Obamacare and Romneycare

Obamacare and Romneycare
May 6, 2014

Benjamin Domenech

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

Consumer Power Report #418

Following on the heels of the failure of the Obamacare exchange in Oregon, Massachusetts has announced its “first exchange in the nation” is also going under.

Bay State officials are taking steps this week to junk central parts of their dysfunctional health insurance exchange – the model for President Barack Obama’s health care law – and merge with the federal enrollment site HealthCare.gov.

The decision is part of an expensive plan that would occur alongside a parallel, last-ditch attempt to build a working state system.

The state on Monday announced the hiring of hCentive, a Virginia-based contractor that helped construct the Kentucky and Colorado exchanges. The company would rush to build a viable state exchange in time for the next enrollment season, which begins November 15.

Officials aren’t sure it’s possible to make that happen in less than six months. Given the narrow timeframe, they intend to simultaneously start shifting the Massachusetts exchange, known as the Connector, to HealthCare.gov.

A move by Massachusetts to the federal exchange would represent a symbolic blow for local Obamacare supporters. Massachusetts built the model of a state-run exchange in 2006, a result of the health care reform effort by then-Gov. Mitt Romney. The RomneyCare exchange, which helped the state provide health coverage to more than 97 percent of residents, became the template for the Obamacare version.

Massachusetts is the second state to begin that transition. Late last month, Oregon opted to scrap its $200 million system and join the federal exchange.

How bad has the Massachusetts version of Obamacare been?

The strategy announced Monday will still cost an estimated $100 million, and it creates many uncertainties, especially for insurance companies and consumers. Some customers might eventually need to change insurance plans.

As late as March, the state had considered rebuilding the balky Health Connector site, which has left thousands of consumers frustrated and many without coverage for months. But Sarah Iselin, the insurance executive whom Governor Deval Patrick tapped to oversee repairs to the site, said that approach turned out to be far too risky …

Massachusetts had the first online health insurance marketplace in the country, created under its landmark 2006 law mandating coverage for most residents. The website worked well until it was revamped last year to meet the demands of the federal Affordable Care Act.

The new website was supposed to tell consumers whether they qualified for a subsidized plan, calculate the cost of coverage, and enable them to compare plans and enroll. It has not worked properly since it was launched in October, leading the state to encourage people to fill out paper applications instead. The flaws forced the state to enroll tens of thousands of residents in temporary insurance plans through the state Medicaid program.

Clearly, Romneycare’s implementation went much more smoothly than Obamacare’s. But what about the larger question of how much Romneycare actually helped people in the intervening period? Michael Cannon responds to a new study on this point:

Two of the most controversial questions in health care reform are whether government-sponsored expansions of health insurance coverage like ObamaCare and RomneyCare save lives, and if so whether other policies could save more lives per dollar spent. “Changes in Mortality After Massachusetts Health Care Reform,” published today in the Annals of Internal Medicine, presents evidence suggesting RomneyCare may have saved lives, but at a very high cost.

Conducted by Benjamin Sommers (Harvard University), Sharon Long (Urban Institute), and Kate Baicker (Harvard University), this study compares Massachusetts counties to similar counties in the United States before and after the enactment of RomneyCare in 2006. Consistent with similar studies, the authors found that when RomneyCare expanded health insurance coverage, consumption of medical services increased. They also find that relative to the rest of the country, mortality among adults age 20–64 in Massachusetts dropped by 2.9 percent, while mortality from causes treatable by medical care fell by 4.5 percent. The below chart shows how mortality rates in Massachusetts diverged slightly from the control group starting in 2006 …

The World Health Organization considers a medical intervention to be “not cost-effective” if it costs more than three times a nation’s per-capita GDP per year of life saved. This in turn suggests that RomneyCare would have to give every person it saves an average of nearly 30 additional years of life to meet the World Health Organization’s criteria for cost-effectiveness. Given that the mortality gains were concentrated in the 35–64 group, that seems like a stretch.

Peter Suderman has more.

-- Benjamin Domenech


IN THIS ISSUE:


FBI SCRUTINIZES OREGON EXCHANGE

The Federal Bureau of Investigation is looking into problems that plagued Oregon’s implementation of the Affordable Care Act, after the state was forced to scrap its problematic health insurance exchange that was never fully functional, according to people familiar with the investigation.

The FBI has already interviewed some individuals as part of their inquiry, which was first reported by local station KATU and the Portland Oregonian last week.

Cover Oregon, the health exchange created under the Affordable Care Act, has faced major problems for months, and officials last month agreed to scrap their planned state-run exchange that was meant to connect residents with private insurance options. The state will going forward join roughly three dozen other states and use the federal exchange, which itself suffered multiple setbacks in 2013 but has since mostly recovered.

The 14 states that decided to create their own health care exchanges showed mixed results. Maryland’s efforts were also beset by problems, but the implementation in Connecticut went much more smoothly. Perhaps nowhere did the state effort stumble as badly as in Oregon, however.

Multiple congressional and government probes into what went wrong in Oregon are already under way, and it hasn’t been determined whether the failed effort was a result of incompetence or if taxpayer money was abused and mishandled.

A recent assessment of Oregon’s problems conducted on behalf of Democratic Gov. John Kitzhaber’s office assigned blame both to the state’s construction of the program and Oracle, which was paid to help set up the system.

SOURCE: Wall Street Journal


INSURANCE INDUSTRY WARNS OF RATE HIKES WITHOUT BAILOUT

Insurance industry lobbyists are warning that imposing budget neutrality on the “risk corridors” program within President Obama’s health care law could trigger rate hikes in 2015.

The risk corridors program was designed to stabilize premiums in the early years of Obamacare’s implementation by compensating insurers who rack up larger-than-expected losses with funds from insurers who do better than expected. The program has come under fire from Republicans as a “bailout” to insurers, because there’s nothing in the text of Obamacare that requires it to be cost-free – meaning taxpayers could be on the hook in the event of industry-wide losses.

After months of Republican criticism led by Sen. Marco Rubio, R-Fla., and Rep. Tim Griffin, R-Ark. (who both introduced bills that would repeal the risk corridors), the Centers for Medicare and Medicaid Services issued proposed guidance aimed at guaranteeing that the program would be budget-neutral. CMS said that if there weren’t enough money flowing into the risk corridors program to cover the payments due to insurers, then the payments would be reduced. Any shortfall would be made up in the following year if there were a surplus of money flowing into the program.

In an April 21 letter to regulators, flagged by Inside Health Policy, insurance industry lobbying group America’s Health Insurance Plans said the new “budget neutrality” pledge will mean more risk for insurers, and thus, higher rates.

“Risk corridors should be operated without the constraint of budget neutrality,” AHIP urged CMS. The letter explained that, “we continue to have significant concerns with the impact that such a policy would have on the risk corridors program’s statutory goal of stabilizing premiums in the reformed marketplace.”

AHIP also questioned whether CMS had the legal authority to adjust the program to ensure it doesn’t cost money. “We believe requiring budget neutrality is contrary to the statutory requirements for risk corridors under the” Affordable Care Act, the letter read.

SOURCE: Washington Examiner


EXPECTATION: HIGHER PREMIUM COSTS

Three out of five healthcare benefit decision makers thinks ObamaCare will raise the cost of health care at their company, according to a new survey.

In a poll of 266 industry decision makers, such as chief financial officers, human resources executives, and benefit managers, 60 percent say the Affordable Care Act will up healthcare costs, according to PlanSource, a healthcare software provider.

Republicans continue to argue ObamaCare will lead to higher healthcare costs, while Democrats insist premiums will come down as more people sign up for health insurance plans in the coming years.

While the decision makers showed strong interest in moving employees to the private exchanges, PlanSource said only 2 percent of those surveyed have so far signed up their employees.

Besides cost, 65 percent of the respondents say the main reason they haven’t made the shift is because of the difficulty in educating their employees about new benefits. One third also said they hadn’t made the change because they don’t have the resources to handle employee issues and manage benefit providers.

SOURCE: The Hill


DIFFERENT STATES, DIFFERENT SUBSIDIES

The Affordable Care Act offers subsidies to many Americans to help them buy private insurance coverage. But some states are getting far more of those subsidies than others.

In all, 85% of the Americans buying coverage through new online insurance exchanges got financial assistance to offset the cost of their premiums, according to enrollment data released by the Obama administration. The administration’s figures also suggest that the percentage is far from uniform across the states, for reasons that are likely linked to the way the law is structured.

Some 94% of enrollees in Mississippi sought and received the subsidies, and in Florida, North Carolina, Arkansas, Wisconsin, South Dakota, Wyoming, Idaho and Maine the proportion was also 90% or more. Meanwhile, in the District of Columbia, the figure was 16%, in Hawaii, it was 38%, and in Vermont and Colorado it was around 60%. Washington, New York and Kentucky hovered around 75%.

SOURCE: Wall Street Journal


DC COUNCIL TO VOTE ON BROAD NEW INSURANCE TAX TO FUND EXCHANGE

The District’s health exchange has a problem – a big money problem. Like the 14 states that started online marketplaces, the District faces a year-end deadline to prove its Web site can move past technology glitches to meet the next looming challenge in President Obama’s Affordable Care Act: financial self-sufficiency.

But unlike the others, the city does not have enough customers buying insurance on its Web site to copy the funding scheme adopted by most states and the federal government: a tax of a few percentage points on premiums.

To cover its $28 million annual budget, the District’s exchange would have to levy a whopping 17 percent tax on every health plan sold on its Web site.

As an alternative, Mayor Vincent C. Gray (D) on Tuesday will ask the D.C. Council to approve legislation granting the District’s exchange board broad new power to tax any health-related insurance product sold in the city – regardless of whether it’s offered on the exchange.

If Gray and exchange officials get their way, D.C. would fund most of its exchange through products not eligible for the exchange, adding a 1-percent tax on more than $250 million in insurance premiums paid annually by hundreds of thousands of D.C. residents.

Those plans include long-term care, disability, vision, dental, hospital indemnity, and dozens of other health-related policies.

In warnings to city exchange officials in recent months, insurers have threatened that the costs will be passed on to D.C. customers and that the exchange is certain to face a court challenge.

SOURCE: Washington Post


WHY OBAMACARE ISN’T GETTING MORE POPULAR

In just one week, a barrage of national polling has reached the same verdict: Obamacare’s Rocky Balboa-esque announcement that 8 million people have signed up for health care has done absolutely nothing to reverse the law’s basic and long-standing unpopularity.

A new high of 55 percent disapproves of the law in a Pew Research Center/USA Today poll. And the Kaiser Family Foundation’s tracking poll, a Post-ABC poll and a NBC News/Wall Street Journal poll last week all found little lasting changes from earlier this year – when the law was at the heart of its implementation struggles.

The stagnant numbers would seem to fly in the face of the strong publicity the law earned by passing 7 million and then 8 million sign-ups. For a law that had experienced almost nothing but bad news for months, one would think a little good news would lead to at least a little recovery.

And some polls initially suggested that might be the case. But whatever momentum the law carried from the sign-ups announcement – and a later projection that it will actually cost less than previously thought – has gone by the wayside.

The stark numbers are bad news for Democrats, but they also shouldn’t be surprising. Attitudes on the law have not fluctuated much since its passage in 2010 and are deeply entwined with long-held partisan loyalties, helped along by a highly political public debate.

What’s more, Americans’ biggest complaints about the health law are pretty well etched in stone. They existed well before the Web site’s troubles, and the number of Americans who sign up for the law was never the root of the opposition. This was laid out clearly in the new Pew poll.

SOURCE: Washington Post


WHY MEDICAL PRICE CONTROLS ARE A TERRIBLE IDEA

Until Price Controls were imposed, despite the many regulatory inefficiencies and high costs, the quality of medical care and services continued to improve with new technologies and greater knowledge. The controls have resulted in the damage to patient care that we have now and were the worst actions that could have been taken.

Price controls have never worked. In the over four thousand years of history – in Babylon, the Roman Empire, and into modern times in Communist countries, Nazi Germany, and in the United States with local controls on rent, and federal controls on gasoline and universal controls in the 1970s – there has never been a single instance of success where prices were controlled without serious damage.

There is general agreement amongst economists that if price controls succeed in keeping prices below the normal market level they result in increased demand, shortages, lower quality, and black markets. They are particularly destructive in Medical Care where, in addition to economic problems, they result in needless suffering and death.

Hospitals, as tax exempt organizations, were able to supplement revenues with charitable contributions and, by virtue of effective monopoly status within their geographic areas, were able to shift their Medicare losses to private payers so that the full negative effects of the controls have not been realized for them. But physicians have no such safety valve.

Price Controls were imposed historically by simply capping the existing prices. This method had the advantages of being understandable and relatively simple to manage and enforce. While there is no right way to do the wrong thing, our government proved that there is a wrong way to do the wrong thing. A committee of social scientists at Harvard University was tasked by government to establish new controls. Instead of using the simple capping method, the committee came up with a complicated, costly, untested plan, the Resource Based Relative Value Scale “RBRVS.” This is based on the discredited Marxist Labor Theory of value which held that the only measure of value of a product or service is the work required to produce it. It made no allowance for quality or demand, had no valid theoretical or practical basis and, except for communist countries, was largely abandoned by the end of the 19th century.

SOURCE: The Federalist

Benjamin Domenech

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