Health Insurance Exchanges: Welcome to the Bread Line

With the dust from the November elections settled and the blur of the holidays behind us, Americans are finally starting to focus on the gritty details of the new healthcare law. 

Most people are at least vaguely aware that the core component of ObamaCare is the “individual mandate”: The requirement that every American have health insurance coverage by January of 2014. What is less understood, however, is the vehicle by which this mandate is proposed to occur – Namely, the state “healthcare insurance exchanges”. 

The very term “exchange” is confusing and a misnomer, as it wrongly implies some sort of swap meet or barter system which it is not.  In reality, the “exchanges” were conceived to be a sort of open marketplace where people can shop for, compare and choose a suitable insurance plan that best fits their individual or family healthcare needs. 

The exchanges, we were told, will be replete with a panoply of different options that will be pre-screened to assure that they meet the basic requirements set by the federal government. It all sounds like the platform for a delightful afternoon of window shopping amongst a multitude of different insurance plans, picking and choosing the one that you think will suit you and your loved ones best.  Lots of “shopping”, “comparing”, “choosing” and “options” will occur in the wonderful new world of health insurance exchanges.

The law calls for the exchanges to be up and running by October 1^st of this year. Apparently, the ringmasters in Washington believe that this will provide adequate time for people to educate themselves about their options, shop for, and purchase an appropriate plan prior to the mandate taking effect in 2014.

States were given the choice of setting up their own exchanges, partnering with the federal government to create an exchange, or deferring the entire thing to the federal government. 

It turns out that state governors took those 3 choices seriously – And the majority of them have said they want no part creating or running their state’s exchange. 

If a state decides to take on the task itself, the state is fully responsible for the set up and administration of the program. This includes the provision of adequate customer service, information technology systems for the coordination of healthcare data, and daily administration of the exchange.  Tens of thousands of helpers -- termed “navigators” -- will need to be hired to assist consumers who are likely to be overwhelmed by the exchanges and their myriad choices.   California alone plans to hire and train 21,000 new employees to act as navigators. These and other administrative costs will fall directly to the state if they opt to set up the exchange on their own.

Given the states’ complete lack of input in determining the requirements for the exchanges on the one hand -- and their obligation to enforce the rules and fund the entire implementation and administration on the other -- it is not a surprise that many would choose to opt out.

Furthermore, although there is initially some federal funding (read “tax dollars”) set aside to help states with expenses associated with the exchanges, full financial responsibility transfers to the states after a year.  In other words, states that assume responsibility for running their own exchanges must devise a source of revenue (read “tax dollars”) for running them by 2015. The federal government has been unable to provide any reasonable prediction regarding the cost to implement and operate the exchanges– A detail that makes fiscally responsible governors more than a tad uncomfortable. 

As conservatives predicted, the wildly unpopular healthcare reform bill is a huge unfunded tax liability, and that reality is becoming clearer by the minute. Faced now with the option of establishing exchanges in their states, the majority of governors have therefore chosen to take a pass.

Unfortunately, in what may be the most egregious insult of Obama’s administration, the Democrats force-fed us a massive healthcare reform plan that is entirely predicated on insurance “exchanges”, that they offered to -- but are neither prepared nor capable of --creating. 

As of this writing, 23 states have declared that they will not set up their own state-based exchanges, deferring to the federal government to do it; 19 will handle the task themselves; 6 have opted for a federal-state partnership; and 3 are still undecided. 

The federal government is therefore left with the daunting task of creating online insurance marketplaces for two-thirds of the country.

Apparently, it did not occur to authors of the bill that states might actually take the option to abdicate responsibility for the exchanges to the federal government. Since it is simply not conceivable that the government will be able to design and implement exchanges in as many as 32 states between now and October, we are left to wonder what portions of their grand plan we will be required to following until this is accomplished.

Even if the exchanges become an eventual reality in all states, great questions remain.

With the ability to “shop”, “compare” and “choose” from the advertised host of different “options”, what’s not to like about the exchanges?  For one, the price tag.

The cost of premiums for insurance purchased on the exchanges is expected to significantly exceed the cost of insurance prior to ObamaCare.

The Department of Health and Human Services has determined a generous, comprehensive list of health benefits that must be covered in order for a plan to be “qualified”. ObamaCare classifies four tiers of qualified insurance – Platinum, Gold, Silver and Bronze – which refer to the portion of healthcare costs that are covered under that plan.  Platinum plans will be designed to cover 90% of the actuarial value of HHS’s required “essential health benefits”, while Bronze plans will cover only 60%.

The IRS itself predicts that the cheapest health insurance plan available under ObamaCare in 2016 will cost a family of four $20,000 a year. The $20,000 per year price tag would be for a “Bronze” plan, the lowest level qualified option to avoid paying a penalty.

The extend to which one is eligible for federal subsidies to purchase one of these plans – and the amount of the penalty for failing to comply with the mandate – will be determined by one’s adjusted income reported to the IRS in 2013.

The penalty (determined by the Supreme Court to be a tax) for not having healthcare insurance, starts at $95 per person and increases to $695 per person or 2.5% of income, whichever is greater.  H&R Block estimates that an individual earning $50,000 in taxable income would pay a $400 fine for failure to have insurance, while a family of four with a household income of $100,000 would face an $800 penalty.  Much of the Affordable Care Act is being implemented through the tax code, and these fines would be deducted from any tax refunds that are due.

That dwindling but fortunate group who continue to get their healthcare insurance through their employers (and therefore not via the “exchanges”) are likely to see their salaries drop as employers have to pay more to provide a “qualified” plan for their workers.

And so it goes. The overwhelming structural flaws in the ill-conceived healthcare reform law are about to be revealed on a massive scale. A critical component of the healthcare law – the insurance exchanges – are shaping up to be the unmitigated disaster that could easily have been predicted. Given the massive impact that the Affordable Care Act will have on Americans and our economy, it is unconscionable that Congress did not anticipate and account for the likely unwillingness of states to create the exchanges upon which the rest of the bill is reliant.

Furthermore, even if the government is ultimately able to get the exchanges up and running, they will clearly saddle consumers with higher premiums and questionable choice. States will undoubtedly be obligated to significant increased costs and administrative nightmares.

Suddenly, “shopping” for healthcare insurance at one of the new “exchanges” begins to sound less like the idyllic marketplace experience that Nancy Pelosi has described.  It appears more akin to the Russians “shopping” for bread  -- If one can call standing in an endless line with the entirely uncertain promise of eventually obtaining a stale and overpriced crust, “shopping”.

ObamaCare 2013: Rich Tax, Poor Tax, High Tax, More Tax

With the November election debacle behind us, inquiring minds want to know what to expect from ObamaCare in 2013.   The answer is simple and resounding: “Taxes”.  Lots of them.  With all due respect to Dr. Seuss, it’s “Taxes here. Taxes there. ObamaCare taxes are everywhere!”

How can this be in light of President Obama’s recurrent promises not to raise taxes on anyone other than the “wealthy”?  Ah what a difference a word makes.  In this case, the word is “income”. All of President Obama’s recent assurances that middle class Americans won’t end up paying higher taxes referred only to “income” taxes.  In reality, most American – 77% according to the Tax Policy Center -- will be paying far more in taxes in 2013 than they did in 2012.

This is due in part to hefty new taxes associated with the ever-unpopular healthcare reform bill -- ObamaCare -- which is due to be fully implemented in 2014.

As with previous waves of ObamaCare implementation, the third set of installments, due this year, will consist of new taxes intended to pay for increased subsidies for health insurance and the significant expansion of Medicaid.

One of the new taxes is a 3.8% surtax on investment income that will impact individuals making more than $200,000 a year and couples earing more than $250,000. This income threshold is far less than the $400,000 cut-off for income tax hikes in the recently passed bill to avoid the so-called “fiscal cliff”.  Furthermore, taxing investment income has nothing to do with healthcare.

These same not-so-wealthy people will be hit this year with an additional 0.9% Medicare payroll tax.  The current 2.9% Medicare payroll tax increases to 3.8% in 2013. For someone who is self-employed this increase will represent a significant ding to take-home pay.

The goal here is apparently to raise $318 billion in additional Medicare taxes to help pay for the bloated and ill-conceived healthcare reform bill that Nancy Pelosi assured us was both “cost saving and deficit reducing”.

Another of the new ObamaCare taxes slated to strike this year is the 2.3% medical device tax.  This tax will apply to companies making anything from heart valves to stents to joint replacement parts.  The 2.3% is a tax on total revenues, regardless of whether or not the company has any profits at all. That means that a company doing $100 million in revenues will be required to pay an additional $2.3 million in taxes, even if they haven’t made a dime in profits.  Given that many medical device companies are small and work on razor-thin margins, this new tax will likely drive production and high-tech jobs overseas as a matter of pure survival.  The government is hoping to raise another $29 billion via the medical device tax.  This will only happen, however, if those companies don’t move abroad in order to stay afloat or close entirely.

Then there’s the new Flexible Spending Account (FSA) Tax that caps the amount of money that workers can set aside tax-free for medical expenses. Previously, there was no government cap on these funds.  Beginning this year, however, the federal government is limiting FSAs to $2,500.  Traditionally, people who have found Flexible Savings Accounts most valuable are those who have predictable, ongoing healthcare needs such as organ transplant patients, those on kidney dialysis, or individuals with nearly any chronic disease, including diabetes or congestive heart failure. Because workers will be able to put fewer pre-tax dollars into these accounts, their tax bills will increase because their taxable income will be higher — even if their overall income remains the same. This change was implemented in order to collect another $13 billion from taxpayers to help pay for our newly reformed healthcare.  

Allowances for Itemized Medical Deductions are also changed under ObamaCare in 2013.   This year, the healthcare expenditure threshold in order to itemize is increased from 7.5% of adjusted gross income to 10%. This will result in yet a further blow to those with the most significant medical expenses by limiting the portion of costs they can deduct on their taxes.  Estimated amount the government will raise with this ObamaCare tax change:  $19 billion.

One of the very few components of the healthcare reform bill that has been broadly favored, even by many conservatives, is the “non-discrimination for pre-existing conditions” clause.  But guess who’s going to be paying for that? The cost for covering those with pre-existing conditions is going to be paid for with a new $63-per-head fee. An estimate 190 million Americans will owe the per-person fee which is designed to raise $25 billion.  The monies will go into a fund administered by the Department of Health and Human Services, and will be used to protect insurance companies from the cost of covering people with medical problems.  You just can’t make this stuff up!

But wait –That’s not all.  There are also the new “taxes” for individuals and businesses that fail to comply with ObamaCare’s mandate that they purchase government-approved health insurance.  According to the law, virtually everyone must have healthcare insurance by 2014.   People have the option, however, of paying a “tax” (according to the Supreme Court, it’s not a “fine”).  As most other taxes in the Unites States, the “failure to comply” tax is based on income and starts at $95 a year for individuals and rises to $695 a year.  More than 6 million people are expected to decline to buy the mandatory insurance.  As a result, the Congressional Budget Office anticipates that penalties (oops, sorry Justice Robert: “taxes”) for non-compliance will generate more than $130 billion in the first decade they are in effect.

In a stunning example of the bill’s complete idiocy, the law then allows people to purchase a health-insurance policy after getting sick for the same price they would have paid if they had bought it earlier – back when it could legitimately have been called “insurance”.  Insurance, as a construct, only makes sense if people are paying premiums ahead of time to mitigate the cost of unpredictable medical events. This bastardized model for healthcare insurance provides little incentive for one to pay premiums when they are well. But the “failure to comply” taxes do generate revenues necessary to pay for the stupid bill, and that was apparently the point all along.

In total, ObamaCare will result in new taxes and fees totally in the range of  $700 Billion over ten years – monies required to help pay for the bill’s grossly expanded entitlements and healthcare insurance programs that we were told would be “cost saving”.

As each new component of ObamaCare is unveiled, Americans will get a clearer and clearer picture of its travesty. Ultimately, the promise of “affordable” insurance will fail by an even greater margin than the Democrat’s stated goal of “universal coverage.”   Costs will continue to escalate, personal choice will be limited, and quality of care will decline. 

In the prescient and oft-quoted words of political satirist, PJ O’Rourke, “if Americans think healthcare is expensive now, wait ‘til they see what it costs when it’s free”.   Not even Dr. Seuss has a clever rhyme that.

Election 2012: As Healthcare Goes, So Goes the Nation

Pivotal. Monumental. Constitutive. So much is at stake in the 2012 presidential elections that many have put its significance on par with the country’s first election, as well as the 1860 contest that spawned the American Civil War.  It is also a study in stark contrasts.

Perhaps nothing elucidates more sharply the axiological difference between the candidates than their approach to healthcare reform.

Without doubt, the Affordable Care Act will have a devastating impact on the economy and the sustainability of the U.S. healthcare industry. As a physician, I also have grave concerns about the very fundamental changes that ObamaCare, if not repealed, will inflict upon the American way of life. Rather than entrusting physicians to make informed clinical decisions and tailor care to individual patients, ObamaCare represents thousands of pages of new regulations that control office visits, operating rooms, consultations and treatment options. It ultimately prohibits the ability for doctors to provide the best possible care.

Few things are as sacrosanct as the relationship between patients and their doctors. We have laws that recognize the confidential nature of the alliance between people and their lawyers, and protect the “attorney-client privilege”.  We safeguard interactions between people and their pastors.  We hold dear the “spousal privilege” that protects the sanctity of conversation within a marriage. And historically, we have held the essence of the relationship between patients and their doctors in the same inviolable regard. 

As a country, we have always recognized that patients and their doctors are in the best position to make decisions about what is right for them and their families.  We have valued the very personal and private bond that occurs within the confines of the exam room.

For the first time in history, the Affordable Care Act threatens the very fiber of the patient-doctor relationship by inserting a host of government mandates and regulations that legislate what doctors can and cannot do. ObamaCare represents an egregious intrusion of the federal government into what was formerly hallowed ground.

Although the Affordable Care Act was passed in 2010 and is just now in the process of full implementation, the seeds of its philosophical transformation were sown from the beginning of the Obama administration.  Medical education itself has changed, as medical students and young physicians have been taught to rely on government issued “guidelines” and standards set by bureaucrats not trained in science. They have been inculcated with the concept that cost-of-care trumps quality, and that the government is better able to make decisions about treatment options than doctors and patients.  As a result, we are training an entire generation of doctors who are little more than reasonably competent “healthcare technicians”.  They have no understanding of how to assess and care for the whole patient, weigh treatment options, and make well-reasoned clinical decisions.

In what can be best described as linguistic subterfuge, ObamaCare’s architects and supporters have co-opted conservative terminology such as “personal responsibility” and “market competition”. They have hijacked these phrases in hopes of surreptitiously passing off their centrally planned and statist concepts. Forcing people to purchase a government-defined product -- and threatening them with a hefty tax penalty for failure to comply –is not “individual responsibility”. It’s extortion.  These requirements serve only to drive costs up and severely limit choice.  The healthcare law, and the new “insurance exchanges” that it mandates, are designed for overwhelming government control and income redistribution rather than for individual choice and free-market competition.  As with every other sector of the economy, liberals simply refuse to believe that the free-market can work in healthcare, and therefore, the government must intercede.

Despite President Obama’s claim that the insurance mandate will guarantee that everyone will now have access to care, “Insurance” is not “assurance” of anything; plummeting reimbursement and ObamaCare’s over-whelming intrusion into the treatment room will cause tens of thousands of highly-trained doctors to leave the practice of medicine, worsening an already critical physician shortage. The multitude of new taxes and entitlements included in the Affordable Care Act will devastate our economy and impoverish future generations.  Mandates and regulation will cripple medical innovation and technological advancement.  In short order, ObamaCare will lower the overall standard of living for Americans.

When the focus of healthcare delivery becomes standardization, and cost-containment, there is no option but for quality to suffer and rationing to ensue. How can physicians possibly render personalized treatment when they are restricted by mandates dictated by appointed bureaucrats like the Independent Payment Advisory Board (IPAB)? How can they provide the best care when they are being pressured by an auditor at an Accountable Care Organization (ACO) to keep costs down? Patients need a doctor who can be an advocate, as well as an expert to provide professional medical expertise. A physician should never be put in a position to choose between doing what is best for a patient and what has been mandated by the government. I took an oath to first and foremost, “do no harm”; ObamaCare will force me, and others in my profession, to violate that crucial first principle of medicine.

In speaking to medical students in 1908, famed poet Rudyard Kipling noted, “There are only two classes of mankind in the world – doctors and patients.” Americans no longer have the luxury of remaining apathetic or uninformed about the potential impact of this election.  It is incumbent upon all of us to vote and to encourage others to do so. If President Obama is re-elected, future historians will reflect on the period from 2008-2016 and conclude that he successfully forced the government take-over of American healthcare, and in so doing, sounded the death knell, both for democracy and for the greatest healthcare system on the planet.

Fighting for Our Lives: The Ten Worst Things About ObamaCare

The gauntlet has been laid down. With less than 50 days until the election, and what many agree will be the most significant political and philosophical decision point of our lifetimes, it’s time to take the gloves off. Not in terms of dirty politics, misleading television commercials or mud-slinging, but with regard to educating the American public about exactly what calamity will befall us if we do not vote President Obama out of the White House and repeal the Affordable Care Act (ACA). The clock has run out; the time is nigh. Failure to repeal this legislation before it is fully implemented will have nothing less than devastating consequences for our country and our lives. Americans need to fully engage in this battle.

In writing the majority opinion of the Supreme Court and upholding the constitutionality of the ACA, Chief Justice John Roberts stated:  

“Members of this Court … possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.”

In so writing, Chief Justice Roberts challenged the American people to speak loudly and decisively with their votes on November 6^th. In the critical remaining days before this election, we need to be armed with the overwhelming and compelling facts about the travesty known as ObamaCare and we need to broadcast these truths from every pulpit:

1) ObamaCare will increase healthcare costs

Although one of the primary stated goals of ObamaCare was to bend the cost curve downward, the average price of a family policy has risen by $2,200 since passage of the law. Costs for families, individuals, doctors and hospitals are expected to rise further as additional components of the law are put in place. In addition to the direct impact on healthcare costs, ObamaCare will levy more than $569 billion in new taxes to offset its massive entitlement spending.  Many of these taxes have nothing to do with healthcare, including new taxes on bio-fuel, investment income, and tanning salons.

2) ObamaCare will increase the deficit

When the bill was passed in March 2010, leading House Democrats proclaimed that it would significantly reduce the deficit. Within less than 6 months of its passage, the CBO essentially doubled the cost estimates from $940 billion to $1.76 trillion and those same House Democrats were forced to admit that the bill was not even “budget neutral.” Current estimates put the cost of ObamaCare at over $2.6 trillion between 2014 and 2023. The reality of this bill’s monumental impact on increasing the deficit has become clear.

3) ObamaCare will limit patients’ healthcare choices

Despite President Obama’s promise that “you will be able to keep your health plan and your doctor” under the new system, that is far from likely; more and more physicians will refuse to accept Medicare and Medicaid patients as a result of inadequate reimbursement from these programs. A large percentage of businesses will drop their current healthcare insurance plans rather than try to meet onerous requirements and rising costs. Furthermore, the law prohibits Americans from paying out of pocket for services that are not covered by healthcare insurance and makes it unlawful for physicians to render those services. This hardly constitutes legislation that promotes choice or provides any element of control to patients and their families!

4) ObamaCare will decrease quality

Think of all the people that you know who fly to Canada, Cuba or the United Kingdom for their healthcare. Can’t think of any? That’s not a coincidence. Government run healthcare systems rely on a capitated budget. What that gets you is rationing of services, long wait times and limited access to the newest drugs and latest technologies. Significant increases in the number of insured, combined with a host of new entitlements promised in ObamaCare, will tax the supply of practitioners beyond capacity. More than 60 percent of physicians say that the increase in patient volume will hurt the level of care they can provide. There will be a leveling of quality amongst physicians because physicians will no longer have to compete for patient business, they will lose their autonomy regarding patient care decisions and their incomes will be capped. The vast majority of physicians will ultimately become government employees and Americans will get exactly the type of compassionate and personalized care that we currently receive at the U.S. Post Office and the Department of Motor Vehicles.

5) ObamaCare will control decisions made by doctors and other healthcare providers

Make no mistake: ObamaCare represents a clear and absolute government takeover of the healthcare system. Federal bureaucrats – not physicians – will determine what healthcare benefits and services are “essential.” Doctors and hospitals will face a tsunami of new regulations and reporting requirements to ensure that they are following the government’s definition of “quality care.” Hundreds of pages of new “guidelines” have already been produced, aimed at “educating” practitioners on ways to “manage finite resources” and “limit overuse of services.” Everything from preventive care and screening services to chronic disease treatment protocols are being rewritten by government appointees and bureaucrats – not based on new scientific studies, but based on actuarial reports that evaluate the cost of services rendered. These new guidelines are nothing less than a thinly veiled manifest for healthcare rationing.

6) ObamaCare will decrease access to care and increase the physician shortage

What good is an insurance card in your wallet if there aren’t any doctors to see you? The United States was already facing a significant shortage of physicians prior to the passage of the ACA; studies have estimated that there will be a deficit of more than 69,000 doctors by 2015. Adding an additional 30 million people to the rolls of the insured will make that shortage worse. More importantly, increased patient volumes and decreased reimbursement is driving physicians out of practice; 43 percent say that they are considering retiring within the next five years as a result of the new law.

7) ObamaCare slashes Medicare

Maintaining his usual distant but cordial relationship with the truth, former President Bill Clinton proclaimed at the Democratic National Convention that the new legislation “does not cut Medicare services.” While technically correct, it is irrefutable that the ACA cuts $716 billion from Medicare, and those cuts will come from drastic reductions in payments to doctors and hospitals. Medicare actuaries predict that 40 percent of physicians will either go bankrupt or stop seeing Medicare patients altogether as a result of these cuts. So while ObamaCare may theoretically extend the life of the Medicare trust fund, the reality is that there will be no Medicare providers to staff it and seniors will be left with a worthless insurance subscription.

8) ObamaCare negatively impacts job creation

Small business is the engine for job growth in America. As a result of the “employer mandate” – that portion of the legislation that requires employers with more than 50 employees to provide government-approved health insurance for their workers or face federal fines – many companies will limit hiring in order to stay below the 50 employee minimum. Furthermore, as many as 60 percent of employers intend to increase the portion of premiums that workers are required to pay. Recent surveys indicate that others – as many as 35-40 percent – will simply stop providing coverage for their workers and opt to pay the fine, forcing employees to purchase their own insurance from state exchanges. The most powerful job creation plan Congress could enact would be to repeal ObamaCare!

9) ObamaCare violates religious freedom

Despite its many promises to the contrary, the Obama administration has refused to respect religious liberty in implementing the Affordable Care Act. The new law guarantees women access to “free” sterilization procedures and contraceptives, including drugs that are intended to induce abortions. At issue is the requirement that faith-based institutions such as Catholic universities and hospitals either violate fundamental tenets of their faith by providing the offending drugs and services in their employee healthcare plans or face the federal fines for failing to meet the employer mandate. Although HHS has promised to issue some type of “accommodation” following the election, it is unlikely that it will truly allow religious organizations and individuals to freely follow the teachings of their faith without government intrusion.

10) ObamaCare violates personal freedom

In a breathtaking assertion of congressional authority, for the first time in history, the federal government will force citizens to use their own money to purchase a product – healthcare insurance. The fact that the Supreme Court ruled that the penalty for not complying is a “tax” does not attenuate this stunning conscription. Not only does it mean that Americans are compelled to purchase a product every month for the rest of their lives, but it reflects an intrusion of the government into our private lives in a way that was heretofore unimaginable.

Americans are just beginning to understand the misadventure that is ObamaCare. It is time that we accept Chief Justice Roberts’ challenge to protect ourselves from the consequences of our political choices. We must educate others on the facts about ObamaCare and the egregious assault it will levy on our personal liberties and healthcare as we know it. We must vote for the candidate who has vowed to repeal this abomination. Fight as if your life depends on it, because it does.