Freedom Line Blog

Vermont is ready to start the first state-run single-payer system in the United States. There’s just one hitch: It needs federal taxpayers to foot the bill.

A state law passed in 2011 intends to create a state-run entity that “would largely sideline the insurance industry, and instead set up a government-managed system to collect all health care fees and pay out all health care costs,” reports Fox News.

But apparently, a program whose supporters estimate will save Vermont citizens a total of $1.9 billion from 2017-19 isn’t financially viable unless taxpayers living in the other 49 states chip in.

“In order for Green Mountain Care to fully launch in 2017, the health care exchange would have to get approval from the federal government to use federal money to fund the state program,” says the report.

It’s not clear from the article whether the federal money needed comes from Obamacare insurance subsidies or Medicaid (probably the former), but either way people living outside Vermont must fund a program that won’t benefit them, so that Green Mountain residents can live in a liberal utopia.

Simply put, if a majority of Vermont voters want to have a state-run single-payer system, they should raise their own taxes to the level necessary to pay for it.

Yesterday, Noam Scheiber of the New Republic defended Obamacare’s failings as a Machiavellian way for liberals to generate public support for even more government control of health care, eventually leading to the creation of a federally-run single-payer system.

“…the law created potentially millions of hard-working Americans who will have some health insurance; just maddeningly insufficient health insurance,” writes Scheiber. “What are the chances politicians stand up and take notice when these Americans complain?”

Fear not fellow liberals, says Scheiber, Obamacare’s disastrous rollout isn’t all bad news. “When you look at the big picture, the underlying political logic is clearly toward more generous, more comprehensive insurance, the natural upshot of cataloguing the law’s shortcomings isn’t to give them less insurance… It’s to give them more.”

In other words, Obamacare can be seen as a two-step process toward a federally-controlled national health system. First, individuals and employees are severed from their current insurance plans. Then, when they see how insufficient are the subsidies in paying for the government’s mandated coverage options, people will demand more money. The end result is having the feds pick up the entire bill as governments do in countries with socialized medicine.

A messy way to get what liberals want? Yes. But it’s worth the cost to pundits like Scheiber if in the end the liberal dream of nationalized health care becomes a reality.

I’ll add an Amen to what our friend Quin Hillyer preaches at National Review Online today.

Quin writes convincingly about the opportunity Republicans have to take control of Congress by uniting behind the Obamacare alternative proposed by the House Republican Study Committee (RSC).

The short, snappy piece is worth reading in its entirety, but here I want to draw attention to two points I’m glad Quin made. First, there must be an agreement among the DC GOP leadership to adopt the RSC’s framework for reform. Doing so would commit the party to a conservative version of reform that, as Quin demonstrates, will be an easy sell during the campaign season.

Second, that this strategic decision must be joined to an equally unified agreement to abandon any version of comprehensive immigration reform this year. Just as Obamacare is an internally divisive issue among Democrats, so too is immigration reform among Republicans. In a year where Obamacare is already the dominant issue, there is no reason for Republicans to voluntarily drive a wedge between their members on immigration by reviving an issue that’s currently dead. Instead, GOP leaders should try to divide and conquer the Democrats with votes on Obamacare alternatives they can’t afford to oppose.

Conservatives at the RSC have put forward a viable plan. It’s up to GOP leaders to decide whether they want to spend 2014 defeating Democrats, or fighting their own members.

A new study by a top flight team of academic researchers destroys the Obama administration’s premise for expanding Medicaid coverage.

The report, authored by researchers at MIT, Harvard and Columbia, focuses on an Oregon experiment to expand Medicaid that predates Obamacare by about five years. The findings show that giving Medicaid to an uninsured person increases the recipient’s visits to the emergency room up to 40 percent. This “runs counter to government assumptions that the newly insured would choose lower-cost options for care, such as doctors’ offices,” says Businessweek.

Avik Roy speculates that one of the reasons for why Medicaid enrollment increases unnecessary ER visits is that many doctors are refusing to accept new Medicaid patients because the federal government pays less than private insurance for the same service. Difficulty in obtaining primary care results in using the ER as the provider of first resort.

If the Oregon study is an accurate predictor of Medicaid patient behavior under Obamacare – and there is every reason to believe it is – then federal spending is about to soar.

With Obamacare’s Medicaid expansion already enrolling 3.9 million new people, the higher costs associated with emergency room visits could balloon actual spending far above the Obama administration’s current projections.

To make matters worse, previous research from Oregon shows that moving from no insurance to Medicaid does not improve health outcomes. Instead, it shifts the cost of care from the beneficiary to the taxpayer (and the provider who either eats the diminished compensation or passes it on to other patients).

So, to recap, Obamacare’s Medicaid expansion looks very likely to increase costs while having zero impact on the health of the beneficiaries.

Let this be a confirmation that the decision by governors who chose not to expand Medicaid under Obamacare was the sensible, scientifically proven way to go.

House Republicans are getting ready to ring in the New Year by focusing on Obamacare’s security risks.

As I’ve written previously, personal information entered into an account on Healthcare.gov – the federal Obamacare insurance exchange – may not be protected from identity thieves.

Amazingly, “Under current policy, an agency within the Department of Health and Human Services is tasked with deciding whether there is a risk of harm and whether individuals need to be notified whenever a security breach occurs,” says Fox News. “Republican lawmakers argue that the notification should not be optional.

A memo authored by House Majority Leader Eric Cantor (R-VA) calls for the chamber to vote on bills that would require HHS and its affiliates to notify the public if a security breach occurs.

Democrats are crying foul, but their opposition is self-serving. The only reason not to support the change to mandatory notice is to preserve the false sense of security that no notice means that all is safe.

President Obama once promised that his is “the most transparent administration in history.” The least he could do is apply that promise to the law that bears his name.

According to management experts, there are three pretty obvious reasons why the Obama administration was ill-prepared to make Heathcare.gov work.

“The heart of the issue, many of these people say, is that Obama and his inner circle had scant executive experience prior to arriving in the West Wing, and dim appreciation of the myriad ways the federal bureaucracy can frustrate an ambitious president,” reports Politico. “And above all, they had little apparent interest in the kind of organizational and motivational concepts that typically are the preoccupation of the most celebrated modern managers.”

In other words, no one in an Obamacare leadership position had relevant experience in this area. Worse, the President himself doesn’t appear to think this glaring deficiency matters.

It’s hard to fathom how a program so central to Obama’s legacy could be quarterbacked so poorly for so long, but here we are. The President thought that simply passing Obamacare would be enough to cement his status as one of the nation’s all-time greats. But if Republicans unite around an alternative and win back Congress this year, he’ll be lucky to leave office with anything resembling a workable program.

Since President Barack Obama refuses to replace any of his political appointees responsible for the epic bureaucratic failure that is Healthcare.gov, liberal supporters of health care reform are trying to turn the crisis into a potential power grab.

“Advocates have been quietly pushing the idea of a CEO who would set marketplace rules, coordinate with insurers and state regulators on the health plans offered for sale, supervise enrollment campaigns and oversee technology,” says a Reuters report.

The move would consolidate responsibility in the hands of one person that reports directly to the White House.

In other words, it would create a “Healthcare.gov Czar,” or, to use the title preferred by FDR when naming such deputies, a dictator.

Since no such position exists in the text of Obamacare, its creation would amount to a unilateral executive action by the President. Unlike the Secretary of Health and Human Services and the Director of the Centers for Medicare and Medicaid, the proposed dictator would not be confirmed by the U.S. Senate. If created, the position would be immune from virtually any oversight from Congress.

Moreover, erecting a Healthcare.gov CEO within the confines of the White House would be a fundamental rejection of the intended operating structure of Obamacare by the very President who signed it into law.

These reasons, plus others, may explain why the White House is said not to be entertaining such a drastic break with the health law’s basic architecture. Even they fear the likely blowback from a move that further centralizes political control of the health insurance industry.

Still, the fact that Obama’s most liberal supporters are pushing this idea – including Ezekiel Emanuel and wonks at the Center for American Progress – shows that the tendency on the Left is to interpret any problem in implementation as stemming from a lack of power. The endpoint for them is a single-payer system run exclusively by the feds.

Even if this proposal goes nowhere, its currency among the liberal elite shows us where this train is heading. Better to dismantle it before it passes the point of no return.

As Americans awake from the annual Christmas spending spree, a new set of bills is coming due in January – Obamacare-related taxes and fees.

The New York Post offers a summary:

·    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

·    A $2 fee per policy that goes into a new medical research trust called the Patient Centered Outcomes Research Institute

·    Insurers pay a 3.5 percent user fee to sell medical plans on the HealthCare.gov website, which is passed onto consumers

·    A 2.3 percent medical device tax that will inflate the cost of items such as pacemakers, stents and prosthetic limbs

·    An added 0.9 percent Medicare surtax on top of the existing 1.45 percent Medicare payroll tax for families making over $200,000 and individuals making more than $250,000 annually

·    The same groups will also pay an extra 3.8 percent Medicare tax on unearned income, such as investment dividends, rental income and capital gains

The government Grinches even swiped the income tax deduction for medical expenses that exceed 7.5 percent of a person’s annual income. In 2014 it will jump to 10 percent.

‘Tis the season for a heavier tax burden.

If you’re fretting over whether to interrupt Christmas Eve activities to sign up for an Obamacare insurance plan, fear not.

“Today’s the deadline to sign up for health insurance on HealthCare.gov if you want that insurance to start by January 1st. But that’s it,” explains Ezra Klein. “If you don’t sign up today and instead sign up on Friday, or next Tuesday, your insurance will kick in a bit after January 1st. There’s no difference in premiums. There’s no difference in plans. There are no penalties.”

I bolded the last sentence to draw attention to an important piece of information often missed in the reporting about the January 1st start date. As Klein says, “The [individual] mandate only kicks in when people have a coverage gap of longer than three consecutive months during the year. That means that buying insurance any time before the end of March [i.e. the end of the open enrollment period on the exchanges] is good enough to avoid the penalty.”

The upshot: Maybe by March the federal government will have fixed all the problems with Obamacare. Maybe. For now, enjoy the Christmas season.

With the Obama administration fearing a surge of users trying to enroll in an Obamacare exchange insurance plan ahead of the midnight deadline today, government officials and IT contractors extended the cutoff over the weekend without bothering to issue a public notice.

The new deadline is midnight of Christmas Eve.

For those trying to lock-in coverage by January 1st – and thus avoid an IRS penalty – the extension is good news. But for the insurance industry, it’s another unwelcome, unaccountable administrative fiat.

“The extension, said the sources, cannot be overridden by insurance companies if they object to it,” reports National Review Online. “It is the latest of several last-minute, ad hoc rule changes issued by the administration, including last week’s announcement that individuals whose insurance plans were [canceled] may receive an exemption from the Affordable Care Act’s individual mandate.”

Until Obamacare is repealed and the federal government is divested of its power to dictate – and change – so many important terms at its whim, volatility in the health insurance market looks like it’s here to stay.

Late yesterday, the Department of Health and Human Services (HHS) announced that anyone whose individual insurance policy was cancelled due to Obamacare and now has to pay for a more expensive plan is exempt from the individual mandate until 2015.

You read that right. The individual mandate – the keystone of Obamacare’s coverage and funding structure – no longer applies to an estimated 5 million Americans.

This is HUGE. By granting this carve-out, the Obama administration has voluntarily weakened the mechanism that is supposed to guarantee insurance companies selling plans through an Obamacare exchange sufficient numbers of people to fill out their risk pools.

Now, suddenly, these companies are facing the very real possibility that millions of people will choose to hold off buying insurance until they get sick. The new exemption changes a consumer’s calculation. Prior to yesterday, all the emphasis was on signing up by the December 23rd deadline to avoid a 2014 tax penalty.

Now, for up to 5 million people, the decision point to buy insurance occurs when they get sick. Thus, insurance companies won’t get to spread the risk of illness by banking premium payments from healthy people. Many more people buying insurance going forward will need costly care the moment they sign up.

In other words, this move destroys the nature of insurance.

It’s also indefensible as a matter of justice to require the uninsured to comply with the mandate.

“Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people whose plans were cancelled more deserving of help than people who couldn’t afford a plan in the first place?” asks Ezra Klein.

As I said in my column this week, Obamacare’s failures are completely that fault of its supporters. Republicans shouldn’t help fix something that is so broken. 2014 should be the year the GOP unites around a viable alternative to replace this monstrosity after it is repealed.

The arrival of Obamacare’s ‘Pajama Boy’ ad campaign coincides with an awful truth the supporters of Big Government don’t want the young and trendy to hear.

If you haven’t yet seen the ad yet Rich Lowry has a picture and an explanation of where it fits in the Obama universe: “But it’s hard not to see Pajama Boy as an expression of the Obama vision, just like his forbear Julia, the Internet cartoon from the 2012 campaign. Pajama Boy is Julia’s little brother. She progressed through life without any significant family or community connections. He is the picture of perpetual adolescence. Neither is a symbol of self-reliant, responsible adulthood.

“And so both are ideal consumers of government. Julia needed the help of Obama-supported programs at every juncture of her life, and Pajama Boy is going to get his health insurance through Obamacare.”

They are also the cohort most likely to pay the bills for all this consumption.

“The current $17 trillion aggregate debt is largely a result of out-of-control entitlement obligations that skyrocketed over the last 20 years and largely were paid out to those over the age of 30,” writes Victor Davis Hanson.

Too bad Julia and Pajama Boy never mention that those under 30 will be the ones paying the bills for decades to come.

New regulations by the Department of Health and Human Services (HHS) say that the price of not complying with government demands to lose money will result in being kicked off Obamacare exchanges next year, reports Avik Roy.

“We are considering factoring into the [qualified health plan] renewal process, as part of the determination regarding whether making a health plan available… how [insurers] ensure continuity of care during transitions,” HHS warns.

‘Continuity of care’ refers directly to the massive disruptions in health insurance coverage meted out by Obamacare. With only a fraction of enrollees likely to have paid their premium in time to be covered by January 1, many people who think they are covered won’t be.

But that’s if ordinary rules of insurance coverage apply. In order to avoid another PR disaster, HHS is demanding that insurance companies pay for services even if the claimant hasn’t paid her premium. Refusal to do so would disrupt continuity of care, and thus give HHS – according to its self-serving rule – reason to expel the insurance company from selling plans on an Obamacare exchange.

Roy says this latest move by HHS is lawless and unconstitutional. I agree. But the worst thing about it is that the insurance companies most vulnerable to this type of abuse probably won’t challenge the Obama administration in court, since doing so would likely get them kicked off the exchanges they have spent three years reorganizing their business model around.

This is gangster government.

Q: What does $300 million in federal grant money to build one of the nation’s most expensive Obamacare exchanges get you?

A: If you’re Oregon, 44 enrollees.

So far, federal taxpayers have spent about $6.8 million per Oregon enrollee. And that doesn’t include the federal subsidies any of these Oregonians might qualify for, nor does it contain the remaining premium amount each enrollee will pay to have health insurance.

Maybe the Obama administration will reverse course and start claiming that Oregon’s exchange is really a job creator since someone got paid with all that money because at this point, it’s certainly not a financially viable health insurance portal.

H/T: Philip Klein

It looks like the crass ad campaign aimed at getting keg-standing frat boys and promiscuous coeds to sign up for health insurance on Colorado’s Obamacare exchange is failing badly.

“The White House has set a goal of ensuring that roughly 40% of all enrollees on the federal exchange are young and healthy,” reports CNN’s Political Ticker.

“As of November 30, just 11% of total enrollees in Colorado’s exchange fall into the targeted 18 to 34 age bracket. The majority of new enrollees – more than 60% – are between 45 and 65.”

If this trend holds, it means that the funding ratios for Colorado’s insurance pools won’t work because there won’t be enough ‘young invincibles’ in the system. As I explained in a post about a similar problem in Kentucky, too few young and healthy people translates into an insufficient wealth transfer to older and sicker people.

Right now, Obamacare’s supporters are telling themselves that young people always wait till the last minute to comply, so all will be well when the enrollment period ends in March. That might be true. But if enough young invincibles pay a fine instead of enroll, Colorado, Kentucky and any other state with too few net payers will see next year’s premiums surge through the roof.

Just in time for the 2014 elections.

A consensus is forming in the public relations world about what went wrong with Obamacare’s horrendous Healthcare.gov rollout.

In what Politico calls “a case study for crisis management consultants and their clients of what not to do,” three problems are clear.

First, the Obama administration wasn’t truthful. By downplaying the website’s crashes and error messages as “glitches” due to heavier-than-expected traffic, the White House misled the public on how bad the system actually was.

Second, updates lacked success stories. That’s probably because only 6 people successfully enrolled via the website on its first day.

Finally, despite more than three years to get ready Obamacare still lacks an effective spokesperson.

But that’s not quite right.

Until recently, President Barack Obama was a very effective spokesman when he told anyone who would listen that his signature bill would expand coverage, reduce costs and improve quality – all without requiring anyone to forfeit their current plans, doctors and hospitals.

Though the criticisms from PR consultants of the Obama administration’s handling of its latest fiasco are well-deserved, the problem with Obamacare runs much deeper than a textbook failure of crisis management. The problem with Obamacare is that it was designed by ideologues, implemented by amateurs and sold on a lie.

No amount of spin or surrogacy can fix that.

Gallup released a new poll this week showing that a sizeable portion of an important cohort for Obamacare’s success is planning to pay fine rather than foot the bill for most costly insurance.

The so-called young invincibles – defined by Gallup as Americans under 30 years old – is the group whose purchase of health insurance on Obamacare exchanges is most coveted because they are projected to pay for more services than they use. The money made off their premiums will cover the cost of care for older and sicker people in the risk pool.

But the financial coercion desired by Obamacare’s operators could likely hit a snag this year because the penalty for not buying insurance is only $95, or less than any monthly premium available on an exchange.

Unfortunately for Obamacare’s supporters, Gallup says that 26 percent of young invincibles are planning to pay the fine instead of buy insurance. If enough do so, Obamacare’s cost structure gets up-ended, putting the feds on the hook to cover the overruns. Private insurers will then spike premiums in future years to compensate.

The big question is, “What number is ‘enough’?” No one knows the answer.

That’s because the key number for making the Obamacare exchanges financially workable is a ratio. For Healthcare.gov – the federal exchange – the Congressional Budget Office estimates that 38 percent of the risk pool needs to be young invincibles in order for the system to operate.

That means that the critical number for Healthcare.gov isn’t whether it actually enrolls the 7 million people it originally projected; it’s whether 38 percent of whatever population enrolls is made up of young invincibles, says Ezra Klein.

Early returns aren’t boding well, reports Breitbart News. The Obama administration so far has refused to release a breakdown of federal enrollees by age bracket, but the State of Kentucky has. The Bluegrass State runs its own exchange and only 19 percent of its enrollees are between the ages of 18-34 – a span that includes more years than Gallup’s. If that trend holds throughout the enrollment period that runs through March, Kentucky – and any other exchange with less than 38 percent of young invincibles – could face the dreaded ‘death spiral’ where premium costs soar to cover a sicker population that anticipated.

For now, we’ll have to wait and see whether the Obamacare-affiliated exchanges hit the magic number by the enrollment deadline. My guess is that the lack of transparency is directly related to the failure to meet the goal.

Obamacare’s “original vision of seamless Medicaid enrollment for all consumers will remain elusive indefinitely because of varying levels of readiness among states and the continued inability of the feds to transfer accounts directly to individual Medicaid agencies,” reports Governing.

That’s more bad news for Healthcare.gov, the federal health insurance exchange serving 36 states.

The problem is simple but not easy to fix. Because there is such a wide disparity among states in their ability to connect their Medicaid databases to the federal server, many of those who qualify for Medicaid can’t sign up for the program online. To compensate, federal workers send digital copies of an applicant’s qualifying information to state counterparts who then must verify eligibility.

Bottom line: All this checking and rechecking loses the efficiency gains assumed by Obamacare’s drafters. Among others, these cost savings were counted toward the health law’s now dubious claim of deficit neutrality.

Now the bad news for states.

Since every state participates in Medicaid, problems with the program created by Obamacare will impact state budgets regardless of whether they run their own health insurance exchange or let the feds do it. That’s because the exchanges are designed to serve those who don’t qualify for Medicaid. If seamless Medicaid enrollment proves impossible, then the resulting expenditures to meet the uptick in demand will be yet another unfunded mandate passed on to state taxpayers.

The Obama administration’s former chief of Medicare and Medicaid is running for Governor of Massachusetts, and hints that his goal is to turn Romneycare into a single-payer system.

“It is time to seriously explore the possibility of a single payer system in Massachusetts,” declares Donald Berwick’s campaign website. (Emphasis in the original) “I will work with the Legislature [to] assemble a multi-stakeholder Single Payer Advisory Panel to investigate and report back within one year on whether and how Massachusetts should consider a single payer option.”

Along with achieving this goal, Berwick makes a series of other promises that seem breathtaking when one considers the amount of information, oversight and control necessary to fulfill them. Again, all bolded words appear the same way on the site.

·    I will personally lead a statewide initiative to make Massachusetts the healthiest state in the nation, through smoking cessation, obesity prevention and reduction, and specific programs to curb domestic and physical violence.
·    We will stop the obesity epidemic in Massachusetts.
·    We will reduce substance abuse and suicide rates by 50% in Massachusetts in the next decade.
·    Massachusetts will be the national leader in patient safety.

I do not dispute that Americans in general – and apparently Massachusetts in particular – are suffering from very serious problems like obesity, substance abuse and suicide, along with all the ancillary problems that follow in their wake. But how is it sensible to assume, as Berwick’s manifesto does, that politicians can solve these deeply personal problems – abetted by a nihilistic culture – through bureaucratic fiat?

Moreover, who is going to pay for all this? Nowhere does Berwick mention the massive increases in state spending his plan implicitly calls for, since Massachusetts will now need an army of public employees to collect data, push ad campaigns and fine or penalize those who don’t change their behavior.

Joshua Archambault outlines other problems with Berwick’s platform, among them the myriad technical difficulties facing a state trying to operate a stand-alone single-payer system.

Berwick is no shoe-in to win the Democratic nomination for governor, but his ideas about single-payer are gaining ground in Massachusetts politics. As Archambault notes, 20% of the state’s heavily Democratic state senate are on record as supporting a single-payer system. That’s not surprising since the Bay State was the first to impose a health insurance mandate on individuals in 2006. As costs have grown, so have calls for more government control.

It bears remembering that President Barack Obama has said repeatedly that Romneycare was a model for Obamacare. If Berwick’s ideas manage to transform the former into a single-payer system, national health care policy may soon have a new maxim: As goes Massachusetts, so goes the nation.

Federal subsidies are the lynchpin holding Obamacare together. Without them, insurance plans bought on state-run exchanges would be too expensive for most people to buy.

Which means there’s a huge gaping problem if you live in one of the 36 states that chose to let the feds run the exchange: You don’t qualify for federal subsidies.

“Congress was exceedingly clear that tax credits and subsidies are available to people whose plans ‘were enrolled in through an exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act,’” argues Scott Pruitt, Oklahoma’s Attorney General, in the Wall Street Journal.

“Congress specified that credits and subsidies are only to be available in states that set up their own health-insurance exchange for a reason: It could not force states to set up exchanges. Instead, it had to entice them to do so.”

But if the enticement fails, then citizens are exposed to the full brunt of Obamacare’s increased cost structure for health insurance. That’s the risk the health law’s drafters took. Now the plain meaning of the text should result in a massively unpopular program.

The Obama administration is spooked. If the vast majority of Americans are forced to choose between paying the real price of Obamacare-related insurance or a hefty fine, there will be an electoral tsunami in 2014.

Here’s hoping Oklahoma’s lawsuit gets a favorable ruling from the Supreme Court sooner rather than later.