The VA Scandal and Socialized Medicine

The VA Scandal and Socialized Medicine
May 28, 2014

Benjamin Domenech

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

Consumer Power Report #421

The continued scandal of the Veterans Health Administration provides a good example of the downside of government-run medicine. But when it comes to comparisons to Obamacare, Avik Roy illustrates why the VA is much worse:

The most important thing to understand about the Veterans Health Administration is that it truly is socialized medicine. We often throw the term “socialized medicine” around to describe any government health care program, but the distinction is really important to understand. Socialized medicine, properly understood, is a system in which the state owns and controls everything. The government owns the hospitals; it employs the physicians; it pays for the health insurance and the health care. That, in a nutshell, is the VA. It’s also, for the most part, the system in place under the British National Health Service.

Single-payer health care, on the other hand, is only partly socialized. In a single-payer system, the government is the sole insurer, but hospitals can be widely privately owned and operated, and doctors can work for private hospitals or for themselves. Medicare and Medicaid, at the outset, were designed as single payer programs.

Subsidized private health care is the next step downward, in terms of government intervention. In countries like Switzerland, for example, there are no government insurers or “public options.” Instead, the Swiss government offers premium support subsidies for low-income individuals to shop for private insurance. Under this model, the government often regulates the types of insurance products that are eligible for subsidies.

Why do these distinctions matter? Because they have a huge impact on the quality of health care. The Swiss system isn’t perfect, but it is renowned for its high patient satisfaction, low wait times, and access to the latest technology. Medicaid, on the other hand, provides poor-quality coverage, and many doctors refuse to accept it. Medicare is better off on this metric, but it’s heading down the same path. On the other hand, while private hospital care in the U.S. is wildly expensive, no one disputes that its quality is generally good, and in many instances world-class.

Obamacare expands coverage in two ways: first, by creating Swiss-style exchanges where people can buy subsidized, regulated private insurance plans; and second, by expanding Medicaid. For all of the exchanges’ flaws--especially their high premiums--the quality of coverage they will offer is decent, and we should expect that uninsured people will do reasonably well on them, so long as they can afford the premiums. Medicaid is a different story; the literature shows that Medicaid does not improve health outcomes relative to being uninsured.

But the VA is an altogether different beast. The VA is not merely single-payer health care; its vast network of hospitals is also government-financed and government-operated. And that is why the VA is the worst health-care system in America.

The reality of the current VA scandal is that it represents the government failing at one of the few things it’s actually supposed to do – provide for the care for those who defended the country. The scandal has already moved into the territory of a political hot potato, where controversies over figures and wait times turn into a sea of numbers that ignores the human cost borne by this mismanaged program. The real question now is whether the scandals will lead to a sustained push to privatize the VA’s health offerings entirely. Such a proposal, which was recently endorsed by House Speaker John Boehner, would go even further than steps endorsed by the likes of Sen. John McCain, who has called for allowing veterans to seek care outside the system.

A number of bills on this front could advance in the coming weeks in Congress. For the sake of future veterans, let’s hope the reforms chosen are ones that engage in broad reform of the system as opposed to mere tweaking at the edges. As long as the bureaucracy of the VA is maintained as-is, it will be more about serving the priorities of bureaucrats than the patients it ought to put first.

-- Benjamin Domenech


IN THIS ISSUE:


MEDICAID SURGE TRIGGERS COST CONCERNS FOR STATES

Before President Barack Obama’s law expanded Medicaid eligibility, millions of people who were already entitled to its safety-net coverage were not enrolled. Those same people are now signing up in unexpectedly high numbers, partly because of publicity about getting insured under the law.

For states red or blue, the catch is that they must use more of their own money to cover this particular group.

In California, Democratic Gov. Jerry Brown’s recent budget projected an additional $1.2 billion spending on Medi-Cal, the state’s version of Medicaid, due in part to surging numbers. State officials say about 300,000 more already-eligible Californians are expected to enroll than was estimated last fall.

“Our policy goal is to get people covered, so in that sense it’s a success,” said state legislator Richard Pan, a Democrat who heads the California State Assembly’s health committee. “We are going to have to deal with how to support the success.”

Online exchanges that offer subsidized private insurance are just one part of the health care law’s push to expand coverage. The other part is Medicaid, and it has two components.

First, the law allows states to expand Medicaid eligibility to people with incomes up to 138 percent of the federal poverty line, about $16,100 for an individual. Washington pays the entire cost for that group through 2016, gradually phasing down to a 90 percent share. About half the states have accepted the offer to expand coverage in this way.

But whether or not a state expands Medicaid, all states are on the hook for a significantly bigger share of costs when it comes to people who were Medicaid-eligible under previous law. The federal government’s share for this group averages about 60 percent nationally. In California, it’s about a 50-50 split, so for each previously eligible resident who signs up, the state has to pony up half the cost. …

The budget consequences are real.

“Clearly we are going to need to do our best to make sure we are working within the budget we are given,” said Deidre Gifford, Rhode Island’s Medicaid director.

States always expected that some previously eligible people would sign up, but Gifford said her state enrolled 5,000 to 6,000 more than it had projected.

In Washington state, people who were previously eligible represent about one-third of new Medicaid enrollments, roughly 165,000 out of a total of nearly 483,000. But state officials say they are treating that as a preliminary number, and the true net increase may be lower once they factor in people who drop out of the program for a host of reasons, such as getting a job with coverage.

Governors in California, Rhode Island, and Washington all strongly supported the health care law. Their outreach campaigns to promote sign-ups overall probably contributed to drawing out uninsured residents who already were entitled to Medicaid.

But researchers also are seeing increased Medicaid enrollment in states that have resisted the health care law.

A recent report from the market research firm Avalere Health found Georgia enrollment increased by nearly 6 percent. Montana saw a 10 percent rise and South Carolina 5 percent. A big exception is Texas, which has barely seen any increase.

SOURCE: Associated Press


STATES CONSIDER USING MEDICAID TO PAY FOR COLLEGE COVERAGE

Some students headed for college this fall will get top-drawer health coverage at little or no cost, because Medicaid will pay the premium for the college’s student health plan.

The program is already being used at some Minnesota and Montana colleges. Proponents say it gives students who are eligible for coverage under Medicaid, the state-federal health insurance program for low income people, access to a wider network of providers at the local, national and even international level. That can be an important consideration for many students who travel for internships and international study or who return to homes away from school during the summer. In addition, it generally improves student access to mental health and specialist services.

Local doctors “often don’t want to participate in Medicaid, but they will participate in student health plans,” says Stephen Beckley, a consultant on college health insurance based in Fort Collins, Colorado.

Under the health law, states can expand Medicaid coverage to adults with incomes up to 138 percent of the federal poverty level (currently $16,105 for an individual). Now that roughly half of states have adopted that expansion, colleges in a number of states, including New York, Connecticut and Oregon, are eyeing Medicaid premium assistance programs for their schools.

Cornell University in rural Ithaca, New York, is one of them. The school is working toward offering between 200 and 400 eligible in-state undergraduates student health plan coverage that’s paid for by the state Medicaid program this fall.

SOURCE: Kaiser Health News


HOSPITALS USE OBAMACARE TO CUT CHARITY

Hospital systems around the country have started scaling back financial assistance for lower- and middle-income people without health insurance, hoping to push them into signing up for coverage through the new online marketplaces created under the Affordable Care Act.

The trend is troubling to advocates for the uninsured, who say raising fees will inevitably cause some to skip care rather than buy insurance that they consider unaffordable. Though the number of hospitals tightening access to free or discounted care appears limited so far, many say they are considering doing so, and experts predict that stricter policies will become increasingly common.

Driving the new policies is the cost of charity care, which is partly covered by government but remains a burden for many hospitals. The new law also reduces federal aid to hospitals that treat large numbers of poor and uninsured people, creating an additional pressure on some to restrict charity care.

In St. Louis, Barnes-Jewish Hospital has started charging co-payments to uninsured patients, no matter how poor they are. The Southern New Hampshire Medical Center in Nashua no longer provides free care for most uninsured patients who are above the federal poverty line – $11,670 for an individual. And in Burlington, Vt., Fletcher Allen Health Care has reduced financial aid for uninsured patients who earn between twice and four times the poverty level.

By tightening requirements for charity care, hospital executives say, they hope to encourage eligible people to obtain low-cost insurance through the subsidized private plans now available under the law.

“Do we allow our charity care programs to kick in if people are unwilling to sign up?” said Nancy M. Schlichting, chief executive of the Henry Ford Health System in Detroit. “Our inclination is to say we will not, because it just seems that that defeats the purpose of what the Affordable Care Act has put in place.”

But advocates for the uninsured point out that many Americans avoided obtaining coverage in the inaugural enrollment period of the Affordable Care Act this year because they found the plans too expensive, even with subsidies. Many uninsured people also remain unaware of the new insurance options, And immigrants who are in the country illegally are not even eligible to apply.

SOURCE: New York Times


IRS BARS EMPLOYERS FROM DUMPING AND USING CASH TO SUBSIDIZE

Many employers had thought they could shift health costs to the government by sending their employees to a health insurance exchange with a tax-free contribution of cash to help pay premiums, but the Obama administration has squelched the idea in a new ruling. Such arrangements do not satisfy the health care law, the administration said, and employers may be subject to a tax penalty of $100 a day – or $36,500 a year – for each employee who goes into the individual marketplace.

The ruling this month, by the Internal Revenue Service, blocks any wholesale move by employers to dump employees into the exchanges.

Under a central provision of the health care law, larger employers are required to offer health coverage to full-time workers, or else the employers may be subject to penalties. Many employers – some that now offer coverage and some that do not – had concluded that it would be cheaper to provide each employee with a lump sum of money to buy insurance on an exchange, instead of providing coverage directly.

But the Obama administration raised objections, contained in an authoritative question-and-answer document released by the Internal Revenue Service, in consultation with other agencies.

The health law, known as the Affordable Care Act, builds on the current system of employer-based health insurance. The administration, like many in Congress, wants employers to continue to provide coverage to workers and their families.

“I don’t think that an employer-based system is going to be, or should be, replaced anytime soon,” President Obama said recently, when asked if the law might speed the erosion of employer-sponsored insurance.

When employers provide coverage, their contributions, averaging more than $5,000 a year per employee, are not counted as taxable income to workers. But the Internal Revenue Service said employers could not meet their obligations under the health care law by simply reimbursing employees for some or all of their premium costs.

SOURCE: New York Times


NEW OBAMACARE COSTS SNARL UNION CONTRACTS

Disputes between unions and employers over paying for new costs associated with the Affordable Care Act are roiling labor talks nationwide.

Unions and employers are tussling over who will pick up the tab for new mandates, such as coverage for dependent children to age 26, as well as future costs, such as a tax on premium health plans starting in 2018. The question is poised to become a significant point of tension as tens of thousands of labor contracts covering millions of workers expire in the next several years, with ACA-related cost increases ranging from 5% to 12.5% in current talks.

In Philadelphia, disagreement over how much workers should contribute to such health-plan cost increases has stalled talks between the region’s transit system and its main union representing 5,000 workers as they try to renegotiate a contract that expired in March.

Roughly 2,000 housekeepers, waiters and others at nine of 10 downtown Las Vegas casinos voted this month to go on strike June 1 if they don’t reach agreements on a series of issues, the thorniest of which involve new ACA-related cost increases, according to the union.

Flight attendants at Alaska Airlines voted down a tentative contract agreement with management in February, in part because it didn’t provide enough protection against a possible surge in ACA-related costs, union members said. They are still without a new contract.

Labor experts on both sides say the law doesn’t take into account that health benefits have been negotiated by employers and unions over decades, and that rewriting plans to meet new requirements can affect wages and other labor terms …

Among the earliest supporters of the health-care law, unions have unsuccessfully tried to win concessions from the Obama administration on some issues now involved in the labor talks.

An Obama administration official said: “We have worked hard to smooth implementation” of the health law.

One pressure point is the higher costs of new mandates, especially the requirement that health plans expand coverage for dependents. For Unite Here, adding that coverage for 14,000 dependents raised costs in the health-care fund run by the union’s Las Vegas local by $26 million since 2011, said union spokeswoman Bethany Khan.

The union plan covers 55,000 workers and 120,000 people in total. Casinos on the Strip have agreed to pay more to meet the higher health-care costs, according to contract summaries. Unite Here President D. Taylor called the rising costs tied to the health law the biggest hurdle to reaching settlements in Las Vegas.

SOURCE: Wall Street Journal


DOCTORS SURVEYED ON FIRST OBAMACARE PATIENTS

- 62% reported moderate to extreme difficulty identifying patients with Obamacare “exchange” coverage (compared to traditional commercial coverage)

- 60% reported that things like eligibility, cost-sharing and network coverage were somewhat or much more difficult to determine (again, compared to traditional commercial coverage)

“We are going to have to hire additional staff just to manage the insurance verification process.”

“Identification of ACA plans has been an administrative nightmare.”

“We thought we would be able to identify ACA insurance exchange products by their insurance card, but quickly found out this isn’t so.”

- 75% reported that patients were very or extremely likely to have high-deductible health plans

For those practices that didn’t accept Obamacare patients – most (no percentage quoted) reported that payment risk (typically associated with a high-deductible) was the primary reason for declining service:

“Patients have been very confused about benefits and their portion of the cost. Once the patients find out their deductible, they’ve cancelled appointments and procedures.”

“The at-risk piece of eligibility is tremendously hard to determine and explain to patients.”

“Patients don’t always understand how health insurance works, so we’ve been engaging in educational events for the community.”

- Nearly 50% reported being unable to provide covered services because they were “out-of-network.”

SOURCE: Forbes

Benjamin Domenech

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