Health Care News
One of Obamacare’s main selling points during the health care reform debate was the need to provide insurance coverage to those with pre-existing conditions—but like other aspects of the law, the plan is failing those it was intended to help.
Beginning in 2014, Obamacare will prohibit insurance companies from excluding anyone with a pre-existing medical condition from coverage (called guaranteed issue). Because this incentivizes people to wait until they’re sick to purchase coverage, Obamacare includes the dreaded individual mandate to force all Americans to purchase health insurance.
But these massive new insurance mandates don’t take effect until 2014, so in the meantime the law set up the pre-existing conditions insurance plan (PCIP), which funded new high-risk pools in each state, providing coverage to those with pre-existing conditions from 2010 to 2014. The PCIP was allocated $5 billion for that time frame.
One of Obamacare’s many failures is the temporary small business tax credit, which is intended to encourage small employers to offer health insurance to their employees by partially offsetting the cost. Thus far it has largely failed to do so.
Initially, the IRS estimated that 4.4 million taxpayers could have been eligible for the credit. As J. Russell George, Treasury Inspector General for Tax Administration, testified before Congress, “The IRS mailed approximately 4.4 million postcards at a reported cost of approximately $1 million, with basic information on the Credit to businesses that could be affected.”
But even after spending $1 million to advertise the credit, only 7 percent of potentially eligible employers claimed it. As George testified: “[T]hrough mid-October 2011, the IRS reported that 309,000 taxpayers…had claimed the Credit for a total amount of $416 million. This is substantially lower than the Congressional Budget Office estimate that taxpayers would claim up to $2 billion of Credit for Tax Year 2010.”
Remember that repetitive presidential promise to “cut the cost of a typical family’s premium by up to $2,500 a year”? As 2014 and full implementation of Obamacare get closer, it is crystal clear that won’t be the case.
Obamacare’s most onerous insurance regulations will directly cause insurance premiums to skyrocket, particularly in the individual and small group markets.
While there are many provisions that will increase premiums, two will have the most expensive impact:
Expanding Medicaid will be costly for most states. The authors of The Patient Protection and Affordable Care Act of 2010 (Obamacare) threatened to strip all federal funding for states’ Medicaid programs if they refused to expand the entitlement.
But 27 states filed suit over Obamacare and the Supreme Court struck down this threat as coercive, making the Medicaid expansion optional for states. Now, governors and state legislatures are debating whether to expand or not, as the above presentation shows. As Nina Owcharenko notes, Medicaid needs reform, not expansion.
Of course, states are tempted by the offer of new federal dollars. But, as Heritage expert Drew Gonshorowski writes:
The Medicaid expansion represents a massive increase in federal and state spending. Although some claim that states could experience savings, it is clear that this is the exception, not the rule. Expanding Medicaid will ultimately cost states in the long run.
For a breakdown of state-by-state costs, click here.
While Members of Congress are arguing about defunding parts of Obamacare, the rubber is meeting the road in the states. Governors and state legislatures are sweating decisions about setting up government health care exchanges and expanding the Medicaid program.
While the offer of additional federal money for Medicaid is tempting for many governors and legislatures, it is a trap. And it is just one of the reasons Obamacare doesn’t work.
The Medicaid expansion is a crucial part of Obamacare that is supposed reduce the number of uninsured. But adding millions of people onto an already strained program doesn’t help anyone. The Medicaid program is already struggling to provide care to its core obligations—a diverse group of low-income children, disabled people, pregnant women, and seniors. So dumping more people into the program will make matters worse. Research shows that Medicaid enrollees already have worse access and outcomes than privately insured individuals.
This will have real effects on America’s needy, including children. Dr. Hal Scherz has seen the problems Medicaid creates firsthand. He practices in the only pediatric urology group in the state of Georgia, and more than half of his practice is made up of Medicaid patients.
Obamacare is approaching its three-year anniversary next week. And while it’s having an impact on nearly all Americans in one way or another, businesses are facing some of the biggest challenges related to the law.
Heritage hosted a panel Monday to examine the implications of the Affordable Care Act. Robert Graboyes, a senior fellow for health and economics at the National Federation of Independent Business Research Foundation, explained the three options employers face with Obamacare: stunt business growth, shrink employee hours, or minimize the damage the mandate does on the employer’s wallet.
That’s the case for Mike Ruffer, who works in restaurant business. Ruffer purchased the franchise rights from Five Guys in 2004 with a commitment to build 11 restaurants. Ruffer owns eight Five Guys in North Carolina, but worries about opening new restaurants because of the uncertainty related to impending federal regulations.
As employers and businesses prepare for Obamacare’s sweeping changes and mandates to begin in 2014, many are already laying off some of their employees. An event at Heritage today will discuss the burdens of the law both for small businesses’ ability to hire and grow and individuals’ ability to find jobs. Here are 10 examples of job loss due in whole or part to Obamacare and its consequences:
Medical Device Tax
- 1,000 jobs lost: “Stryker Corporation Confirms Obamacare Layoffs.”
- 275 jobs lost: “Medical Device Tax Blamed for Welch Allyn Layoffs.”
- 100 jobs lost: “Latest Obamacare Casualty: 100 Workers at Smith and Nephew.”
The 2.3 percent excise tax on the sale of medical devices, one of the 18 tax hikes in Obamacare, is estimated to cost the industry over $29 billion between 2013 and 2022. Many employers in the industry are compensating for the tax hike by reducing their labor costs.
Medicare Payment Cuts
- 950 jobs lost: “Wake Forest Baptist Medical Center Reengineers Cost Structure, Eliminate Positions.”
- Up to 400 jobs lost: “Orlando Health to Cut Record Number of Jobs to Save Money.”
- 52 Jobs lost: “Delaware Hospice Lays Off 52 Workers amid Federal Changes.”
- 58 jobs lost: “Hospital Layoffs and the Affordable Hea[l]th Care Act.”
The Medicaid expansion is touted by proponents of Obamacare as a “no-brainer.” While it is true that some states may see projected savings, it is erroneous to claim that this experience applies to every state.
Proponents predict that by expanding Medicaid states will be able to reduce payments to health care providers, such as hospitals, for uncompensated care. As a matter of fact, nationally, the opposite is true:
- 40 of 50 states are projected to see increases in costs due to the Medicaid expansion.
- The majority of states see costs exceed savings when the federal match rate is lowered after the first three years. From there, state costs continue to climb, dwarfing any projected savings.
- State savings are concentrated in large states. New York is estimated to see $33 billion in savings, while Massachusetts is estimated to save $6 billion over 10 years. Because of the design of their current programs, these states have a unique opportunity to restructure their programs and transfer significant cost to the federal ledger. (continues below chart)
Of course, even these savings are highly speculative. They assume that uncompensated care costs actually decrease under a Medicaid expansion. Analysis of other states shows that this is not always the case. In fact, in Maine, uncompensated care continued to grow.
Obamacare has been law for nearly three years, with its anniversary approaching on March 23. And while the major provisions (exchange subsidies and Medicaid expansion) aren’t slated to begin until 2014, Obamacare is already having devastating effects on Americans and their health care.
Recall that fateful Presidential promise, made on several occasions during the health care reform debate, “If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.”
Despite the President’s promise, Heritage warned that many provisions in Obamacare would encourage employers to drop health coverage for their workers:
Many businesses and their employees—especially lower-income employees—will find that replacing ESI [employer-sponsored insurance] plans with subsidized coverage on the exchanges is mutually beneficial. Employers would no longer offer health insurance but would offer wage increases as wages and benefits are substitutes in an employee’s net compensation. At the same time, these workers will still have access to coverage through the exchanges with the subsidies or through Medicaid.
Heritage had it right. As employers and businesses prepare for the law’s major insurance regulations and mandates to begin next year, more stories of people losing their current coverage are emerging.
Then: In his September 9, 2009, speech to a joint session of Congress, President Obama declared, “I will not sign a plan that adds one dime to our deficits—either now or in the future.”
Now: Over the next 75 years, the Affordable Care Act—Obamacare—will add an estimated $6.2 trillion to the primary deficit under the most realistic outlook on federal spending, according to a new report by the Government Accountability Office (GAO), the nonpartisan fiscal watchdog of Congress. The primary deficit, as noted by the GAO, is the difference between federal revenues and non-interest spending.
Senator Jeff Sessions (R–AL), who commissioned the study, released its findings this morning at a Senate Budget Committee hearing. The GAO report examines the long-term impact of Obamacare on the nation’s fiscal health.
Projections of spending and deficits and debt, as the GAO analysts observe, are often calculated under the “Baseline Extended Simulation,” which assumes that current law will “continue unchanged.” These projections can also be calculated under an “Alternative Simulation,” which assumes “historical trends and policy preferences continue.” Different assumptions lead to very different results.
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