One year ago this week — March 23, 2010 — President Obama signed the Patient Protection and Affordable Care Act into law. Joe Biden called it a “big [flipping] deal.” Enthusiasts of the law predicted that Obamacare would reduce the deficit, save hundreds of thousands of lives, significantly improve national life expectancy, dramatically reduce medical bankruptcies, and massively improve infant mortality. I even recall a New Republic editorial arguing that the passage of PPACA would mean no one would ever again have to die of cancer.
Democrats confidently proclaimed that the law would become more popular over time as Americans became more aware of its benefits. In Nancy Pelosi’s felicitous phrase, “We have to pass the bill so that you can find out what is in it.”
Indeed, over the last twelve months, the law’s unpopularity has remained remarkably consistent, and we’ve only begun to find out what’s in it. The health-care system in Massachusetts upon which Obamacare was modeled has continued to deteriorate. Officials within the Obama administration have regularly pointed out Obamacare’s financial instability. Insurers have exited the market. HHS Secretary Kathleen Sebelius has handed out waivers to labor unions and other favored special interests, and to companies that would have otherwise been forced to drop coverage for their workers, bringing damaging headlines in their wake. The constitutionality of the individual mandate, to which liberals had not given a serious thought, was called into question by two federal judges, one of whom overturned the law in its entirety (the ruling was stayed pending an appeal).
Indeed, there has been so much bad news about Obamacare over the last twelve months, it’s easy to forget how many things have gone wrong. Here is a month-by-month recount.
APRIL 2010
In a preview of what’s to come under Obamacare, health-care costs in Massachusetts continued to rise, yet Massachusetts insurance commissioner Joseph Murphy arbitrarily rejected 235 of 274 proposed insurance-rate increases, in a first step towards driving private insurers out of business.
Richard Foster, chief actuary of the Centers for Medicare and Medicaid Services (CMS), released a report showing how Obamacare will increase, not decrease, health costs. The White House announced that it was nominating Donald Berwick, the profit-hating dean of progressive health-policy wonks, to head CMS.
MAY 2010
An under-the-radar provision of Obamacare, placing caps on the percent of insurance premiums that could be used for insurers’ administrative expenses — called “medical loss ratio” — threatened to put many insurers out of business. It became clear, quite quickly, that the president’s promise — “if you like your health-care plan, you will be able to keep your health-care plan. Period. No one will take it away, no matter what” — was a lie. A federal report later confirmed this.
A survey by Towers Watson, a human-resources consulting firm, found that 88 percent of employers intended to pass Obamacare’s higher costs on to their workers.
JUNE 2010
Congressional Budget Office director Douglas Elmendorf delivered a presentation to the Institute of Medicine in which he said: “In the CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish” the pressure of “the rising costs of health care.” Elmendorf’s 2010 Long-Term Budget Outlook made clear that the growth of health-care entitlements is the be-all and end-all of our dangerous fiscal situation.
John Hoff of the Galen Institute unearthed a provision of Obamacare that “instructs the HHS Secretary to ‘consider standardization of [chain restaurant] recipes and methods of preparation, in reasonable variation in serving size and formula of menu items, space on menus and menu boards, inadvertent human error, training of food service workers, variations in ingredients.’”
An important article in the New York Times cast doubt on White House claims that the government could eliminate $700 billion in wasteful health spending by micromanaging doctors’ practices.
July 2010
The White House decided to take advantage of Congress’s brief Fourth of July recess to appoint Donald Berwick to the leadership of CMS. Usually, presidents employ the recess-appointment power to push through nominees who are being filibustered by the Senate. In this case, the Senate was eager to hear from Dr. Berwick, but the president didn’t want Berwick’s left-wing philosophy entered into the Congressional Record.
A study conducted by surgeons at the University of Virginia found that, on many metrics, patients on Medicaid performed worse than those without any insurance, and far worse than those with private insurance. Given that Obamacare’s expansion of health-insurance coverage is largely effected by expanding Medicaid, these findings reinforced the negative impact that Obamacare will have on the quality of health care for lower-income families.
Things in Massachusetts continued to unravel.
August 2010
U.S. District Court Judge Henry Hudson, in the first hint of what was to come from the courts, wrote of the individual mandate, “Never before has the Commerce Clause and Necessary and Proper Clause been extended this far.”
The CBO’s August economic outlook estimated that Obamacare would eliminate approximately 780,000 jobs.
A new report from CMS actuary Richard Foster pointed out that, under the new law, physician reimbursement rates for Medicare would sink below those of Medicaid, forcing doctors and hospitals out of the Medicare program and leaving seniors without access to health care.
September 2010
The Washington Post published a report suggesting that PPACA’s elimination of the Medicare “donut hole” may “steeply increase in the price of drugs.”
Detailed research from the Democratic lieutenant governor of New York, Richard Ravitch, found that Medicaid is “the largest single driver of the State’s growing expenditures,” which is “threatening New York’s ability to handle the growth of this program without dramatically raising taxes or cutting other essential government services.”
Harvard Pilgrim Health Care, the second-largest health insurer in Massachusetts, decided to drop out of the Medicare Advantage program.
Several states, including Maine and Iowa, asked HHS Secretary Kathleen Sebelius for waivers from the aforementioned medical-loss-ratio regulations, because they feared that the provisions would “destabilize the individual health insurance market” in their states. The Wall Street Journal reported that McDonald’s was also seeking a waiver, without which it would be forced to drop insurance coverage for 29,500 hourly-wage employees. Sebelius used her dramatically expanded powers under Obamacare to grant McDonald’s that waiver.
The market for child-only health-insurance policies disappeared.
The Republicans released their Pledge to America, in which they promised to repeal Obamacare and replace it with popular, incremental provisions.
October 2010
Kiplinger’s helpfully summarized the ten major tax increases of Obamacare.
November 2010
Republicans, riding a wave of backlash against Obamacare, gained more seats in Congress than they had since 1938.
Governors, wary of Obamacare’s massive expansion of Medicaid, considered dropping out of the program entirely.
December 2010
The president’s bipartisan fiscal commission described CLASS, Obamacare’s new entitlement for long-term care, as “financially unsound . . . Absent reform, the program is therefore likely to require large general revenue transfers or else collapse under its own weight.”
Judge Henry Hudson ruled Obamacare’s individual mandate unconstitutional, but elected to leave the rest of the law intact.
January 2011
House Republicans voted to repeal Obamacare. The bill died in the Senate, but it was more than symbolic: It showed that Republicans remained united in their conviction that repealing the law is their highest priority.
New research from Douglas Holtz-Eakin and others showed that one way in which Obamacare will explode the deficit is by employers’ dumping their employees onto the government-subsidized exchanges.
On the other hand, the Department of Health and Human Services put out a ludicrous report arguing that “129 million could be denied affordable coverage” if Obamacare were repealed. Never mind that the law was projected to expand coverage by only 30 million.
David Freddoso of the Washington Examiner found that 40 percent of the Obamacare waivers granted by Kathleen Sebelius were given to labor unions.
Blue Shield of California, a non-profit insurer that supported Obamacare, announced that it was seeking cumulative rate hikes of as much as 59 percent.
Judge Roger Vinson, ruling on a constitutional challenge to Obamacare involving 26 states, voided PPACA in its entirety, owing to the unconstitutionality of the individual mandate.
February 2011
Aftershocks of Vinson’s ruling reverberated throughout the country. Harvard constitutional-law professor Charles Fried, a supporter of the mandate, argued that Congress had the right to force Americans to buy broccoli. In another Obamacare constitutional challenge, a D.C. federal judge ruled that Congress had the power, under the Commerce Clause, to regulate “mental activity.”
President Obama expressed his support for giving the states more flexibility — to impose a single-payer system.
March 2011
Judge Vinson, who had earlier overturned PPACA in its entirety, told the White House to stop stalling and file an expedited appeal of his ruling with the Eleventh Circuit Court of Appeals. They heeded him.
A new (but seriously flawed) study indicated that Romneycare in Massachusetts had no significant impact on medical bankruptcies.
Congress passed a repeal of the infamous “1099” provision, whereby any business-to-business transactions greater than $600 in one year would have to be separately reported to the IRS.
Kathleen Sebelius admitted to the House Energy and Commerce Health Subcommittee that Obamacare double-counts its Medicare cuts in order to claim that the law simultaneously is deficit-neutral and contributes to Medicare’s solvency. Meanwhile, a report from the Congressional Research Service found that Sebelius lacks the legal authority to fix the CLASS program, meaning that it is certain to go bankrupt.
The Years Ahead
What will we find out in Year Two of the Obamacare Era? Health costs will continue to rise. Insurers will face additional pressures to drop out of markets where they are weak. Doctors will increasingly avoid Medicare and especially Medicaid patients, as they strive to keep their practices solvent. States will continue to wrestle with exploding Medicaid costs.
We’ll also gain a ruling from the Eleventh Circuit Court of Appeals on the Florida v. HHS case, in which Obamacare was overturned, possibly in the latter part of summer. Paul Ryan has promised to bring entitlement reform into the 2012 House budget, despite the political risks.
And we will find out if Republicans can field a serious presidential contender, one who vows not only to repeal Obamacare, but to put real health-care reform in its place. Conservative primary voters will play a decisive role in determining whether the Republican nominee will do so.
Everything hinges on November 2012. For the dominant question in Year Three of the Obamacare Era will be whether or not there will be a Year Four.
— 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.