This column by ACRU General Counsel Peter Ferrara appeared January 5, 2011 on The American Spectator website.
Most commentators have focused on the revelation just before Christmas that Obamacare’s end of life death panel consultations rejected by Congress were resurrected by the Obama Administration by regulatory requirement. There is no truth to the rumor that President Obama has agreed, after his term of office ends, to head up a new organization called Democrats Against Democracy.
But while this regulatory authoritarianism is, indeed, yet another dirty trick of Obamacare, it is small potatoes compared to the real dirty tricks of Obamacare. A dirty trick is defined here as burying in vague language in the abusive, several thousand page Obamacare legislation socially repulsive policies that the public overwhelmingly opposed and that Congress denied it was adopting. Like the end of life death panel consultations.
Phasing Out Private Insurance
But as indicated above, the emerging abuses of Obamacare are much graver than that. Also just before Christmas, on December 21, HHS Commissar Kathleen Sebelius claimed authority buried deep within the Obamacare abomination to impose federal price controls on health insurance companies, which members of Congress again denied they were adopting when they passed Obamacare. In fact, she issued a 136 page “regulation” providing precisely for such federal rate regulation.
Most states have long regulated health insurance premiums. The state regulators know from long experience that in this regulation they have to make sure that the insurance company has the money to pay the promised benefits. If the regulators don’t allow sufficient premiums to pay benefits, in the states they know that it is the sickest people covered by the insurance company who lose out. Because then the insurance company goes out of business and the sick people it was covering don’t have the money to pay their medical bills.
State insurance regulation is consequently simply a matter of mathematics. The regulators analyze the cost data, and the actuarial probabilities, and they set premiums based on that data sufficient to allow the insurance company only a modest, reasonable, market rate of return on its operations. As a result, the hard numbers unquestionably show that health insurance companies only make modest if not below average profits at best. That is why in many states there are so few health insurance companies left, and so many of those that remain are actually non-profits.
The resulting bottom line is that health insurance company profits are not a significant factor in overall health costs. And those politicians who rant and rave about them, calculating that they can take political advantage of the clueless and gullible, are shameless demagogues who dishonor our democracy by their participation in it.
Under the new federal power that Sebelius has seized, the supposed smarter, wiser bureaucrats in Washington will review the state regulation, and Washington will decide if the state approved rate increases are “reasonable.” If the Washington wise guys decide the increases are not, they will deem the state regulation not “effective,” and substitute Washington’s rate regulation.
Sebelius has already decreed, not based on a review of the actual data, that increases over 10% are probably not reasonable, even though many increases across the country are coming in over 20%, based on the analysis described above, as predicted. Indeed, the Red Queen has intimated that even lesser premium increases may be deemed too much.
But there is socialist method behind the madness. Obamacare raises health insurance costs by mandating that health insurers provide expensive new benefits. That is why it was so obvious that Obamacare will raise health insurance costs. But now come the federal regulators who plan to dictate to the insurers that they cannot reflect those costs in higher premiums.
It will work just like the Democrats’ “affordable housing” policies worked in causing the financial crisis. First the regulators forced banks to lend mortgage money to so many who were not financially qualified under traditional lending standards. Bill Clinton bragged in 1995 that through this scheme he had found a way of spreading housing prosperity to so many “without costing the taxpayers a dime.”
But now we know how all that turned out. When so many proved unable or unwilling to pay the mortgages, as the displaced traditional lending standards suggested they might, the mortgage backed securities that had been spread so widely throughout the financial system began their downward spiral that froze credit markets, and the whole financial system began to unravel, costing taxpayers a fortune in bailouts and lost jobs.
Left-wing sophisticates know from experience that their grassroots troops can’t follow that logic. Your average grassroots Democrat supporter can’t understand that if the law forces health insurance costs up with required new benefits, but the insurance company can’t raise premiums to cover those higher costs, the company goes out of business.
But this is exactly what the Reds who now run today’s modern Democrat party want. They are planning precisely to use this new federal rate regulation power to drive private insurers out of business, so the only option left will be the outright socialized medicine public option that first the public and then the Congress rejected in the health care “debate” last year. Hence the foundation for the new organization, Democrats Against Democracy.
This plot against the people is already underway in the more Left states that the Democrats still control. On December 22, the Wall Street Journal editorialized regarding the ongoing “political thuggery” in Connecticut regarding former state insurance commissioner Tom Sullivan. The Journal explained, “In September, following a thorough actuarial analysis, Mr. Sullivan approved some rate increases reaching 20% for Anthem Blue Cross Blue Shield, the largest insurer in the state by membership.”
Even though the higher rates applied only to new customers, to cover the new costs of Obamacare, “Attorney General Richard Blumenthal made the approval a centerpiece of his Senate bid, while Mr. Sullivan was demonized by local labor unions.” In a letter to Blumenthal explaining his resignation, Sullivan explained that he could not sensibly operate in an environment where “we are required by Congress to approve richer benefit packages, while simultaneously being called upon by you to reduce rates.” To complete the travesty, his successor, under federal pressure from the same bureaucrats who have now seized new federal ratemaking power, overturned the increase, and Blumenthal rode his shameless demagoguery to election. Similar travesties are now playing out in Massachusetts as well.
But once the private insurers have been driven out, patients will have nowhere to turn but the friendly Obama national political machine. The leading lights in that operation, such as the recess-appointed, unconfirmed head of Medicare and Medicaid, “Dr. Doom” Donald Berwick, have already made the determination that more votes can be bought redirecting all the money that is now spent saving the sickest and most vulnerable to other causes.
Health Coverage, Not Health Care
President Obama barnstormed the nation promising health care for all, to achieve passage of Obamacare. But the legislation he delivered is already on course to decimate the ability of the health care system to deliver critical health care to the sickest and most vulnerable. Most Democrats and liberals have no idea what they have done. This assault on the most essential health care of the American people, achieved flying under false pretenses, should be recognized as a national scandal.
The assault begins with Medicare. I
have previously reported that my analysis of last summer’s annual Medicare Trustees Report concluded that the President’s Obamacare policies involve cutting $5 trillion in payments to doctors and hospitals for services and treatment to seniors under Medicare, over the first 20 years of full implementation of Obamacare.
Confirmation of this and more now comes from the recently released 2010 Financial Statement of the United States, from the U.S. Treasury Department. That report openly brags, repeatedly, about the Medicare cost savings resulting from Obamacare. The accompanying data reveals, in fact, that the total future Medicare cuts in payments to doctors and hospitals under Medicare accumulate to $15 trillion! The Obama Administration is apparently convinced that its supporters cannot understand that if the government does not pay the doctors and hospitals for medical care and treatment under Medicare, seniors are not going to get medical care and treatment under Medicare.
This is why Medicare’s Chief Actuary has already reported that ultimately under these Obamacare policies Medicare payment rates will be only half of what is paid by Medicaid, where the poor often can’t find access to essential care. The Chief Actuary also reports that even before these cuts already two-thirds of hospitals were losing money on Medicare patients. Cuts of this magnitude will consequently wreak havoc and create chaos in health care for the elderly. Health providers will either have to withdraw from serving Medicare patients, or eventually go into bankruptcy.
Too many conservatives have been reticent to criticize Obamacare for these draconian cuts, out of recognition that Medicare is hopelessly bankrupt over the long run, and will have to be sharply cut in any event. But this view is far too simple minded, for refusing to pay the doctors and hospitals for the health care they provide under Medicare is no way to reform the program.
That would not only suddenly leave seniors without the health care they have been promised, and have come to rely on as a result. It would suddenly leave doctors, clinics, specialists, and hospitals with uneconomic practices for seniors that they entered in good faith on the promise of payment from the government. This is like trying to achieve budget savings in national defense by not paying the manufacturers of the Air Force’s planes, the Navy’s ships, the Army’s tanks and artillery, and the bullets, bombs and guns. How long do you think our national defense would last under that policy? The same goes for health care for America’s seniors.
Think of it this way. You wouldn’t try to balance your own family budget by just refusing to pay your bills, particularly for goods and services you planned to continue to consume. You would recognize that is really just impractical stealing. Yet that is the Obamacare policy for Medicare. Except that what they are really thinking was explained above. They have decided, as every government running socialized medicine programs has, that more votes can be bought with all the money spent on saving the sickest and most vulnerable by spending it elsewhere. That is the dirty little scandal of Obamacare.
Conservatives should assail this socialist assault on the most important of all medical care for the American people, an essential and fundamental component of their rapidly receding highest standard of living in the world, and advance more fundamental, more carefully structured Medicare reforms, that can achieve far more in savings over the long run.
One example of that is the Medicare reforms in the Ryan Roadmap. Seniors would receive vouchers they could use to buy their choice of coverage in the private sector, including Health Savings Accounts. The growth of the voucher amounts would be restrained over time, so seniors would have to pay more out of pocket for such coverage over time than they would otherwise. But at least they would be able to get the essential health care they want and need. The lowest income seniors would be protected by supplemental payments. The Ryan Roadmap has been scored as achieving full solvency for Medicare, and permanently balancing the federal budget over the long run.
But the most long run budget savings by far would be achieved by allowing younger workers to save and invest their Medicare payroll taxes in personal accounts. In retirement, those accounts would finance their health insurance vouchers, and would be able to finance far more because of the accumulation of all the market returns over the years. This would shift huge amounts of spending out of the federal budget altogether, and to the private sector. The general revenues currently used to finance so much of Medicare would be used for means tested supplements for lower income seniors to ensure that they could afford essential coverage and care. But these general revenues devoted to Medicare would be limited to grow no faster than the rate of growth of GDP, providing further huge savings over the long run.
These more basic, more fundamental reforms would be far more politically salable that than the wholesale slaughter of health care for seniors that is going to result from the current Obamacare policies. Seniors showed in the last election that they understand this. Why not conservative political strategists?
Already we see on our current course the beginnings of the disappearance not only of private health insurance, but also of private, independent medical practices as well. Sally Pipes of the Pacific Research Institute reports that while in 2005 at least two thirds of doctors practices were private, independent operations, less than half are today, and that is expected to fall below 40% by the end of this year.
Instead they are fleeing to salaried positions at large hospitals, where they are safe from Obamacare’s draconian cuts in their compensation, and they can sharply reduce the patient load they take on when their personal economic survival is at stake. This trend is strongly supported by President Obama’s top health care aide Nancy-Ann DeParle, who openly cheerleads the consolidation of America’s health care system into modern HMOs, called now Accountable Care Organizations (ACOs). Such a system will be far more able to enforce the health care rationing and denial policies of the Obama political machine.