Freedom Line Blog

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Following on Ashton’s post below (many of the themes of which appear in my column for this week), it’s crucial to note that the hazards presented by Obamacare’s incentives for lower-income Americans to stay out of the workforce are compounding a pre-existing problem. As noted by Mark Peters and David Wessel in yesterday’s Wall Street Journal:

More than one in six men ages 25 to 54, prime working years, don’t have jobs—a total of 10.4 million. Some are looking for jobs; many aren’t…

… The trend has been building for decades, according to government data. In the early 1970s, just 6% of American men ages 25 to 54 were without jobs. By late 2007, it was 13%. In 2009, during the worst of the recession, nearly 20% didn’t have jobs.

To the crisis amongst men, we can add the crisis amongst youth. As noted earlier in the week by Zara Kessler at Bloomberg:

According to a Pew Research Center analysis of U.S. Census Bureau data, 36 percent of the country’s 18- to 31-year-olds were living in their parents’ homes in 2012 — the highest proportion in at least 40 years. That number is inflated because college students residing in dorms were counted as living at home (in addition to those actually living at home while going to school). Still, 16 percent of 25- to 31-year-olds were crashing with mom and pop — up from about 14 percent in 2007 and 10 percent in 1968. In a Pew survey conducted in December 2011, 34 percent of adults aged 25 to 29 said that due to economic conditions they’d moved back home in recent years after having lived on their own.

Every trend line is pointing in the wrong direction. Yes, there are structural issues (technology, offshoring) that complicate the employment picture, but free markets generally resolve such issues given enough time. Markets can’t resolve, however, the pathologies imposed on the economy by government — whether Obamacare’s perverse incentives or the consistently anti-growth policies of the White House.

If nothing changes, the upshot will be the Europeanization of the American economy: fewer workers toiling to support a growing class of government beneficiaries.

Future generations may note the irony of Mitt Romney being so thoroughly pilloried during the 2012 election for his infamous 47 percent comment. While you can quibble with the statistics, the underlying theme is correct: we’re headed towards an economy with fewer makers and more takers. Changing that trajectory will be the responsibility of the next president — and it won’t be an easy one.

A new report by the non-partisan Congressional Budget Office predicts the Affordable Care Act (i.e. Obamacare) will cause up to 2 million lower-income workers to leave the labor force over the next decade because they will make more in government benefits than as a private employee.

“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor – given the new taxes and other incentives they will face and the financial benefits some will receive,” the agency says in Appendix C, Labor Market Effects of the Affordable Care Act: Updated Estimates (pdf).

The incentive to drop out of the workforce is one’s eligibility for a government subsidy to help pay for an insurance plan bought through an Obamacare exchange. Since eligibility for a subsidy phases out as a person’s income rises, people who will receive subsidies will have to factor in whether to take a job that makes more money, but will likely reduce or eliminate eligibility. In this scenario, taking the job may actually result in a net loss of income as the person must now pay for the full cost of health insurance.

The disincentive to work also applies to those hanging between Medicaid and Obamacare subsidies. Eligibility for Medicaid means the cost to the beneficiary is nothing (at least not directly). In this scenario, qualifying for a subsidy increases one’s out-of-pocket expenses, making it financially smart (for the individual) to work less and stay on Medicaid.

It’s important to emphasize that deciding to work less to receive more in government benefits is a financially rational decision for individuals to make, and one that any economist would readily predict. My hunch is that at least some of Obamacare’s architects knew this and designed their programs accordingly.

The problem, of course, is that convincing millions of people not to work is not financially sustainable for the country as a whole.

“Health economists worry that mergers could end up increasing what you pay. Hospital systems can often negotiate higher rates with insurers for the same care,” says a report at CNN Money.

The mergers in question are the result of an incentive structure within Obamacare that gives financial rewards to doctors and hospitals that create “Accountable Care Organizations” (ACOs) that, according to the report, “coordinate treatments with the goal of delivering quality care for less.”

In order to increase their eligibility for ACO benefits, hospitals across the country are scooping up individual and small group medical practices. The reason this may be bad for patients is that mergers allow hospitals to increase their market share, giving them greater leverage to negotiate higher rates with insurance companies. Cigna, a health insurance company, has seen bills for routine procedures spike 300 percent to 500 percent after a hospital acquires a practice.

Of course, those increased costs are passed on to patients, many of whom may not realize it until they get hit with a new “facility fee” that tacks on $75 to $150 for a routine visit.

One would think that a program designed to deliver “quality care for less” would pass on the savings to the patient. Instead, it looks like patients will pay more while the federal government rewards hospitals for cornering the market.

Yesterday, three senior Republican Senators introduced a set of ideas that could eventually turn into the upper chamber’s Obamacare alternative.

The proposal – coauthored by Senators Tom Coburn (Oklahoma), Richard Burr (North Carolina) and Orrin Hatch (Utah) – is a welcome companion to the repeal and reform plan put forward by the House Republican Study Committee (RSC).

The plans share some important elements. Both would repeal Obamacare (though the Senate plan would reinstate certain Medicare changes). Both limit medical malpractice awards in an attempt to cut down on junk lawsuits. And both would increase access to various tax-shielded vehicles like Health Savings Accounts.

An interesting divergence is over whether to allow consumers to purchase health insurance across state lines. The RSC bill does, while the Coburn-Burr-Hatch proposal does not. If allowed, consumers would have more choices, including access to cheaper out-of-state plans for those living in high regulation states.

On the other hand, there is the possibility that insurance companies might cluster in a low-regulation state, leading to a domino effect where all states cut back on coverage requirements or risk losing companies to more business-friendly states. Stripped down health insurance is fine for young and healthy people, but hardly adequate for older and sicker persons. If enough people are priced out of the market, expect the liberal solution to be expanding government programs to cover them.

We know, because that’s one of the arguments liberal defenders of Obamacare used to justify its passage. As Republicans deliberate on how best to reform Obamacare after it’s repealed, figuring out a way to avoid that trap should be high on the priority list.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

For all the attention given to Obamacare’s federal and state exchanges it’s easy to forget that expanding Medicaid remains the single biggest way the controversial law intends to increase the amount of people covered by health insurance.

And unlike the private plans available on the exchanges, every new Medicaid enrollee is completely dependent on the government.

In states where Democratic lawmakers chose to expand Medicaid under Obamacare, the spike in enrollments could pose problems for Republican candidates.

Greg Sargent, after noting that around 75,000 people have signed up for expanded Medicaid in West Virginia, asks, “How would the GOP Senate candidate in West Virginia, Rep. Shelley More Capito, respond if asked directly if she would take insurance away from all these people?”

Sargent’s liberal frame is sure to be echoed in the 2014 election as Democrats try to portray Republicans as heartless skinflints. In this telling, the only options are either to embrace Obamacare’s massive expansion of the welfare state or return to the status quo of sizeable numbers of people unable to get health insurance. (To combat this framing, Republicans should unite around an already existing proposal that gives them the upper hand.)

But that’s at the federal level. More locally, GOP gubernatorial candidates in states that (1) expanded Medicaid and (2) appear most likely to elect a Republican governor are staying mum about repealing Obamacare’s Medicaid expansion.

“None of these Republicans is pledging to repeal the Medicaid expansion put in place by a Democratic governor,” according to Jonathan Bernstein.

As Bernstein puts it, “Liberals assume that once benefits are extended, no government will take them away.”

Unless Republicans at the state level show the kind of policy moxie exhibited by Wisconsin’s Scott Walker, that prediction might come true.

If you know a young person who is unemployed, has no health insurance and spends waaay too much time using social media, the Obama administration has just the timewaster they’re looking for.

At tellafriendgetcovered.com, America’s healthiest non-working adults can absorb six straight hours of sales pitches and snarky humor trying to lure them into purchasing an Obamacare-approved health insurance policy that they probably won’t use.

One segment has a balding Richard Simmons bantering with a Miley Cyrus look-a-like. There are also ads featuring Oscar winner Jennifer Hudson, and former NBA stars Magic Johnson and Alonzo Mourning.

The one with Hudson portrays the starlet telling a distraught father of a recent college graduate not to worry – his uninsured son can stay on his company’s policy through age 26! All seems well in la-la land as father and son ignore the fact the company will be paying up to four more years to cover someone who isn’t helping the firm increase its revenue.

Sedentary viewers are encouraged to tweet, post and otherwise spread the fleeting joy they get from watching taxpayer-funded, government-directed infomericals. The goal is to create a social media buzz among young adults to increase their enrollment in Obamacare exchange plans.

The move is motivated by desperation. Currently, Obamacare-related enrollments by young and healthy people are at 24%. Originally, the Obama administration estimated that this cohort needed to be at least 40% of Obamacare’s risk pool to make it financially viable. The disparity could be disastrous.

If the White House’s celebrity-themed push doesn’t work, it won’t be for lack of creativity and spending. It will be because a sizeable number of young and healthy people wind up laughing at the administration’s pitch, not with it.

H/T: CNBC

In this week’s Freedom Minute, CFIF’s Renee Giachino explains that ObamaCare is failing not because its authors are  leftist geniuses who concocted some deliberate scheme to impose a national single-payer healthcare system, but because it fails to recognize the basic truths of American government.

James Taranto draws attention to an adverse selection problem revealed by the newest federal Obamacare enrollment numbers: More women than men are signing up for health insurance.

The gap between women and men enrollees is troublesome for President Obama’s signature law because women, on average, consume more health services than men. That higher rate of spending drives up the cost of future premiums for everyone.

Of course, women are a larger percentage of the population than men, so as long as the ratio on the federal exchange mirrors the ratio in the population, all should be well.

Except that current enrollment numbers – 54% women to 46% men – don’t mirror the population (where adult women outnumber adult men by a slight 50.3%).

It gets worse. “A 54% to 46% enrollment difference means that only 85.2 males are enrolled in Obamacare for every 100 females,” writes Taranto. Put simply, “Obamacare is missing more than 13 men for every 100 women who’ve signed up.”

Obamacare needs more men in its exchange pool just like it needs more young and healthy people – to pay for others with higher rates of health spending (i.e. women and older people, respectively). That the federal exchange is failing to attract people to pay more for coverage they don’t need is proof that everyday Americans aren’t the sheep central planners envision.

Thank goodness.

Karl Rove draws some much needed attention to the specific provision in Obamacare that increases the price young and healthy people pay for health insurance.

The “Adjusted Community Rating” in the law contains a ban on charging anyone a premium more than three times someone else’s. This new 3:1 ratio, called an “age rating band,” effectively prohibits insurers from pricing their product according to the age, health and lifestyle of the individual consumer (since to liberal ears that would be impermissible discrimination).

But by requiring insurers to treat everyone as if actuarial factors didn’t matter, Obamacare forces insurance companies to extract higher premiums from young and healthy people to pay for the care of older and sicker folks.

That’s why young people are paying more for health insurance under the misnamed “Affordable Care Act.”

As a policy matter, Obamacare insurance plans act as a wealth transfer from younger to older Americans.

Not that you’ll hear anyone in the Obama administration point that out. In fact, as Rove observes, they’re saying just the opposite.

Despite logic and evidence to the contrary, the National Press Secretary for the Department of Health and Human Services said last week that Obamacare “is making health insurance more affordable for young adults.”

Except that it isn’t. And unlike much of what the Obama administration says about Obamacare, that’s no lie.

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.