Health and Human Services Secretary Kathleen Sebelius has an op-ed out today in the Wall Street Journal in which she attempts to defend herself from those who have pointed out her menacing, Chavistic attempts to intimidate the health-insurance industry. Let’s go through her piece, point-by-point.
There’s a long history of special interests using similar attacks to oppose change. In the mid-1960s, for example, some claimed Medicare would put our country on the path to socialism.
Ironically, Medicare is in far worse shape today, and has done more damage to the fiscal stability of the country, than anyone could have predicted in 1965. Sixties-era critics could scarcely have imagined that, by 2010, the government would control more than half of all health-care spending; that our per capita state spending would be higher than all but two countries in the world; and that Medicare would lead to tens of trillions of dollars of unfunded liabilities. Indeed, it is precisely the track record of Medicare and Medicaid that leads most Americans to view Obamacare with alarm.
But what is really objectionable about these comments is not who they’re attacking, but what they’re defending. These critics seem to believe that any oversight of the insurance industry is too much, and that consumers would be better off in a system where they have few rights or protections.
This is a ridiculous assertion. We already have extensive regulation of insurance at the state level — just ask anyone in Massachusetts. It is entirely appropriate for there to be a regulatory framework for the insurance industry, to ensure that insurers remain solvent, and to prevent genuinely fraudulent business practices. And there long has been one. But states’ (and now the feds’) overweening micromanagement of plan benefits and premiums is precisely why most Americans face higher prices and fewer choices.
Over the past decade, Americans have seen what happens when insurance companies have free rein. The cost of health insurance has more than doubled, while millions of hard-working Americans lost their coverage or drained their savings to keep up with premiums. Employers—big and small—have struggled mightily to absorb these cost increases and have been losing the fight.
Why has the cost of health insurance doubled? Because of unwise government policies: lobbyist-driven state mandates that force insurers to cover things like acupuncture and drug abuse; wage controls that favor employer-sponsored insurance over individually purchased plans; Medicare’s subsidy of wasteful and fraudulent care; and laws that prevent physician entrepreneurs from competing against hospital monopolies. Obamacare, rather than addressing these problems, makes them worse.
As insurance commissioner and governor of Kansas, I saw firsthand how these rate hikes burdened people. I spoke with families who watched their insurance go up 20%, 30%, even 40% a year without explanation. I met with small business owners who had stopped offering health insurance to their employees because they couldn’t afford the annual double-digit premium increases.
It is Sebelius’s experience as Kansas insurance commissioner that makes it highly unlikely that she does not appreciate the misleading nature of her arguments. She knows that insurers have extremely slim profit margins, and that they are forced to either pass on the cost increases imposed on them by hospitals and doctors, or go bankrupt.
Yet even as our insurance markets have failed Americans time and time again, special interests successfully blocked reform.
Yes, special interests blocked reform: by supporting Obamacare. Corporate health-care interests were more than happy to support a law that would force tens of millions of new customers to buy their products.
We are already seeing this new level of accountability pay off. Last week, North Carolina’s largest insurer announced a “one-time refund that will return $155.8 million to more than 215,000 individual Blue Cross Blue Shield customers as a result of the Affordable Care Act.” This rebate will put an average of $720 back into the pockets of each of those policyholders. In addition, thanks to diligent work by North Carolina’s insurance commissioner, they’ll see their premiums rise by less than 6% in 2011—the smallest rate increase in four years.
This is another misleading assertion by someone who knows better. As Hank Stern of InsureBlog points out, the rebates are funded by drawing down the plan’s active life reserves: a “rainy day fund” that, when it is not being raided, increases the stability of the plan and reduces the risk of future rate increases.
A day after Blue Cross Blue Shield’s announcement, seniors with private Medicare plans got some news that most Americans haven’t heard in years: Their premiums will actually go down 1% next year, even as many of them enjoy better benefits.
Is Sebelius seriously trying to argue that Medicare Advantage premiums are slated to go down, with better benefits, under Obamacare? When over $500 billion has been removed from the program? If she’s right, then maybe more people should leave traditional, government-run Medicare in favor of the privately run Medicare Advantage program.
The Affordable Care Act is bringing some basic fairness to our health insurance market. So when I learned that a handful of insurers around the country are blaming their significant rate increases on the new law—even though the facts show that the impact of the law on premiums is small, just 1% to 2% declining over time—I let them know that we’d be closely reviewing their rate hikes.
They say that people aren’t entitled to their own facts. But unless the HHS has invented time travel, projections about the future aren’t facts. One can understand Secretary Sebelius’s desire to represent government forecasts as “facts,” but her desire does not make them so.
It’s understandable that some insurance companies and their allies don’t welcome this change. They’ve made large profits from the status quo. And it’s not surprising—though still disappointing—that House Republicans have recently pledged to repeal the Affordable Care Act and get rid of these new consumer protections.
Insurance companies, like everyone else, are out for themselves: they support things like the individual mandate, which drives up their business, and oppose things like price controls, which limit their viability. But just because something is bad for insurers doesn’t mean it’s good for the public, nor vice versa. Insurers are the messenger: passing on the high cost of health care to individual consumers. True health reform doesn’t involve demonizing the messenger, but addressing the underlying reasons for high costs.
If critics really want to go back to the days when insurance companies ran wild with no accountability, they should have the courage to say so openly instead of hiding behind distracting attacks. In the meantime, we’re going to keep standing up for American families and small business owners who deserve a system that works for them.
American families and small business owners — and large business owners, for that matter — do deserve a system that works for them. That involves, first and foremost, repealing Obamacare, and minimizing the degree to which Washington makes our health-care decisions. Kathleen Sebelius is essentially saying, “Trust us. We’re the government, and we’re here to help.” Her misleading op-ed makes her less worthy of that trust.
— Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co., and blogs on health-care policy at The Apothecary.