Consumer Power Report #195
The biggest news of the week was without doubt the march on Washington on Saturday. Heartland's John O'Hara was one of the speakers and I was in the crowd. Our write-ups and some pictures I took are available at the Heartland Institute Web site.
There is something profound going on in the country. Several people have called it "an awakening," and that sounds about right to me. People feel betrayed by those who were supposed to be their leaders--and not just in government and politics, but in business, academia, the media, the arts, and even in the churches in many cases.
All of these institutions find the whole thing distasteful and not worth paying attention to. But this is the same arrogance that created the mess we are in today. Contempt for the people will bring down this privileged elite.
IN THIS ISSUE:
Last week, after President Obama's speech, I said, "The rock 'em, sock 'em partisan pep rally might energize some of his most ardent followers, but that energy will fade within hours, and the ugly reality will still be with us." Why? Because he failed to answer the simple questions people have, such as, "What benefits will be covered? What premiums will be charged? How much will subsidies be worth? How will it be enforced? What is the long-term cost? How will it be paid for?" Now the polls are confirming that analysis.
Writing about a new USA Today/Gallup poll, Susan Page says, "Six in 10 say Obama's proposal, if enacted, would not achieve his goals of expanding coverage to nearly all Americans without raising taxes on the middle class or lowering the quality of health care. For the first time, a majority disapprove of the way he's handling health care policy." And she adds an example. "Milton Downing, 51, a teacher from Wilmington, Del., is a Democrat who says Obama is doing an 'awesome' job, but he worries the legislation might upend the coverage he has. 'How would it affect me right now and in the future?' he asks. 'I don't have enough facts on what it might do to my family.'"
SOURCE: USA Today
ABC News had similar findings in a survey it conducted with the Washington Post. In an analysis Gary Langer writes that "views on health care reform have failed to improve since President Obama addressed the nation." He writes, "Americans in this ABC News/Washington Post poll divide by 48-48 percent on [Obama's] handling of the issue and by 46% in favor and 48% opposed on the reform package itself, both essentially the same as their pre-address levels," and adds, "More continue to think reform will worsen rather than improve their own care, costs and coverage. There's still a nearly even split on whether it'll improve care for most people in general. More think it'll weaken rather than strengthen Medicare. And nearly two-thirds think it'll boost the already vast federal deficit."
As importantly, 54 percent say the more they hear about health care reform, the less they like it.
SOURCE: ABC News
Rasmussen has similar findings. He found that support ticked up a bit immediately following the speech and got as high as 51 percent in favor and 46 percent opposed, but it is now back down to 42 percent in favor and 55 percent opposed.
SOURCE: Rasmussen
NEW KFF/HRET SURVEY ON EMPLOYER BENEFITS
The Kaiser Family Foundation has released its annual Employer Health Benefits Survey. Here are some highlights:
- Not much has changed since last year. Costs for family premiums have risen 5 percent, but single person premiums had no "statistically significant" growth.
- 20 percent of workers are in family plans that cost $16,000 or more (approaching the trigger for the Senate Finance proposed 35 percent surcharge -- see below), while 21 percent are in plans costing $10,700 or less.
- 60 percent of workers are in PPOs, 20 percent in HMOs. 10 percent in POS plans, 8 percent in HSAs or HRAs, and 1 percent in "conventional" plans. If something attracts only 1 percent, is it still "conventional"?
- Of those workers with annual deductibles, the deductible amount for single coverage is $634 for PPOs, $699 for HMOs, $1,061 for POS, and $1,838 for HRA/HSA plans.
The percentage of all firms offering health benefits has gone down from 63 percent in 2008 to 60 percent in 2009. The percentage of the smallest firms (under 10 workers) is 46 percent.
Only 29 percent of large firms (more than 200 workers) now offer retiree health benefits (see story below on proposed subsidies for these companies).
HSAs are the best deal around. For family coverage the total annual premium is $10,396, as compared to $12,223 for an HRA and $12,719 for a PPO. Of this, workers contribute $2,543 to the HSA premium, $3,067 to the HRA premium, and $3,470 to the PPO premium. Employers on average contribute $1,126 to an HSA and $2,073 to an HRA, and obviously nothing to a PPO deductible. So the total employee exposure for premiums and deductibles is $3,255 for an HSA, $2,932 for an HRA, and $4,094 for a PPO. But it is only with the HSA that an employee may keep unspent funds when he leaves the job.
SOURCE: KFF survey
Now that the long-awaited Max Baucus Senate Finance Committee health care proposal has come out, the final straw is breaking the camel's back. It is doubtful this bill will even pass in the committee. It has no Republican support and key Democrats, including Jay Rockefeller (D-WV) and Ron Wyden (D-OR), have already said they oppose it. This bill would:
- Dump the Medicare-like "public option" in favor of state-based co-ops.
- Extend Medicaid to all those below 133 percent of poverty.
- Provide credits on a sliding scale to those up to 300 percent of poverty.
- Cap premiums at 13 percent of income for those between 300 percent and 400 percent of poverty.
- Mandate that everybody else buy health insurance or pay a penalty of $950 for a single or $3,800 for a family.
- Require employers with 50 or more workers who do not provide coverage to "reimburse" the government for any tax credit provided to those workers.
- Require states to set up insurance exchanges for the individual and small group markets and offer four levels of coverage, plus another for "young adults."
- Apply an excise tax of 35 percent on any coverage that costs more than $8,000 for a single or $21,000 for a family.
- Provide $5 billion to fund risk pools for people who have been denied coverage until 2013, when guaranteed issue would kick in. Oddly, a state risk pool that has a waiting list would not be eligible.
- Apply new taxes on drug makers, insurance companies, medical device manufacturers, and laboratories.
- Generate large savings from Medicare, including $100 billion from Medicare Advantage plans.
SOURCES: Wall Street Journal; Washington Post; New York Times; Fox News; Chairman's Mark
In an initial estimate, the CBO says the Baucus bill would cover about half of the uninsured and actually reduce the deficit by $29 billion over 10 years. The insurance expansion would actually cost about $774 billion, but that new cost would be offset by new taxes (especially the tax on high-cost plans) and spending cuts in Medicare.
Other analysts inform me this bill appears to be less costly because it fixes the physician payment cuts (known as SGR) for only two years and fails to increase Medicaid payments for primary care physicians.
SOURCE: CBO
Oddly, the key population to be hit with the effect of mandatory coverage are young adults, who are also the biggest supporters of Obama and health reform generally. The Census Bureau survey we reported on earlier notes that 28.6 percent of young adults from 18 to 24 years old are uninsured, as are 26.5 percent of those from 25 to 34. That is double the rate of those of age 45 to 64.
Many of these people are in very good health, so they don't feel a strong need for coverage, but in the proposals before Congress, they will not be allowed to benefit from their good health and will pay the same premium as people who are very sick.
These young people often have other priorities for their money. They are looking for a mate or starting a family. They are setting up their household from scratch and need to buy furniture or save for the down payment on their first house. They are getting rid of the beat-up Toyota they used in college and buying a decent car to get to their new jobs. They are buying clothing that is suitable for the workplace.
They are also more supportive of ObamaCare than any other age group. The Washington Post reports, "According to a Washington Post-ABC News poll last week, young adults are more optimistic about the outcome of health-care reform than those age 30 and older, but they are evenly divided on the cost implications, with 32 percent expecting their costs to decline and 27 percent expecting an increase. About 52 percent of young adults support the idea of the individual mandate, about the same proportion as in other age groups. But in terms of the overall package, the under-30 group broadly supports the Democratic effort, with 60 percent favoring the proposed reforms vs. 42 percent among older adults."
Man, if this thing passes, these folks are in for a rude awakening. But, I guess growing up involves a whole series of disillusionments. This will be just one of many for the new generation.
SOURCE: Washington Post
YET ANOTHER BAILOUT OF GENERAL MOTORS?
Heartland's Maureen Martin came across a provision in H.R. 3200 (Section 164) that appropriates $10 billion to set up a "reinsurance program" for retiree health benefits up to Medicare eligibility. The government would pay 80 percent of any claim between $15,000 and $90,000.
As mentioned above, only 29 percent of large employers still have retiree health programs and these are almost entirely unionized manufacturing operations, such as -- oh, I don't know, maybe General Motors?
The Detroit Free Press had an overview article that nicely sums up the attitudes of labor and its opponents. "Greg Mourad of the National Right to Work Committee called it 'a shameless case of political payback,' saying Democrats and President Barack Obama are trying 'to force the rest of us to pay billions to cover those unions' health care.' But, 'It is not enough money,' said former U.S. Rep. David Bonior, a Mt. Clemens Democrat who chairs the board at Washington, D.C.-based American Rights at Work, a labor advocacy group. 'That will have to be supplemented to fill the gap.'"
No, it's never "enough money," is it, Mr. Bonior?
The article explains, "Layoffs, buyouts and company cutbacks have contributed to force more people into early retirement at a time when only about one-third of U.S. firms with 200 or more workers even offer retiree benefits, compared with more than twice that percentage two decades ago. Of those that remain, companies with union employees are far more likely to offer benefits for early retirees."
In the case of GM, of course, the company got the UAW to take over its retiree obligations a while ago by promising to fund a VEBA program. But, "According to outside experts, the UAW's VEBAs have only about 30% of the cash needed to cover retirement health benefits for about 850,000 people -- making it the second biggest retiree insurance pool in the nation, with only California's pension plan larger. Shares in Chrysler Group, Ford Motor Co. and General Motors Co. will add to the bottom line -- but it's impossible to say how much."
So, in step the taxpayers -- once again -- to pay for promises that could never be kept.
SOURCE: Detroit Free Press
The idea that putting everyone into something like a Mayo Clinic will save oodles of money underlies almost everything being discussed in Washington. But like most widely held beliefs in Washington, it is based more on wishful thinking than on any real evidence. Now Peter Nelson at the Center of the American Experiment offers a paper that should put this fantasy to rest for a while -- if anyone in Washington cares about finding out the truth instead of just advancing a political agenda. In other words, Fat Chance!
Mr. Nelson agrees that the Mayo Clinic provides very high quality care, but he says if you look beyond the price controls of the Medicare program, it is by no means low cost. He writes, "In Medicare, the government sets prices and, as a result, the prices in the Dartmouth data reflect national Medicare policies and do not reflect the price of health care services negotiated between private health plans and providers more generally." Indeed, "Relative to other Minnesota providers, most evidence pegs the Mayo Clinic as a high-cost provider."
How does he know this? Well,
"Last week, Minnesota Community Measurement unveiled a new Web site that provides the most concrete public data on the price of various physician procedures in clinics across Minnesota. Specifically, the Web site provides the average negotiated price from Minnesota's four largest health plans for 105 procedures offered in a physician's office. Based on this data, the Mayo Clinic is often the highest cost provider relative to other Minnesota providers.
"Based on the data in the table, Mayo costs far more than other Minnesota providers. Of the 69 procedures, Mayo's price is the highest for 11 and among the top five highest for 48. On average, Mayo's price was 220 percent higher than HealthEast and 180 percent higher than Park Nicollet."
He goes on to provide some caveats, but concludes, "Nonetheless, the fact that every tiered health plan in Minnesota places Mayo in the high-cost tier suggests strongly that Mayo's total cost of care is higher relative to other Minnesota providers."
He draws some lessons for national reform efforts:
- Medicare data understate the cost of high-quality health care.
- Reforms that attempt to replicate high-quality practices may not automatically result in lower costs.
- Quality at "centers of excellence" like the Mayo Clinic would suffer if a majority of Americans were to switch from private health plans to a government-controlled, Medicare-style public plan option.
- Measuring, publishing, and understanding the cost of health care are difficult.
- Comparative effectiveness research--assessing the relationship between cost and quality, divining what works and what doesn't--is also very complicated.
- Health care markets assess value and effectiveness better than government health care programs.
