Medicaid
Not As Advertised
Now that health care bills have passed in both the House and the Senate, Democrats just can’t seem to stop themselves from rhetorical excess. Just before Christmas, as the bill sponsored by Majority Leader Harry Reid was clearing its final hurdles in the Senate, Democrats took to the chamber floor and cable television shows to trumpet the “historic” nature of the legislation they were about to vote on — legislation that would, at long last, move toward their long-sought goals of “universality” and a government-guaranteed right to health care.
But is it so?
Yes, both the House and Senate would provide essentially free health insurance, through the Medicaid program, to many millions of low-income people. But, even so, enrollment in Medicaid is a far cry from getting good care when it’s needed. For starters, about 40 percent of the nation’s physicians don’t see Medicaid patients because the payment rates are too low, which also means certain hospitals have very low rates of Medicaid admissions. The truth is that current Medicaid enrollees already have trouble getting access to high-quality care when they need it because the network of providers willing and able to see them is constrained and over-burdened. The House and Senate bills would add 15 million or more people to this program’s rolls without any guarantee whatsoever that there will be doctors and hospitals that can see them.
Ironically, the very Democrats who most frequently tout “universality” as the goal are also the ones who ensure it will never actually come about by insisting that America’s lower-income families enroll in government-run insurance — with no other options.
Beyond the Medicaid expansion, Obamacare is really an obligation, not a right. Every citizen would be required to sign up with a government-approved health-insurance plan or pay a tax penalty for going without coverage. According to the Lewin Group, households with at least one uninsured member and an income between $50,000 and $75,000 per year would see their costs rise for health care by $2,133 under the Senate bill. “A new tax on the uninsured” isn’t exactly a catchy slogan for Obamacare — but that’s essentially what it is. There would be a lavish new entitlement program to offset some of the premium for some households, but the vast majority of working Americans would get no additional help. They would just get the unfunded mandate, and that’s it.
Meanwhile, despite all of the talk of painlessly slowing the pace of rising costs with more efficient care, the Democrats’ bills would cut costs mainly by imposing arbitrary rate reductions in the Medicare program — pushing it more and more toward the Medicaid model. In fact, at the end of December, the Mayo Clinic announced that it would no longer see Medicare patients at one of its clinics in Arizona because the program’s payment rates are simply too low to cover its costs. A small glimpse into our Obamacare future.
In the coming days and weeks, we will hear a great deal more about how close the nation is to making history. Readily available health care for all, without limit — that’s what the overheated rhetoric will imply. But the public figured out months ago that the reality under Obamacare would be very different. There would be higher costs, higher taxes, and more regulation. Worst of all, clumsy governmental “cost-control” efforts would put the quality of American medicine at risk for everyone. Which is why public sentiment has hardened in opposition, and why the debate is not over yet.
posted by James C. Capretta | 7:51 pm
Tags: Obamacare, Medicaid, Medicare, Harry Reid
File As: Health Care
The Insanity of the House Bill
At the beginning of this year, there was great hope in some circles that Congress would enact significant health-care reform that would address the central, vexing problem of today’s arrangements, which is rapidly escalating costs. That hope has waned considerably as the Democrats controlling the process have made a series of decisions revealing that their only real ambition is to get to a signing ceremony for something called “universal coverage.”
Still, there have been some true believers in the business, health, and policy communities who have thought it better to keep their powder dry and not criticize the emerging legislation based on the hope that some level of constructive engagement might improve matters. Fat chance. The bill unveiled today by House Speaker Nancy Pelosi should put to rest for good the thought that this year’s legislative process will produce anything other than a total fiscal and health policy disaster.
To sum it up, the House bill is nothing but a massive, uncontrolled federal entitlement expansion — at a time when the central, looming threat to the nation’s long-term prosperity is the unaffordable health-care entitlements already on the federal books. To create the impression of fiscal responsibility, the bill is jury-rigged with budget gimmicks, implausible eligibility rules, and arbitrary, government-dictated price controls — that have been tried repeatedly without success — to make it look like it costs “only” $900 billion over a decade.
Let’s start with the much ballyhooed effort to bring the costs of the bill down from the $1.5 trillion budget-buster which was introduced by House leaders in July. There are two significant changes from that earlier version. First, the bill simply drops altogether the repeal of the so-called “sustainable growth rate,” or SGR, formula. The SGR, ironically, is a product of just the kind of central planning that is at the heart of Obamacare. It was designed by the Medicare bureaucracy to control costs, but all it has done is cut doctors’ fees while volume soars. The scheduled cut in 2010 is for more than 20 percent. Everyone knows it must be fixed, but the full, ten-year costs of repeal approaches $250 billion. The Democratic solution? Repeal it separately from Obamacare — and borrow more. Presto. The House bill now “costs less.” The Congressional Budget Office (CBO) projects that the Obama budget will push the nation’s debt to more than $17 trillion in 2019, up from $5.8 trillion at the end of 2008. It’s only a matter of time before that level of borrowing precipitates a crisis. The last thing our country needs is more unfinanced Medicare spending.
The second major change is a massive expansion of Medicaid, raising the upper income cutoff from 133 percent of the federal poverty line in the July bill to 150 percent in today’s version. According to CBO’s estimate of the plan released today, the total, ten-year cost of the higher Medicaid enrollment will be $425 billion. By 2019, some 50 million Americans will be enrolled in the program (and its companion program for children’s coverage), compared to 35 million under current law. Even before this massive expansion, CBO projected that the combined costs for Medicare and Medicaid would increase from 5.3 percent of GDP in 2009 to 9.7 percent in 2035. Adding more enrollment to Medicaid will only make matters much worse. Indeed, CBO acknowledges that the additional spending on Medicaid in the House bill is likely to increase at an annual rate of about 8 percent indefinitely. That’s not surprising. Medicaid spending has been escalating rapidly for nearly half a century, and the House bill does nothing to change the trajectory. It is true that Medicaid expansions appear to cost less than private insurance coverage, but that’s only because Medicaid shifts costs to private payers by underpaying doctors and hospitals.
Still, CBO’s cost estimate shows neutrality, at least on paper. How? There’s a new, nearly $500 billion income-tax increase, aimed at high-income households. Of course, many of these households own businesses, and so the Democrats are planning a heavy new tax on just the individuals who may be in a position to do some hiring in a recession.
Then there are the payment-rate reductions in Medicare and Medicaid, totaling more than $400 billion over a decade. The president and many other Democrats have claimed for months that they were going to make health-care delivery more efficient, thus painlessly finding new money to pay for more coverage. Nothing of the kind is in the House bill. Instead, there are scores of provisions that are essentially more of the same price-setting payment regulations that have failed so miserably in the past. They get scored by CBO, but that doesn’t mean they will happen. In fact, they have been tried countless times over the past quarter century, and have never worked to permanently slow the pace of rising costs. All they ever really do is shift more costs onto middle-class enrollees in private insurance.
There’s much else in this bill that would do great damage to the health sector and the American economy. Heavy payroll taxes that will reduce low-wage employment. Mandates on employers that will drive up costs and reduce wages. Intrusive federal bureaucracies that will come between patients and doctors. They can do a lot of damage in nearly 2,000 pages.
Fortunately, there remains one very powerful opponent to what House and Senate Democrats are considering — the public. Most Americans want no part of this massive liberal overreach. And there’s still time to put a halt to the madness. But the window is closing.
posted by James C. Capretta | 6:28 pm
Tags: Obamacare, Nancy Pelosi, House bill, Medicare, Medicaid, tax increase, small businesses
File As: Health Care
Senate Democrats Opt for Regressive Mandates
President Obama and his congressional allies greeted the Congressional Budget Office’s latest estimates of the Kennedy-Dodd legislation with great enthusiasm. The cost had come down, we were told, even as more people would get covered.
But, as others have already noted, there was an awful lot of spin in the media coverage of what CBO actually said. For starters, it’s clear the Kennedy-Dodd bill, even as amended, would still cost a fortune. CBO’s new estimate shows a ten-year cost of about $600 billion for the bill, but that estimate excludes the cost of covering Americans with incomes below 150 percent of the poverty line under Medicaid, which is not yet part of the Kennedy-Dodd draft but is central to the overall Democratic reform framework. That addition alone would add at least $500 billion to $600 billion to the tab, and perhaps much more, putting the total cost of Kennedy-Dodd, even as revised, at well over $1 trillion for the decade.
Still, CBO did say Kennedy-Dodd 2.0 would cost less than the original version. In mid-June, CBO projected that the health-insurance subsidies provided in the original bill would cost $1.279 trillion over a decade. But, in the new version of the legislation, those subsidies would cost $723 billion over ten years — or $556 billion less.
So how does the new, apparently leaner Kennedy-Dodd bill cut the subsidy costs?
Part of the answer is a scaling-back from an outlandishly expansive starting point. The original version of Kennedy-Dodd contemplated subsidizing households with incomes all the way up to 500 percent of the poverty line. Even House Democrats found that to be too much. So Kennedy-Dodd 2.0 now sets the income limit at 400 percent of poverty.
But, beyond the lower income threshold, Senate Democrats, including Finance Committee Chairman Max Baucus, have also discovered the budgetary virtues of heavy-handed government decrees. If you want to expand insurance coverage, you can simply make people sign up for a plan — whether they want to or not. And to keep costs down for the government, you subsidize only those who get insurance outside of the workplace — and then write rules that make it nearly impossible for anyone to fall into that category. Presto! Government-run health-care paid for with the hidden taxes of government mandates.
According to the Census Bureau, there are about 102 million Americans under age 65 living in households with incomes between 150 and 400 percent of the poverty line — the presumed target population for subsidized insurance in the Kennedy-Dodd bill. But CBO said only about 20 million people in 2014 would get the subsidies under the revised version of the legislation. That’s because the authors sought to create a so-called “firewall” to prevent most workers from getting insurance outside the workplace if their employer offered a plan. And, of course, the bill would also impose severe, per-worker penalties on any employer that didn’t offer approved coverage. Only workers who would have to pay more than 12.5 percent of their income for a job-based plan could opt to get their insurance through the subsidized insurance arrangements, which CBO apparently assumes will be a relatively small number of people.
What’s ironic is that mandating enrollment in job-based insurance is about the most regressive way possible to expand coverage. Despite the perceptions, employment-based health insurance is financed by workers, not firms. The premiums for coverage implicitly reduce the cash compensation workers take home. In most companies, workers pay the same implicit premium for health insurance regardless of their age or health status or salary. That means the cost of enrolling in job-based coverage falls more heavily on low-wage workers than higher-salaried employees, which is why such a large percentage of the uninsured are in households that have access to a plan but choose not to enroll.
Democrats used to be sympathetic to the financial strain these workers are under. But that was before CBO said their sympathy would be expensive. So now the emerging plan is to make tens of millions of Americans pay more than they do today for government-approved insurance organized by their employer. That’s really their only choice. If they don’t take it, they will face a large financial penalty. Great deal, huh?
Congressional Democrats are between a rock and a hard place. They desperately want to pass a bill they can label “universal coverage,” but they have no coherent plan for making health-care provision more efficient and less costly. Thus, expanding coverage with new federal subsidies for a large segment of the population in the current cost environment is prohibitively expensive. Presented with these facts, the lead Democratic Senators could have chosen to write a more sensible reform plan focused first on building a functioning marketplace in which cost-conscious consumers would drive out unnecessary costs. But, instead, they have decided to plow ahead with their “universal coverage” plan, only now they want to impose the high cost of it on struggling workers. Their only hope is that the bill will pass before the public discovers what they are up to.
posted by James C. Capretta | 5:13 pm
Tags: ObamaCare, CBO, HELP, Medicaid, projected costs, Max Baucus, mandate, universal coverage
File As: Health Care
