergency rooms. Does Blinder actually believe that the eternal condition of limited resources somehow has been defeated by Medicaid? Or, more generally, by government health coverage?

(4) Blinder’s claim about “copious tax cuts” for “the rich” in the Ryan framework simply is dishonest, as the reductions in marginal rates are combined with elimination of innumerable tax preferences. (One wonders if Blinder approves of the Orwellian term “spending through the tax code,” but never mind.) Whether the “rich” would pay more or less, or more or less as a proportion of total income-tax revenues, or as a proportion of GDP, is entirely unclear. 

There is much more to mock, but you get the point. If this is the best that the defenders of Obama can do, we already have won, at least intellectually.

Benjamin Zycher is a senior fellow at the Pacific Research Institute.

Doubling Down on Obamacare Rationing


Seniors, beware. Buried in the president’s deficit speech this week was a plan to give even more powers to the Medicare rationing board created in his health-overhaul law.

President Obama proposes giving the unelected, unaccountable Independent Payment Advisory Board (IPAB) new authority to tighten the screws on payments. He clearly sees rationing as the tool to control costs by setting “a more ambitious target” for the IPAB ax.

According to a House Budget Committee estimate, the president’s IPAB goals would lead to benefit cuts of $9,600 for seniors over the coming decade. Medicare actuaries have said that the payment cuts already built into Obamacare make it so that Medicare will eventually pay less than Medicaid does today, making it extremely difficult for patients to find doctors who will see them.

Are seniors prepared for this?

The president disingenuously claimed in his speech that seniors would “have to pay nearly $6,400 more than you would today” under Chairman Paul Ryan’s plan to modernize the Medicare program. Since the president offered a speech, not a detailed 73-page plan like Ryan’s, we have to try to figure out what the White House really means. Here’s the best assessment: The Ryan plan, when it begins in the year 2022, would provide an age-adjusted payment so that seniors can pick the best health plan to meet their needs. The older they are, the bigger the payment they would get. The average payment for insurance for all seniors is expected to be about $15,000 a year. But it will be less for seniors when they turn 65 because their health costs will be lower and the expected payment of $8,000 would cover most or all of their premiums.

The White House apparently did simple subtraction between the expected payment for 65-year-olds and the average premium for all seniors and came up with a number that has no relation to reality.

But expect to hear that number a lot when members of Congress hit their town-hall meetings over the next two weeks, as they try to scare seniors about supposedly having to pay $6,400 more out of pocket a decade hence. This was politically motivated math that would be exposed if the White House had the decency to provide a plan rather than a speech. They shouldn’t get away with it, especially since the president’s own proposal is much more dangerous for current seniors. Not only does he do nothing to save the program from bankruptcy, but seniors in this decade will face nearly $10,000 in benefit cuts under IPAB’s rule.

The president’s speech missed the mark in both form and content. How insulting to invite Congressman Ryan to sit in the front row, only to literally look down on him and belittle his serious plan to save entitlement programs for future generations!

The speech could have been an opportunity to start “an adult conversation” over saving our country from fiscal calamity. Instead, the president used his time at the podium to give a shallow political speech that reiterated the same government-centric policies.

The president is kicking hard choices down to road to his successors or to unelected bureaucrats. He proposed yet another commission; he walled off entitlement programs from genuine reform, even though it is clear that Medicare, Medicaid, and Social Security are the real drivers of the deficit; and he would give new powers to IPAB appointees, proposing they be directed to limit Medicare cost growth per beneficiary to GDP growth per capita plus 0.5 percent beginning in 2018 vs. 1 percent under current Obamacare law.

He also targets prescription drugs for savings when it represents only a small fraction of overall Medicare spending. (We have to wonder what happened to the deal that prescription-drug companies wouldn’t be demonized if they came to the table and supported Obamacare.) Further, the president refuses to give governors real power to manage their Medicaid programs even as his new health-care law threatens to crush states with more than $115 billion in new spending from mandated-coverage expansions. The only way to “make Medicaid more flexible, efficient, and accountable” is to give states the resources and incentives to better manage spending through block grants that allow them to cut through mountains of federal red tape, as the Ryan plan would do.

Robert Pear of the New York Times had an important article about Medicaid in which he describes a conversation he had with a Louisiana Medicaid recipient, Nicole Dardeau. “My Medicaid card is useless for me right now,” Ms. Dardeau said over lunch. “It’s a useless piece of plastic. I can’t find an orthopedic surgeon or a pain management doctor who will accept Medicaid.”

And what does Obamacare do? It sends up to 25 million more people to this Medicaid ghetto as states are forced to dramatically expand their programs, making it even more difficult for the poorest and sickest recipients to get care in ever more crowded hospital emergency rooms.

Seniors should be listening, because under Obamacare, that is their fate, too.

Colorado Republicans for Obamacare?


Colorado’s Health Benefits Exchange legislation, which would implement Obamacare in the state, was “mortally wounded,” but is being brought back to life by none other than the Republican majority leader in the state house of representatives, Amy Stephens, according to the Denver Post’s Tim Hoover.

Exchanges are the vehicles through which the gusher of cash from Obamacare’s tax hikes will be laundered into subsidies to favored health plans, payments to vendors and consultants, and salaried jobs for political appointees.

To be sure, this is not what the conservative Stephens thought she was doing. The bill was rolling happily along a couple of weeks ago, when the state’s liberty groups caught wind of it and convinced Stephens to “test” whether or not this was actually an Obamacare-enabling exchange, by offering an amendment that the exchange could only start up if the state got a waiver from Obamacare. Needless to say, the legislation failed the test, and the bill’s supporters pulled it in order to get to work on Stephens.

Its supporters included a powerful group of business interests such as the Denver Metro Chamber of Commerce and the National Federation of Independent Business. Sure, the NFIB is party to the Florida-led lawsuit to overturn Obamacare, but they’re not going to let that prevent them from straddling both sides of the fence.

These business groups probably think that the state’s current political make-up — Democratic governor and Senate majority, and a one-seat Republican majority in the House of Representatives — represents the GOP’s high-water mark for the next few political cycles. They (and Stephens) believe they can blunt the worst effects of the Obamacare exchange if Republicans have some input into the bill.

This is wishful thinking. Section 1311(k) of PPACA states: “An Exchange may not establish rules that conflict with or prevent the application of regulations promulgated by the Secretary under this subtitle.” If Obamacare is not repealed by 2014, Kathleen Sebelius, the U.S. Secretary of Heath & Human Services, will ramp up a regulatory bureaucracy that will quickly breach Colorado’s legislative defenses. After all, she who has the gold makes the rules. Every penny of subsidies that the exchange will launder will be federal. The idea that Colorado will have the ability to resist federal directives once the subsidies start flowing is surely unrealistic. Soon after 2014, there will be no effective difference between state-based and federal Obamacare exchanges.

Reinforcing this wishful thinking is an irrational fear: that if they don’t craft legislation, Gov. John Hickenlooper will implement Obamacare through executive order. Maybe he will, but so what? Collaboration confuses the commitment to repeal. Surely it is far better that the governor be forced to implement Obamacare unilaterally — as best he can — under strict oversight from anti-Obamacare House committees of jurisdiction.

Republican state politicians in Florida, Texas, Georgia, Louisiana, and other states have killed exchanges because they do not want to see President Obama campaigning on Obamacare’s faux flexibility and responsiveness — as would have been demonstrated by bipartisan state legislation to implement it.

It’s not too late for Majority Leader Stephens to make the same decision for Colorado.

Obamacare Health Benefits Exchanges Are Flailing and Failing


(This post has been corrected from its initial version, with an apology.  Please see here.)

The most disappointing news on the Obamacare front these days is that at least two Republican governors cannot wait to implement Obamacare in their states. Apparently, one Republican state senator in Oklahoma has finally decided to prevent an Obamacare exchange bill from reaching Gov. Mary Fallin for signature. Fair enough, but how did it get this far in the first place?

In Virginia, Gov. Bob McDonnell has forced amendments to prevent health plans participating in his state’s Obamacare exchange from covering abortions — at least, that’s what he thinks he’s done. In fact, U.S. Secretary of Health & Human Services Kathleen Sebelius will decide whether Virginia’s health plans will cover abortions, because she’s the one who will certify the exchange — or not. Because 100 percent of Obamacare’s subsidies to individuals in the exchanges come from the federal government, Sebelius’s whims will decide the rules governing the cash flows. Virginia will simply be stuck with paying salaries to the bureaucrats and fees to the vendors and consultants who operate the exchange.

What is motivating these Republicans? They have surely fallen for the talking point that if they don’t implement a state-based exchange, the federal government will rush in and impose one on them. Oh, really? Is that what they’ve seen in Florida, where Gov. Rick Scott has gone so far as to send back the initial federal grant that his predecessor wheedled out of Secretary Sebelius?

In fact, the U.S. Department of Health & Human Services has shown zero will or ability to establish exchanges in states that resist Obamacare, and that is hardly going to change. Despite the Obamacrats’ brave talk that they will keep regulating despite the looming government shutdown, congressional Republicans’ commitment to defunding Obamacare only means that Secretary Sebelius’s ability to implement Obamacare will decrease in 2011 and 2012.

And it’s not like they achieved much in 2010 except to churn out thousands of pages of regulations and immediately issue waivers exempting their friends from those very regulations. And their friends’ performance has been equally underwhelming.

Look at California, the first state to establish an Obamacare exchange, signed by former Governor Schwarzenegger last September 30. Governor Brown’s secretary of health and human services wants California to be the “lead car” in imposing Obamacare. Governor Schwarzenegger’s former policy adviser Herb Schultz is now Secretary Sebelius’s director for the region covering California, so state and federal Obamacrats are surely moving together swiftly to implement health reform.

Or maybe not. Although it’s existed for over half a year, the California exchange’s board of directors has never had a meeting. Its only achievements so far are to have provided unpaid board slots for Kim Belshé (Schwarzenegger’s secretary of health and human services), Susan Kennedy (his chief of staff), and two others. (Advocates hope that the board’a fifth slot will be rounded out with a Latino or person of color.)

California’s Obamacare exchange’s only achievement has been to attach golden parachutes to friends of Schwarzenegger’s and Brown’s. The Obamacrats can’t even get an exchange operating in the state which is the most committed to Obamacare. They’re sure not going to do it in a state that resists them.

RomneyCare’s Popularity Plummets


Grace-Marie Turner speaks for many in expressing frustration with Mitt Romney’s inability to let go of his failed Massachusetts health-care “reform.” President Obama himself has frequently asserted that Obamacare is partly based on the so-called conservative ideas encompassed in RomneyCare. New polling results from the Bay State might make the president rethink this approach, and give Romney more confidence to admit his error.

A recent poll from Suffolk University and WHDH-TV reports that 49 percent of respondents do not believe RomneyCare has helped, while only 38 percent believe that it is working. Fifty-four percent said that Romney’s signing the law likely hurt his presidential chances, while only 22 percent believed that it helped.

This is a pretty dramatic shift. A July 2008 poll, conducted two years after the law was signed, showed 69 percent favoring the law and only 22 percent opposed. A year later, another survey reported similar results.

In contrast, Obamacare has never cracked 50 percent in the polls. If RomneyCare can fall from over two-thirds support two years after its passage to under 50 percent less than five years after it, it suggests that we have not yet begun to see the depths of unpopularity that Obamacare can plumb.

Clarifying Ryan’s Medicare Reform


As yesterday’s uncritical cheerleading of Paul Ryan’s budget proposal dies down, one of his loudest fans has taken a closer look. Yesterday’s Wall Street Journal editorial asserted (incorrectly) that Ryan’s proposal “means that at age 65 you would be able to keep your same insurer, with the feds paying for that insurance instead of your employer.”

As I’ve already noted, that was a feature of last year’s “Roadmap,” not this week’s proposed budget. The Wall Street Journal corrected the record in today’s editorial, which clarifies that “the subsidies will flow through Medicare, only to regulated insurers and government-approved plans. It does not go as far as Mr. Ryan’s previous ‘roadmap’ which offered direct cash vouchers for individuals who preferred to buy insurance themselves.”

(Not that Ryan’s retreating from the term will prevent “voucher” being used to describe his reform. Grace-Marie Turner has explained how “premium support” differs from a voucher, but even Ryan supporter Michael Cannon of the Cato Institute insists on describing it as a voucher.)

Of course, a good night’s sleep will not only allow the time-pressed scribbler to make sure that he has the facts right, but to put them in a better context. On the latter front, the Wall Street Journal does a better job today than I did yesterday, noting that Ryan “moderated his ambitions” because “reforms of this order are so unusual,” and that Ryan’s Medicare would look a lot like Medicare Advantage. Medicare Advantage is a popular alternative to traditional Medicare, whereby seniors can choose Medicare through a private plan, which does not have to pay providers according to the government’s Soviet-style fixed-price schedule.

Obamacare will drive about a half of participating seniors out of the program, as I discussed in a study of the costs and benefits of Medicare Advantage, so Republicans should be able to leverage this to their advantage in both the fight against Obamacare and Medicare reform. Of course, Ryan would have saved himself the grief I dealt him yesterday if his proposed budget had used the term “Medicare Advantage” instead of federal “tightly regulated exchanges,” which smacks of Obamacare.

But that is water under the bridge, and there is plenty of time to change the labels on the goods in the store. (In the study noted above, I describe a way to combine the best features of Medicare Advantage and Medigap to approach a market of real choice for Medicare beneficiaries.)

Ryan Flinched on Medicare


Path to Prosperity,” Paul Ryan’s budget proposal, beats a significant retreat from last year’s “Roadmap for America’s Future.” The Roadmap contained a very precise “payment” (in Ryan’s words) of $11,000 — to be adjusted for future inflation by a factor combining changes in the Consumer Price Index and changes in medical prices — for future Medicare beneficiaries who are now under 55 years of age. Furthermore, you could have taken the “payment” and used it to “to pay for one of the Medicare certified plans, or any other plan, such as those offered by former employers or available from the private market” (p. 51).

“Path to Prosperity,” however, eliminates the “payment” in favor of the woolier “premium support.” Nor does it even report how it would calculate this premium support, beyond asserting that “wealthier beneficiaries would receive a lower subsidy” (p. 46). It never ceases to amaze me that conservative policy analysts cheer such a notion, which in any other environment we correctly label “increasing marginal income tax rates.” One professor who hates the proposal figures that the average “premium support” will be about $15,000.

Worse, we won’t be using our “premium support” to buy whatever policy we want, but choosing it from a federal “tightly regulated exchange” (p. 47). Can’t we put any talk of “exchanges” to bed until we finally get rid of Obamacare? Currently, discussion of “exchanges” only serves only to confuse people about the role of the state in determining our health benefits. Nor will we be receiving the money and then sending it to the plan of our choice, as we would have with our payment under the Roadmap. Ryan insists that the money “doesn’t go to the person, into the marketplace. It goes to the plan.”

If this is a tactic to avoid the dreaded “V” word, it’s not working. John Podesta of the Center for American Progress immediately attacked the “voucher,” and so has every critical comment I’ve read in the last few days. Why the fear? We have a voucher for seniors that is just as “popular” as Medicare and has resulted in a program that is in significantly less fiscal distress than Medicare despite being three decades older. It’s called Social Security.

Why a politician with the skills of Paul Ryan would retreat from a plan to reform Medicare by increasing seniors’ Social Security checks by $11,000 or $15,000 annually, and replace it with one to send the money directly to the despised health insurers, is beyond my understanding. Unfortunately, Ryan has surrendered critical ground on Medicare reform.

Paul Ryan Takes On the Medicare (and Medicaid) Industrial Complex


There will be howls of outrage on Capitol Hill today when House Budget Chairman Paul Ryan unveils a comprehensive federal-budget-reform package that cuts $6.2 trillion in government spending over the next ten years. Most importantly, Ryan’s plan will fundamentally rewrite the rules for entitlement spending for the government’s massive health-care programs, Medicare and Medicaid, that are on track to wreck the nation’s finances.  

Ryan is taking on the trillion-dollar Medicare/Medicaid industrial complex at no small political risk to himself. (President Obama won’t go near it, and didn’t propose any serious entitlement reforms in his most recent budget package.) 

Here’s the first, and most important thing to understand about both programs: Spending is completely uncapped. If a state spends more money on Medicaid services, the feds kick in more money to pay for it (on average federal government pays about 57 percent Medicaid costs, with higher federal matching rates for poorer states), regardless of quality or actual access for Medicaid recipients. This formula also means that richer states that can afford to spend more (like New York) get billions more in federal Medicaid funds than poorer states (like Mississippi). 

Medicare operates similarly: The more doctors and hospitals spend on seniors, the more they get paid, regardless of quality. Medicare is in deep financial trouble, with spending outstripping revenue, and the hospital insurance trust fund going bankrupt by 2020.

Historically, states and the federal government have tried to use price controls to restrain entitlement spending — a tactic that has failed miserably. In Medicare, providers respond to price controls by performing more services, or more highly reimbursed services. In Medicaid, reimbursement rates for patients are so low, says one physician in New Orleans, “having a Medicaid card in no way assures access to care.” 

Worse yet, to compensate for hundreds of billions in new federal spending under Obamacare, over the long term the federal government would slash provider rates for Medicare to below Medicaid rates, putting seniors into the same miserable basket as Medicaid patients.

Ryan’s reform proposals are bold, but fundamentally fair-minded. For Medicaid, he’d cap federal spending through block grants but liberate states from federal red tape that prevents them from finding more efficient ways to provide high-quality care for the poor. Capping federal contributions is a critical step, because without some kind of spending discipline states have little incentive to press providers to offer higher quality care at lower cost.

On the Medicare side, Ryan would shift to a premium support system for buying private health insurance by 2022 — modeled after the health-care system congressional members enjoy now. Sicker and poorer seniors would get more support. It’s a plan that has been endorsed by a majority of the Democrat-led Breaux Commission of 1999, and by Clinton-era budget guru Alice Rivlin last year.   

Ryan’s approach would maintain a viable safety net for the poor and elderly, while “bending the curve” of federal health-care spending. Still, he’ll undoubtedly be savaged from every group that benefits from runaway government health-care spending. It’s a sign that he’s on the right track.

Premium Support Will Be Good for Seniors


House Budget Committee chairman Paul Ryan is working to save Medicare with his proposal to begin modernizing the program through premium support.

Joseph A. Antos of the American Enterprise Institute took the lead in developing a letter sent to congressional leaders last week endorsing this concept, and the letter was signed by 30 of our colleagues in the policy community.

The key message: “The budget resolution that will soon be adopted by the House of Representatives is likely to include a call for Medicare reform. The key to that reform is premium support, which can restore fiscal health to the program by promoting more efficient and effective health care for America’s seniors.”

Premium support “is a new way of structuring the financing of Medicare benefits that gives beneficiaries more control over their health choices and spending. Medicare beneficiaries would be granted an annual subsidy that reflects the costs associated with their health status and their financial wherewithal,” the letter explained. 

It’s essential that we get on a new path to a more efficient design for Medicare that doesn’t continue to rely on an antiquated model of government officials making decisions about what benefits will or will not be available to seniors and what providers will be paid through a web of regulations and price controls.

The concept of premium assistance was endorsed in the 1990s by a majority of the members of the National Bipartisan Commission on the Future of Medicare and last year by the Bipartisan Policy Center’s Task Force on Debt Reduction.

Opponents of the proposal have charged that Ryan is planning to voucherize Medicare.  But that shows a misunderstanding of the proposal. In contrast with vouchers, premium support allows for more flexible subsidies that can be adjusted and targeted to seniors based upon financial status, age, health status, or other considerations.

Moving Medicare toward sustainability means modernizing the program. And that means giving seniors more choices in a market competing for their business, as Part D has successfully done in a program that is popular and that also is saving taxpayers money.

Premium support is a path to save Medicare over the long term without increasing taxes or further increasing deficit spending as it continues to chase an unsustainable fee-for-service model.  

We can choose rationing, higher taxes, and more deficit spending — or 21st-century reforms such as premium support that put Medicare and seniors on a better path. There will be a choice.

— Grace-Marie Turner is president of the Galen Institute and co-author of Why ObamaCare is Wrong for America: How the New Health Care Law Drives Up Costs, Puts Government in Charge of Your Decisions, and Threatens Your Constitutional Rights.

Repeal Obamacare’s 1099 Reporting Provision? No Way!


I probably should have weighed in on this issue a few weeks back, but the looming bipartisan repeal of Obamacare’s 1099 reporting requirement is nothing for Obamacare’s opponents to cheer.

The 1099 provision refers to the justly reviled clause in Obamacare (section 9006) that compels any business spending at least $600 on a supplier to issue a 1099 to that supplier. So, if my consulting business buys $600 worth of office supplies from Staples, I’m supposed to issue Staples a 1099!

It’s supposed to raise some tax revenue by giving the IRS more accurate information about business transactions, but it’s an easy target for a “mini-repeal” of an obviously ridiculous provision of Obamacare.

The House passed a short bill to repeal the reporting requirement on March 3 (with every Republican and 76 Democrats voting in favor), and the Senate has been tossing it around for a few days now. Although the Senate appears to want to move it to the president’s desk, certain senators have been trying to add unrelated amendments to it, so it hasn’t passed yet.

Nor should it. The 1099 reporting requirement kicks in at the beginning of 2012, just when the thousand-plus Obamacare waivers are expiring and their beneficiaries will be pleading for their renewal. The bureaucratic hassles of Obamacare will be back on the front pages. Although a nuisance, the 1099 reporting requirement will be the most obvious “cost” of Obamacare to millions of small businesses and sole proprietors as we go into the next campaign season.

Taking this off the table risks losing that community’s commitment to the complete defeat of Obamacare. Repealing the 1099 reporting requirement would be a Pyrrhic victory in the struggle against Obamacare — exactly the type of bipartisanship we don’t need.

Rick Perry: No Obamacare Exchange for Texas


Governor Rick Perry has reportedly prevented State Representative John Zerwas and other legislators from making a potentially fatal blunder in the fight against Obamacare. According to local media, the governor’s office has discouraged Rep. Zerwas from championing legislation establishing a state-based Obamacare Health Benefits Exchange in Texas.

This is very good news. States that establish Obamacare exchanges are making a one-way, lose-lose bet on Obamacare, as I’ve written before. Governor Jindal in Louisiana and Governor Deal in Georgia have also recently learned this.

Our friends at the Heritage Foundation, who are most closely associated with exchanges, have also sounded the warning against abusing their original idea (which had the objective of pooling dollars from small employers) in order to seek federal Obamacare grants and grow Obamacare’s roots deeper into the soil. Here are a paper by Edmund Haislmaier and a blog entry by Nina Owcharenko.

A Mandate Is Not a Market Solution to Medical Malpractice


Today’s New York Times has a compelling op-ed by Ronen Avraham, a law professor at the University of Texas.  It proposes a way to fix the out-of-control medical-malpractice laws that hold sway over much of the country. Pointing out that both Republicans and Democrats in D.C. regret that Obamacare didn’t do enough on med-mal, Professor Avraham proposes a reform based on the sound principle that physicians who follow accepted medical guidelines should suffer reduced liability. I can’t imagine that any reasonable person would disagree with this principle. However, there are two problems with his proposal.

First, Professor Avraham goes the way of many clever people who have a good idea, but become frustrated that society does not immediately adopt it: He proposes that the federal government mandate that physicians purchase (or license) appropriate guidelines from for-profit companies!

If there’s one thing we’ve learned from Obamacare, it’s that Americans — either patients or doctors — don’t like the federal government mandating that they buy products or services. And the lobbying efforts focused on writing and modifying the guidelines would quickly become truly (and expensively) monstrous. The process for composing the guidelines would quickly become intertwined with the already overly controlling Food and Drug Administration, as well as the looming threats of both government-sponsored “comparative-effectiveness reviews” (which were financed by the 2009 stimulus) and the Independent Payment Advisory Board (IPAB) that Obamacare institutes. In other words: Just another way for the federal government to tell you whether you can have a red pill or a blue pill, as the president has put it.

States have demonstrated empirically effective reforms to med-mal laws that do not rely on the federal government mandating that physicians purchase guidelines from for-profit companies. Texas seems to get all the headlines, but other states have also instituted good reforms, according to a recent ranking.

Second, Professor Avraham joins with too many Republicans and Democrats in asserting a federal power over med-mal laws. Where in the Constitution does he find an enumerated congressional power to legislate torts of professional liability? Let the states deal with med-mal reform, and let Congress focus on defunding and ultimately repealing Obamacare.

Romney Still Doesn’t Get It


Former Massachusetts governor Mitt Romney recently posted a comment on NRO about how he would undo Obamacare — a comment that shows he is still a very long way away from understanding where he needs to be on what is likely to be the crucial domestic issue of the 2012 elections. His short post misses the mark in two important ways.

First, Romney says he would begin to undo Obamacare with an executive order: “If I were president, on Day One I would issue an executive order paving the way for Obamacare waivers to all 50 states,” he wrote. “The executive order would direct the Secretary of Health and Human Services and all relevant federal officials to return the maximum possible authority to the states to innovate and design health-care solutions that work best for them.”

Governor Romney has to know he can’t use an executive order to wipe out two massive new entitlement programs, $550 billion in new and higher taxes, vast Medicaid expansion, and mandates on individuals, businesses, and the states to comply with the Patient Protection and Affordable Care Act. Waivers are not a solution.

Second, he says: “Of course, the ultimate goal is to repeal Obamacare and replace it with free-market reforms that promote competition and lower health-care costs. But since an outright repeal would take time, an executive order is the first step in returning power to the states.”

Take time? The Republican House passed a repeal bill within a few weeks of taking power. If there were a majority in the Senate supporting repeal, then a new president could have a bill to sign on his desk within a month or two of taking office. Why on earth would you want to send states on a wild chase to start implementing Obamacare in a different way?

Governor Romney’s post shows he is still trying to defend his indefensible position that RomneyCare was right for Massachusetts but that he wouldn’t impose it on the rest of the country. RomneyCare gave President Obama the model for the Obamacare monstrosity, a fact which is clear and where the president has shown a rare willingness to share credit.

How is Romney’s new solution on waivers different from President Obama’s position? It isn’t. The president said recently he would be happy to grant waivers to any states that wanted to go about putting health care under government control in a different way. Romney’s plan to issue an executive order to implement Obamacare is derivative of the president’s position.

The voters will see little daylight between Romney’s approach to health reform and the president’s. If Romney were to get the Republican presidential nomination, Obamacare would collapse as an issue. And it would be much, much more difficult to undo this legislation that would turn citizens into subjects and turn states into contractors of a vastly more powerful federal government.

This is a debate we must have, and Governor Romney still seems to have a difficult time grasping its central importance.


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