A New Plan to Replace Obamacare

A New Plan to Replace Obamacare
August 13, 2014

Benjamin Domenech

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

Consumer Power Report #432

Avik Roy of the Manhattan Institute has been one of Obamacare’s most prominent critics over the past several years. On Wednesday he released his new plan – The Universal Exchange Plan – to replace Obamacare. He has been advocating for this plan in general terms for some time, and it could prove to represent the most realistic path for future reform if the politics of the issue does not play in favor of Republicans. The plan does not actually require the full repeal of Obamacare in order to work.

What Roy is presenting here is a recipe for reform even in a situation where Obamacare’s structure endures. But it does not accept Obamacare’s permanence; instead, Roy is outlining a plan that dramatically shifts Obamacare’s effects; eliminates the individual and employer mandates; essentially transforms the Medicaid expansion in favor of private coverage; repeals all but the Cadillac Tax of Obamacare; and shifts power and authority to the states. The full plan is here, and here are its five major points:

Exchange reform. The Plan repeals the ACA’s individual mandate requiring most Americans to purchase government-certified health coverage. The Plan restores the primacy of state-based exchanges and state-based insurance regulation. It expands the flexibility of insurers to design exchange-based policies that are more attractive to consumers, because they are of higher quality at a lower cost. The Plan expands access to health savings accounts. Because these reforms lower the cost of insurance for younger and healthier individuals, they have the potential to expand coverage, despite the lack of an individual mandate.

Employer-sponsored insurance reform. The Plan repeals the ACA’s employer mandate, thereby offering employers a wider range of options for subsidizing workers’ coverage. The Plan preserves the ACA’s “Cadillac tax” on high-cost health plans, but it repeals other taxes, and reforms other regulations that artificially drive up the cost of employer- based insurance.

Medicaid reform. The Plan migrates the Medicaid acute-care population onto the reformed state-based exchanges, with 100 percent federal funding and state oversight. (Medicaid acute care is a form of conventional insurance for hospital and doctor services.) In exchange, the Plan returns to the states, over time, full financial responsibility for the Medicaid long-term care population. (Long-term care funds nursing home stays and home health visits for the elderly and disabled.) This clean division of responsibilities will improve coverage for the poor; reduce waste, fraud and abuse; and provide fiscal certainty to state governments.

Medicare reform. The Plan gradually raises the Medicare eligibility age by four months each year. The end result is to preserve Medicare for current retirees, and to maintain future retirees – in the early years of their retirement – on their exchange-based or employer-sponsored health plans. (Today, the government does not allow the newly retired to remain on their old plans; instead, it forces them to enroll in Medicare or forfeit their Social Security benefits.) In total, these changes would make the Medicare Trust Fund permanently solvent.

Other reforms. The Plan tackles the growing problem of hospital monopolies that take advantage of their market power to charge unsustainably high prices. The Plan reforms malpractice litigation in federal programs. And it accelerates the pace of medical innovation through reform of the Food and Drug Administration.

Callie Gable has more. The fiscal and coverage outcomes of the approach were modeled by Stephen Parente of the University of Minnesota, and the outcomes are interesting indeed. Here’s Avik Roy on the goals of the plan:

  • Reduce the deficit without raising taxes
  • Expand coverage meaningfully above ACA levels
  • Repeal the individual mandate
  • Reduce the cost of private health insurance
  • Improve health outcomes for the poor

According to Parente’s models, the plan does this:

Based on our modeling, the plan, over a thirty-year period, reduces federal spending by $10.5 trillion and federal revenue by $2.5 trillion, for a net deficit reduction of $8 trillion. We project that it will expand coverage by more than 12 million individuals over its first decade, despite the fact that it repeals the individual mandate. It reduces the cost of private-sector insurance policies by 17 percent for single policies and 4 percent for family policies.

But the most dramatic improvement, we estimate, is in the Medicaid population. A group that today receives substandard care and substandard access to care will see a dramatic increase in provider access and health outcomes, based on Parente-developed indices that measure these things.

Should Republicans face divided government in 2016 or should Obamacare’s polling numbers rebound, this approach could be the one they deploy to achieve long-lasting reform. Indeed, I’m curious if Roy has broken down how much of his proposal would need to be done legislatively.

One of the key points here is that Roy is essentially betting that no realistic reform can be achieved if it shrinks coverage for Americans who gained it under Obamacare. He is also assuming passage of this reform would therefore be easier than a reform that fully repealed Obamacare and did not instead try to turn Obamacare’s mechanisms against the entitlement state. This may not be the case: It may turn out to be just as hard as replacing Obamacare fully.

One final note: One of the most interesting parts of Roy’s reform, and the one people should pay attention to given its unique nature, is Section 5, focused on the cost of health care and health insurance and particularly the role of hospital consolidation. Cost was always the priority for most Americans prior to reform and polling evidence suggests it remains their top priority going forward. Rather than talking about the fiscal impact of Obamacare or its problems in aggregate, conservatives and libertarians would be wise to focus on reforms targeted at bringing down the cost of care and of coverage, and breaking the hospital oligopoly that drives up prices for everyone.

-- Benjamin Domenech


IN THIS ISSUE:


ARKANSAS’ LATEST PRIVATE OPTION BAIT AND SWITCH

Arkansas’ “Private Option” ObamaCare Medicaid expansion has been “bumpy.” Costs have run over budget every single month. Arkansas officials have signaled that they now are seeking a bailout from federal taxpayers. The Medicaid director who spearheaded the program abruptly resigned to “pursue other opportunities.” The program’s chief architect, a three-term Republican state legislator, lost his primary election to a political newcomer. And the Private Option is already prioritizing coverage for able-bodied adults over care for truly needy patients like Chloe Jones. News is so bad that the Governor is secretly trying to silence negative press about his failed ObamaCare experiment.

The program’s biggest cheerleaders have long promised that their ObamaCare expansion plan would give patients “skin in the game” and “encourage personal responsibility.”

Like so many of the promises ObamaCare expansion advocates have made, however, this promise turned out to be false.

Not only did the Private Option lack any kind of meaningful “skin in the game” requirements, it actually reduced cost-sharing to below what Medicaid allows.

It’s these cost-sharing provisions, which have enrollees pay a portion of their own health care costs, which can incentivize enrollees to be more responsible health care consumers. Yet more than 80 percent of Private Option enrollees currently have no cost sharing whatsoever.

The program barely squeaked through the Arkansas Legislature – after four failed votes – earlier this year in the battle for funding reauthorization. But one of the many promises to continue this ObamaCare Medicaid expansion for another year was that the state would be adding Health Savings Accounts (HSA) to the mix, which one architect of the plan called the “heart and soul” of the Private Option. He promised that these new provisions would incentivize the ObamaCare expansion population to “make wise choices about their health care spending.”

But new details of how these provisions will work make clear that the Private Option will do the exact opposite of what its advocates promised.

SOURCE: Jonathan Ingram, Nic Horton and Josh Archambault, Forbes


HOW SOLVING A POLITICAL OBAMACARE PROBLEM WILL DRIVE PREMIUM HIKES

Last fall, President Barack Obama responded to outrage over his broken promise of “if you like your plan, you can keep it” by allowing insurers to continue offering existing plans if states agreed. But insurers say the president’s decision is now having an impact on upcoming rates, Pro’s Brett Norman reports. “Many younger, healthier Americans – the category companies had counted on enrolling when they set their initial prices – stuck with their existing coverage. In states with the biggest numbers of these ‘transitional’ policyholders, their absence from the Obamacare market is pushing premiums higher.” While proposed rates average 7.5 percent for much of the country, but in some of the around 25 states that are allowing transitional policies through at least 2015, including Florida, North Carolina and Iowa, rates are spiking by double-digits.

The upcoming premiums are indeed the Affordable Care Act’s next big test. The administration is hoping to build on the successful inaugural enrollment of 8 million people in ACA plans, yet it knows that premium spikes could be a real threat – not just to 2015 sign-ups but to Democrats’ prospects in the fall congressional elections.

SOURCE: Natalie Villacorta, Politico


IS OBAMACARE ENROLLMENT DROPPING?

Aetna is, of course, only one insurer, and other insurers may not be experiencing a similar decline. Since the launch of Obamacare’s exchanges last year, CEO Bertolini has been more bluntly critical of the law than other insurance execs, talking back in October about the pre-launch problems with the exchanges, and then saying early this year that the company will definitely lose money on Obamacare plans in 2014 and could end up leaving the exchange-driven insurance market entirely. Obamacare plans are only expected to make up about 3 percent of the company’s revenue this year, so if things go south, Aetna has less to lose than some of its competitors.

Even still, this is a rare early indication of the direction enrollment has gone in the months following open enrollment. A Pro Publica report last month noted that activity – sign-ups, cancellations, and other changes in enrollment status – remained significantly higher than expected in the federal exchange system, but the administration wouldn’t say how many represented new enrollments. According to an anonymous insurance industry official, less than half were new enrollments.

As Graham notes in the IBD report, enrollments in Washington state, which reports separately from the federal government, have shrunk from 164,062 at the end of April to 156,155 in June.

Combine the reports, then, and it seems at least plausible, though not at all certain, that actual enrollment in Obamacare has fallen in recent months.

SOURCE: Peter Suderman, Reason


OREGON SUED BY ORACLE OVER EXCHANGE

Oracle Corp. has sued the state of Oregon in a fight over the state’s health insurance exchange, saying government officials are using the technology company’s software despite $23 million in disputed bills.

Oracle’s breach-of-contract lawsuit against Cover Oregon was filed Friday in federal court in Portland. It alleges that state officials repeatedly promised to pay the company but have not done so.

The lawsuit seeks payment of the disputed $23 million plus interest, along with other unspecified damages.

Oregon’s health-insurance enrollment website was never launched to the general public. State officials have blamed Oracle, but the company says the state’s bad management is responsible.

Gov. John Kitzhaber has called for the state to sue Oracle and recover some of the $134 million it has already paid to the Redwood City, California, company.

In June, Oregon issued legal demands for documents that could become evidence in a possible lawsuit against Oracle under the state’s False Claims Act.

“The governor is aware of the lawsuit and isn’t surprised by it,” Melissa Navas, a spokeswoman for Kitzhaber, said in a statement. “The state fully expected to end up in litigation over Oracle’s failure to deliver.”

Lawyers at the state Department of Justice were reviewing the lawsuit, spokeswoman Kristina Edmunson said. “We will continue to pursue all legal options,” she said.

Oracle declined to comment.

SOURCE: Jonathan J. Cooper, Associated Press


29 STATES SEEK TIGHTER E-CIGARETTE REGULATIONS

Twenty-nine state attorneys general on Friday urged the Food and Drug Administration to strengthen its proposed regulations on electronic cigarettes, a business that has exploded into a $2.5 billion industry with virtually no regulatory oversight.

Earlier this year, the F.D.A. proposed federal restrictions on the products for the first time, including a ban on the sale of e-cigarettes to people under 18, and a requirement for identification to verify a buyer’s age. In a letter sent on Friday, the attorneys general supported these steps but said they did not go far enough.

“While the Proposed Rule addresses some of our concerns, it fails to address matters of particular concern, such as characterizing flavors, the marketing of e-cigarettes, and the sale of tobacco products over the Internet,” the letter said.

Among the restrictions called for in the letter, the attorneys general urged the federal government to prohibit the sale of most e-cigarette flavoring. … In 2009, the F.D.A. banned flavors from traditional cigarettes, like clove, chocolate and vanilla – menthol was exempt – in an effort to deter young people from picking up the habit.

The letter also urged restrictions on the advertising and marketing of e-cigarettes to bring the rules more in line with those that apply to traditional cigarette companies, which have had to adhere to tight restrictions for years. …

Though still a small portion of the overall tobacco industry, e-cigarette sales have grown over the last few years even as the number of traditional smokers has declined. Recently, big tobacco companies, including Altria, which makes Marlboro, have introduced or announced e-cigarette initiatives of their own, moves that have the potential to greatly speed the industry’s growth.

Some public health experts have said that e-cigarettes appear to be a less dangerous alternative to traditional tobacco products, which are loaded with substances like tar that e-cigarettes do not have. (E-cigarettes contain nicotine dissolved in a liquid that becomes a vapor when heated, which the user inhales.)

But others say that too little is known about e-cigarettes to accurately assess their safety, and that they may hook more people – especially young people – onto nicotine than they help wean off standard cigarettes.

SOURCE: Elizabeth A. Harris, New York Times


HOW REGULATIONS ARE PREVENTING MOBILE HEALTH INNOVATION

Imagine you suffer from high blood pressure and are required to take medicine twice a day. As you prepare to take your medication, you grab a small electronic device and swallow it alongside your pills. Powered by your stomach fluids, this sensor tracks the effects of the pill on your body and relays it to your iPad, where the information is presented to you in an accessible form. The information is seamlessly transmitted to your doctor’s computer, through which you can easily review it during your next visit.

While this invention may have belonged in a futuristic novel a decade ago, it is now a reality thanks to the incredible advances made in mobile health over the last five years. The Proteus Digital Health Feedback System is one of many groundbreaking medical applications revolutionizing the relationship between technology and health care.

Smartphones and tablets have been harnessed for medical use by a growing subset of application developers, and their products include Android asthma detectors, smartphone-based glucose meters, and portable stethoscopes. The market potential is huge: 78 percent of smartphone users have expressed interest in portable health devices, and download numbers have skyrocketed in the last two years. Mobile health has the potential to reduce health care costs and to minimize human error.

But what if, for example, the ingestible sensor misreads? Or what if an upgrade in the iPad software causes the display to be incorrect and its patient to ignore an important health risk? Medical applications may appear alongside games and social media applications on a smartphone, but they have the potential to seriously harm their users if errors occur.

US government organizations ranging from the Food and Drug Administration (FDA) to the US House of Representatives are engaged in a wrestling match to define what applications government should regulate, who in government should regulate them, and how this regulation will be enforced. While most of these measures are sensible and designed to protect consumers, regulatory risk has scared off investors and caused delays in introducing valuable applications to the market.

Mobile health has too much potential to allow regulatory concerns to undermine it. By considering feedback from stakeholders and adapting to digital health challenges, the organizations in charge of regulating mobile health can develop a regulatory plan that promotes, rather than inhibits, innovation and consumer safety.

SOURCE: Sarah Fellay, AEI

Benjamin Domenech

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