#276: Gaming the System

#276: Gaming the System
June 13, 2011

Benjamin Domenech

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

You’ve doubtless heard the news about the troubling McKinsey Quarterly study showing “30 percent of employers will definitely or probably stop offering [employer-sponsored insurance] in the years after 2014.”

Grace-Marie Turner’s piece in The Wall Street Journal offers a good encapsulation of the failed prediction – and the failed promise of “if you like it, you can keep it” – within this report:

Before the health law passed, the Congressional Budget Office estimated that only nine million to 10 million people, or about 7% of employees who currently get health insurance at work, would switch to government-subsidized insurance. But the McKinsey survey of 1,300 employers across industries, geographies and employer sizes found “that reform will provoke a much greater response” and concludes that the health overhaul law will lead to a “radical restructuring” of job-based health coverage.

Supporters of the law are pushing back hard against this study, as you might expect. Avik Roy documents several reasons why their pushback fails – the study is not an outlier from other reports, and the arguments of the White House in response are mostly thin gruel. But it’s important to note what McKinsey’s goal is here – not politics, but sound business advice. Roy draws the critical distinction in his conclusion:

A less useful criticism is that the McKinsey study, by its own account, “educated respondents about [employer-sponsored insurance] implications for their companies and employees before they were asked about post-2014 strategies.” Indeed, the McKinsey study found that, among employers who were most knowledgeable about Obamacare, 50 percent planned to stop providing their workers with health insurance. This is a finding that should alarm Obamacare’s supporters.

As 2014 becomes reality instead of theory, more and more employers will learn from their competitors how to take best advantage of the new law’s quirks. It would be one thing if McKinsey were, say, a Republican push-polling firm trying to scare people into voting against Obama. But McKinsey’s only agenda is to give its clients sound strategic and business advice.

Again and again during the process of PPACA’s passage, the motivation for reform seemed to be conducted in spite of everything we’ve learned about the way consumers and markets respond to signals, mandates, and regulation. What a novel idea! How courageous! How stupid.

As I wrote at the time regarding concerns on the left about citizens gaming the individual mandate, if your answer to that problem is that supporters of Obamacare need to be “bolder about emphasizing the moral and civic imperative of buying insurance for those who can afford it – and how collective non-compliance could jack up everyone’s own premiums in the future,” as Jonathan Cohn and others have argued, you’re betraying a supreme amount of confidence in the ability of government to convince people to do something that isn’t in their financial or personal interest. And when that fails, history tells us guidelines and weak mandates will become more forceful and more invasive – such as Sen. Dianne Feinstein’s new effort to strengthen rate controls – as government compels where it could not convince.

As a general rule, if your response to an obvious policy failing is to ask consumers to roll back human nature, or businesses to avoid examining their bottom line (“Think not of yourself or your family, but of the collective!”), that’s no response at all.

-- Benjamin Domenech


IN THIS ISSUE:


ON EXCHANGES, IMPLEMENTATION PROBLEMS

John R. Graham of the Pacific Research Institute and Christie Herrera of the American Legislative Exchange Council spoke at the Washington Policy Center’s 9th Annual Health Policy Conference on the implementation of Obamacare. It’s worth watching the whole video, and sharing with others.

I particularly like the portion around the 17 minute mark, where Graham points out the fiscal analysis that accompanied the recent Colorado vote in favor of establishing an exchange under PPACA (where a Republican House Majority Leader sided with the Democrats to pass the law). Graham points out the House estimated (in ludicrous fashion) that the exchange could be run by 0.4 full-time employees per year, at a cost of $30,000.

Graham noted the challenges of implementation in this post at the NCPA blog, which notes even states who actively want to form exchanges are running into difficulties:

But I think that the real news is how much difficulty states that want to implement PPACA as fast as possible are having. Take California: “We want to be the lead car,” California Health & Human Services Secretary Diana Dooley told POLITICO in January, shortly after the state became the first in the nation to pass legislation allowing it to set up a health exchange. POLITICO reporter Sarah Kliff visited the Golden State four months later and found a stalled and discouraged effort. According to Kliff, governor Jerry Brown is more focused on filling a $25 billion hole in California’s budget than setting up the health reform’s new programs: “The Health Exchange Board only held its first meeting in April, and sweeping cuts to Medicaid threaten to undermine the public insurance program meant to serve as the foundation of the federal reform law.” Kliff quotes Peter Long, CEO of the Blue Shield of California Foundation, complaining that: “You can’t be the lead car when you take three months off.”

I expect that at least some of this holding back would vanish post-election, when things are clearer. But it could be there are more fundamental problems in play here. Be sure to read the quote on Utah’s exchange as a “loss leader” in Graham’s post.

SOURCE: Washington State Public Affairs TV Network


TEXAS PUSHES FORWARD ON MEDICAID WAIVER

It’ll be interesting to see how Washington responds to this request for a block grant:

Texas lawmakers passed major changes to Medicaid on Wednesday that would privatize the health program in South Texas and allow the formation of health care cooperatives.

The 142-page measure is part of a special legislative session to pass laws that will balance the state budget. The Legislative Budget Board says it could save the state $467 million, almost two-thirds of that coming from Medicaid savings. Medicaid is a joint state and federal health insurance program for the poor and disabled.

“It’s a big bill and it tries to do a lot of things, it really is transformative,” said Rep. John Zerwas, R-Simonton, who authored the bill and is also a doctor.

The bill passed 91-47, largely along party lines with Democrats opposing it. After a final procedural vote, the measure goes back to the Senate for consideration of the small changes made by amendments added Thursday.

There’s more on the bill in question at the Texas Tribune. The problem is that according to the Tribune’s report, this request is being advanced under PPACA’s “innovation waiver” – an element we’ve dissected before as being woefully insufficient for the flexibility states need.

SOURCE: Bloomberg Businessweek


AMERICA’S EXPECTATION: REPEAL

Jeffrey Anderson notes the latest Rasmussen numbers regarding opposition to PPACA, and adds a secondary point about expectations:

The latest Rasmussen poll of likely voters shows that, by a margin of 19 percentage points (54 to 35 percent), Americans support the repeal of Obamacare. Among independents, the margin is 27 points (60 to 33).

Americans are also relatively confident that their desired result will be achieved: More people think Obamacare will be repealed (46 percent) than not (37 percent), with only 7 percent thinking repeal is “not at all likely”.

This could get interesting. If fully 46 percent of Americans – small business owners, doctors, medical professionals among them – are planning ahead based on the assumption that this sweeping law will be repealed, what happens to them if it isn’t?

SOURCE: The Weekly Standard


IN U.K., RATCHETING BACK REFORM

A new report this morning from the BBC details the efforts of NHS allies in Britain to push back against David Cameron’s relatively modest reform push. The Economist, per its usual aim, outlines the conventional wisdom about the status of the nudging toward more pro-market steps:

So far, three main concerns have dogged the health proposals. The first is that change is being rushed. Mr Cameron now concedes that point: he has overruled Andrew Lansley, his health secretary, in removing the deadline for family doctors to take on responsibility for commissioning secondary health-care. Originally due to be fully established in spring 2013, the new commissioning bodies will now be instigated, Mr Cameron says, only “when groups of GPs are good and ready”.

Liberal Democrats in the coalition are also worried about the composition and accountability of those bodies. Hospital doctors and other health-care professionals will now have a say in their decisions. Alas, that re-creates one of the problems that the basic split between purchasers and providers of secondary care, which dates back to Tory reforms of the 1990s, was intended to address: hospital doctors will now be involved in purchasing the treatment that they provide.

Meanwhile, and perhaps most importantly, the drive towards more private provision of services and competition within the NHS--which has provoked fears about a wholesale privatisation and the end of universal coverage--seems to have been blunted. Monitor, the health watchdog, which the government had intended to make responsible for enhancing competition and choice in the NHS, will now support the “integration” of patient care. Nick Seddon of Reform, a think-tank, describes this switch as a “Napoleonic retreat.”

There’s a useful model here for what to expect in the American experience. The NHS’s expansive force as the monopolistic entity in the marketplace creates its own constituency of agencies, partner groups, contractors and others who can, and often do, overrule consumers in designing a marketplace that suits their needs. Even Cameron’s reforms, which are a modest reassertion of devolved power toward the consumer, are a bridge too far for these bureaucrats and rent-seekers – and it is their voices, not the disorganized voices of those most tangibly affected by the awful extremes of the NHS decision process, which are likely to be heeded.

SOURCE: The Economist


SHOULD THE PEDIATRICIAN BE ABLE TO ASK IF THERE’S A GUN IN THE HOUSE?

The Boston Globe has a predictable piece this morning on the ability of doctors to ask children if there’s a gun in their home. Excerpt:

Governor Rick Scott this month signed a law making Florida the first state to limit a physician’s ability to ask patients or their parents whether they own a gun. Those who do would be subject to discipline by the state medical board. Similar proposals now being considered by several other states have enraged many doctors who say the law impinges on their ability to deliver critical information to families.

“This is not an even-steven discussion,” said Dr. Joel Alpert, a pediatrician and assistant dean at Boston University School of Medicine, who is past president of the American Academy of Pediatrics. “This is child health against a paranoid fear about guns being taken away from someone.”

At the heart of the issue is whether guns are a matter of public health. Supporters of the law say that they are not.

Let’s hope other governors follow Scott’s lead. It’s an absurd invasion of privacy and a brazen attempt to declare this issue one of public health as opposed to home defense.

SOURCE: The Boston Globe


MEANINGFUL MEDICAID REFORM: STRATEGIES TO FINANCE INNOVATION

Our friends at the American Action Forum are hosting a breakfast tomorrow on Capitol Hill which I’d urge you to attend, featuring remarks from Republican Sens. Tom Coburn and Richard Burr on the need for Medicaid reform. From the release:

Medicaid is broken. The program fails to deliver consistent, quality care to the neediest Americans and at the same time is bankrupting states and the federal government. Without comprehensive reform, the program will increasingly strain budgets, suffer financial collapse and fail in its role in the nation’s social safety net. Please join the American Action Forum for a Congressional breakfast discussion on how to achieve meaningful Medicaid reform through payment and care delivery innovation.

It’ll be held in Dirksen Senate Office Building Room #562, and several other worthy speakers will be participating. I hope you’ll RSVP and attend.

SOURCE: American Action Forum

Benjamin Domenech

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