Obamacare Insurer Bailout: Budget Neutrality Would Lead to 20 Percent Rate Hikes


Last month, I had the privilege of testifying in person at a hearing of the House Oversight Committee on Obamacare’s risk corridors, an unlimited taxpayer liability that protects health insurers’ profits in Obamacare’s health insurance exchanges. The Administration has suggested that the risk-corridor payments will be budget neutral, a claim which I and others find unconvincing. I advised that budget neutrality of risk-corridor payments can be insured by amending Obamacare to make budget neutrality statutory.

The Committee has investigated the Administration’s claims of budget neutrality further, and found that they are bunk. In a recently released staff report, the Committee noted that:

At least one insurance company appealed directly to Valerie Jarrett, Senior Advisor to President Obama and Assistant to the President for Public Engagement and Intergovernmental Affairs, after the Administration signaled its intent in March 2014 to implement the Risk Corridor program in a budget neutral manner. Chet Burrell, the President and CEO of Care First Blue Cross Blue Shield, wrote to Ms. Jarrett that insurers would likely require Risk Corridor payments on net and that budget neutrality would lead insurers “to increase rates substantially (i.e., as much as 20% or more…)”

Hits and Misses


Surgery Center of Oklahoma, which posts prices online, saved county health plan $570,000 in five months.

Obamacare boosts hospital profits.

Ear, nose and throat residents reduced direct patient care after electronic health records were introduced.

Nine months after government shutdown furloughed federal workers, there’s a baby boom in Washington, DC.

Australia’s largest private hospital operator had a $2.1 billion IPO.

Why Can’t Health Insurers Criticize the Government?


This blog has recently given the health insurance industry a hard time for its fight against Gilead, an innovative pharmaceutical company, and drug-makers generally. So, it may be time to clarify that we approve of private health insurance and wish health insurers the best of success in a healthcare system that is consumer-driven and suffers little government control. We are not going to get there if health insurers cannot support others’ criticism of the government.

Eric Lipton of the New York Times has discovered that America’s Health Insurance Plans (AHIP), the health-insurers’ trade association, gave $1.593 million to the Voice of Free Enterprise, a project of the National Federation of Independent Business, to advertise against U.S. Senator Mark Pryor’s support for Obamacare in Arkansas. AHIP made this grant anonymously. Lipton and his sources would prefer that the trade association be forced to disclose its contribution to the advertising campaign.

Medicaid Should Be Included in Paul Ryan’s Anti-Poverty Proposal


Congressman Paul Ryan has introduced a proposal, Expanding Opportunity in America, to bring together different federal anti-poverty programs into one. Ryan focuses on the Earned Income Tax Credit, housing and home-energy assistance, education assistance, food stamps (SNAP), and criminal sentencing reform.

Ryan’s proposal hinges on the Opportunity Grant (OG). States would apply for OGs that would roll some or all of this federal money into one lump sum. However, it would not just be turned over to states as a block grant. States, civil-society organizations, and recipients themselves would all be responsible for measuring and achieving outcomes. The OG would have one overriding goal: To facilitate recipients moving out of dependency and into self-reliance.

Ryan is looking back to the success of the 1996 welfare reform, signed by a reluctant President Clinton after a successful campaign by House Speaker Newt Gingrich. Ten years after the reform, it was widely recognized as a significant success. (In 2012, President Obama gutted much of the reform through executive action.)

At a recent briefing at the American Enterprise Institute, Ron Haskins of the Brookings Institution pointed out that this proposal should have bipartisan appeal, and if it got to President Obama’s desk he would likely sign it. This explains the appeal of Ryan’s proposals. He doesn’t just throw out wide-eyed ideas designed to attract media attention. He develops them and modifies them until they get enough support from his colleagues that a pathway to success can be identified.

This is what happened to his Medicare reform proposal. The initial version, contained in his Roadmap, proved bait for demagoguery. President Obama accused him of wanting to give seniors “some kind of voucher,” insinuating that it would be about as valuable as a supermarket coupon. Most Republican colleagues were terrified of having to vote for this. Nevertheless, after some watering down, Ryan put it in his budget and convinced his colleagues to vote for it.

Is the Health IT Punchbowl Being Taken Away?


This blog has been very critical of the federal government’s blowing $30 billion to bribe doctors and hospitals to install Electronic Medical Records (EMRs) that they do not want, and which do not appear to help patient care.

electronic-medical-recordWell, the punchbowl may be taken away soon. One of the goals of the $30 billion was to install EMRs that would talk to each other. Well, in fact, many EMRs do not share information but actually block it:

“ONC should use its authority to certify only those products that…do not block health information exchange,” the budget report states. “ONC should take steps to decertify products that proactively block the sharing of information because those practices frustrate congressional intent, devalue taxpayer investments in [certified EHR technology], and make [the technology] less valuable and more burdensome for eligible hospitals and eligible providers to use.

VA to be Rewarded $17 Billion for Failing Vets


A few days ago, we saw a headline we wished we hadn’t seen, in which a VA official testified to Congress that the VA would need over $17 billion to “fix” the problems that have been denying veterans access to care. Well, it looks like he’s going to get it.

The New York Times reports that a bipartisan bill has been negotiated, that hands $17 billion more dollars to the failed agency. Lawmakers from both sides of the isle hope to pass the bill before the August recess. $10 billion will be allocated to get veterans appointments with private doctors and hospitals when they cannot access the VA system. However, that is not the good news it appears to be.

This looks like it is meant to solve the problem that private providers are increasingly unwilling to see VA patients, because the VA does not pay its bills adequately or timely. So, the solution would be to give vouchers directly to vets, right? No such luck:

Why are Health Insurers Persecuting Innovative Drug-Makers, Instead of Bloated Hospitals?


One constant refrain heard in national health policy circles is the need for “integrated” or “coordinated” care. To be sure, I have never heard anyone speak favorably of “disintegrated” or “un-coordinated” care. While there are many good-faith practitioners who do want to integrate and coordinate care for patients, these terms are often used to camouflage a more straightforward way to raise prices. Here’s an example from Bloomberg BusinessWeek:

money-burdenFor the past four years, Pennsylvania insurance company Highmark has watched its bills for cancer care skyrocket. The increase wasn’t because of new drugs being prescribed or a spike in diagnoses. Instead, the culprit was a change that had nothing to do with care: Previously independent oncology clinics and private practices have been acquired by big hospital systems that charge higher rates, sometimes three times as much, for chemotherapy drugs. “The site of care and the type of service provided does not change at all,” says Tom Fitzpatrick, Highmark’s vice president of contracting. “The only significant difference that we primarily see is the [patient] gets a wristband placed on them.”

Obamacare Architect: No Tax Credits for Federal Exchanges


Halbig versus Burwell is the famous lawsuit that claims that Obamacare federal health insurance exchanges cannot pay tax credits to health insurers. The plain language of the law is that only state-based Obamacare health insurance exchanges can channel these tax credits. The real champions of this argument are Michael Cannon and Jonathan Adler of the Cato Institute, who recently encapsulated their argument in the Wall Street Journal.

The question is still unsettled. Last week, two different Circuit Appeals Court panels came to different conclusions: The DC Circuit agreed that the subsidies could only go to insurers in state exchanges; while the 4th Circuit ruled that they could go through federal exchanges too.

The Administration is horrified that the Supreme Court could decide that it is illegal to subsidize insurers in federal exchanges. Most states have declined to set up their own exchanges. Further, some of those that did are closing up shop.

Hits and Misses


Happy Older Couple in Beach Chairs

Heart attacks are down 20 percent among seniors. No changes for the middle aged.

Fist bumps and high fives are more hygienic than handshakes.

Doctors are almost twice as likely to be organ donors as general public is.

Google and Novartis ink deal to put smart sensors in contact lenses.

Patents for Apple’s iWatch laid open: It will integrate “plethora” of health apps.

CMS Views Medicare Solvency through Rose-Colored Glasses


The 2014 Trustees Report was released on Monday, July 28th. The Center for Medicare and Medicaid Services (CMS) press release paints a rosy picture, but fails to discuss the bad news that is hidden in plain sight.  According to the cheerleaders at CMS, the health of the Medicare Hospital Insurance Trust Fund has improved since last year. The Trust Fund purportedly will remain solvent until 2030 — four years longer than projected in the 2013 Trustees’ Report. The press release partially credits the 2010 landmark law, the Patient Protection and Affordable Care Act (ACA) with controlling the growth of Medicare spending.

The Trustees Report is supposed to project future Medicare spending based on current law. But, that also means the official projection includes provisions meant to slow spending growth that the Trustees know are unlikely to occur. In years past, the Trustees tended to ignore these uncomfortable facts. Around 2010 the Office of the Actuary at CMS took the unprecedented step of producing an Alternative Scenario report explaining that the assumptions in the Trustees Report were unrealistic, and the projection were most assuredly wrong. That raised eyebrows in the policy world. This year, the alternative scenarios (i.e. conditions that are more likely to occur) crept up from the appendix (at the back) and landed uncomfortable on page 2, with the authors explaining: