Part of President Barack Obama’s health care law, the program is in limbo as a congressional debt panel searches for budget savings and behind the scenes, administration officials scramble to find a viable financing formula.

A longstanding priority of the late Sen. Edward M. Kennedy, D-Mass., the Community Living Assistance Services and Supports program, or CLASS, was spliced into the health care law despite nagging budget worries. Administration emails and documents reveal that alarms were sounded earlier and more widely than previously thought. Congressional Republicans seeking repeal of the program provided the materials to The Associated Press.

“Seems like a recipe for disaster to me,” William Marton, a senior aging policy official in the administration, wrote in an October 2009 email. Marton explained his concern that large numbers of healthy people would not willingly sign up for CLASS, creating a predicament in which soaring premiums for a smaller group of frail beneficiaries would destabilize the program.

Read the rest of the column at the Associated Press

By John Goodman – I’ve been through this three times. You’d think that someone would notice a pattern. Learn lessons. Avoid repeating dumb mistakes. Alas, it was not to be.

First there was the Medicare Catastrophic Care Act of 1988. A drug benefit added to Medicare was passed one year and repealed the next. It was the first repeal of a major federal welfare program in 100 years. Grass-roots negative reaction was so intense that House Ways and Means Chairman, Dan Rostenkowski, was chased down the streets of Chicago by angry senior citizens. Then there was HillaryCare. After working for a year, the designers of this plan met ignoble defeat. There was never a hearing. Not even a vote. And now there is ObamaCare.

In all these cases, politicians and special interests met behind closed doors to carve up huge chunks of the medical marketplace. They then emerged and announced their plan to push everyone around and tell them what to do in the most intimate and personal aspects of their lives. In all three cases, the voters replied “no.” 

The reaction of nonseniors to the latest reform is easy to understand. How many times did Barack Obama say, “If you like the health plan you are in, you can keep it”? Inside the Beltway, I’m sure no one bothered to count. They weren’t listening anyway. That’s because no one in Washington — whether Republican or Democrat, man or woman, old or young, tall or short, fat or thin — no one took this promise seriously from the get-go.

But out in the Hinterland, people did take it seriously. And when it was obvious that the promise was not going to be kept and that no one who voted for ObamaCare could explain why the promise was not being kept, the negative reaction was palpable. Adding to the understandable fear and anxiety was a threat by McDonald’s to abolish health insurance for 30,000 employees and 3M’s announcement that it would end coverage for its retirees.

Folks, this is only the beginning. Over the next two years, many more people will get hit with similar unpleasant surprises. In an earlier Health Alert, I predicted that this election would not go well for people who devised the Affordable Care Act (ACA). If this Rube Goldberg contraption is not opened up and seriously repaired, we will have another election in 2012 just like this one.

As for seniors, this is all a no-brainer. For every $1 of benefits under the new bill, they will bear $10 of cost. As Joe Newhouse explained in Health Affairs, by the end of the decade their access to care will be worse than low-income families on Medicaid. (See the very excellent chart prepared by the Office of the Medicare Actuary.) Not only will seniors have to turn to community health centers and safety net hospitals for their care, they will be the least preferred patients in the waiting lines.

Read the rest of the column

From the Washington Examiner

Six months ago, President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi rammed Obamacare down the throats of an unwilling American public. Half a year removed from the unprecedented legislative chicanery and backroom dealing that characterized the bill’s passage, we know much more about the bill than we did then. A few of the revelations:

» Obamacare won’t decrease health care costs for the government. According to Medicare’s actuary, it will increase costs. The same is likely to happen for privately funded health care.

» As written, Obamacare covers elective abortions, contrary to Obama’s promise that it wouldn’t. This means that tax dollars will be used to pay for a procedure millions of Americans across the political spectrum view as immoral. Supposedly, the Department of Health and Human Services will bar abortion coverage with new regulations but these will likely be tied up for years in litigation, and in the end may not survive the court challenge.

» Obamacare won’t allow employees or most small businesses to keep the coverage they have and like. By Obama’s estimates, as many as 69 percent of employees, 80 percent of small businesses, and 64 percent of large businesses will be forced to change coverage, probably to more expensive plans.

» Obamacare will increase insurance premiums — in some places, it already has. Insurers, suddenly forced to cover clients’ children until age 26, have little choice but to raise premiums, and they attribute to Obamacare’s mandates a 1 to 9 percent increase. Obama’s only method of preventing massive rate increases so far has been to threaten insurers.

» Obamacare will force seasonal employers — especially the ski and amusement park industries — to pay huge fines, cut hours, or lay off employees.

» Obamacare forces states to guarantee not only payment but also treatment for indigent Medicaid patients. With many doctors now refusing to take Medicaid (because they lose money doing so), cash-strapped states could be sued and ordered to increase reimbursement rates beyond their means.

» Obamacare imposes a huge nonmedical tax compliance burden on small business. It will require them to mail IRS 1099 tax forms to every vendor from whom they make purchases of more than $600 in a year, with duplicate forms going to the Internal Revenue Service. Like so much else in the 2,500-page bill, our senators and representatives were apparently unaware of this when they passed the measure.

» Obamacare allows the IRS to confiscate part or all of your tax refund if you do not purchase a qualified insurance plan. The bill funds 16,000 new IRS agents to make sure Americans stay in line.

If you wonder why so many American voters are angry, and no longer give Obama the benefit of the doubt on a variety of issues, you need look no further than Obamacare, whose birthday gift to America might just be a GOP congressional majority.

Rick Foster is the Chief Actuary of Medicare, and his office has just released a devastating critique of the Administration’s health reform law.

Before getting to details, let me say there is nothing in the report that is surprising to independent health economists. The conclusions are consistent with everything The Lewin Group and other private estimates have been saying for months. What is surprising is that one of the most respected agencies of the U.S. government is completely undermining the Alice-in-Wonderland fables being spun by the White House, on Capitol Hill and in the mainstream media. To wit:

• You cannot take close to one trillion dollars away from one group of people and spend it on another group of people and somehow leave those footing the bill better off.
• You cannot give millions of people large increases in medical care without creating any new doctors, new nurses or other paramedical personnel.
• You cannot arbitrarily reduce what you are paying providers by billions of dollars and still expect to get the same quantity and quality of care.
• You cannot give millions of patients and thousands of doctors new incentives to waste medical resources and then expect health care spending to go down.

In other words, the Chief Actuary is simply saying reality is reality. Economics is economics. A is A.

 

Convenient summaries of the Actuary’s report have been produced by the Republican staff of the House Ways and Means Committee and by the Senate Republican Policy Committee. Although these are partisan groups, the summaries appear to be quite faithful to the source. Here are the salient findings (with page numbers in the Actuary’s report):

• Health care costs will go up, not down. National health expenditures will increase from 17 percent of GDP now to 21 percent under the new law and will be higher than without the legislation. [Page 4] Net federal spending on health care will also increase.
• Health care shortages are “plausible and even probable.” Because of the increased demand for health care, “supply constraints might initially interfere with providing the services desired by the additional 34 million insured persons.” [Page 20]
• 14 million employees will lose their employer coverage. Employees of small firms are especially at risk (despite small employer tax credit subsidies). [Page 7]
• 2 million employees who lose coverage will have to enroll in Medicaid. [Page 3]
• A Medicaid insurance card is not a guarantee of care. An estimated 18 million people will be added to Medicaid. [Page 3] However, because there is no corresponding increase in the supply of caregivers, “it is reasonable to expect that a significant portion of the increased demand for Medicaid would be difficult to meet, particularly over the first few years.” [Page 20]
• One in ten insured workers will see their health benefits taxed. By 2019, more than 10% of insured workers will “be in employer plans with benefit values in excess of the thresholds (before changes to reduce benefits) and this percentage would increase rapidly thereafter.” [Page 13]
• Higher taxes will lead to higher premiums. The new taxes on medical devices, prescription drugs, and insurance plans “would generally be passed on through to health consumers in the form of higher drug and device prices and higher insurance premiums.” [Page 17]
• There are more than one-half trillion in Medicare cuts. The new health law cuts “$575 billion” from Medicare. [Page 4]
• Medicare cuts would threaten almost one in every seven hospitals. About “15 percent of Part A providers would become unprofitable within the 10-year projection period.” [Page 10]
• Overall access to care for seniors would go down. Because of the law’s payment reductions, “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program. [Page 10]
• 7.4 million people will lose access to Medicare Advantage plans. Enrollment in MA plans will be cut in half (from its projected level of 14.8 million under the current law to 7.4 million under the new law). [Page 11]
• False advertising: The new “Medicare Tax” doesn’t go to Medicare. “Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds.” [Page 9]
• False advertising: Budgetary double-counting does not improve Medicare’s solvency. Medicare cuts “cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the [life of the Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.” [Page 9]
• The new long-term care insurance plan (CLASS Act) is unsound. The program faces “a significant risk of failure” because the high costs will attract sicker people and lead to low participation. [Page 15]
• The promise to those with pre-existing conditions is unfunded. “By 2011 and 2012 the initial $5 billion in Federal funding for [high risk pools] would be exhausted, resulting in substantial premium increases to sustain the program.” [Page 16]
• The law does almost nothing to limit actual fraud and abuse. The fraud provisions in the law will save only about two percent of $47 billion in suspect claims.

President Barack Obama’s new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% “Medicare tax” on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.

The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.

It won’t work. It never works.

The maximum tax rate fell to 28% in 1988-90 from 50% in 1986, yet individual income tax receipts rose to 8.3% of GDP in 1989 from 7.9% in 1986. The top tax rate rose to 31% in 1991 and revenue fell to 7.6% of GDP in 1992. The top tax rate was increased to 39.6% in 1993, along with numerous major revenue enhancers such as raising the taxable portion of Social Security to 85% of benefits from 50% for seniors who saved or kept working. Yet individual tax revenues were only 7.8% of GDP in 1993, 8.1% in 1994, and did not get back to the 1989 level until 1995.

Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn.

Read the rest of the column.

By William Tucer.  Two weeks ago we smashed the side view mirror on our car and had to take it to the shop. We paid $250 for a replacement.

This week I went to my dermatologist to see if I had developed any more skin cancers (red hair and all that). The doctor took a biopsy on one spot and sent if off to the lab. If it’s malignant, I’ll have to go back and have a bigger chunk of my cheek removed. The cost of all this? Zero.

This simple comparison illustrates why healthcare “reform,” as Congress has just adopted it, will probably bankrupt the country.

As far as auto insurance is concerned, we have it like almost everyone else. It covers major damage. A year ago I was in a fender-bender. The insurance paid a small portion of the repairs. Several years ago, we bought my son a car and — typically — he nearly totaled it within a week. The insurance company paid an astounding $8,000 in repairs but our premiums tripled and we spent several years paying the penalty. That’s what “underwriting” is about. After one accident you get moved into a higher risk category. It’s what you might call a “pre-existing condition.”

At the auto shop, the mechanics have high school backgrounds with two or three years of on-the-job training and use basic hydraulic lifts and wrenches. I pay them $250 for parts and an hour of labor. At the doctor’s office, the person who serves me has done four years of medical school plus another three or four years of hospital residency and uses sophisticated equipment. The lab that does the biopsy will have the latest technology. Yet because I have a part-time job with a major employer, I receive union “health benefits” that pay for everything. I would be happy to pay $80-100 for my visits to the dermatologist. After all, I pay a plumber $50 just to come to my house and look at my leaking sink. But because politicians like Nancy Pelosi have convinced people that even a $20 co-payment is an “insurance company rip-off,” I get my medical services for free.

Not that I am unaware of the dangers of falling out of this system and going uninsured. A few years ago I didn’t have coverage and was paying $500 apiece for these minor office procedures.       

As John Goodman and Robert Musgrave wrote in their brilliant analysis, Patient Power (written in 1994 and still the best critique around), what we are calling “health insurance” is not insurance at all. It is prepaid medical benefits. Insurance is a way of pooling the risk for major expenses — the kind you incur when you have an auto accident or suffer a serious illness. Prepaid benefit plans try to cover all medical expenses, no matter how small.

No insurance company could possibly provide auto insurance that paid the bills every time you changed a tire. The premiums would be impossibly expensive and people would abuse the system, running to the auto shop every time they felt they needed new windshield wipers or suffered a dent in their bumper. Likewise, no insurance company offers policies with 100 percent coverage of all medical bills. The premiums would be impossibly expensive and people would run to the doctor every time they had a sniffle or suffered a cut finger.

Instead, prepaid benefits plans were pioneered by the major corporations and their labor unions, plus federal, state and local governments and their labor unions, which are now the majority of union members and one of the principle players in this melodrama. Taking advantage of an IRS ruling that health and retirement benefits could not be taxed as income, major corporations and governments began funneling tax-free dollars to their employees as “greater take-home pay.” Instead of income, employees got first-dollar coverage of all medical bills with no co-payments and no deductibles. In other words, medical care was “free.” And of course people began to treat it that way. Writing in 1994, Goodman and Musgrave argued that it was all these people flooding into the system with cost-free health benefits that was driving up medical prices.

What corporations, governments and their unions had created was a mini-welfare state. We all know what happens to welfare states. When General Motors went under this year, it was lamenting that every car that came off the line had $1,500 in employee and retiree health benefits on board. When President Clinton tried to “reform” healthcare in the 1990s, one of the central initiatives was that the bloated healthcare commitments made by major corporations would be off-loaded onto the government.

Practically every state and local government in the country has the same unfunded employee pension and health benefits threatening them with bankruptcy. Medicaid is working the same way and now consumes 25 percent of state budgets. And of course the granddaddy of all is Medicare, which now has unfunded liabilities of $90 trillion over the next seventy years and will only be payable if the dollar loses about 80 percent of its value.

So what has Congress decided to do in order to “reform” this system? Instead of getting a grip benefits and substituting a policy of health insurance, the Democrats have decided to extend the same unrealistic benefits to everybody.

Read the rest of the column.

The Congressional Budget Office late Friday released some new figures pertaining to the health care reform bill that suggest Democrats were able to dodge creating a deficit by removing a section of the legislation that they will have to pass later.

The $940 billion health care bill excludes a provision that would prevent automatic, steep cuts in payments to doctors who treat Medicare patients. Such a provision would cost $208 billion over the next decade and if it were included in the Democratic health care plan, would end up increasing the deficit by $59 billion over ten years.

Democrats left the provision out of the health care bill in order to keep the plan from costing money instead of saving money. As currently written, the bill would save $138 billion over the first ten years, the CBO determined.

But Republicans argue this does not provide a true cost for the bill, since everyone knows the costly “doc fix” will have to be paid for somehow.

Rep. Paul Ryan, R-Wis., who is the top Republican on the House Budget Committee, sent a request to the CBO to provide the cost of the bill that includes the fix. Ryan asked the CBO to produce cost estimates for other scenarios as well, including one in which Congress fails to implement an excise tax on expensive insurance plans or create a special Medicare advisory panel aimed at cutting the programs costs. These scenarios would also produce a deficit, the CBO found.