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Why Obamacare Is Still With Us

The Josiah Bartlett Center’s Andrew Cline writes in USA Today that to replace Obamacare, Republicans must first agree to make a gradual transition toward a freer market in health care.  (Editor’s note: We did not write the USA Today headline. That was the work of an editor at the paper.)

 

Why Obamacare is still with us

By Andrew Cline 

Republicans in Washington have failed to deliver on a signature campaign promise — to repeal Obamacare — despite controlling the House, Senate and White House. After last week’s flop, the party’s various factions pointed fingers faster than an all-mime production of “Gunfight at the O.K. Corral.” 

The most common accusations — inept management, poor leadership, rogue senators — identify only symptoms of a larger problem. The “root cause,” so to speak, is that the Republican Party does not enjoy the same clarity of purpose on health care that the Democratic Party enjoys. 

On health care, Democrats have two advantages over Republicans. One is a shared purpose: universal coverage achieved through aggressive government intervention. The other is their willingness to achieve that goal incrementally.

Obamacare did not achieve universal coverage. The percentage of uninsured Americans has fallen from 14.6 percent in 2008 to 11.3 percent. But Obamacare moved the country closer to the goal, which brought more strident left-wingers on board. 

Republicans do not share such clarity. There is broad agreement only on the political goal: repealing Obamacare. There is no agreement on the principles, never mind the details, that would guide replacement.

There are two primary reasons for this lack of clarity. One is that the Republican Party does not insist on ideological conformity from coast to coast. Keeping the likes of Sens. Rand Paul and Susan Collins under the tent helps the party win majorities in Congress. But that ideological diversity can make it harder to govern. 

Democrats have a spread, too, but it is narrower. Nearly a third (29 percent) of Republicans say the federal government “has a responsibility to ensure health coverage for all,” while only 14 percent of Democrats say it doesn’t, according to Pew Research data. 

The other reason is that health care does not lend itself to quick “get the government out of the way” fixes. The health care marketplace is thoroughly distorted by government interference (this was true well before Obamacare). These distortions have to be slowly and carefully unwound. Because many of them have grown popular, no majority can be found for quickly abolishing them. 

If there were a quick and easy free-market solution, it would be law by now. But the political reality is that government’s heavy hand will not be removed any time soon — because most voters don’t want it to be. 

Another factor: Medicaid comprised 28 percent of state budgets in 2015, which explains why so many Republican governors pushed back against the last Obamacare repeal bill. (For comparison, elementary and secondary education accounted for 19.5 percent.)

Pew polling shows that only 5 percent of Americans say government shouldn’t be involved in health care. Given the country’s lack of an appetite for a pure free market in health care, Republicans might consider turning to a leader from the past for guidance. Conservative health care analyst Avik Roy reminds Republicans that in his classic 1964 “Time for choosing” speech, Ronald Reagan offered a guidepost, saying “no one in this country should be denied medical care because of a lack of funds.” Taking his lead from Reagan, Roy offers a path forward. 

Roy, who has urged Republicans to bridge their internecine gap, points out that health care is the No. 1 driver of runaway federal spending. With every day that passes under the current system, the country slips into worse financial shape and the country becomes more dependent not just on Washington, but on the bureaucracy itself (see Medicaid). 

Roy offered a plan in 2014 that would cover more people than Obamacare while reducing government interventions and spending. It would replace Obamacare with Swiss-style subsidies for lower-income Americans while transitioning the inefficient government-run Medicaid program toward a more market-oriented system. 

It would be an improvement over the current system, yet it is not even considered because it is not free market enough for most Republicans. Opponents to options such as this one pretend that the alternative is a true free market in health care. It isn’t. There is no appetite for a true free market at the moment. The alternative to a transitional model is the status quo. 

We can either move incrementally toward a freer market, or we can drift toward single payer. Those are the options. If Republicans cannot agree on that, then Obamacare really is here to stay. 

Andrew Cline is interim president of the Josiah Bartlett Center for Public Policy, a free-market think tank in New Hampshire. 

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Narrow Hospital Networks are the Last Gasp of the Past

Charlie Arlinghaus

May 21, 2014

As originally published in the New Hampshire Union Leader

The real problem with the Obamacare network in New Hampshire is not that it is too narrow but that there is any network at all. Healthcare costs are lowered not when the one government sanctioned picks winners and losers but instead when providers compete for the customer pool. The oddly constructed health exchange in New Hampshire is not the beginning of the future but the last gasp of the past.

Under the Affordable Care Act (ACA) commonly known as ObamaCare, the federal government created a set of regulations to offer approved health insurance in what was optimistically called an exchange. In theory — and in some larger states this sort of worked – multiple insurance companies would offer competing products albeit ones that were all constructed according to the thousands of pages of regulations that limit differences.

In New Hampshire – and this wasn’t actually a surprise to anyone – it didn’t work that way. We don’t have a lot of competition in the regular health insurance market and only one company, Anthem, signed up to be the government insurer. This is where the trouble starts.

Insurance companies worried that the population would be somewhat sicker than typical and have fewer young people than they’d like (young people consume very little healthcare so their premiums are profit used to subsidize others). In fact, we’re discovering the population is much sicker and less young than previously thought.

To control costs, Anthem did what so many exchange insurers have done across the country: they developed a narrow network of hospitals and affiliated doctors. Some hospitals were in and others out. At first, half the hospitals were in and half out but they added back in a few small rural hospitals under pressure. Right now there are 16 winners among hospitals and 10 losers. Naturally the ten that have left out of the government-subsidized health insurance system are worried.

The use of preferred providers and networks of allowed providers was common in the 1990s era of HMOs and is making a comeback. The Kaiser Family Foundation reported that narrow networks in employer plans rose from 15% to 23% in the last six years. On ACA exchanges across the country narrow networks account for 70% of the plans.

The reason is cost. Exchange plans are not like regular private insurance. They need hospitals and the doctors they own to accept a significantly lower payment that your insurance and mine give them. The deal offered is that you’ll get less money but we’ll improve your market share by excluding some of your competition.

In April, the Congressional Budget Office found that costs will likely be $1.38 trillion rather than $1.48 trillion over ten years or about 7% lower than they would have been. The CBO said exchange plans have narrower hospital networks, lower payment rates, and tighter management of use of care (think HMOs) than regular insurance does.

In a regular free market, there is nothing wrong with one company deciding to offer a product that can’t be used everywhere. Narrow networks are fine. If it’s too narrow, try another product. But the exchange isn’t regular. One provider of a government plan that many citizens are required by law to purchase insurance from is not the same thing as regular choice. As the government pushes more and more of the traffic into the exchange, hospitals are rightly worried that if they’re left out that the government as de facto selected them for closure.

So we end up with hearings about whether the state should have, once it knew there was to a monopoly provider of the service, approved picking winners and losers this way.

It doesn’t have to be this way. There is an argument to be made for not having networks at all. Noted national policy expert John Goodman writes about Wellpoint in California. They noticed that knee replacement cost from $15,000 to $115,000 for the same thing. They offered a plan for state workers and retirees that paid $30,000 which any one of 46 hospitals would accept. Consumers could go anywhere else but any cost over $30,000 was on their own. The result: Prices came down everywhere to meet demand. Anyone who wished could provide the same service at the same cost.

I think that model of pricing is worth repeating: Any provider who chose to meet the cost was eligible to provide the service. This model doesn’t pick winners and losers. It creates an incentive and offers complete customer choice. Customers could pay more but providers competed and often lowered their price to get the business.

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5,400 NH Obamacare Enrollments in January and an Updated Look at the Pool

Josh Elliott-Traficante

February 2014

January saw 5,417 Granite Staters select an insurance policy on the federal exchange. Since open enrollment began in October a total of 16,863 have selected coverage.

The Department of Health and Human Services with each successive monthly report continues to add more demographic data, giving a more detailed look at the insurance pool and what type of coverage they have purchased.

Plans Purchased:

Looking at the different polices purchased (Bronze, Silver, Gold, Platinum, Catastrophic) there has been very little change in percentages of each since last month’s report. The January numbers however, seem to indicate a shift, albeit minor, towards the less expensive plans.

Bronze

Silver

Gold

Platinum[i]

Catastrophic

New Hampshire

23%

59%

18%

N/A

1%

Change over Dec

+1

+2

-3

N/A

+1

 

A Demographic Look:

A possible cause for this trend towards the lower metal levels may be a result of a marginally more youthful pool. New Hampshire pool saw small up ticks in the proportional size of the 18-25 and 35-44 cohorts, with a corresponding decrease in the 55-64 cohort over last month. The all-important 18-34 cohort saw its share of the total pool increase a single percentage point to 23%. This reflects trends nationally, which also saw the share of 18-34 cohort increase by a single percentage point to 25%. Despite this improvement, this still leaves the 18-34 cohort well behind of the intended goal of it making up 40% of the pool.

<18

18-25

26-34

35-44

45-54

55-64

>65

18-34

New Hampshire

4%

8%

15%

14%

23%

36%

0%

23%

Change over Dec[ii]

0

+1

0

+1

0

-2

0

+1

 

Subsidies?

The percentage receiving subsidies for coverage increased slight to 74%, up from 72%. That translates to 12,450 receiving a subsidy, while 7,610 are not.

For the first time, the Department of Health and Human Services has included subsidy data, cross referenced with plan level. For those who did not qualify for subsidies, there was roughly an equal distribution between the three metal plans, with a small number opting for a catastrophic plan.[iii] In contrast, those receiving subsidies overwhelming chose Silver level plans over the other three options. This is not unique to New Hampshire but a national trend.

One possible cause the Cost Sharing Subsidy, which reduces the co-pays, deductibles and out of pocket limits of the insurance plans. In order to qualify for the subsidy, one must be below 250% of the federal poverty limit and purchase a Silver level plan. This type of incentive would naturally make the Silver level plan a much more attractive option over the other three options.

New Hampshire

Bronze

Silver

Gold

Catastrophic

With Subsidies

18%

68%

13%

0%

Without Subsidies

35%

31%

31%

4%

[i] Note: Anthem does not offer any Platinum level plans in New Hampshire

[ii] Note: Percentages may not equal 100% due to rounding

[iii] Note: Catastrophic level plans are only available for purchase by those age 30 and below.

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1,300 NH residents sign up for Healthcare Insurance on the Exchange in November

Josh Elliott-Traficante

December 2013

The latest data released by the Department of Health and Human Services showed that a total of 1,300 New Hampshire residents have selected a health insurance plan through the federal exchange during the month of November. Since open enrollment began on October 1, a total of 1,529 have signed up.

A total of 8,763 applications have been received by the federal exchange to cover a total of 17,234 individuals.

It is interesting to note that of the 12,768 that have been determined to be eligible to enroll in exchange provided insurance plans, only 4,927 qualify for subsidies, roughly 38.5% of the total.

The balance, 7,841 individuals, (61.5%), do not qualify for any assistance. There are two categories of people this might fall into: either people who have had their insurance policies canceled due to the law itself, or people who did not have insurance and though had the resources to buy it, did not.

The end result is that though Obamacare was designed to improve access to affordable healthcare, the majority of New Hampshire residents buying health insurance through the exchanges likely doing so either because their existing plan was canceled, or because they did not want to have insurance and are now required to have it.

All of these numbers stand in contrast to the nearly 22,000 who will lose coverage because their existing plans were not compatible with the new law. Though they were granted a temporary reprieve, the policies are still due to be canceled.

Link to full report from DHHS: http://aspe.hhs.gov/health/reports/2013/MarketPlaceEnrollment/Dec2013/ib_2013dec_enrollment.pdf

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Manuse Plan Would Protect NH From Obamacare Exchanges

Charlie Arlinghaus

February 22, 2012

As originally publish in the New Hampshire Union Leader

Contrary to some of the misinformation circulating in Concord, a state-run health insurance exchange bureaucracy operating on behalf of the federal government is a bad idea, is not required by any federal regulation, and would be an expensive strain on our state budget.

At the centerpiece of President Obama’s health care legislation is a mechanism known as an exchange — i.e., a new federal or state bureaucracy to be set up to administer the rules and regulations regarding health insurance under the so-called Affordable Care Act (ACA).

The ACA included hundreds of new regulations and federal mandates to govern health insurance once the law takes full effect. In addition, federal agencies are in the process of issuing thousands of new rules to implement the myriad provisions of the law. To administer those rules, there will be a state-level exchange in each of the 50 states.

The federal government had hoped each state would set up its own exchange and manage the regulations for it while assuming the operating costs of the new regulatory agency.

The law can’t require states to set up an exchange. It provides that the federal government will set up and fund a state-level exchange if the state government chooses not to. The majority of states around the country have balked.

Much of the information in this debate is easily misunderstood. One particular piece of information exists only in New Hampshire and is incorrect. Our HHS commissioner mistakenly claimed that not running the exchange ourselves will cause us to lose our federal Medicaid funding, decimating the state budget.

This claim has not been made in any other state. The Obama administration, which has been eager to have every state establish an exchange, has never alleged any such thing.

It seems unlikely that there is a condition attached to Medicaid that no one else in the country knows about except one lawyer in Concord.

The Cato Institute has published a more authoritative legal analysis to show why this claim just isn’t true. The misunderstanding stems from a problem with the original draft of the state bill. The debate in New Hampshire centers on Rep. Andrew Manuse’s House bill prohibiting a state-run exchange.The original version included language that could have cost significant Medicaid dollars based on requirements that new information be able to interface with the state exchange whether federally or state-run.

Rep. Manuse quickly changed the language to make the bill simply a prohibition on the state setting up an exchange, whether by itself or through contract. That’s a very sensible compromise.

Another big question mark has been the financing of a state-run exchange. While federal grants would cover the setup, no one is quite sure how much an exchange would cost the state to operate. The final rules haven’t come out. However, we have some hints in that the Massachusetts version costs $29 million to operate.

New Hampshire’s costs are likely to be in the neighborhood of $10 million annually.

Exchange supporters have taken to saying we pay either way. What they mean is that they believe that the federal government would likely tax participants (fees on insurance plans, brokers, insurers and businesses related to their policies) and that states, if forced to fund a program this expensive, would have to look at similar fees.

Although local exchange supporters believe the federal government can impose these taxes already, the federal government itself doesn’t agree with them. In the President’s budget proposal, he asked Congress for $860 million for the express purpose of funding federal exchanges. Mind you, the start-up money for state-established exchanges is elsewhere in the budget so the $860 million is just for the 20-30 states not creating a state bureaucracy.

So the administrative function of the federal health law isn’t funded unless we fund it for them.

They haven’t finished the rules, but they want us to create the administrative agency. They don’t have the money or the authority to raise it, so they want us to assume the financial cost.

I think Rep. Manuse has things about exactly right.

Charles M. Arlinghaus is president of the Josiah Bartlett Center, a free-market think tank in Concord. His email address is [email protected].

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Healthcare Exchanges

This is our dedicated page to information on healthcare exchanges, which are a centerpiece to the Patient Protection and Affordable Care Act, more commonly known as ‘Obamacare’

It will be periodically updated.

JBC President Charlie Arlinghaus on Healthcare Exchanges and why they are bad for NH

Cato’s Director of Healthcare Studies Michael Cannon and John Adler on the all important Obamacare Glitch

Also from Michael Cannon, his article in the National Review on how Obamacare can’t be fixed

The New Hampshire House  Bill: HB1297, which seeks to ban the state from setting up a healthcare exchange

JBC President Charlie Arlinghaus on why HB1297 is a good idea

 

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A State-run Federal Exchange is the Worst of Both Worlds

Charlie Arlinghaus

January 25, 2012

As originally published in the New Hampshire Union Leader

 

At the center of the debate over the federal law known as ObamaCare is a debate over whether or not states should administer the federal rules and regulations in a supposedly state-run Exchange. New Hampshire would make a mistake with significant financial consequences if it allowed itself to be seduced into this foolish idea.

When the federal government adopted health care reform known as ObamaCare or the Affordable Care Act (ACA), the rules and regulations included a plan that each state should set up an Exchange, a new bureaucracy to administer the significant rules already adopted and the forthcoming regulations envisioned by the bill. States are encouraged to set up their own federally regulated bureaucracy – the state as federal extension agents – or else the federal government will administer an exchange itself.

As details have become apparent over the last year or so, it is clear that whether the federal government runs the exchange or the state administers its rules for it amounts to the same thing, that the costs of running an exchange will impose a significant burden on the state, and that not setting up a state-based exchange is likely to force the law to be re-opened and hence renegotiated.

In early days, some opponents of Obamacare nevertheless thought perhaps states themselves could blunt its impact by setting up their own exchanges. The Heritage Foundation, opponents of the federal law, had helped Massachusetts establish its pre-ObamaCare exchange called the connector and initially thought maybe other states should follow suit. After a few months looking into the rules and regulations, they concluded “a state would now have no more real control over an exchange it set up than one HHS established.”

The conclusion is obvious and at the heart of the exchange debate. Whether run directly by the federal government or mandated by the federal government and carried out by local agents is immaterial. The regulations and decisions come from Washington with perhaps a few window dressing exceptions. As such, we are not deciding between regulation and autonomy, we are deciding whether or not we want a puppet government.

If it’s all the same, why not run our own exchange even for those few admittedly insignificant rules we can control? The difference is money. The Massachusetts connector, although the prototype, administers a less complex system than the new federal law and its annual budget is $29 million. No one knows what a New Hampshire exchange would cost but it would be somewhere between $10 and $20 million.

Federally collected tax dollars would pay for the start up costs but after start up the state would pay for the exchange itself. With state government on the hook, the federal regulations would pay less heed to their costs so there would be more of them. With a federally run exchange, the federal government – which hasn’t the budget authority for them yet – would have to weigh financial costs.

I have written often of the folly of a federal bailout of state governments. I don’t think any of us wants to see a state bailout of the federal government.

By the way, the obvious decision to hold our fire on establishing an exchange is not irreversible. The state may at any point if it so chooses reverse course and implement one.

The last reason to avoid a state run exchange is what’s known as The Glitch. Michael Cannon and Jonathan Adler writing in the Wall Street Journal discovered that the health law provides for premium assistance programs in state run exchanges but not federal ones. This was an error drafting a bill which requires the bill to be reopened to correct. If only 20 or 25 states adopt exchanges, as looks likely, the law would have to be opened up if it isn’t repealed next year.

By not adopting an exchange, we increase the pressure to open the law to fix the glitch. We also increase the financial pressure on a law that counted on passing the cost of running the exchanges to the states.

But regardless of the pressure we may wish to exert, setting up a state exchange is a bad idea. A state exchange is a fig leaf layer of bureaucracy between us and the people who really make the rules. Setting up a puppet government to put a happy face on federal regulation does no one any favors, and it would cost us tens of millions of dollars each year that we don’t have.

 

UPDATE: Attached below is a letter from HHS Commissioner Toumpas to House Commerce Chairman Hunt, which lays out his objections to HB1297.

HB1297 would ban the State of New Hampshire from setting up a healthcare exchange.

Toumpas Letter to House Committee on Exchanges

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