Obamacare's Negative Prognosis

Enjoy your quality health care while it lasts.

The trillion dollar Obamacare experiment to reform America’s health system won’t work. But the primary reason why it won’t work is not what you may think.

Although a majority of Americans want nationalized health care repealed, that probably won’t lead to the demise of the law. A July 19 Rasmussen Reports poll found 60 percent of voters want the law overturned. And 61 percent of voters think health costs now will go up, not down. Sixty-two percent thought the federal deficit will increase, with 54 percent believing the law is “bad for the country.” Still, repeal seems unlikely. Congress would need a two-thirds majority to both pass a repeal and then override the presumed veto. Only a new President, friendly to repeal, could kill the law, a Fox News.com story noted.

What about the doctor shortage? “Aging baby boomers will create a growing demand for medical services,” said The Foundry June 18. “Nearly 40 percent of doctors are 55 or older and on the cusp of retirement—and the number of students on track to graduate from medical and nursing schools will not be adequate to replace them.” Obamacare expands health coverage by adding 16 million more people to the Medicaid rolls. Medicaid pays doctors notoriously low reimbursement rates, usually not enough to cover the cost of seeing the patients.

But Department of Health and Human Services Secretary Kathleen Sebelius smilingly says the government is subsidizing an increase in health-care providers: $250 million to train more primary-care doctors by 2015, and new physician’s assistants, and nurses, even though that will still fall short of needs.

What about the states that have sued the federal government to repeal Obamacare? Some have argued that a state can “nullify” a federal law believed to be unconstitutional. This was a principle propounded by Thomas Jefferson and James Madison. When a state proclaims that such a federal law is void, then it is not a law within that state. State attorneys general have pointed out that the added millions eligible for Medicaid will swamp state budgets. States pay nearly half the costs of Medicaid. A March 23 Bloomberg article said Medicaid makes up about 15 percent of total national health care expenditures. As Attorney General Bill McCollum of Florida has declared, the law is an “encroachment on the sovereignty of states.” States also have challenged the right of the government to impose a mandate requiring individuals to buy health insurance. The White House argued at first that Congress had the “inherent authority to mandate coverage under the commerce clause,” which allows the federal government to regulate interstate commerce.

But to guard the health law against that contention, the Obama Administration was forced to pull another rabbit out of its hatful of tricks. It changed its original concept of the health law provision making people buy insurance by redefining it, instead, as a tax. The Justice Department moved to dismiss a Florida suit against the law, arguing that courts can’t interfere with the government’s ability to collect taxes, The American Spectator reported July 17. But some argue a tax can only be paid to the Treasury, not a private entity. Otherwise it is unconstitutional. But who knows what the Supreme Court would decide on such an issue?

There may well be many sound reasons why in the real world Obamacare won’t work. But probably the most persuasive one is—to use a term in the vernacular: the law is bass-ackwards. It has the government, not the consumer, making the decisions. A persuasive study, released in July by the Galen Institute’s Entitlement Reform Project, concluded that only by giving beneficiaries their choices can this lead to “the revolutionary and cost-cutting changes the government has never been able to successfully impose by regulatory fiat.” The Institute is a nonprofit research organization devoted to advancing free-market ideas in health policy.

The 21-page study stated that the “more promising approach for addressing the significant challenges we face is a completely new relationship between the government and the beneficiaries of its programs. What is particularly significant is that putting the consumer in control in health matters already has been shown to work. It has worked since the prescription drug program of Medicare went into effect in 2006. Consumers were given control to make their own choices.

The Medicare Modernization Act proved that combining the efficiencies of private industry with government oversight could provide the highest quality prescription drug coverage to seniors. It’s known as Medicare Part D. It gave seniors access to many choices of drug providers. Some Americans wondered, an article Nov. 16, 2009 in Politico said, whether private industry could keep costs reasonable and if people would be in control of their choices. In 2009, the Centers for Medicare and Medicaid (CMS) found that 26 million enrollees in Part D had access to more than 2,000 plans offered by a range of providers. Costs have remained reasonable for customers. The Politico article went on to report a nonpartisan national poll found that 88 percent of its customers favor the prescription drug plan.

Astonishingly, the long-standing British health system (NHS), born in 1948, is now being recognized as too complex and unwieldy, The New York Times reported July 24. The health Secretary is promising to put more power in the hands of patients rather than 150 bureaucrats.

The Galen Institute study explaining why Obamacare is unworkable was written by an eminently qualified expert in the health field, James C. Capretta, a fellow in the Economics and Ethics Program at the Ethics and Public Policy Center. He formerly was top budget officer for health care as associate director of the Office of Management and Budget (OMB). He also is a health policy and research consultant with Civic Enterprises, LLC, and is with the Hudson Institute. Earlier, he served Congress for a decade as a senior analyst for health care issues.

The Galen Institute study focused its analysis on Medicare, the largest culprit in national health costs. It’s estimated to cost $497 billion in 2009. Congress has known for many years that Medicare and Medicaid spending threaten to push the nation’s finances past the breaking point, Capretta notes. “If the country can’t pay for its existing health care commitments,” how could we “subsidize health care to millions of new beneficiaries?” As the rest of the developed world “is moving toward retrenchment of their welfare states, Americans are rightly concerned that their government has just piled an enormous new budgetary risk onto an already precarious outlook.

“Between 2010 and 2030,” the Galen Institute study points out, “the population aged 65 and older is projected to  increase from 41 million to 71 million people” driving up entitlement spending even more rapidly.... “The health law does absolutely nothing to address this fundamental aspect of the entitlement crisis.” As for the ‘cost curve,’ which was promised to go down, the chief actuary at the Centers for Medicare and Medicaid, after passage of the law, projected “overall national health expenditures would be higher in 2019 than if the law had not been enacted at all.”

The Galen Institute study: “What’s needed more than anything else in health care is a coherent, reality-based policy prescription for altering the basic dynamics away from cost escalation to productivity improvement and more efficient patient care. That’s the goal. But getting there requires a clear and accurate diagnosis of what is creating the cost problem in the first place....The Medicare program, as it operates today, is a primary cause of the cost problem.” It is “pulling the rest of the health system down the tracks at an accelerated and dangerous rate....It is “the most important reason health care is expensive and needlessly inefficient....

“At the heart of” the inefficiency in our health system is “Medicare—and more precisely Medicare’s dominant fee-for-service (FFS) insurance structure.” FFS enrollees face no additional cost when they use more services, and health care providers earn more only when service use rises.” The result is a “fragmented dysfunctional system virtually frozen in place—for all users of health care, not just Medicare beneficiaries....

“The Obama White House and its allies” saw the solution as a “top-down payment reform program” through which patients would get their care through new organizational arrangements. “The alternative is a bottom-up approach in which cost-conscious customers choose between competing insurers and delivery systems based on price and quality.” Capretta points to Rep. Paul Ryan’s (R-Wis) proposed “Roadmap” as a comprehensive plan for health and other policies to solve the long-run budget problem. The “core reform is the conversion of the entitlement from a defined benefit to a defined contribution model.” With “cost-conscious consumers looking for the best value for their money, cost-cutting innovation would be rewarded....Physicians and hospitals would have strong financial incentives to reorganize themselves” to be more productive and capable of capturing more of “what would become a highly competitive marketplace. That’s the way to slow the growth of health care costs. Indeed, it’s the only way to do so without harming the quality of care.”

Under the Medicare prescription drug program, Capretta writes, “Beneficiaries get a fixed dollar entitlement that they can use to buy coverage from a number of different competing plans...” (and) “government has no role in setting premiums or drug prices. And how is it working? Costs have come in 40 percent below original expectations.” Bottom-up, not top-down, is what works.