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Critical Condition

NRO’s health-care blog.

The Democrats’ Small-Business Policy: Keep Them Small



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Freshman Rep. Mick Mulvaney (R., S.C.) made a good point in the House debate on H.R. 2, the Repeal the Job-Killing Health Care Law Act. Responding to Rep. Nydia Velazquez, last year’s chair of the House Small Business Committee, Mulvaney pointed out the tough spot in which congressional Democrats find themselves. They have contradictory intentions: Be tough on business, but be soft on small business.

On one hand, businesses that don’t provide health insurance are bad; they will face new penalties if they do not begin to provide health insurance. On the other hand, small businesses are good; no penalties on businesses that employ fewer than 50 workers.

The result: a policy to keep businesses small. Once a business reaches 50 employees, it will get a bill whenever an employee gets a government subsidy to buy health insurance. At 49 workers, small businesses will face a cliff. Only a business that is fairly confident it will blow way past 50 employees will add the 50th. The result will be small businesses that decide to stay small. The burden of a line drawn at 50 employees won’t be on the small firm that forever stays at about the same number of employees, plus or minus a few. The burden will be on “gazelles,” the small firms that are on their way to becoming bigger firms. And that is part of the story of how health-care reform, unless repealed and replaced, will cost jobs.

Hanns Kuttner is a visiting fellow at the Hudson Institute.

Repealing Obamacare Is Not ‘Symbolic,’ It’s a Constitutional Duty



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Even conservative talk-radio hosts and, this morning, the Wall Street Journal seem to have fallen for the line that the vote to repeal Obamacare, expected tomorrow in the House of Representatives, is “symbolic.” Apparently, because Sen. Harry Reid is unlikely to allow a vote in the Senate, and the president would veto repeal if it managed to beat the odds and get to his desk, the whole exercise is a waste of time.

How the tables have turned! Back when Nancy Pelosi was speaker, the legacy media bemoaned the fact (as of last October) that the House had passed 420 bills that the Senate had not taken up. Journalists would never have dared label these bills “symbolic.” Rather, the problem was a “gap in productivity” between an energetic and  progressive people’s chamber and the Jurassic Senate, where archaic rules empowered a rump to block critical agenda items.

Today, a rambunctious and reckless Tea-Party–fuelled House majority is threatening to upset last year’s singular legislative achievement. Thank Providence the Senate is likely to spare the president embarrassment by preventing the repeal bill from arriving at his desk!

Well, we will see what happens. Even if the House bill does not reach the Senate floor for debate, the House’s repeal is important for two reasons.

First, it demonstrates that the House majority’s commitment to the Constitution is not limited to reciting it on the first day of the session. The Constitution divides the federal government into three branches, and the legislature further into two chambers, each body with a sworn duty to repeal legislation that it believes is unconstitutional — notwithstanding the beliefs of the other chamber or the president.

Second, it puts the Republicans on the record. Moving beyong talking points to actually voting is no small achievement, especially because the Republican alternative to Obamacare in the “Pledge to America” is little more than a mish-mash of crowd-pleasing sound bites — “Obamacare-lite,” if you will. Virtually no corporate interest in the health sector is agitating for repeal. (Even the U.S. Chamber of Commerce is a Johnny-come-lately to the fight.) Instead, the conservative and libertarian grassroots are driving this train. The repeal vote shows that the Republicans now understand this.

Even more importantly, it will influence the corporate interests to take repeal seriously. No, I am not expecting the CEO of Merck & Co. or CIGNA to stand at the podium, shake his fist, and scream for repeal. However, the investment decisions that they make over the next two years will largely determine the fate of Obamacare. Every step that discourages them from throwing good money after bad in support of Obamacare will increase the likelihood of full repeal in 2013.

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Come On, Kathleen



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This morning, the Department of Health and Human Services released a report headlined, “At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans: 129 Million Could Be Denied Affordable Coverage Without Health Reform.” Get the implication? Without Obamacare, half of America would be left without health insurance.

Well, admits the actual report, maybe not exactly. The HHS estimates that anywhere between 50 to 129 million non-elderly Americans have “some type of pre-existing condition.” Between 50 and 129 — I’ve gotten more reliable estimates of next year’s weather. But the real laugher is in how the HHS takes the term “pre-existing condition” and mutates it beyond all recognition, in order to prop up our benighted new health-care law.

Let’s understand first what the problem of preexisting conditions is.

Because our World War II–era tax system allows employers to buy health insurance tax-free, while making individuals buy it with after-tax dollars, the vast majority of those under 65 get health insurance from their employers. This, in turn, creates the phenomenon of job lock: Individuals who fall ill at one job (or have family members who fall ill under their health plan) are afraid to leave that job, because switching jobs means switching insurance plans, and a new insurance plan is likely charge more to cover someone who is already sick.

Note that the words “denied coverage” are not present in the preceding paragraph. Indeed, as Michael Cannon points out, a 2001 HHS survey found that only one percent of Americans had ever been denied health insurance for any reason. Cannon brings us to two other studies, one by a Wharton economist and one by the RAND Corporation, both of which echo the HHS data. As Cannon writes,

It is true that insurers charge higher premiums to many people with pre-existing conditions — and it is crucial that they have the freedom to do so.  Risk-based premiums create virtuous incentives for people to buy insurance while they are healthy and to be cost-conscious consumers.  They also encourage insurers to develop innovative products that protect against the risk of higher premiums.  The real problem here is that the government has created an employment-based health insurance system that denies consumers the protections that unregulated markets already provide, as well as additional protections that insurers would develop absent this government intervention.

Our health-care system, pre-Obamacare, was far from perfect. But it’s exceptionally dishonest to say that half of Americans are at risk of losing their coverage without Obamacare’s blizzard of mandates and controls. Instead of creating two new entitlements and hundreds of thousands of pages of new regulations, we could have done something much simpler: equalize the tax treatment of individual and employer-sponsored health insurance.

There are lots of ways to do this, depending on if you want to increase or reduce taxes. You can eliminate the employer loophole altogether, raising taxes by over $300 billion a year, making a huge dent in the budget deficit. Or, you can extend the tax break to all individuals, whether employed, self-employed, or unemployed. Finally, you could split the difference: reducing the tax break for employers, but increasing it for individuals.

Once people are buying insurance for themselves, rather than depending upon their employer, their insurance stays with them. If you lose your job or change jobs, your insurance will still be yours, just as your auto insurance and your life insurance stays with you regardless of where you work. And if you have insurance, like most Americans do, the issue about preexisting conditions is irrelevant: If you are sick, your insurance provides the coverage it is meant to provide.

Sebelius and her HHS colleagues try to morph the definition of “preexisting conditions” into “conditions.” Take this random sample of Sebelius’ assault on the English language:

An analysis of a survey that follows people over time found that, among healthy people—reporting very good or excellent health with no chronic conditions—today, 15 to 30 percent (depending on their age) will develop a pre-existing condition within the next eight years.

So, let’s get this straight. Fifteen to 30 percent of Americans will, in the future, develop a preexisting condition. This only makes sense if the HHS has also invented time travel.

A person who has health insurance, and later becomes ill, does not have a preexisting condition. He has a condition of the plain old “existing” kind—one that his insurance will help pay for. This is exactly how insurance is supposed to work.

Millions of young, healthy people who can afford health insurance today choose not to buy it. Obamacare will allow them to buy it after they get sick — because, aha! They now have a “preexisting condition.” This is exactly the opposite of how insurance is supposed to work.

Obamacare’s advocates want you to believe that, without their 2,300-page, trillion-dollar extravagance, half of America would lose their health insurance. The reality is that preexisting conditions is a problem affecting a minute fraction of Americans, a problem that could be solved with a simple, one-page bill.

If Republicans repeal Obamacare and replace it with a straightforward law that equalized the tax treatment of employer-sponsored and individually-purchased health insurance, they will have done more for real health-care reform, and for people with real preexisting conditions, than the last forty Congresses put together. Let’s hope they get their chance.

— Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co. in New York City. He blogs on health-care issues at The Apothecary.

GOP Heads into Repeal Vote with Winning Hand



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While the political class confidently touts the alleged resurgence of President Obama and patronizingly labels the upcoming vote to repeal his signature initiative as “symbolic,” the truth is that President Obama is the one who’s holding the weak cards.

It’s amazing, really, that anyone could think otherwise. This is a president who recently led his party to the loss of 63 seats in the House of Representatives, more than any party had lost in 62 years. The main reason for that “shellacking” (President Obama’s word) was his insistence that congressional Democrats ignore popular will and pass the highly unpopular health-care overhaul that the House is now going to vote to repeal.

“But,” the political class replies, “the president has gotten more popular since the election.” But has he? While President Obama has indeed enjoyed an uptick in most polls, the Real Clear Politics (RCP) average still shows his approval rating as being slightly below 50 percent. More importantly, none of the polls listed by RCP have screened for likely voters — save one, Rasmussen. On Election Day, Rasmussen showed that 48 percent of likely voters approved of President Obama’s performance, while 51 percent disapproved. Today, that same poll shows that 48 percent of likely voters approve of President Obama’s performance, while 51 percent disapprove. That’s not a lot of progress.

True, President Obama has in fact gained some ground among those who feel strongly: On Election Day, Rasmussen showed that Obama faced 60 percent opposition among those who feel “strongly” about his performance. Now he faces only 58 percent opposition.

Moreover, whatever support President Obama might have, that doesn’t equate to support for Obamacare. Peter A. Brown, assistant director of the Quinnipiac University Polling Institute, says, “The Republicans pushing repeal of the health care law have more American people on their side. They may not have the votes in the Senate, but they have many on Main Street.” Brown adds, “While President Obama’s poll rating has improved in recent weeks, the coalition against his health care plan remains and is quite similar to the one that existed when his numbers were at their nadir.”

Indeed, to the best of my knowledge, three polls have been released this month that have asked Americans the straightforward question of whether they want Obamacare to be repealed or not. Gallup shows Americans favoring repeal by a tally of 46 to 40 percent. Quinnipiac shows Americans favoring repeal by a tally of 48 to 43 percent (54 to 37 percent among independents). And neither of those polls screens for likely voters (although Quinnipiac does screen for registered ones), who tend to support repeal by wider margins. Among likely voters, Rasmussen shows Americans favoring repeal by a tally of 55 to 40 percent, exactly the same tally of 55 to 40 percent that Rasmussen showed during the week of the election.

The widely publicized AP/GfK poll, which didn’t include a representative number of Republicans, didn’t ask respondents a straight yes-or-no question on repeal. Instead, it offered rather ambiguous answers saying that the law should do “more” or “less” — while most Obamacare opponents would likely say that it should do more (to lower health costs) and less (to raise federal spending and consolidate money and power in Washington). Still, by a margin of seven percentage points, even this poll showed support for repeal outpacing support for leaving Obamacare as it is.

Why would the press corps advance such different messages, inflating the popularity of Obama and Obamacare and alike, while correspondingly deflating the popularity of repeal? Perhaps looking deeper into Rasmussen’s polling provides the answer. Among likely voters who aren’t in what Rasmussen labels as the “political class,” Rasmussen shows support for repeal at 67 percent, with only 30 percent opposed. Among likely voters who are in the “political class,” the poll shows support for repeal at 9 percent (!), with 78 percent opposed — a ratio of nearly 9 to 1 against repeal.

So, for what it’s worth, here’s some unsolicited advice for congressional Republicans: Stop believing everything you read in the papers. Believe in your own convictions, and trust that the majority of Americans share them. And then play your winning hand, with confidence.

Bad Polls Are No Reason to Retreat



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As the House Republicans move to vote on repealing President Obama’s health-care law, they have received some bad news in the form of two polls showing a lack of interest in repeal. According to an AP poll, only one in four Americans want full repeal. And a USA Today/Gallup poll found that 32 percent of Americans want to repeal the bill.

Republicans are unlikely to let these recent figures change their plans to hold the vote on repeal. Both of these numbers are down from earlier polls, and of course the best national poll, held on Election Day, showed significant concerns about the bill. Still, the newer polls are evidence of the fact that, as Noam Levey wrote in the Los Angeles Times, President Obama “is now more formidable than he was immediately after the Republican electoral victory in November, thanks to a productive lame-duck congressional session and his actions after the Tucson shootings.”

These developments should not come as a surprise. President Obama had a terrible 2010, and political fortunes wax and wane. But the problems with the health-care bill have not gone away just because the president has experienced a recent popularity spike. The bill remains, as Ezra Klein put it, “a clunky piece of legislation.” It still will leave over 20 million Americans uncovered in 2019, even after spending a trillion dollars, imposing a constitutionally dubious mandate to purchase insurance and, according to the CBO, leading to insurance-premium cost increases.

Republicans see the value in putting themselves on record as against this bill. But they also know that the repeal vote is only the first step in what will have to be a multi-front effort to reverse what has been done and to come forward with a more credible alternative.

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Krugman, Obamacare, and the ‘Doc Fix,’ Again



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During the yearlong debate over Obamacare, the law’s apologists returned over and over again to the supposed fiscal benefits flowing from its provisions as a top selling point. Pass Obamacare, they said, and we’ll have health insurance for everyone, painless cost-cutting to slow rising premiums, and deficit reduction to boot. Its win, win, win!

No one believed them, of course. The claim of deficit reduction may have provided a fig leaf to allow some wavering congressional Democrats to vote yes, but it didn’t convince a skeptical electorate. Most Americans have too much common sense to buy the argument that what the nation needs to get its fiscal house in order is a new trillion-dollar-plus entitlement program, piled on top of the unaffordable ones already on the books.

Sure, on paper the Democrats might be able assemble “offsets” to make it look like the program was “paid for.” But even a casual review of the legislation and associated analyses reveals what most people intuitively know to be the case: that Obamacare combines dead-certain entitlement expansion (for at least 30 million people, and probably many millions more) with budgetary sleight of hand and “pay fors” that are either phony or altogether implausible.

Nonetheless, as the House readies a repeal vote for this week, Obamacare enthusiasts are back at it again, claiming once again that Obamacare supporters are practitioners of fiscal discipline, while those who want to undo the largest expansion of government in nearly half a century are the budget busters.

To be sure, it’s a tough sell, but Paul Krugman of the New York Times is eager to give it a try nonetheless. He claimed in his Sunday column that the Republican contention that Obamacare is a budgetary disaster amounts to a “war on logic.”

But Krugman’s attack is itself illogical, and inaccurate too. He focuses most of his attention on the so-called “doc fix,” which is the periodic legislation passed by Congress to prevent deep and unrealistic cuts in what Medicare pays for physician services. Republicans have argued, accurately, that the accounting for Obamacare omits the “doc fix” spending, and that if it were included, the supposed deficit reduction from Obamacare would vanish altogether, even before the other gimmicks and implausible assumptions were exposed and removed.

Krugman contends that this Republican argument is illogical because, in effect, the real “baseline” of federal spending already includes higher physician fees. With or without Obamacare, Congress is going to spend more on physicians, Krugman suggests, therefore Obamacare shouldn’t get charged for it.

But that’s not what’s really going on here. If Krugman’s analysis were accurate, why does Congress go through the annual agony of a “doc fix” at all? Why haven’t they just passed a permanent solution already and gotten it over with?

The answer is that, while Congress doesn’t want to cut physician fees, it hasn’t wanted to pile the costs onto the national debt either. What has held back a permanent solution is the inability to find $200–$300 billion in acceptable “offsets” to make sure a permanent fix doesn’t add to the deficit.

When President Obama assumed office, he wanted his health bill and a permanent “doc fix” too, but he didn’t have enough flimsy offsets to grease the way for them both. So he came up with a new “solution”: use the offsets to pave the way for Obamacare’s spending, and exempt the “doc fix” from the need for offsets at all. This would create the perception of “deficit reduction” from Obamacare even as an unfinanced “doc fix” ran up the deficit by an even larger amount.

At the end of the day, even some Senate Democrats balked at this shameless sleight of hand and blocked the effort to pass an unfinanced and permanent “doc fix.” But the issue remains very much unresolved, and the administration has yet to disavow their push from last year to pay higher physician fees with borrowed money.

Krugman also seems completely unaware that the Medicare cuts that are supposed to pay for Obamacare’s entitlement spending are of the same type as the physician-fee cuts he now wants to assume away. They are arbitrary and unrealistic too, so much so that the chief actuary for Medicare considers them entirely implausible. He projects that if Obamacare’s Medicare cuts were allowed to remain in effect for long, Medicare’s payment rates would fall below those of Medicaid, which are so low that Medicaid patients often have trouble accessing care. And yet Obamacare’s apologists want us to believe we can safely erect a massive new entitlement based on the assumption of future savings from these cuts.

In truth, the Krugman critique doesn’t lay a glove on the Republican argument. He doesn’t even try to defend the CLASS Act, another new entitlement for long-term care. As a start-up program, CLASS collects $70 billion in front-loaded premiums during its first decade. Krugman and others want to count this money toward Obamacare, even though every analysis available shows CLASS will itself need a bailout when its costs balloon beyond ten years. And then there’s the so-called “Cadillac” tax that starts in 2018. The tax is so unpopular with Democratic constituencies that President Obama was never willing to collect it himself (if reelected, he will leave office no later than January 2017). But Obamacare’s defenders argue this tax can be counted on to produce trillions in new revenue beyond 2020.

If liberals and Democrats want to make the fight over Obamacare about taxes, spending, and the budget deficit, Republicans should allow them to do so. The public has already taken sides in this fight. Taxpaying Americans are never going to be convinced that the government has found a way to give away new benefits to millions of people, with no cost to them or anyone else.

The Rights You Will Have with Obamacare



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With the debate over the repeal of Obamacare coming up, President Obama and his supporters in Congress are trying to calm the millions of Americans who strongly oppose the law by focusing only on its early sweeteners — including the right of 26-year-old “children” to stay on their parents’ insurance, the right to “free” preventive care, and the right of uninsured people with preexisting conditions to buy coverage.

While these provisions are all desirable, they are not without costs and consequences. It is therefore helpful to look at what other “rights” you will have under Obamacare when the full impact hits.

1. You will have the right to lose your job as employers struggle to comply with expensive mandates. According to labor economist Diana Furchtgott-Roth, those hit hardest will be younger, less-skilled workers. The cost of employing them will soar as employers are required to buy health insurance that may cost as much as a lower-wage person’s annual earnings.

High-tech workers will be hit as well. The $20 billion tax on medical-device companies, to take one example, will force companies to lay off researchers and curtail development of new products. And tens of thousands of insurance brokers will lose their livelihoods because of arbitrary regulations from Washington.

2. As a taxpayer, you will have the right to see the federal debt soar as Congress’s budget gimmicks face economic reality. According to former CBO director Doug Holtz-Eakin, Obamacare will cost nearly $1 trillion more than estimated as employers begin dropping health insurance and sending people to the new taxpayer-subsidized exchanges instead.

3. As a business owner, you will have the right to comply with the expensive new mandates in Obamacare or drop coverage and pay fines instead. You will have the right to keep the IRS informed about the coverage you are offering and its cost. And you will have the right to stop hiring and keep your business smaller than 50 people to escape Obamacare’s fines and mandates.

4. As an employee, you will have the right to lose the coverage you have now as you and 80 to 100 million people (according to McKinsey & Company analyst Alissa Meade) are switched to other coverage when Obamacare takes effect in 2014.

5. As a citizen, you will have the right to have the government decide what health insurance you must have and to either buy the expensive policy or pay a fine.

6. If you are a young person, you will have the right to pay higher premiums for mandatory health insurance to subsidize people who are older and sicker.

7. If you are a senior, you will have the right to see half a trillion dollars taken out of Medicare to pay for new health-insurance entitlements — a move allegedly designed to make Medicare stronger.

8. If you are in a Medicare Advantage plan, you and 7 million other seniors will have the right to go back into traditional Medicare and take your chances at finding a doctor who will see you.

9. If you are already on Medicaid, you will have the right to compete with millions more people trying to get appointments with doctors, especially specialists.

10. If you are one of the estimated 16 million people who will be added to the Medicaid rolls in 2014, you will have the right to wait in hospital emergency rooms for even routine care as the program swells to 87 million recipients by the end of the decade. (As many as 900,000 additional emergency room visits every year are expected — primarily by new enrollees in Medicaid — and from many of the 23 million people who will remain uninsured.)

11. If you are a doctor or nurse, you will have the right to receive lower Medicare payments while filling out mountains of new paperwork to satisfy government “quality reporting” requirements.

12. If you have child-only health insurance, you have the right to lose that coverage as more insurers exit the market. And you have the right to lose dependent coverage entirely as many employers decide it’s just too expensive to offer.

13. If you are an insurance company, you will have the right to figure out how you are going to continue to pay claims as government adds more expensive, mandatory benefits but caps premium increases at less than the cost of providing the coverage.

14. If you have a preexisting condition and are in a temporary high-risk pool, you and 8,000 others enrolled in the $5 billion program will have the right to pay high costs for your health insurance in the poorly designed program.

15. If you are a governor or state legislator, you will have the right to figure out what state services you will cut further — education? transportation? public safety? — to comply with the federal mandate that you expand Medicaid and set up the huge health-exchange bureaucracies. You also have the right to sue the federal government to protect your state’s rights.

And everyone will have the right to pay more for health insurance as the costs soar from what will surely be a heavily loaded list of benefits that your policy must cover.

Or you have the right to ask Congress to start over again and get health reform right.

The DNC’s Talking Points on Repealing Obamacare



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As Republicans assumed power in the House of Representatives, vowing to repeal Obamacare, Democrats began readying for an intensive campaign to oppose them. With this in mind, the Democratic National Committee released a set of talking points with which they hope to persuade the public that Republican repeal efforts are misguided. Let’s see what the DNC’s sharpest operatives came up with:

Instead of working to find bipartisan solutions to create jobs, grow the economy, and make America more competitive, Republicans in Congress are spending all of their time re-fighting the political wars of the last two years by trying to repeal health reform and give control over your health care back to insurance companies. The Affordable Care Act provides Americans with more freedom and control in their health care choices.

The Democrats claim that labeling PPACA a “government take-over” is unfair. But the above paragraph gives the game away: to the degree that insurers no longer “control” health care, it’s because control has been consolidated in Washington. It’s great that Democrats claim to want to “provide Americans with more freedom and control in their health care choices,” because from a policy standpoint, providing Americans with more freedom and control means adopting free-market policies: creating a truly free, individual market for health insurance, in which consumers control their own health spending.

• [PPACA] gives families the freedom from worrying about losing their insurance, or having it capped unexpectedly if someone is in an accident or becomes sick.

Unbeknownst to many, due to spin from Obamacare advocates, the Health Insurance Portability and Accountability Act, passed in 1996, already contains all of the consumer protections that Obamacare claims to institute anew. If we had a true individual market for health insurance, in which people bought policies for themselves instead of getting them from their employers, HIPAA would never have been necessary.

Prohibiting lifetime caps on insurance payouts will drive up the cost of insurance for everyone, essentially forcing individuals to buy extra insurance that they, in all likelihood, will never need.

• It frees Americans from the fear of insurance companies raising premiums by double digits with no recourse or accountability.

This is perhaps the most ridiculous claim on the whole list. Health-care costs are not rising because of greedy, profiteering insurers. They are rising because socialized medicine incentivizes people to use more health care than they need. As Obamacare does nothing to address the rising cost of health care, insurers will continue to be forced to pass these costs onto policyholders.

As to the issue of recourse and accountability: every state in the Union has an insurance commissioner, who is responsible for reviewing and approving rate increases. Obamacare installs a redundant layer of federal regulation atop this system.

• It frees Americans from discrimination when insurance companies deny women health insurance because they are pregnant, or refuse to provide coverage to children who are born with disabilities.

Allowing women to buy insurance after they are pregnant, instead of beforehand, goes against the very nature of insurance: paying a small amount now to avoid financial risk in the future. It will incentivize women to wait until they are pregnant to buy insurance, driving up the cost of insurance for non-pregnant women.

Requiring policies to cover children born with disabilities is actually a good idea, as it will mitigate the need for subsidized high-risk pools, and reduce a significant incentive for abortion. Republicans don’t have a problem with this.

• It provides parents the choice of providing health coverage for a child after they finish school.

This is an Orwellian description of the PPACA provision that requires all new health plans to cover a worker’s “adult children” until they are 26. “Mandate” is an antonym of “choice.” This insurance mandate, like all the others in Obamacare, forces people to buy insurance they may or may not need: driving up the cost of insurance for everyone.

• It provides people the freedom to change jobs without worrying about losing one’s health insurance, or even retire a little earlier without having to worry about losing one’s coverage.

As described above, HIPAA already provided these protections, protections that an individual insurance market would achieve by definition. Contrary to the above bullet point, Obamacare-driven tax increases have incentivized companies to drop private coverage for their retirees, dumping more people into Medicare.

• It provides seniors with the freedom to get the care they need, including free preventive care, lower cost prescription drugs, and Medicare that they can count on.

Again, note the Orwellian equation of mandates with “freedom.” Closing the “donut hole” for prescription drugs under Medicare will destabilize the program by encouraging seniors to spend more on drugs than they need to, driving Medicare further into insolvency.

• And, it gives small business owners the power of competing with large employers by providing small business tax credits to make employees’ health coverage more affordable, and by increasing their purchasing power through competitive private health insurance Exchanges.

Obamacare, by driving the cost of insurance even higher with its numerous mandates, incentivizes employers to drop coverage for their employees so they can receive federally subsidized insurance. According to Dan Danner, president of the National Federation of Independent Business, “fewer than one-third of small businsesses” even qualify for the tax credit, which only lasts for a maximum of six years anyway.

• Finally, it frees our children from the threat of out-of-control government debt and deficits by holding government accountable for its spending. Independent estimates show it will reduce the deficit by a trillion dollars by cracking down on waste, fraud and abuse, and stopping hundreds of billions in unfair and irresponsible subsidies to insurance companies that are now paid by taxpayers.

If you believe this, then I have a trillion dollars of subprime debt I’d like to sell you. I, among others, have addressed this issue at length. Democrats have had two years to persuade the voters that Obamacare will reduce the deficit, and have gotten pretty much nowhere.

These new choices, freedoms and options are only possible because the Affordable Care Act holds insurance companies accountable.

With this law, insurance companies can no longer overcharge for insurance just to boost their profits and CEO bonuses. They won’t be able to deny women coverage because they are pregnant, something they classify as a preexisting condition. The law has already stopped them from denying kids coverage if they are born with a medical problem or disability. And insurance companies can no longer use fine print, or legal tricks to deny medical treatments that are covered under people’s policies.

Now, Republicans in Congress want to unravel the law that holds insurance companies in check.

Even before Obamacare, health care plans were one of the least profitable industries in America, with profit margins consistently in the 4-6 percent range: lower than those for brewers, railroads, and utilities. The idea that insurer profiteering is behind rising health costs is patently ludicrous, and you won’t even find many left-of-center health policy experts who believe it.

It’s already illegal for insurers to “deny medical treatments that are covered under people’s policies,” because that would be a violation of the insurance contract. Insurers — and consumers — have a legitimate need for protection against those who intentionally omit information about preexisting conditions from their insurance applications. Obamacare eliminates those protections, thereby allowing unscrupulous consumers to game the system, driving up the cost of insurance for everyone else.

A better reform would be to allow people to buy insurance for themselves, in a national market, where independent consumer groups can criticize plans that have worrisome fine print.

• The insurance company lobbyists are working overtime with Republicans to return to the days when insurance companies were free to do whatever they want, including raising premiums and imposing higher costs on families and businesses to protect their CEO bonuses and corporate profits.

This is simply dishonest rhetoric from the DNC. The idea that health insurance was an unregulated jungle before Obamacare came along would come as news to every state insurance commissioner. Obamacare is the best thing that has ever happened to special interests and lobbyists; increasing government control of the health care industry requires industry participants to spend more of their money on politicians’ campaigns instead of health care.

• Republicans will allow insurance companies to once again DENY coverage to children with existing conditions, CANCEL coverage when people get sick, and LIMIT the amount of care you can get − even if you need it.

• When the insurance companies are free to pursue their profits without any accountability, people have fewer choices, fewer options, and little recourse.

• And, by rolling back the Affordable Care Act, Republicans are adding a TRILLION dollars to the deficit.

• They would give back to insurance companies subsidies of hundreds of billions of taxpayer dollars. And they would cut back on efforts in the law to stop waste, fraud, and abuse in government spending. We can NOT afford to add another trillion dollars in debt that our children and grandchildren will have to pay – especially when it goes to wasteful spending and outrageous subsides for insurance companies.

Republicans are opposed to stopping “waste, fraud and abuse in government spending”? That’s a good one.

Liberals have long complained that the reason that Obamacare is unpopular is because Democrats haven’t spend enough time communicating why the law is so great. But the DNC’s talking points illustrate the real problem: the more people learn about the law, the less popular it becomes.

Insurance Brokers Should Reverse Their Position on Obamacare



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A recent story in Politico confirmed what was already known in health-policy circles: In order to meet Obamacare’s arbitrary Medical Loss Ratios (MLRs), health insurers are cutting commissions to brokers. (The MLR is the ratio of premiums to claims paid out to health providers.)

Fair enough, many might say: The point of establishing this arbitrary accounting target was to ensure more cash flow to providers than to middlemen. This outcome leads to an unhealthy schadenfreude for me, because I’ve always thought brokers should have advocated strongly for individually owned health insurance, instead of the current employer-based monopoly, but unfortunately, because most health insurers pay commissions as a percentage of premiums, brokers’ interests were not aligned with society’s interest in reforming the bloated and expensive employer-monopoly system.

The brokers’ primary trade association, the National Association of Health Underwriters (NAHU), failed to respond adequately to the threat of Obamacare. Naturally, it was tempted to believe that mandatory purchase of health insurance (which Judge Hudson in Virginia has inconveniently found to be unconstitutional) would guarantee its members a revenue stream, so NAHU endorsed an individual mandate. When Obamacare passed, NAHU complained that the mandate was “unworkable,” i.e. not tough enough.

As a result, brokers’ commissions are being cut in half. The quality of customer service provided to employers will surely decline — just as the Obamacrats churn out hundreds of pages of regulations impacting employers’ benefits every month.

Well, it’s never too late to admit an error. Like the U.S. Chamber of Commerce, which has finally and unequivocally declared itself in favor of repealing Obamacare, the brokers’ trade association needs to save its profession by doing the same.

Pawlentycare’s Pluses and Minuses



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Over at The Atlantic, Nicole Russell has given us “A First Look at Pawlentycare.” There’s little doubt that Tim Pawlenty, former governor of Minnesota, is eager to trumpet his state’s achievements on health-care reform, and he definitely talks the talk of consumer-driven health care. I was very impressed by an op-ed he wrote in the San Diego Union-Tribune last November, wherein he called for “repealing Obamacare state by state”.

There is no doubt that Governor Pawlenty executed some changes in the right direction — the Flexible Benefit Plan, for example, allowed employers more flexibility of health benefits. He’s also a champion of using prices, and allowing patients more control of how their health dollars are spent. Doing this for public-sector workers resulted in lower costs to taxpayers.

But there is also more of a whiff of big-government conservatism in Pawlentycare. Before unloading on the recently retired governor, let me note that he faced seriously liberal Democratic majorities in both chambers of the state legislature, so we should not measure his reforms by an unrealistic free-market yardstick. Furthermore, he never got snookered into signing a bill that imposed an individual mandate to buy health insurance, as Governor Romney did in Massachusetts.

Most importantly, a governor and state legislature can do nothing to overcome the federal government’s continuing failure to reform the tax code to give our pre-tax health dollars to individuals and families, instead of employers and government agencies. Pawlenty’s Smart Buy Alliance, which allows “employers and groups to buy health insurance for their employees and members and sets uniform performance standards and reporting requirements,” may have a positive impact within the limits of employer-monopoly benefits – but it’s Big Government banging folks’ heads together nevertheless.

Other “fixes” are even less convincing. For example (emphasis mine): “In 2007, he signed legislation creating a new uniform billing and coding process across the entire state — a major change which has increased efficiency in the system and is expected to ultimately lower health-care costs.” Wrong, wrong, wrong!

Suppose we had a system whereby the government gave our employers control of our housing. That is, instead of a mortgage-interest tax deduction, the home you occupy would be a non-taxable benefit. You would live in it for as long as your employers’ HR manager decided, and would have to move whenever she decided to change benefits. Furthermore, when you needed a new refrigerator, for example, you wouldn’t go out and buy a new one, but go to an in-network kitchen-appliance dispensary where you’d pay a $20 co-pay to pick up the fridge that was on the list of kitchen appliances available to employees of your firm.

Insane? Yes. And the way to fix it would not be to have government-sponsored “uniform billing and coding” for household effects.

I continue to hedge my criticism by noting that Pawlenty has unambiguously championed reforming the federal tax code to allow individuals and families to control their health dollars. Furthermore, because a state has more general powers than the federal government, it may be more appropriate for a governor to take a greater operational interest in health care than a president should.

But if he wants to be the Republican candidate, Pawlenty still has to describe the health-care reforms he’d attempt with a Republican-led Congress acting within its enumerated powers. I am hopeful that he will do so in the months to come.

Death Panels Through the Back Door



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There is widespread agreement that, in America, we don’t do enough to consider the consequences of modern medical miracles. Medicare pays for anything and everything: so the elderly have an incentive to seek aggressive treatment for diseases that weren’t even treatable a decade ago. The “unintended” consequence of this conundrum is exploding Medicare costs, costs that may literally wreck this country.

The Left’s solution is rationing: the government should determine when individuals are seeking care they don’t need, and prevent them from obtaining it. The Right’s solution is privatization: let individuals pay for the care they want, even if that means that some people are able to afford more care than others.

There are a lot of policy arguments to be made against rationing and in favor of privatization: for one, health care expenditures in socialized systems are increasing at rates that are equal to, or even higher, than those in the United States. But the reason why “death panels” have aroused so much passion is because they touch on something more personal and more ethical.

The news item is this: The Centers for Medicare and Medicaid Services, under the leadership of controversial recess appointment Donald Berwick, are set to enact a rule in which Medicare will reimburse doctors for end-of-life planning during the doctor’s initial interview of a patient. (Medicare calls these interviews IPPEs.) The rule was buried on page 74,306 of the Federal Register, Volume 75, Number 228, on November 29 (re-formatted and hyperlinked for clarity):

Comment: We received a number of comments from physicians, health care providers, and others urging us to add voluntary advance care planning as an element to the definitions of both the “first annual wellness visit” and the “subsequent annual wellness visit.” They base their recommendation upon a number of recent research studies, and the inclusion by statute of a similar element in the existing initial preventive physical examination (IPPE) benefit.

One commenter noted that “the new wellness visit was wisely designed to build on the initial preventive physical exam, providing an ongoing, systematic focus on wellness and prevention by harmonizing Medicare services into a coordinated benefit.” Another commenter stated that “the AWV provides an appropriate setting for providers to initiate voluntary conversations about future care wishes, as they counsel beneficiaries on other aspects of their health and achieving their personal health goals.” The commenter added that the “care plans discussed in the ‘Welcome to Medicare visit’ should not be frozen in time, but revisited as an important component of patient wellness.”

Response: We agree that voluntary advance care planning should be added as an element of the definitions of both the “first annual wellness visit” and the “subsequent annual wellness visit” based on the evidence described below, and the inclusion of a similar element in the IPPE benefit (also referred to as the Welcome to Medicare visit), since January 1, 2009. We believe that this will help the physician to better align the personal prevention plan services with the patient’s personal priorities and goals.

Recently, Detering and colleagues (British Medical Journal 2010; 340:c1345) reported that “advance care planning improves end of life care and patient and family satisfaction and reduces stress, anxiety, and depression in surviving relatives.” Silveira and colleagues (New England Journal of Medicine 2010; 362:1211-8) reported that “data suggest that most elderly patients would welcome these discussions.” Lastly, a study by Fischer and colleagues (Journal of the American Geriatric Society 2010; 58:400-401) found “no evidence that these (advance directive) discussions or completing an advance directive lead to harm.”

Based on the available evidence and other relevant information, we are adding to the final regulation a definition of the term “voluntary advance care planning” to read as follows:

“Voluntary advance care planning” means, for purposes of this section, verbal or written information regarding the following areas:

  1. An individual’s ability to prepare an advance directive in the case where an injury or illness causes the individual to be unable to make health care decisions.
  2. Whether or not the physician is willing to follow the individual’s wishes as expressed in an advance directive.

This definition is based on the definition of “end-of-life planning”, which is included as an element of the IPPE as described in section 1861(ww)(3) of the Act. Thus, the addition of “voluntary advance care planning” to the AWVs extends to those visits a similar element to the one already in the one-time IPPE.

We are also revising the definitions of the terms “First annual wellness visit” and “Subsequent annual wellness visit” by inserting a new element (ix) to the definition of the term “first annual wellness visit” and a new element (vii) to the definition of the term “subsequent annual wellness visit” in Sec.  410.15 (a) of the final regulation text that would read as follows: “Voluntary advance care planning as that term is defined in this section upon agreement with the individual.”

Donald Berwick’s nomination to head CMS was controversial precisely because he is a passionate advocate of the British system, in which there are indeed death panels that prevent patients from receiving life-extending therapies for cancer, blindness, and other conditions. In his commentary above, Berwick cleverly cites several academic studies that show that end-of-life planning is a good thing: that it’s good for individuals and families to think ahead about what kind of care they want, in situations where they might only be able to live with the assistance of machines.

Yet there is no disagreement about the value of end-of-life planning. Where there is disagreement is as to the propriety of state involvement in the plan.

Earlier this year, I wrote a lengthy piece describing the concerns that many Americans have with state-sponsored end-of-life planning: concerns that Atul Gawande and others have dismissed as “demagogic.” The problem is, when the state pays for your health care, the state has an incentive to avoid paying for end-of-life care. When the government pays for end-of-life planning, it has a conflict of interest, because it has every incentive to encourage the elderly to “pull the plug” instead of encouraging them to fight to stay alive. This is why Britain has the system it has.

When Sarah Palin spoke out against death panels in August 2009, she wasn’t specifically referring to state-sponsored end-of-life planning. Nonetheless, the resulting furor caused House Democrats to pull Section 1233 of their health care bill, which would have allowed Medicare to reimburse physicians for conducting end-of-life conversations. “See?” said various Democrats. “We aren’t allowing the government to meddle in end-of-life care. Conservatives are just being paranoid.”

Unfortunately, while Obamacare did not explicitly grant Medicare the ability to fund end-of-life planning, it did transfer massive amounts of power to the Department of Health and Human Services, and under HHS, the Centers for Medicare and Medicaid Services (CMS). Donald Berwick, the CMS head, has wasted little time in using his powers to full effect. According to a Robert Pear article in the New York Times, advocates of the Berwick approach are keeping a low profile:

Congressional supporters of the new policy, though pleased, have kept quiet. They fear provoking another furor like the one in 2009 when Republicans seized on the idea of end-of-life counseling to argue that the Democrats’ bill would allow the government to cut off care for the critically ill…

While the new law does not mention advance care planning, the Obama administration has been able to achieve its policy goal through the regulation-writing process, a strategy that could become more prevalent in the next two years as the president deals with a strengthened Republican opposition in Congress.

Rep. Earl Blumenauer (D., Ore.), the author of the original House legislation around state-sponsored end-of-life planning, was quite pleased with Berwick’s insertion:

After learning of the administration’s decision, Mr. Blumenauer’s office celebrated “a quiet victory,” but urged supporters not to crow about it.

“While we are very happy with the result, we won’t be shouting it from the rooftops because we aren’t out of the woods yet,” Mr. Blumenauer’s office said in an e-mail in early November to people working with him on the issue. “This regulation could be modified or reversed, especially if Republican leaders try to use this small provision to perpetuate the ‘death panel’ myth.”

Moreover, the e-mail said: “We would ask that you not broadcast this accomplishment out to any of your lists, even if they are ‘supporters’ — e-mails can too easily be forwarded.”

The e-mail continued: “Thus far, it seems that no press or blogs have discovered it, but we will be keeping a close watch and may be calling on you if we need a rapid, targeted response. The longer this goes unnoticed, the better our chances of keeping it.”

Consider it noticed.

Myth of the Massachusetts Health-Insurance Mandate



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Some Obamacare cheerleaders (including the president) insist that Governor Romney’s 2006 Massachusetts “reform” was the forerunner of Obamacare (and Gov. Romney is having a heck of a time distancing himself from it). There is a media myth that the individual mandate — which requires you to pay a fine if you don’t buy government-approved health insurance — has been critical to the Massachusetts law’s so-called “success.” Well, it’s not true.

In the New York Times, David Leonhardt asserts that:

The law depends to a significant degree on the mandate. Without it, some healthy people will wait to buy coverage until they get sick — which, of course, is not an insurance system at all. It’s free-riding. Just look at Massachusetts. In 1996, it barred insurers from setting rates based on a person’s health but did not mandate that individuals sign up for insurance. Premiums then spiked. Since the state added a mandate in 2006, more people have signed up, and premiums have dropped an average of 40 percent.

Whoa, whoa, whoa! The mandate is a myth because it is (reasonably) not enforced on most of the uninsured. According to Massachusetts’ 2008 report on the uninsured only 17 percent of the 150,000 residents who reported being uninsured for all of the year were assessed a penalty. Only 35 percent of the 71,000 who were uninsured part of the year were assessed a penalty. That’s 50,350 people in 6.5 million: Less than one percent of the population.

It is politically and economically ridiculous to think that the government can assess a financial penalty on people who cannot reasonably afford overpriced health insurance. Many of these folks pay nothing towards their coverage under the reform. According to the Commonwealth Connector’s latest report (p. 8 ), 42 percent of Commonwealth Care beneficiaries pay zero share of their premiums. This is a one third increase (from 31 percent) since 2009.

Can anyone credibly argue that this is significantly different from a Medicaid expansion? The Massachusetts health reform was little more than a huge ramping up of subsidies, entailing a significant increase in political control of people’s access to medical care.

It’s the Incentives, Stupid



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To paraphrase James Carville, when it comes to fixing the U.S. health-care system, you have to get the incentives right. And the incentives in our current system — before and after Obamacare — are deeply perverse. This is the central theme health law expert David Hyman explores in his short but enlightening essay in the current issue of Regulation magazine. Opponents of Obamacare would be well served to raise the theme of perverse incentives and unintended consequences again and again in the next Congress.

Hyman writes that the biggest incentive, of course, is money, because “what we pay for and how we pay for it profoundly affect the care that is provided (and not provided), the settings in which care is provided…and the lives and fortunes of those providing and receiving the care and those presented with the bill.” 

In other words, you get what you pay for. The biggest spenders in that respect are the federal Medicare program for the elderly, and a tax system that favors employer-provided health insurance. Medicare is a fee-for-service program replete with thousands of price controls that encourages provider fragmentation and overconsumption of some highly reimbursed services, and the underconsumption of more poorly reimbursed services. The tax preference for employment-based insurance drives employees to favor comprehensive plans with high (pre-tax) premiums and low (after-tax) deductibles and copayments, which pushes up health inflation while leaving millions of uninsured without affordable access to care. One should also mention the state-federal Medicaid program, which massively underpays doctors, leaving millions of poor patients unable to find physicians who accept Medicaid’s rock-bottom rates. 

Let’s recap: What does the Affordable Care Act accomplish? More price controls in Medicare (which will be gamed by providers and lobbyists). More subsidies for comprehensive insurance for middle-class families, this time outside the employer-based system (which will likely lead to employers dumping middle- and low-income workers into Obamacare’s state insurance exchanges, leaving taxpayers on the hook). And a massive Medicaid expansion, thrusting 16 million people into a “safety net” with gaping holes in it. 

We are (almost literally) doubling down on everything we’re already doing, and doing poorly. 

To be fair, the Affordable Care Act does make some concessions towards improving Medicare through pay-for-performance experiments, and putting pressure on “gold-plated” health plans through a Cadillac Tax starting in 2019. But the sad but predictable truth is that these efforts are likely to be severely curtailed or killed entirely through congressional lobbying, since, as has often been noted, every congressional district has doctors and hospitals in it (and unions love their gold-plated health plans). 

Finally, the new insurance regulations put into effect under Obamacare are being “waived” by the administration left and right, out of the sheepish realization that putting insurers out of business or forcing companies to drop mini-med plans (and presumably send those employees into the state health exchanges) would be a PR disaster.

Can we get the incentives right for Health Care Reform Part II? It’ll be harder this time, because the president squandered enormous political capital ramming a partisan health-care bill through Congress. And the base of his party will fight fiercely to protect the new status quo. But there is at least some hope for improving the system because the federal debt (driven by entitlement spending) will crush the U.S. economy if we remain on our current trajectory. 

Conservatives should wrap their repeal-and-replace efforts into bipartisan discussions about how to fix the budget and improve the U.S. economy through tax reform (the employer deduction should be scrapped and replaced with a tax credit) and by seriously considering the Ryan-Rivlin  plan as a starting point for making Medicaid and Medicare sustainable. Both would go a long way towards improving incentives in health-care markets. And if we can do that, as Hyman points out, “most of the big problems will take care of themselves,” leaving policymakers with a “far smaller and more tractable set of problems.”

We’ll never have a perfect health-care system, because human beings aren’t perfect. But getting the incentives right will produce a health-care system that actually offers better care to more people at lower cost. And that’s enough.

If Obamacare Is Unconstitutional, Why Aren’t Medicare & Medicaid?



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A federal judge in Virginia has ruled that the individual mandate in Obamacare is unconstitutional. The “Minimum Essential Coverage Provision” has no basis in the powers delegated to Congress by the Constitution, according to Virginia Attorney General Ken Cuccinelli, and Judge Henry E. Hudson has agreed.

So how can Medicare and Medicaid be constitutional?

Legally, the difference is that the latter two programs are government operations, whereas the individual mandate would have compelled people to buy a private product. Helvering v. Davis (1937) was the famous (or infamous) case wherein the U.S. Supreme Court found that the Social Security Act was constitutional. As Robert A. Levy and William Mellor explain in their excellent book, The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom, the Roosevelt administration cleverly argued that collecting the Social Security payroll tax and paying Social Security checks were completely independent operations. The first lies within Congress’s taxing power, and the second lies within its power to spend for the “general welfare.” Because Medicare was an amendment to the Social Security Act, it is also constitutional, according to this reasoning.

People are often shocked to learn that Social Security and Medicare are not “entitlements” at all. Congress could pass a law stopping all Social Security and Medicare payments tomorrow, and no citizen would have a legal claim against the government based on how much payroll tax he or she had paid into the so-called “Trust Fund.” Because Medicaid is financed by general tax revenue, its constitutionality under the general-welfare clause is even more secure, according to current legal reasoning.

For a non-lawyer, the distinction is silly. The stated goals of all three programs — Medicaid, Medicare, and Obamacare — are to lay paving stones on the path to so-called “universal” coverage. The Founding Fathers had no notion of government-run health care, so they would surely find it absurd that 20th and 21st-century jurisprudence allowed that Congress can tax Jack to pay for Jill’s health insurance, and tax Jill to pay for Jack’s health insurance, but cannot tax Jack to pay for Jack’s (or Jill to pay for Jill’s) health insurance.

In a sane world, this matter would have to be resolved in one direction or the other. As an advocate of individual choice, I’d hope the Virginia ruling stands up, but also that its shock-wave crashes up against Medicare and Medicaid. But I wouldn’t be too confident.

After all, we know that President Obama and Secretary Sebelius are actually advocates of government-monopoly, so-called single-payer, health care. I wouldn’t be surprised if they were high-fiving each other right now: “The individual mandate is unconstitutional! Time to move on to Medicare-for-all — Ted Kennedy’s dream!”

Ultimately, Obamacare can be mortally wounded in federal court, but it can only be slain in the court of public opinion.

More than $1 Billion in Stocking Stuffers for the Affordable Care Act



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The Senate Republican Policy Committee reports that the omnibus appropriations measure includes more than $1 billion in funding to implement the Affordable Care Act.

An increase of more than $80.7 million in the Department of Health and Human Services’ Departmental Management account, to enforce the new insurance mandates and regulations created in the law.  This $80 million “plus-up” is also significantly higher than the $44.9 million increase proposed in Democrats’ year-long CR.  (Provision found on page 1015 of the legislation.)

An increase of over $175.9 million in the Centers for Medicare and Medicaid Services’ Program Management account, to implement the massive Medicaid expansion and cuts to Medicare Advantage.  (Provision found on pages 1000-1001 of the legislation.)

Spending of $750 million from the Prevention and Public Health “slush fund” created in the law.  Among the programs receiving “slush fund” dollars are the new community transformation grant programs, which “could provide billions of dollars for walking paths, streetlights, jungle gyms, and even farmers’ markets,” provisions that have caused controversy.  (Provisions found on pages 983, 988-89, 998, and 999 of the legislation.)

 Funding of $3 million for the National Health Care Workforce Commission created in the law, just one of the 159 boards, bureaucracies, and programs created by the majority’s government takeover of health care.  (Provision found on page 1077 of the legislation.)

Alarm bells appear to be going off in droves at these attempts to pad the bill with all sorts of goodies, and this is undoubtedly an attempt to stymie the “defund” strategy that House Republicans are considering. Of course, even if these appropriations remain in the bill, Republicans can always try and strip them out later — part of the fiscal chess game that will play out next year.

What Happens if the Mandate Disappears: Premiums and Uninsured Both Increase



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Judge Henry Hudson’s ruling that the individual mandate to require the purchase of health insurance is unconstitutional will make the unpopular new health law even more unpopular by making its impact worse than originally anticipated. If Judge Hudson’s narrow ruling is upheld by the Supreme Court and nothing happens to change the current law — always a safe assumption given our sclerotic system — the mandate will go away, leaving the rest of the problematic legislation behind, with potentially disastrous effects.

Last June, the Congressional Budget Office prepared an analysis of the impact of the removal of just the individual mandate. According to the CBO, the elimination of the mandate would increase the number of uninsured compared to current expectations. Many people fail to realize this, but the new law, for all its spending and bureaucratic machinations, would not eliminate the problem of the uninsured even with the mandate. Per CBO, there are likely to be 23 million uninsured residents in 2019 under the new law. If the mandate were to go away, this number of uninsured would increase even further, to 39 million in 2019. The 16 million additional uninsured people would come from a mix of fewer people getting Medicaid, coverage in the individual mandate, or exchange coverage.

In addition, the loss of the mandate coupled with the new regulatory burdens that the law imposes on insurance companies, would lead to significant health insurance premium increases. This is because of adverse selection — healthier uninsured people who are not forced to purchase or procure insurance will not do so, while less healthy people will take advantage of the government subsidies and new requirements that insurers take all comers and purchase insurance. Insurers will as a result have to cover a less healthy pool of individuals, which will lead to increased premiums. As CBO puts it, “This adverse selection would increase premiums for new non-group policies (purchased either in the exchanges or directly from insurers in the non-group market) by an estimated 15 to 20 percent relative to current law.”

These changes would also reduce the cost of the new law. According to CBO, the mandate-less version of the Obama health law would shrink the deficit by $252 billion over the period from 2011-2020, largely because fewer people would take up government subsidized health offerings, be they from the expansion of Medicaid or the new exchanges. But the law would still be hugely expensive, and would not have that much of an impact on the number of uninsured, which was after all its primary selling point. It certainly would not “bend the cost curve down,” an old selling point that has largely disappeared from Democratic rhetoric.

In a nutshell, the result would be some decrease in the cost to government, fewer people covered than projected, and increased premium costs to individuals. The lower cost will not be felt directly, but the increased premiums and higher number of uninsured will. The judge’s ruling makes the already unsustainable legislation even less sustainable, from both an economic and a political perspective.

Virginia v. Sebelius: There Is No Easy Way Out for Obama



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Obamacare has always been deeply controversial. But the arguments over its purported unconstitutionality have always been hypothetical. Until now. 

On Monday, Virginia district court Judge Henry Hudson ruled that the individual mandate to buy health insurance under the Affordable Care Act is an unconstitutional expansion of Congress’s Commerce Clause powers. Obamacare’s defenders now have to face a powerful, closely reasoned judicial argument that the Affordable Care Act does something that no prior act of Congress has done: define the refusal of an individual to buy a product as interstate commerce. 

Hudson writes that the ”expansive interpretation of the concept of activity” championed by Secretary Sebelius could equally apply to “transportation, housing, or nutritional decisions” and “lacks logical limitation and is unsupported by Commerce Clause jurisprudence.” He concludes that:

Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.  In doing so, enactment of the [mandate] exceeds the Commerce Clause powers vested in Congress under Article I. 

Hudson’s decision severs the unconstitutional mandate from the rest of the legislation, which can continue to be implemented as written.  The case is also destined for a Supreme Court hearing, probably within the next year or two, that will decide the ultimate fate of the legislation. In that sense, Judge Hudson’s ruling is far from a death knell for Obamacare.

But in a more important sense, as Professor Richard Epstein noted earlier, the decision puts the government into a “real pickle.”

Virginia has drawn a clear line that accounts for all the existing cases, so that no precedent has to be overruled to strike down this legislation. On the other hand, to uphold it invites the government to force me to buy everything from exercise machines to bicycles, because there is always some good that the coercive use of state authority can advance.

In other words, there is no way to justify this legislation without abrogating almost any meaningful limitation on Congress’s powers to regulate individual behavior in the name of some greater policy good. Most Americans will find this fact deeply unsettling, if not actually repulsive. Having put himself into a pickle, President Obama will not be able to find any easy way out.  

Obamacare: Now Legally as Well as Politically Unstable



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The decision on the individual mandate handed down today by U.S. District Judge Henry Hudson in the Eastern District of Virginia makes it clear that Obamacare is on extremely shaky legal ground. That’s fitting, because it’s been on shaky political ground for well over a year now. Today’s decision — possibly joined by others in the weeks ahead — is going to strengthen the already strong perception that this law was ill-advised from the get-go and needs to be repealed to make way for a more sensible, consensus-driven program.

Specifically, the judge’s ruling today found that the new law’s requirement that all Americans must purchase government-approved health insurance or face a fine was not a permissible use of the lawmaking authority granted to Congress under the Constitution. In other words, Congress doesn’t have unlimited authority to do anything it wants. Its powers are carefully enumerated. And among them is not the power to force Americans to buy something they would otherwise forgo.

Without the individual mandate, the whole Obamacare edifice crumbles. The judge did not rule that the entire law must be invalidated. But if the individual mandate goes, the insurance regulations — and most especially the requirement that insurers must take all comers without regard to their health status — will never work. Patients could simply wait to enroll in health coverage until they needed some kind of expensive treatment or procedure, and thus pocket the premiums they would have paid when they were not in need of much medical attention.

Still, it’s been clear for some time that repeal advocates should never bank on courts bailing the country out of Obamacare. This issue is far too important to leave to such an unpredictable process. Moreover, even if the mandate and related provisions are gutted by the courts, that would still leave many horribly damaging aspects of Obamacare in place, such as the massive entitlement expansions and the heavy reliance on government-imposed price controls.

Today was a good day. But it’s really just a small skirmish in a much wider war. By all means, every legal remedy should be pursued. But Congress has a responsibility to undo this mess as well, regardless of how the court cases turn out.

Obamacare Is Unconstitutional



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In its first serious court test, the most unpopular provision in Obamacare — the individual mandate — has been declared unconstitutional on two crucial grounds.

First, U.S. District Judge Henry E. Hudson ruled that Congress exceeded its constitutional authority to regulate interstate commerce by compelling people “to involuntarily engage in a private commercial transaction.”

Second, he said the Obama administration can’t argue after the fact that the mandate is a tax and therefore within Congress’s constitutional taxing authority. “The Court is unpersuaded” that the penalty for not purchasing insurance is a “bona fide revenue raising measure enacted under the taxing power of Congress,” he wrote from his bench in the Eastern District of Virginia.

Virginia attorney general Ken Cuccinelli led the commonwealth’s case against the law. It was a victory for him when Judge Hudson declared that the mandate to purchase health insurance represents an “unchecked expansion of congressional power” that “would invite unbridled exercise of federal police powers.”

Cuccinelli had argued that the Commerce Clause of the constitution does not grant Congress the authority to force people into economic activity. Judge Hudson declared that the mandate is “neither within the letter nor the spirit of the Constitution.”

This is the tall pole in the tent of Obamacare. While Judge Hudson did not halt implementation of the law or declare the whole thing invalid, supporters and opponents alike argue that losing the individual mandate could cause the whole flawed structure to collapse.

In his 42-page opinion released today, Judge Hudson caught those who drafted the law at their own game: He cited earlier versions of the legislation in both the House and the Senate that explicitly referred to the penalty for not complying by the “politically toxic term ‘tax’.” But they substituted the term “penalty” for the word “tax” in the individual-mandate section of the final law.

“A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress,” especially since the term “tax” is used in numerous other places in the law regarding taxing medical devices, employer-sponsored health insurance, high-income taxpayers, and indoor tanning services.

This “taxing” issue likely will be key to the Florida court decision that will be argued this Thursday. Twenty states and the National Federation of Independent Business are challenging the individual mandate as well as the government’s authority to dictate health-coverage expansions to the states.

Federal Judge Roger Vinson of Florida declared earlier that “Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an ‘Alice-in-Wonderland’ tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check.”

The White House is, predictably, arguing that the decision against them in the Virginia case isn’t a big deal because numerous other challenges to the law have been thrown out by other judges.

But none is as important as this one and the major one to come in Florida. Most of the other cases have been thrown out on “standing” claims or by judges with a very different interpretation of the Constitution. Judge George Caram Steeh of the U.S. District Court for the Eastern District of Michigan, for example, said that the individual mandate is needed so the other provisions of the law can work.

Numerous experts argued while Obamacare was being debated that the individual mandate is unconstitutional. The White House and Congress chose to ignore them and, in their hubris, decided they could not only reengineer one-sixth of our economy but rewrite the Constitution in the process.

The astonishing thing is that virtually the entire health-care establishment bought into this. The health-insurance industry staked its future on the individual mandate as necessary to make all of the other provisions of this Rube Goldberg monstrosity work.

Was there ever anyone at any of these meetings who raised his hand to say that maybe it wasn’t a good idea to pass a major piece of legislation that was premised on violating the Constitution?

Judge Hudson did not strike down the whole law but determined that the individual mandate and associated provisions could be declared unconstitutional — severing the “problematic portions while leaving the remainder intact.” He concluded that the law “embraces far more than health care reform. It is laden with provisions and riders patently extraneous to health care — over 400 in all.”

This is a major victory for opponents of Obamacare, and the judge made the correct constitutional decision.

Federal Court Declares Obamacare’s Individual Mandate Unconstitutional



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. . . but it shouldn’t have stopped there.

Obamacare has always hung by an absurdity. Its supporters claim that with the words “Congress shall have the Power … To regulate Commerce … among the several States,” the Constitution somehow give Congress the power to compel Americans to engage in commerce. This ruling exposes that absurdity, and exposes as desperate political spin the Obama administration’s claims that these lawsuits are frivolous.

This ruling’s shortcoming is that it did not overturn the entire law. Anyone familiar with Obamacare knows that Congress would not have approved any of its major provisions absent the individual mandate. The compulsion contained in the individual mandate was the main reason that most Democrats voted in favor of the law. Yet the law still only passed by the narrowest of all margins — by one votein the dead of night, on Christmas Eve — and required Herculean legislative maneuvering to overcome nine months of solid public opposition. The fact that Congress did not provide for a “severability clause” indicates that lawmakers viewed the law as one measure.

Despite that shortcoming, this ruling threatens the entire edifice of Obamacare, not just the individual mandate. The centerpiece of Obamacare is a three-legged stool: the individual mandate, the government price controls that compress health-insurance premiums, and the massive new subsidies to help Americans comply with the mandate. Knock out any of those three legs, and whole endeavor falls.

Moreover, the individual mandate is not the law’s only unconstitutional provision.

These lawsuits and the continuing legislative debate over Obamacare are about more than health care. They are about whether the United States has a government of specifically enumerated powers, or whether the Constitution grants the federal government the power to do whatever politicians please, subject only to a few specifically enumerated restraints. This ruling has pulled America back from a precipice.

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