Consumer Power Report #201

Published November 9, 2009

What a week last week was!

First were Tuesday’s elections, which should have been a wake-up call for Democrats everywhere. The Democrat establishment tried to spin it as a victory (because of NY-23), or at least no reflection on President Barack Obama since Virginia had a lousy candidate and New Jersey had corruption. Interesting that ol’ “Blame Bush Obama” takes no responsibility for anything. But the people who will be on the ballot in 12 months don’t have that luxury. This is looking more and more like a replay of 2004. Let us hope that if the Republicans win, this time they won’t squander the opportunity. You can’t win an election just to hold the office. You have to do something useful while you are there.

Thursday, the folks came to Washington to express themselves on health care. Their activism is the best insurance that a new Republican Congress, if it happens, will stay focused on restoring freedom. These newly energized activists are not impressed with party labels or job titles. They are impressed only with action. Do the job right, or get the hell out.

President Obama touted the endorsement by the AMA and AARP of the worst piece of legislation ever written in America. Unfortunately for the AMA leadership, it has to meet its members in Houston at the semi-annual House of Delegates meeting. They were met with a Tea Party right outside their convention headquarters and a resurrection of physicians who are shocked and dismayed that “their AMA” has so flagrantly disregarded the long-standing policies and principles established by the House of Delegates. Expect a vote of No Confidence in the Board of Trustees. Now, when does the AARP hold its next meeting?

Finally, also on Saturday Nancy Pelosi brought her bill to a vote on the floor of the House. They spent all day Saturday weighing the pros and cons, not of the bill, but for themselves personally. That is why announced on Friday it has a war chest of more than $3 million to spend on primary challenges against Democrats who vote “No.”

In the Senate, things are more difficult. Democratic leadership has been hinting that it will not be able to get anything through this year, and may have to delay until 2010. It is hard to see how they will have the votes to pass it in 2010 if they don’t have them in 2009.

All of this is just beginning to get interesting, eh?



Congress and the White House are using the insurance industry as an example of what they would do to the AMA, PhRMA, AHA, and other interest groups that dare to get out of line. This is Chicago-style intimidation at its most vivid. Not that the industry doesn’t deserve it. AHIP is just fine and dandy with mandates and price controls as long as its member companies will prosper. But it was always naïve of them to think it would work that way.

Four reports have come out recently pointing out the obvious: Guaranteed issue and community rating without mandatory coverage will raise premiums through the roof. It is a completely unremarkable finding. Every economist on the face of the Earth knows it is true and it has been proven over and over again in states such as New Jersey, New York, and Massachusetts. Now, the government may be able to paper over those premium increases with subsidies, but the underlying effect is still there. And the price has to be paid for by someone … if not by the insured through premiums, then by the taxpayers through subsidies.

AHIP and the Blues were all in favor of these rating restrictions and price controls as long as people were forced to buy what they sell. But Congress started to waver on the mandate because it is mean to working people to make them buy what they can’t afford. Well, yes it is. But they still thought it was nice to have healthy young people pay the same premiums as decrepit older people. Well, no it isn’t.

We already have reported on the studies by AHIP and the Blue Cross Blue Shield Association. Since then WellPoint has released a study looking at the impact in the specific states where it does business, and Milliman released a report on “Adverse Selection and the Individual Mandate.” Both re-emphasize the message.

But Congress and the White House do not like to be contradicted, so National Underwriter reports the “Administration Takes on Insurance Giant.” It writes, “The White House has accused WellPoint Inc. of ‘cherry picking certain policies and ignoring major aspects of reform’ in a collection of analyses of how health reform might affect some of the states it serves.” And so on, in the administration’s continuing effort to demonize any person or company who has the “audacity” to disagree with it.

But the abuse of power doesn’t stop at the White House. Sen. Jay Rockefeller, jes’ a good ol’ boy from West Virginny, thinks profits are a terrible thing, according to Reuters. (Hey, Jay, just how did your granddaddy make his money again?) It writes, “Senate Commerce, Science and Transportation Committee Chairman John Rockefeller, in a letter to Cigna, demanded that the company immediately clarify the amount of premiums it receives and the amount of the claims it pays for group health insurance products.”

The article adds, “He wrote in the letter that: The analysis shows that in the individual and small group segments, insurers spend a significantly smaller portion of each premium dollar on patient care than they do in their large group businesses.” Well, duh!

And so it goes in this new era of a unified America.

SOURCE: Milliman Report; WellPoint studies; National Underwriter; Reuters


But so far AHIP is undaunted. It released the following statement last week:


Congress will soon vote on health care reform legislation that could harm the more than 8 million Americans who have a health savings account (HSA) and restrict those who want to purchase HSA coverage in the future.

Starting this week, the House of Representatives will begin debate on the Affordable Health Care for America Act, and the Senate is expected to finish work on its version of health care reform shortly.

Both the House and Senate bills make major changes that would impact people with HSAs:

Both bills mandate benefit levels for most health plans that could eliminate HSAs as an option.

Both bills prohibit you from using any money in your HSAs to buy over-the-counter drugs such as allergy medications that you now get without a prescription.

The Senate bill may place a tax on high-value health plans, so-called “Cadillac” plans, by taxing the cost of such coverage, including employer contributions to your HSA.

Both bills raise the penalty for the use of HSA dollars for non-qualified medical expenses from 10% to 20% of the reimbursement.

It is important that you take the time to contact your members of Congress and let them know that you depend on your HSA for affordable coverage and the flexibility to set aside tax-free dollars to pay for your health care expenses.

When contacting your member of Congress, here are some things to keep in mind:

Over 8 million Americans currently have coverage through HSAs — people should be able to keep the coverage they currently have.

Going forward, people should be able to choose what works best for them — including the right to pick a health savings account that allows them to decide how best to spend their health care dollars.

Employers that offer HSAs should be allowed to continue to provide these benefits to their employees.


I participate in a number of discussion groups, often with highly educated experts in health policy. In recent months it has become increasingly difficult even to discuss the health reform proposals. There are so many versions and iterations of all these bills and amendments that it has become nearly impossible to discuss any of it. And some of it isn’t even exposed yet, like Reid’s bill. CBO keeps scoring this, that, and the other, and it is hard to match up the particular CBO score with the right bill or amendment, let alone compare specifics.

Yet every provision is critically important, and not just by itself, but how it interacts with the other provisions.

It feels like a shell game, and it is small wonder people are edgy about the whole enterprise. Too many moving parts, too little clarity, too much rhetoric and jargon, and all tainted with political ambitions.

I think we are way beyond what the legislative process is capable of doing. There is literally no one in Washington who knows what it is they are voting on anymore.

It would be far better to take all these topics one bite at a time, by which I mean separate bills for:

  • Medicare payment reform
  • Insurance regulation
  • Assistance to the needy
  • Management technology upgrades
  • Workforce initiatives
  • Quality improvement initiatives
  • Professional liability reform

Each of these is complex by itself. Blending them all together into a single bill is simply impossible.

For example, I concede that we need to completely overhaul the regulatory regime currently in place for insurance. Each state has completely different statutes for the individual, small group, and large group markets. Some states have separate regulations for Blue plans, commercial companies, and HMOs. Then ERISA exempts self-funded employers from any state regulation. Regulatory reform is an enormous challenge all by itself and the current bills are way too vague on how, or even whether, that is supposed to happen. For instance, it is not at all clear what will be the state and federal roles for regulating carriers that participate in the Exchange. Who oversees their solvency, reserves, accounting, investment practices? If a company markets exclusively through a national Exchange, what is its state of domicile? Will HMOs continue to be regulated by agencies that are different from the agencies that regulate other carriers, as they are in California? Who will regulate brokers?

Or take the workforce issue. We are facing substantial shortages of primary care physicians and nurses as the Baby Boom generation retires. Expanding insurance coverage will aggravate the problem. Plus there are new technologies coming on-line all the time. How do we get enough technicians to run the machines?

It is not just a matter of giving scholarships to med students or opening more slots in dental schools. The whole licensure and oversight regime currently in place needs to be re-examined. Everyone who looks at it concludes it is a mess. Why at least could there not be interstate reciprocity for licensing and disciplinary actions? Why can’t a physician who is licensed in Arizona prescribe drugs for patients in New Mexico? Or how is it that a doctor who is disciplined in one state can set up shop in the adjoining state?

And on and on and on. Because this thing is so big, we are not paying enough attention to the critically important REAL issues.


One of the best writers in American newspapers these days is Jeff Jacoby of the Boston Globe. He writes that President Obama thinks a “public option” would increase competition in health insurance. “No, it wouldn’t,” Jacoby writes. “More competition among health insurers is a consummation to be devoutly wished. But there are better ways to get there than a public option. Here are three:

“Tear down the barriers to buying insurance across state lines.

“Repeal mandatory benefits that make health insurance needlessly expensive.

“De-link health insurance from employment.”

He concludes, “Yes, Mr. President, consumers do benefit from choice and competition. The key to both is not more government regulation and control, but less.”

ABC News reports “senior Congressional Democrats told ABC News today it is highly unlikely that a health care reform bill will be completed this year, just a week after President Barack Obama declared he was ‘absolutely confident’ he’ll be able to sign one by then.”

The Wall Street Journal says, “Time is running short for Congress to deliver a health bill to President Barack Obama before the end of the year, prompting lawmakers to prepare for the debate to carry into 2010.”

The Associated Press writes, “After months spent criticizing Democrats’ health overhaul plans, House Republicans have produced a draft proposal of their own. It’s much shorter and focuses on bringing down costs rather than extending coverage to nearly all Americans.”

CHCC member Robert Hamilton, MD and 21 other physicians wrote to the Chicago Tribune to say, “We take serious exception to the letter “Children’s health” (Voice of the People, Sept. 29), signed by physicians associated with public and private pediatric hospital programs in the Chicago area, advocating a tax on sugared beverages to add more funds for children’s care programs.”

The American Legislative Exchange Council reports, “Montana now becomes the 20th state where legislators have introduced, or will introduce, legislation modeled after ALEC’s Freedom of Choice in Health Care Act.”