Consumer Power Report #405
The Congressional Budget Office’s latest report includes some astounding evidence of how Obamacare is impacting the labor market in a negative way. Sean Hackbarth highlights some key quotes from the report:
The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024. … CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor – given the new taxes and other incentives they will face and the financial benefits some will receive. … In the longer run, some businesses also may decide to reduce their hiring or shift their demand toward part-time hiring – either to stay below the threshold of 50 full-time-equivalent workers or to limit the number of full-time workers that generate penalty payments.
As workers transition from part time work (without benefits) to full time work (with health benefits) many workers will actually lose income in the form of the subsidies that they will have to forgo (and the additional fact that lower wage workers, who are in lower tax brackets, won’t benefit as much from the implicit subsidy they will get from the special tax treatment of health benefits that they receive by purchasing their health insurance through their employer). CBO seems to focus mostly on people who are out of the labor force for a period of time and transitioning back to full time work, which suggest its estimates may be low.
CBO states, in reference to these impacts, that the “exchange subsidies effectively constitute a tax on labor supply for a broad range of workers.” CBO focuses mostly on those transitioning to full time work (with benefits). But the same disincentives apply to workers on Obamacare who are already employed full time, and looking to grow their income.
The congressional actuaries go on to state that forgoing Obamacare subsidies and returning to full time work with health benefits (for lower wage and middle class workers) amounts to an average, implicit tax of about 15% paid by each worker. CBO does note that these considerations only affect a segment of the workforce – specifically the middle class and working class who earn annual incomes that put them below 400% of the Federal poverty level (about $95,000 for a family of four). But that represents a large portion of the labor market.
These disincentives can’t be easily fixed – they are baked into the structure of the Obamacare subsidies. A refundable tax credit, similar to the one offered in some conservative plans, sidesteps many of these effects.
Sean Davis has more from the report. And it’s not like the non-partisan CBO is alone in this conclusion: It is consistent with the latest report from the Federal Reserve as well. Whatever the reality of Obamacare’s impact on the percentage of America that is insured or uninsured, it seems clear that they are reducing the number of working hours available and decreasing hiring in professions and positions that are most likely to be filled by the working class … the very people Obamacare was originally intended to help.
— Benjamin Domenech
IN THIS ISSUE:
Former Republican state Rep. Patrick Sheehan told the KATU Investigators he has gone to the FBI with allegations that Cover Oregon project managers initiated the design of dummy web pages to convince the federal government the project was further along than it actually was.
If Sheehan’s allegations are true, those managers could face time in jail for fraud.
“One of the allegations that was made was so alarming that it went way beyond a legislative oversight committee and so I did reach out and contact the FBI,” Sheehan said.
“The issue had to do with federal funding and proving some amount of compliance with the federal regulation in order to get funding.”
To which funding is he referring?
Early in its life, Cover Oregon was given a $48 million “early innovator” grant from the federal government. That amount would later grow to $59 million. There were a few strings attached though. To keep the money flowing, the website would have to hit specific benchmarks between 2011 and 2013. The state needed to show the feds it had picked a company to provide software and technical assistance; it had to demonstrate that the website was safe from hackers; and, most importantly, it had to show that people could actually sign up for insurance on the website. The evidence these marks had been reached would be presented during a process called “gate reviews.” Read more on the red flags here.
If Lee Mullins lived in Pittsburgh, he could buy mid-level health coverage for his family for $940 a month. If he lived in Beverly Hills, he would pay $1,405. But Mullins, who builds custom swimming pools, lives in southwest Georgia. Here, a similar health plan for his family of four costs $2,654 a month.
This largely agrarian pocket of Georgia, where peanuts and pecans are major crops and hunters bag alligators up to 10 feet long, is one of the most expensive places in the nation to buy health insurance through the new online marketplaces created by the federal health law. The only places with higher premiums are the Colorado mountain resort areas around Aspen and Vail, a high-cost-of-living area unlike Georgia.
“We’re not real happy with the way things are going in our neck of the woods,” said David Hardin, Mullins’s insurance broker.
All the dynamics that drive up health costs have coalesced here in southwestern Georgia, pushing up premiums. Expensive chronic conditions such as obesity and cancer are common among the quarter million people in this region. One hospital system dominates the area, leaving little competition. Only one insurer is offering policies in the online marketplace, and many physicians are not participating, limiting consumer choice.
Until these elements are brought under control, it will be challenging for the Affordable Care Act to fully live up to its name, not just here but in other parts of the country where premiums are high. Other expensive places include rural Nevada, parts of Wisconsin, most of Wyoming, southeastern Mississippi, southwestern Connecticut and Alaska.
In these places, government subsidies are shielding people with low and moderate incomes from the full cost of the premiums. Randy Gray, a flower shop owner in Albany, is paying just $32 a month, with taxpayers picking up the remaining $805.
But for those earning too much to qualify for federal financial help, the premiums can be overwhelming. A 60-year-old making $47,000 in Albany would have to pay a quarter of her income for the least expensive mid-level “silver” policy, the level most consumers are buying.
Even some people who qualify for federal assistance, such as Stacie Brown, owner of a pottery shop, are balking. The cheapest “bronze” plan for Brown, her husband and son would cost the family $300 a month but not begin paying medical bills until they exceeded the $6,300 individual deductible. The cheapest silver plan would cost $508 a month but not start paying until a $3,000 individual deductible was met. Her son’s pediatrician was not in any of the networks, and that was the one medical service she felt sure her family would use.
Brown ultimately bought a $256-a-month Assurant Health plan for her son, sold outside the marketplace, which covers his pediatrician and unlimited office visits. She and her husband have decided to forgo coverage for themselves, even though they may face a tax penalty of $700.
“I can’t afford the affordable health care,” she said. “I don’t know anyone in this area who can afford it, and I do pretty well in life.”
SOURCE: Washington Post
Start with the assumption that just about everyone wants health insurance. You can easily find polls that support this proposition. ObamaCare architects assumed that if you offered health insurance with subsidies for those with relatively modest incomes, those currently uninsured would flock to apply. So far that seems not to have happened. A McKinsey & Co. survey of those thought to be eligible for ObamaCare health-care exchanges found that only 11% of those who bought new coverage between November 2013 and January 2014 were previously uninsured.
Two small insurance companies told Wall Street Journal reporters for a Jan. 17 article that only 25% and 35% of those purchasing their policies were previously uninsured. Larger insurers don’t yet have numbers, but it seems that far fewer of the uninsured than expected are signing up. The latest Kaiser Family Foundation poll reported that only 24% of uninsured under 65 had a favorable view of ObamaCare while 47% had an unfavorable view.
One reason may be that ObamaCare requires policies to cover not just the expenses of catastrophic illness – the sort of thing auto and home insurance policies cover – but routine medical expenses and procedures that many individuals will not need. To that extent ObamaCare policies are not insurance but prepayment of routine expenses. Apparently many of the uninsured aren’t interested in prepaying for health insurance any more than they are interested in prepaying their credit cards.
A second assumption of ObamaCare’s architects is that health insurance will make people healthier. That assumption has been tested in Oregon. In 2008 the state government, with limited Medicaid funds, held a lottery to determine which people who were eligible for Medicaid would be enrolled. The result was an unusual randomized control trial of similarly motivated people with and without insurance. The results, reported in the May 2013 New England Journal of Medicine, were that after two years there was no significant difference between insured and uninsured in blood-sugar level, blood pressure and cholesterol levels – although those with Medicaid saved money and were less likely to suffer depression.
A third assumption is that those with health insurance are more likely to seek care from physicians and less likely to go to emergency rooms. But the Oregon health study showed that those with Medicaid were 40% more likely to go to emergency rooms than those without insurance.
SOURCE: Wall Street Journal
The idea seemed transformative. The Affordable Care Act would fund a new research outfit evocatively named the Innovation Center to discover how to most effectively deliver health care, with $10 billion to spend over a decade.
But now that the center has gotten started, many researchers and economists are disturbed that it is not using randomized clinical trials, the rigorous method that is widely considered the gold standard in medical and social science research. Such trials have long been required to prove the efficacy of medicines, and similarly designed studies have guided efforts to reform welfare-to-work, education and criminal justice programs.
But they have rarely been used to guide health care policy – and experts say the center is now squandering a crucial opportunity to develop the evidence needed to retool the nation’s troubled health care system in a period of rapid and fundamental change.
“It’s the greatest irony,” said Gordon Berlin, president of MDRC, a nonprofit organization whose studies have influenced American policies on welfare, job training and education. In health care, of all areas, he said, in which every group that evaluates medical evidence ranks such studies as the most reliable by far, they have rarely been used.
“The results,” Mr. Berlin said, “speak volumes about the path not taken – an extraordinary body of evidence has been built to inform welfare policy and practice while we have only just begun the process of learning what works in health policy.”
The studies that are regarded as the most reliable randomly assign people or institutions to participate in a program or to go on as usual, and then compare outcomes for the two groups to see if the intervention had an effect.
Instead, the Innovation Center has so far mostly undertaken demonstration projects; about 40 of them are now underway. Those projects test an idea, like a new payment system that might encourage better medical care – with all of a study’s participants, and then rely on mathematical modeling to judge the results.
Dr. Patrick Conway, the director of the center, defended its reliance on demonstration projects, saying they allowed researchers to evaluate programs in the real world and regularly adapt them. “Does it look like it is working?” he asked. “If it does not look like it is working, we can stop.”
He said that the center has had trouble getting such studies to yield solid results because those in the control groups – who do not get the innovation being tested – tend to drop out.
SOURCE: New York Times
Drug costs are rising, but in the opaque world of health care pricing, figuring out what’s driving the increase has become difficult – if not impossible.
Nonetheless, pharmacists want Congress to try. Vexed by triple- or quadruple-digit percent increases in drug costs, the National Community Pharmacists Association [NCPA] is asking lawmakers to hold a hearing to find out why.
The problem, the group says, is that pharmacists are getting gouged. Pharmacists trying to get their hands on generic drugs such as Pravastatin, a drug for patients with high cholesterol, or the antibiotic Doxycycline faced price spikes upwards of 1,000 percent in 2013, according to a survey by the group.
Some 77 percent of pharmacists surveyed by the association said in the last six months of 2013 they experienced 26 or more instances of a large upswing in the acquisition price of a generic drug.
An additional 84 percent said the price fluctuations impeded their ability to provide care and remain in business, as some community pharmacies could not fill prescriptions that would result in losses and some patients declined medication that would have emptied their wallets.
The findings are consistent with reports nationwide that generic-drug prices are experiencing bank-breaking price increases. Health care and pharmaceutical consulting firm Pembroke Consulting, for instance, found that within the last year, more than a dozen drugs hit prices 10 times their standard rate. NCPA wants Congress to hold a hearing to find out what’s driving the price points and whether anything can be done by the feds to stop the trend.
SOURCE: National Journal