Bureaucracy in a Bind

Health care is a life-and-death matter. It’s also a huge part of our economy (one-sixth, to be exact).

With so much at stake, it makes sense to “go slow,” when it comes to reforming the system. But rather than take the time to get it right, the liberal leaders of Congress rammed through a wholesale restructuring of the system without giving their rank and file enough time to read—much less comprehend—what they were up to.

Obamacare Adds to the Ranks of the Uninsured

Imagine if Washington applied Obamacare’s regulatory approach to car sales. Forget choosing your ride based on your own needs and what you can afford. Instead, your wheels would be dictated by what Uncle Sam thought was best for you. For example, you might want -— and be willing to pay for -— a Mercedes, but Obamacare Motors would let you buy only a [Yugo].

CMS reports that under new law, overall national health expenditures will increase by $311 billion. This is the net result of increases in coverage and decreased spending from reductions to Medicare and due to the excise tax on Cadillac insurance plans. Expect this figure to rise if Congress indefinitely postpones unsustainable Medicare cuts (again, think "doc fix") and yields to political pressure to ax the Cadillac tax, both of which will likely happen. Comparative Effectiveness may have a small effect on reducing the growth of health care costs, but, writes CMS, “We show a negligible financial impact over the next 10 years for the other provisions intended to help control future health care cost growth” (p. 13).

The CLASS Program will offer long-term care insurance, but enrollees will pay premiums (which are, by the way, counted as an offset to the overall cost of the bill) for five years before benefits are attainable. This program is doomed from the get-go: CMS reports that “… voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants … there is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable” (p. 15).

Medicare hospital payments will grow at a slower rate than the cost of providing services, such that “… providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention [think "doc fix"], might end their participation in the program (possibly jeopardizing access to care for beneficiaries)” (p. 10). As far as changes for Medicare Advantage enrollees, CMS reports that “new provisions will generally reduce MA rebates to plans and thereby result in less generous benefit packages … in 2017 … enrollment in MA plans will be lower by about 50 percent …” (p. 11).

Estimated savings for Medicare Part A would be substantial enough to extend the program’s solvency to 2029 — under prior law, funds would be exhausted by 2017. However, CMS writes, “In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund…” (p. 9). Savings from Medicare will fund newly created programs — not reduce the program’s future unfunded liabilities.

CMS reports that about 14 million Americans will end up losing their current employer-sponsored coverage. Though many will instead receive coverage in the exchange, this shows that instead of encouraging employers to offer coverage, new law creates incentives to dump the responsibility of their employees’ health care onto taxpayers.

Writes CMS, “For many individuals, the penalty amounts for not having insurance coverage were not sufficiently large to have a sizable impact on the coverage decision” (p. 7). Concerning employers, “the penalties would not be a substantial deterrent to dropping or forgoing coverage” (p. 7). So these provisions will do little to achieve their purpose (i.e., to encourage individuals to carry coverage and employers to offer it).

Recently, the actuaries at the Centers for Medicare and Medicaid Services (CMS), the agency that runs the giant entitlement programs, released its analysis of the new health care law. The AP reports that “White House officials have repeatedly complained that such analyses have been too pessimistic and lowball the law’s potential to achieve savings,” but the official CMS analysis reinforces several of Heritage’s predictions regarding Obamacare.

Congress Regulates Themselves Out of Coverage

Members of Congress and Congressional staff currently enjoy a wide variety of excellent health insurance options, courtesy of the Federal Employees Health Benefits Program (FEHBP). One of the more commonplace campaign promises of federal lawmakers is that they will fight to give ordinary Americans the same kind of choice and competition among the wide variety of private health plans that they have.