Consumer Power Report: Don’t Go Exchanging

Published September 12, 2011

Welcome to the Consumer Power Report.

In the latest edition of Health Care News, we report on information that provides every incentive for states to reconsider their current positions in regards to the health insurance exchanges mandated by President Barack Obama’s law.

It now appears the threat of an instituted “federal” exchange – where a state presumably would have no input during the process – is a more hollow threat than ever before. An excerpt from our upcoming piece:

Supporters of exchange implementation have argued repeatedly that states must act or risk losing control to a federally run exchange, operating outside state authority. Yet a closer examination of the law indicates such federally run exchanges would have several difficult budgetary hurdles to overcome.

While the text of Obama’s law grants HHS a nearly unlimited budget to fund state-created exchanges, the authority to create a federal exchange within the bill did not come with any funding at all. In a situation where a significant number of states declined to run exchanges themselves, HHS would have to go back to Congress for additional funding or find other means within its overall budget.

An additional drafting error in the law could prevent these federal exchanges from offering heavily subsidized premiums, their primary attraction to consumers. As first reported by Investor’s Business Daily, while Section 1311 of the law mandates the creation of state exchanges, and Section 1321 authorizes HHS to establish an exchange if a state refuses to comply, subsidies are available only to those consumers enrolled in “an exchange established by the state under (Section) 1311.” No similar language in the bill authorizes the subsidizing of individuals within the federal exchanges.

David Hogberg at IBD has that original report here. It’s impossible to overestimate how devastating an effect this glitch could have if it turns out to be immovable. And according to legal minds like Jonathan Adler, this is an error that cannot be corrected by the administration or the IRS.

As Vanderbilt’s James Blumstein tells IBD (and I discussed in this paper), the exchange-related provisions of the law were not written all-that-carefully. Nonetheless, federal agencies lack the authority to unilaterally revise statutory mistakes. (A point Cato’s Michael Cannon also makes here.) Congress may have wanted to make tax credits more widely available – just as it may have wanted those making less than poverty-level income to be eligible for exchanges as well – but that is not what Congress did.

The IRS may be inclined to argue that the failure to include a reference to federally run exchanges or Section 1321 in Section 1401 was a “scrivener’s error” that should be disregarded. But this is a difficult argument to make in this case for several reasons. First, a “scrivener’s error” is supposed to be that – a purely clerical error that could be attributed to a failed transcription or something of that sort. An example would be mistaking the relevant subsection in a statutory cross-reference – say mistaking “(i)” for “(ii)” or “Section 36B(B)(I)(b)” for “Section 36(B)(I)(b),” or screwing up punctuation. The alleged error here is more significant, however. Not only did Congress forget to include any reference to Section 1321, it also expressly stated that the tax credits were for insurance purchased through “an Exchange established by the State.” So a legislator reviewing the relevant language could not claim that they did not realize the statutory cross-reference excluded federal exchanges because the clear text of the statute does as well. In other words, any legislator who actually bothered to read the bill before voting would have seen the limitation.

As of this writing, only 11 states have made the decision to proceed with an exchange – ten with legislative approval, one with the mere will of the governor (Minnesota’s Mark Dayton). Many states – even including New York – are balking at implementation, and some have rejected the idea entirely, understanding that no exchange set up through the auspices of Obama’s law will serve to create a truly competitive marketplace. With this new evidence that federal exchanges are nothing more than a hollow threat, legislators and state officials should understand that implementing an exchange throws a life preserver to Obama’s law.

— Benjamin Domenech



Montana House Majority Leader Tom McGillvray of Billings writes of his frustrations with the state auditor, who has endeavored to push forward with an exchange despite the rejection of the legislature.

State Auditor Monica Lindeen has forgotten that she was elected by the voters of Montana. She continues to willfully disregard a landslide election that resoundingly rejected the idea of a federal health care plan. Lindeen has said she will implement the unpopular Obamacare bill regardless of its dubious constitutionality which mandates Montanans to participate in the purchase of federally controlled health insurance products via a coerced insurance exchange. This, like all federal coercion will cost us money we cannot afford to spend.

The fact that the Montana Legislature rejected every bill she sent to it to legislate this tyranny over the people of Montana is being willfully ignored by Lindeen because she believes she knows what is best for us. This is not representative government; it is reprehensible.

Lindeen should respect the will of the people as expressed through their elected representatives in the Legislature. The Legislature rejected the state exchange idea because it is the implementation of federally designed heath care products. The mandated exchange is simply the avenue to force us into the insurance policies which are pushed with billion dollar deficit spending; spending we cannot afford as evidenced by the recent downgrade of the United States AAA credit rating. Our country is on the precipice of fiscal ruin and Lindeen is looking for federal handouts to put in place a plan that puts the nail in our fiscal coffin.

SOURCE: Billings Gazette


John Biebelhausen and Amy Lischko author an interesting paper on medical liability reform possibilities for Massachusetts for the Pioneer Institute.

In the current era of health care reform, continued inaction with respect to medical liability is unacceptable. Recent health care reform has aimed to fundamentally restructure the organization, delivery and financing of health care. As a result, physicians face increasing pressures to take on additional risk and institute more cost-effective care. If such initiatives are expected to be successful in helping to slow the growth of health care expenditures, then physicians must be afforded changes to their practice environment and changes in the medical liability system aimed at promoting increased patient safety and improved quality.

Rather than serve as a quid pro quo for physicians, medical liability reform should bring stakeholders together to generate a more fulfilling tort system. Such a system must ensure patients’ rightful compensation for negligent injury while providing assurances to physicians that allow for practice in a medically sound fashion without the need for excessive care. Unfortunately, the current health care system does not reward transparency or address doctors’ fears of being drawn into long, inefficient litigation. Accordingly, the time for meaningful medical liability reform in Massachusetts is now.

SOURCE: Pioneer Institute


Avik Roy factchecks a New York Times editorial on Texas health care and finds it absurdly lacking:

As I wrote last month, “From 1999 to 2009, the proportion of uninsured in Massachusetts declined by 51%, from 8.9% to 4.4%. Over the same time period, Texas’ uninsured population grew, by a similar proportion (18%) to that of the nation as a whole (19%).” And the Times editorial makes no mention of the factors that partially mitigate Texas’ higher uninsured rate: its younger population; its high Hispanic and illegal immigrant population; its higher proportion of smaller and newer businesses; and its unusually extensive system of free charity care.

The Times goes on to slam Texas for being one of the “worst offenders” (along with, interestingly, California) in “failing to enroll children who were eligible for Medicaid or a related children’s program.” Whether you like Medicaid or not, this is a dishonest criticism, given that Texas has one of the most expansive programs for low-income children in the country. The Texas Medicaid/CHIP program for children in 2007 covered 11.0% of the Texas population, compared to 6.9% in Massachusetts and 9.5% nationally. And while Massachusetts spends more per enrollee than Texas does – $4,064 in 2007 vs. $2,400 for Texas – Texas spends more than the $2,135 national average.

The biggest whopper of all is when the Times claims that premium costs in Texas and Massachusetts are “roughly the same.” That’s a selective use of the underlying data, which comes from the federal government’s Medical Expenditure Panel Survey. From 2006 to 2009 – that is, from the passage of Romneycare to the passage of Obamacare – premiums were cheaper, and grew at a much lower rate, in Texas: 3.0% on average for individuals and 1.2% for families, compared to 4.3% and 4.6% nationally, and 5.8% and 6.2% in Massachusetts.

Only in 2010, after the passage of the ironically-named Affordable Care Act, did Texas premiums undergo an anomalous rise. This is likely because insurers wanted to get their rate increases in before Obamacare’s federal price-control provisions go into effect this month.

SOURCE: Forbes


Megan McArdle intones on this story:

Last week, this story about a man dying of a tooth infection spread across liberal blogs who used it as evidence of the failure of the US health care system. Conservative bloggers quickly pointed out that this made no sense: emergency room doctors had given the man a prescription for painkillers and antibiotics, and he had chosen to fill the prescription for painkillers. Though you can’t really tell from the story, he may have thought that the painkillers had been enough – as I understand it, once a tooth infection has killed the root, the pain may stop. Then the infection spread to his brain, and he died.

Matt Yglesias argues that while he may have made bad choices, you shouldn’t have to choose. And while I personally know enough to know that the antibiotics will make the pain stop almost as quickly as the painkillers, having had a terrible dental infection myself, I’m not exactly surprised that he chose the thing that made the pain stop.

However, I can’t believe he had to choose. As far as I know, the antibiotics commonly prescribed for dental infections are all generic. Amoxicillin and penicillin, two of the antibiotics that the web thinks are most common, are available from Wal-Mart for $4. Erythromycin is probably pricier, but we’re not talking about a $100 antibiotic here; the generic form is cheap enough that at least one supermarket gives the stuff away for free as a loss leader.

Frankly, the toothache that I think says a good deal more about American health care is Deamonte Driver’s.

SOURCE: The Atlantic


Thomas Sowell writes on his recent experiences with the system:

In the intensive care unit, where I was sent after the first of two operations, I was hooked up to high-tech machines and had a small army of people looking after me around the clock. Would a government-run medical system have provided all this, especially for a man in his eighties?

In some countries with government-run medical systems, individuals are not even permitted to pay out of their own pockets for medications that the government has ruled are too expensive for people in their age bracket or medical condition.

That same mindset has already become evident in the United States, where a very expensive cancer drug has been refused federal approval to be sold, because it helps only a limited number of people and at very high costs.

But what if you are one of those limited numbers of people – and you are willing to pay what it costs, with your own money? You are free to take your life’s savings and gamble it away in a casino, if you want to – but you are not free to use your life’s savings to save your life. This is not an isolated paradox. This is the logical consequence of a vision of the world that prevails all too widely among the intelligentsia, and not just as regards medical care.

In that vision, people can draw on the available resources only to the extent that the government considers appropriate, in the light of other claims on those resources. This treats what the people have produced as if it automatically belongs to the government – and as if politicians and bureaucrats have both the right and the wisdom to override the personal decisions that the people want to make for themselves.

This issue involves a difference between a world in which people can make their own decisions with their own money and a world in which decisions – including life and death medical decisions – are taken out of the hands of millions of people across the country and put into the hands of politicians and bureaucrats in Washington.

SOURCE: Real Clear Politics


On Thursday, September 15, in Washington, DC, the American Action Forum and other groups are hosting what looks to be an interesting event with a series of panels.

The American Action Forum, Employment Policies Institute, and e21 are hosting a discussion on the health insurance coverage impacts of the Affordable Care Act. Employer reactions to the law, specifically the potential for a large decline in employer sponsored health insurance coverage, have been hotly debated among policymakers and scholars. Accurately predicting the potential coverage drop will dramatically impact the overall cost of the Affordable Care Act and the development of state insurance exchanges.

SOURCE: American Action Forum