Consumer Power Report #227

Consumer Power Report #227
June 25, 2010

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)

Man, ain't it swell when politicians run things? Unlike them greedy, money-grubbing business executives, politicians are interested only in What Is Good For America. If Harry Reid and Nancy Pelosi decide something is Good, you know it must be so, because they aren't tainted by profits.

So, you may rest assured that cutting physician fees by 21 percent on June 1 and then raising them again until November, at which time they will be cut again by 21 percent, makes absolute sense. Now, you may not be able to see how sensible it is, but that is because you are a dweeb. If you were as smart and as wise as our Members of Congress, you would understand all of this better.

Plus, we all know that the American Medical Association had a "seat at the table." So the AMA must be on-board with these machinations, eh? Seeing as how the AMA "speaks for America's doctors," all of the docs in the country must be in agreement, too.

And Congress's decision to avoid enacting a budget this year makes sense, too. I mean, why be confined by budgetary restrictions when there is an economy to be rescued? Budgets may be okay for the "small people," but Congress ain't small. No sirree, Bob! Congress is BIG. And smart!! And breathtakingly wise!!!

Thank God for politicians!

-- Greg Scandlen


IN THIS ISSUE:


SEATS AT THE TABLE

Yep, the AMA is just great. Having a Seat at the Table, the way it does, must mean it is highly influential in the corridors of the Capitol. And being so influential must mean that physicians are swarming to join the organization. In its pitch to prospective members, the AMA says:

Why Does the AMA Matter?
The AMA impacts the daily work of all physicians, residents, fellow and medical students in the U.S. In recent years, we've tackled crucial topics like medical liability, clinical quality, managed care, patient safety, Medicare billing and payment, medical education debt and more.

And you can see the results in the happy smiles of physicians everywhere. Now that all those "crucial topics" have been "tackled," America's physicians are just happy as clams. They are so happy that they are willing to not have a clue how much they will be paid for serving people on Medicare.

Politico reports that Medicare will have to reprocess more than 50 million claims that have been filed since June 1 when the cuts originally went into effect. At 30 cents per claim, that is a fair bit of money that is diverted from actual patient care to feeding the bureaucracy. We'll file that under "stimulating the economy."

One physician who is not so happy is Bob Berenson, MD, a senior fellow at the Urban Institute, vice chairman of MEDPAC, and one of the more liberal physicians you are likely to meet. The Politico article quotes him as saying, "It's very bad. Something like this will produce the kind of cynicism that will lead doctors on the fence to throw in the towel. The reality is, the payment system is getting fairer and better, but the perception that Medicare is an unreliable and politically driven payer reinforces those who want to no longer take patients."

Not us. We would never think "Medicare is an unreliable and politically driven payer." Repeat after me – "Every day, in every way, Medicare gets fairer and better."

SOURCE: AMA – Why Join?; Politico; John Graham did an interesting piece on "the Myth of the Doc Fix." USA Today on Docs Refusing Medicare Patients

Another group with that "seat at the table" was the Business Roundtable, which the Washington Post describes as "Obama's closest ally in the business community." It was a big supporter of Obamacare, joining SEIU, AARP, and (bafflingly) NFIB in the "Divided We Fail" coalition that spent millions on pro-Obamacare advertising.

One might think the Business Roundtable would be in a good position to influence policy, given the special relationship it had with the administration. But, alas, the Washington Post reports, "In recent months that relationship has begun to fray. First, Democrats included a provision in the health-care bill -- over the Roundtable's objection -- that reduced corporate subsidies for drug coverage to retirees, a move that could cost big companies millions of dollars. Then the EPA unveiled rules to regulate greenhouse-gas emissions even without climate-change legislation, creating uncertainty about the future cost of energy."

It goes on, "The final straw, said Roundtable president John Castellani, was the introduction of two pieces of legislation, now pending in Congress, that the group views as particularly bad for business. The rhetoric accompanying the tax proposals has been particularly harsh, Castellani said, with Democrats vowing to campaign in this fall's midterm elections on a platform of punishing companies that move jobs overseas."

Verizon President Ivan Seidenberg has been particularly outspoken lately, which puzzles White House staff: "Seidenberg is one of a number of chief executives who have met several times with Obama and repeatedly with senior officials. In February alone, he was invited to dinner with Obama and to the president's Super Bowl party."

What could he possibly be upset about after going to the president's Super Bowl party?

SOURCE: Washington Post; John Goodman has an interesting take on all this


IMPLEMENTATION

Merrill Matthews had a great article published in Human Events. He is sympathizing with HHS Secretary Kathleen Sebelius for having so many mandates (to impose) and so little time in which to do it. He writes, "When Democrats jammed Obamacare down Americans' throats, they decided to punt a lot of the important decisions, letting the HHS secretary do their dirty work."

He goes on, "The biggest immediate problem facing Sebelius is to figure out how to meet the deadlines imposed by Congress. The Kaiser Foundation identifies 30 reforms that must be implemented by the end of this year. Most are major changes that should not be rushed if they are to be done correctly."

One example is the "minimum loss ratio" standard for health plans. "But the initiative has already missed one imposed deadline because state insurance commissioners are divided on what should be considered administrative costs. And now The New York Times reports that perhaps half of the policies owned by individuals (i.e., not a group plan) could lose their coverage because the insurers can't meet that 80 percent loss ratio."

Even when deadlines are met, it turns out they are little more than fluff. "Obamacare provides a tax credit to help small businesses pay for healthcare coverage. The government sent out thousands of postcard-size announcements encouraging small businesses to sign up. The only problem is almost no companies qualify."

SOURCE: Human Events

And the New York Post published an analysis by Scott Gottlieb which says, "HHS Secretary Kathleen Sebelius (who was once the Kansas state-insurance commissioner) has taken to these tasks with zeal. In some circles, she's now known as the nation's 'insurance regulator in chief.' She's starting off by applying new regs to health plans offered by large employers--even though these costly rules were supposedly only going to apply to plans sold in the state insurance 'exchanges' that don't get created until 2014. This twist is spelled out in an 83-page draft of a new regulation that leaked late last week."

He adds, "The ObamaCare bills were written to paper over an intellectual divide between White House economists and HHS policy wonks. Some economists wanted genuine competition to take root in the new federally managed insurance 'exchanges.' The HHS crew favored a one-sized government plan with tight federal regulation over benefits." Guess which side is winning out?

SOURCE: New York Post (courtesy AEI)

One of the many missed deadlines is the requirement that every state have a high-risk pool by July 1. The Chicago Sun Times reports Illinois will be lucky to get its going by September. It writes, "Changes to state law were necessary to allow the federally mandated pool to be operated through the existing Illinois Comprehensive Health Insurance Plan." Plus, "The (insurance) department is also awaiting approval from the U.S. Department of Health and Human Services for its plan to provide coverage."

Not only that, but the new pool won't do very much even when it is up and running: "The state will receive $196 million to set up the federally mandated pool, which would provide coverage to about 5,000 people between now and 2014. That's far less than the 2.5 million people with chronic conditions estimated to be living in Illinois."

SOURCE: Chicago Sun Times

And then there is the ol' grandfather provision, which says if you like your current coverage you can keep it. Unless, of course, you want to change it at all. Then it is no longer "your current coverage" and you will not be allowed to keep it. Investor's Business Daily reports that at least half of all health plans, including 66 percent of small business plans, will have to comply with a host of new rules.

SOURCE: Investor's Business Daily

Then there is the Medical Loss Ratio provision. Writing in The New York Times Robert Pear says, "State insurance officials say they fear that health insurance companies will cancel policies and leave the individual insurance market in some states because of a provision of the new health care law that requires insurers to spend more of each premium dollar for the benefit of consumers."

The regulators are "drafting a recommendation that urges the federal government to allow a gradual three-year transition in states where the new requirement, which takes effect Jan. 1, could destabilize the market."

SOURCE: New York Times


LAWSUIT UPDATE

The lawsuits against Obamacare are looking like winners. A blog called 60 Second Activist summarized where they are now. It says:

The New York Times' Kevin Sack reports that the lawsuits challenging the constitutionality of Obamacare could actually invalidate the new law. "Some legal scholars, including some who normally lean to the left, believe states have identified the law's weak spot and devised a credible theory for eviscerating it," Sack wrote.

and

Jonathan Turley, of the George Washington University Law School, agreed that the arguments against Obamacare are compelling. "There are few cases in the history of the court system that have a more significant assertion by the government," Turley said.

It adds

One of the outside attorneys who will be handling the case for states, David B. Rivkin, Jr., countered, "Every decision you can make as a human being has an economic footprint. ... To say that is enough for your behavior to be regulated transforms the Commerce Clause into an infinitely capacious font of power. ..."

The case will be heard on September 14 before U.S. District Judge Roger Vinson in Pensacola. Vinson, 70, was appointed to the bench in 1983 by President Reagan and is now on senior status, a form of semi-retirement for federal judges.

On the other hand, a blog on the New England Journal web site by Sara Rosenbaum and Jonathan Gruber makes the case for why they think the law will prevail. It is not a very compelling argument because it relies far too much on social policy fallacies, like that the uninsured incur a lot of uncompensated care and that non-insurance is a major cause of bankruptcy. These folks seem to actually believe their own propaganda, which is always dangerous.

SOURCE: 60 Second Activist; States Lawsuit site; The NEJM article is one of many "gee whiz" articles on this health reform site


HOW'S MASSACHUSETTS DOING?

Massachusetts, the prototype of Obamacare, continues to struggle with its reform scheme. An article by Jim Stergios and Amy Lischko in the Boston Globe opines, "The Commonwealth's 2006 health care reform was supposed to help address rising health insurance costs for small businesses. It hasn't -- and small businesses are paying the price."

They explain, "The lack of focus on small businesses is evident. The Connector took three years to make information about provider networks and participating primary care providers for small businesses available on its website. It took over two years to launch a small employer pilot program; in more than a year it attracted just 65 businesses and has now been replaced by a new program that offers only seven plans."

The authors compare this to a similar effort in Utah that was more focused on helping business and less on building a bureaucracy. The Massachusetts Connector has a $40 million administrative budget that employs 45 people earning an average $100,000 salary. In contrast, the Utah Exchange has just two employees and a budget of $600,000. The authors write, "Fewer than 1,500 small business employees receive coverage through the Connector. In Utah, with a far smaller population, about 55,000 small business employees have purchased health insurance through the Exchange. It offers 66 plans from a number of carriers, including the largest ones in the state."

SOURCE: Boston Globe

On Politico Sara Kliff writes that while the state was trumpeting the low number of uninsured, "also making headlines about the same time were scathing complaints from the state's insurance department, in which a state official called Massachusetts's decision to reject the vast majority of insurer rate hikes a 'train wreck' that would very likely lead to the insolvency of some companies." She explains, "In April, the Massachusetts Division of Insurance rejected 235 of the 274 requested premium increases."

She adds, "Insurance companies contend that limiting premiums while not capping the costs they're charged by doctors, hospitals and other providers puts an unfair burden on them. 'If premium review is divorced from review of underlying medical costs, then that's where there's a potential for disruption in coverage,' said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's lobby group."

SOURCE: Politico

On CNN Money Shawn Tully writes, "The best guide to how President Obama's historic health-care legislation will reshape the nation's medical marketplace and fiscal future is the pioneering model in Massachusetts. The Bay State's reform program started in late 2006, and it shares virtually all the major features of the new federal plan."

He adds, "At the same time the plans offer lavish subsidies that swell the demand for health care, they do nothing to increase the supply of medical services in a market suffering from shortages of everything from family doctors to nurses to hospital beds." And, "The combination of heavily subsidized demand and tight, over-regulated supply is a textbook formula for perpetuating the big, chronic price increases that bedevil today's health-care system."

He goes on to list five lessons from Massachusetts:

Lesson 1: The Massachusetts plan does not control costs.
Lesson 2: Community rating, guaranteed issue, and mandated benefits swell costs.
Lesson 3: Huge subsidies for low-to-medium earners could prove extremely expensive.
Lesson 4: The exchanges reward people for working less and earning less.
Lesson 5: The generous plans and added mandates give employers an incentive to drop health insurance.

SOURCE: CNN Money

Sally Pipes of the Pacific Research Institute writes in the Washington Examiner, "By now, Bay Staters should be celebrating reform. It promised to benefit all. The bureaucrats would design and broker affordable health plans, doctors and hospitals would get a bump in Medicaid rates, and the uninsured would no longer be a burden."

But alas, "The system is inherently unstable and primed for a series of nasty fights. Like dry season at an Everglades watering hole, all the players are confined in a tight space, hungry, and all eyeing the same receding resources. Like this tight ecosystem, the players will start to feed on each other, as survival of the politically fittest takes hold."

For example, "Massachusetts' political leaders and activists are making a strong push for a structure of mandatory global payments, which is merely a state-dominated HMO or single payer system. This, they claim, is the next logical step of health care reform. Meanwhile, a bill in the state senate would force doctors to accept cut-rate reimbursements for Medicaid patients as a condition to practice medicine in the state. When voluntary exchange doesn't work for politicians, they move to conscription."

SOURCE: Pacific Research Institute

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)