Healthcare

The Wall Street Journal reports today that the leaders of three major labor unions are asking Congress to make fundamental changes to Obamacare, saying that without such changes, it will “shatter” employee health benefits, cut employee hours and wages, and “destroy” a ”foundation” of America’s middle class:

Since last year, union leaders have complained that many of the law’s requirements will drive up costs for union-sponsored health-care plans that are managed jointly by unions and mostly small employers, making unionized workers less competitive and potentially causing unionized employers to drop the plans that cover more than 20 million people.

To offset the expected rising costs of these “multiemployer” plans, several union groups want their lower-paid members to be able to remain on the plans while also getting access to federal insurance subsidies to be provided under the law. Their problem is that under the law, the subsidies were designed to be used by low-income workers who don’t have employer coverage, as a way to help them buy private insurance. The bottom line: they want lawmakers to apply the subsidies to people in the multiemployer plans.

In a letter dated July 11 to Sen. Harry Reid and Rep. Nancy Pelosi, union officials also said they are concerned the Affordable Care Act is leading employers to cut workers’ hours below 30 hours a week so that workers can avoid requirements to provide health coverage for those workers in the future.

Without changes, the health-care law “will shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class,” the union officials wrote.

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The Obama administration has illegally discarded the reporting requirements mandated by the 2010 healthcare law, which were designed to prevent countless billions of dollars in fraud by claimants seeking reimbursement for healthcare expenses in Obamacare’s state health-insurance exchanges. Eligible participants in the exchanges can commonly claim thousands of dollars in federal subsidies for participating them. The reporting requirements, which require that exchanges verify participants’ income and health insurance status, were designed to ensure that such people do not defraud the taxpayers by seeking subsidies even though they already have employer-provided health coverage, or have an income high enough that they do not qualify for any subsidy.

Now, the subsidies will be available to people who lie about whether they are eligible. The Wall Street Journal calls them “Obamacare’s Liar Subsidies”: “Remember ‘liar loans,’ the low- or no-documentation mortgages that took borrowers at their word without checking pay stubs or W-2s? ObamaCare is now on the same honor system, with taxpayers in tow.”

The Washington Examiner‘s Philip Klein observes:

In a regulation released Friday and flagged by Washington Post reporters Sarah Kliff and Sandhya Somashekhar, the administration will now rely on self-reported data. You read that correctly. A man who earns $50,000 per year and gets insurance through his employer could log on to the new government website and say he earns $20,000 and gets no insurance through his employer, and the government would not even attempt to confirm that the information is accurate before forking over generous taxpayer subsidies. It’s a recipe for rampant fraud, which is already widespread in Medicare and Medicaid.

According to the rule as reported by Kliff and Somashekhar, “The exchange may accept the applicant’s attestation regarding enrollment in eligible employer-sponsored plan … without further verification” and “the Exchange may accept the attestation of projected annual household income without further verification.”

The authors’ note that if anybody is caught lying, that they would be subject to a $25,000 fine and forced to repay any excess subsidies they received. But just like a waiter who under-reports cash tips, it likely won’t be very hard to get away with lying on Obamacare forms.

With this news coming after the employer mandate delay announcement, the Obama administration has now openly conceded that it is in way over its head when it comes to implementing this unworkable law. Thus, the new strategy is to simply set up a mechanism to feed taxpayer subsidies to as many Americans as possible so that even if Obamacare is a complete train wreck, it will make enough people dependent on government to make repeal politically impossible. Republicans should seize on this immediately, and force the administration to defend a policy that would open the floodgates to fraud.

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Contraceptives are easy to obtain, and forcing employers to include a broad array of contraceptives in employee health insurance makes as little sense as forcing an auto insurer to cover routine oil changes. Actually, it makes much less sense, since without an oil change, your car will eventually break down, but some people have no desire to ever use any contraceptive (and get by just fine without them).

But that did not stop the Obama administration from imposing a contraceptive mandate on employee health insurance, requiring even religious employers (with the exception of churches) to provide them (and not just contraceptives, but — more controversially — certain abortifacients). Some objectors, like Bishop Lori, have likened the administration’s demand that Catholic institutions provide contraceptive and abortifacient coverage to forcing a kosher deli to serve ham.

HHS Secretary Sebelius admits that she did not even seek a legal opinion about the legality of this mandate before imposing it, even though many legal scholars have since criticized it, and it created a political firestorm in 2012.

Now, the Tenth Circuit Court of Appeals has revived a legal challenge to the contraceptive mandate, ruling in favor of an appeal by the religious employer Hobby Lobby. The court ruled that Hobby Lobby has shown that it will likely succeed on its challenge to the mandate under the Religious Freedom Restoration Act, and is probably entitled to a preliminary injunction against it. As Judge Tymkovich put it in his opinion for the court:

This case requires us to determine whether the Religious Freedom Restoration Act and the Free Exercise Clause protect the plaintiffs—two companies and their owners who run their businesses to reflect their religious values. The companies are Hobby Lobby, a craft store chain, and Mardel, a Christian bookstore chain. Their owners, the Greens, run both companies as closely held family businesses and operate them according to a set of Christian principles. . . the plaintiffs brought an action challenging a regulation that requires them, beginning July 1, 2013, to provide certain contraceptive services as a part of their employer-sponsored health care plan. Among these services are drugs and devices that the plaintiffs believe to be abortifacients, the use of which is contrary to their faith.

We hold that Hobby Lobby and Mardel are entitled to bring claims under RFRA, have established a likelihood of success that their rights under this statute are substantially burdened by the contraceptive-coverage requirement, and have established an irreparable harm. But we remand the case to the district court for further proceedings on two of the remaining factors governing the grant or denial of a preliminary injunction.

More specifically, the court rules as follows:

As to jurisdictional matters, the court unanimously holds that Hobby Lobby and Mardel have Article III standing to sue and that the Anti-Injunction Act does not apply to this case. Three judges (Kelly, Tymkovich, and Gorsuch, JJ.) would also find that the Anti-Injunction Act is not jurisdictional and the government has forfeited reliance on this statute. These three judges would also hold that the Greens have standing to bring RFRA and Free Exercise claims and that a preliminary injunction should be granted on their RFRA claim. A fourth judge (Matheson, J.) would hold that the Greens have standing and would remand for further consideration of their request for a preliminary injunction on their RFRA claim.

Concerning the merits, a majority of five judges (Kelly, Hartz, Tymkovich, Gorsuch, and Bacharach, JJ.) holds that the district court erred in concluding Hobby Lobby and Mardel had not demonstrated a likelihood of success on their RFRA claim [and] further holds that Hobby Lobby and Mardel satisfy the irreparable harm prong of the preliminary injunction standard. A four-judge plurality (Kelly, Hartz, Tymkovich, Gorsuch, JJ.) would resolve the other two preliminary injunction factors (balance of equities and public interest) in Hobby Lobby and Mardel’s favor and remand with instructions to enter a preliminary injunction, but the court lacks a majority to do so. Instead, the court remands to the district court for further evaluation of the two remaining preliminary injunction factors. . . .Accordingly, for the reasons set forth below and exercising jurisdiction under 28 U.S.C. § 1292(a)(1), we reverse the district court’s denial of the plaintiffs’ motion for a preliminary injunction and remand with instructions that the district court address the remaining two preliminary injunction factors and then assess whether to grant or deny the plaintiffs’ motion.

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The so-called rate shock from Obamacare has hit Ohio. The state’s Department of Insurance announced last Thursday that the average individual-market health insurance premium in 2014 will cost approximately $420,” per month, “representing an increase of 88 percent.”  “We have warned of these increases,” said Lt. Gov. Mary Taylor. “Consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014.”  Projected costs ranged from $282.51 to $577.40 for individual health plans. “But for many experts who understand the economics of health insurance, the premium increases are not shocking at all. In August of 2011, the actuarial firm Milliman predicted that the Affordable Care Act would increase individual-market premiums in Ohio by 55 to 85 percent.

Most of these cost increases are not only a matter of red tape and compliance burdens, but also related to cost-shifting (what some might view as robbing Peter to pay Paul), and requirements that insurance cover routine minor expenses, rather than performing insurance’s traditional function of protecting against risk by paying unexpected expenses such as medical treatment for injuries and illnesses.  Wall Street Cheat Sheet’s commentary “Proof that Obamacare ‘Rate Shock’ Is Real” says that “two main drivers” cause most of this increase: Risk pool composition changes will require the young to subsidize the old and the healthy to subsidize the sick; and Obamacare’s expansion of insurance benefits, particularly its required reductions in deductibles and co-pays.”

Health insurance expenses also will go up because of state court rulings that invalidate common-sense limits on meritless lawsuits, such as the Oklahoma Supreme Court’s recent ruling in Wall v. Marouk . In that case, the court struck down a requirement medical malpractice lawsuits not be filed unless they are supported by evidence the physician violated the standard of care (in the form of an expert affidavit), even though such evidence is required for liability.  In so doing, it encouraged nuisance lawsuits that drive up the cost of healthcare by encouraging doctors to order unnecessary tests and practice other forms of costly and unnecessary “defensive medicine.” (The activism of the court’s decision is buttressed by the fact that the same day it did that, the Oklahoma Supreme Court also nullified the state’s general tort reform in its entirety. (Here is some coverage: WLF, TortsProf, Tulsa World, Reuters, NewsOK, Beck (“the Oklahoma Supreme Court was plainly out of control in Ysbrand, and unfortunately it remains out of control to this day”), Douglas v. Cox Retirement Properties).)

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Does austerity kill? In a recent New York Times op-ed, David Stuckler and Sanjay Basu claim that fiscal austerity leads to a worsening of health outcomes, using higher suicide and disease rates across Southern Europe as their case-in-point. But there are problems with this formulation.

First, the authors make the mistake of linking fiscal austerity with less health spending.  Greece, Spain, and Italy chose to cut health spending even though there were better choices for cuts. And health spending didn’t put them into deep debt to begin with. Borrowing at cheap interest rates and spending it on pet projects and political patronage — which includes the welfare state, but not so much in health — put them in deep debt. Estonia swiftly and severely began to reduce the size of government in 2009, but it increased health spending during that period and suffered no health declines.

Second, Stuckler and Basu point to high unemployment and trimmed social services as the sources of increased depression and suicide in Southern Europe. But this is not an argument against austerity; it is an argument to make people less dependent on the social welfare system. In Southern Europe, labor markets are broken. That’s why the IMF gave each country a failing grade in labor market efficiency in 2010. In Italy, it’s illegal to fire employees for poor performance and difficult to dismiss them for outright negligence. Layoffs also are a long and expensive process. So,when recession comes, employers can’t hire at lower wages and don’t want to hire because of these factors — which makes matters even worse. Droves of Italians and Spaniards wouldn’t be dependent upon state welfare today if labor markets were more flexible. That’s why austerity should regard not just cutting spending and revenues, but also shrinking the regulatory state. Job protections,  a hidden cost of the welfare state, are the real killer.

The narrative with which the authors open their op-ed—in which an older Italian family commits suicide because Italy’s increasing the pension eligibility age forced the main breadwinner back into a workforce with meager opportunities—tells us to abandon not austerity but the level of commitment to current welfare-state policies. If businesses had more flexibility to hire and fire workers, if the implicit tax rate on labor wasn’t the highest in all of Europe, and if Italy’s court system was more efficient in resolving labor disputes, this family wouldn’t have been so reliant on receiving a state pension in the first place. Finding work would not have been such a hopeless proposition that it  ended in such tragedy.

Third, the authors bring up Estonia’s experience with poor health outcomes during its transition from communism but conveniently fail to mention its success with real austerity from 2009 to the present. After making deep cuts to both spending and revenues beginning in January 2009 (unlike any other country in the Euro Area), Estonia experienced positive economic growth by the third quarter of that year — more than 2 percent growth in 2010, and 7.6 percent growth in 2011. Unemployment began to decrease by the sixth quarter after austerity and is now below the Euro Area average. And most importantly to Stuckler and Basu, neither the change in the rate of suicides nor the change in the total death rate were statistically significant relative to Estonia’s previous 10 years. See my in-depth statistical report for more information: http://cei.org/web-memo/separating-european-austerity-fact-and-fiction.

Painting austerity as the grim reaper is more than a stretch. “Austerity” need not mean a reduction in health spending. And focusing on the short-term effects of trimming the welfare state ignores the long-term causes behind why some citizens’ lives depended so heavily upon it. Does austerity “kill”? It doesn’t have to.

Post image for Possible Unintended Consequences in New Obamacare Regulation

The Patient Protection and Affordable Care Act (Obamacare) bans health insurers from denying people coverage if they have certain pre-existing medical conditions. A regulation partially implementing that policy appeared in today’s Federal Register. It is the first “economically significant” regulation ($100 million or more in annual economic impact) to appear since April 18. This interim final rule extends the Pre-Existing Condition Insurance Plan (PCIP) program through 2014.

How much does it cost? The analysis accompanying the rule is vague. It does say that the Health and Human Services Department “is authorized to disperse $5 billion to pay claims and the administrative costs of the PCIP program that are in excess of premiums collected from enrollees.” Essentially, if insurers and providers are required to take losses on some of their patients, Washington has agreed to subsidize some of the difference with taxpayer dollars.

Since this is government spending, I won’t include this $5 billion in my running tally of compliance costs for this year’s economically significant rules (currently ranging from $5.58 billion to $10.19 billion, as of the most recent Battered Business Bureau post).

The rule acknowledges administrative costs, but claims they will be minimal since they build on existing systems. It gives no numbers.

The cost analysis also states, “With respect to other parties, we lack data with which to quantify costs associated with this regulation.” Since the bread and butter of this regulation is a series of price controls and subsidies, it can be hard to quantify how patients and providers might change their behavior.

Some providers, because of the price controls and paperwork involved with the PCIP, might opt to simply refuse to treat patients in the PCIP program. The rule acknowledges this:

While we understand that the decision to no longer treat PCIP enrollees is possible, we believe and are hopeful that most facilities and providers will accept the new payment rates established in this interim final rule given the serious health conditions many federally-administered PCIP enrollees have and the prospect that such reduced payment is temporary until 2014 when no one can generally be denied health coverage because of a pre-existing condition.

People change their behavior when their incentives change. The PCIP program gives health care providers an incentive to refuse treatment to people who desperately need it. And that unintended consequence, as opposed to paperwork, may be the true cost of today’s regulation.

Have a listen here.

Small business owners and individuals in six states, with help from CEI, are suing the IRS over what General Counsel Sam Kazman calls a flagrantly illegal expansion of the Affordable Care Act.

At least one union that supported passage of Obamacare, is now calling for its repeal. As The Wall Street Journal notes, the United Union of Roofers, Waterproofers and Allied Workers has given up on salvaging the deeply-flawed health care law:

Organized labor . . . recently has voiced concerns that the law could lead members to lose their existing health plans. . .“After the law was passed, I had great hope…that maybe the rough spots would be worked out and we’d have a great law,” said Kinsey Robinson, international president of the [roofer's] union, which represents 22,000 commercial and industrial roofers…Mr. Robinson says the union’s concerns about the law began to pile up in recent months after speaking with employers.

The roofers’ union’s current insurance plan caps lifetime medical bill payouts at $2 million for active members and $50,000 for retirees. Next year, the plan has to remove those caps in order to comply with the health law. . . that will increase the cost of insuring members, Mr. Robinson said, and has prompted the union to weigh eliminating the retiree plan.

Adding to those cost concerns is a new $63-per-enrollee fee on health plans that pays insurers to cover people with pre-existing conditions next year. Looking ahead to 2018, when the law levies an excise tax on high-value insurance plans, Mr. Robinson predicts that at least some of the union’s plans will get hit by it… On Tuesday, the union called for a repeal of the health law or a complete reform of it.

Meanwhile, Sen. Max Baucus, D-Mont., who helped write Obamacare and is up for re-election in 2014, says he’s worried about a “huge train wreck coming” when the Obama administration begins fully implementing the health care law later this year. Baucus “sharply criticized the administration’s outreach efforts in a budget hearing on Wednesday. He told Health and Human Services Secretary Kathleen Sebelius that people and businesses ‘have no idea what to do, what to expect’ from the law.” His colleague, Sen. Jay Rockefeller, D-W.V., now admits the health care law is so unprecedentedly complicated as to be “just beyond comprehension” (alas, his inability to comprehend it didn’t keep him from voting to pass Obamacare).

Obamacare is strangling job creation and will harm life-saving medical innovation. Some employers have stopped hiring because of Obamacare, and others are cutting full-time workers and replacing them with part-time workers to avoid Obamacare mandates that apply to full-time employees. Obamacare caused layoffs in the medical device industry through what a liberal Senator conceded was a “job-killing tax” that will “impair American competitiveness in the medical device field.” Obamacare will cut employment by an additional 800,000 because of work disincentives and bizarre income-cliffs.

Earlier, I wrote about the dismal March jobs report and how high unemployment has been masked by rising numbers of discouraged workers and people going onto Social Security Disability. I also noted Obamacare has wiped out some jobs and prevented the creation of others.

Economists including Mark Zandi and economics writers such as James Pethokoukis recently cited Obamacare as the likely culprit behind those lousy jobs numbers. Zandi cited the way it affected the labor market and which sectors were most sluggish in hiring. Ed Morrissey discussed some alternative theories for why hiring was weak, and why he wasn’t buying them, here.

Earlier, restaurant chain CEO Andrew Puzder explained how Obamacare is preventing jobs from being created in the restaurant industry, and causing layoffs in other industries. And John Stossel reported on how Obamacare is stopping businesses from hiring, interviewing people whose businesses have been harmed.

At Bloomberg News, Ramesh Ponnuru argued Obamacare’s medical-device tax will harm medical “innovation,” citing forecasts it will lead to “reduced research and development.” His conclusion was echoed by the dean of Harvard Medical School, and Cato health care policy analyst Michael Cannon, who likewise concluded Obamacare will harm life-saving medical innovation. Obamacare contains several other taxes, and it increased taxes on many investors starting in Jan. 1 of this year.

The University of Virginia is expecting a roughly $7-million bill for Obamacare’s new employer penalties, said Susan Carkeek, the University’s vice president and chief human resources officer. “We’re expecting fairly significant cost implications from the Affordable Care Act that pass on new penalties and charges, fees to employers – probably in the order of $7 million a year,” she explained in an interview.

Community colleges across the country are slashing employee hours to avoid costly Obamacare mandates. For example,”Pennsylvania’s Community College of Allegheny County (CCAC) is slashing the hours of 400 adjunct instructors, support staff, and part-time instructors to dodge paying for Obamacare.” Youngstown State University is also “trimming staff hours to avoid Obamacare’s fiscal burden.”  Other universities are also cutting employee hours, which is “a double whammy” for instructors, who are “facing a legal requirement [under the new law] to get health care and if the college is reducing our hours, we don’t have the money to pay for it,” said an adjunct biology professor.

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