Consumer Power Report #231

Published July 21, 2010

I really hate it that I have to write about Obamacare every week. Unfortunately, the law is so sweeping and so onerous that it has taken all of the air out of the room and left little time to discuss anything else. We don’t get to look at any other developments around the world or domestically in medicine or health care financing. We aren’t even able to deal with the stalking horses of health information technology or comparative effectiveness research, which slightly preceded Obamacare by being inserted into the “stimulus package.”

It isn’t just us. There are a flood of conferences around the country aimed at employers and providers on topics such as “how to transform your business into an Accountable Care Organization.” As if anyone wanted to be an Accountable Care Organization before this damned law was passed. No one even knew, or knows today, what an Accountable Care Organization is, but when the feds put up a hunk of moolah everyone jumps to get a piece of it.

And it isn’t just today. This will be going on for the next 20 years. Already there are new proposals floating around in Congress to “improve and enhance” Obamacare. Every time a politician sneezes the entire health care system will reach for a hankie. And not one minute or one dollar of all of this has anything to do with actually caring for patients.

Health care is now about nothing except politics.

— Greg Scandlen


  • Once More to Massachusetts
  • Surprise! Berwick’s Back
  • Obamacare and Taxes


Writing in The Wall Street Journal on July 7, Joseph Rago looks at how the Bay State is doing as a model for Obamacare and concludes, “the Massachusetts plan couldn’t be a more damning indictment of ObamaCare.” He begins with the arbitrary price controls on insurance premiums that ignored the advice of the state’s professional insurance regulators and were eventually reversed by a state appeals board. Still, he says, “the five major state insurers have so far collectively lost $116 million due to the rate cap. Three of them are now under administrative oversight because of concerns about their financial viability.”

Now, the governor “wants to export the rate review beyond the insurers to hospitals, physician groups and specialty providers–presumably to set medical prices as well as insurance prices,” and a state senator “has introduced a new bill that will make physician participation in government health programs a condition of medical licensure.”

SOURCE: Wall Street Journal

Robert Samuelson takes a similar view in The Washington Post and decides the Massachusetts experience is “not encouraging.” He says, “The state did the easy part: expanding state-subsidized insurance coverage. It evaded the hard part: controlling costs and ensuring that spending improves people’s health.”

He acknowledges the state reduced the numbers of uninsured and slightly improved access, “But much didn’t change. Emergency rooms remain as crowded as ever [and] state leaders have proved powerless to control costs.” He adds that state spending on health care has risen from 16 percent of its budget in 1990 to 22 percent in 2000 and 35 percent this year. Health care is squeezing out everything else the state is expected to do.

He writes, “A year ago, a state commission urged another approach: Scrap the present ‘fee-for-service’ system,” in favor of a “global budget.” “But the commission offered no blueprint, and efforts to craft consensus among providers, consumer groups and insurers have failed. State Senate President Therese Murray, an advocate of payment change, has given up for this year. ‘Nobody is in agreement on anything,’ she told the Boston Globe.”

Samuelson concludes, “What’s occurring in Massachusetts is the plausible future: Unchecked health spending shapes government priorities and inflates budget deficits and taxes, with small health gains. And they call this “reform”?

SOURCE: Washington Post

Meanwhile, in the Boston Globe Kay Lazar writes, “The relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventually weigh heavily on the state’s already-stressed budget.”

She cites one broker who has lost 90 employer clients to the state plan since April and another consultant who has been asked to help 400 workers get state-subsidized coverage. State officials are unconvinced it is a trend, but the last survey was done at the end of 2009. The article says, “company owners say it has become far cheaper to pay the state penalty for not covering their workers – roughly $295 annually per employee – than to pay thousands more in premiums.” It adds that the federal penalty that goes into effect in 2014 does not impose any penalty on firms with fewer than 50 employees, so we can expect a flood of small employers dropping coverage then.

SOURCE: Boston Globe

Also from the Boston Globe is an article by Elizabeth Clooney that reports “primary care doctors [are] harder to find.” She bases her reporting on a study issued by the state and notes, “Massachusetts has the highest ratio of doctors per population in the country, but that doesn’t mean its residents can find a primary care physician who is accepting new patients.” More specifically, she writes, “Last year 60 percent of family medicine doctors’ offices were accepting new patients, down from 70 percent in 2007 [and] only 44 percent of internal medicine practices were accepting new patients, down from 66 percent in 2005.” In fact, “last year 22 percent of residents said they had trouble obtaining health care, despite statewide gains in insurance coverage.”

SOURCE: Boston Globe


Let’s start with a little article from Business Insurance. Jerry Geisel reports on another recess appointment Obama recently made – naming Joshua Gotbaum as director of the Pension Benefit Guaranty Corporation. PBGC guarantees the solvency of private pension funds, a function that is critical right now as so many companies are in financial peril and so many Baby Boomers are reaching retirement age.

In this case, the recess appointment was entirely appropriate. Gotbaum was originally nominated last November, he was approved by the Senate HELP Committee in April, but further action was blocked by Sen. Sherrod Brown (D-OH) who had a problem with the way PBGC handled the termination of the pension program at Delphi Corp.

This is a true example of unreasonable obstructionism, and Mr. Obama was right to make the recess appointment. But it is curious he had not a word to say about how the Dems were placing obstacles in the way of good governance, etc., etc., etc.

SOURCE: Business Insurance

Much to my amazement, Senate Republicans were pretty effective in objecting to the Berwick dodge. Alexander Bolton reports in The Hill that in retaliation to the Berwick recess appointment, “Senate Republican Leader Mitch McConnell (Ky.) blocked a Democratic request Wednesday evening to advance two of President Obama’s nominees to the U.S. Court of Appeals for the Fourth Circuit.”

He quotes McConnell as saying, “Democrats didn’t schedule so much as a committee hearing for Donald Berwick. The mere possibility of allowing the American people the opportunity to hear what he intends to do with their health care was evidently reason enough for this Administration to sneak him through without public scrutiny. So given that the President has been so dismissive of the Senate’s right to provide advice and consent under the Constitution, I am not inclined at this point to consent to the agreement proposed by my friend from North Carolina.”

Okay. That’s more like it.

SOURCE: The Hill

So, now Obama’s relented – sorta. His recess appointment still stands, but he also has resubmitted the nomination to the Senate. That means Berwick will continue running CMS at least through 2011, but he may also have to finally go through confirmation hearings.

SOURCE: Bloomberg Businessweek; UPI; Ben Domenech

And what a feast these hearings would be. Berwick’s nomination should open up a discussion of the “real nitty-gritty” in the future of health policy, financing, and delivery. One might have thought the legislative process would have done so long before the damnable law was passed but alas, no one in Congress had the slightest interest in actually debating any of the issues. They preferred to echo talking points and bromides, all of which have turned out to be untrue. For a preview, I will simply refer you to an article Nat Henthoff published on Real Clear Politics.

SOURCE: Real Clear Politics


Although the medical/business community is focused on how to implement Obamacare, the likelihood of it being thrown out by the courts is growing dramatically. The latest evidence is that the administration has decided not even to defend the law on Commerce Clause grounds, but will argue instead that the mandate isn’t really a mandate at all, but merely a tax. The federal government certainly has authority to levy a tax and provide a program.

Well, yes it does. And if that was how the law had been written it would certainly pass judicial review. But of course, if that was how it had been written it never would have passed in Congress. Instead, it was written to require people to pay premiums to private entities. The “tax” here is not merely the penalty paid to the IRS for failure to buy health insurance, but the requirement to pay premiums in the first place. Ergo, it is NOT a “tax.” Private companies are not allowed to collect taxes from citizens.

My advice to companies – do not throw away a lot of money learning how to comply with a law that will never survive a court challenge.

SOURCE: One of the niftiest analyses is by Ken Blackwell and Ken Klukowski on the Huffington Post (of all places); Heritage also has an analysis, but it is a little too willing to accept that this “tax” is legitimate for my tastes; American Spectator

Meanwhile, the IRS will have its hands more than full trying to administer everything else this law requires, according to the Washington Post. Some of this is just beginning to sink in to the minds of the public. In 2012, every business, including sole-proprietorships, will have to issue a 1099 to anyone from whom it buys $600 worth of goods or services. The IRS’s Tax Advocate Service says, “For example, if a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases.”

When I try to explain this to business groups, they invariably reply, “No, that can’t possibly be right. You mean if I buy $600 worth of paper from Wal-Mart in the course of a year I have to get their IRS number, the address of the corporate accounting office, send them a 1099 and another copy to the IRS?” Yep. That’s exactly what it means. “What does this have to do with health care? What is wrong with these people?”

I don’t know, but the Tax Advocate Service estimates 40 million businesses will be affected. And no money was appropriated to cover the cost.

CNN Money reports that purchases made with debit and credit cards will not be subject to this new rule, because “a separate reporting requirement kicks in next year that will cover card transactions and help the IRS spot unreported payments made through those channels.” The article quotes Tom Henschke, president of SMC Business Councils, as estimating only 10 percent of all transactions will be exempted. He says, “Most of the small businesses out there that do small business [purchasing] don’t do it by credit card. One of the reasons is the transaction cost is very high – 2% to 3%.”

SOURCE: Washington Post; CNN Money