Senators John Barrasso, R-WY, and  Sen. Tom Coburn, R-OK, have co-authored a report detailing the disaster known as Obamacare. Senators Barrasso and Coburn have a unique perspective on the emerging octopus of centralized/federalized health insurance: they are both physicians.

Some excerpts from the 38 page report:

• Warned the health care law could eliminate about 788,000 jobs. CBO Director Doug Elmendorf confirmed in Congressional testimony that the health care law would reduce the workforce by approximately 800,000 jobs.
• Concluded the Medicaid expansion’s “extra costs forced upon state taxpayers and state governments could climb into the hundreds of billions of dollars”. In fact, according to a tally of state estimates, the law will impose about $120 billion in additional costs on states, just in the first few years of the law’s implementation.
• Explained the Community Living Assistance Services and Support (CLASS) program was “a budget gimmick to appear to offset new spending” and warned the program could “expose taxpayers to tens of billions of dollars of loss” because it was would eventually collapse. The Department of Health and Human Services (HHS) has admitted CLASS was unworkable, and shuttered the program.
• Cautioned “the appearance of Medicare‘s extended solvency is actually only a mirage. In reality, under the new law, Medicare‘s unfunded liabilities will grow worse”. The Medicare Actuary late concluded that Medicare’s unfunded liabilities are made worse by about $2 trillion under the law.
• Warned that “as the new law is being implemented, millions of Americans are in danger of losing their current health insurance.” HHS concluded that, under the law, between 39 and 69 percent of businesses will lose their status as “grandfathered health plans”—plans largely unaffected by the law’s new mandates. HHS estimates by 2013, up to 80 percent of small businesses will lose their grandfather status.
• Noted that “rather than fixing an issue everyone in Congress agreed was a problem, Congressional leaders left the doc fix out of the final health bill” because of “budgetary shenanigans” to decrease the appearance of the bill’s cost. We warned that this policy omission “could endanger access to care for millions of seniors. In fact, Congress has already had to intervene several times to prevent severe cuts to physician reimbursements that would harm seniors’ access to care.

An eye opening report that every employee worried about their employer abandoning their health care, and every employer worried about the spiraling cost of benefits, should read.

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.

This has been an interesting month, as HHS continues its assault on the health insurance industry, religious freedom, and the hollowing out of the promise made during the passage of Obamacare not to impose abortion on the majority of citizens who oppose federal funding for abortion, not to mention abortion-on-demand. And, lastly, The Congressional Budget Office (CBO) finally tells us that, lo and behold, Republicans were right when they tried to point out, to a deaf and dumb press, that the Administration was cooking the books in it’s original cost estimates for Obamacare, and that the estimates were in fact, inaccurate. Garbage in, garbage out, as always. (And then there is this ludicrous piece, written in Forbes, of all places, that tries to make the point that the new estimates aren’t in fact an increase, and…well, I’ll let you read it and figure out exactly where the writer is missing the boat.)

But most interesting of all, I think, is the orchestrated PR campaign being coordinated by the White House for the oral arguments on the constitutionality of Obamacare before the Supreme Court. The Center for American Progress, Families USA, Health Care for America Now, and Protect Your Care are among the groups (“partner organizations”) mentioned in a leaked strategy memo, all of them left-wing advocacy groups, at least one of which is an open supporter of single-payor health care. The PR campaign, on the second anniversary of Obamacare, targets the “core constituencies” of women, young adults, and others who benefit from Obamacare. See the full story here, and the memo here.

• An excerpt: “”Remind people that the law is already benefiting millions of Americans by providing health care coverage, reducing costs and providing access to healthcare coverage. This message will include the ideas that these are benefits that politicans/the Court art (sic) are trying to take away from average Americans.”
• And: “Frame the Supreme Court oral arguments in terms of real people and real benefits that would be lost if the law were overturned. While lawyers will be talking about the individual responsibility piece of the law and the legal precedence, organizations on the ground should continue to focus on these more tangible results of the law.”

In other developments, HHS finalized the rules governing “health insurance exchanges” which, in the opinion of many, are a defacto takeover of state-regulated health insurance, since the exchanges, and the regulations which govern them, inevitably lead to a decrease in state sovereignty and a strengthening of federal control, via a “one size fits all” regulatory approach which, contrary to the HHS press release, will not reduce rates, since it’s only mechanism, pooling, has limited ability to fix rising premiums. Let me put it another way: if pooling was all it took to reduce health insurance premiums, then larger employers, so the story goes, have an advantage over individual and small groups because they can negotiate lower rates. Assuming this is true, then working for the largest employer in Colorado – the state government – would automatically give you lower rates. But this is false: Colorado state employees have very high rates for insurance coverage, $444.46/mo. for an employee on a PPO plan, and more than $461/mo. for a single employee on a Kaiser HMO plan. This is higher, actually, much higher, than competing plans on a small group basis that I place with employers, and substantially more expensive than individual plans (which aren’t guaranteed issue). See the rates and benefits here. Lastly, they aren’t even great plans. So much for “pooling” being the antidote to continued federal messin’ in the delivery of health care: it isn’t so. And the exchanges won’t be any cheaper.

Lastly, the federal government, as it often does, purposely misses the point when it comes to the actual mechanisms in place for large employers to manage their health care costs, namely, self-insurance. While pooling has an effect on the overall premiums charged, ultimately it is the way the contract is written, managed, and back-stopped with stop-loss coverage that makes all the difference. As with the contraceptive controversy, federal regulators at all levels show an appalling lack of interest and expertise in how insurance markets, or for that matter,  insurance risk pooling, really work, probably because they aren’t advocates for real insurance mechanisms, preferring their ivory tower academic approach of vilifying “evil insurance companies” and advancing their sacred, pet solutions embracing centralized control and redistribution rather than free-market approaches.

“The Founding Fathers knew a government can’t control the economy without controlling people. And they knew when a government sets out to do that, it must use force and coercion to achieve its purpose. So we have come to a time for choosing.” – Ronald Reagan

Quote: ” ..the Obama administration has implemented rules that even it concedes infringe on the traditional rights of religious employers.”

This article, written by James C. Capretta, details the Administrations’ way of speaking out of both sides of its mouth: “Here, it’s worth repeating some of the basic facts… on the same day that the administration announced it wanted to craft the so-called accommodation [to the mandatory contraceptives rule], it finalized the rule that had been previously issued with no change.” The rule, as I recall, was also published in the Federal Register. So much for “accommodation”.

The dominant elite media is doing it’s best to characterize this problem as no problem at all, as evidenced by this story, which inaccurately states that insurance companies, rather than employers, will be required to pay for these services (obviously, they must think that insurers are able to provide this at no cost to anyone, which boggles the mind, since nothing is ever provided “free” – it must be purchased first, and the cost is inevitably passed on to policyholders, as Mr. Capretta accurately states). In the case of the Catholic Church and its various entities, they are self-insured, for the most part, which means they pay, regardless of what President Obama wants you to think.

As I’ve noted elsewhere, the single largest problem with Obamacare (besides the deliberate destruction of private capital via the “death spiral” for health insurers casually mention by Secretary Sebelius) is the massive expansion of government health care, especially with Medicaid, via taxpayer-funded subsidies, creating a permanent “dependency class” that will accelerate wealth redistribution and move us (nudge us?) forever closer to the Democrat goal of “equality of outcome”. By creating a permanent group of citizens that are entirely dependent on government largesse, Democrats hope to ensure a fifty year lock on Washington to permanently destroy our freedoms and protections under the Constitution. I shudder to think what new entitlements masquerading as “positive rights” might flow from such a situation.

While I wouldn’t stop at 10, here is a list of “10 Terrible Provisions of Obamacare” that anyone concerned about the massive expansion of government into each of our lives should be aware of.

In spite of The White Houses’ best attempts at muddying the waters and shifting the contraceptive controversy to one of “women’s health” from “religious freedom” (and, frankly, some success with this, albeit in cahoots with their progressive brethren in the press, not to mention Democrats in Congress, who excel at press conferences masquerading as committee hearings) in order to get the public on board with his free birth control mandate, Mr. Obama is signaling that, like most anything else he decides he wants, he’ll say whatever he knows the press will echo loudly while doing exactly the opposite – namely, mollifying the religious community with worthless platitudes while giving them absolutely no real reason to think that anything has changed.

Not so fast, say Catholics.

Frankly, to this observer it almost appears as if… is it possible?.. the Prez really wants the Catholic Church and any other religious organization that provides health care of any kind, and objects to unconstitutional mandates that impact their religious freedom, to get out of the business of health care, completely and forever. And, close the door on your way out. To those who scoff at such a notion: the reason given for cutting the guts out of Tricare, the military health care system for active duty and retired military, is to move more people into the (Medicaid-style) Obamacare. So, I think it’s entirely plausible that the Prez isn’t interested in what the Catholic Church or any other religious organization that provides health care thinks: he just wants them out of the way.

As an aside, let me say to the Church: hey, I know exactly how you feel: I’m a health insurance agent.

Let’s recap: The Obama Administration announces the most restrictive definition of religious exemption possible, thereby guaranteeing him a collision course with anyone with a religious objection to mandatory contraceptive coverage. After a day or so of Catholic weeping, wailing, and gnashing of teeth, the President decides that, rather than the Church, insurance companies can pay for it. Problem solved, The One has spoken.

Problem is, Mr. Obama apparently either doesn’t know, doesn’t care, or doesn’t think the press will report on the most important fact of all: the Catholic Church is, for the most part, self-insured. There is no “insurance company” to pay for it, as they provide and pay for their own care for their employees, a fact pointed out by Cardinal Timothy Dolan, president of the U.S. Conference of Catholic Bishops, in a letter to his fellow bishops.

The rest of the letter is illuminating, most of all because the good Cardinal accurately points out that, as we have now seen demonstrated over the last week in excruciating detail, Democrats are busy painting the entire issue as one of “women’s health care” and abortion-inducing drugs rather than one of religious freedom, as evidenced by the vote on the Blunt Amendment. And obviously, there is little evidence in the “mainstream” media that the religion issue is even an issue, or even important. Why, the temerity of those Catholics, to attempt to discuss religious freedom when we all know that women need free contraception, if only to keep the nations’ birth rate down and help hold those health care expenses in check.

The fact that this Administration is doubling down on their position, by publishing the decision in the Federal Register, etc., points out that, on matters of ideology (as in, progressive action), there is no room for any accommodation that deviates from long-held and cherished policy goals of the left, no matter who they have to skewer. And Catholic Bishops, who stood by and actively supported Obamacare, have now learned that very important lesson. They have been used, and others should heed this warning. Republicans in the Senate, take note.

As if we didn’t already know this: The infamous HHS Secretary tells us what she really thinks in Congressional testimony.

Read the comments on that page, too – very interesting.

Another story on this topic references the infamous McKinsey study released last year. “At least 30 percent of employers are likely to stop offering health insurance once provisions of the U.S. health care reform law kick in in 2014, according to a study by consultant McKinsey,” Reuters reported. “McKinsey, which based its projection on a survey of more than 1,300 employers of various sizes and industries and other proprietary research, found that 30 percent of employers will ‘definitely’ or ‘probably’ stop offering coverage in the years after 2014, when new medical insurance exchanges are supposed to be up and running.”

The Obama Administration went to a full-court press in an attempt to deflect and discredit this story as being a put-up job by a) the insurance industry, b) Republican operatives, and c) all of the above, even going so far as to label it an “outlier” (whatever that means!). In fact, Democrats used these and other arguments in a kitchen sink attempt to discredit a study that was, by the way, funded entirely by McKinsey. Their efforts were less than successful, and I can assure you that the survey’s results are, anecdotally, true: I’ve been told the same thing by many clients.

Surprisingly, even Howard Dean says that the McKinsey study is one that “the Democrats don’t like but I do and I think it’s true.” Dean likes it because it will remove a burden from small businesses. Note that Dean, always a proponent of single-payor, pulls no punches as he advocates for a government system, whereas the Obama folks are trying to camouflage their real intent: destroying private insurance companies by crashing their reserves and limiting their ability to offset health care costs with appropriate premiums, which will lead to the same thing.

Quote: 

“When I say ‘If you have your plan and you like it,… or you have a doctor and you like your doctor, that you don’t have to change plans..”

“What I’m saying is the government is not going to make you change plans under health reform.”

(Editors note: unless you have an HSA!)

These are well-known comments from POTUS Obama in the time leading up to the passage of The Affordable Care Act, and afterwards as he flew around ginning up support for an incredibly bad piece of legislation. We now know that these comments aren’t accurate, or even, strictly, truthful. And they directly impact so-called Bronze plans, of which HSAs should be a component. Only, they won’t be.

It should come as no surprise that Democrats despise Health Savings Accounts (HSA for short). Their leading left-wing think tanks routinely lambast them. It’s been somewhat hard to understand why the Administration hasn’t been dissing them openly since the passage of Obamacare; now we know why. They are simply going to eliminate them without a shot being fired, due to a complex series of rules and regs that could only be interpreted as willful, and involve the actuarial percentage of benefits paid in each Gold, Silver, and Bronze plan, and the confusing effects from a price control enacted for political purposes.

The Medical Loss Ratio (MLR) Rule is the culprit. HSAs, under this regulation, cannot qualify.

The MLR Rule requires insurers to spend no more that 20% of premium on administration in the small group and individual markets and 15% in the large-employer market. This spells trouble for high-deductible health plans in exchanges, since only 5% of those with an HSA qualified health plan in a year have any claims paid by their insurance.

HSAs, in summary, are high deductible plans that allow cash to be set aside in a fully tax-deductible savings plan to be used to pay for out-of-pocket expenses before the deductible is met. HSA-qualified health insurance policies are usually lower cost than many fully-featured health plans, and are especially well suited for many small business sole proprietors, or others who believe saving money to pay for their own out-of-pocket costs is better than giving it to an insurer, who is in essence subsidizing other health insurance claims with their dollars.

Here’s part of the problem: payments made by an insurer for health care expenses count towards meeting the MLR Rule; payments by individuals out of their health savings accounts do not. Taking into account the complex rules for “credibility adjustment” and “cost-sharing adjustment” for companies that sell high-deductible plans, HSA-qualified or not, it appears that, given the lower claims-paying of HSA  or other high deductible plans, it is mathematically impossible for any plan to meet the MLR of 80%. This would mean no Bronze plans in the Exchanges, since they cannot meet the complex and required Minimum Loss Ratio Rules.

Obviously, plans with higher deductibles are being intentionally disadvantaged by this arcane formula because they cannot count claims incurred below the deductible. Since Bronze plans under the PPACA cover 60% of the benefit costs of the plan, it seems unlikely that HSA plans will be eligible under this scenario, even though the original guidance showed HSA plans as being eligible based on their deductible range (See here). Further, the carrier must still process claims below the deductible to track deductible expenses, but no cost of that processing can be applied to the MLR’s.

I draw my final conclusions from this study prepared by the HSA Coalition:

“Clearly, the MLR adjustment factors for cost-sharing and credibility help companies offering high deductible plans but only if they have low enrollment. Most [insurance] companies will likely see little benefit because the adjustments end up being minimal and ultimately disappear because of the way the MLR formula is constructed. In the short-term, this could limit future growth of HSAs in the fully-insured markets (individual, small group, large group) and put extra pressure on premium pricing to minimize potential rebates. Insurance companies (especially the current market leaders) may be encouraged to sell more expensive plan designs with more first-dollar coverage (e.g., HMOs and traditional PPOs)because it will be easier to meet the MLR requirements. The result could be a future market dominated by more expensive plans, dramatically reducing affordability of coverage and adding significantly to the costs of income-based subsidies provided under the law, since the subsidies are based on the weighted average premiums for Silver plans in the “market area.”

The end result will be that the exchanges will likely be dominated by high-cost health plans with few lower cost options available, leaving people out of the market – until they desperately require health insurance coverage. This will quickly drive up the cost of coverage, expanding the subsidies needed to pay for it.

A summary of the problem is here. And, here is a detailed article on MLR’s Potential Effect of HRAs and HSAs.

UPDATE on 2/26/12 – Quote: “The obstacles Obamacare creates for consumer-driven health plans could lead to their extinction, even though they are an affordable form of coverage that is gaining in popularity.” See this link.

A recent study shows that Canadians are facing the longest waiting times for medically necessary care in almost two decades.

With all the talk about how bad Obamacare will be, with its standardized benefit structures, centralized command and control, and over-arching subsidy program that will drive as many as 80 million Americans into Medicaid (yes, you read that right, it’s in the bill!) one should remember why so many Canadians have come south of the border to access care: they can’t get any, which is something we are going to be facing in the not-too-distant future, as anyone who’s ever studied socialized, government run or controlled, capitated health care delivery systems knows all too well. Remember: in the Orwellian future of American health care, you are no longer the customer – you are a unit.

ITEM: In a report from late last year, the Fraser Institute, Canada’s leading public policy think-tank, said this:

• “Canadians are being forced to wait almost four-and-a-half months, on average, to receive surgical care, prolonging the pain and suffering patients and their families are forced to endure.”

And this:

• “Despite significant increases in government health spending, Canadians are still waiting too long to access medically necessary treatment.”

Amazingly, Canadians put with waiting times between referral by a general practitioner or PCP and consultation with a specialist of between 7 1/2 weeks to almost 10 weeks, depending on where they live. Obviously, Canucks are way more patient than anyone in my family.

It gets worse:

-I pity the poor fool who needs orthopedic surgery: average wait is more than 39 weeks (more than 9 months).

-And, this is a stunner: if you need neurosurgery, like, on your brain (!) be prepared to pray a lot: you’ll wait 38.3 weeks.

No wonder Canada has introduced “market reforms” that finally allow some people to buy private health insurance. Too bad we’ve taken the wrong path and will have to learn the hard way what Canada and Britain have already learned.

In a brazen and somewhat twisted (in that, it’s so cheerful!) online op-ed piece in the New York Times online, authors Ezekiel Emanuel and Jeffrey Liebman, ex-Obama Administration advisors on health care policy, posits the wondrous new world of “Accountable Care Organizations” (ACOs) amidst the utopia of Obamacare (assuming the Supreme Court doesn’t render it mute; but then, when did the Left ever let something as silly as nine black-robed Justices exercising their constitutional duty stand in the way of equality and social justice?).

Disclaimer: it should be noted that neither of these “experts” has any experience in the private sector.

The problem, dear readers, is this: they aren’t telling you the whole story (what, you’re surprised??). And what story they do tell is full of inaccuracies and oft-quoted myths/distortions. Much like the current brouhaha concerning enforced contraception mandates for all religious organizations, the story is, err, telling more for what it doesn’t spell out accurately as opposed to what it tries to say badly.

So, here’s my take on their not-so-distinguished attempt at becoming fiction writers:

• “Already, most insurance companies barely function as insurers. Most non-elderly Americans — or 60 percent of Americans with employer-provided health insurance — work for companies that are self-insured. In these cases it is the employer, not the insurance company, that assumes most of the risk of paying for the medical care of employees and their families. All that insurance companies do is process billing claims.”

BEEEEP: Wrong. There are MANY inaccuracies in this statement, but the basic premise is so faulty it’s difficult to even say that this is anything but pure spin, or pure hatred for health insurance companies, who they love to portray as the villains, instead of themselves. While it’s true that many companies, both public and private, “self-insure”, very few (none to my knowledge, actually) do so completely, at least for medical coverage. There are any number of reasons for this; particularly, reserving for future claims of this potential magnitude would be a drag on earnings, and the kind of companies these two are talking about are almost certainly public, not to mention what an unexpected $2M cancer claim could do to the bottom line. No, the reality is that under a self-insured scheme of insurance, an employer contracts with an insurer to take all risk after a certain level of claims, which lowers the cost of premiums. This is called aggregate and specific stop loss coverage, and it’s a marvelous way for companies to lower costs relating to providing health insurance coverage to its employees. Beyond the mega-corps (who use stop-loss coverage almost exclusively) this insurance technique, almost always done under the eye of ERISA regulation at the federal level, is the norm. And of course, the employer sets the level of risk retained, thereby exercising a means to regulate and control their premium costs, based on their unique needs and circumstances. Does it work? YES. As for the last part, “all that insurance companies do is process claims”, is simply false, and denigrates the administrative-services-only component of modern insurance management, as only two eggheads with no practical real-world experience could do. In fact, ASO is just part of what insurers, whether dealing with self funding coverage or fully insured plans, do best: run efficient, honest, and reliable network and claims processes. And let’s not forget that it’s the insurers and their pursuit of negotiated fee networks that have saved patients billions of dollars, unlike government mandates which often inflate the cost of care and therefore insurance costs. These networks are so efficient that the federal government went so far as to contract with them to gain access to their networks – as compared to the dinosaur known as “original Medicare”, which has major problems with doctor availability. Or, have these two policy wonks never heard of Medicare Advantage?

• “For individuals and small businesses, health insurance companies usually do provide insurance; they take a premium and assume financial responsibility for paying the bills. But the amount of risk sharing that is accomplished is limited because the insurers charge premiums that vary, depending on the health of an individual or a group of employees, and use their data and market power to identify healthy people to cover and unhealthy people to exclude from coverage.”

Oh My. BEEEP. Where have these guys been all these years, stuck in the Executive Office Building reading back issues of  The New Republic? To be fair, they get part of it right: health insurance companies do take a premium and assume financial responsibility for paying the bills. Good enough. But the spin enters promptly when they disregard acres of state regulation of individual and small group insurance that actually prevents much of what they allege happens. In Colorado, and in much if not all of the nation, small group insurers aren’t allowed to charge more for health conditions present at time of underwriting except in very narrow circumstances and in very limited amounts, and employers aren’t expected or even allowed to carry their own claims, as all claims must be pooled. In point of fact, insurers in Colorado aren’t even allowed to rate up OR down at time of underwriting, except for basic underwriting criteria such as, say, SIC Code and address. They must also make available guaranteed-issue plans for business groups of one, again, without regard to the health of any individual in the group. In the individual market, very few medical conditions actually result in outright declination of coverage, and many insurers have very liberal underwriting standards that allow for sensible rate-ups or exclusions for medical conditions present that might prove to be too risky for the insurer to accept and still be able to meet reserve requirements mandated by regulatory agencies. As usual, these two spin-meisters miss the point: no health insurer in the individual market can knowingly accept obviously uninsurable conditions and attempt to stay in business and do what their corporate charter almost certainly mandates: provide a pool of money to pay for catastrophic or other kinds of medical illnesses and injury, without regard to rationing or other capitation schemes that are at the heart of Obamacare. As an individual health insurance agent for many years, I fail to see ANY evidence of the charge they make: using their data and market power to cherry-pick the market, especially given the regulatory environment in Colorado. As pointed out in this piece, they use their ability to provide quality coverage to increase their client base, the governing rule of insurance being the law of large numbers. And assessing premiums relative to risk is the heart and soul of insurance underwriting – something that these two propeller heads obviously don’t think is very important, especially since they’ve never had to worry about covering costs except by raising taxes. Strike Two.

• “Many health insurance companies also impose barriers — like requiring prior authorization for tests and treatments and denying payment for covered services, which forces patients to appeal — to discourage patients from using the medical services for which they are insured and to attempt to avoid paying for those services.”

Health insurers aren’t fools, and know (and respect, even fear) the power of the regulatory apparatus that claims “consumer protection” as its primary goal, so this statement is suspect on its face. So-called “barriers”, such as prior authorization, aren’t designed as gate-keepers to that care, but are designed to ensure that premium dollars are used for medically necessary procedures or treatments, and that the treatment is appropriate – which saves money for care that is needed and appropriate. Denying payment for covered charges in, for instance, fully-insured, state regulated plans triggers an avalanche of remedies, including economic sanctions in the form of market conduct fines or other penalties that all insurers wish to avoid at all costs; in ERISA governed plans, remedies can be brutal in federal court or via federal regulatory remedies. To be sure, self-insured plans that are governed or managed by a complacent Third Party Administrator with an employer allowed to run rough-shod over the governing documents, are a problem in some instances (and has nothing to do with the general health insurance industry, a fact not commonly or even casually reported). Fraudulent, self-insured Multiple Employer Welfare Arrangements (MEWAs) can also be a problem; this has been the case for as long as they’ve been in existence, though. But this hardly represents the current state of the industry in terms of insured health insurance coverage, which is remarkably free of corruption, impropriety, taint, market excess, or accounting or claims issues. This is fear mongering, much akin to the famous and ill-advised rant of a certain former Speaker of the House, who famously railed against “evil insurance companies” with little or no evidence to support her emotional outburst. Foul Ball.

• “Because most physicians and hospitals today are paid on a fee-for-service basis, medical care is organized around treating a specific episode of illness rather than the whole patient. This system encourages overtreatment and leads to mistakes and miscommunication when patients are sent between their primary care doctors, specialists and hospitals.”

Obviously these two have never been to a physician who advises a reduction in salt, exercise, and blood pressure medication after a physical that shows.. wait for it.. high blood pressure. This statement simply ignores the fact that the vast majority of physicians always perform care using ethical guidelines that promote returning the patient to health, regardless of treatment required or billed, or where the physician practices medicine. This statement is akin to a physician treating a long-standing headache, or history of headaches, with a dose of aspirin and doing nothing more – and nothing could be further from the truth (physicians, already faced with trial attorneys’ who salivate at the chance to cash in on a lawsuit alleging substandard or negligent care, go too far the other way, practicing “litigation medicine” in the absence of realistic tort reform). Fee-for-service is just what it claims to be: you buy a service and you pay for it, which is in fact the way most services are provided in our free enterprise system. In fact, most physicians nowadays aren’t governed by pure retail fees in any event, but in fact already accept, due to negotiated contracts with health insurance companies and their networks, fees based on a pre-determined schedule that substantially lowers the insureds’ cost of coverage and out-of-pocket costs. In response to this, the authors’ claim, in the classic Alinsky Method, that the system somehow, even in the face of insurers who relentlessly pursue fraud (currently a small fraction of expenses compared to estimated Medicare losses) and unwarranted health care expenses and charges, promotes “overtreatment” and mistakes or miscommunication without advancing any rationale or basis for this claim – we are simply to accept their assertion of “fact” as accurate (and disregard or ignore the fact that the federal government doesn’t even attempt to calculate the fraud and mismanagement in original Medicare – a fact seemingly lost to these two snake oil purveyors). One thing is certain, though – they have identified their enemy, and it’s private, fee-for-service physicians and the health insurers that pay out millions in claims and live on 2-3% profit before taxes that they wish to destroy. Foul Ball Two.

• “A.C.O.’s are not simply a return to the health maintenance organizations of the 1990s. Although in both models patients are members of a provider network with a specific group of doctors and hospitals, and both are paid primarily per member rather than per procedure or test, there are big differences between them. H.M.O.’s were often large national corporations far removed from their members.”

In actuality, the public rejected the HMO model on a nation-wide basis for issues relating to access to care, per member per month limitations on care, restrictive gatekeeper provisions, and a host of other issues; mention “managed care” to anyone who had such a plan in the 90s and the reaction is usually negative, probably due to the inability to access care easily, especially specialists. Even many local health maintenance organizations of the type  that ACOs are supposedly drawing their identification with have issues relating to high doctor to patient ratios, long waiting lists for specialist care and other issues; pod plans, so-called because they represented a group of doctors and other care providers that practiced in a specific facility and thereby represented a mini-network of care for insureds, had limited success and appeal and were never wholeheartedly accepted by the public; they most closely mirror the structure of ACO’s but with troubling and ominous “big differences”, such as the fact that ACOs will increasingly come under the sway of the Centers for Medicare and Medicaid Services (CMS), which will use that power to enact more and more top-down, bureaucratic control over Americans’ health care choices, including the recommendations of the Independent Payment Advisory Board (IPAB). This is, folks, proof of the sinister take-down of the private health delivery system in our country, replaced by a government funded and controlled single-payor style, collectivist health delivery system modeled as a co-op, non-profit socialized version of the British National Health System, with physicians who are employees rather than private docs and nurses that can be more easily unionized. And if that doesn’t scare you…

This will:

• “Today, consumers have to choose among insurance plans with a bewildering array of copayments, deductibles and annual out of pocket maximums — choices that few of us are any good at making.”

All of which I thought was… choice. Now, they’ll do our choices, for us. Strike Three.

Gosh, a thinking human being might have to apply some basic cognitive skills and assess what might be best for themselves based upon a set of criteria as complex as a copay, or a deductible, or out of pocket costs. Wow. Thank you, THANK YOU! Federal Government – what would we do without you? Will you help me choose a new car now? It’ll be green, I’m told. Or, perhaps, help me so that my VCR (yes, I still have one) stops blinking. I am soooooo thankful that we have actual Government Bureaucrats that will come to our aid when we need it…most. I’m just stunned… these difficult questions will now finally be answered for me. Tell me, will all of these be, say, less confusing than your current Medicare rules and process which, I have to say, isn’t..umm… user-friendly. Every year I have seniors who call me up and ask me … beg me actually… to try and explain, in some manner related to common-sense, what all of that Medicare mumbo-jumbo means, what with the 300 page booklets full of government-speak that no one understands (alas, I’m no longer allowed to speak to seniors except in very very limited circumstances, so.. no help for you!!).

The reality, and what is NOT written in their upbeat, everything-is-just-going-to-be-fine-with-Obamacare article, is that ACOs represent an intrusion into the private medical care of all Americans that will not be pretty: in the words of The Heritage Foundation, “they are more like a vessel for Centers for Medicare and Medicaid Services (CMS) statisticians and health policy gurus to work their craft than a mechanism that actually delivers better care.” And that is not the prescription for health care that many Americans will find appealing, especially from advocates who distort and mislead the public about the very disturbing nature of their prized tool for re-making the American health care delivery system, especially when coupled with Medicare cuts and the nature of IPAB. Because, the patient isn’t the customer. And that is the most troubling conclusion of all.

To learn more, go here. And, here. For background on ACOs, click here. For research and commentary, see this. For a simple example deconstructing how they will likely work, go here. John Goodman’s Health Policy Blog has excellent articles/links on ACOs – search! And last but not least, a comment from the FTC Commissioner that says ACO’s will make everything worse, in Forbes.

In closing, my opinion: the condescending attitudes and arrogance expressed by these two “public servants”, and their hatred of  private sector mechanisms, is telling, and clearly demonstrate their “government is the solution” mentality,  which should give all Americans pause to stop and think about whom to vote for this November. Liberty comes in many forms; being beholden to a government that views health care as an item on the bottom line is synonymous with a loss of that liberty – especially if you are no longer working and “contributing” to society. Food for thought.

2012 will be a landmark year in the life of The Affordable Care Act, aka Obamacare, as the federal regulatory apparatus continues it’s torturous development of various aspects of the legislation and HHS builds out the infrastructure of the program, in spite of the constitutional challenge brought by more than two dozen states attorney generals, scheduled for oral argument in April by the Supreme Court of the United States. Battle lines continue to be drawn between pro and con advocates of the sweeping legislation, with California being the latest to submit an Amicus Brief in support of health care reform (not surprising, given the lay of the political landscape in California).

Here are some key dates this year in the implementation of this massive expansion of the welfare state:

Jan/Feb. 2012 – HHS awards grants totaling $3.4 billion to Consumer Oriented and Operated Plans (CO-OPs) for startup costs in order to meet state solvency requirements. These programs, which are essentially non-profit collectives with a high degree of default risk, are essentially being seeded and grown with federal taxpayer dollars and will surely undermine private, for-profit health care organization. HHS admits that these organizations may lose $1 billion of more. Sounds like Solyndra to me.

Spring 2012 – “Essential Health Benefits” regulation expected. This regulation will tell us what benefits will be required for all plans, rather than current state regulations or oversight. Expect health care premiums to increase with the publication of these regs, since there will be little effort to constrain what will be required for essential benefits (well, unless you are a senior on Medicare, of course).

March 26-28, 2012 – The Supreme Court of the United States hears oral arguments on the constitutionality of Obamacare. The Court has scheduled three days of oral arguments, almost unprecedented in the modern era. (The final day of Supreme Court’s 2011-2012 session is June 25th, 2012 – media reports suggest that a decision on Obamacare’s constitutionality is expected within a week or two before this date.)

June 29, 2012 – Deadline for States to apply for federal grants to implement Health Insurance Exchanges. Colorado has accepted federal grant money to develop it’s exchange, discussed here.

November 6, 2012 – For those who aren’t in favor of letting the Supreme Court legislate from the bench, or strike down only parts of Obamacare rather than extinguish it all based on it’s lack of a severability clause, this is the most important day of the year: Federal Election Day.

This article by John Goodman, a noted commentator on health care issues, makes many of the points I’ve discussed with clients over the years. It’s an excellent treatise on why true competition in the delivery of health care would result in lower prices.

I’d add one thing: federal health care spending is a major cause of the exorbitant prices charged for health care, as the federal government simply imposes a price control on itself and passes the unpaid costs on to you, the insured consumer. By demanding that care be provided at below the cost to produce it, the federal government is essentially imposing an ever escalating tax on anyone who has insurance and then forcing you to pay it. This of course leads to the scenario that we see all around us: insurers, forced to cover the “hydraulics” of cost shifting, charge higher and higher premiums, while the federal government ratchets down what they pay for care, further exacerbating the premium crisis, and then, lo and behold, the government announces that it’s the solution to the crisis – a crisis that they created and compound every day.

I submit that the federal government should get out of the health care industry all together. States do a far better job of administering social welfare programs for it’s citizens. Incidentally, this is the same idea Paul Ryan has, among others, for an alternative to Obamacare.