What is a “Free” Market in Health Care?

In the Albuquerque Journal’s Business section this Monday, columnist Winthrop Quigley made the following statement to start out his column: “Now that Congress and President Obama have decided they want a privately-run, free-market health care system….”

The rest of the column dealt with the lack of information that consumers have regarding their health care and Quigley even made the excellent point that if consumers don’t pay for their care (and insurance companies do), they have no access or reason to access this information. But I was still stuck back on the “free market” point. What was Quigley thinking?

So I emailed him and he was nice enough to email me back. He said in part that ObamaCare “leaves health care delivery to the private sector and preserves the private insurance industry….” therefore it is a “free market.” I beg to differ.

Even before ObamaCare takes effect, governments pay more than half the costs of Americans’ health care. Then there are literally thousands of restrictions and tax provisions — from the FDA which restricts access to new medication to the third-party-payment system that is created by Congrees’ tax exemption for employer-purchased car — that restrict our care and therefore restrict the “free market” aspects of US health care.

While a truly and completely “free market” is probably not on the table in today’s political climate and with the dozens of layers of regulations that have been piled on over the years, Whole Foods CEO John Mackey laid out a way that we can capture many of the benefits of the free market by making some common-sense reforms.

“Three R’s” Against ObamaCare

My colleague Jeff Anderson has coined a winning slogan for the continuing struggle against ObamaCare: “Repeal and replace.”

But there’s another “R”: Resist!

Anticipating repeal, governors have significant opportunities to put sand in the gears of ObamaCare. Two have recently taken exemplary action:

• Nebraska Governor Heineman has told his state’s education establishment (i.e. teachers’ union bosses) that the costs of ObamaCare will hit their budgets, because the state will have to raid education funding to pay the price of ObamaCare.  It’s a great way to fragment the big-government coalition that rammed ObamaCare through, and is desperate to block repeal.
• Minnesota Governor Pawlenty has signed an executive order forbidding his bureaucrats from applying for federal grants to set up a state-based “exchange” which would limit people’s choice of health insurance under ObamaCare.  It’s important not to establish a new politically appointed bureaucracy dedicated to implementing a law that is going to be repealed before January 2014, when the exchanges are supposed to dictate what health insurance people can have.

Every governor should look to resist using these and other tactics.  In California, the pro-single-payer legislature has sent Governor Schwarzenegger a bill to set up an exchange that would likely be the most restrictive in the country.   Signing it would create a terrible legacy, and complicate his successor’s ability to resist ObamaCare.

PA’s Insurance Hypocrisy

I saw a commercial during an episode of Jeopardy from the Pennsylvania Insurance Fraud Prevention Authority. It warns people against trying to buy car insurance after an accident — which is illegal and represents insurance fraud. Here is the ad:

The law makes perfect sense — being able to receive an insurance claim settlement without having paid into the system drives up costs for those who have insurance. It also creates incentives to go without insurance until something bad happens.

In a nutshell, higher costs for insurance combined with no penalties for lack of insurance results in more uninsured drivers.

Oddly enough, the same government that polices auto insurance fraud will soon be working to encourage people to buy health insurance after they get sick. The new federal health care law forces insurance companies to cover people who sign up only after becoming ill or injured, and even prevents them from charging these folks more. The result will be higher costs and more uninsured residents.

Missouri Insurance Department Lacks Proper Controls

The enactment of ObamaCare is meant to signal a new era of “cracking down” on insurance companies. For example, Congress gave the states money to enhance their ability to control the premiums companies charge.

But not every insurance regulator is working up to expectations. The Missouri insurance office, for example, lacks adequate procedures for managing the disbursement of federal grants. The revelations come from the Missouri auditor, Susan Montee. Missouri Watchdog’s Brian R. Hook has more.

Putting the Brakes on Obamacare

If Republicans take control of one or both houses of Congress this fall, many will have been elected with a promise to “repeal and replace” ObamaCare. But what are their options, really? There likely will be an initial showdown, but President Obama will surely veto any challenge to the law, and it would be hard to imagine mustering the votes to overturn it.

Information is the key weapon. Republicans can use congressional hearings to explain what ObamaCare is doing to the economy and the health sector. Their strongest cases would be built around jobs, the cost of health care, and the rising deficit.

If evidence shows that looming mandates on employers are crippling job-creation, they should be repealed. If health costs are rising, as they inevitably will be, Congress needs to hold hearings to investigate the causes and explain why the offending taxes and regulations must be repealed.

Here are six key strategies that a Republican Congress could employ to put on the brakes:

• Defund it. House Republican Leader John Boehner of Ohio has vowed to choke off funding for implementation of the legislation, starting with parts that are especially egregious such as the “army of new IRS agents” needed to police compliance.

While Republicans could target the most damaging provisions of the legislation and tie their defunding measures to appropriations legislation that the president wants and needs to sign, they’d better be ready for battles. When former House Speaker Newt Gingrich lost a stand-down with President Clinton over closing down the government in 1996, it was widely seen as a setback for GOP efforts to scale back big government.

• Dismantle it. To focus committee action and floor votes, Republicans can look for provisions in the law that Democrats are on record as opposing. For example, Senate Budget Committee Chairman Kent Conrad (D., N.D.) has said that the new federal program to fund long-term care—the Community Living Assistance Services and Supports Act, or CLASS Act—is “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.” Mr. Conrad and five of his Democratic colleagues sent a letter to Senate Majority Leader Harry Reid (D., Nev.) before the legislation passed opposing the program and expressing “grave concerns” about its fiscal sustainability.

Other highly unpopular provisions include the requirement that all businesses must file 1099 forms with the IRS to report any purchases totaling more than $600 in a year. This is designed to raise about $17 billion over 10 years from tax cheats. Rep. Dan Lungren (R., Calif.) was the first to introduce legislation to repeal this gigantic paperwork burden. Many Democrats in vulnerable districts who voted for the health law are also anxious to repeal this provision, which the National Federation of Independent Business says will impact 40 million businesses.

• Delay it. Republicans can also vote to postpone cuts to the popular Medicare Advantage program, postpone mandates requiring that individuals and businesses purchase and provide health insurance, and delay imposition of the $500 billion in taxes required by the law. Mr. Obama wouldn’t likely sign such legislation, but the debate would shine a light on problems that haven’t received nearly enough attention.

• Disapprove regulations. The Congressional Review Act of 1996 (CRA) gives Congress the authority to overturn regulations issued by federal agencies if both houses approve, with a two-thirds majority needed to override a presidential veto. This would be difficult to pull off. But proposing a resolution of disapproval under the CRA gives Republicans a platform to express strong disagreement and bring attention to especially egregious rules.

The current congressional majority wants to gut the CRA, and the House passed a bill that would eliminate the requirement that federal agencies submit their rules to Congress before they can take effect. The Senate has not yet acted, but this measure should be on the Republicans’ watch list for the rest of the year.

• Direct oversight and investigation. Other aspects of ObamaCare are ripe for public hearings. For example, rules dictating how much insurance companies must spend on direct medical benefits are already hugely controversial—even before they have been issued. Businesses are also aghast at the narrow openings they have to protect their current health plans from onerous federal regulation. Republicans could summon many witnesses to testify about the impact of this regulatory straightjacket.

Congress also must keep a careful eye on the evolving cost estimates and deficits. Former Congressional Budget Office Director Douglas Holtz-Eakin estimates that the cost of the subsidies for private insurance could rise to $1.4 trillion —triple the $450 billion assumed by the current CBO. This is because the legislation creates strong incentives for businesses to drop coverage and dump their employees into federally subsidized insurance. Congress has a responsibility to protect taxpayers from what surely will be exploding costs.

Republicans also will want to call Donald Berwick, head of the powerful Centers for Medicare and Medicaid Services, to testify before Congress and detail his regulatory agenda for implementing the health-care law. He escaped that duty earlier this year when the White House avoided his Senate confirmation by giving him a controversial recess appointment.

• Delegate to the states. Congress should encourage states to press forward with their own innovative programs. For example, Gov. Mitch Daniels’s popular and fiscally responsible Healthy Indiana Plan expands coverage to the uninsured using a health savings account model. And the lightly regulated Utah Health Exchange provides a marketplace for individuals and small businesses to purchase affordable, portable health insurance. Both are threatened by ObamaCare. The more that states are marching forward with reform that suits the needs and pocketbooks of their citizens, the easier it will be for Congress to repeal ObamaCare and start over.

Americans intuitively understand that government can’t pay for huge new entitlement programs and the expansion of Medicaid with imagined cuts to Medicare, while still improving Medicare’s long-term solvency. They also know that job creation is flat and that employers’ fear of ever-rising health benefit costs is part of the problem. They need to hear the evidence that their fears are valid.

The real wallop of ObamaCare will come in 2014, when most of the spending begins and businesses and individuals are hit with intrusive and expensive mandates. The main job of Republicans, should they capture Congress, will be to slow down implementation of the law and explain to the American people the damage it will do—and already is doing—to our economy. If the White House changes hands in 2012, they can be ready to start with a clean slate and begin a step-by-step approach to sensible reform.

One State, Two Risk Pools

North Carolina has taken the option of setting up a high-risk pool, funded, at least initially, by the U.S. Government, It did so even though the state set up its own pool 18 months ago.

So now there are two public high-risk pools in the state. Guess which pool is more financially attractive to people looking for insurance–and less attractive to the state’s taxpayers? Carolina Journal reports.

Mandated Nursing Ratios are Harmful

John R. Graham, a contributor to this site, argues in a recent op-ed in the San Diego Tribune that setting nursing-patient ratios by law is harmful.

North Dakota: Target, Wal-Mart Pharmacies Not Allowed

Wal-Mart introduced $4 generic drugs to American consumers–a move that was soon matched by others. But residents of North Dakota do not get that kind of deal.

It’s not that the state lacks Wal-Mart stores. There are 11 locations in the state, according to AllStays.com, a website geared for RV living. But according to InForum.com, a state law “says the controlling ownership of most North Dakota pharmacies must be in the hands of registered pharmacists.”

An effort to repeal the law, which would open the door for Wal-Mart, Target and other retailers to set up pharmacies, has been underway. But it has stalled by the refusal of the secretary of state to certify a voter initiative on the matter.

Does Healthy Living Reduce Health Care Costs?

One widely accepted belief about health care is that we (employers, governments, etc.) ought to promote healthy lifestyles because doing so will reduce health care spending.

But if you look at a person’s costs over a lifetime, it just  isn’t so. From the Center for Retirement Research, at Boston College (PDF):

Our main finding is that although the current health care costs of healthy retirees are lower than those of the unhealthy, the healthy actually face higher total health care costs over their remaining lifetime. To illustrate, the expected present value of lifetime health care costs for a couple turning 65 in 2009 in which one or both spouses suffer from a chronic disease is $220,000, including insurance premiums2 and the cost of nursing home care, and 5 percent can expect to spend more than $465,000. The comparable numbers for couples free of chronic disease are substantially higher, at $260,000 and $570,000, respectively.

We’re spending more on health care. That in itself isn’t a bad thing–we’re also living longer.

ObamaCare Is Already Creating More Uninsured Americans

I just received an e-mail from a correspondent who is planning to drop his health insurance. His reasoning goes like this:

I’ve decided to not renew my coverage when the bill comes in for the 4th quarter. I currently pay $320/mo for a $2500 deductible BCBS plan. I have an HSA and have saved up a fair amount of money in it. Pretty good deal. So why drop it? 

1. I have never even come close to meeting my deductible. Everything I have done since HSAs came in has been paid for from my HSA. In fact, never in my life have I ever incurred more than $2,500 in medical expenses in one year.  The odds are that will not change, even though I am older.
 
2. I expect a pretty substantial increase in my premiums, but it doesn’t really matter. I would make the same decision anyway.
 
3. If I guess wrong and my health does change, I will be able to sign up for the new federal risk pool – but ONLY after I have been uninsured for six months. I might as well get started on that six month qualifying period now while I am still healthy.
 
4. There is no penalty for doing this. The federal risk pool is not allowed to charge me more than standard rates.
 
5. Meanwhile I will be able to save $4,000 a year on insurance premiums, which is no small matter these days that I am semi-retired.
 
6. I will not be able to contribute additional money to my HSA, but my income is low enough now that there is virtually no tax advantage to making an HSA contribution. My main tax issue today is the payroll tax, and the HSA has no effect on that.
 
So, I am joining the ranks of the uninsured. Thank you, Mr. Obama.

I can’t really criticize his plan.  He understands ObamaCare all too well.

Let the Price Controls Commence

Among other things, the federal health care “reform” law boosts the role of price controls over health insurance. Price controls of X (or Y, or Z) by their nature reduce the supply of X, but no matter. And no matter that if insurance premiums are too high, it’s due in large measure to government regulations. The cure for bad regulation? More regulation!

Under Obamacare, the U.S. government adds to deficit spending by giving out piles of money to state governments, so they can “better” control “unreasonable” insurance costs. The first piles of money have been distributed lately, which has resulted in a shower of news from across the states, including:

Alabama
Arizona
California
Maine
Montana
Nebraska
New Mexico
North Dakota
Ohio
Oregon
South Dakota
Utah

Like Flies to Honey, Politicians Take Money

From the Sorosphere, we learn,  ”Health insurance companies give big to NM politicians.”

Excuse me while I a colloquial response: “DUH!”

Government micromanages insurance companies. Are we supposed to be surprised that the companies, in turn, donate to politicians? Politicians wouldn’t garner the donations they do if the state didn’t have the power it does.

A Government Mandate to Purchase Trash Hauling Services, and Health Care

In a not-entirely-related-to-health-care blog post, David Stokes of the ShowMe Institute writes about a man who was charge with violating a law requiring all people to purchase trash-hauling services. The man won out, though, by proving that he recycles everything, and thus produces no trash.

Stokes writes, “This is very interesting ruling. I’m aware this ruling won’t actually establish a precedent for courts hearing lawsuits about the federal health care mandate (they’re in different jurisdictions, etc.), but it is still intriguing to note that one court has decided that the government cannot compel someone to purchase something for the public good.”

Looking on the Sunny Side of the Obamacare Lawsuit

Though there are multiple lawsuits going on against Obamacare, the one that has advanced the farthest is the one brought by the Commonwealth of Virginia, which has survived a motion to dismiss. Ronald L. Trowbridge, a fellow with the Texas Public Policy Foundation, finds some reasons to hope that the law will come crashing down. He focuses on the way the judge in the case framed his ruling to let the case continue.

Here’s Trowbridge’s summary:

No one can predict with certainty how the constitutionality of the health care law will be resolved. But [Judge] Hudson’s focus on the individual mandate and his granting of standing is the best of all possible starts for finding the individual mandate unconstitutional. And as the new law has no severability clause, if any part of the law is found unconstitutional, the whole bill goes down.

Unpleasant Surprises in Your Company’s Health Plan

I wonder how many people share the sentiments that a friend shared with me:

Just received a document from our VP of HR that outlines the projected impact of Health Care Reform legislation on my company’s plan. Let me just summarize by saying that my zeal to elect representatives who will overturn HCR just increased significantly.

There are of course good forms of health care reform. Pity that our elected representatives chose to ignore them.