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“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important not to establish a new politically appointed bureaucracy dedicated to implementing a law that is going to be repealed before January 2014, when the exchanges are supposed to dictate what health insurance people can have.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.

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.

Medicaid Grows in Good Times and Bad

Monday’s federal bailout of government unions threw a big chunk of change at Medicaid, the joint federal-state program for low-income Americans.

According to neo-classical economics, Medicaid should be an automatic stabilizer, i.e. growing during recessions and shrinking during prosperous times.

Unfortunately, this is not the case: Medicaid shows no evidence of counter-cyclicality. It just grows and grows, in both booms and busts.

Complete analysis here.

Nevada’s Hospitals Under ObamaCare: Harry Reid Finally Gets It

Congressional Quarterly has produced a July 21 letter from Senator Harry Reid to U.S. Secretary of Health & Human Service Kathleen Sebelius, in which the Senate Majority Leader complains that Obamacare’s cuts to Medicare will “result in a net reduction in payment to Nevada’s hospitals when they are unable to absorb such a cut.” Furthermore, he questions the method used by the Centers for Medicare & Medicaid Services to calculate the payments to hospitals, and is “very concerned about potential effects on beneficiary access if this regulation is finalized without adjustment.”

Did Senator Reid finally read the bill, almost four months after passing it and a year after masses of Americans began to demand that Congress do so?

A week after Senator Reid wrote his letter, the Government Accountability Office confirmed that 70 percent of Federally Qualified Health Centers already had costs that were higher than their reimbursements in 2004, a share that had been climbing since 1997.

Obamacare will wreak further havoc on these reimbursements, as Senator Reid would have known if he had read the CBO’s analyzes of Obamacare before it passed. On March 20, the CBO estimated that the government would capture about half the cost of Obamacare through 2019 ($455 billion) by cutting back payments to hospitals and other Medicare providers.

Oh well, it’s not too late for Senator Reid to join the growing number of politicians advocating repealing and replacing Obamacare.

Did Judge Tauro Kill ObamaCare?

On July 8, a federal judge in Boston, Joseph Tauro, took it upon himself to find the Defense of Marriage Act (DOMA) unconstitutional. His decisions in two cases might have unwittingly facilitated the legal challenges to Obamacare.

Read entire article here.

States Are Right To Shun ObamaCare’s High-Risk Pools

One of ObamaCare’s first major cash flows was scheduled to start on July 1: $5 billion to bail out states’ so-called “high-risk pools” until January 1, 2014. 22 states want nothing to do with it. It’s a drastic choice for states with broken budgets. Nevertheless, it’s the right choice.

Read the full article here.

CastroCare in Crisis: Lessons from Single-Payer Health Care

Although Cuba’s government commits 16 percent of its budget to health care, the communist dictatorship’s real health-care “system” is dedicated to serving cash-paying customers from Canada and other countries. This comes from a fascinating article in the latest issue of Foreign Affairs, “CastroCare in Crisis,” by Laurie Garrett of the Council on Foreign Relations.

It’s not news that The Castro brothers profit from medical tourism. Michael Moore infamously shilled for the enterprising Havana Hospital in his movie, SiCKO, where he brought 9/11 Ground Zero rescue workers to be treated. The Havana Hospital appears to be a more competitive, patient-centered enterprise than any American general hospital I’ve seen: It posts prices for its services, reports testimonials, and can schedule surgeries on short notice (three days for open-heart surgery)!

Garrett explains that the hospitals that serve foreigners are owned by a government-owned tourism conglomerate, and serve patients from 70 different countries. Canadians are significant customers. Like Cuba, Canada controls access to medical services through a government monopoly, so citizens cannot get timely care. Unlike Cuba, Canada allows the rest of the economy to operate freely, so Canadians are rich enough to be able to pay just under $7,000 for knee replacements in Cuba (instead of waiting for months in Canada).

But what will happen when the Castros are gone? Two competing effects, according to Garrett: An influx of U.S. patients who will be free to travel to Cuba for treatment, but an exodus of physicians who will be free to emigrate to the U.S. Plus Cuba has the second oldest population in the Americas, with only one quarter of the population under 40 years of age. Once the Cuban people are free of communism, their pent-up demand for medical care will also explode. Cuban patients (as opposed to Canadian patients in Cuba) already have to provide their own syringes, sheets, and towels. Soap, disinfectant, and sterile equipment are rare. (See John Goodman’s previous post here.)

Unfortunately, Garrett does not consider the consequences of ObamaCare, which will likely accelerate the international travel of U.S. patients, while minimizing the emigration of Cuban doctors. If Cuba becomes a free society that welcomes foreign capital, American investors will soon decide that investing in hospitals that serve U.S. and other foreign patients is a good bet. There will be plenty of opportunities for Cuban surgeons who stay at home.

RomneyCare vs. ObamaCare: Adverse Selection

The Wall Street Journal’s Joseph Rago recently wrote an indictment of the Massachusetts health reform, generally viewed as the model for recently enacted federal health reform. One of the criticisms he notes is that people in Massachusetts who do not have employer-based benefits can wait until after they have become sick to apply for health insurance via the Commonwealth Connector. This is because the fine levied by the state for not having health insurance is much less than actuarially fair premiums.

Many fear that this will also happen under ObamaCare. As of 2016, unless a person has qualifying coverage from his employer or through an exchange, the IRS will levy a penalty of the greater of $695 or 2.5% of a taxpayer’s household income. On its own, this would hardly seem enough to dissuade people from waiting until after they have become sick to buy increasingly expensive health insurance. Furthermore, people with incomes under 133 percent of the Federal Poverty Line (FPL) will now be eligible for Medicaid, which means they will be exempted from the penalty, as will anyone whose health insurance costs over 8 percent of his gross income.

Responding to Mr. Rago, Professor Jonathan Gruber of MIT asserted that ObamaCare will not suffer the same adverse selection as RomneyCare, because ObamaCare limits people who wish to apply for coverage in an exchange to an annual open-enrollment period. This is true: The U.S. Secretary of Health & Human Services has the authority to define annual open enrollment periods, as well as special enrollment periods similar to those that currently exist under the Health Insurance Portability and Accountability Act (HIPAA)]. Furthermore, people with incomes up to 400 percent of the federal poverty level are eligible for refundable tax credits to subsidize their premiums.

John Goodman has concluded that households with incomes up to $80,000 will receive bigger subsidies in the exchanges than under employer–based health benefits. So, the combination of limited open enrollment and huge subsidies for buying health insurance via an exchange surely mitigates adverse selection.

On the other hand, ObamaCare will give a three-month grace period before levying fines on people without coverage. If the affected persons find the open enrollment too difficult to navigate, political pressure may force the Secretary to make the window very wide. (This is the case in Medicare Advantage. Although the open-enrollment period for the following year’s coverage is from November 15 to the end of the current year, beneficiaries have the free option of switching again until March 31 of the new year.) If this is what ObamaCare’s open enrollment will look like, every individual will have up to six and a half months to gain some benefit from adverse selection: Either waiting to buy health insurance or switching to a richer plan after becoming sick.

Medical-Tort Law: Ranking the States

How much do a state’s laws governing medical malpractice and other torts relevant to health care affect the availability of care?  Plenty!

Lawrence J. McQuillan’s & Hovannes Abramyan’s 2010 edition of the U.S. Tort Liability Index, which has a number of measurements included in the U.S. Index of Health Ownership, ranks states according to 42 variables.

Eight of the measurements in the U.S. Tort Liability Index are relevant to the U.S Index of Health Ownership: One output and seven inputs. The previous edition of the U.S Index of Health Ownership included six measurements of medical tort, but McQuillan & Abramyan have discovered more variables for their 2010 edition of the Tort Liability Index, allowing more detailed measurement.

As a partial update of the U.S. Index of Health Ownership, this brief analysis calculates a medical-tort index from a simple average of the eight relevant variables.  Mississippi, Nevada, Michigan, Colorado, and Louisiana lead the pack; while Vermont, Rhode Island, Kentucky, Pennsylvania, and Iowa bring up the rear. Even the leaders, however, lag in some measurements.

Mississippi, for example, leads on procedural rules: Pre-trial screening or arbitration and conditions on the use of expert witnesses. However, it does not limit lawyers’ ability to abuse their privilege by limiting their share of awards. Colorado and Louisiana also fail to impose limits. Unfortunately, the laggards do not show a similar pattern: The bottom five states perform poorly in all eight measurements.

Reducing the burden of medical tort is critical to increasing Americans’ health ownership and reducing medical costs that curtail our access to care. Some progress is evident, but states aiming to improve their medical-tort laws still have a long way to go.

Nurses, Hospitals, & The State

Under ObamaCare, those who believe the government should decide how much medical care you deserve, and how it should be delivered, are eager to impose their preferences nationwide. Nurses’ unions lead the charge, armed with a recent study that could use more examination than it is getting from politicians and the media.

In 2004, the California Nurses Association (CNA) strong-armed a law through the state legislature that mandates a ratio of one nurse to five patients in surgical wards, one to six in psychiatric wards, one to four in pediatric wards, one to three in maternity wards, and one to two in intensive care. As of September 2009, 14 states and DC had such legislation or similar regulation, and 17 more states were considering legislation. The CNA, which has national ambitions, has long agitated for Congress to make this a federal diktat, and U.S. Senator Barbara Boxer carries the union’s water on Capitol Hill.

Sensing that the clock is ticking for the Democratic majority to impose such a law, the media tout a study led by Linda Aiken, of the University of Pennsylvania’s Center for Health Outcomes and Policy Research. This study compared a number of outcomes for hospitals in California, New Jersey, and Pennsylvania. The latter two states have no mandatory staffing ratios and fewer nurses per patient. Aiken and colleagues concluded that if New Jersey and Pennsylvania hospitals had achieved California’s staffing ratios, New Jersey’s hospitalized patients would have experienced 13.9 percent fewer deaths and Pennsylvania’s 10.6 percent.

There are a number of ways to critically assess this study, and its political implications. First, the responses came from mailing surveys to 80,000 nurses in California, New Jersey, and Pennsylvania, of which about 22,000 responded. Many of the questions address quality of work-life, which was (perhaps obviously) reportedly superior in California. Self-reports might be acceptable for such indicators, but to expect nurses accurately to recall and report data on patient mortality is way too much to expect from a mailed survey. Actual claims data would result in much more confident conclusions.

Second, beyond government mandates, a number of causes drive nurse-patient ratios. In the June 18 New York Times, nurse Theresa Brown, cheerleading the study’s conclusions, unwittingly trumps her argument by reporting that the Pittsburgh hospital where she is employed voluntarily exceeds the recommended thresholds.

Third, even if the California standards are appropriate for California, and perhaps Pennsylvania and New Jersey, it is irresponsible to use this one study to demand that Congress apply them throughout the United States. If advocates want to use the results to influence legislatures in Harrisburg and Trenton to replicate the California law, that is their business. Congress, however, has neither the constitutional authority nor the competence to determine whether these standards should apply to 47 other states.

Fourth, the blunt conclusion of the study – that government should simply command hospitals to hire more nurses – ignores more fundamental causes of the nursing shortage. In a 2007 article, John M. Welton, RN, reported that most nurses were independently employed by patients until the 1920s, and provided care in the home. Nurses and patients agreed on payment directly. As technology enabled hospitals to deliver more acute care, nurses increasingly became employed by hospitals. Welton argued that the problem with nurse staffing lies not in numbers, but that nurses’ incomes are no longer determined by patients directly.

Hospitals bundle nursing costs with room and board charges, leading to crude decision-making about staffing. Welton recommends that hospitals should unbundle these costs and charge them by intensity of service. Obviously, this approach requires very complex data and collaboration between hospitals and insurers, which pay the bills. Thinking that the U.S. government could take the lead in such a valuable reform is utterly delusional, as the current legislative proposal to impose top-down, federally dictated, nurse-staffing ratios demonstrates.

Like schools, health facilities should be amongst the most innovative operations in 21st-century America, not the least. For Congress to impose an outmoded, industrial-age strait-jacket on hospitals will condemn patients to inferior care at the mercy of union bosses. Those union bosses will soon become all-powerful, unless Obamacare is repealed.