Consumer Power Report #239

Consumer Power Report #239
September 17, 2010

Greg Scandlen

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

“You know something’s happening here, but you don’t know what it is, do you, Mr. Jones?” Bob Dylan, Ballad of a Thin Man

Man, oh man, oh man, oh man. I have never seen anything remotely like this. This newsletter isn’t supposed to focus on political analysis, so I will just say that once again the experts have been proven wrong, as they have been all year. One of the best explanations of Tuesday’s election comes from my colleague Ben Domenech on Red State.

But in health care the experts have been wrong for the past 40 years. They were wrong about health planning, they were wrong about small group reforms, they were wrong about managed care, they were wrong about consumer-driven health, and they are being proven massively wrong about every dot and tittle in Obamacare.

The only remedy is total, complete repeal of the whole damned thing. But here, too, the “experts” are wrong. I’m not sure where it is coming from but there is a campaign out there to undermine the repeal effort. People are being told that repeal would mean doctors would have to repay any money they have received under Obamacare, and presumably anyone who has received any benefit from the law, like the paltry number of people in the federal risk pools, would have to give it all back.

Complete and utter nonsense. Repeal does not mean that the law never existed. It means it will cease to exist as of a date certain. If we repealed farm subsidies, the farmers would not have to pay back all the money they received over the years. They simply wouldn’t get any more money. When we repealed prohibition, we didn’t try to undo all the damage that had been done. We didn’t compensate bar owners or breweries for their lost income. We simply stopped making the same mistakes in the future.

Ultimately, the Tea Party movement is showing us the way out of this health care mess. The message is don’t trust the experts. Rely on your own good sense. In other words, give us back our money and let us decide how best to spend it.

– Greg Scandlen


IN THIS ISSUE:


KFF ANNUAL EMPLOYER SURVEY

The Kaiser Family Foundation (KFF) has released the annual survey it does with HRET of employer health plans. As usual it is a wealth of information. Here are a few highlights of special interest to the readers of CPR:

  • Twenty-seven percent of all workers now have deductibles of at least $1,000, up from 22 percent in 2009. Of firms with under 200 employees, 46 percent of workers now have such deductibles.
  • Family premiums for HSAs now average $11,683, compared to $13,068 for HRAs, $14,022 for PPOs, and $14,125 for HMOs.
  • The average family deductible for an HSA is $4,006, of which the employer contributes $1,006. This dollar amount averages in those employers who provide no contribution. Of those who do make a contribution, the average is $1,546.
  • Enrollment in CD health plans (including HRAs and HSAs) increased 62 percent in the past year, from 8 percent of all workers to 13 percent. (KFF defines CD health pretty narrowly. A plan must have a high deductible with a savings mechanism.)
  • The percentage of large firms (1,000 + workers) that offer a CD plan increased from 28 percent in 2009 to 34 percent in 2010.

Plenty more in the report. You can spend hours studying it.

SOURCE: Kaiser Family Foundation


HEALTH AFFAIRS ON COST PROJECTIONS

Health Affairs published a new article revising a previous estimate of health care spending through 2019. This one tries to update the projections to account for Obamacare. Good stuff in here – IF you read it carefully.

For example, it revises its previous expectation of a total health spending rise of 3.9 percent in 2010 to 5.1 percent due to the new law. Most of the commentary you will see reports this as a “mere” 1.2 percent increase in spending, but in fact it is a rise of 31 percent (that is, THIRTY-ONE PERCENT) in the rate of increase!

It goes on to project a spending increase in 2011 of a more modest 4.2 percent, which is a drop of 1.0 percentage points from the previous estimate. But that is largely due to an assumption that the 23 percent cut in physician fees under Medicare will go into effect as scheduled in December 2010. Mmm, hmmmm. I wonder if the authors would like to make a little wager with me on that happening. Let’s put some money where our projections are, shall we?

The article goes on to project a 9.2 percent increase in health spending in 2014, as opposed to the prior projection of 6.6 percent – an increase of 39 percent! They attribute this to the idea that “Medicaid coverage will be expanded to all people under age sixty-five in households with incomes up to 138 percent of the federal poverty level.” Once again, I wouldn’t take that projection to the bank, either. Even if the law is still in effect in 2014 (doubtful), it is Medicaid “eligibility” that will apply to all these folks, not Medicaid “coverage” (see next story.)

For private health insurance coverage, the authors had predicted growth of 3.3 percent in 2009, 2.5 percent in 2010, and 4.0 percent in 2011, but they have updated that to 3.5 percent, 4.3 percent, and 2.2 percent respectively. These changes have nothing to do with market conditions or underlying health care costs. They are based almost solely on Congress’s fiddling with the COBRA subsidies – up one year, gone the next.

Yahooo! Welcome to the roller coaster.

SOURCE: Health Affairs


HEALTH AFFAIRS ON MEDICAID ENROLLMENT

Almost every article I read takes it for granted that all of the people Obama has promised to cover will in fact be covered by some time certain. The Health Affairs article cited above assumes 92.7 percent of the population will be covered by 2019. Other articles just blithely assume 30 million or 32 million more people will have insurance coverage, and at least half of this is due to expanded Medicaid.

But in fact, it is extremely unlikely this will come to pass, even if the law is perfectly implemented. We have long known that a very large number of the uninsured are already eligible for Medicaid and SCHIP. In fact, one-third of uninsured children are not only eligible, but had been enrolled in the programs within the past year!

Now comes a new study in Health Affairs that claims it is even worse than that. In the abstract, the authors put it starkly – “According to our coverage estimates, an estimated 7.3 million children were uninsured on an average day in 2008, of whom 4.7 million (65 percent) were eligible for Medicaid or CHIP but not enrolled.”

If this is true of children, imagine how much more true it will be of those childless adults who will be newly eligible for Medicaid.

And why not? The fact is that Medicaid is a lousy insurance program. In many states it pays doctors so little that you can’t get in to see one even if you wanted to. So, you roll down to the ER when you are feeling poorly just like you did before. If something serious happens the hospital will enroll you on the spot, so why bother pre-enrolling?

And what are the bureaucrats going to do about it? Nothing. For the kiddos they might have some leverage, like requiring proof of coverage to go to school. But that will be resisted by those who will say, “don’t punish the children for the sins of the parents!” For the adults there is no leverage at all. Right now the law will apply a tax penalty on those who fail to enroll. But people below 138 percent of poverty aren’t paying taxes, so how would such a penalty be applied?

SOURCE: Health Affairs


GANGSTER GOVERNMENT

Michael Barone is not usually given to incendiary language, but he is calling the Obama Regime a “Gangster Government” after Kathleen Sebelius threatened health insurers who dare to raise premiums to account for all the new mandates contained in the new law.

In a letter to AHIP she says, “There will be zero tolerance for this type of misinformation and unjustified rate increases.” Barone writes, “She acknowledges that many of the law’s ‘key protections’ take effect later this month and does not deny that these impose additional costs on insurers. But she says that ‘according to our analysis and those of some industry and academic experts, any potential premium impact ... will be minimal.’”

He isn’t impressed that “some academics” think there won’t be much of a rate increase. And he says, “The threat to use government regulation to destroy or harm someone’s business because they disagree with government officials is thuggery. Like the Obama administration’s transfer of money from Chrysler bondholders to its political allies in the United Auto Workers, it is a form of gangster government.”

SOURCE: The Examiner

But that is just the beginning of the intimidation. Bill Boyles of the Health Plan Markets newsletter writes Sebelius is applying the same gangster tactics with health plans that provide Medicare Advantage coverage. These companies have submitted bids to provide the coverage in 2011. Usually, the contracts would go to the lowest bidders, but in this case Ms. Sebelius just didn’t like the look of the bids, so “In a private phone call over the weekend from Sebelius to AHIP, and in a Sept. 14 showdown between the CMS chief actuary and contractors, the Administration stated bluntly that contractors must either grant deeper reductions in their bids as part of the 2011 contract negotiations or they would be terminated. They were given 48 hours to make new bids.”

He continues, “Top actuaries told HPM that the only way most plans can reduce bids is by accepting losses or zero profits, or raising premiums if CMS thinks benefits are too skimpy but higher premiums are okay. But neither CMS nor the Secretary gave any specifics, just that the bids looked way too high and had to be cut more.”

Apparently the new law places no constraints on the Secretary. She is given dictatorial powers to accept or reject any bid based on nothing more than how she is feeling at the moment.

SOURCE: Private letter from Health Plan Markets newsletter

By way of background, The Wall Street Journal reported carriers are indeed raising premiums for individuals and small businesses. This is due in part to trend, but also due to the new benefits required by the health care law, such as covering “children” to age 26, providing first-dollar coverage for prevention services, and elimination of lifetime caps.

It says, for example, “Aetna, one of the nation’s largest health insurers, said the extra benefits forced it to seek rate increases for new individual plans of 5.4 percent to 7.4 percent in California and 5.5 percent to 6.8 percent in Nevada after Sept. 23. Similar steps are planned across the country, according to Aetna.” And, “Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points of a 17.1 percent premium rise for a small-employer health plan.” And, “In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18 percent increase it is seeking comes from complying with health-law mandates.”

The article goes on to quote the insurance commissioner in Kansas (Sebelius’s old job) as saying, “In Kansas, I don’t have a lot of authority to deny a rate increase, if it is justified.” Well, DUH! Of course you can’t deny a justified rate increase.

And the Colorado commissioner says, “A lot of it is guesswork for companies. I was anticipating the carriers to be more uniform.” Of course it is guesswork. Projecting the coming year’s expenses is always guesswork, especially when trying to anticipate new requirements that have been imposed by politicians. And if “the carriers were more uniform,” they would be accused of collusion.

Good Lord! Is it any wonder that America is in decline with idiots like these in charge?

SOURCE: Wall Street Journal

Greg Scandlen

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