Archive | Health Care Bill – Washington

Employers Looking at Health Insurance Options

The new health care law wasn’t supposed to undercut employer plans that have provided most peopleT in the U.S. with coverage for generations.

But last week a leading manufacturer told workers their costs will jump partly because of the law. Also, a Democratic governor laid out a scheme for employers to get out of health care by shifting workers into taxpayer-subsidized insurance markets that open in 2014.

While it’s too early to proclaim the demise of job-based coverage, corporate number crunchers are looking at options that could lead to major changes. Gov. Phil Bredesen, D-Tenn., said the economics of dropping coverage are “about to become very attractive to many employers, both public and private.”

That’s just not going to happen, White House officials say.

“The absolute certainty about the Affordable Care Act is that for many, many employers who cover millions of people, it increases the incentives for them to offer coverage,” said Jason Furman, an economic adviser to President Barack Obama.

Yet at least one major employer has shifted a greater share of plan costs to workers, and others are weighing the pros and cons of eventually forcing employees to strike out on their own.

“I don’t think you are going to hear anybody publicly say ‘We’ve made a decision to drop insurance,’ ” said Paul Keckley, executive director of the Deloitte Center for Health Solutions. “What we are hearing in our meetings is, ‘We don’t want to be the first one to drop benefits, but we would be the fast second.’ We are hearing that a lot.” Deloitte is a major accounting and consulting firm.

“My conclusion on all of this is that it is a huge roll of the dice,” said James Klein, president of the American Benefits Council, which represents big company benefits administrators. “It could work out well and build on the employer-based system, or it could begin to dismantle the employer-based system.”

Employer health benefits have been a middle-class mainstay since World War II, when companies were encouraged to offer health insurance instead of pay raises. About 150 million workers and family members are now covered.

When lawmakers debated the legislation, the nonpartisan Congressional Budget Office projected it would only have minimal impact on employer plans. About 3 million fewer people would be covered through the job, but they’d be able to get insurance elsewhere.

Two provisions in the new law are leading companies to look at their plans in a different light.

One is a hefty tax on high-cost health insurance aimed at the most generous coverage. Although the “Cadillac tax” doesn’t hit until 2018, companies may have to disclose their exposure to investors well before that. Karen Forte, a Boeing spokeswoman, said concerns about the tax were partly behind a 50 percent increase in insurance deductibles the company just announced.

The tax is 40 percent of the value of a plan above $10,200 for individual coverage and $27,500 for a family plan. Family coverage now averages about $13,800.

White House adviser Furman said blaming a cost increase next year on a tax that won’t take effect for eight years “stretches credibility very far past the breaking point.”

Bigger questions loom over the new insurance markets that will be set up under the law.

They’re called exchanges, and every state will have one in a few years. Consumers will be able to shop for coverage among a range of plans in the exchange, with a guarantee they can’t be turned down because of an existing medical problem. To help make premiums affordable, the law provides tax credits for households making up to four times the federal poverty level, about $88,000 for a family of four.

Bredesen said last week that employers could save big money by dropping their health plans and sending workers to buy coverage in the exchange. They’d face a fine of $2,000 per worker, but that’s still way less than the cost of providing health insurance. Employers could even afford to give workers a raise and still come out ahead, Bredesen wrote in a Wall Street Journal opinion piece.

Employers are actively looking at that. “I don’t know if the intent was to find an exit strategy for providing benefits, but the bill as written provides the mechanism,” said Deloitte’s Keckley, the consultant.

Erin Shields, a spokeswoman for the senators who wrote that part of the law, says she’s confident that when companies do the math, they’ll decide to keep offering coverage.

That’s because employers get to deduct the cost of workers’ health care from the company’s taxes. Take away the health plan and two things happen: Employers lose the deduction and they’ll probably have to pay workers more to get them to accept the benefit cut. Not only will the company’s income taxes go up, but the employer will also face a bigger bill for Social Security and Medicare payroll taxes. So it’s not as simple as paying $2,000 and walking away.

“It is clearly cheaper for employers to continue providing coverage,” Shields said.

Another wrinkle: the health insurance tax credits available through the law are keyed to relatively Spartan insurance plans, not as generous as most big employers provide. Send your workers into the insurance exchange, and valuable employees might jump to a competitor that still offers health care.

MIT economist Jon Gruber says it’s impossible to create new government benefits without some unintended consequences, but he doesn’t see a big drop in employer coverage. “This is a brave new world with uncertainties,” said Gruber. But “the best available evidence suggests a small erosion. It’s not going go down wildly.”

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Health Reform’s $550B Hidden Costs to Taxpayers

 

Pop Quiz: if McDonald’s offered a 30 percent discount on hamburgers, would consumption increase, decrease or remain unchanged?

If you said “increase,” you understand a basic principle of economics that most Americans with common sense realize even without completing Econ 101. The idea that “if you tax something, you get less of it” is the same principle in reverse. Yet Congress completely ignored this truism in passing the health bill last March.

Notwithstanding President Obama’s firm pledge to the contrary, “Obamacare” included a plethora of new taxes that will impact Americans at all income levels. Indeed, less than half the revenue raised by Obamacare comes from taxes explicitly limited to high income households ($200,000 for individuals/$250,000 for families).

The remaining new taxes affect all consumers and include levies on prescription drugs, medical devices, health insurance providers and even tanning parlors. These and related revenue increases amount over 10 years to more about $225 billion (over $700 per U.S. resident), an enormous burden on the economy.

It is bad enough that the President would violate so flagrantly his own repeatedly-stated tax pledge. Even worse, Congress completely ignored hundreds of billions of dollars in hidden costs related to these taxes. Recall that virtually any increase in taxes results in lost production. So if we tax prescription drugs and medical devices, fewer people will buy them. The net dollar value of this lost production is called “deadweight losses” by economists, but it’s simpler to call it a social welfare loss.

This may seem trivial. However, economists have figured out that for every additional dollar imposed in new federal taxes, social welfare losses amount to 42 cents per dollar of new tax revenue collected.

Thus, every dollar of tax-financed spending really costs society $1.42 — one dollar in visible transfers from taxpayers to the government and another 42 cents in hidden losses related to unseen goods and services that would have been produced but for these added taxes.
You would think that Congress would take into account such massive hidden losses when debating proposals as expensive as health reform. Yet it does not. By ignoring these costs, the true costs of health reform — even if accepting the unrealistic way in which the bill was scored –were probably $157 billion higher than advertised.

But the bill also included Medicare and Medicaid savings that even the Medicare actuary has said “may be unrealistic,” along with an assumed 21 percent reduction in physician payments that no one expects to happen. Including the added taxes needed to cover $550 billion in savings never realized or to pay the roughly $300 billion needed over 10 years for a “doc fix” to avert deep cuts in physician pay, the overall hidden social welfare costs of taxes needed for health reform would rise to $550 billion.

Imagine you were a member of Congress who reluctantly cast a vote for health reform because Presidential arm-twisting persuaded you that the benefits exceeded costs. Had you been aware that the true cost of the bill was at least half a trillion dollars more expensive, might that have changed your vote?

It is distressing to think that such a massive cost would have made no difference in how some members of Congress evaluated this plan. Health reform barely passed the House. Yet a mere four more “no” House votes would have defeated it.

It is plausible to believe the outcome would have been different had Congress been made aware of the enormous, hidden costs embedded in this bill. Like the consumer who jumped at McDonald’s 30 percent off sale, Congress passed a plan that appeared to be about 30 percent cheaper than it actually will be after purchase. And now, we all are beginning to pay the price for this hasty and ill-informed decision.

Conover is a research scholar at the Center for Health Policy and Inequalities Research at Duke University.

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SURPRISED BY THE HIGH RATES OF HEALTH INSURANCE PREMIUMS

Santa Cruz Sentinel -Oct. 26: Santa Cruz – A program launched by California on Monday aims to insure 23,000 people with pre-existing conditions, but it won’t help Soquel resident Michael Rosenberg.A self-employed marketing consultant and tech writer, Rosenberg has a chronic nonlife-threatening condition that he says is under control with inexpensive drugs. In 2001, he was paying $570 a month for health insurance for himself, his wife and his two daughters.

He knew he would pay more when he turned 55 in September, but he didn’t expect the PacifiCare premium to go up to $2,391 a month for himself and his wife.

“That translates to a 400 percent increase in costs in 10 years, with just two on the plan now instead of four,” he said. “Even worse, we still pay 30 percent of all medical costs.”

He tried to switch to a PacifiCare plan with a higher deductible and a lower cost, but was denied. That’s when he called an insurance broker to see if he had options.

The state’s pre-existing condition insurance plan, known as PCIP, is open to people who have been without health coverage for at least six months.

So Rosenberg doesn’t qualify. “My choices are now to either let coverage lapse or pay a ridiculous $30,000 a year,” he said. “I just paid off my daughters’ college. I thought I was going to be free and clear.”

Just as people who turn 55 start thinking about retiring, they enter the age bracket where health insurers consider them a higher risk. “I’m a baby boomer,” Rosenberg said. “There must be a million like me.” He’s loath to drop his coverage, saying, “That’s Russian roulette if you have something major happen.”

Tyler Mason, a spokesman for UnitedHealthcare, PacifiCare’s parent company, said he could not comment on Rosenberg’s situation because of the federal privacy rule, but UnitedHealthcare public relations director Will Shanley issued a statement explaining that insurance premiums reflect the cost of care, which is rising due to hospitals charging higher prices, drug prices going up and increasing demand for services such as MRI and CT scans and knee replacements.

Gov. Arnold Schwarzenegger announced the PCIP plan as “a major milestone in health care reform,” funded by $761 million from the federal government. The idea is to bridge the gap between now and 2014, when federal health care reform will not allow insurers to decline to cover people with pre-existing conditions or charge them higher premiums.

“Unfortunately, these people have to make a choice,” said Jeanie Asajian of the state’s Major Risk Medical Insurance Program, noting the six-month gap was written into the federal law. “That was a surprise to the state as well. We didn’t have any input on that.”

She suggested Rosenberg and others in a similar situation look at the state’s high-risk pool, MRMIP, which stands for Major Risk Medical Insurance Program. “He doesn’t have to drop insurance for that,” she said. “It’s not nearly as expensive as what he’s paying.”

The MRMIP handbook posted online lists two options in Santa Cruz County: Kaiser, a health maintenance organization with facilities in San Jose, at $631 per month per person, and Anthem Blue Cross, a preferred provider organization, at $982 per month per person.

The state agency pays insurance brokers a fee for enrolling people in the program, Asajian said. “I had already looked at the MRMIP program,” Rosenberg said. “It sounds like I’d be eligible, except that I have been able to secure adequate coverage.’ It’s just gone through the roof in terms of cost.”

He got more bad news Monday: A rejection notice from Anthem. “There is no other carrier I can go to,” he said.

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Employers looking at health insurance options

By Ricardo Alonso-Zaldivar Associated Press

WASHINGTON—The new health care law wasn’t supposed to undercut employer plans that have provided most people in the U.S. with coverage for generations.  But last week a leading manufacturer told workers their costs will jump partly because of the law. Also, a Democratic governor laid out a scheme for employers to get out of health care by shifting workers into taxpayer-subsidized insurance markets that open in 2014.

While it’s too early to proclaim the demise of job-based coverage, corporate number crunchers are looking at options that could lead to major changes. Gov. Phil Bredesen, D-Tenn., said the economics of dropping coverage are “about to become very attractive to many employers, both public and private.”

That’s just not going to happen, White House officials say.

“The absolute certainty about the Affordable Care Act is that for many, many employers who cover millions of people, it increases the incentives for them to offer coverage,” said Jason Furman, an economic adviser to President Barack Obama.

Yet at least one major employer has shifted a greater share of plan costs to workers, and others are weighing the pros and cons of eventually forcing employees to strike out on their own.

“I don’t think you are going to hear anybody publicly say ‘We’ve made a decision to drop insurance,’ ” said Paul Keckley, executive director of the Deloitte Center for Health Solutions. “What we are hearing in our meetings is, ‘We don’t want to be the first one to drop benefits, but we would be the fast second.’ We are hearing that a lot.” Deloitte is a major accounting and consulting firm.

“My conclusion on all of this is that it is a huge roll of the dice,” said James Klein, president of the American Benefits Council, which represents big company benefits administrators. “It could work out well and build on the employer-based system, or it could begin to dismantle the employer-based system.”

Employer health benefits have been a middle-class mainstay since World War II, when companies were encouraged to offer health insurance instead of pay raises. About 150 million workers and family members are now covered.

When lawmakers debated the legislation, the nonpartisan Congressional Budget Office projected it would only have minimal impact on employer plans. About 3 million fewer people would be covered through the job, but they’d be able to get insurance elsewhere.

Two provisions in the new law are leading companies to look at their plans in a different light.

One is a hefty tax on high-cost health insurance aimed at the most generous coverage. Although the “Cadillac tax” doesn’t hit until 2018, companies may have to disclose their exposure to investors well before that. Karen Forte, a Boeing spokeswoman, said concerns about the tax were partly behind a 50 percent increase in insurance deductibles the company just announced.

The tax is 40 percent of the value of a plan above $10,200 for individual coverage and $27,500 for a family plan. Family coverage now averages about $13,800.

White House adviser Furman said blaming a cost increase next year on a tax that won’t take effect for eight years “stretches credibility very far past the breaking point.”

Bigger questions loom over the new insurance markets that will be set up under the law.

They’re called exchanges, and every state will have one in a few years. Consumers will be able to shop for coverage among a range of plans in the exchange, with a guarantee they can’t be turned down because of an existing medical problem. To help make premiums affordable, the law provides tax credits for households making up to four times the federal poverty level, about $88,000 for a family of four.

Bredesen said last week that employers could save big money by dropping their health plans and sending workers to buy coverage in the exchange. They’d face a fine of $2,000 per worker, but that’s still way less than the cost of providing health insurance. Employers could even afford to give workers a raise and still come out ahead, Bredesen wrote in a Wall Street Journal opinion piece.

Employers are actively looking at that. “I don’t know if the intent was to find an exit strategy for providing benefits, but the bill as written provides the mechanism,” said Deloitte’s Keckley, the consultant.

Erin Shields, a spokeswoman for the senators who wrote that part of the law, says she’s confident that when companies do the math, they’ll decide to keep offering coverage.

That’s because employers get to deduct the cost of workers’ health care from the company’s taxes. Take away the health plan and two things happen: Employers lose the deduction and they’ll probably have to pay workers more to get them to accept the benefit cut. Not only will the company’s income taxes go up, but the employer will also face a bigger bill for Social Security and Medicare payroll taxes. So it’s not as simple as paying $2,000 and walking away.

“It is clearly cheaper for employers to continue providing coverage,” Shields said.

Another wrinkle: the health insurance tax credits available through the law are keyed to relatively Spartan insurance plans, not as generous as most big employers provide. Send your workers into the insurance exchange, and valuable employees might jump to a competitor that still offers health care.

MIT economist Jon Gruber says it’s impossible to create new government benefits without some unintended consequences, but he doesn’t see a big drop in employer coverage. “This is a brave new world with uncertainties,” said Gruber. But “the best available evidence suggests a small erosion. It’s not going go down wildly.”

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ObamaCare’s Incentive to Drop Insurance

My state of Tennessee could reduce costs by over $146 million using the legislated mechanics of health reform to transfer coverage to the federal government.

By PHILIP BREDESEN

One of the principles of game theory is that you should view the game through your opponent’s eyes, not just your own.

This past spring, the Patient Protection and Affordable Care Act (President Obama’s health reform) created a system of extensive federal subsidies for the purchase of health insurance through new organizations called “exchanges.” The details of these subsidies were painstakingly worked out by members of my own political party to reflect their values: They decided who was to benefit from the subsidies and what was to be purchased with them. They paid a lot of attention to their own strategies, but what I believe they failed to consider properly were the possible strategies of others.

Our federal deficit is already at unsustainable levels, and most Americans understand that we can ill afford another entitlement program that adds substantially to it. But our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected—and with them, much greater cost—into the reform’s federally subsidized system. This will happen because the subsidies that become available to people purchasing insurance through exchanges are extraordinarily attractive.

In 2014, when these exchanges come into operation, a typical family of four with an annual income of $90,000 and a 45-year-old policy holder qualifies for a federal subsidy of 40% of their health-insurance cost. For that same family with an income of $50,000 (close to the median family income in America), the subsidy is 76% of the cost.

One implication of the magnitude of these subsidies seems clear: For a person starting a business in 2014, it will be logical and responsible simply to plan from the outset never to offer health benefits. Employees, thanks to the exchanges, can easily purchase excellent, fairly priced insurance, without pre-existing condition limitations, through the exchanges. As it grows, the business can avoid a great deal of cost because the federal government will now pay much of what the business would have incurred for its share of health insurance. The small business tax credits included in health reform are limited and short-term, and the eventual penalty for not providing coverage, of $2,000 per employee, is still far less than the cost of insurance it replaces.

For an entrepreneur wanting a lean, employee-oriented company, it’s a natural position to take: “We don’t provide company housing, we don’t provide company cars, we don’t provide company insurance. Our approach is to put your compensation in your paycheck and let you decide how to spend it.”

But while health reform may alter the landscape for small business in unexpected ways, it also opens the door to what is a potentially far larger effect on the Treasury.

The authors of health reform primarily targeted the uninsured and those now buying expensive individual policies. But there’s a very large third group that can also enter and that may have been grossly underestimated: the 170 million Americans who currently have employer-sponsored group insurance. Because of the magnitude of the new subsidies created by Congress, the economics become compelling for many employers to simply drop coverage and help their employees obtain replacement coverage through an exchange.

Let’s do a thought experiment. We’ll use my own state of Tennessee and our state employees for our data. The year is 2014 and the Affordable Care Act is now in full operation. We’re a large employer, with about 40,000 direct employees who participate in our health plan. In our thought experiment, let’s exit the health-benefits business this year and help our employees use an exchange to purchase their own.

First of all, we need to keep our employees financially whole. With our current plan, they contribute 20% of the total cost of their health insurance, and that contribution in 2014 will total about $86 million. If all these employees now buy their insurance through an exchange, that personal share will increase by another $38 million. We’ll adjust our employees’ compensation in some rough fashion so that no employee is paying more for insurance as a result of our action. Taking into account the new taxes that would be incurred, the change in employee eligibility for subsidies, and allowing for inefficiency in how we distribute this new compensation, we’ll triple our budget for this to $114 million.

Now that we’ve protected our employees, we’ll also have to pay a federal penalty of $2,000 for each employee because we no longer offer health insurance; that’s another $86 million. The total state cost is now about $200 million.

But if we keep our existing insurance plan, our cost will be $346 million. We can reduce our annual costs by over $146 million using the legislated mechanics of health reform to transfer them to the federal government.

That’s just for our core employees. We also have 30,000 retirees under the age of 65, 128,000 employees in our local school systems, and 110,000 employees in local government, all of which presents strategies even more economically attractive than the thought experiment we just performed. Local governments will find eliminating all coverage particularly attractive, as many of them are small and will thus incur minor or no penalties; many have health plans that will not meet the minimum benefit threshold, and so they’ll see a substantial and unavoidable increase in cost if they continue providing benefits under the new federal rules.

Our thought experiment shows how the economics of dropping existing coverage is about to become very attractive to many employers, both public and private. By 2014, there will be a mini-industry of consultants knocking on employers’ doors to explain the new opportunity. And in the years after 2014, the economics just keep getting better.

The consequence of these generous subsidies will be that America’s health reform may well drive many more people than projected out of employer-sponsored insurance and into the heavily subsidized federal system. Perhaps this is a miscalculation by the Congress, perhaps not. One principle of game theory is to think like your opponent; another is that there’s always a larger game.

Mr. Bredesen, a Democrat, is the governor of Tennessee and the author of “Fresh Medicine: How to Fix Reform and Build a Sustainable Health Care System,” just out by Atlantic Monthly Press.

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Utah, a Model of a Health Exchange That Works

By David Clark

Years of experience has taught us that, when it comes to Congress, “We the people” should keep our expectations low. With the passage of federal health care reform, it seems those expectations have been soundly met. The Patient Protection and Affordable Care Act (PPACA) is, at best, seriously flawed legislation. That said, it has certainly brought health care to the forefront and now serves as an unprecedented opportunity to legitimately reform a fragmented and failing system.

One of the most sweeping elements of the law was the requirement that all states establish a statewide health insurance exchange by 2014. It further stipulates that if, by 2013, the U.S. Secretary of Health and Human Services (HHS) determines a state hasn’t made “sufficient progress” toward establishing an exchange, the feds will come in, take over, and default the state into the one-size-fits-all federal program.

State health insurance exchanges, as originally conceived, were supposed to serve as “farmers markets”–a centralized location where insurance carriers could come and display their wares and where consumers could make comparisons on based price and quality and then purchase the plan that best suited their individual or family circumstances. The authors of PPACA, however, bastardized the concept by making exchanges less competitive and more regulatory.

Currently, only two states have functioning exchanges–Massachusetts and Utah. The two models share a number of similarities, but also some distinct differences. In Utah, we began our path to reform with the notion that the invisible hand of the market, not the heavy hand of government was the best means whereby problems with the health care system could be addressed.

We began by establishing the defined contribution market and creating the Utah Health Exchange. Employers who participate in the defined contribution market give workers a specified dollar amount rather than a specified (or “defined”) benefit plan. Workers then use those dollars to shop in the exchange for a plan that best fits their needs.

This approach has the potential to unleash competitive forces by offering expanded choice while preserving pre-tax advantages for both the employer and employee. Furthermore, it introduces consumerism into the system by re-sensitizing patients to costs and giving them control over their personal medical expenditures. It should be noted that the Utah Health Exchange was not a regulatory entity, was not a new state agency, and did not require any mandates.

States, by design, serve as laboratories for innovative government solutions. There is no “one-size-fits-all” solution to the question of how best to reform the health care system; truth be told, there should be at least as many solutions as there are individual states.

The upcoming elections introduce a level of uncertainty with respect to health care reform. The strategy to “repeal and replace” does not seem viable. Although it seems inevitable that Republicans will make significant gains in Congress this November, no one is forecasting a veto-proof majority. States must have a second battle plan in mind – one more likely to succeed as this drama plays out. The new federal health care reform legislation includes a great deal of regulatory discretion and, since power abhors a vacuum, that void will necessarily be filled with either the collective states or with the federal government.

Unfortunately, states have historically underplayed their hand in Washington, their inaction resulting in them being acted upon. With respect to health care reform regulation, states should assert themselves and beat Washington to the punch. As the regulatory infrastructure for health care reform begins to take shape, states must be able to present tangible evidence of their willingness and ability to handle this responsibility. They must also be able to demonstrate that they can do so more effectively and efficiently than Washington.

Make no mistake about it, for anyone involved with the health care industry–including patients, doctors, hospitals, regulators, insurance carriers, and brokers–the world changed on March 23, 2010. From this point on, the effort to protect patient choice and preserve private health coverage will be a series of battles fought in the trenches of regulation. PPACA, if amended and corrected, has the potential to effectively elevate the efforts of states who dare to creatively advance in this most important effort–but only if we aggressively seize the opportunity.

Clark, a Republican, is Speaker of the House of the state of Utah.

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ObamaCare will clog America’s medical system

By Marc Siegel
A month ago, U.S. Health and Human Services Secretary Kathleen Sebelius sent a letter to the president of America’s Health Insurance Plans stating that the impact on insurance premiums from “the new consumer protections and increased quality provisions” of the new health reform law “will be minimal … no more than 1% to 2%.” Sebelius warned Karen Ignagni that there would be “zero tolerance” for insurers blaming unjustified premium increases on the new law. Talk about subtle.

Sebelius’ threat, though, obscures a larger problem: The new health care law mandates and extends the kind of insurance that breeds overuse, thereby driving up costs and premiums. And here I thought the reform intended to reduce costs.

As the details of this massive government-led health care overhaul begin to trickle out, let me be clear (to borrow the president’s go-to phrase): The medical system is about to be overwhelmed because there are no disincentives for overuse.

A free-for-all

ObamaCare was lauded by many for covering all Americans with pre-existing conditions. That’s not the issue. We’re going to get into trouble because of the kinds of coverage that the new law mandates. There are no brakes on the system. Co-pays and deductibles will be kept low, and preventive services will have no co-pays at all. That sounds like a good deal for patients, yes? But without at least a pause to consider necessity and/or cost, expect waiting times to increase, ERs to be clogged and longer lead times needed to make an appointment.

Patients with new Medicaid cards who can’t find a doctor will go where? To emergency rooms. The escalating costs of these visits (necessary and unnecessary) will be transferred directly to the American public, both in the form of taxes as well as escalating insurance premiums.

Beginning in 2014, insurance exchanges will be set up in every state so that individuals can choose a health insurance plan. This will help control costs, right? Wrong. Don’t expect to find individually tailored plans or those with higher deductibles or co-pays. They won’t be there because they can’t receive the government stamp of approval.

In the new system, my patients will be able to see me as often as they’d like. But will they get the same level of care? I don’t think so. I anticipate that more expensive chemotherapies and cardiac stents or transplants, for instance, will have a tougher time being approved, as is already the case in Canada.

Over on the public side, the new Independent Payment Advisory Board — established by the health reform law to “recommend proposals to limit Medicare spending growth” — will advise Medicare that some treatments are more essential and more cost-effective than others. I believe that value judgments inevitably will have to be made, reducing my options as a practicing physician. Private insurers will follow suit, as they often do.

During the battle over this reform, you often heard, even from President Obama, that you’d be able to keep the plan you have. What he didn’t say — but what we now know — is that because of this new law, the private markets will have to remake their plans, that the costs will rise and that the plan you were told you could “keep” is in all likelihood no longer available. But when your plan changes, backers of reform will simply blame it on those evil private insurance companies.

The truth is, private health insurance is a low-profit industry, with profit margins of 4% compared with over 20% for major drug manufacturers. With the additional costs of no lifetime caps and no exclusion for pre-existing conditions, these companies will be compelled to raise their premiums in order to stay in business. The individual mandate is supposed to be the tradeoff by providing millions of new customers, but there is no guarantee that this additional volume will preserve profits with all the new regulations. This is what occurred in New York state in 1992, when a new law denied exclusion on the basis of pre-existing conditions.

Every scratch or dent

None of this is terribly surprising. I mean, imagine if your car insurance covered every scratch or dent. Wouldn’t you expect your premiums to rise to meet the expanded coverage? And wouldn’t you expect your auto repair shops to become clogged with cars that didn’t really need to be repaired, competing for time and space with other cars with broken transmissions or burnt-out motors?

If we want lower insurance premiums, we will need to return to a system that favors high deductible, high co-pay catastrophic-type insurance with a built-in disincentive for overuse, such as the kind that some employers have provided as an option up until now. Patients could pay for office visits from health savings accounts or other flexible spending tax shelters. More than 10 million Americans already have such accounts.

Unfortunately, the new law is taking us away from the kind of insurance that compels patients to have more skin in the game. As a result, we’ll all pay in the long run — both financially and with less efficient, perhaps even lower quality, care.

The kind of insurance the new law mandates will, over the years, wear out the health care system in the same way that overuse in orthopedics wears out an elbow or knee joint. This won’t be fun for doctors or, most important, for patients.

Marc Siegel is an associate professor of medicine and medical director of Doctor Radio at NYU Langone Medical Center.

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Voters on ObamaCare: Informed and Opposed

By DAVID BRADY, DANIEL KESSLER AND DOUGLAS RIVERS

The Obama administration has tried to convince Americans that they will like the new health law once they understand its effects. According to a new poll, they understand the law pretty well—and they don’t like what they see.

At the end of last month, we asked a sample of 1,000 adults about health reform. The big picture: A majority (55%) believe the new law will cause them to get lower-quality care, pay more in insurance premiums or taxes, or both. Consistent with other surveys, 42% favor repeal, 36% don’t, and 22% aren’t sure.

Our poll also asked about specific provisions. The mandate that individuals buy insurance or face a tax penalty generated the greatest opposition, with 55% opposed and only 25% in favor. Other aspects of the law received more mixed reviews. The provision requiring employers to offer their employees health insurance or pay a tax penalty had plurality support, with 47% in favor and 36% opposed.

On the surface, these findings might seem to support the administration’s view. People are less negative about some of the specifics than they are about the package as a whole. But does this imply that those who understand the law like it better?

To investigate, we asked people about their perceptions of the link between reform, insurance premiums, and wages—in particular, “if employer insurance costs increase as a result of the health reform plan, do you think the take-home pay of employees will decrease or not?” Policy analysts on the left and the right agree that workers bear the costs of insurance through wage offsets; numerous empirical studies have found this to be true. We therefore used people’s answer to this question as a proxy for their understanding of the effects of health reform.

Fully 49% answered the question correctly, saying that employee pay would decrease by approximately any additional amount that employers have to spend. Thirty-one percent believe employee pay would decrease but by less than the full amount; 19% believe the extra costs would have no effect on pay.

People who understand the economic consequences of health reform span the political spectrum. Although these respondents were somewhat more likely to identify themselves as Republicans than the overall population (37% versus 28%), fully 25% identified themselves as Democrats (versus 34% in the population), and 29% as independents (versus 28% in the population).

Despite their political views, the well-informed share a strong opposition to the new law. They advocate repeal 56/25; oppose the individual mandate 73/13; and oppose the employer mandate 52/36. Such numbers do not bode well for the administration’s claims that to know reform is to like it.

We also asked about three other provisions in the law: the ban on charging more for insurance based on a person’s health (“community rating”), the mandate that employers cover “children” up to age 26, and the ban on lifetime limits on benefits. We told people that these provisions would increase insurance costs by $700, $200, and $100 per year, respectively—approximately what health economists and actuaries have estimated as the added cost to an average employer-sponsored family insurance policy.

People who thought they could enjoy these benefits while someone else picked up the tab generally supported them. Those who believed that there is no “free lunch” opposed community rating (by 43% to 32%) and mandated coverage of children to age 26 (by 48% to 32%). However, they supported the new law’s ban on lifetime limits on benefits by 43% to 33%. These responses are consistent with a poll we conducted in January 2009, published in Health Affairs, which found widespread political support for a more moderate package of reforms.

As the midterm elections approach, one can expect candidates opposed to the new health reform law to point out how its effects on health costs will translate into people’s paychecks. Our poll suggests this message will resonate with voters of all stripes.

Mr. Brady is professor of political science at Stanford University and deputy director of the Hoover Institution. Mr. Kessler is professor of business and law at Stanford and a senior fellow at the Hoover Institution. Mr. Rivers is professor of political science at Stanford, senior fellow at the Hoover Institution, and president of YouGov Polimetrix.

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Judge disses Dems’ ‘Alice in Wonderland’ health defense

POLITICAL.COM

A federal judge in Florida on Thursday said he will allow some of the lawsuit challenging the constitutionality of the health care law to proceed — and criticized Democrats for making an “Alice in Wonderland” argument to defend the law.

U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.

In his ruling, Vinson criticized Democrats for seeking to have it both ways when it comes to defending the mandate to buy insurance. During the legislative debate, Republicans chastised the proposal as a new tax on the middle class. Obama defended the payment as a penalty and not a tax, but the Justice Department has argued that legally, it’s a tax.

“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,” he wrote.

Vinson ruled that it’s a penalty, not a tax, and must be defended under the Commerce Clause and not Congress’s taxing authority.

A Dec. 16 trial date is planned in the lawsuit, brought by 20 state attorneys general and governors. Many legal experts expect it to end up before the U.S. Supreme Court.

Just last week, a Michigan judge struck down a similar challenge to the reform law, arguing that Congress was well within its constitutional authority when it crafted the law. There are several lawsuits against the health law that are working their way through the court system, but the attorney general suit is the highest-profile challenge.

Vinson dismissed three of the states’ challenges, including complaints that the law interferes with state sovereignty as to whether employers must offer insurance; that the law coerces states into setting up insurance exchanges; that the individual mandate violates the states’ due process rights.

The states argued in September that the law violates the Constitution by requiring an expansion of the Medicaid program that’s funded in part by the states and for penalizing people for not purchasing health insurance.

Florida Attorney General Bill McCollum, a Republican who lost the state’s gubernatorial primary this summer, filed the suit minutes after President Barack Obama signed the health care bill into law in March

The Obama administration argued that the states and the National Federation of Independent Business, the small business lobby that joined the suit, don’t have standing to bring the lawsuit. They said that only individual taxpayers do.

The White House downplayed the ruling Thursday.

“Having failed in the legislative arena, opponents of reform are now turning to the courts in an attempt to overturn the work of the democratically elected branches of government,” Stephanie Cutter, an assistant to the president for special projects, wrote on the White House blog. “This is nothing new. We saw this with the Social Security Act, the Civil Rights Act, and the Voting Rights Act – constitutional challenges were brought to all three of these monumental pieces of legislation, and all of those challenges failed. So too will the challenge to health reform.”

But opponents of the law hailed it as a victory.

“It is the first step to having the individual mandate declared unconstitutional and upholding state sovereignty in our federal system and means this case will go forward to the summary judgment hearing that the court has set for December 16th,” McCollum said in a statement.

Vinson avoided politics for most of the 65-page order but noted the extraordinary partisanship surrounding the issue.

“As noted at the outset of this order, there is a widely recognized need to improve our healthcare system,” Vinson wrote. “How to accomplish that is quite controversial. For many people, including many members of Congress, it is one of the most pressing national problems of the day and justifies extraordinary measures to deal with it.

“I am only saying that (with respect to two of the particular causes of action discussed above) the plaintiffs have at least stated a plausible claim that the line has been crossed,” he added.

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Obama grapples with implementing unpopular health law before Nov.

By Bob Cusack and Julian Pecquet

The Obama administration is grappling with implementing the unpopular healthcare reform law in the weeks leading up to the midterm election.

Some regulations establishing the rules of the various pieces of the health overhaul passed by Congress have been issued, and others will be released in the years to come. But the threat of employers dropping their coverage because of the new law has emerged as a thorny political problem this fall.

The timing could not be worse for the administration as undecided voters are making up their minds on which congressional candidates to support on Nov. 2.

Republicans are hammering Democrats on what they call “ObamaCare” while congressional Democrats, by and large, avoid the topic. A new poll by The Hill of 12 battleground districts in the House found that nearly one in four Democrats support a repeal of the health law.

In a June 22 speech touting healthcare reform, President Obama said, “So, starting in September, some of the worst abuses will be banned forever.” He listed several aspects of the law, including an elimination of “restrictive annual limits on coverage.”

At the time, Obama said, “Those days are over.”

But for nearly a million people, those days are not over yet.

Desperate not to violate the president’s pledge that people who like their coverage will be able to keep it, the administration recently granted 30 waivers from annual limit restrictions. Those waivers were quietly posted on the Department of Health and Human Services (HHS) website — without drawing attention to the fact that they’re exempting from the law’s patient protections plans that offer some of the weakest coverage.

An administration official said all but one of the requested waivers was granted, but the source was unclear which company was denied. It is also unclear how many waiver requests are pending at HHS.

The waivers are only valid for one year, raising the possibility that more employers will seek them in the future as the limits increase every year.

The healthcare reform law sets the annual-limit floor for health plans at $750,000 for plan years beginning on or after Sept. 23, 2010. The annual minimum rises to $1.25 million for plan years starting Sept. 23, 2011, and again to $2 million for plan years starting between Sept. 23, 2012, and Jan. 1, 2014. Starting in 2014, annual limits will be banned, with some exceptions.

Lobbyists say their clients are very interested in securing waivers and are not surprised that the administration didn’t issue press releases on them.

A lobbyist who requested anonymity said, “If I were them I’d hide these exemptions too. They have to be worried about other companies seeing this and following suit. If you hit a critical mass of exemptions, it seems to me that a major assumption of the reform package — that the government can simply set an expensive mandate and expect it to be followed — falls apart.”

Administration officials dispute the notion they buried the announcements, pointing to a notice in the Federal Register and a list of the approved waivers on the HHS website.

During his Thursday briefing at the White House, press secretary Robert Gibbs was asked six different questions on the HHS waivers. The tenor: Now that the administration has started granting waivers, where will it stop — and doesn’t doing so undermine healthcare reform?

“I’m not worried that the dam is going to burst,” Gibbs answered, referring to a potential deluge of waiver requests.

The debate on this issue heated up last week after The Wall Street Journal reported that McDonald’s was threatening to drop coverage for 30,000 employees if the company didn’t get a waiver from the law’s medical loss ratio requirement for its so-called “mini-med plans.”

The administration pushed back hard against the story, claiming it was too early to speculate on who was going to get waivers for the medical loss ratio since the regulations putting it in place don’t even exist yet.

HHS Secretary Kathleen Sebelius also told reporters that the administration was being flexible with employers to help them keep their coverage. She then revealed that McDonald’s had been granted a waiver from the annual limits provision of the law within 48 hours of asking for it. Other companies that received waivers included CIGNA, Denny’s and Aetna.

The HHS waivers may have assuaged employers, but they prompted infuriated healthcare reform advocates to strongly criticize the administration.

The single-payer advocates at Physicians for a National Health Program argued that this is one more example of why Medicare for all would have been a much better solution than Democrats’ attempt to more thoroughly regulate the private health insurance market.

“Is HHS really that sympathetic to employers while being so uncaring about the needs of their employees?” senior policy fellow Don McCanne said in a statement. “I mean waivers … not just waivers … but expedited waivers! Just what was reform supposed to have accomplished?”

New York Times columnist David Leonhardt weighed in on Wednesday, noting that McDonald’s main health plan offers $2,000 worth of benefits a year — a far cry from the $750,000 minimum called for in the reform law. Getting rid of such plans, he suggested, should be embraced rather than avoided.

The healthcare reform law “does represent progress,” Leonhardt wrote. “The fact that it is beginning to disrupt the status quo — that some insurance policies will eventually be eliminated and some inefficient insurers will have to leave the market altogether — is all the proof we need.”

HHS spokeswoman Jessica Santillo said, “HHS is to committed strengthening employer-based coverage for employees and retirees, while building a bridge to a new competitive marketplace in 2014. Applications for waivers from annual limit requirements are reviewed on a case-by-case basis by Department officials who look at a series of factors including whether or not a premium increase significantly exceeds medical inflation or if a significant number of enrollees would lose access to their current plan because the coverage would not be offered in the absence of a waiver.”

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