Critical Condition

The President’s ‘Policy via Selective Anecdote,’ and Other SOTU Comments

Tonight, according to the advance text of his State of the Union speech, the president will address health-care policy in two sections. In the first, he addresses Republicans’ efforts to repeal Obamacare:

Now, I’ve heard rumors that a few of you have some concerns about the new health care law. So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.

What I’m not willing to do is go back to the days when insurance companies could deny someone coverage because of a pre-existing condition.  I’m not willing to tell James Howard, a brain cancer patient from Texas, that his treatment might not be covered. I’m not willing to tell Jim Houser, a small business owner from Oregon, that he has to go back to paying $5,000 more to cover his employees.  As we speak, this law is making prescription drugs cheaper for seniors and giving uninsured students a chance to stay on their parents’ coverage. So instead of re-fighting the battles of the last two years, let’s fix what needs fixing and move forward.

PPACA’s infamous 1099 rule, which requires individuals and businesses to fill out a separate IRS form for any vendor they spend more than $600 on in a given year, was one of the fiscal devices the law’s authors used in order to improve its CBO score. Repealing it appears to have garnered bipartisan support. If Republicans intend to offset this tax increase with spending cuts or other tax increases, it is strategically important that those offsets are unrelated to PPACA, so as to improve the CBO score for repealing the law at a later time under reconciliation rules.

As to the president’s policy-via-selective-anecdotes: (1) The incidence of insurers refusing to cover people because they have pre-existing conditions is vanishingly low; (2) Obamacare will drive health costs skyward, placing severe burdens on individuals and small businesses; (3) closing the Medicare prescription drug “donut hole” will increase wasteful Medicare spending, make entitlement reform more difficult, and increase the price of important medicines; (4) forcing all plans to cover “adult children” up to the age of 26 drives the cost of insurance up, making it less affordable for the very people who need it.

Here’s what the president had to say about entitlement reform:

The bipartisan Fiscal Commission I created last year made this crystal clear. I don’t agree with all their proposals, but they made important progress. And their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it – in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes.

This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit.  Health insurance reform will slow these rising costs, which is part of why nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit. Still, I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year: medical malpractice reform to rein in frivolous lawsuits.

When it comes to health care, the Fiscal Commission accomplished very little, so the fact that the president finds himself to the left of that body is telling. Furthermore, it’s laughable for him to say that Obamacare will “slow these rising costs,” when the law includes trillions of dollars in new entitlement spending.

The one area where Republicans and the president might be able to make progress is malpractice reform, though given his disinterest in the issue during the Obamacare debate, one can’t be too optimistic.

I’ll put out a new post with comments on Paul Ryan’s response, either later tonight or tomorrow.

UPDATE: Paul Ryan has posted his prepared SOTU response. It paints in broad brush strokes (appropriate in an all-encompassing, but brief, speech):

Then the President and his party made matters even worse, by creating a new open-ended health care entitlement.

What we already know about the President’s health care law is this: Costs are going up, premiums are rising, and millions of people will lose the coverage they currently have. Job creation is being stifled by all of its taxes, penalties, mandates and fees.

Businesses and unions from around the country are asking the Obama Administration for waivers from the mandates. Washington should not be in the business of picking winners and losers. The President mentioned the need for regulatory reform to ease the burden on American businesses. We agree – and we think his health care law would be a great place to start.

Last week, House Republicans voted for a full repeal of this law, as we pledged to do, and we will work to replace it with fiscally responsible, patient-centered reforms that actually reduce costs and expand coverage.

Health care spending is driving the explosive growth of our debt. And the President’s law is accelerating our country toward bankruptcy.

Ryan makes the important point about entitlement reform: that it’s future retirees who are most at risk if we don’t tackle Medicare now:

Just take a look at what’s happening to Greece, Ireland, the United Kingdom and other nations in Europe. They didn’t act soon enough; and now their governments have been forced to impose painful austerity measures: large benefit cuts to seniors and huge tax increases on everybody.

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.

Avik RoyMr. Roy, the president of the Foundation for Research on Equal Opportunity, is a former policy adviser to Mitt Romney, Rick Perry, and Marco Rubio.


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