Consumer Power Report: An Increasingly Irrelevant Reform

Published August 1, 2011

Following on Peter Orszag’s admission that President Barack Obama’s health care law does not solve the unsustainable health care cost problem the United States faces, the latest CMS Actuary report confirms that health care spending is likely to double over the next decade, including roughly 20 percent more on Medicaid.

The report by the Medicare Office of the Actuary estimated that health spending will grow by an average of 5.8 percent a year through 2020, compared to 5.7 percent without the health overhaul. With that growth, the nation is expected to spend $4.6 trillion on health care in 2020, nearly double the $2.6 trillion spent last year.

The full report is here. It concludes:

The largest impact on the growth of health spending is expected to occur in 2014, when the major coverage expansions begin. There is projected to be a proportionately larger impact on physician and clinical services and on prescription drug spending growth relative to other services and goods, as those who gain coverage are likely to be relatively young and healthy and to use less intensive care than the populations currently enrolled in Medicaid and private health insurance.

Combined with the entry of the baby boomers into Medicare and Medicaid, the impact of the Affordable Care Act–stemming from the expansion of Medicaid, subsidies associated with exchanges, and administrative costs associated with implementing and operating the various provisions–is projected to increase federal, state, and local governments’ estimated share of total health spending to near 50 percent in 2020. At the same time, households and private businesses are anticipated to pay for a smaller portion of the nation’s health bill than they would have without the Affordable Care Act, but still will face a growing burden on their respective limited resources.

Set aside, for the moment, the partisan reports about PPACA’s failures. Consider only these neutral assessments. What do you see?

It’s a picture of a lot of nibbling around the edges, and very little that addresses the problems hitting most Americans where they are. It’s a picture that looks less like health reform and more like a haphazard approach to income redistribution, which does nothing of significance to help deliver better quality care, nothing to ease the overwhelming burden of health costs on the vast majority of Americans, and nothing to stem the ever-increasing problems of access barriers for those on Medicaid, and soon for those on Medicare. And at the same time, it only accelerated the challenging entitlement picture–the reform’s honest supporters readily concede that fact.

So with all that bipartisan goodwill squandered, an approval rate sunk, an election cycle lost, and narrative control ceded away–what, then, did PPACA truly achieve? If the report from federal officials at CMS is to be believed, it nudged America’s health spending from a rate of 5.7 percent growth in health costs to 5.8 percent, while mandating insurance coverage for the population least likely to need it.

When President Obama is former President Obama–either in 2013 or in 2017–he will be asked a question, and I expect asked regularly: Was all that health care reform talk really worth it?

I also expect he will tire of answering, and rather quickly.

— Benjamin Domenech

In This Issue:


In this story, we see the Obama administration trying to shift the PPACA storyline with the concentrated power of the federal government over the states. The White House has decided the states aren’t sufficiently holding the line against premium hikes:

The Obama administration will soon take over the review of health insurance rates in 10 states where it says state officials do not adequately regulate premiums for insurance sold to individuals or small businesses.

At least one state, Iowa, has protested the federal decision and asked administration officials to reconsider.

Several other states acknowledged that they lacked the power under state law to review health insurance rates. Several insurance commissioners tried and failed to get such authority from their state legislatures this year.

Starting Sept. 1, federal and state officials will begin to scrutinize proposed rate increases of more than 10 percent to determine if they are justified. White House officials say their ability to publicize excessive, unreasonable rates will be a major protection for consumers under President Obama’s health care law.

Many individuals and small groups of employees have seen premiums rise 20 percent or more in the last year.

For those keeping track, that’s small groups and individuals in Alabama, Arizona, Idaho, Louisiana, Missouri, Montana and Wyoming, and small groups only in Iowa, Pennsylvania and Virginia. The power’s in D.C. now, whether they like it or not.

SOURCE: The New York Times


Grace-Marie Turner cites an interesting American Action Forum study on the level of cost-shifting to seniors expected under PPACA’s reworked Medicare system.

Pharmaceutical companies already are required to pay rebates to states for the right to sell their products to Medicaid patients. A proposal by Rep. Henry Waxman, D-Calif., and Sen. Jay Rockefeller, D-W.V., would require drug companies to pay a rebate to the federal government for prescription drugs sold through Medicare Part D for those low-income seniors who also qualify for Medicaid or who are eligible for subsidies. This proposal, which is now in play as part of the negotiations to increase the government’s debt ceiling, would collect up to $112 billion over the next 10 years.

Supporters of the rebate proposal say the money would come from the pharmaceutical companies, but the logic is flawed. Experience with the Medicaid rebate programs already has been shown to increase costs for prescription drugs sold in the private sector. And ultimately, the rebate costs are shifted to consumers.

If the new Medicare rebate tax were imposed, more than 17 million seniors who don’t qualify for low-income subsidies would face drug benefit premiums that would be 20 to 40 percent higher than they are paying now, and they would face an average of $200 a year in higher out-of-pocket costs.

The American Action Forum study she references is here.

SOURCE: Kaiser Health News


The House Oversight Committee last week looked into improper Medicare payments, highlighting a new Government Accountability Office (GAO) report released on Thursday

The report found that the Health and Human Services Department has been making progress in cutting back on improper payments, but has a long way to go.

Improper payment estimates cover both overpayments and underpayments and include improper documentation, medically unnecessary services, coding and billing errors and payment calculation errors. Fraud is partly to blame, but the full cost of fraud in the program isn’t known because the process to estimate improper payments isn’t designed to detect or measure fraud.

HHS officials defended their efforts. They point out, for example, that they’ve reduced the error rate for fee-for-service billing for physicians and hospitals, down to 10.5 percent of claims in 2010 from 12.4 percent in 2009.

Read the GAO report referenced above here.

SOURCE: The Hill


Sen. Orrin Hatch (R-UT) wrote to HHS Secretary Sebelius last week challenging the Institute of Medicine (IOM) recommendation to make prevention services a federal mandate for all health insurance plans–a recommendation that holds particular concern for religious providers:

Aside from my procedural concerns with the approval of these recommendations, I have substantive concerns as well. First, it was disconcerting to learn that the Administration directed the IOM to disregard any consideration of how these new federal mandates would drive up health care costs for American families. President Obama, you, the former Director of the Office of Management and Budget, and many other administration officials repeatedly told the American people that the President’s health care law would bring down costs and make coverage more affordable. Health care economists understand, however, that as a general rule benefit mandates drive costs up. In fact, the Congressional Budget Office has stated that “[a]lthough different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.” In addition to taking away the right of individuals to choose the health care plans that best fit their needs, approving these recommendations will bend the health care cost curve in the wrong direction through federal benefit mandates, added layers of regulation, and price controls that stifle innovation. Given that benefit mandates generally increase the cost of coverage and decrease affordability, your contention that such benefits are “free” would be misleading, and your failure to instruct IOM to consider mandate costs is troubling.

My second concern with these recommended mandates runs deeper, because they threaten the core principles of personal liberty and individual conscience on which this nation was founded and that you and I take an oath to support. If the IOM recommendations were implemented, every health insurance plan would be forced to cover all Food and Drug Administration (FDA) approved contraceptives, including abortion-inducing drugs such as Plan B and Ella. The implications of such a decision would be a deliberate violation of First Amendment principles. If you adopt these recommendations, the President’s health care law would require institutions like Brigham Young University and the University of Notre Dame to subsidize abortion-inducing drugs for their employees. It would require the health plans of religious hospitals, and even churches themselves, to subsidize abortion-inducing drugs.

Helen Alvaré, an associate professor at George Mason University School of Law and a senior fellow of the Witherspoon Institute, criticizes this decision further at Public Discourse.

SOURCE: Senator Orrin Hatch


One of the underreported issues with the technological demands of the federally mandated health care exchanges is the problems sparked by cloud-based security for patient records. A new approach is being tested at Veterans Affairs to try to mitigate situations where records were being shared via poorly secured online storage mechanisms.

The Department of Veterans Affairs (VA) is testing an unnamed commercial “cloud” application that will allow VA employees to share data in the cloud without compromising the personal health information of patients, according to a report in FierceGovernmentIT. VA Chief Information Officer Roger Baker said a few months ago that this option would be available by the end of the summer.

The department’s monthly reports to Congress have mentioned infractions of security rules involving unauthorized use of web-based solutions outside of the VA information system. Employees reportedly stored personally identifiable health data in commercial cloud collaboration applications such as GoogleDocs and Yahoo Calendar.

In one case at the Indianapolis VA hospital, a spreadsheet uploaded to EditGrid included the names and diagnoses of 184 patients. While the spreadsheet was password-protected, the site didn’t use secure hypertext transfer protocol.

Read the VA report here.

SOURCE: Fierce Health IT