Health Care Reform? What Health Care Reform? – Oct. 11, 2010

It is a truly remarkable turn, probably unequalled in American politics.  Little more than six months ago, Democrats emerged bloodied but victorious after a legislative battle as savage as Antietam.  Remember the scene on that raucous Sunday in March?  As Nancy Pelosi led the Congressional Black Caucus, arm-in-arm, across the grounds through the angry protesting crowd?  Defiant, courageous, determined to succeed in this latest incarnation of the struggle for civil rights in this country, they galvanized their supporters.  Shortly afterward, they passed the monumental Obamacare legislation, achieving a goal – universal health care coverage (well, more or less) – that had been a cherished liberal ideal for decades.   It truly was a major victory for President Obama and his legislative allies.

How come is it, then, that of all the Representatives and Senators that voted thus to transform the provision of health care in this country, the number of those who are actually running TV ads touting that support can be counted on the fingers of one hand?  Of greater number are those Democrats who are advertising their opposition to the health care legislation as a sign of independence.  This great accomplishment is apparently not something to talk about now that the election is upon us.  I’m not sure if even Nancy Pelosi is running ads about it.
Why is it so unpopular that voters still prefer repeal by double-digit margins?  After all, the design of the program is that some benefits kick in early on to get people fired up about it, and sure enough right before the election some of those goodies did start to appear – children can stay on their parents’ policies until age 26, children can’t be denied coverage for pre-existing conditions, and so forth.
But the problem is that every one of those goodies makes costs go up, and responsible companies providing these services will respond by raising their prices or leaving the market.
It started early, with several major corporations taking billion-dollar charges to reflect higher anticipated costs for the health care promises they have made.  Political stunt! cried Congressional Democrats, amid calls for hearings so the CEO’s can come and justify what was clearly a ploy to discredit Obamacare.  When it became apparent that making allowances like that are required by law and the rules of accounting – and that to fail to do so would have risked jail for the bosses – the calls for hearings drifted away.
Then the insurance companies started raising their rates.  No surprise – they were being hit with clearly-defined obstacles to profitability in the form of mandated expansion of coverage.  And the hordes of healthy new policy holders who would fill up the money hole were not coming onstream for years if at all – the penalties for dodging the mandate start out at pretty mild levels.  Naturally, the response of the insurers is to try to restore their profitability.  HHS Secretary Sibelius rides to the rescue, actually threatening insurance companies who have the temerity to honor their fiduciary responsibility to shareholders, to enact what she calls “unjustified rate increases.”  “Zero tolerance!” she declares, conveniently forgetting that health insurance is already one of the most heavily regulated industries in the country and that states have entire bureaucracies devoted to evaluating and approving premium changes.  And, of course, there’s that little control element known as competition.  If Cigna is  making obscene profits charging over-the-top rates, it’s probably worth it for Wellpoint to go through the regulatory obstacle course and get certified to compete on the same turf – which will bring the premiums down to fair market levels if they’re not already there.  And parenthetically, one might add that one of the largest insurers in the country, Blue Cross/Blue Shield, is a non-profit association, and they are not noticeably reluctant to change their premiums.
The revenge of the free market really started to kick in when the specific mandated expansions became available.  The children’s non-denial clause has resulted in Cigna, Wellpoint, Aetna, Humana, and CoventryOne all deciding to drop children-only policies.  Again, no surprise – if government makes a certain line of business unprofitable, don’t expect companies to engage in it.  Charities they are not.  So Obamacare ends up doing nothing for children with previous conditions but does end up yanking coverage for all the other children out there who for one reason or another had policies in their own name.  A great success!  This of course will be magnified in 2014 when the no-denial rule is expanded to all comers.
One of the rules that has caused consternation is the 80-85% medical loss ratio.  This is a term that Congressional Democrats fell in love with, indicating supposedly how efficient an insurance provider is – the higher the proportion of premium that is spent on health care the better.  So they made it law that it had to be no less than 80 or 85% depending on the circumstances.  Sounds reasonable, and a good way to keep insurers from wasting money on admin.  But they failed to consider such things as “mini-med” plans.
These plans, provided by McDonalds and others, cover part-time and minimum wage workers.  As it happens, workers in these places tend to exhibit high turnover, which raises the administrative costs of covering them.  The Golden Arches determined that they could not offer the plans and comply with the 80% medical loss ratio, so again the logical response is to drop the plan.
Whoa! said Sec. Sibelius.  And in a hurried negotiation, McDonalds and some 30 other entities (including insurance companies who offer the plans and the New York City teachers union) got waivers so that this law doesn’t apply to them.  Fine, I’m thinking, but what about those companies that don’t have the lobbying clout to be included in that group of 30?  Are their part-time employees just out of luck?  And isn’t it just a bit creepy that a top Federal bureaucrat has the power to decide who does and who does not get shafted by this law?
Somebody along the way said, and I’m sure said repeatedly, “if you like your current insurance plan, you can keep it.”  That must have been one of those lies the Republicans were tossing about to undermine support for Obamacare.
It sure didn’t apply to the seniors who enjoyed Medicare Advantage.  You’ll recall, that’s the government subsidy for seniors to buy private coverage that fills in the gaps of what Medicare itself does not cover.  Obama said over and over – to no effective contrary argument – that that subsidy was just wasted taxpayer money doing nothing except to give insurers excess profits.  So now it’s gone, and the administration is finding to their consternation that the retirees who owned those subsidized policies kind of liked the coverage – a lot more than not having the coverage now that the subsidies are gone.  A few hundred thousand voters are finding that they actually don’t get to keep their current insurance, as promised.
It goes on and on.  Providers of medical devices are finding their business decimated because the allowances and reimbursement rates for the use of such tools are being upended; Medicare recipients are finding that the cuts in expenditures are resulting in cuts in services (imagine that!); Principal Financial Group has decided to leave the market, leaving 840,000
policy holders high and dry – and what company wants to take on a bunch more customers in an environment where profitability is so uncertain?
Instead of being a crowning achievement of the progressive majority of the Class of 2008, Obamacare is proving exemplary in a completely different way: it is showing how destructive legislation can be that springs from the hubristic notion that the law of supply and demand can be overturned.  It may in the end turn out to be one of the greatest legislative calamities in our nation’s history.
The voters see it; their congressmen sense it; the Obama administration still hasn’t a clue.
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