Obamacare Is More Unpopular than Ever

As Obamacare sputters along, liberals are growing increasingly frustrated that it isn’t working the way it was supposed to. First, the Supreme Court ruled that Medicaid expansion was optional, and then half the states opted not to expand. Even more states (36 so far) opted not to set up health-insurance exchanges and just let the feds do it themselves. Then last month the D.C. Circuit Court ruled that the law doesn’t allow subsidies to be disbursed through federal exchanges.

For many on the left, the culprits here are the intransigent states that refuse to go along with the Obamacare scheme. At a conceptual level, the real culprit is therefore federalism — the Constitution’s separation of state and federal powers. As Slate’s Jamelle Bouie lamented last week, states have “too much discretion in administering the welfare state.” He claims that some state leaders — like Mississippi governor Phil Bryant — don’t really even want to have safety-net programs and therefore can’t be trusted to run them. Programs like Medicaid, he says, should be taken out of the hands of the states and turned over entirely to bureaucrats in Washington.

Bouie has it exactly wrong. Our erstwhile federalist system no longer allows states any effective means of resisting federal policy schemes — and almost no meaningful discretion in administering social welfare programs. Bouie cites a recent Atlantic piece by Mario Loyola and Richard Epstein that explains in great detail why this is so and how it came to be. But instead of refuting their claims, he dismisses the argument as “exaggerated,” citing only that states have some discretion in deciding how generous their Medicaid programs will be (e.g., more people are eligible for Medicaid coverage and welfare assistance in California than in Mississippi), and saying that this is reason enough to do away with federalism when it comes to social welfare.

But Bouie doesn’t give enough credence to his cause. Whether or not he realizes it, federalism has already been largely cast aside in the operation of jointly funded federal-state programs. Under the guise of so-called “cooperative federalism,” Washington has been able to impose its will on states across a number of policy areas, through programs like Medicaid, Common Core, the Clean Air Act, and the federal highway system. As Loyola and Epstein explain:

“Federal ‘assistance’ to the states currently accounts for 30 percent of state budgets, on average. Since the early 1980s, the federal government has transferred about 15 percent of its budget to the states, which is almost as much as the federal deficit in an average year. Why does the federal government borrow so much money, only to transfer it to the states? Do the states really need that much help?

“They don’t. States have their own taxing authority. The real reason for federal ‘assistance’ lies in the conditions that come attached to it, which allow the feds to dictate state policies and even what the states do with large chunks of their own money. The result is a massive increase in real federal control and real federal spending — entirely behind the scenes.”

This process began with the New Deal and has slowly grown over time. President Lyndon Johnson understood that the vast social-welfare programs of the Great Society couldn’t simply be implemented and administered from Washington. States would have to be deputized — a process he euphemistically called “creative federalism” — if welfare programs were going to work “at the point of impact.”

The latest round of anti-Obamacare lawsuits is inching closer to the Supreme Court.

Both the federal government and its challengers filed appeals this week in cases involving the law’s insurance subsidies. The challenges, if they succeed, would tear apart central provisions of the Affordable Care Act.

On Friday, the Justice Department asked a federal Appeals Court to overturn a ruling that said insurance subsidies should not be available in more than half the country. That ruling would “eviscerate the ACA’s model of cooperative federalism” and “thwart the operation of the ACA’s core provisions,” the Justice Department argued.

A three-judge panel of the D.C. Circuit Court of Appeals said earlier this month that the IRS broke the law by making insurance subsidies available in every state. The financial assistance should only be available to people who live in states that established their own insurance exchanges, the panel said in a 2-1 ruling.

As expected, the Obama administration asked the full D.C. Circuit to hear the challenge and reverse the panel’s decision. It said the panel’s ruling was too narrow and ignored the broader goals of the health care law.

On the same day the D.C. Circuit panel issued its decision, another three-judge panel in another federal Appeals Court–the 4th Circuit–also ruled in a nearly identical lawsuit. That panel, though, sided with the Justice Department, saying subsidies are legal in all 50 states.

The challengers in that case, King v. Burwell, appealed their case to the Supreme Court on Thursday. Citing the division between the D.C. Circuit and the 4th Circuit, the challengers said the Supreme Court needs to settle the dispute as soon as possible.

“The disagreement is clear, and all of the arguments on both sides have been thoroughly aired. Only this Court can ultimately resolve the issue,” the brief states.

Legal experts had predicted this legal strategy. The challengers are trying to move quickly because the split between Circuit Courts might not last–and if it doesn’t, the Supreme Court would be less likely to take up the issue.

It may seem puzzling that a law that both hands out subsidies to encourage coverage and imposes penalties on those who do not [obtain coverage] could possibly increase the incentive to become or remain uninsured. But actuary Greg Fann, of the Wakely Consulting Group, has cranked the numbers and here’s what they show …

Very low income 24-year-olds with incomes close to poverty clearly have a strong incentive to secure coverage because subsidies on the Exchanges drive the net cost of coverage (inclusive of out-of-pocket spending) well below the expected costs of being uninsured or of the expected costs of a non-qualified plan outside the Exchanges.

Note that for those who remain uninsured and those who purchase non-qualified coverage, the expected costs also include whatever penalty payments would be imposed on an individual at that income level if they fail to obtain qualified health coverage. As well, in states that expand Medicaid, such young adults would end up on Medicaid rather than have private coverage, but even if we considered a 24-year-old at 140% of poverty (just above the Medicaid eligibility threshold), the story would be quite similar: deep subsidies for qualified Exchange coverage, in conjunction with penalties associated with not having qualified coverage tip the scales heavily in favor of a decision to purchase health insurance.

Floridians who signed up for health insurance under the Affordable Care Act will see premium increases averaging about 13.2 percent for 2015, according to data provided to the state Office of Insurance Regulation.

Fourteen companies have filed to participate in the federal health insurance marketplace in Florida next year. Three of those are newcomers and did not participate in the inaugural year of President Barack Obama’s signature legislation.

Of the 11 returning companies, eight filed average rate increases ranging from 11 percent to 23 percent, and three filed rate decreases ranging from 5 percent to 12 percent.

Florida Blue, the state’s largest health insurer, filed for an 18 percent hike.

Steven Hendricks, a spokesman for the Florida Blue in Tampa, said the rate hike reflects the demographics of the insurance pool. He said when healthier consumers kept their existing plans in the Affordable Care Act’s first year, the sickest and most expensive consumers turned to marketplace plans.

John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is–like Gov. Terry McAuliffe and other state Democrats–gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.

Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken of the need to “make health care available to 400,000 Virginians,” insisting it is “the right thing to do.”

Foust’s wife, Dr. Marilyn Jerome, practices with Foxhall OB/GYN in northwest Washington, D.C. Six of its physicians made Washingtonian magazine’s list of “Top Docs,” and one of them–Nichole Pardo–was featured on the cover. Not too shabby.

The practice is notable for another reason as well: It doesn’t accept Medicaid patients.

This draws attention to an under-covered aspect of the debate over Medicaid expansion. While advocates speak of it as “making health care available” to the needy, what it really does is make coverage, rather than care, available to them. A newly enrolled Medicaid patient can get the money to pay a doctor. But can she get the doctor to take it?

On his website, Foust blasts insurance companies that “hiked insurance premiums and gouged consumers. … Insurance companies denied care to those with pre-existing conditions … and refused coverage to those who needed it most. … We cannot go back to the days when insurance companies could arbitrarily … deny coverage.” In a commentary on the Foxhall practice’s website, Dr. Jerome praises the Affordable Care Act–particularly because now “women cannot be denied insurance” and because the plan’s standards mandate coverage for a wide variety of treatments.

Doctors, however, can operate under a much different set of standards. They can deny care all they want. Statewide, roughly one in five physicians will not accept new Medicaid patients–usually because Medicaid pays only two-thirds as much as private insurance does, on average.

The point here isn’t to shame physicians or to provoke a marital spat. The incongruity goes to a much broader issue–regarding individual responsibility in a system that is becoming increasingly collectivized.

Prior authorization clearly saves money for the insurance companies, at least up front. Many physicians simply give in, because the process is just too arduous.

But prior authorization ultimately ends up costing the health care system. The time and money that medical practices devote to prior authorizations could surely be put to better use for patient care. And it’s not even clear that insurance companies save money in the long run. One study examined the records of more than 4,000 patients with Type 2 diabetes who were prescribed medications requiring prior authorizations. Those who were denied the medications had higher overall medical costs during the following year; not getting the medications probably worsened their conditions.

I bit my tongue for the remainder of my conversation with the insurance company, holding back long enough to obtain the prior authorization that would allow Mr. V. the 90 pills he needed each month. I tried not to break the phone when I finally slammed down the receiver.

I’m all for controlling medical costs and trying to apply rational rules to our use of expensive medications and procedures. But in the current system, everything seems to be in service of the corporate side of medicine, not the patient. The clinical rationale and the actual patient — not to mention the doctors and nurses involved in the care — are at best secondary concerns.

In the end, we were able to keep Mr. V.’s blood pressure under control. My blood pressure, however, was a different story.