HEALTH CARE EXCHANGES: THE WORST IDEA YOU NEVER HEARD OF
By Eric Novack
Danger ahead: with the passage of President Obama's health care law by Congress in 2010 and the affirmation of its constitutionality by the Supreme Court in 2012, our country is on track for a health care system that combines the spending indiscipline of the Pentagon with the utter unaccountability of our public schools.
Such will be the legacy of the sadly misnamed Patient Protection and Affordable Care Act (PPACA), barring a political U-turn in the future. Fortunately, that can occur. We still have an opportunity to get it right—but this will require Americans to see past the smokescreen put up by subsidy-seeking special interests and look carefully at actual policies and their impact.
Obama Promised but Didn't Deliver
Remember the landscape before PPACA was enacted? For millions of our fellow citizens, access to quality health care had long been a problem. The cost of health care was a huge issue for everyone. And politicians' promises about the future of Medicare and Medicaid were becoming ever more empty. So when Barack Obama pledged to make reforms that would address these exact issues, an overwhelming majority cheered.
What the president delivered, however, is a series of policies that will demonstrably make access worse, especially for the needy; that will make costs skyrocket for families while enriching special interests from insurance companies to hospitals; that will imperil Medicare's and Medicaid's very existence; and that will place health care decisions that rightly belong to patients and families in the hands of politicians and their pals. Thanks for nothing.
The hated individual-mandate provision is the best known of PPACA's many bad features. But perhaps the most insidious of the law's provisions is the creation of health insurance exchanges as a state-by-state “marketplace” for purchasing insurance. It will place control over massive flows of federal, state, and personal dollars in the hands of a few corporations with minimal oversight and accountability.
This is why the insurance industry, hospital associations, state and regional chambers of commerce, and other “pro-business” groups avidly support the exchanges—and have committed hundreds of millions of dollars to convincing state legislators and governors that somehow this is a free-market solution for health care. It's nothing of the kind.
Faux Markets, not Free Markets
In the coming decade, insurance companies, along with hospital corporations functioning as insurance companies, stand to get $800 billion in taxpayer subsidies to sell policies through exchanges. That's according to the Congressional Budget Office. But a more accurate ten-year price tag, since the program is not slated to begin until 2014 and takes several years to ramp up, may approach $2 trillion.
In some states the amount of money flowing through the exchanges each year will rapidly become larger than the entire state budget. As this happens, since dollars translate directly into political power, the companies whose representatives legally hold majority (or even super-majority) control over the oversight boards of the exchanges will, for practical purposes, rule the state.
Once entrenched, these exchanges with their vast control over rulemaking—including access to care, creation of new health care facilities, and the stifling of competition—will be nearly impossible to displace. The subsidies are attached to patients and families, who will be treated (as they increasingly are already) as commodities worth government funds rather than, well, patients.
But it gets worse because, stunningly, the enormous sums being thrown at insurance and hospital companies will not even be close to enough. Economist Austin Frakt, writing on Ezra Klein's liberalWashington Post blog, noted that the subsidies may be much lower than expected in terms of total insurance costs, and that many children may not be eligible for subsidies.
Paying More for Less
Under PPACA, after 2018, the subsidies allowed will be below the projected rate of rising health care costs. When this intentional shortfall is added to Obamacare's 18 different tax increases (not including the individual mandate, now judicially certified as a tax in itself), the result will be that American families will be paying even more, for less.
States that are moving forward to establish the exchanges as called for are already spending billions of federal dollars just to help begin implementing the complex bureaucracy and even more complex technology platform that will be required. Not only must policymakers integrate what is, in many states, a completely outdated Medicaid computer system with the exchanges, but the technology platform must also have the ability to collect and analyze eligibility data and then transmit that data to the federal government.
That's because the IRS will need access to all the data from each state in order to advise the exchanges how much of a subsidy is available for insurance companies to buy down the cost of coverage for policyholders.
This past August, President Obama's Department of Health and Human Services handed out another nearly $900 million to eight states working on implementation of their exchanges. California recently signed a $360 million contract with a company to help them just get an exchange up and running. Massachusetts spends over $30 million per year on administrative costs for their exchange.
The kicker: due to administrative costs, an identical policy will be more expensive when purchased through an exchange than from outside. Even before the exchanges begin, new insurance broker fees and other hidden taxes are being piled on families and businesses.
Lobbyists on the March
Interest groups have deployed lobbyists to every crevice of state legislatures and governors' suites, peddling the poll-tested language of “free-market reforms,” “state-based control,” “keep power away from Washington,” and “won't our state do a better job of making decisions for our residents than politicians in D.C.?”
What they fail to reveal is that—in spite of everything—states will have little control over the fundamental rules under which the health insurance exchanges function.
State legislators and governors must have very short memories if they forget that Medicaid was supposed to be a state-based program too—but now states must go hat in hand to Washington, when controlled by either party, to make even minor changes to their Medicaid programs.
If that is not enough, the checklist for states to comply with the exchange rules runs 27 pages long, with many tasks being so vaguely defined as to make it nearly impossible to know in advance if time and money spent will be adequate.
Resistance by States Could Stymie Feds
But here's a ray of hope: states that resist the lobbying onslaught and refuse to begin establishing these puppet exchanges may be taking a large step toward blocking PPACA's implementation, period. You see, the law does not appear to give a federal exchange the authority to offer subsidies to insurers, without which the whole scheme would collapse.
While the administration will try to laugh this out of court, no one can predict how judges will rule. Scoffers should recall that litigation against the individual mandate and the Medicaid mandate was also deemed hopeless not long ago.
We the people and our elected state legislators should just say no to these market-fixing, government-created, and ultimately government- and corporate-crony-controlled health insurance exchanges.
This is a top priority for every American who believes that the Obama's health care law has put us on the wrong path—everyone who wants decisions made by patients and families, not politicians and their pals. Cronyism and collectivism, to which both parties unfortunately are susceptible, must not go unopposed. Let's raise our voices accordingly.