Health Insurance Info for Colorado

news & commentary on health insurance and benefits

Colorado Medicaid Sign-ups Defy Expectations

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Politico, May 19, 2015: “Colorado has repeatedly revised its average enrollment estimates to account for increases. Early on, officials had projected that for the fiscal year ending June 30, about 144,000 new adults would be covered in any given month. In November, they bumped the number to nearly 205,000. It currently stands at about 234,000.”

See the full story here.


Gruber-ized in Colorado!

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Everyone’s aware of the infamous Gruber statements. Let me paraphrase: you’re all idiots – now pay me. Followed by an evil laugh.

Well, apparently the good folks over at your local Marketplace Exchange, Connect For Health Colorado, fell for it, too. (And I should add a disclaimer that I am a Certified Agent for C4H-CO, and I’m just reporting the facts, Ma’am).

Those pesky folks over at the Independence Institute, namely their Health Care Policy Center, run by the charming Linda Gorman, an economist by trade and a member of Colorado’s Blue Ribbon Commission on Health Care Reform, have published a very interesting piece of analysis titled “How The Gruber Model Failed In Colorado”. You can get it here. The bottom line assessment? “Its poor predictions will likely end up costing taxpayers billions of dollars”.

This is so good it’s hard to summarize: I think anyone interested in the effects of Obamacare and the lackeys employed to carry the water for it should read it, re-read it, and pass it around. And, if you know anyone in Vermont …

Seriously, I’m no economics expert (or anything else for that matter, except maybe good coffee) but for really educated folks to buy into Grubers’ predictions, as highlighted in the reports and analysis he got paid to do by Colorado, simply defies explanation. I mean, really: the idea that, based on somebody’s economic assumption, there wouldn’t be an almost catastrophic rise in Medicaid recipients is simply stunning. As almost anyone who’s been around the health insurance business knows, it isn’t the folks who can buy insurance and don’t who are the biggest problem, it’s the folks who couldn’t buy coverage at all due to extreme low-income or other circumstances. The farcical notion that many more people would get subsidies rather than a short trip to Medicaid says that no one really understood what’s been happening in Colorado. Guess what? Medicaid enrollment has exceeded expectations by 40%, and drastically overestimated the demand for subsidized policies (one-sixth of what was projected!).

Even unsubsidized policies are far below Grubers’ prediction. (And here’s an odd thing: why would anyone buy an unsubsidized policy through the exchange, anyway? There is simply no reason to buy an unsubsidized individual policy through the Marketplace exchange – something that comes as a surprise to many people.)

The reports go on to (laughably) suggest that insurance premiums would go down “27% on average”, with people buying richer plans because of their tax savings. I should send this to my clients who have a) had their premiums rise at least that much, b) their deductibles go up dramatically, and c) their networks and doctor choices curtailed, seeing that the market switched from PPO to HMO offerings almost immediately. That would be all of them, by the way.

The list of predictions that were wrong read like a list of Obama statements, that’s for sure! Like Grubers’ predictions that people in grandfathered plans would “see no change in their premiums”. Actual fact: they rose by 37% by early 2014.

And we won’t even talk about how Obamacare wrecked a high-risk pool that was actually cheaper than it’s replacement (and rather than an HMO was an any willing provider network, to boot).

This, my friends, is what happens when common sense and good public policy get replaced with redistributive ideology: any argument works so long as it advances the political objective, true or not. And the essence of Obamacare wasn’t about “health insurance reform”, it was about federalizing the health insurance markets prior to a move to a single-payor system (that’s my own opinion, by the way, not anything taken from the report).

Best take-away quote: “.. substituting tax subsidies for direct payment does not affect the cost of health insurance”. Of course not.

Download it, have a good read, and discuss it. Better yet, share it with every Colorado legislator you can! Good job, Ms. Gorman!





The Roberts Court and Obamacare

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Well, I can’t pick horses, either.

With the stunning decision by the Supreme Court of the United States this morning, Chief Justice John Roberts reminded me of the history surrounding another Chief Justice, Earl Warren, appointed by President Dwight D. Eisenhower. Eisenhower, when asked, made the point that many may make about Roberts in the not-too-distant future – that it was, after all, a bad decision to elevate this juror to the Supreme Court, given his now-apparent political unreliability and left-leaning nature. Roberts has now proven, in at least two decisions this year, to be at least as politically unreliable as Justice Warren, and has firmly relabeled the Supreme Court as “the Roberts Court” rather than “the Kennedy Court”, since Justice Kennedy sided with the minority, all conservative, in the dissent to the bizarre and unsupported decision concerning the Affordable Care Act. Chief Justice Roberts, flatly, sided with the liberals on the Court in upholding the constitutionality of The Affordable Care Act.

It’s not as if the Court hasn’t previously made law out of whole cloth: but what’s interesting about this decision is that Mr. Roberts has essentially told the Obama Administration, and the country, that, while the individual mandate exceeds the Commerce Clause authority, the mandate can and will be considered a tax, something that the Administration itself argued wasn’t the case, until it had to be argued, and then promptly reversed itself, again, during oral arguments before the Justices. Chief Justice Roberts in essence said, yes, I think this is a tax, notwithstanding the Solicitor Generals’ previous denial, and as such you can proceed. He did what all Constitutionalists fear: he warped reality and invented law, conveniently, to advance an ideological position, from the bench.

The Affordable Care Act now becomes the biggest issue of this Presidential election, or perhaps any election since 1936. While Republicans have always espoused “repeal and replace” as the ultimate solution, in light of the devastation wrought by this decision, Republicans will be galvanized (or should be!) like never before to do just that, as, given the breathtaking depth and breadth of the societal changes wrought by Obamacare, they face the prospect of permanent isolation in the wilderness of politics, or, alternatively, complete disintegration as a political organization, if Mr. Obama is handed another four years to build a permanent majority of government-dependent voters who will fully embrace a government-dominated socialist society that promises them everything at the expense of the producers who, flatly, create the bounty we now enjoy. With this election, and this enormous landmark legislation now seemingly upheld, voters will be handed a stark contrast, one that favors liberty and individual freedom and one that favors “equality” and government intrusion. It is not inconceivable that, if Mr. Obama is re-elected, a permanent Democratic majority will come into power for decades, based only on the power of a newly created “dependency class” to continue voting to receive government largesse. And the bottom line is that, if you want to see the outcome of such a majority, take a good look at Europe today.

“That sound you hear is the marching of libertarians into Camp Romney, with noses held, knowing that the libertarian and conservative coalitions must unite to defeat Obama and Obamacare.” – Eric Erickson,

The Supreme Court decides

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Media reports suggest that today (or, at, least, this week) the Supreme Court will hand down its decision on The Affordable Care Act. To briefly recap, dozens of states sued the federal government to overturn the act; the reasons for that suit are varied, such as the individual mandate, but include such issues as Medicaid funding requirements, which is a huge unfunded liability for states.

I’ve resisted the urge to handicap the forthcoming possibilities, but I do have an opinion. Right or wrong, I’m going to publish it today; one way or the other, the debates between Mr. Obama and Mr. Romney about health care in the upcoming general election will be fascinating to discuss in light of what the SCOTUS decides.

There are four possible outcomes: to do nothing and leave the entire Act standing; to narrowly strike down just the mandate provisions; to strike down the mandate and two other major provisions (which is the position that the Obama Administration said should happen if the Supremes conclude that the individual mandate is unconstitutional), and the fourth: declaring the entire Affordable Care Act unconstitutional.

I have no idea what the “Vegas line” is on this decision, so, I will take my shot-in-the-dark and lay odds:

Do nothing: 12 to 1. Not likely.

Strike down just the individual mandate: 6 to 1. Too narrow, and creates a bigger problem.

Strike down the mandate and the provisions relating to it (the position argued by the Administration if the mandate is unconstitutional): 4 to 1. The Administration wins, and the remaining Act becomes a rallying cry for progressives who always wanted the single-payor option (and this decision almost guarantees it).

Strike down the entire Act: 3 to 1. The most sensible solution of all.

My reasons for giving the best odds for striking the entire Act lay in the unprecedented suit brought by a coalition (frankly, a majority) of states against the federal government. I’m unaware of any action brought against the government by so many states, and this alone should prompt an unprecedented examination of the role of the federal governments’ power to pass legislation that intrudes on the right of the states to govern themselves. It also bears pointing out that the federal government is, technically,  a government of limited powers (the term “states rights” is not a pejorative for discrimination, despite what liberals have always said) with the remaining powers reserved exclusively to the states. With the individual mandate exceeding any rational understanding of the purpose and use, even in liberal hands, of the Commerce Clause, the demand by the states to be relieved of a burden they clearly feel is unconstitutional has to be carefully considered. The strange manner in which the Act was passed, the lack of ANY bipartisanship (or, of that matter, any input from anyone except the Progressive Caucus in the bills ultimate form) the distorted cost projections, not to mention the majority view of the Act across the nation by voters – all of these things must be taken into account by the Justices. Never mind that they are legal scholars who pass judgment on constitutional issues at the highest level; there is and always will be a political element to every controversial Supreme Court decision. Couple this with the lack of a severability clause, and my opinion is that the Supremes err, not on the side of caution, but on the side of good sense: telling Congress that this legislation is so flawed and so intrusive that it would be best to just start over.

And that is what I think the Supremes will do. If they don’t, they will be performing a major disservice to the country, by leaving in place a huge entitlement program that completely remakes the social contract between the government and its citizens (or should they now be called subjects?) without any rational means to pay for it (assuming that the Commerce Clause doesn’t allow the government to tell you what you must buy), while dooming a portion of the insurance industry to almost-certain extinction or, worse, outright nationalization or regulation as a monopolistic utility, with the government calling ALL the shots, while re-distributing massive tax increases to pay for it.

Whatever they decide – it’s going to be interesting. And don’t forget that, in the absence of any new federal legislation, states, including Colorado, will be in a position to craft their own solutions, which is how it should be in the first place. The fact is that Colorado state Republicans control the House by a slim one vote margin – and history shows that in the early 90’s, Colorado’s Governor Roy Romer (D) threatened to pass a single payor system unless “health reform” was enacted, which set us upon the very path we now walk.

Let the games begin! Quoting Rep. Michele Bachmann: ““The decision on Obamacare goes well beyond health care,” she wrote. It “will determine whether or not the court believes the government has a right to mandate that Americans buy a product or service, a direct impact on our freedom and liberty.”




Misleading the Supreme Court on Obamacare

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As I’ve written before, one of  the central defenses for the Affordable Care Act, as put forth by the Administration and echoed by all of it’s supporters, is the case for uncompensated care. Briefly stated, the Administration argued that uninsured patients drive up the costs of the delivery of health care sharply, and that cost is borne by all who are insured – hence, the primary reason for Obamacare.

I’ve also stated that this is, in fact, a canard – the total cost of uncompensated care is a scant fraction of the cost of Obamacare, now estimated by the Congressional Budget Office at somewhere around $1.76T for the first ten years (and this figure will rise, probably rise to more than $2T within the next year or so, unless the entire statute is declared unconstitutional or repealed). Spending the functional equivalent of $2T to fix a problem of less than $100B is not efficient – it’s one that only the federal government would develop, support, and champion.

The data that was used to make much of the argument around uncompensated care comes from a study done by FamiliesUSA, an ultra-left wing group that is on record as supporting a single-payor system. In that study, published in 2009, the cost of uncompensated care was estimated at $43 billion, the figure used by the Obamacare lawyers in it’s brief before the Supreme Court.

But as it turns out, there are major flaws in that study, and it should come as no surprise to anyone who follows how the left uses suspect statistics and shady reasoning to advance an agenda, the flaws inflate the costs to arrive at a foregone conclusion. David Hogberg, writing for Investors Business Daily Online, details the specifics here.

Researchers, led by Jack Hadley at the Urban Institute, examined uncompensated care and arrived at a different conclusion in the Kaiser Commission on Medicaid and the Uninsured: that uncompensated care was “most likely about $8 billion. Given that total private health insurance expenditures in 2008 are estimated to be $829.9 billion (from NHEA projections), the amount potentially associated with cost-shifting represents less than one percent of private health insurance costs.” Documented here.

If the feds were really serious about “uncompensated care”, they’d look no further than their own under-compensated reimbursement scheme for Medicare, which dictates what Washington pays for its care under Medicare and other social welfare medical programs – which is in fact a far greater cost-shift to the private market than the care that is delivered to the uninsured. The accounting gimmick used – price fixing by Medicare through the HHS – transfers billions in costs directly to every American with a health insurance policy, and dwarfs any amount spent for uncompensated care that the Administration is touting as its primary reason for Obamacare.

The Federal “health care tax” revealed

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Many people are puzzled by media reports that center on “the doc fix” and other aspects of the Medicare and Medicaid programs, and this is to be expected, given that media outlets do a spectacularly poor job of explaining any aspect of federal health care policy, in my opinion. I’m writing this article in an attempt to broadly illustrate a basic tenet of federal health care spending, namely, price controls, and the cost-shifting to private patients that occurs because of centralized price-fixing at the federal level. I submit that this centralized pricing, which purchases on demand and without contract, health care at below-market prices, is a hidden tax passed directly to all Americans who purchase health care, or health insurance, and is a major driver, if not THE major driver, in ever increasing health care costs.

[Disclaimer: federal health care spending is so complex and obtuse that it’s extremely easy for the average person to get “lost in the weeds”, a situation tailor-made for policy wonks who feel we are all too ignorant to draw basic conclusions without their help.  This article is intended to cut through the chaff and provide a common-sense rationale for much of the current premium pricing debacle that we face. Frankly, given the behavior of regulators at the federal level, it’s astonishing to me that private insurers aren’t forced to demand double digit premium increases yearly from private payors just to stay in business.]

This column is in direct response to a clients’ question: how is the federal government purchasing health care at below-market rates? The client asked me to send him additional information on this topic, since I brought it up in a meeting. I must first confess that I provided him with a statistic, incorrectly stated: I inadvertently transposed a percentage when detailing the true costs of  federal health care costs as compared to the costs related to the private delivery of health care. I’ll fix that with this post, and provide substantial ammunition to support the idea that it is imperative that the federal government get out of the business of centralized price-controls in the health care arena. Sadly, it is very unlikely that this will happen, as the two sides on the issue are separated by a divide the size of the Grand Canyon on the heart of the matter – how to pay for and deliver health care to the nation, and by extension either control health care delivery at the federal level via central planning, or allow the free-market, and private insurers, working in harmony (important consideration) with various regulators to provide solutions to the health care woes of the nation with insurance programs that avoid rationing and expand care.

On one hand, progressive Democrats view insurance as evil, and wish to have health care costs borne by a progressive system based on a social policy of wealth redistribution through the tax code, the word “insurance” not being in their vocabulary. Conservative Republicans view health care, on the other hand,  as a free-market product that insurers, using standard reserve techniques, can provide far more economically and efficiently, without the centralization or government control demanded by progressives in their march towards utopia (a rationed utopia, at that). And it should be pointed out that Democrats have done a superb job of forcing the market conditions that have created a health care system in which there is little if any competition, where the federal government pays substantially less than the true cost of care for its Medicare/Medicaid programs, and where continued market and pricing stresses, literally created by Democrats intent on their end goal of a single-payor system, provide the perfect excuse for the federal government to proclaim that it alone can save the day, when in fact they have created the very problem they will now take pains to “fix”. But we are getting into partisan waters here, and it’s best to stick to the facts, and answer my clients’ question.

That the federal government purchases a great deal of the nations’ health care is beyond dispute. According to the Department of Justice, federal, state, and local governments pay for approximately 45 percent of total U.S. expenditures on health care. This figure, first published in 2003, is likely higher today. The problem is that Congress, rather than any free-market mechanism, approves the reimbursement schemes for much of that care – and we all know how well centrally planned price-fixing schemes usually work out. And herein lies the true problem: the controversy concerning Medicare or Medicaid isn’t that it under-pays health care providers and facilities, but that the under-payment is over-stated, or even, depending on whom you are listening or talking to, non-existent or even irrelevant. In fact, there does appear to be two schools of thought, which, coincidentally, mirror the two different philosophies of the left & the right. The left views the “underpayment” of costs related to its share of health care costs as unimportant, even illusory, due to the scale of care they are “purchasing”, and point to the complex (and politically tainted) process of Medicare price-setting as proof that all’s well with the way the feds pay for care. To explain, Medicare’s physician and other fee rates are based on the relative cost of providing services determined by what’s known as the Resource-Based Relative Value Scale (RBRVS), a system of “comparable worth” in medicine, and is itself based on “the objective theory of value, one of the fundamental tenets of Marxist economics”. This cumbersome process, updated every 5 years or so, is guided by input from the AMA, as well as others, but is ultimately set by the federal government, under the Federal Health Care Financing Administration, part of HHS, and then submitted to Congress. In the words of Michael F. Cannon, director of health policy studies at the Cato Institute, “The Medicare bureaucracy is somehow supposed to divine the correct prices for more than 7,000 distinct physician services in each of Medicare’s 89 physician-payment regions (yep, some 623,000 separate prices). And – unlike market prices – these price controls don’t automatically adjust to reflect the value of goods and services.” Central planning, at its finest.

The conservative right enthusiastically supports a contrarian view, and points out that “the hydraulics of health care“, which the left takes great pains to vigorously support as somehow necessary and equitable, and at the same time labels as overblown, is real and impacts every non-federal health care transaction. This controversy serves the left well, as it obscures the true costs associated with below-market federal reimbursement. It is, indeed, the 800 pound gorilla in the room.

To say that there is a lack of any consensus would be an understatement, and this explains the lack of clarity when discussing the impact of cost-shifting. And there is plenty of evidence, outside of left-wing policy wonks trying to re-define “costs” and “shifting”, to support the notion that federal reimbursement is below-market. Much of the evidence, as illustrated by this report, is troubling: cost shifting as a percentage of premium more than tripled over a five year time period, and appears to me to be accelerating. In fact, “employers and consumers in California pay up to 10 percent more for health care coverage because of government underpayments”, according to data compiled by Milliman for Blue Shield of California a few years ago. Even the Colorado Division of Insurance, in its most recent Annual Report, acknowledges that “..members of..Medicaid and Medicare.. typically pay less than commercially insured populations” when discussing cost-shifting.

So, an acknowledgement that cost-shifting is real and has an impact on, at least, premiums. But, how much is that impact, and how much more do private carriers and health care facilities wind up paying? In this study, The Lewin Group addresses cost-shifting relative to Medicare and Medicaid reimbursement. Lewin defined “cost-shift” as “not simply a set of differential prices as seen in the airline industry, but rather higher prices (above cost) systematically paid by one payer group to offset lower prices (below cost) paid by another payer group”[italics mine]. The study goes on to show a payment “hydraulic” (payment-to-cost-ratio) of 1.22 for private payers, compared with .95 for Medicare and .92 for Medicaid (1.00 would be cost). With a cost advantage of 5 to 7% below cost, and private insurers obligated to provide a profit to physicians and carriers in response, this represents a 30% increase in private payor costs compared to federal programs. In another article, entitled “At the Intersection of Health, Health Care and Policy”, published in Health Affairs, the authors acknowledge the Lewin Study and make note of  “The Cost Shift As A Form Of Premium Taxation” :

  • “The cost-shifting dynamic places hospitals in the unenviable position of playing the role of private-sector tax collectors, to maintain their financial solvency. To the extent that public programs are not adequately funded through general tax revenues and trust funds, and the uninsured get care for which they do not fully pay, hospitals must attempt to “tax” the privately insured to make up the shortfall. Some of this shortfall is absorbed by increased hospital efficiency or a decreased emphasis on hospitals’ social missions, but much of the difference eventually resurfaces in the form of increased health insurance premiums. Employers indirectly fund the cost-shifting tax through their purchase of health insurance. They bear not only the cost of health care insurance for their employees but also a portion of the under- and uncompensated care pool. This is one reason why—aside from the underwriting cycle—private-sector employers’ payments rise faster than underlying health care costs..”

This hidden tax is estimated at 32% by some observers (in 2007, hospital payments for the care of privately insured people were equal to about 132 percent of their actual costs of care; Shields, House Ways & Means hearings). And the “cost shift” appears to be increasing: In 2007, Medicare paid on average only 91 percent of the actual cost of hospital care for Medicare patients, as shown in the original Milliman report.

America’s Health Insurance Plans (AHIP), through a spokesman, goes further: “Right now, Medicare only reimburses hospitals about 85% of their cost. It’s employees and families that are paying $1500 a year to subsidize the Medicare program.” Given the 20% or higher differential that private payors, through their insurers, pay, this translates into an almost 40% differential between what Medicare reimburses and what private payors are expected to pay for the same services.

The consensus, then, is that, even if the left characterizes “cost-shifting” as an exercise akin to differential pricing with airline tickets or new cars, pricing hydraulics exist in health care, made all the more problematic by price controls that are neither realistic or flexible, and serve to exacerbate the current difficulty with fewer and fewer insureds paying a higher and higher tariff for more and more people who, by virture of mandated government cost-shifting in the form of reduced payments for services, are provided with services at less-than-cost, primarily to save the federal government from the true cost of its social welfare programs. This, then, is the “taxation without representation” present in your health insurance premiums.

I’ll address “the doc fix” is another post, since the reduction in Medicare payments for physicians services relates directly to the hydraulics of health care, and was a central feature in the purported “savings” that Obamacare was to provide in its first ten years – an estimate that has already been wiped out with further CBO estimates, not to mention Congress’ restoring the cuts to avoid political damage to a powerful lobbying group.

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