Consumer Power Report #440
With the upcoming second round of enrollment for Obamacare, let’s check on a few of the promises that sold the health care law to the American people.
People who already bought health insurance through Obamacare will likely face another round of confusing technical issues as they try to reenroll for a second year.
The health care law’s second open-enrollment period begins Nov. 15. And by almost all accounts, HealthCare.gov will probably work much better this time, especially considering its disastrous debut.
Health insurance companies, at least so far, seem to think HealthCare.gov is on the right track to function more smoothly for new customers. But insurers still see gaps in the system for people who want to renew their coverage, including pitfalls that threaten consumers with duplicate enrollments, unexpected cancellations, or surprising tax bills.
Double-digit rate hikes for individual health insurance plans have become an issue in the Louisiana and Iowa Senate races over the past week, where the Republican candidates are hammering their Democratic opponents for the steep premium increases expected to hit some customers under the Affordable Care Act next year.
In Louisiana, Rep. Bill Cassidy (R) called the double-digit increases for some insurers, including Blue Cross Blue Shield of Louisiana, “another hurdle for families and businesses already struggling under the demands of Obamacare.” He also blamed Democrats for “false promises” that premiums would go down. In Iowa, Senate candidate Joni Ernst used the sharp rate increases for two insurers to blast the Democratic candidate, Rep. Bruce Braley, for supporting the law, charging that “thousands of Iowans are paying for it.”
The attacks could easily give the impression that the health care law is causing premiums to go through the roof around the country. They’re not. In reality, in most states, premiums for coverage in the Obamacare health insurance exchanges for 2015 are rising at about the normal rate for health insurance throughout the country. In some places, they’re even going down.
But there are a few states that are facing more extreme premium increases from some insurers – and Louisiana and Iowa are two of them. Alaska, where Democratic Sen. Mark Begich is struggling to win a second term, is another one.
Based on these assumptions, Obamacare is now projected to get $262 billion less in (non-coverage-related) revenue because of its detrimental effect on job growth, a notion that wasn’t registered in the CBO’s July 2012 scoring.
Compared to the deficit surplus of $180 billion for 2015–24 that a straight extrapolation from the CBO’s 2012 scoring would yield, current projections now indicate that Obamacare’s decreased spending (in relation to prior expectations) will reduce deficits by another $83 billion (bringing the estimated surplus to $263 billion), but those projected surpluses will be more than offset by the projected $132 billion decrease in Medicare revenue and $262 billion decrease in tax revenue due to lower job growth.
CBO projections indicate that Obamacare will increase deficit spending by $131 billion from 2015–24. That’s a $311 billion swing from the extrapolated 2012 numbers, a $240 billion swing from the actual 2012 numbers, and a $255 billion swing from what we were told when Obamacare was passed.
It’s amazing that, given all of this, the health care law isn’t more popular. It’s a good thing the administration is planning on underselling the law now that it’s in place, given how much they oversold it to get it passed.
— Benjamin Domenech
IN THIS ISSUE:
This past week provided an important example of the anticipated effects of the Affordable Care Act (ACA) coming to pass. Walmart has announced that it will no longer offer health insurance for 26,000 part-time workers, prompting a piece at Vox recognizing that this termination of coverage occurred because “Obamacare changes the calculus on getting coverage at work” and noting that “the loser in the Walmart decision is the federal budget.”
The ACA enables Walmart to cut its labor costs without necessarily lowering the standard of living of its employees, simply by shifting much of these workers’ health insurance costs to taxpayers who, in Sarah Kliff’s words, “will now take on the financial burden of helping to pay for thousands of part-time workers’ medical bills.”
In a similar decision last year, Trader Joe’s also cut health benefits for its part-time workers, citing the rationale that such an employee “is only able to receive the tax credit from the exchanges under the [ACA] if we do not offer them insurance under our company plan.”
This effect of the ACA was not only predictable but predicted. In a 2012 Mercatus Center paper on the ACA’s fiscal effects, I wrote:
“The ACA creates a horizontal inequity between two hypothetical low-income individuals; one who purchases insurance via an exchange receives a substantial direct federal subsidy, whereas one who receives employer-provided insurance does not. This differential treatment could well lead either to the second individual’s moving into the health exchanges (thus increasing participation rates) or to the federal government expanding low-income subsidies to those with [employer-sponsored insurance] (increasing costs). Some experts have noted that the law may create an incentive for some workers to request reduced employer contributions to health insurance to render them eligible to receive the more generous federal subsidies in the exchanges. The influence of such inequities upon the substantial financing risks under the ACA is barely taken into account in the figures presented in Table 2. Perhaps more importantly, the financing risk surrounding the exchange subsidies is only dimly visible within the projection period ending in 2021. It is over the longer term that the potential for more rapid cost growth in the exchange subsidies threatens its most damaging fiscal effects.”
This point was important in that context to understand whether the ACA’s budget costs might ultimately be higher than originally projected. As low-income individuals’ health insurance coverage shifts from employer-provided benefits to the ACA’s subsidized exchanges, taxpayers will be required to finance significant new costs and the law’s effect on the budget will worsen.
The Congressional Budget Office (CBO) appears to be conclude that its original estimates did not take full account of this effect. In 2011, CBO estimated that about “6 million to 7 million people” would lose their offer of employer-provided health coverage as a result of the ACA by 2019, which, netted against other individuals gaining employer-provided coverage, would result in a net reduction of 1 million in those holding employer-sponsored health insurance. In 2012, CBO revised this estimate to project that 11 million people would lose their employer coverage offers by 2019 due to the ACA, with a net reduction of 5 million in those with employer-provided insurance. By this year, CBO had further increased its estimate of those losing employer coverage offers to 13 million, with a net reduction of 8 million in those with employer-sponsored insurance.
SOURCE: Charles Blahous, Economics21
California’s health insurance exchange is canceling Obamacare coverage for 10,474 people who failed to prove their citizenship or legal residency in the U.S.
Covered California, the state-run insurance exchange, enrolled more than 1.2 million people during the rollout of the Affordable Care Act this year. For most consumers, the exchange said, it could verify citizenship or immigration status instantly with a federal data hub.
But more than 148,000 enrollees were lacking proof of eligibility and needed to submit documentation. People living in the U.S. illegally aren’t eligible for coverage.
Covered California began sending notices to individuals last month.
The exchange said 130,105 people submitted proof of legal status. Covered California said it’s still reviewing information related to 7,629 people who sent in paperwork.
That left the 10,474 people who will receive a “pre-termination notice” this week.
SOURCE: Chad Terhune, Los Angeles Times
Hundreds of thousands of people who signed up for Medicaid months ago still don’t have coverage, a problem that could worsen when insurance sign-ups under the Affordable Care Act restart next month.
California and Tennessee are facing lawsuits from residents who say they have seen long delays for coverage after signing up for Medicaid, the federal-state health program for low-income and disabled Americans. Some say they have been waiting since late 2013.
The delays stem from various technical problems and the sheer volume of Medicaid applications states must process.
Some applications that come through the federal enrollment site, HealthCare.gov, and are transferred to the states still have problems with data accuracy, says Matt Salo, executive director of the National Association of Medicaid Directors.
While consumers can apply for Medicaid anytime, an influx is expected when exchanges reopen for enrollment on Nov. 15 and eligible applicants go into the Medicaid system.
Some states’ own information-technology systems weren’t prepared for the flood of applications that began when the heath law expanded Medicaid eligibility to a broader swath of the poor for 2014. About a dozen states, including Georgia, Illinois, Indiana, and North Carolina, have struggled with delays.
California had a backlog of 159,000 applications as of early October, according to state officials. In New Jersey, about 12,000 Medicaid applications are pending at county boards of social services, says an official at the state human services department. In Tennessee, the backlog tops 10,000, according to attorneys for plaintiffs in the lawsuit. State officials declined to give a figure, saying they are still assessing data.
“Looking toward open enrollment in 2015 … it’s better, but it is not fixed,” Mr. Salo said of applications from HealthCare.gov.
They have health insurance but still no peace of mind. Overall, one in four privately insured adults say they doubt they could pay for a major unexpected illness or injury.
A new poll from The Associated Press-NORC Center for Public Affairs Research may help explain why President Barack Obama faces such strong headwinds in trying to persuade the public that his health care law is holding down costs.
The survey found the biggest financial worries among people with so-called high-deductible plans that require patients to pay a big chunk of their medical bills each year before insurance kicks in.
Such plans already represented a growing share of employer-sponsored coverage. Now, they’re also the mainstay of the new health insurance exchanges created by Obama’s law.
Edward Frank of Reynoldsville, Pennsylvania, says he bought a plan with a $6,000 deductible last year through HealthCare.gov. That’s in the high range, since deductibles for popular silver plans on the insurance exchanges average about $3,100 – still a lot.
“Unless you get desperately ill and are in the hospital for weeks, it’s going to cost you more to have this plan and pay the premiums than to pay the bill just outright,” said Frank, who ended up paying $4,000 of his own money for treatment of shoulder pain.
“The deductibles are so high, you don’t get much of anything out of it,” said Frank, who is in 50s and looking for a new job.
SOURCE: Associated Press
The Emergency Medical Treatment and Active Labor Act (EMTALA), enacted in 1986, requires Medicare-contracting hospitals with emergency rooms (ERs) to screen and stabilize anyone presenting for emergency care, regardless of ability to pay. The law has played a pivotal and peculiar role in American health care as the only assured access to care for millions of people.
Curiously, although EMTALA imposes enormous costs on hospitals, the statute provides no compensation for the services it mandates, and neither the Supreme Court nor any circuit courts have addressed its constitutionality. This article proposes that EMTALA regularly violates the Fifth Amendment’s Takings Clause, which limits what property the government may take and how the property must be compensated for. As shown below, the basic elements of a taking (often dubbed “eminent domain”) can be readily established: property, taking, and public use. EMTALA then becomes unconstitutional any time the taking is not justly compensated.
The conclusion is not that hospitals should ignore those who lie crushed and bleeding while they search the wreckage for an insurance card. Rather, when the federal government commandeers resources from hospitals under EMTALA , the Fifth Amendment requires that the hospitals be justly compensated. At present, hospitals annually incur billions in uncompensated EMTALA losses.
As discussed below, the government cannot bypass this challenge by labeling EMTALA a mere condition of participation (CoP) in Medicare, saying, “If you want our money, you must follow our rules.” Ordinary Medicare CoPs are program-integrity requirements to ensure that Medicare’s elderly and disabled beneficiaries get what they and the government pay for – quality and quantity of services, properly billed. EMTALA has a completely different purpose. It leverages hospitals’ financial dependence on Medicare (averaging as much as 30 percent of hospitals’ revenues) to coerce them to provide free services to a completely different population: people who show up in the ER. Arguably that amounts to what the Supreme Court calls an “unconstitutional condition.” Once it becomes clear that EMTALA really does impose takings on hospitals and that it cannot be justified as simply a string attached to federal funds, all that remains in the Takings analysis is to determine just compensation.
SOURCE: Haavi Moriem, Cato Institute
Sen. Mitch McConnell (R-Ky.), the current Senate Minority Leader, often says that Obamacare should be repealed “root and branch.” But McConnell has also undercut that message by saying that Kentucky residents covered by Medicaid under the health law are unlikely to lose their coverage. In a recent debate, he said that the state could keep its self-administered Obamacare insurance exchange, Kynect, which McConnell has previously described as “unconnected” to the larger issue of Obamacare repeal.
The most charitable way to describe McConnell’s remarks is as evasive; at minimum, he is heavily downplaying the ways in which Kentucky’s exchange, which, far from being “unconnected,” was built using federal grants provided under Obamacare and which offers subsidized coverage funded federally through the health law, would function differently without Obamacare in place. McConnell surely knows this, and this is why his remarks are better characterized as intentionally misleading.
But the inherent contradiction in those statements is telling anyway. What’s tripping up McConnell (and, to a lesser degree, several other Republican candidates) is the problem described by Cruz last year: With Obamacare’s coverage expansion in place, and so many people relying on it for insurance, it has become nearly impossible to repeal. McConnell seems to want to have it both ways; he wants to repeal the law but not his constituents’ access or coverage.
As a report by Politico’s David Nather suggests, despite continuing public calls for repeal, many Republicans now acknowledge privately that prospects for repeal are slim. “There is a disconnect between the private dialogue and the public dialogue,” one GOP health policy expert told Politico.
But party politicians are still struggling to settle on a strategy about what to do next. There are several conservative replacement plans should the party choose to rally behind them, but all assume Obamacare is repealed first, and most focus on tax credit systems that would significantly alter the shape of the American health insurance market. The problem is that the GOP has long criticized Obamacare for being too disruptive; with any of these plans, Republicans would be opening themselves up to a similar charge.
As it happens, these are exactly the problems that Manhattan Institute’s Avik Roy has attempted to solve with his recently released health care plan, which he pitches as a way of “transcending Obamacare.” It’s meant to overcome the law’s flaws in a way that does not require wholesale repeal.
“Disruption is extremely important to the average American,” Roy said recently at a private dinner. He urges a cautious approach. “What we have to do is be very gradual” in transforming the system.
Roy’s plan is designed to be “maximally plausible,” both in its policy reforms and its politics. The basic idea is to keep Obamacare’s exchanges, as well as some of its popular insurance reforms, but deregulate those exchanges to allow for greater insurance plan flexibility, end the individual mandate, and – in the plan’s boldest move – slowly transition Medicare and Medicaid into the exchanges as well.
In some sense, it is a trade: accepting Obamacare, in its broad strokes, but using it as a vehicle to reform the nation’s two big health entitlements, which, Roy notes, are responsible for the biggest portions of the nation’s long-term fiscal crisis.
SOURCE: Peter Suderman, Reason