Health Care Costs Rage Out Of Control

Found in a recent edition of the Ogden Standard Examiner (http://www.standard.net/stories/2012/07/31/obamacare-costs-careening-out…):

On July 1, I learned Obamacare would be a wild ride as my insurance company increased my health insurance premium for the coming year an eye-popping 17.8 percent. Ouch! During the health care debate, President Obama claimed the average family would see a $2,500 reduction in premiums per year. What’s up?

With a dazed look on my face, I checked the Consumer Price Index (CPI) for June 2012. It was an increase of 1.7 percent. I further checked the portion of the CPI which measures medical care services; it went up by 4.3 percent. So why did my health insurance premium go up by 17.8 percent?

The answer is Obamacare: 13.5 percent of the increase will be used to pay for increased costs that the health care industry will experience under Obamacare but are not covered by federal revenues under Obamacare. The U.S. Department of Health and Human Services reported that through March of 2012, dozens of insurers in nine states have applied for rate increase reviews ranging from 10 to 24 percent.

The Standard-Examiner’s July 19 column by Vijay K. Mathur, “Here we go again on the Affordable Care Act,” criticized the economic analysis presented by professors John F. Cogan, Glen Hubbard and Daniel Kessler in a column in The Wall Street Journal, of June 6, which discussed the inefficient economics of Obamacare and offered more cost-effective solutions.

Proponents of Obamacare justify it on the concept of the existing inefficiency of cost-shifting from hospitals treating uninsured patients and making up for it by billing the insurance companies of insured patients. Cogan et al. cited studies showing this accounts for at most a 1.7 percent increase. Cogan et al. were right, the economic inefficiencies in Obamacare are very, very large, only they, like everyone else, grossly underestimated just how large they really are. Mathur cited a study by Rand which claimed that “under individual exchange plans, average premium per enrollee will increase 9.3 percent without the mandate in” Obamacare “by 2016.” He goes on to say, “…the estimated premium increases, generated by the Congressional Budget Office (CBO), range from 15 percent to 27 percent without the mandate.” So now with Obamacare’s mandate in place why did my annual premiums go up 17.8 percent by 2012?

Mathur also cited the CBO study which stated the “insurance coverage provisions of” Obamacare, “will have a net cost of just under $1.1 trillion during 2012-2021 period,” as if to turn on a light bulb to show you how cheap Obamacare will be.

What Mathur didn’t tell us is that the CBO only measures costs that they will be obligated to pay for with federal tax revenues. The real cost of Obamacare in your out-of-pocket dollars includes the increase in insurance company premiums, plus increases in your co-pays, plus the individual mandate, plus the interest income surcharge tax, plus all of the more than 20 other separate Obamacare taxes.

The Democratic Congress would have never passed Obamacare if the law required increased taxes to pay for its entire cost. As it turns out, Obama has provided the insurance companies a sweet deal as evidenced by the higher premiums insurance companies are filing with DHHS as annual plan renewals come due. This has translated to increases in stock prices ranging from 67 percent to 170 percent for several large private health insurances companies in the first two year period since Obama care was enacted.

You and I had Obamacare crammed down our throats and we were told it wouldn’t raise our taxes if we made less than $200,000 per year. But, now we know from the Supreme Court that individual making less than $200,000 will indeed be taxed.

Above that, we were told by Obama, that premiums would go down by $2,500 per year. This number came from Massachusetts Institute of Technology economist Jonathan Gruber. What is Gruber saying today, two years into Obama care? Forbes Magazine on March 22, 2012 reported that “…Gruber, in a span of two years, has gone from claiming that the law would reduce non-group premiums by 13 to 31 percent, to estimating that they will increase those premiums by 19 to 30 percent.”

Obama and the Democrats dipped into our pockets and took more of our income via higher health insurance premiums, which are in reality just a hidden tax of Obamacare. What’s the difference whether you call it an increase in health insurance premiums or an additional tax? Either way, additional dollars you haven’t paid in the past now come out of your pocket. Both taxes and insurance premiums to cover Obamacare will continue to escalate rapidly as the full costs of Obamacare, which were delayed until later in the decade, are brought to bear.

My first comment:

Obama-Care makes no changes likely to reduce health care costs. Finding ways to bring more people into health insurance or Medicaid does not change how wasteful US health care spending has come to be. Do you want proof? Look at the results of six years of similar health care ‘reforms’ in Massachusetts. The following is excerpted from a recent edition of the Christian Science Monitor (http://www.csmonitor.com/USA/2012/0731/Health-care-reform-Massachusetts-…):

The plan is the next chapter in the Bay State’s reform efforts, following the 2006 landmark law pushed by then-Gov. Mitt Romney that served as the basis for President Obama’s Affordable Care Act. Among other things, the Massachusetts law introduced the individual mandate – the requirement that all residents get insurance or face tax penalties. The US Supreme Court upheld the federal law in June.

While the Massachusetts law expanded insurance coverage, it did little to solve the problem of rising costs, which have climbed markedly in recent years, rising on average 6.4 percent a year in the state. Per capita health spending in Massachusetts is about 15 percent higher than the rest of the nation. By comparison, national health costs have risen about 6.5 percent on average since 1991.

The bill that passed both the House and the Senate Tuesday, and that is likely to be signed Gov. Deval Patrick (D), tries to change that.

“It’s an interesting bill for the assumptions [the lawmakers] make. But they’re making a lot of assumptions about how fast can we get to these points,” says William Fields, a private health-care consultant. “What path are we really starting to lead ourselves are down? At the end of the day, where are we going to go with this? Are we going to be cutting-edge, or are the costs going to go so low that we lose all innovative aspects of our system?”

The 349-page plan, dubbed Health Reform 2.0 in some circles, is forecast to save $200 billion over 15 years, by tying the growth in health-care costs to the growth in the state economy.

“The truth is there are some pretty lofty, ambitious goals in the legislation. The real efforts will come with the implementation,” says Amy Whitcomb Slemmer, executive director of the advocacy group Health Care For All. “Savings will come because there will be fewer redundant [medical] tests and fewer unnecessary [patient] visits.”

Negotiators from the House and Senate, who had struggled for months to reconcile the chambers’ separate bills, opted to strip out the more controversial measures, such as a luxury tax on hospitals that provide premium services.

In the end, they decided to create a new state commission with the power to audit health-care providers that exceed state targets for cost growth and to refer them to the state attorney general for investigation. In a state that is home to world-renowned hospitals like Massachusetts General, Brigham and Women’s, and Beth Israel Deaconness, this was one of the most controversial provisions. State Attorney General Martha Coakley said in a 2010 report that insurers end up paying some hospitals and doctors twice as much money as others for similar care, in large part because they dominate the market.

The legislature’s plan also levies a surcharge on insurers, and that money, combined with future appropriations, will fund preventative-care programs and help support smaller community hospitals that typically have lower costs than the larger institutions but that also have lower revenues. Some funds will bolster reimbursements for Medicaid, the federal-state health program for the poor. The plan also promotes the creation of “accountable care organizations,” which aim to replace the current piecemeal fee-for-service approach for medical procedures with “global” or “bundled” systems of payments for providers.

The Massachusetts Hospital Association appeared to give a lukewarm response to the bill, welcoming the effort but also warning that “the aging population and obesity epidemic” will stress hospital budgets. It also says the state must do more to ensure adequate reimbursement for patients in state-funded programs.

Critics, including the Pioneer Institute, a Boston think tank, say the plan creates more bureaucracy and higher administrative costs. Joshua Archimbault, a health-care analyst at the institute, also says the ambiguity in some of bill means that state regulators would have sizable discretion.

“My concern is that whenever you have government officials, or a commission or a panel or whatever, making arbitrary determinations, you run the risk of picking winners and losers, and you open the door for increased lobbying, which is very problematic,” Mr. Archimbault says.

My second comment:

Targets for cost growth, audits, criminal investigations, luxury taxes, and surcharges do not sound like real health system reform to me. At least Massachusetts is openly admitting that mandating health insurance and growing Medicaid do not reduce health care costs. Can’t somebody help the White House and Congress see that Obama-Care, which follows the Massachusetts plan, is doomed to cost too much? We Americans have high health care costs because of inefficient payment schemes (private health insurance business model failure) and poor quality care (inappropriate care, preventable patient harm, and poorly executed effective care). Unless we reform how we pay for health care (get rid of the private health insurance business model) and improve the quality of care delivered (stop paying for inappropriate care, start public health surveillance for patient injury, organize cooperative health care delivery) we will watch health care costs continue to careen out of control. We can’t afford Obama-Care. We must choose soon to do something entirely different than has been done in Massachusetts.

Dr Joe Jarvis