#275: Don’t Like Mandates? Just Make Less Money!

#275: Don’t Like Mandates? Just Make Less Money!
June 6, 2011

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

You’ve likely heard the bracingly honest comments from President Barack Obama’s Solicitor General, Neal Kumar Katyal, last week in the context of Sixth Circuit hearings on the individual mandate. If you haven’t, audio of the oral arguments are here. I’d also commend to you Philip Klein’s coverage of the issue in the Washington Examiner:

During the Sixth Circuit arguments, Judge Jeffrey Sutton, who was nominated by President George W. Bush, asked Katyal if he could name one Supreme Court case which considered the same question as the one posed by the mandate, in which Congress used the Commerce Clause of the U.S. Constitution as a tool to compel action.

Katyal conceded that the Supreme Court had “never been confronted directly” with the question, but cited the Heart of Atlanta Motel case as a relevant example. In that landmark 1964 civil rights case, the Court ruled that Congress could use its Commerce Clause power to bar discrimination by private businesses such as hotels and restaurants.

“They’re in the business,” Sutton pushed back. “They’re told if you’re going to be in the business, this is what you have to do. In response to that law, they could have said, ‘We now exit the business.’ Individuals don’t have that option.”

Katyal responded by noting that there’s a provision in the health care law that allows people to avoid the mandate.

“If we’re going to play that game, I think that game can be played here as well, because after all, the minimum coverage provision only kicks in after people have earned a minimum amount of income,” Katyal said. “So it’s a penalty on earning a certain amount of income and self insuring. It’s not just on self insuring on its own. So I guess one could say, just as the restaurant owner could depart the market in Heart of Atlanta Motel, someone doesn’t need to earn that much income. I think both are kind of fanciful and I think get at …”

As Sutton interjected, and Klein points out, this is an extremely limited “hardship exemption” that applies only to those who can’t obtain insurance for less than 8 percent of their income. The more likely scenario is that such individuals would end up on the ever-expanding threshold of Medicaid.

Yet we shouldn’t let this moment pass us by, because of how instructive it is in the mindset of Obama’s administration beyond just defending the mandate. Approaching governance from the perspective of class-based analysis of society--where the prosperity of individuals is by its very nature an act of self-interest, at odds with the uplifting of the whole--is a perverse way to approach politics. But it’s made all the worse when you apply it in the form of policy.

In The Audacity of Hope, Obama wrote that Americans “have always been in a constant balancing act between self-interest and community, market and democracy, the concentration of wealth and power and the opening up of opportunity.” In the view of this White House, the individual mandate is not a blunt and haphazard act of concentrated power--ordering the nation to purchase a product whether they need to or not, whether they wish to or not--but rather a rejection of self-interest in favor of community, democracy, opportunity, etc. On the whole, this approach betrays a belief that such attributes, rather than growing and flourishing from among the people themselves, must necessarily be increased through the force of government.

Community and opportunity good, wealth and markets bad--got it? You keep using these words. I do not think they mean what you think they mean.

-- Benjamin Domenech


IN THIS ISSUE:


WHY AREN’T DC DEMOCRATS TALKING ABOUT MEDICAID? OH, RIGHT – THOSE GOVERNORS

Over the weekend, Politico noted Washington, DC Democrats seem awfully reluctant to bring up Medicaid as a political issue despite the move toward block grants within Budget Chairman Paul Ryan’s plan:

Medicaid covers more than 50 million people, including low-income children and seniors in long-term care, but it doesn’t pack the same political punch as Medicare. Some observers say that’s due to the lingering perception that Medicaid is just a program for poor people that holds a much less broad-based appeal.

That perception is definitely part of the challenge in communicating Democratic opposition to the GOP’s Medicaid plans, Rep. Robert Andrews (D-N.J.) told POLITICO.

Medicaid “doesn’t quite have the same political dynamic” as Medicare, Andrews said.

That’s true in more ways than one, Rep. Andrews: The simple fact is that many Democrat governors know full well they need the flexibility Republicans are offering in order to survive an increasingly pressurized budgetary scenario. Just look to Washington State Gov. Chris Gregoire’s recent waiver request and emphasis on flexibility:

Gov. Chris Gregoire is hitting the road to win federal help for some major health care changes she and other governors are seeking.

One bill in particular, Engrossed Substitute Senate Bill 5596, was sponsored by Senate Republicans led by Linda Evans Parlette of Wenatchee. It requires the state to seek a federal Medicaid waiver to give the state more flexibility and savings in its management of the state-federal health program for low-income people.

The Democratic governor signed that bill and several health care-related measures into law last week and others earlier in May. Gregoire now is headed to Washington, D.C., to push for that flexibility for all states.

And she intends to meet with federal Health and Human Services Secretary Kathleen Sebelius about her own state’s waiver request, which is already under way.

“It’s my role as head of the National Governors Association,” Gregoire said after signing SB 5596. “So on behalf of the governors, I’m going to be presenting some agreed-upon ideas where we seek flexibility from health and human services in administering the Medicaid program.”

Medicaid costs currently account for nearly a fourth of Washington’s operating budget. PPACA’s acceleration of this problem is avoided in polite conversation--but as Grace-Marie Turner has noted, the numbers can be bent only so far.

SOURCE: The Olympian


IN LOUISIANA, MORE FRACTIOUSNESS OVER MEDICAID

In the latest edition of Health Care News, an extensive interview with Louisiana Health and Hospitals Secretary Bruce Greenstein on the state’s new Medicaid reform--which, despite the promise of improved outcomes and taxpayer savings for one of the worst state Medicaid systems in the country, could be sacrificed to short term political interests. Leon Wolf reports:

Louisiana has a financial incentive to reform the way it provides Medicaid services, but also a need to improve outcomes. The state’s health system currently ranks in the bottom five in numerous health categories, including infant mortality and cancer deaths. According to Louisiana Secretary of Health and Hospitals Bruce Greenstein, a major reason is that Louisiana residents historically have been discouraged from developing relationships with primary care physicians and preventive care physicians such as OB/GYNs.

“In Louisiana, we have for a long time had a culture of using the emergency room as a substitute for a primary care physician,” said Greenstein. “A significant part of Louisiana’s population does not even have a primary care physician.”

Greenstein says that ever since legendary governor Huey Long established a network of charity hospitals, Louisiana’s Medicaid population has developed a habit of thinking all illnesses requiring a doctor’s intervention should be treated at the emergency room.

“We have a fundamental problem in Louisiana with our Medicaid population not receiving care in appropriate settings,” Greenstein said. “Medicaid pays for one-year wellness visits for children, but not adults. As a result, most adults never develop a relationship with a primary care physician--children, diabetics, asthmatics, and people with other chronic problems aren’t getting the preventative care that they need. They tend to just take themselves to the emergency room over and over again.”

Unfortunately, a debate over how to pay for the transition costs involved in the shift to managed care has this reform on the cusp of defeat. We’ll have to wait and see what happens.

SOURCE: The Heartland Institute


OBAMACARE’S PRICE CONTROLS AND SEBELIUS’S MAGIC HAT

Kevin Williamson writes at National Review on the arbitrary nature of the Obama administration’s latest price control announcement:

Today’s milepost on the road to serfdom: The Obama administration is beginning to impose price controls on the insurance industry. Henceforth, if a health-insurance premium is to be increased by more than 10 percent, the company will be obliged to go and beg the government for its blessing.

Incidentally, Congress has enacted no law regarding that 10 percent standard. Health and Human Services secretary Kathleen Sebelius simply issued a decree. She could have chosen 1 percent, 11 percent, or 0.01 percent. Why 10 percent? Because it sounds nice and won’t confuse dim voters who are not good with math.

In one important way, this move is even worse than it looks initially: The economics of price controls are well understood (usually the result is shortages), and the consumers the Obama administration alleges it is protecting here are the ones who will pay the highest price, in the form of degraded services and very probably, in some cases, loss of health insurance. That’s all obvious enough, and it serves the insurance industry right for allowing itself to be bought off with Obamacare’s individual mandate. But what the Obama administration really is up to is imposing undefined political mandates on insurance pricing. It hasn’t so much passed a regulation as inserted itself into the market as a subjective arbiter – a pattern it is following in other industries, too, and one that bears keeping a watchful eye on.

That 10 percent benchmark is a dead giveaway of politics at play: It’s an entirely arbitrary number that is in no way related to health-care prices, health-insurance prices, health-care inflation, general inflation, or any other economic factor. It’s a nice, round number that’s easy to remember – which is to say, it’s a political number, pulled out of Sebelius’s magic hat. Why is 10 percent the standard of unreasonability? The law contains a mess of self-referential, subjective standards: An “unreasonable” increase is one that is “excessive,” an “excessive” increase is one that is “unjustified,” etc. All of which means: Kathleen Sebelius gets to insert herself between insurers and the insured whenever she likes and do whatever she wants.

Read the whole thing.

SOURCE: National Review


PERSONALIZED MEDICINE’S PROMISE AND PROBLEM

For all the talk about personalized medicine in recent years, it’s still a treatment solution that holds great promise, but may run into equally great regulatory hurdles:

“A pattern is developing at an accelerated pace where we are able to match genetic information about a tumor to a new agent and get results,” says John Mendelsohn, president of Houston’s MD Anderson Cancer Center.

Despite the progress, researchers stress, most personalized treatments don’t necessarily offer a cure. Currently about 800 cancer drugs are in development, many of them designed to target specific mutations. It may take changes in regulatory policy and the development of new diagnostic tests in order for successful therapies to come onto the market. Another issue is cost. The targeted drugs already available run into the tens of thousands a year.

One study led by doctors at Memorial Sloan Kettering, for instance, found that among skin-cancer patients with a mutation in a gene called BRAF, 48% responded to a targeted treatment, compared with just 5% who responded to the current standard treatment.

The report was published online Sunday by the New England Journal of Medicine. Another study, from researchers at Massachusetts General Hospital, suggests that lung-cancer patients with a specific mutation lived significantly longer when treated with a targeted therapy from Pfizer Inc. than a matched group of similar patients who didn’t get the drug.

Both drugs are now on a fast-track review at the U.S. Food and Drug Administration, reaching the agency in about half the time it takes more conventional medicines to get there.

It remains to be seen how the FDA handles these matters. Acknowledging the agency “is working to change regulatory policies to help accommodate these scientific advances” is a start, considering delay in this case could be measured in lives.

SOURCE: The Wall Street Journal


HOUSE REPUBLICANS PUSH BACK ON MEDICARE

One of the worst-messaged facts regarding the current Medicare debate for those who favor reform is a truth detailed by Robert Samuelson in his column today: that Medicare as we know it is essentially a goner anyway. The choice is between rationing and rebuilding the system:

The theory is simple. Suddenly empowered, Medicare beneficiaries would shop for lowest-cost, highest-quality insurance plans providing a required package of benefits. The health-care delivery system would be forced to restructure by reducing costs and improving quality. Doctors, hospitals and clinics would form networks; there would be more “coordination” of care, helped by more investment in information technology; better use of deductibles and co-payments would reduce unnecessary trips to doctors’ offices or clinics.

It’s shock therapy. Would it work? No one knows, but two things are clear.

First, as Medicare goes, so goes the entire health-care system. Medicare is the nation’s largest insurance program, with 48 million recipients and spending last year of $520 billion. About 75 percent of beneficiaries have fee-for-service coverage. If Medicare remains largely fee-for-service, the rest of the system will, too. ...

It’s Ryan’s radicalism vs. President Obama’s tinkering. Which is realistic and which is wishful thinking? This important debate should rise above cheap political rhetoric. Burdened by runaway spending, Medicare “as we know it” is going to end. The only questions are when and on whose terms.

The House Republicans--whose own staffers will confide their nervousness about this policy and are pushing for their bosses to flee from the controversial proposals within Ryan’s plan--would do well to consider this reality and absorb the details within this report. The people are not well-served by false promises about the future.

SOURCE: House Budget Committee

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)