Archive | Medicare

Fiscal Diagnosis Only Gets Tougher for Health Care Law

For Democratic lawmakers who were hesitant to sign onto the sweeping 2010 health care law, one of the most powerful selling points was that the Affordable Care Act would actually reduce the federal budget deficit, despite the additional costs of extending health insurance coverage to the uninsured. Four years after enactment it’s unclear whether the health care law is still on track to reduce the deficit or whether it may actually end up adding to the federal debt. In fact, the answer to that question has become something of a mystery.

  • In its latest report on the law, the Congressional Budget Office said it is no longer possible to assess the overall fiscal impact of the law. That conclusion came as a surprise to some fiscal experts in Washington and is drawing concern. And without a clear picture of the law’s overall financing, it could make it politically easier to continue delaying pieces of it, including revenue raisers, because any resulting cost increases might be hidden.

Charles Blahous, a senior research fellow at George Mason University’s free market-oriented Mercatus Center, calls the CBO’s inability to estimate the net effect of the law “a real problem.”

“The ACA’s financing provisions were assumed to be effective so as to get a favorable score out of CBO upon enactment, but no one is keeping track of whether they’re being enforced,” says Blahous, a public trustee for Social Security and Medicare. “We receive occasional updates on the gross costs of the law, but none on whether the previously projected savings provisions are producing what was originally projected.” “There’s no barrier to continually rolling back the financing mechanisms without the effect on the ACA’s finances ever being fully disclosed.”

  • When Congress passed the health care law in 2010, the CBO estimated it would reduce the deficit by more than $120 billion over a decade, compared to the agency’s current-law baseline projection of spending, revenue and the deficit. That meant the health care law would, in effect, pay for itself and deliver an additional fiscal bonus.

The CBO based its estimate on the assumption that the law, which included hundreds of billions of dollars’ worth of Medicare cuts and tax increases to pay for health care subsidies, would be implemented as written. Now, after a chaotic start and a series of delays or adjustments in various provisions of the act, including an employer mandate that was expected to bring in new tax revenue, it’s unclear to what extent those promised savings are being realized.

Limited Analysis

  • In a little-noticed footnote to a report issued in April, “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act,” the CBO wrote that it and the Joint Committee on Taxation “can no longer determine exactly how the provisions of the ACA that are not related to the expansion of health insurance coverage have affected their projections of direct spending and revenues.”

The CBO nevertheless maintained in the report that, based on an earlier analysis in 2012, apart from the insurance provisions in the law, “many other provisions, on net, are expected to reduce budget deficits.” Still, that analysis is effectively a ballpark figure since the CBO did not include a precise estimate of the law’s overall budgetary impact. “They don’t want to admit that what they assumed two years ago is no longer correct because the administration has not implemented many provisions of the law.”

But Dan Mendelson, who runs Avalere Health, a consulting company, says that after a number of years, it’s always hard to track the fiscal effects of a law.

  • “It becomes very difficult in a fiscally valid way to assess the impact of legislation because so many other things change at the same time,” says Mendelson, who served as associate director for health at the Office of Management and Budget during the Clinton administration. “It gets hard to isolate the effects.”

Mendelson adds that “at a certain point it becomes irrelevant because it’s all part of the baseline of expenditures. It’s current law. And if somebody wants to repeal some portion of that law, then you can assess in a targeted way what that would cost or what the spending impact would be.”

  • The CBO did say that one element of the law’s fiscal impact is relatively clear: its changes to insurance coverage.

In its April report, the CBO updated its estimates of the budgetary effects of the health insurance coverage provisions of the law, including insurance subsidies, the Medicaid expansion, penalties paid by employers and individuals for not providing or purchasing insurance, and the excise tax on high-premium insurance plans.

Compared with its February 2014 baseline, the CBO said payments of penalties generated by the employer and individual mandates were projected to fall by $18 billion over a 10-year period. Still, because the cost of subsidies and related spending was estimated to fall even more, the agency said the insurance provisions would cost $104 billion less over the 10-year period than projected two months before.

Beyond insurance changes, though, the deficit effects of the law are much harder to analyze.

While CBO can isolate and reassess the provisions of the ACA that expanded insurance coverage, it cannot perform the same analysis on the portions of the law that modified existing federal programs and made changes to the tax code. “Isolating the incremental effects of those provisions on previously existing programs and revenue four years after enactment of ACA is not possible,” the CBO said.

In its original score of the law in March 2010, the CBO said the insurance provisions would cost $788 billion between 2010 and 2019. But that cost would be more than offset by $511 billion in spending cuts, primarily to Medicare, and $420 billion in new revenue, much of it generated by new taxes on hospital insurance and manufacturers of drugs and medical devices. As a result, the CBO estimated at the time, the health care law would reduce the deficit by $143 billion over 10 years, compared to the agency’s current law baseline. The vast majority of the savings — $124 billion — was supposed to come from the health care portion of the law, but another $19 billion would be derived from changes to student loans and grants.

Two-Year-Old Estimate

The last time the CBO produced an estimate based on the entire law was in 2012, when the agency said that a GOP proposal to repeal the law would add $109 billion to the deficit over a 10-year period. That implies the CBO still thought two years ago that the law would save money.

Since then, the administration has made numerous adjustments to the implementation of the law, reducing the revenue it was supposed to raise or savings it was expected to achieve. Last year, for example, the IRS delayed the employer mandate until 2015 from 2014. And earlier this year, the agency extended the delay for another year for certain employers. In its April report, CBO estimated the delay in the employer mandate would cost the government $3 billion in penalty payments in 2016.

The health care law also mandated cuts to Medicare, but the savings related to the Medicare Advantage program have been somewhat reduced by an administration pilot project that boosted bonus payments to Medicare Advantage plans since 2011.

In 2010, the CBO projected the health care law would cut Medicare as well as some Medicaid and related spending by $455 billion between 2010 and 2019.

But in a letter to House Speaker John A. Boehner in 2012, the CBO provided an updated estimate that suggested those savings may be increasing. According to that letter, repealing the law would increase Medicare and related spending by $741 billion from 2013 to 2022, which implies that keeping the law on the books would save the same amount.

Paul N. Van de Water, a senior fellow at the left leaning Center on Budget and Policy Priorities and former assistant director for budget analysis at the CBO, argues the adjustments in the law will have little fiscal impact as long as they remain temporary.

“I don’t think that any of the delays that you’re talking about are likely to turn the law from one that reduces the deficit into one that increases it,” he says. Van de Water argues that the specific Medicare cuts in the ACA are being implemented. Two of the key tax increases in the law took effect last year, he added — a 0.9 percent increase in Medicare payroll tax rate, and a 3.8 percent tax on dividends and interest, both for upper income brackets. “My strong instinct is that all of these changes are going to leave the basic financial impact picture of the law much the same,” he says.

But to Blahous, the delays stoke doubts about the viability of other cost-saving measures in the law that have yet to be implemented and may be more painful and politically challenging. “The question is, if things haven’t been enforced to date, is it really a valid assumption to assume they will be fully enforced going forward?” he says. “You have this sort of invisible undoing of the financing of the ACA. But it doesn’t appear anywhere in the scorekeeping, because we assume it’s not going to happen in the future, and we’re not keeping track of it happening in the past.”

If the employer mandate were repealed rather than just delayed, for example, it would cost the government an estimated $106 billion in lost revenue between 2013 and 2022, the CBO said in 2012.

Blahous notes the delays are not surprising, since the law was pushed through Congress with little Republican input or support.

“This is what happens when a vast new spending program is passed on a partisan basis,” Blahous says. “Those who opposed the law have no stake in enforcing the provisions required to finance it. Those who enacted the ACA don’t want sole political ownership of its tax increases, penalties and Medicare spending cuts, so they scale them back.”

*Modified from a Rollcall.com article

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2.7 Million ObamaCare Enrollees Still Unaccounted For

Affordable Care Act: President Obama has for a while been bragging that 8 million people have signed up for ObamaCare. But the administration still hasn’t released the state-by-state numbers to back up that number.

As a result, we still don’t know where 2.7 million ObamaCare enrollees came from.

Here’s what we do know:

  • The exchanges run by 15 states and Washington, D.C., have reported final enrollment numbers at least through March, and most have numbers through April 15. The combined total for these exchanges is 2.6 million.

  • For the remaining 36 states, all we have are the numbers HHS released through February. At that point, these states accounted for 2.7 million sign-ups.

  • Add the two together, and you get 5.3 million. That means roughly 2.7 million must have signed up in just these 36 states after March 1 to reach the 8 million mark. And that means enrollment in these states must have doubled in just the last six weeks of a 28-week open enrollment period.

  • To call this an incredible achievement is putting it mildly, particularly since the state-run exchanges saw enrollment climb only 62% in those final six weeks.

So where did these 2.7 million come from? We won’t know until the HHS report comes out, which presumably could be any day now. But even if Obama can account for these fantastic gains, there are still several questions that need answering.

First, of course, is: How many have paid?

  • Georgia says that only 48% of the 221,604 who enrolled through March 31 have paid their premiums. In South Carolina, only 59% of the 114,789 who enrolled through April 15 had done so.

  • Another question: Do the numbers account for people who dropped coverage earlier? We know at least some have been kicked off for nonpayment, and others canceled their plans for one reason or another. Is HHS netting out these losses, or is it simply adding new enrollment numbers on top of the old ones?

  • And, did the agency screen out duplicate enrollments? One broker told us that in the last month his company was encouraged to simply start a new application if something went wrong during the process, so as to speed things up. He figures 30% of the ObamaCare applications his firm handled in the home stretch were duplicates. Did these get counted in the final tally?

The mainstream media, unfortunately, have shown zero interest in trying to make sense of these numbers, much less independently verify them. Instead, they obeyed Obama’s command to “move on.”

But until we get more data, and get answers to these questions, we’re reluctant to accept any ObamaCare numbers put out by this administration.

Modified from an IBD.com article

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Obama Says Health-Insurance Enrollees Reach Eight Million

WASHINGTON—President Barack Obama said Thursday that eight million people had picked health-insurance plans through the Affordable Care Act, a number that significantly outstripped initial projections and emboldened him to step up criticism of Republicans seeking to repeal the law.

The eight million sign-ups go beyond earlier projections by the Congressional Budget Office that six or seven million people would enroll through the exchanges in 2014. Mr. Obama pointed to the number to declare the law a success and that Republicans should stop trying to overturn it.

“The point is, the repeal debate is and should be over,” the president said. “The Affordable Care Act is working and I know the American people don’t want us spending the next 2½ years refighting the settled political battles of the last five years.”

Some 35% of those who signed up through the federal health-insurance exchange were in the coveted under-35 demographic, Mr. Obama said. The participation of younger, relatively healthy people is needed to balance out the cost of medical claims from older and sicker ones.

The announcement contained few other new details about enrollment. Republicans quickly pointed to missing information—such as the number of people who had actually gained coverage after being uninsured, as opposed to those replacing an existing policy—to suggest the figures could be overblown as a measure of success.

Democrats up for re-election in the fall have been bracing for a renewed debate around the law as the Senate prepares to hold confirmation hearings for a successor to Health and Human Services Secretary Kathleen Sebelius, whose resignation was announced last week.

Rep. Carol Shea-Porter (D., N.H.), who has come under strong criticism from Republicans for supporting the law and is in a tough race for re-election, called the development great news. She has made her frustrations with the law known to the Obama administration, but she said Thursday she has also heard from constituents in both parties who have been helped by the law. “The Affordable Care Act still has challenges, but today’s news is clearly a giant step forward,” she said in a statement.

Polls regularly show that while opinion remains sharply divided over the law and more people dislike it than like it, a majority of Americans don’t want it repealed. The White House has seized on that finding, and on Thursday Mr. Obama also suggested that the final enrollment numbers could provide Democrats with some measure of political cover amid a likely barrage of election-year attacks.

“If Republicans want to spend all their time talking about repealing a law that’s working, that’s their business,” Mr. Obama said. “I think what Democrats should do is not be defensive, but we need to move on and focus on the things that are really important to the American people right now.”

GOP lawmakers continued to emphasize information not contained in the numbers, including how many people have paid their first month’s premium, the final step in enrolling for insurance.

“How many of those who have signed up were among the millions who had their plans canceled? How many were already insured but forced to sign up for an Obamacare plan?” said Sen. Lamar Alexander (R., Tenn.). “This law promised to insure the uninsured, let those who liked their insurance keep it, and lower the cost of insurance—let’s talk about what the law was supposed to do instead of how many millions of people the president has so far forced into Obamacare.”

The new total reflects people who had signed up through April 15 through the federal and state exchanges, the last date on which most Americans were allowed to finish applications. The official enrollment deadline had been March 31, but the federal exchanges gave people who tried to sign up but got stuck in long lines or computer overloads an additional 15 days to finish their applications. Most states offered similar extensions.

Bringing the uninsured into the health system was a key promise in Mr. Obama’s push for the law. Federal officials said earlier that only insurers know how many people have paid their first month’s premium, and that they aren’t collecting information on what proportion of enrollees had been uninsured.

The president’s announcement didn’t include state-by-state information about enrollment, which will be key to determining premiums for 2015 and beyond since each state’s insurance market is different and rates are based on the makeup of people who sign up within each.

White House officials said Thursday that 28% of the enrollees in the federally run exchanges serving 36 states are in the 18-34 demographic. Some 7% are children covered by family plans. The administration didn’t release demographic information for the 14 states running their own exchanges.

Insurance officials previously said 80% to 85% of enrollees paid the first month’s premium, a proportion that would suggest the administration will ultimately hit enrollment targets for the exchanges for 2014 even if some people drop out or have picked more than one plan and are overrepresented in the numbers, especially since some people who have a change in their life circumstances such as a divorce or job loss are still allowed to sign up after March 31.

The figures represent a slight increase in young people compared with the previous five months. The administration said earlier that through Feb. 28, about 4.2 million people were covered by plans picked via the federal and state-run exchanges. Of those, 25% were 18 to 34, and 6% were children covered by family plans.

The mix of younger people buying coverage is considered by health plans to be crucial in determining future insurance prices. Under the law, insurers no longer can charge premiums based on health histories, and are restricted in how much more they can charge older consumers.

Mr. Obama offered a muted warning about premiums next year, saying he expected them to rise, though he also said they had done so before the law was passed because of the increase in health costs.

The president also criticized states that opted not to expand their Medicaid programs to include all adults making around the poverty line, a decision made available to them after the Supreme Court ruled in June 2012 that they couldn’t be required to participate in that part of the health law.

Governors and legislators in 24 states, most of whom are Republicans, say they don’t believe state budgets or Washington can withstand the additional costs of expanding Medicaid.

Mr. Obama on Thursday characterized the decision as one motivated by “political spite.”

“That’s wrong. It should stop,” he said. “Those folks should be able to get health insurance like everybody else.

*Modified from a WSJ.com article

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“Junk” Health Plans and Other Obamacare Insurance Myths

Obamacare affects nearly all areas of health care, but the most disruptive provisions of the law affect insurance sold in the individual market. In 2013, at least 4.7 million policyholders across 31 states and the District of Columbia were notified that their current coverage was being discontinued. The number is likely even higher, since data were not available for 19 states.

  • Myth: The canceled health plans were “substandard” policies.
  • Myth: Before Obamacare, there were routine plan cancellations in the individual market.
  • Myth: Pre-existing condition exclusions were rampant before Obamacare.
  • Myth: Obamacare plans are “better” insurance.

Obamacare’s advocates claim that the law and its plethora of new insurance regulations were necessary to better protect consumers in this market. They discount the large disruption of coverage for millions of people by claiming that the plan cancellations were for “substandard” policies and that plans were routinely canceled in this market regardless of Obamacare. Further, they assert that the law will replace these plans with “better” insurance all of which is largely untrue.

  • Myth: The canceled health plans were “substandard” policies.

President Obama has repeatedly referred to the 4.7 million discontinued policies as “substandard.” When the President announced his administrative “fix” that attempted to allow those with canceled plans to keep their existing plans for another year, Senator Tom Harkin (D–IA) said he was still “concerned about people having policies which don’t do anything. They’re just junk policies.”

Typically, “substandard” refers to plans with limited benefits, which are commonly seen as inadequate because they do not protect against catastrophic costs. These types of plans typically cover routine care, but if there were a major medical event, they might pay only up to a certain amount before leaving the enrollee to pay the rest.

Obamacare gradually phased out these types of plans from 2010 to 2013—completely outlawing them by 2014—by prohibiting both annual and lifetime limits on coverage.

Limited-benefit plans are not nearly as prevalent in the individual market as they are portrayed to be. Of the nearly 16 million enrollees in the individual market in 2012, 725,710 individuals were enrolled in plans classified as limited-benefit plans, and slightly more than a million were in student health plans, which also typically have a limited benefit package. Thus, less than 11 percent of the individual market in 2012 had a plan that could reasonably be considered “substandard.”

Limited-benefit plans are mostly offered by employers in the group market. Indeed, of the temporary waivers received by over 4 million plan enrollees from the Obama Administration for Obamacare’s annual limit caps before they were completely phased out, only 3.7 percent were for individual market plans; the rest were given to enrollees in group market plans.

  • Myth: Before Obamacare, there were routine plan cancellations in the individual market.

Many Obamacare defenders blame the discontinued policies on “bad apple insurers,” claiming that it was typical in this market to have plan cancellations and that they are not a result of Obamacare.

For instance, former Obama Administration official Van Jones called the individual marketplace a “‘wild, wild west’ where people were denied coverage for pre-existing conditions and policyholders were continually dropped by insurers offering thin, sketchy coverage.” In addition, President Obama said, “Before the Affordable Care Act, the worst of these plans routinely dropped thousands of Americans every single year.”

But since the enactment of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), insurers have been broadly prohibited from canceling or refusing to renew coverage. One of the few exceptions to that prohibition is if an insurer discontinues a particular plan or type of coverage. In such cases, the insurer must provide the affected individuals the option to enroll in any other applicable coverage that the insurer offers.

That is largely what happened with the 4.7 million plan cancellations that were reported at the end of 2013. The insurers were discontinuing their pre-Obamacare plans and offering policyholders replacement coverage that complied with Obamacare’s wide variety of new mandates and regulations.

  •  Myth: Pre-existing condition exclusions were rampant before Obamacare.

Individuals being denied health insurance or kicked off their plans because of pre-existing medical conditions is often cited by defenders of Obamacare as justification for the law. The President has said that “up to half of all Americans have a preexisting condition.”

However, while the problem did exist, it was on a much smaller scale than depicted. The issue was in the individual market, where about 10 percent of the privately insured purchase coverage. In the group market, where about 90 percent of privately insured Americans are covered, the issue was mostly resolved by HIPAA.

Beginning in 2014, Obamacare enforced a blanket prohibition of pre-existing condition exclusions in the individual market. A consequence of this policy is that it incentivizes people to wait until they are sick to purchase coverage. Thus, the law also included an individual mandate to force all Americans to purchase health insurance or pay a tax penalty.

Since the provisions did not take affect right away, the law created the pre-existing conditions insurance plan (PCIP) to operate from 2010 to 2014. It funded new high-risk pools in each state to provide temporary coverage to those with pre-existing conditions.

The PCIP experience revealed that the number of individuals facing pre-existing condition exclusions was not nearly as large as it was portrayed. The Obama Administration initially estimated that 375,000 people would enroll in the PCIP by 2010, but the highest enrollment total ever to occur over the three-year period was in March 2013: almost 115,000, only about 30 percent of original projections.

  • Myth: Obamacare plans are “better” insurance.

Obamacare does indeed mandate a host of new benefits that every plan must cover and new rules that each insurer must follow, but the result is not just standardization and over-regulation of health insurance; it also increases costs, which is seen in premiums and cost-sharing levels.

For instance, the average deductible for a bronze plan in the 34 states with a federally facilitated exchange is $5,095 a year for an individual, and the average catastrophic plan carries an individual deductible of $6,346. Moreover, 42 states will see significant average premium increases—in many cases, over 100 percent—for individuals purchasing from the exchanges. Therefore, enrollees may not see “better” insurance for their money.

*Modified from a heirtage.org article

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Cost of Generic Drugs Soaring Due to Increased Demand from Obamacare

The pervasive use of generic over brand-name medications was anticipated to be a money-saver, but recently prices are soaring, even up 6,000 percent for some common drugs that were once fairly low-cost. Seventy seven percent of pharmacists said they experienced 26 or more instances of a large increase in the acquisition price of a generic drug within the last six months of 2013.

Generic drugs such as Pravastatin, which treats high cholesterol, and the antibiotic Doxycycline spiked upwards of 1,000 percent in 2013, according to a survey by the National Community Pharmacists Association.

Eighty four percent of pharmacists said price fluctuations prevented them from providing care and remaining in business due to the fact that filling prescriptions resulted in losses when some patients refused their prescriptions because of costs.

The pharmaceutical consulting firm Pembroke Consulting found that within the last year more than a dozen drugs increased ten times their standard rate. Some pharmacists and physicians are pointing a finger of blame at drug companies for the price hikes.

At Costco, for example, at one given time the generic high blood pressure medication Irbesartan was nearly $300 for a 90-day supply of the 150 mg tablet, yet the cost of the same supply of the 300 mg tablet was only $30.

Dan Mendelson, CEO of consulting firm Avalere health, says prices of generic drugs have gone up because demand for them has risen. Since ObamaCare requires all health insurance plans in the exchanges to cover prescription drugs, the new health reform law may increase demand for drugs, causing prices for generic medications to rise even higher in the future.

*Modifed from a breibart.com article

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New ObamaCare fees coming in 2014

Here comes the ObamaCare tax bill. The cost of President Obama’s massive health-care law will hit Americans in 2014 as new taxes pile up on their insurance premiums and on their income-tax bills.

Most insurers aren’t advertising the ObamaCare taxes that are added on to premiums, opting instead to discretely pass them on to customers while quietly lobbying lawmakers for a break.

But one insurance company, Blue Cross Blue Shield of Alabama, laid bare the taxes on its bills with a separate line item for “Affordable Care Act Fees and Taxes.”

  • The new taxes on one customer’s bill added up to $23.14 a month, or $277.68 annually, according to Kaiser Health News. It boosted the monthly premium from $322.26 to $345.40 for that individual.
  • The new taxes and fees include a 2 percent levy on every health plan, which is expected to net about $8 billion for the government in 2014 and increase to $14.3 billion in 2018.
  • There’s also a $2 fee per policy that goes into a new medical-research trust fund called the Patient Centered Outcomes Research Institute.
  • Insurers pay a 3.5 percent user fee to sell medical plans on the HealthCare.gov Web site.

ObamaCare supporters argue that federal subsidies for many low-income Americans will not only cover the taxes, but pay a big chunk of the premiums.

But ObamaCare taxes don’t stop with health-plan premiums.

  • Americans also will pay hidden taxes, such as the 2.3 percent medical-device tax that will inflate the cost of items such as pacemakers, stents and prosthetic limbs.
  • Those with high out-of-pocket medical expenses also will get smaller income-tax deductions.
  • Americans are currently allowed to deduct expenses that exceed 7.5 percent of their annual income. The threshold jumps to 10 percent under ObamaCare, costing taxpayers about $15 billion over 10 years.

Then there’s the new Medicare tax.

  • Under ObamaCare, individual tax filers earning more than $200,000 and families earning more than $250,000 will pay an added 0.9 percent Medicare surtax on top of the existing 1.45 percent Medicare payroll tax.
  • They’ll also pay an extra 3.8 percent Medicare tax on unearned income, such as investment dividends, rental income and capital gains.

Modified from a NewYorkPost.com article

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Are they signing up for Obamacare, or for Medicaid (MediCal)?

How many people have tried to sign up for Obamacare? How many have completed the process? Those numbers are important, but let’s keep something else in mind here — there’s another important number that a lot of publications are failing to separate out. That is, how many people are enrolling in the private insurance plans within the Obamacare exchanges — as opposed to those applying who report very low incomes and get steered into the Medicaid program?

  • In terms of getting more people insured, it might seem like a minor detail. But the private insurance exchanges, a centerpiece of Obamacare, need a very large number of people to sign up if they are to be viable insurance pools. By the Obama administration’s estimate, they need about 7 million people to sign up for the exchanges nationwide. (They also estimate they need 2.7 million of those to be young/healthy types, a separate but related issue.) There is a separate goal of enrolling another 8 million poor people in Medicaid.
  • Yesterday, The Washington Post suggested that at least 185,000 people have signed up for Obamacare:. That sounds promising for the program even if it’s still well short of the pace needed to meet the goals. And then Oregon has just reported 56,000 enrollments. So isn’t everything going just fine?
  • In fact, no. When you see state enrollment numbers, you have to ask yourself this question: How many of those people are actually becoming Obamacare private insurance exchange customers, as opposed to people who (1) were always eligible but are just signing up for Medicaid for the first time, and (2) people who are newly eligible for Medicaid under the expanded coverage thresholds in some states?
  • In Oregon, that 56,000 number you’re hearing today is all Medicaid. Their online exchange doesn’t even work yet. Something similar is happening in many other states as well. Minnesota, for example, said it had 3,800 applicants. But when you scratch the surface, only 406 of these are Obamacare exchange applicants — again, most of the signups were low-income customers who were steered to Medicaid instead.  
  • California, has put 600,000 new people on Medicaid, but their last hard number of actual, completed applications for the exchanges was under 17,000. That’s over a week old, but I’m still skeptical when I see them say that 100,000 “are in some stage of applying for insurance on the marketplaces.” Why all those weasel words? Have those people completed applications — in which case California is doing great — or have they merely entered their zip code and started looking at plans? California may not release any reliable numbers on their exchange enrollment until next year.
  • Are these numbers going to add up to viable health insurance exchanges? A very sober assessment yesterday on the Corner, noting among other things that the slow trickle of signups, from the insurers’ perspective, is a true nightmare and even worse than if no one was signing up at all. If only “highly motivated consumers” are spending the hours it takes to get through right now, the exchanges are filling up with the people most likely to be very sick or old.

*Modified from a conservativeintel.com article

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What Does New Health Law Mean For Me?

Beginning today October 1st, individuals will begin selecting health insurance plans that will become effective January 1, 2014. These are some questions and answers to clarify the process. 

I already have health coverage at my job. What happens to me?

  • Changes may not affect you much if you’re one of the 171 million Americans with coverage through your job or your spouse’s job. You might be able to use new health-insurance exchanges opening Tuesday, but you probably wouldn’t be eligible for a subsidy.

I heard some companies that offer health coverage are making changes—is that true?

  • Yes. The law already mandates allowing people to keep children on their plans up to age 26. Plans with very limited benefits offered by some companies—particularly in retail, restaurants and agriculture—are generally being phased out. A few firms are giving workers a fixed sum and letting them choose their own plan from what’s called a private exchange. This isn’t the same as the health law’s exchange.

I’ve been buying my own health coverage. What now?

  • On Tuesday, you’ll see new private insurance plans through insurance exchanges in most parts of the country. Singles making less than $46,000 a year, couples making less than $62,000 and families with slightly higher income levels may be eligible for subsidies to pay for coverage.

What kinds of policies are they selling on these exchanges?

  • Policies must cover certain preventive care and can’t have lifetime caps. Also, your premium won’t be based on your medical history—good news if you’ve been sick. Healthy people who previously could buy inexpensive policies may pay more. Plans are labeled gold, silver or bronze depending on how much they cover.

Do I get to keep my doctor?

  • If you’re buying a new policy on an exchange or switching insurers, you’ll likely find they have different networks of providers. Some of the lowest-priced policies are likely to have smaller networks.

What if I’ve been going without coverage?

  • Some of the 46 million uninsured Americans may be subject to a penalty starting at $95 next year if they don’t have coverage starting Jan. 1. You can go to the new insurance exchanges to shop for plans, or if your income is below 138% of the federal poverty level, you may qualify for Medicaid, depending on your state.

Those of us on Medicare?

  • If you’re one of 49 million in the Medicare program, with or without a supplemental insurance plan, you’ll continue to enroll the same way. The law cuts spending by billions of dollars over a decade—largely by reducing payments to hospitals and doctors and increasing incentives for more-efficient care—but it doesn’t directly affect benefits. Supporters say this will strengthen Medicare. Opponents say seniors will find it harder to access their benefits if providers are squeezed.

*Modified from a WSJ.com article

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Price, Price, Price: Health-Insurance Shoppers Have Priorities

The federal health overhaul’s big requirement that most people carry health insurance is still months away, but already insurers like Blue Cross & Blue Shield have a sense of what will matter most to consumers: price.

  • “To me, it’s all about money,” said Rob Roy, who compared plans in a consumer test for the insurer. Currently uninsured and working as a cook in a pub, Mr. Roy said he found the choices too expensive. He ended up opting for a competitor’s plan instead of Blue Cross.

To figure out who’s going to show up for the new marketplaces and what they want, companies have plunged into research. They have been setting up simulated exchanges for consumers to test-drive. WellPoint Inc., the insurer that may end up with the biggest presence on the exchanges nationally, has put about 55,000 people through these faux exchanges.

“You’re going to try to have a population of individuals who have never purchased this product,” said Raymond Smithberger, who oversees individual health plans at Cigna Corp. “It’s like buying a brand-new car if you’ve never driven before.” Cigna used the online simulations to help decide which state exchanges it would join, and to shape some elements of its coverage design.

  • Simulations by firms like Stonegate Advisors LLC, which conducted the insurer’s test-drive, have found that consumers often choose plans fairly quickly, without always looking in-depth at the benefit details. People with more health problems wanted richer coverage so they wouldn’t have to pay much to go to the hospital or doctor’s office.
  • Still, the focus on price, including the effect of subsidies, is a constant. Consulting firm Booz & Co.’s pretend exchanges showed that premiums were the most important factor in plan selection, followed by cost-sharing features like deductibles. McKinsey & Co., which tested about 150,000 consumers, found most would opt for smaller arrays of doctors and hospitals to achieve discounts.
  • “People were willing to trade off network access for price,” said Shubham Singhal, a McKinsey director who leads the firm’s health-care practice.
  • Blue Cross found the monthly premium was the most important thing for 48% of people, and one of the most important things for another 26%. It dwarfed other factors like prescription-drug coverage and copayments for doctor visits.
  • Blue Cross sponsored the simulated exchange last fall to get “a real-life glimpse into how people will behave,” said Jim Gallagher, the insurer’s vice president of marketing. The company tested around 500 people, but it struggled to enlist Hispanics, a key demographic; only four completed a Spanish-language version of the simulation.
  • On average, people spent just nine minutes on the process. And less than a third tried to access the definitions of key terms like “deductible.” That may raise concerns that they didn’t fully understand details of the plans, and insurers will need to help educate them, said Marc Pierce, president of Stonegate Advisors.
  • “I found it very difficult to compare the different options,” said Elise Loftis, who said she would want to seek advice from an agent. She wanted to know what the plans would cover in hospital costs. Her husband has had his hips replaced, which resulted in an infection and a second hospital stay, and the couple has a 3-year-old son. She chose a Blue Cross plan in the test.
  • The research is shaping Blue Cross’s decisions. The company is initially selling a “tiered” plan that requires consumers to pay more to see certain health-care providers, and next year it will roll out a new design with a smaller network, both approaches that can hold costs down.
  • As in the real exchanges, people had to enter income information to learn what federal subsidy they might get. Then they were shown tiers of plans, ranked as bronze through platinum, with platinum the richest and most expensive. They could also choose from three different insurers, and click to figure out details like deductibles.
  • Forty-one percent of the consumers said they would sacrifice a broad choice of doctors and hospitals in order to save money, even if their own doctor might not be in the plan’s network. Overall, Blue Cross plans were chosen by nearly 60%.
  • The insurer also isn’t offering any platinum plans to consumers, partly because the simulation showed they tended to draw people with significant health needs, a particular concern if it’s the only competitor with a platinum product.

A new, broad Blue Cross marketing campaign boasts of features it hopes will be inviting to consumers, like doctor ratings. Another ad focuses on the idea that consumers can get a refund the following year if they don’t use enough services to get through their deductibles—a design that tends to reward healthier people as well as encourage people to stick with Blue Cross.

*Modified from a WSJ.com article

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The Coming ObamaCare Shock

Millions of Americans will pay more for health insurance, lose their coverage, or have their hours of work cut back.

In recent weeks, there have been increasing expressions of concern from surprising quarters about the implementation of ObamaCare. Montana Sen. Max Baucus, a Democrat, called it a “train wreck.” A Democratic colleague, West Virginia’s Sen. Jay Rockefeller, described the massive Affordable Care Act as “beyond comprehension.” Henry Chao, the government’s chief technical officer in charge of putting in place the insurance exchanges mandated by the law, was quoted in the Congressional Quarterly as saying “I’m pretty nervous . . . Let’s just make sure it’s not a third-world experience.”

These individuals are worried for good reason. The unpopular health-care law’s rollout is going to be rough. It will also administer several price (and other) shocks to tens of millions of Americans.

  • Start with people who have individual and small-group health insurance. These policies are most affected by ObamaCare’s community-rating regulations, which require insurers to accept everyone but limit or ban them from varying premiums based on age or health. The law also mandates “essential” benefits that are far more generous than those currently offered.
  • Single adults age 21-29 earning 300% to 400% of the federal poverty level will be hit with an increase of 46% even after premium assistance from tax credits.
  • Six million of the 19 million people with individual health policies are going to have to pay more—and this even after accounting for the government subsidies offered under the law.
  • In total, it appears that there will be 30 million to 40 million people damaged in some fashion by the Affordable Care Act—more than one in 10 Americans.

Determining the number of individuals who will be harmed by changes to the small-group insurance market is harder. According to the Medical Expenditure Panel Survey, conducted by the Department of Health and Human Services, around 30 million Americans work in firms with fewer than 50 employees, and so are potentially affected by the small-group “reforms” imposed by ObamaCare.

Around nine million of these people, plus six million family members, are covered by employers who do not self-insure. The premium increases for this group will be less on average than those for people in the individual market but will still be substantial.

  • According to analyses conducted by the insurer WellPoint for 11 states, small-group premiums are expected to increase by 13%-23% on average.

While some firms (primarily those that employ older or sicker workers) will see premium decreases due to community rating, firms with younger, healthier workers will see very large increases: 89% in Missouri, 91% in Indiana and 101% in Nevada.

Because the government subsidies to purchasers of health insurance in the small-group market are significantly smaller than those in the individual market, I estimate that another 10 million people, the approximately two-thirds of the market that is low- or average-risk, will see higher insurance bills for 2014.

Higher premiums are just the beginning, because virtually all existing policies in the individual market and the vast majority in the small-group market do not cover all of the “essential” benefits mandated by the law. Policies without premium increases will have to change, probably by shifting to more restrictive networks of doctors and hospitals. Even if only one third of these policies are affected, this amounts to more than five million people.

In addition, according to Congressional Budget Office projections in July and September 2012, three million people will lose their insurance altogether in 2014 due to the law, and six million will have to pay the individual-mandate tax penalty in 2016 because they don’t want or won’t be able to afford coverage, even with the subsidies.

None of this counts the people whose employment opportunities will suffer because of disincentives under ObamaCare. Some, whose employers have to pay a tax penalty because their policies do not carry sufficiently generous insurance, will see their wages fall. Others will lose their jobs or see their hours reduced.

Anecdotal evidence already suggests that these disincentives will really matter in the job market, as full-time jobs are converted to part time. Why would employers do this? Because they aren’t subject to a tax penalty for employees who work less than 30 hours per week.

There is some debate over how large these effects will be, and how long they will take to manifest. However, the Bureau of Labor Statistics reports on a category of workers who will almost surely be involuntarily underemployed as a result of health reform: the 10 million part-timers who now work 30-34 hours per week.

These workers are particularly vulnerable. Reducing their hours to 29 avoids the employer tax penalty, with relatively little disruption to the workplace. Fewer than one million of them, according to calculations based on the Medical Expenditure Panel Survey, get covered by ObamaCare-compliant insurance from their employer.

When that reality becomes clearer, the law is going to start losing its friends in the media, who are inclined to support the president and his initiatives. We’ll hear about innocent victims who saw their premiums skyrocket, who were barred from seeing their usual doctor, who had their hours cut or lost their insurance entirely—all thanks to the faceless bureaucracy administering a federal law.

The allure of the David-versus-Goliath narrative is likely to prove irresistible to the media, raising the pressure on Washington to repeal or dramatically modify the law. With the implementation of ObamaCare beginning to take full force at the end of the year, there will be plenty of time before the 2014 midterm elections for Congress to consider its options.

For those like Health and Human Services Secretary Kathleen Sebelius, who told a gathering a few weeks ago at the Harvard School of Public Health that she has been “surprised” by the political wrangling caused so far by ObamaCare, there are likely to be plenty of surprises ahead.

*Modified from a WSJ article by Daniel Kessler

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