study: medicaid architects of doctors trapped of ...€¦ · wisconsin’s gov. walker rejects...

T h e M o n T h l y n e w s p a p e r f o r h e a l T h C a r e r e f o r M

Walker Rejects Exchange CashWisconsin sends back federal grant money for Obamacare insurance exchange implementation. Page 3

Ohio GOP Exchange DivisionThe Buckeye State’s majority party is split over whether to imple-ment Obama’s health insurance exchanges. Page 4

Health Cost-Sharing on RiseA Christian alternative to insur-ance is exempt from the regula-tions of Obama’s law and becoming increasingly popular. 0

Oregon Considers New TaxOregon’s plan for the health insurance exchange mandated by Obama’s health care law includes a new tax on health care plans. Page 11

Missouri Exchange VoteThe Missouri Senate voted to send the health insurance exchange implementation mandate to the state’s voters in the fall election. Now it’s up to the House and gov-ernor to determine whether the public gets to decide. Page 15

©2012 Vol. 13 no. 3 ~ april 2012

T h e M o n T h l y n e w s p a p e r f o r h e a l T h C a r e r e f o r M

The Pulse

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study: medicaid increases cancer deaths – 7

By Kenneth Artz and Benjamin Domenech

Over the past ten years, Kansas’s Medicaid budget has grown about 7.5 percent year—a rate consis-

tent with the growth in other states, but one lawmak-ers say cannot be sustained.

To improve outcomes and reduce costs, Gov. Sam Brownback, a Republican, has proposed a method of privatizing the system, which serves about 350,000 Kansans.

Kansas Gov. Seeks Medicaid Reform

www.healthpolicy-news.org

doctors traPPed in a backward system – 16

HealtH Care NewsIDEAS THAT EMPOWER PEOPLE

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architects of mass. Plan exPect obamacare Premium hikes – 14

©2012 www.healthpolicy-news.orgIDEAS THAT EMPOWER PEOPLE

HHS Mandate Sparks an Outcry from Religious Groups, Congress

brownback, p. 8Sam Brownbackgovernor - KS

By Kendall Antekeier

A requirement under President Barack Obama’s health care law for employers to provide access to insurance coverage of preventative services

at no direct cost to employees caused uproar among faith communities and religious organizations when the administration announced in February those ser-

MANDATE, p. 6

florida Sen. marco rubio addresses a news conference about the birth control requirement in the health care law as fellow senators (from left) John Thune (SD), Kelly ayotte (NH), roy Blunt (mO), and mitch mcConnell (KY) listen.

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Wisconsin’s Gov. Walker Rejects Health Insurance Exchange Funds

health CaRe neWs i aPRil 2012 3

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by ashley bateman

Republican Gov. Scott Walker of Wisconsin became the most recent

governor to reject implementation of the health insurance exchanges mandated under President Barack Obama’s health care law, saying he will return the $38 million taxpayer-funded grant pro-vided to his state by the federal govern-ment.

Several states, including Florida, Kan-sas, Louisiana, and Oklahoma, already have decided to return federal funding designed to cover the costs of setting up an exchange. As of February, only 15 states had made significant progress toward establishing an exchange under Obama’s law, with the remaining 35 having either halted implementation or decided against any action.

‘it doesn’t make sense’Last year, Walker set up the Office of Free Market Health Care, a collab-orative office designed to evaluate the effect of Obama’s health care law in the state and develop an initial insur-ance exchange plan for consideration by the legislature. But in recent months the governor has become more openly critical of federal restrictions on the exchange, and he closed the Office of Free Market Health Care.

In a January 18 statement Walker said the state would “discontinue any devel-opment on a health exchange,” adding, “stopping the encroachment of Obam-aCare in our state, which has the poten-tial to have a devastating impact on Wis-consin’s economy, is a top priority.

“When job creators and Wisconsin families are facing difficult times, it doesn’t make sense to commit to a fed-eral health care mandate that will result in hidden taxes for Wisconsin families, increase health care costs and insurance premiums, and [create] more uncertain-ty in the private sector,” Walker said in the statement.

short-term funding, long-term costsThe grant from the federal government Walker rejected was intended to pro-vide initial funding, but the long-term expenses for states could grow expo-nentially, notes Nicole Fisher, a senior policy director for Health Systems Inno-vations and a fellow of the American Action Forum.

“We don’t know what it’s going to cost between companies having to change their requirements, having to change their plans, even something as simple

as filling out paperwork to be part of the exchange. ... There are all kinds of silly regulatory costs,” said Fisher.

Fisher says information security is another concern, as an online health provider shop will require consumers to give out sensitive information.

“For an exchange to function as well as the government claims it should, they’re going to need real-time data,” she said. “That’s income data, citizen-ship data, health care data, access to medical records. To have access to all this government data and to hire com-panies who can manage all this data will cost money.”

Fisher says Walker’s decision to return the money will free the state from the attached strings.

“Clearly, under a free-market men-tality the default answer is it should be left up to the state,” Fisher said. “With exchanges, ultimately, it’s a good idea if it works out the way [the government] claims it will. In theory that’s fabulous. In reality I don’t see how it’s possible. Every plan is going to have to change their criteria.”

washington’s strings attachedInsurance exchanges are only part of Wisconsin’s concern regarding federal

mandates, according to Michael Ford, research director at the Wisconsin Policy Research Institute.

“The experience with No Child Left Behind that Wisconsin and other states are going through is instructive,” said Ford. “There are always strings attached to federal money.”

Forced implementation may become a moot point after the U.S. Supreme Court ruling expected this spring concerning other aspects of Obama’s health care law, Ford notes.

“Conceptually, the idea of a market-based insurance exchange makes a lot of sense,” Ford said. “That said, we cer-tainly sympathize with the position to not set up a new government entity that is just going to get struck down.”

Fisher says the need for Walker’s decision illustrates how Washington red tape overrules state and local interests.

“Ultimately, the federal government is giving so much regulation with this bill, you can try to set up an exchange and make it as free-market and local as possible—but still 95 percent of it is dic-tated from Washington,” Fisher said.

Ashley Bateman ([email protected]) writes from Williamsburg, Virginia.

“When job creators and Wisconsin families are facing dif-ficult times, it doesn’t make sense to commit to a federal health care mandate that will result in hidden taxes for Wisconsin families ...”scott walker, Governor - wi

by ashley bateman

Although Ohio is party to the 26-state lawsuit questioning the constitu-

tionality of President Barack Obama’s health care law, an internal split has developed within Republican Gov. John Kasich’s administration concerning implementation of the law.

Lt. Gov. Mary Taylor, who heads the Ohio Department of Insurance, has described the law as “catastrophic.” But appointee Greg Moody, who leads the state’s Office of Health Transforma-tion, has spoken positively about some aspects of it.

“All of this is more complicated than an easy yes or no,” Moody said in an interview with Gannett. “There are aspects of federal reform … that picked up innovation on the state level. Those are things we were going to do with or without” the federal law.

Taylor, by contrast, reiterated the administration’s opposition to the law.

“The Governor and I oppose the fed-eral health care law and want to see it repealed and replaced with something that works better for individuals and businesses by fostering a vibrant health

insurance marketplace, reducing costs and fighting lawsuit abuse,” Taylor said in an official statement. “We are seeking every possible option to reduce costs for job creators and help Ohioans preserve control over their health care. Ohio con-tinues to study the best path forward and has not made any decisions.”

mixed messagesJohn R. Graham, director of health care studies at the Pacific Research Insti-tute, says Ohio lawmakers should avoid undermining public opposition to the law.

“The state is giving a mixed message and threatens [to impede] the defeat of Obamacare if it collaborates in any way,” said Graham.

Although Taylor has reiterated her opposition to the federal law, she also has said Ohio is still evaluating the chief question facing the states, whether to implement the insurance exchange man-dated by Obama’s law, Graham notes.

“Implementation of Obamacare is not a goal toward which state officials should be working,” Graham said. “Instead, they should do their best to stifle Obam-acare, until the Supreme Court or the November 2012 election defeats it. If [those events] do not result in the defeat of Obamacare, there will be plenty of time for states to respond to the law.”

Greg Lawson, a policy analyst with the Buckeye Institute, says Ohio has not been as adamantly against Obama’s law as some states and has accepted a few federal taxpayer-funded grants related to implementation.

“I think [Lt. Gov. Taylor’s] concerns are federal mandates and aspects of how it’s going to create a whole cost vortex for Ohio,” Lawson said. “If the law is struck down, that opens up a whole new vista of what can happen. If upheld, we have to implement or the feds are going to come in. Nobody knows what’s really going to happen. There’s no stability yet.”

implementing budget woesIf Ohio adopts any aspects of Obama’s law, budget woes will follow due to the expansion of Medicaid, Lawson says.

“It would be unquestionably negative for the state’s budget,” Lawson said. “Ohio is already dealing with a Medic-aid budget referred to as the ‘Pac Man’ of the state budget by a former governor. The way the law is structured will open up the floodgates of more people being eligible for Medicaid.”

Medicaid currently represents 30 per-cent of Ohio’s state budget and is grow-ing, Lawson notes.

“The whole thing is one big tightrope,” Lawson said. “What it’s been all along

is joint federal-state funding. The feds always come in with the majority of the funding, but the state has to pony up as well. Obamacare really exacerbates the problem.”

ohio not aloneThat problem faces every state, says Graham.

“We’re going to see increases in the number of Medicaid recipients by 16 to 18 million people,” Graham said. “Although the federal government will borrow most of the money from the cen-tral bank of communist China to finance this expansion, states like Ohio will also be on the hook for much of the money.”

Graham says centralization is the main motivation behind Obama’s law.

“Health care is local,” Graham said. “This law centralizes policy decisions that have traditionally been made by state legislators. The central govern-ment will impose policies with unin-tended consequences.”


Kasich Administration Split on Implementation

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4 health CaRe neWs i aPRil 2012

“The governor and I oppose the federal health care law and want to see it repealed and replaced with something that works better for individu-als and businesses ...”mary taylor

lieutenant Governor - oh

John Kasichgovernor - OH

by loren heal

The latest Massachusetts request for a Medicaid waiver renewal from the

federal government assumes Safety Net Hospitals will significantly reduce costs for the state’s Medicaid program.

But no new methods for such cost reductions are specified in the waiver request.

Considering the Bay State depends on this waiver to a greater degree than other states—it provided the basis for Republican Gov. Mitt Romney’s state-wide reforms—this unresolved funding question could indicate future problems for the nation under President Barack Obama’s similar health care reform.

Under the terms of the waiver request, the Safety Net Hospitals would be pushed away from the fee-for-service payment model. Federal Section 1115 waivers allow states to experiment with different funding and delivery options for their Medicaid and CHIP programs, which must be federally budget-neutral over the duration of the waiver.

The page of the waiver describing what payment models Massachusetts plans to move to was left blank, accord-ing to Joshua Archambault of the Pio-neer Institute.

“As part of this agreement, you are going to move these Safety Net Hospi-tals to a different payment methodology. And in the waiver they laid out seven individual hospitals. They put addition-al money on the table to allow for that transition. The agreement was these hospitals had to move in that direction payment-wise,” Archambault said.

“There are some thresholds or bench-marks that these institutions have to reach in order to get all of the money that’s on the table for them. They have to make these payment changes, but the page that describes what they actu-ally need to do is completely blank,” he added.

non-specified cost savingsJennifer Kritz, communications director for the Office of Massachusetts Health and Human Services, confirmed “the waiver does not specify exactly the type of payment [model or models] that safety net providers should move to in [lieu] of the fee-for-service model.

“In general, we believe that the health care system must transition from the fee-for-service payment model toward alternative models that reward provid-ers for quality, coordination, and cost effectiveness in care,” Kritz added. “These models may include bundled pay-ments, shared savings, and global pay-ments, among others.”

According to Archambault, Massachu-

setts policymakers are considering leg-islation to describe the payment models to be used at the Safety Net Hospitals, but as of yet they have offered no specific solutions.

“We’re moving away from fee-for-ser-vice. That’s about as much detail as we have,” Archambault said.

still discussing optionsArchambault says there is a common understanding between the health pol-icy establishment in Massachusetts and the federal government that “fee-for-ser-vice is not how you pay for health care.” State officials and those at the Centers for Medicare & Medicaid Services have discussed many different options for payment, according to Archambault.

“I don’t think they’ve coalesced around one form, but they may include bundled payments, episodic payments, and these all mean different things to different people, but in essence, starting to pay for an individual’s care rather than one specific procedure. This is an area of a lot of debate right now in our state,” Archambault said.

Archambault says the inherent assumption within the waiver request is that in order to shift away from the fee-for-service model, “you have to put these hundreds of millions of dollars on the table.

“In order to get these Safety Net Hospitals to change you’re going to have to give them a ton of money,” he

explained. But he sees two problems with that: “First, what about the other hospitals not specifically mentioned in the state waiver? And secondly, at the federal level, the federal law is partially financed by pulling all of this money out of the system.”

obamacare cuts PaymentsMerrill Matthews, a health care policy analyst with the Institute for Policy Innovation, says what’s at issue in Mas-sachusetts are federal Disproportionate Share Hospital (DSH) adjustment pay-ments, which provide additional help to hospitals serving low-income patients not covered by either public or private health insurance.

“The background on this is that his-torically hospitals have gotten an extra bump from the federal government if they serve a disproportionate number of uninsured people,” Matthews said. “What the Obamacare legislation did was largely try to do away with the DSH payments because they thought ‘every-one’s going to be insured.’”

With more people on Medicaid, Medi-care, and private insurance, the idea was there would be less need for DSH payments, which are cut by 75 percent nationally under Obama’s law. The tran-sition away from fee-for-service is to be financed in part through future cuts in Medicare DSH payments, according to Archambault.

“What this is about,” Archambault

said, “is the future of how we pay for health care. There is a lot of disagree-ment about how you should actually pay for health care. None of these unnamed reforms they’re considering are proven to save a bunch of money.

“Our waiver seems to imply that CMS’s belief is that hundreds of mil-lions of dollars are required to make that change. Where is that money going to come from nationally? Obviously, we have no idea,” Archambault added. “Through the waiver they are assuming that the only way you can change the payment structure is by giving hundreds of millions of dollars more to do it, and under the federal government currently they are planning to take away money from these hospitals.

“Something has got to give,” Archam-bault said.

Loren Heal ([email protected]) is a research programmer at University of Illinois at Urbana-Champaign and a reporter for The Heartland Institute.

Mass. Medicaid Waiver Request Lacks Savingshealth CaRe neWs i aPRil 2012 5

“[W]e believe that the health care system must transition from the fee-for-service payment model toward alternative models that reward pro-viders for quality, coordi-nation, and cost effective-ness in care.” Jennifer kritz

communications director

office of massachusetts health

and human services

vices must include abortifacients, steril-ization, and contraceptives.

Under its initial rule, the U.S. Depart-ment of Health and Human Services (HHS) mandated all private insurance plans cover the costs of such prescrip-tions as preventative care for women.

Although representatives of Chris-tian communities had lobbied the White House for months to create a full exemp-tion for organizations that have religious reasons to oppose being forced to pay for such services, their requests were ignored. HHS’s rule included an exemp-tion only for actual faith institutions, such as churches, and not for nonprofits, charities, or hospitals. Those affected by the law are being given a year to comply.

freedom vs. u.s. requirementsSr. Mary Ann Walsh of the U.S. Confer-ence of Catholic Bishops raised concerns over how Catholic hospitals would oper-ate under such a mandate. She says they have been given an ultimatum: abandon their values and go with the govern-ment, or be true to their Catholic morals and either violate the law or serve only Catholics, undermining ministry.

“We help others because we are Cath-olic, not because others are Catholic,” said Walsh.

Walsh says the exemption was so nar-rowly defined that most religious orga-nizations, such as parochial schools and universities, charitable institutions, and religious hospitals, would be required to offer plans that cover contraception, abortifacients, and sterilization services.

In a letter to HHS criticizing the man-date, University of Notre Dame Presi-dent Fr. John Jenkins stated, “It’s about religious freedom, it’s not about contra-ception.”

attempt at compromiseIn response to the high level of outrage

from religious organizations, politi-cal leaders, and the public, the Obama administration announced what it called a compromise. The new policy has not yet been released as a new rule from HHS, but according to a White House press release, “Under the new policy … [a woman] will have free pre-ventive care that includes contraceptive services no matter where she works. If a woman works for religious employ-ers with objections to providing con-traceptive services as part of its health plan, the religious employer will not be required to provide contraception cover-

age, but her insurance company will be required to offer contraceptive care free of charge.”

White House Chief of Staff Jack Lew stated, “hopefully now this [compromise] will set the issue to rest.” Organizations such as Planned Parenthood praised the administration’s decision, and White House Press Secretary Jay Carney called the move an “accommodation” and “an appropriate balance between religious beliefs and access to preventa-tive services for women.”

‘it’s not a compromise’Many of the opponents of the Obama administration’s initial approach remain unsatisfied with the proposed compro-mise. The new version of the mandate does nothing to protect religious liberty and still forces religious organizations to compromise their moral conscience, says Yuval Levin, a fellow at the Ethics and Public Policy Center in Washington, DC.

“The new rule does exactly the same thing. It puts religious employers in the position of having to choose between pro-viding their workers with free access to contraceptives … or not providing those workers with health insurance at all and paying a large fine,” Levin said.

Rep. Paul Ryan (R-WI) went even further, claiming the administration’s compromise was nothing more than an “accounting trick.”

“It forces the insurance company … to pay to do the coverage. So instead of making the institution itself [pay], it forces the insurer, and a lot of these Catholic institutions are self-insured,” Ryan said in a press conference. “It’s not a compromise. The president’s doubled down.”

Sen. Marco Rubio (R-FL) introduced legislation, the Religious Freedom Res-toration Act of 2012, to strip the require-ment from Obama’s health care law. At the time this article was written, the measure had 29 cosponsors in the Sen-ate.

legal suits move forwardStates, too, are examining the possibil-ity of legal recourse to avoid complying with the mandate. Michigan is the first to move forward, with Republican Attor-ney General Bill Schuette announcing the state will file legal briefs in support of a lawsuit brought by the Becket Fund for Religious Liberty against the Obama administration.

“We cannot compromise religious lib-erty,” Schuette said in announcing the move. “We cannot undermine consti-tutional protections. This is a radical attack on the First Amendment that cannot stand.”

Additional legal action is being con-sidered at the federal level, according to Anna Franzonello, legal scholar at Americans United for Life.

“This is a violation of religious liber-ties and conscience rights for Catholics and for so many others in religious com-munities when it comes to requiring the provision of life-ending devices,” Fran-zonello said. “Consider that the line of cases from Griswold to Roe, cases that deal with contraception and abortion—none of them say that there is a right to payment for these drugs, devices, and procedures. The Obama administration has twisted this from an issue of your right to privacy to their claim they can demand participation from everyone else.”

more to come?Franzonello expects additional action in the coming months.

“In law school, I never learned the First Amendment had a balancing clause for non-constitutional rights,” Franzonello said. “It’s not okay to say I have to pay for someone else to do this.”

Kendall Antekeier ([email protected]) is a legislative specialist in health care policy for The Heartland Institute.

Mandate Sparks Outcry from Religious Groups6 health CaRe neWs i aPRil 2012

continued from page 1

“So instead of making the institution itself [pay, the new rule] forces the insurer, and a lot of these Catholic institutions are self-insured. It’s not a compromise.”Paul ryan

u.s. rePresentative - wi

“We cannot compromise religious liberty. We can-not undermine constitu-tional protections. This is a radical attack on the first amendment that cannot stand.”bill schuette

attorney General - mi

by kenneth artz

Patients enrolled in Medicaid have worse survival rates than those with private insurance or even

no insurance at all, according to a new study focused on Ohio Medicaid recipients published in the journal Cancer.

Researchers Siran Koroukian, Paul Bakaki, and Derek Raghavan compared survival and five-year mor-tality with Medicaid status in more than 11,000 Ohio adults aged 15 to 54 years and diagnosed in the years 1996–2002 with eight highly treatable cancers. They also sorted the Medicaid enrollees into two categories—those enrolled at the time of their diagnosis and those enrolled afterwards—to get more insight into how cov-erage affects outcomes.

Compared with non-Medicaid recipients, patients in the Medicaid pre-diagnosis and peri/post-diagnosis groups were found to have experienced unfavorable survival outcomes. Of the non-Medicaid patients, fewer than one in 10 died of their cancer diagnosis within five years, whereas more than one in five Medicaid patients died during that period.

According to Raghavan, who undertook the research while working at the Cleveland Clinic and now heads the Levine Cancer Institute in North Carolina, the team’s research illustrates how Medicaid can fall short

of providing sufficient care.“While Medicaid is potentially lifesaving, it is better

to be able to support yourself and have insurance that protects at a higher level than just Medicaid,” Ragha-van said in a press statement.

Devon Herrick, a senior fellow with the National Center for Policy Analysis, says Raghavan’s findings are consistent with other research.

“Dr. Raghavan is observing what many others have found: Medicaid is inferior to private coverage. Several studies have found Medicaid enrollees have a tougher time getting physician appointments than either the uninsured or the privately insured. Doctors who accept Medicaid patients are sometimes ‘Medicaid mills’ that run patients through [the system] like cattle through a corral,” explained Herrick.

Herrick notes the Medicaid program does not guar-antee enrollees timely access to high-quality care because reimbursements are so low many physicians will not treat Medicaid patients.

“Theoretically, Medicaid enrollees are eligible for the same cancer care as the privately insured. However, some doctors will not accept Medicaid, so Medicaid enrollees have a harder time finding a doctor and often have to accept whoever they find regardless of reputa-tion or experience,” said Herrick.

Dr. Karin Rhodes, who directs the Division of Health Policy Research at the University of Pennsylvania School of Medicine in Philadelphia, says the study indi-cates the need for President Barack Obama’s health care law.

“It is actually the impact of being uninsured. This really highlights the importance of fully implementing the Affordable Care Act (PPACA) and getting every-body fully insured,” she told Reuters.

Herrick, however, says Rhodes’ argument “is rather short-sighted given that half of those expected to gain coverage under the PPACA will be covered by Medicaid.

“Past research has found that between half and three-quarters of people newly covered after a Med-icaid expansion were previously insured with private coverage. Some of these newly eligible under PPACA will succumb to the temptation of free coverage and find they have less access to care when they need it,” Herrick explained.

Kenneth Artz ([email protected]) is a free-lance reporter for The Heartland Institute based in Dal-las, Texas.

For Cancer Patients, Medicaid Worse than Being Uninsured

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Rather than liberate the American health care system from bureaucracy and waste, Obamacare blankets it with more of both, suffocating innovation and destroying freedom.

PETER FERRARA, senior fellow of The Heartland Institute, offers a devastating appraisal of how Obamacare expands the reach of government, raises costs, and reduces benefi ts.

Health care deformed

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“[S]ome doctors will not accept medicaid, so medicaid enrollees have a harder time finding a doctor and often have to accept whoever they find regardless of reputation or experience.”devon herrick, senior fellow

national center for Policy analysis

Brownback’s administration promises the plan, named “KanCare,” will achieve the savings without reducing coverage for the disabled, the elderly, or poor families, and without cutting payments to doctors, hospitals, clinics, and nursing homes.

consolidation and coordinationAccording to Beverly Gossage, direc-tor of HSA Benefits Consulting, who participated in the planning sessions for the new system, the approach leans heavily on consolidating and coordinat-ing care.

“The primary aim was to cut costs but maintain services that we’re offer-ing without cutting provider reimburse-ment. That was the challenge,” Gossage said. “There was a consensus that we have to cut back on money. However, when you went around the table, for many people that vague sentiment would be paired with a comment that ‘we need to add dental, we need to add this and this’—instead of cutting back on costs.”

examples from other statesGossage said Kansas looked to Michigan, Pennsylvania, Tennessee, and Texas for examples of how features could be com-bined to improve the system.

“What KanCare aims to do to meet this challenge is to make Medicaid more patient-centered, through coordinated care,” Gossage said. “What providers told us is that if you are dealing with someone who has multiple disabilities, multiple issues, there was very little coordination of their care, leading to

a significant amount of duplication of effort.

“We also found we needed more accountability,” she added. “If you don’t have true coordination of care, we found no one’s truly accountable for not only the costs for these services but for the outcomes. Medicaid was spread over sev-eral different agencies in Kansas, with lots of different people hired to do pieces of this—again, that contributed to not having enough accountability.”

Gossage says the consolidation of ser-vices, agency streamlining, and a clearer line of authority, paired with a consoli-dated portal of qualification for services, was undertaken to help KanCare make the system “more person-centered, more efficient, and provide better outcomes at a lower cost.”

unintended consequencesSome advocates for the developmental-ly disabled express concerns about the plan. According to Anna Lambertson, executive director of the Kansas Health Consumer Coalition, the long-term care needs of patients with develop-mental disabilities won’t be sufficiently addressed via a private program to man-age health care costs.

“We have lots of concerns going forward. The governor put forth KanCare, which will move the Medicaid silos all under one umbrella,” Lambertson said. “The gover-nor is saying he’s going to improve out-comes and lower costs, but is there a Plan II if this one doesn’t work out?”

Lambertson says the governor’s plan doesn’t address the nearly 5,000 people with developmental disabilities who are on a waiting list to receive assistance in their homes. She maintains the speed of

the process could lead to unanticipated problems.

“I’m not convinced any of us have taken the time to study the best prac-tices for managed care. This is all hap-pening very fast—they’re signing the contracts this summer and the reforms start at the beginning of 2013. All I’m asking is: Are we ready? Has anyone looked at the numbers yet?” she asked.

State Sen. Dick Kelsey (R-Goddard) echoed those con-cerns. He said the move toward coor-dinated care is hap-pening too fast and has too many unre-solved questions.

“The request for proposals from managed care com-panies has elicited 1,100 questions

from the bidders, implying that even the professionals don’t understand what is being suggested, let alone the providers of Medicaid services and those receiving those services,” Kelsey said.

incentives for better outcomesShawn Sullivan, secretary of the Kan-sas Department of Aging and one of the architects of the new system, says the changes are necessary and will not dis-rupt the lives of the developmentally dis-abled. Sullivan says everyone currently in the system will be able to keep his or her case manager.

“By coordinating Medicare’s medical, mental health, and long-term care ser-vices,” Sullivan said, “the state will be able to save money by relying less on institutions and nursing homes when

providing services to those who need it.”Beyond the newly streamlined model,

Gossage points out the reform will pro-vide incentives for efficiency and cost saving.

“Roughly 3.5 percent of the funding will go toward incentives, using a carrot and stick approach. If you can demon-strate greater outcomes at a lower cost, there’s an incentive in place to give to the private contractor,” Gossage said.

doctors approve changeJerry Slaughter, executive director of the Kansas Medical Society, says the governor’s plan does three things that have met with approval from the doctors he represents.

“It coordinates agencies across the whole spectrum of health care, which will gradually slash costs; it preserves eligibility without dropping anyone from the program; and it continues to pay pro-viders at current rates,” Slaughter said.

Slaughter said Kansas was on an unsustainable path and that reform was clearly necessary.

“We recognize that some people think this plan is moving too fast, but our state is facing some serious financial prob-lems, and we think the governor’s plan has the best chance of making this pro-gram sustainable. We tell the critics: If you have a better alternative, then you’d better present it now,” Slaughter said.

Kenneth Artz ([email protected]) is a freelance reporter for The Heart-land Institute based in Dallas, Texas. Benjamin Domenech ([email protected]) is managing editor of Health Care News and a research fellow at The Heartland Institute.


continued from page 1

Dick KelseyState Senator - KS

Brownback Seeks Kansas Medicaid Reform

Kansas gov. Sam Brownback addresses the National governors association as fellow governors (from left) Earl ray Tomblin (Wv), martin O’malley (mD), Chris gregoire (Wa), and Dave Heineman (NE) listen.

by marc kilmer

U.S. Health and Human Services Sec-retary Kathleen Sebelius recently

announced the health insurance pre-mium rate increases proposed for five states by Trustmark Life Insurance Company were “unreasonable.”

The rate increases for the states of Alabama, Arizona, Pennsylvania, Vir-ginia, and Wyoming were 13 percent. HHS contends an independent review determined the rate hikes were exces-sive.

“Before the Affordable Care Act (ACA), consumers were in the dark about their health insurance premiums because there was no nationwide trans-parency or accountability,” said Sebelius in a January statement. “Now, insur-ance companies are required to disclose rate increases over 10 percent and jus-tify these increases. It’s time for Trust-mark to immediately rescind the rates, issue refunds to consumers, or publicly explain their refusal to do so.”

trustmark Pushes backNot surprisingly, Trustmark has a dif-ferent view.

Patton Hallow, spokesperson for

Trustmark, responded to HHS by say-ing, “we respectfully disagree.”

“Our premiums are driven by the rising cost and increased utilization of medical services. As a smaller carrier, our loss ratios can vary significantly from year to year, and we take that vol-atility into consideration,” Hallow said. Trustmark’s increases were already implemented in the fall of 2011, she added.

Merrill Matthews, a resident scholar at the Institute for Policy Innovation, agrees Trustmark’s rate increases may not be “excessive,” as HHS claims.

“Trustmark asked for the increases in five states, although it sells coverage in many more,” noted Matthews. “That

limited number tends to support Trust-mark’s claim that the increase is due to health care costs in those states. For example, hospital mergers that limit the ability of health insurers to negotiate lower reimbursement rates, new state-imposed mandates or regulations, or higher utilization rates could all play a role in the increase. Or it could be that Trustmark imposed lower increases for a few years only to find out now that it needs to catch up. The point is that health insurance premiums are often driven by state-specific actions and not insurance greed.”

no authority to block increasesHHS has no authority to roll back the

rate increases. Although the Obama administration previously sought power to do so, the final version of its health care legislation included only language giving HHS the power to determine whether premiums that increased by more than 10 percent a year are “rea-sonable.”

Matthews points out that even though HHS has no authority to reverse Trust-mark’s decision, there may be other ways the agency can affect any insurer that increases rates in the face of HHS criticism.

“Obamacare gives the secretary of HHS so much power and discretion over the health insurance system, and Medi-care and Medicaid, that the department could create problems in other ways,” said Matthews. “More importantly, HHS can just make life—and business—mis-erable for any insurer that doesn’t buck-le under HHS whims. So the question isn’t whether Trustmark must conform, but is it wise not to.”

Marc Kilmer ([email protected]) is a Maryland Public Policy Insti-tute senior fellow specializing in health care issues.

HHS Hits ‘Unreasonable’ Insurance Rate Hikes

The new health care legislation will impact every American. The National Center for Policy Analysis (NCPA) has created a pamphlet that explains the new legislation’s major points in a succinct and unbiased way.

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“Trustmark asked for the increases in five states, although it sells coverage in many more. That limited number tends to support Trustmark’s claim that the increase is due to health care costs in those states.”merrill matthews

resident scholar

institute for Policy innovation

by kenneth artz

With President Barack Obama’s health care law causing upheaval

in the traditional insurance marketplace across the country, an alternative has grown in popularity: Christian health-sharing, an approach among faith com-munities to share costs without being subject to the regulatory burdens and mandates of Obama’s law.

Medi-Share is a nationwide commu-nity of more than 40,000 Christians who follow the biblical model of sharing and paying each other’s medical bills. Mem-bers commit to following healthy life-styles based on Christian principles—such as not smoking, using drugs, drink-ing in excess, or having sexual relation-ships outside of marriage. Medi-Share members are legally exempt from the provisions of Obama’s health care law.

Instead of monthly premiums, Medi-Share participants share in each oth-ers’ medical bills and pay, on average, 20 percent to 30 percent less for health care than those with traditional insur-ance, saving participants more than $600 million in health care expenses since 1993. With health insurance pre-miums expected to rise by as much as 40 percent over the next three years, more people are turning to health-sharing as an alternative, says Larry Guyetta, chief operating officer of Christian Care Min-istries, which operates Medi-Share.

“This program is not for everyone. But our unique approach is how we’re able to protect our members and keep costs low,” he said.

negotiated Payments to ProvidersGuyetta says members contribute an average of $170 per individual or $282 per family per month. When they expe-rience a medical problem, they select

a network provider. At the health care provider’s office, they show their Medi-Share ID card and the provider notifies Medi-Share. The provider sends the bill to Medi-Share, which then negotiates and possibly discounts the bill.

Afterwards, Medi-Share publishes the eligible medical bill for sharing. Medi-Share transfers the sharing funds directly between member accounts and issues a check to the provider drawn on the member’s ACCU (America’s Chris-tian Credit Union) account.

“We don’t think members should have to pay for illnesses related to smoking, drug abuse, or abortion. We also have a list of preexisting conditions we don’t cover—cancer, for instance. We also don’t cover routine needs, like your year-ly physical, or elective procedures like face lifts. We believe it is the member’s responsibility to cover things like that. What we do cover is the unexpected, such as a car wreck,” Guyetta said.

‘Passing the Plate’Although Medi-Share can help Chris-tians manage the costs of health care, it is not insurance. Resources are shared directly between members—there is no

pooling of funds, and the program can’t legally compel its members to help one another with their bills. Thus, Medi-Share does not offer the legal protec-tions you’d expect from regulated insur-ance companies, notes Spencer Harris, a health care policy analyst with the Texas Public Policy Foundation.

“Medi-Share is up-front with you that they’re not providing health insurance. What they are is a faith-based organiza-tion you can contract with when you’re in difficult circumstances due to health reasons. Medi-Share is akin to passing the plate at church on Sunday—only here they’ve expanded the scale,” Har-ris said.

not an insurance ProgramLinda Gorman, director of health care policy at the Independence Institute, says the association is similar to the fra-ternal organizations that were so impor-tant in the late nineteenth and twenti-eth centuries.

“They have deductibles and lifetime limits like commercial policies. The limit is $1 million a year and $5 million lifetime, $50,000 during the first month of membership. There are separate lim-its for preexisting conditions unknown when a person joined,” Gorman said.

Gorman notes the policy is canceled if there is any tobacco use, substance abuse, evidence of “sexual relations out-side of traditional Christian marriage,” or participation in activities that “rep-resent a willful disregard for personal safety.” If you gain too much weight, you have to make “significant progress toward the established goals” of losing it, she said.

“All kinds of things require precertifi-cation. There’s no treatment for sexually transmitted diseases except for rape, no

behavioral or mental health care, no rou-tine and preventive care,” Gorman said. “This might be a model that works for a lot of people if adapted to a more tradi-tional insurance approach. It’s too bad that Obamacare essentially stops this kind of experimentation” in the overall marketplace.

alternative for ProtectionTarren Bragdon, president of the Foun-dation for Government Accountability, says Medi-Share serves a purpose for faith-based populations looking for an alternative to private health insurance.

“When you enroll in Medi-Share, you are basically the same as a cash-paying individual whenever you go to the doc-tor. However, if you are going into the hospital for a major medical procedure, you make your case and the other mem-bers share your bills,” he said.

Bragdon says someone laid off from their job or starting a small business might find this a good alternative to pri-vate health insurance, and members of the clergy might use it for many years.

“Private insurance is not a one-size-fits-all solution for everyone. Programs like Medi-Share are real alternatives for individuals looking for protection against financial ruin due to a cata-strophic health incident,” Bragdon said. “Just as you see other faith-based orga-nizations competing with private relief organizations, Medi-Share is a faith-based alternative to private insurance. I think it fills a useful niche for the peo-ple availing themselves of this service. That’s how the market works.”

Kenneth Artz ([email protected]) is a freelance reporter for The Heartland Institute based in Dallas, Texas.


“This program is not for everyone. But our unique approach is how we’re able to protect our mem-bers and keep costs low.”larry Guyetta

chief oPeratinG officer

christian care ministries

Christian Health-Sharing Grows in Wake of Obamacare

by kenneth artz

Oregon political leaders decided last year to create the health insurance

exchange mandated under President Barack Obama’s health care law.

But they have since run into a series of hurdles that illustrate the difficulty of timely implementation, including a decision to tax health plans to fund the exchange after federal grant money runs out and the challenge of deciding which benefits will be mandatory under insur-ance plans.

Obama’s law tasked each state with creating a health insurance exchange, a government-controlled marketplace where individuals and small businesses can shop for health insurance coverage. If a state does not take steps toward operating its own exchange by 2014, the federal government has said it will establish one.

The business plan for Oregon’s exchange, HB 4164, is currently under consideration in the state legislature. Lawmakers established a public corpo-ration last year to create the exchange and decided to allow for up to a 5 percent tax on health care plans sold under the exchange in order to pay for it. The busi-ness plan assumes a tax of 2.5 percent in 2014 and 2.7 percent in 2015.

who should Pay?Dr. Roger Stark, a physician and health care policy analyst at the Washington Policy Center, says Oregon’s challenges illustrate the tough decisions facing each state that decides to implement.

“As of January 2012, 15 states either have passed legislation or are about to pass bills to establish state exchanges, while 35 states haven’t really done any-thing yet. The health care law says that the federal government will set up an exchange if the state won’t, but the feds in no way are prepared to do this—at least right now,” he said.

Stark says Oregon’s decision to tax insurance plans is a method other states will consider.

“The states will be responsible for the cost of running the exchange. And I am not aware of any fallback position, short of the feds supplying more money. Of course, the federal government is as broke as the states,” said Stark.

which Plans will Qualify?In December, the Obama administra-tion announced states would have the responsibility to choose the benefits offered under the health care overhaul. Nine members of a public corporation that will oversee Oregon’s exchange will decide which plans qualify under federal guidelines.

Participating insurers must rate their plans—bronze for a minimum 60 per-cent of benefits, silver for 70 percent, gold for 80 percent, and platinum for 90 percent—and offer at least one “silver” and one “gold” plan. According to Stark, it’s unclear whether the federal govern-ment will approve every plan in every state exchange or if states will be able to offer not only the plans in Obama’s law but also plans with high deductibles and catastrophic coverage.

“My guess is that the feds will not have the time or manpower to approve or disapprove every plan. The feds could withhold the subsidies for the exchang-es that don’t comply, but that would be self-defeating as far as the goals of the health care law,” Stark explained.

mandated benefits and rationingOregon legislators also have yet to decide on a minimum benefits package that insurance policies must cover in order

to qualify for sale through the exchange. Stark says every medical specialty from acupuncture to vascular surgery is put-ting pressure on legislators to include their services in the package.

“As the benefits package grows, so will the cost of premiums,” Stark said.

Research shows each benefit or pro-vider mandate adds, on average, 0.5 to 2 percent to every policy sold in a state, exacerbating the problem of rising costs, Stark notes.

“Health care costs are the real prob-lem with our health care system, so the government will control those costs via rationing. And rationing will take the form of procedural denial based on age, or by limiting access with long waiting lines for treatment,” said Stark.

coming federal takeover?Devon Herrick, a senior fellow with the National Center for Policy Analysis, says he doesn’t believe the Obama admin-istration will allow states flexibility on benefit packages for very long.

“Individual insurance policies tend to have fewer benefits because people buy-ing insurance on their own quickly learn the tradeoff between comprehensive pol-icies that are costly and high-deductible plans that are affordable. The problem is that the Department of Health and Human Services will ultimately deter-mine the essential benefit package and it will be loaded down with mandated benefits that are unaffordable,” he said.

“Mandates increase the cost of cover-age. Estimates are that up to one-quar-ter of the uninsured have been priced out of the market by mandated benefits,” added Herrick. “I expect the mandates to increase as special interests descend on state capitols to lobby for their respec-tive diseases, conditions, and services to be covered by the mandate.”

GoP reconsidering supportEric Fruits, president of Economics Inter-national Corp., an Oregon-based consult-ing firm, says after the most recent Ore-gon legislative session some Republican legislators took heat for going along with exchange implementation. He doesn’t believe they will be so willing to walk down that aisle this session.

“Right now the Oregon health insur-ance exchange is still up in the air. It’s not going as fast as supporters had hoped, in part because the federal gov-ernment will build it anyway,” Fruits said.

Kenneth Artz ([email protected]) is a freelance reporter for The Heartland Institute based in Dallas, Texas.

Oregon Will Tax Health Plans to Fund Exchangehealth CaRe neWs i aPRil 2012 11

“Health care costs are the real problem with our health care system, so the government will control those costs via rationing.”dr. roGer stark

health care Policy analyst

washinGton Policy center

by loren heal

The Obama administration released a final list of waivers from the costly mandates of President

Barack Obama’s health care law—a list including an overwhelming number of union members.

The waivers were necessary because the Affordable Care Act mandates no annual or lifetime limits may be placed on coverage, so insurers cannot afford to offer those plans.

In all, 1,625 plans covering 3,914,356 individuals were exempted from the mandates through 2014.

unions benefit the mostAccording to Edward Haislmaier, a senior research fel-low in health policy studies at The Heritage Founda-tion, labor unions benefited the most from the admin-istration’s waivers.

“A lot of those waivers are for union plans where the union runs the plan for the workers and the employers contribute,” Haislmaier said.

The administration abandoned its earlier practice of

issuing annual waivers, instead granting them through 2014. According to Merrill Matthews, a resident schol-ar at the Institute for Policy Innovation, there is no predicting what will happen in 2014, when exemptions are no longer allowed.

“Part of the waivers [allowed] limits that insurers could impose on a health insurance policy. If you elimi-nate those limits, as Obama’s law does, prices could go up,” Matthews said.

Matthews noted more than half of the approximately four million individuals receiving waivers are union members, including 82.9 percent of those covered in the most recently updated list of waivers.

borrowed timeHaislmaier notes most of the plans receiving waivers will have to end by 2014 “because they are essentially mini-med plans,” a more limited form of insurance plan that does not meet the many requirements of Obama’s law.

“Come 2014 these people are going to lose their cov-erage, because their plans are not economically viable if they don’t have annual limits. So what that means is the rest of this had better be in place or the adminis-tration is going to be throwing people out of—granted, limited coverage, but it’s something versus nothing—in 2014,” Haislmaier said.

“And that gets to the question,” Haislmaier contin-ued, “Is the administration going to be ready when that day comes? I’m just assuming that they think they’re

going to be reelected. There are a lot of skeptics who think that even if they got reelected they wouldn’t be ready.”

Loren Heal ([email protected]) is a research programmer at the University of Illinois at Urbana-Champaign.

Unions Get Lion’s Share of Final ACA Waivers12 health CaRe neWs i aPRil 2012

HealtH Care NeWS

http://news.heartland.org/health

A Web site combining all the best content on health care policy from

The Heartland Institute.

Everything you need to know about health care policy

The Heartland Institute is a national nonprofit public policy research organization founded in

Chicago in 1984. Its mission is to discover, develop, and promote free-market solutions to social and

economic problems. For more information, visit our Web site at www.heartland.org

or call 312/377-4000.

“protecting Consumers, Maintaining options, and Building a Bridge to 2014,” Centers for Medicare and Medicaid services: http://cciio.cms.gov/resources/files/approved_applications_for_waiver.html

internet info

by marc kilmer

As Idaho’s 2012 legislative session got underway in January, the

state’s overwhelmingly Republican leg-islature struggled with ideological divi-sions over how to proceed with imple-mentation of President Barack Obama’s health care law.

Given the GOP divide, the future of Idaho’s health insurance exchange may rest with the state’s minority party.

As the leader of a party with only 13 seats in the 70-member House of Rep-resentatives, Minority Leader John Rusche (D-Lewiston) acknowledges “it’s not often we can exert influence in the discussion.” In the debate over a health insurance exchange, however, the minority party’s votes may be responsi-ble for either killing or implementing the program.

A retired doctor, Rusche has been a tireless advocate of implementing an exchange in the state. Although he says he’s uncomfortable with many aspects of Obama’s law, he has worked to tell his colleagues about what he claims to be a “significant detriment to the state of Idaho that will come with a federal exchange” if the state does not establish one on its own.

Although Rusche is hesitant to predict how the exchange legislation will fare, he does say the vote “will be really close.” A close vote in the House of Representa-tives would put the 13 Democrats in a powerful position.

republicans dividedErik Makrush, a health care analyst with the Idaho Freedom Foundation, which has been warning the legislature

about what it sees as the pitfalls of a health insurance exchange, says Repub-lican legislators are divided on the issue.

According to Makrush, one faction of Republicans in the legislature is opposed to any legislation complying with Obama’s law. Another faction wants to take a cautious course in implementa-tion, waiting to see what the Supreme Court will decide and how the 2012 elec-tion turns out.

With health insurance exchange leg-islation yet to be introduced, Makrush says it’s too early to tell the size of the two groups.

“It is possible,” Makrush said, “that taken together these two groups could hold enough legislators to defeat any legislation to allow the state to set up a health insurance exchange.”

As legislators continue to learn more about the details of the Affordable Care Act, those opposed to immediate imple-mentation are “gaining ground,” Mak-rush says.

mistake on medicaid fundingHe said this was especially clear after a misstatement by Republican Gov. Butch Otter in early January. Otter, who has opposed Obama’s law in lawsuits but has supported taking federal implemen-tation grants, stated Idaho could lose $300 million in federal Medicaid match-ing funds if it did not set up a state exchange.

When confronted on this claim, Otter acknowledged he had made a mistake and federal Medicaid matching funds were not at stake.

Makrush says the incident “put the brakes on the urgency” of establishing

an exchange and led legislators to ask more questions about exactly what the federal government required of the state.

democrat urges implementationRusche says Idaho Republicans who have relentlessly campaigned against the health care law now find it difficult to vote for any legislation that could be seen as complying with it. The Republi-can members “have a real problem,” he says, because “they’ve whipped them-selves into a fervor” over Obama’s law. To Rusche, “this fervor isn’t supported by what’s good for the state.”

Although Rusche understands the opposition to implementation, he main-tains “this is a policy choice; it shouldn’t be a political choice.

“If they vote down the exchange,” said Rusche, “the irony of the situation

is that they will have empowered the federal government to take over health insurance in Idaho.”

Rusche says the Democratic caucus has met with the Otter administration about members’ concerns and is keeping an open mind on the issue.

Rusche dismisses the notion Idaho Democrats will oppose the exchange to score a political blow against a Republi-can governor. Although he says he can’t predict how his caucus will vote, he acknowledges Obama’s law “is viewed by us as a signature achievement of a Democratic president. It’s hard not to support it.”

Marc Kilmer ([email protected]) is a Maryland Public Policy Insti-tute senior fellow specializing in health care issues.

Obamacare Debate Empowers Idaho Democratshealth CaRe neWs i aPRil 2012 13

Butch Ottergovernor - ID

John ruscheState representative - ID

Florida Rep. Ross on Repeal, Replace“I reject the idea that we have to settle for a partial approach to getting rid of Obamacare. We have to follow through on what we promised the American people: repeal and replace. Of course, one of the things we haven’t done yet is come forward with a patient-centered plan to replace Obamacare, but we did pass out of the House last year a sym-bolic repeal of Obamacare. The next step is to put forward our alternative.

“I think what we have to do is come back and say, in replacing this bad idea, we want this one instead: an approach that allows for the interstate sale of health insurance, which uses tort reform to reduce defensive medi-

cine, and a patient-centered approach to policy which allows for affordability and availability of health care but also encourages individual responsibility.

“We have to grow our economy if we want to get out of debt. We see the crisis coming, and we know we can’t tax our way out of it. And you can’t grow the economy when you are being drained by the mandates, regulations, and requirements of this disastrous law.”

— Rep. Dennis Ross, Republican from Florida, speaking on the Health Care News podcast. Listen at http://heartland.org/podcasts/.

“I reject the idea that we have to settle for a partial approach to getting rid of Obamacare.”

dennis ross, u.s. rePresentative - fl

by myles miller

Medical insurance premiums in the United States will continue to rise,

according to the chief architect of Presi-dent Barack Obama’s health care over-haul.

Massachusetts Institute of Technology economist Jonathan Gruber, who also devised former Massachusetts governor Mitt Romney’s statewide health care reforms, is backtracking on an analysis he provided the White House in support of the 2010 Affordable Care Act, inform-ing officials in three states that the price of insurance premiums will dramatically increase under the reforms.

Gruber framed this new reality in terms of the same human self-interest that some conservatives had warned in 2010 ultimately would rule the market-place.

“The market was so discriminatory,” Gruber said, “that only the healthy bought non-group insurance and the sick just stayed [uninsured].”

“It is true that even after tax credits some individuals are ‘losers,’” he conced-ed, “in that they pay more than before [Obama’s] reform.”

acknowledges Premium hikesIn 2011, officials in Colorado, Minneso-ta, and Wisconsin ordered reports from Gruber that offer a drastically different portrait in 2012 from the one Obama painted just 17 months ago.

“As a consequence of the Affordable Care Act,” Obama said in September 2010, “premiums are going to be lower than they would be otherwise; health care costs overall are going to be lower than they would be otherwise.”

Gruber’s new reports are in direct contrast to Obama’s words—and with claims Gruber himself made in 2009. Then, the economics professor said that based on figures provided by the inde-pendent Congressional Budget Office, “[health care] reform will significantly reduce, not increase, non-group premi-ums.”

During his presentation to Wiscon-

sin officials in August 2011, Gruber revealed that while about 57 percent of those who get their insurance through the individual market will benefit in one way or another from the law’s subsidies, an even larger majority of the individual market will end up paying drastically more overall.

“After the application of tax subsidies, 59 percent of the individual market will experience an average premium increase of 31 percent,” Gruber reported.

The reason, Gruber said, is because an estimated 40 percent of Wisconsin residents are covered by individual market insurance that doesn’t meet the Affordable Care Act’s minimum cover-age requirements. Under the Affordable Care Act, they will be required to pur-chase more-expensive plans.

already experiencing increasesAsked for his own explanation for the expected health insurance rate hikes, Gruber said his reports “reflect the high cost of folding state high-risk pools into the [federal government’s] exchange—without using the money the state was already spending to subsidize those high-risk pools.”

Minnesotans already have seen a 15 percent average rate increase because their state government is spending approximately $100 million to subsidize those high-risk pools. Gruber said they, too, will see a premium increase—even after subsidies are factored in. In his presentation in the state in November, he estimated 32 percent of Minnesotans will face premium hikes similar to those of their neighbors in the Badger State.

In his Colorado analysis, delivered in January, Gruber wrote that while some may benefit from new tax credits folded into Obama’s health care overhaul, “13 percent of people will still face a premi-um increase even after the application of tax subsidies, and 7 percent will see an increase of more than 10 percent.”

across the board cost hikesSally Pipes, president of the Pacific

Research Institute in San Francisco and author of The Pipes Plan: The Top Ten Ways to Dismantle Obamacare (Regnery 2012), says the health care law’s man-dates ultimately will result in far great-er costs across the board.

“If [instead] we change the tax code and allow a competitive market to build, and put doctors and patients in power, then that would really solve a lot of the problem,” Pipes said.

Pipes said she believes applying the Affordable Care Act, as written, will result in care “being rationed and more expensive.”

Promises don’t match realityRep. Trey Gowdy (R-SC), who chairs the House Subcommittee on Health Care, says consumers are beginning to under-stand the president’s 2010 promises are out of sync with reality.

“What a shock,” Gowdy said, feign-ing surprise. “Obamacare doesn’t lower costs, doesn’t increase coverage, and has turned into a wildly unpopular, labyrin-thine government overreach. ‘If you like your health insurance, you can keep it’ has morphed into ‘I, President Barack Obama, will decide what you need and make others pay for it.’”

Gruber, whom the Obama adminis-tration hired to provide an independent analysis of reforms, was widely criti-

cized for failing to disclose the conflict of interest created by $392,600 in no-bid contracts the Department of Health and Human Services awarded him while he was advising the president’s policy advi-sors. Gruber also received $566,310 dur-ing 2008 and 2009 from the National Institutes of Health to conduct a study on the Medicare Part D plan.

Myles Miller ([email protected]) is a reporter with the Daily Caller, from which this article is reprinted with permission.

Designer of Romney and Obama Health Care Laws Says Premiums Will Rise

Jonathan Gruber’s Colorado presentation: http://dailycaller.com/wp-content/uploads/2012/02/Colorado_gruber_Jan_2012.pdf

Jonathan Gruber’s Minnesota presentation: http://mn.gov/commerce/insurance/images/gruber-gorman-Slides-11-17-11.pdf

Jonathan Gruber’s wisconsin presentation: http://dailycaller.com/wp-content/uploads/2012/02/Wisconsin_gruber_aug_2011.pdf

internet info


“Obamacare doesn’t lower costs, doesn’t increase coverage, and has turned into a wildly unpopular, labyrinthine govern-ment overreach.”trey Gowdy

u.s. rePresentative - sc

Jonathan grubermassachusetts Institute of Technology

by ashley bateman

The Missouri state senate recently decided to send implementation of

the health insurance exchange program mandated by President Barack Obama’s health care law to the voters, taking the first step toward turning the exchange into a ballot issue that could be sent to the voters in November.

Democratic Gov. Jay Nixon supports implemen-tation, but the Republican-led legislative branch has pushed back against this key element of the presi-dent’s health care agenda, which would create a gov-ernment-run marketplace for purchasing insurance.

Senate Bill 464 would put on the ballot a mea-sure that prohibits the establishment of an exchange in the state via executive order, requiring either approval from the General Assembly or at the ballot box. The state senate passed the bill by a 25–8 vote—it must now pass the House before going to voters.

This would not be the first ballot issue in the state to reject a mandate from the federal govern-ment. In 2010 Missouri voted overwhelmingly in favor of Proposition C, which prohibited any man-datory purchase of insur-ance. If Missouri voters supported an exchange, officials would be required to implement a state-pro-duced program by 2014 or turn over control to the federal government.

viewed as unconstitutionalState Sen. Rob Schaaf (R-St. Joseph) has been an outspoken critic of exchange implementation, saying a federally run insurance program would be unconsti-tutional.

“We have separation of powers in our governments, and the legislative branch is the policy-making branch, not the executive branch,” Schaaf said. “Making a health insurance exchange is a huge alteration in the fabric of our society, and it needs to be done by the legisla-tive, not the executive, branch.

“Our system is so perverse and cor-rupt without competition. The market-place protects existing competitors, and

there is no downward pressure on pric-es,” Schaaf said.

local vs. federalKaren Edison, director of the Missouri Center for Health Policy, says a state-run exchange would be better for Mis-

souri than a federally man-dated one.

“I think health care works better when policy decisions are made on a local basis,” said Edison. “I think it would be prefer-able for Missouri to have its own health insurance exchange. However, that process has been stalled in this state—there are some folks who have philosophi-cal objections to the federal government having more control in a regulatory way over the health insurance market.

“If our own state does not set up our own exchange, we will have much less control over the structure,” Edison said.

But John R. Graham, director of health care stud-ies at the Pacific Research Institute, says the federal government in fact has the final say on every sig-nificant aspect of how the exchanges are run. He maintains exchange imple-mentation would sacrifice Missouri’s sovereignty and leave the state responsible for the long-term costs.

“The few million dollars from the federal govern-ment allotted to each state for exchange implementa-tion are a pittance, certain-ly not worth selling your

state’s sovereignty for,” Graham said. “It would be better for these funds to be given back to the people, instead of fund-ing a new government bureaucracy.”

little upside to implementationSchaaf says he does not see any upside to the implementation of exchanges for individuals or the state.

“I suspect the cost of running an exchange will be a financial drain, and in my experience when government tries to meddle with the free market it just ends up making things worse,” Schaaf said.

“They need to put competition back into health care by making the purchase and delivery of health care totally trans-

parent,” Schaaf said. “People need to know how much they are paying before they buy. They need to have some stake in the cost, and they need to make choic-es on the basis of costs. All the various roadblocks to competition need to be removed. When those things happen, the price of health care will go down sig-nificantly.”

Graham says Obama’s law already

has proven to be flawed and politically toxic, and Missouri should do nothing to apply it at the state level.

“Obamacare is Obama’s problem,” Graham said. “Missouri should not make it a state problem.”


Mo. May Put Exchange Implementation on Ballot

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“I suspect the cost of running an exchange will be a finan-cial drain, and in my experi-ence when government tries to meddle with the free market it just ends up mak-ing things worse.”rob schaaf

state senator

st. JosePh, missouri

by John c. Goodman

Health care reform that raises quality, lowers costs, and improves access to care is almost inconceiv-

able without physicians leading and directing the changes.

Of all the people in the health care system, none is more central than the physician. Yet of all the actors in modern health care, none are more trapped than our nation’s doctors.

no telephoneSometime in the early part of the last century, all the other professionals in our society discovered the tele-phone. It’s ideal for communicating with clients. Yet even today I find I can rarely talk to a doctor by phone.

Medicare has a list of about 7,500 tasks it pays phy-sicians to perform. Medicare doesn’t pay for telephone consultations. Private insurance tends to pay the way Medicare pays. So do most employers. At a time when doctors are being squeezed on their fees from every direction by third-party payers, most become very focused on which activities are billable and which are not. And most are going to try to minimize their non-billable time.

no e-mailSometime toward the end of the last century, all the other professionals discovered e-mail. Everybody e-mails everybody these days. Even the corner liquor store e-mails me when they have a bottle of wine they know I will like. Everybody e-mails everybody—except doctors.

Why is that? This is another task that’s not on Medi-care’s price list—at least not in any way that makes e-mailing practical. Since Medicare doesn’t pay, all the private insurers who piggyback on Medicare’s payment system follow suit.

The fact patients cannot conveniently consult with physicians leads to two bad consequences. First, the unnecessary office visitors (say, patients who have a cold) expect at least a prescription in return for their investment of waiting time. All too often the drug will

be an antibiotic that won’t help their cold. Were e-mail or telephone consultations possible, the physician might recommend an over-the-counter remedy, avoid-ing the cost of waiting for the patient and the cost of degrading the effectiveness of antibiotics for society.

At the same time, rationing by waiting at the doc-tor’s office imposes disproportionate costs on chronic patients who need more contact with physicians. The ability to consult with doctors by phone or e-mail could be a boon to those needing chronic care. Face-to-face meetings with physicians would be less frequent, espe-cially if patients learned how to monitor their own con-ditions and manage their own care.

lack of electronic medical recordsThe computer is ubiquitous in our society, and many believe electronic medical record (EMR) systems can improve quality and greatly reduce medical errors. Yet only about half of physicians have such systems, and most of those are not connected to other physicians’ offices and hospitals, do not allow electronic prescrib-ing, etc.

The same is true for hospitals. One study concluded “information systems in more than 90 percent of U.S. hospitals do not even meet the requirement for a basic electronic-records system.”

Why are most medical records still stored on paper? Again, the short answer is this: There is no financial incentive to do otherwise.

EMRs may improve quality, but in the third-par-ty-payer system, doctors do not compete for patients based on quality. EMRs may be a boon for patient convenience—especially in transferring information from doctor to doctor—but physicians don’t get paid for increasing patient convenience.

inadequate adviceWhy do doctors so often prescribe brand-name drugs and fail to tell patients about generic, therapeutic, and over-the-counter substitutes? Why do they typically not know the price of the drugs they prescribe or the costs of alternatives? Even when they are vaguely aware of

cost differences, why does your doctor not know where you can get the best price in your area for the drug she prescribes?

Once again, the short answer is: They do not get paid to know these things. Knowing the current best price, knowing where the patient can obtain that price, and knowing the prices and availabilities of all of the alter-natives are demanding and time-consuming tasks. For the doctor, it is time that is not compensated.

inadequate Patient educationNumerous studies have shown chronic patients often can manage their own care, with lower costs and as good or better health outcomes than with traditional care. Diabetics, for example, can monitor their own glucose levels, alter their medications when needed, and reduce the number of trips to the emergency room. Similarly, asthmatics can monitor their peak airflows, adjust their medications, and also reduce ER visits.

To take full advantage of these opportunities, how-ever, patients need training they rarely receive. ER doctors could save themselves and future doctors the necessity of a lot of future ER work if they took the time to educate the mother of a diabetic or asthmatic child about how to monitor and manage the child’s health care.

But time spent on such education is not billable.

escaping the trapWhat is the common denominator for all these prob-lems? Unlike other professionals, doctors are not free to repackage and re-price their services in customer-pleasing ways. The way their services are packaged is dictated by third-party-payer bureaucracies. The prices they are paid are similarly dictated.

Doctors are the least free of any professional we deal with. Yet these un-free actors are directing one-fifth of all consumer spending! This must change.

John C. Goodman ([email protected]) is president and CEO of the National Center for Policy Analysis.


“Doctors are the least free of any pro-fessional we deal with. Yet these un-

free actors are directing one-fifth of all consumer spending! This must change.”

Health Care System Traps Doctors

by benjamin domenech

Republican Sens. Tom Coburn of Oklahoma and Richard Burr of

North Carolina have unveiled a new comprehensive blueprint for Medicare reform in Washington, DC.

They say their proposal, which goes further than prior legislative solutions for Medicare reform put forward by Republican House Budget Chairman Paul Ryan of Wisconsin, represents the degree of significant change the program requires in order to be made fiscally sus-tainable.

Called the Seniors’ Choice Act, the blueprint combines some aspects of Ryan’s reforms with a previous proposal put forward by Coburn and Sen. Joseph Lieberman (I-CT). It accelerates a shift of the Medicare system toward a premi-um support approach, which Coburn and Burr maintain is necessary to ensure the program survives.

“Right now, the American people have little faith in Congress’s ability to do anything to fix the problems fac-ing our nation, and with good reason. But let’s prove them wrong. The Medi-care program is broken, and we have an obligation and an opportunity to fix it,” Coburn, a physician, said at a press con-ference announcing the proposal.

action needed nowCoburn and Burr pointed out estimates by the Congressional Budget Office (CBO) and Centers for Medicare and

Medicaid Services actuary Richard Fos-ter state Medicare could become insol-vent as early as 2016.

“With insolvency predicted to hit as soon as 2016, and with budget experts warning that Medicare represents the nation’s single largest fiscal challenge, Americans are right to be concerned,” said Coburn. “What we are proposing is the catalyst needed to strengthen and save Medicare for our nation’s seniors and ensure the program will be there for future retirees.”

While Burr acknowledged the political challenge of making dramatic changes to the Medicare program, as opposed to methods proposed by Ryan and oth-ers that delay policy shifts and insulate imminent retirees from any significant changes, he noted the fiscal challenges demand more immediate action.

“The numbers require us to do some-thing now, not in 2022,” said Burr. “So the politically smart way has been tried, but it doesn’t answer the mathemati-cal challenges that we’re up against. Tom and I believe, if we say we’re sav-ing Medicare, we want to save it on all fronts.”

immediate reformsThe Seniors’ Choice Act would make significant changes almost immediately, giving patients in traditional Medicare a unified deductible (a single annual deductible of $550 for both Part A and B services) beginning in 2014, gradually increasing the eligibility age, repealing President Barack Obama’s Independent Payment Advisory Board, and making significant reforms to Medigap.

The measure also creates a new inde-pendent agency, the Medicare Con-sumers’ Protection Agency, designed to ensure the existing Washington bureau-cracy does not undermine the new com-petitive bidding process.

Coburn and Burr maintain the new agency would be modeled after the Office of Personnel Management, which cur-rently administers the Federal Employ-ee Health Benefits Program (FEHBP).

“We see markedly less inflation [in FEHBP] than in the private market,” said Coburn. “People start to pay atten-tion to where they’re getting their health care and what it costs.”

freezing the doc fixRegarding the effect on doctor payments by the Medicare Sustainable Growth Rate (SGR), which was intended to func-tion as a global cap on payments to pro-viders, Burr and Coburn would freeze reimbursements at current rates—not capping them, but also not allowing for dramatic increases. Congress repeatedly

has struck deals to keep reimbursement from going down, as SGR demands.

“How well have caps worked?” asked Coburn. “The caps don’t work. ...We’ve tried everything except market forces to control health costs.”

Burr noted the Seniors’ Choice Act also includes proposals by former CBO director Alice Rivlin and former Sen. Pete Domenici (R-NM) as well as the bipartisan Medicare Commission led by former Sen. John Breaux (D-LA) and for-mer Rep. Bill Thomas (R-CA).

“We made a promise to our seniors that Medicare will be there when they need it most, but the program as it cur-rently stands is broken. We have a moral obligation to our parents, children, and all Americans to take steps now to save Medicare,” Burr said.

He continued, “The Medicare program in its current form is unsustainable, and we have an obligation and opportunity to improve it for our nation’s seniors within the next few years.”

Benjamin Domenech ([email protected]) is managing editor of Health Care News and a research fellow at The Heartland Institute.

Senators Offer Blueprint for Medicare Reformhealth CaRe neWs i aPRil 2012 17

“The numbers require us to do something now, not in 2022. So the politically smart way has been tried, but it doesn’t answer the mathematical challenges that we’re up against.”richard burr, u.s. senator - nc

“With insolvency predict-ed to hit as soon as 2016, and with budget experts warning that medicare represents the nation’s single largest fiscal chal-lenge, americans are right to be concerned.”tom coburn, u.s. senator - ok

by sally Pipes

On March 23, 2010, President Barack Obama forever altered the Ameri-

can health care system by signing into law the Patient Protection and Afford-able Care Act.

Its advocates promised the measure would reinvent the nation’s health care and reinvigorate the economy. As House Minority Leader Nancy Pelosi (D-CA) put it, “This bill is not only about the health security of America, it’s about jobs. In its life it will create 4 million jobs, 400,000 jobs almost immediately.”

Boy, were they wrong.It’s becoming more apparent with each

passing day that Obamacare will devas-tate the nation’s health care and our citi-zens’ health, while further damaging our country’s fragile finances. The PPACA is expected to cost in excess of $2.5 tril-lion over the decade beginning in 2014 because of the expansion of Medicaid, federal tax subsidies, the hiring of 16,000 new IRS agents, and the bans on lifetime and annual coverage caps and on discrim-ination based on preexisting conditions.

sweeping nationalizationImplementing the law has been extreme-ly challenging. It’s tough to completely remake our health care system over-night. After all, it already accounts for one-sixth of the U.S. economy, about $2.5 trillion—and in July 2011 ana-lysts from the Centers for Medicare and Medicaid Services (CMS) reported in the journal Health Affairs that by 2020, national health care spending will rise to $4.6 trillion, one-fifth of the U.S. economy.

Certain provisions of the president’s reform plan kicked in immediately. But many of Obamacare’s main provisions and cost-drivers do not take effect until 2014. As of mid-July 2011, there are more than 9,000 pages of rules and Federal Register notices related to Obama care.

Consequently, there is still time to reverse course. Congress can repeal Obamacare and replace it with market-based reforms that actually expand access to coverage, provide quality care, and reduce the cost of health care.

the need for repealMy new book, The Pipes Plan: The Top Ten Ways to Dismantle Obamacare (Reg-nery 2012), provides a blueprint and a

roadmap for accomplishing that mis-sion. It examines ten key components of Obamacare and shows why each one doesn’t work, how to eliminate it, and what reform to put in its place.

Since the day the president signed the Affordable Care Act into law, a clear majority of American voters—reaching as high as 63 percent—has favored its repeal. Prior to Obamacare’s passage, Nancy Pelosi famously stated Congress would “have to pass the bill so that you can find out what is in it.” The American people have found out what is actually in the law—and they’re not pleased.

The clock is ticking. Our health care system—and our nation’s fragile econ-omy—are under imminent threat from the president’s poorly conceived attempt at reform. Let’s now see how our lead-ers can go about repealing and replacing Obamacare with a law that actually does provide “affordable, accessible, quality care” for all Americans.

how do we replace?Obama sold his health care law to the public as an effective way to bend the health care cost curve down and elimi-nate the ranks of the uninsured. It won’t achieve either goal. Since the law passed, evidence has poured in showing the PPACA is actually accelerating the growth in the cost of medical care, and that it will not solve the problem of unin-sured Americans.

The solution I propose: Stop the mad-ness, repeal the legislation, and replace it with a plan that delivers affordable, accessible, quality care for all. Start by implementing reforms that increase patient autonomy and competition among insurers and providers.

Obamacare doesn’t address the fun-damental reasons health care costs are skyrocketing and insurance coverage is out of reach for many. Trying to cut costs and expand coverage by government decree will fail—in fact, the evidence of the law’s failure to achieve these goals is already mounting. Free-market competi-tion and putting more control in patients’ own hands is the way to increase cover-age and lower costs.

unleash the marketplaceReforming the tax code to grant indi-viduals the same tax advantages that businesses currently enjoy when buy-ing health insurance would do wonders to stimulate competition. So would per-

mitting people to purchase insurance across state lines. And market-friendly tools such as health savings accounts, health reimbursement accounts, flex-ible spending accounts, high-deductible health plans, and vouchers for seniors, the working poor, and the chronically uninsured would both expand coverage and lower costs.

Obama has violated the promises he made in the run-up to the passage of his health care reform law. The evidence shows Obamacare will not stop escalat-ing health costs or expand coverage—and will actually exacerbate many of the problems plaguing our health sys-tem.

The nation can continue with the government-heavy approach typified by Obamacare, creating new bureaucra-cies, instituting draconian price controls, and imposing top-down restrictions on insurance plans. Or we can repeal this gargantuan, costly mess and institute reforms that stoke competitive forces in the health care marketplace and empow-er patients to purchase coverage that suits their specific medical and financial needs.

Sally Pipes ([email protected]) is president of the Pacific Research Institute and the author most recently of The Pipes Plan: The Top Ten Ways to Dismantle Obamacare ($8.99 Regnery 2012).

Real Reforms Are Possible Once Obamacare Is Repealed


commentary

“reforming the tax code to grant individuals the same tax advantages that businesses currently enjoy when buying health insur-ance would do wonders to stimulate competition.”

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A project of the Galen Institute | www.galen.org

Stay current with the latest commentaries, studies, podcasts, and videos from around the web

Keep up with the health reform debate in Washington, and in the states

Learn about market-based ideas for health reform from the nation’s top experts

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The American people have sent a powerful free-market message to Washington and state capitols

across the nation. But election victories are not enough. We need to equip our new leaders with the free-market solutions they need to restore our freedom and prosperity. To support this historic eff ort, The Heartland Institute is making available free copies of its public policy newspapers and other publications, both on-line at the Web sites identifi ed below and in print editions upon request. To request free copies of these publications, call 312/377-4000 and ask for Cheryl Parker.

TEN LEGISLATIVE PRINCIPLES BOOKLETS

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Casualty Insurance Regulation• 10 Principles of Privatization• 10 Principles for Improved Business Climates• 10 Principles of Federal Tax Policy• 10 Principles of Higher Education Reform

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One in a series of brief guides to the most important public policy issues of the day, written especially for elected officials and other opinion leaders.

LegisLative PrinciPLes series

Number 9

everything you need to knowabout one of the hottest public policy issues facing legislators andcivic and business leaders today.

Use the ideas and data in this booklet for:• Answering questions from constituents;• Formulating position papers and talking points;• Preparing speeches and testimony;• Writing op-eds, letters to the editor, and commentaries; and

• A tool for further research

Tax reform is one of the top challenges facing the nation. How can the nation’s tax code be made simpler, less intrusive, and more fair? How can the state collect enough money to finance essential services without also placing an excessive burden on the engines of economic growth? And what are the constitutional limits on the government’s ability to collect taxes?

This booklet, the ninth in a series from The Heartland Institute,provides policymakers and civic and business leaders a highly condensed and authoritative yet easy-to-read guide to the debate. It presents the 10 most important principles for federal tax reform, principles that also can be used to improve taxes at the state and local levels. Each principle is explained in plain yet precise language and accompanied by an extensive bibliography for further research.

Discovering, developing, and promoting free-marketsolutions to social and economic problems.

The Heartland Institute19 South LaSalle Street #903Chicago, IL 60603phone 312/377-4000fax 312/377-5000www.heartland.org

Ten Principles of Federal Tax Policy

By Daniel J. Pilla

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Ten Principles ofFederal Tax Policy

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