At his impromptu news conference last Tuesday, President Obama demonstrated he is either so detached he doesn’t know what’s happened as the Affordable Care Act (aka ObamaCare) is being implemented or that he knows but intends to brazen his way through an emerging policy debacle. Whichever it is, it’s likely to be a political disaster for the president and his party.
Saying that while there were big changes for those now uninsured, it was a different situation “for the 85 to 90 percent of Americans who already have health insurance,” Mr. Obama said. The only impact for them, he assured us, is that “their insurance is stronger, better, more secure than it was before. Full stop. That’s it. They don’t have to worry about anything else.”
Yes they do.
Start with their premiums. Rather than declining by $2,500 per family of four by the end of 2010 as Mr. Obama pledged, average family premiums have risen from a pre-ObamaCare cost of $13,375 in 2009 to $15,745 last year, according to the Kaiser Family Foundation’s 2012 Employer Health Benefits Summary.
That’s a $2,375 or 18% increase, not the $2,500 or 19% decrease Mr. Obama promised.
Workers are picking up most of that increase as employers grapple with rising insurance costs by requiring bigger co-pays and deductibles.
Premiums are rising fast for precisely the reason ObamaCare critics predicted: the health care act includes so many mandates and requirements that make insurance much more costly.
Premium sticker shock is even worse for those who aren’t covered by a group or company policy. There has been an “average increase of roughly 50% in premiums for some in the individual market for the same coverage,” according to last year’s “Medical Cost Trend: Behind the Numbers 2013” report from PricewaterhouseCoopers’ Health Research Institute.
Premiums will go up even more and faster for younger families because of the perverse provision of ObamaCare called “community rating.” This causes younger, healthier policyholders to pay higher prices than they would otherwise in order to subsidize the premiums of older, less health policyholders.
Then there was Mr. Obama’s 2009 pledge that he’d never raise taxes on any family making less than $250,000 a year. But the Affordable Care Act includes $525 billion in new taxes during its first decade as law, with ever-higher taxes in the decades ahead. Among these are new levies on medical devices, drug companies, hospitals and providers and insurance policies.
Medical device manufacturers, pharmaceutical companies, health care companies and insurance companies will not pay these taxes.
As Congressional Budget Office director Douglas Elmendorf told a Senate hearing, these companies will simply pass the taxes onto their customers.
In other words, sick people needing a medical device, a drug, a hospital stay, a doctor’s care or even the backstop of an insurance policy will pay the $525 billion in new taxes through higher prices for those goods and services.
Last time I looked, there were plenty of sick people who made less than $250,000 a year. And since these taxes are phased in, the tab will get bigger and bigger in the “out” years.
ObamaCare even raises revenue from those in college on a student loan. The Affordable Care Act nationalized student loans issued with a federal guarantee. Now students can only get these loans from the government, not private lenders.
College students are being hit again because the federal government took over the student-loan business in 2010, eliminating the competition. This allows the Education Department to borrow money from Treasury at an interest rate of 2.8% and lend it to college students at a rate of 6.8%. A portion of the profits from overcharging students will be used to help pay for ObamaCare.
Mr. Obama also said in 2010 that he didn’t “want a plan that interferes with the relationship between a family and their doctor. So we’re going to preserve that.”
But a massive survey of 14,000 doctors by the Physician’s Foundation, conducted in 2010, said that 40% of physicians said they would drop out of patient care in the next one to three years, either by retiring, seeking a non-clinical job within health care, or by seeking a non-healthcare related job.
The majority of physicians (59%) said health reform will cause them to spend less time with patients, most of them saying Medicaid and Medicare patients would be most affected.
Who can blame the doctors? The over 150 new federal commissions, bureaus, agencies, and panels — and the new rules they are charged with crafting to govern every minute action by physicians, nurses and other care givers — are already causing many health professions to contemplate doing something else or retiring early.
But perhaps the worst impact on American families are coping with all of this springs from Mr. Obama’s pledge that “If you like your health care plan, you can keep your health care plan.”
With $130 billion in cuts to Medicare Advantage plans, the 13 million seniors, or roughly 25% of the total, who use Medicare Advantage are seeing their plans dramatically altered or even cancelled.
But seniors aren’t the only ones impacted by Mr. Obama’s false promise that “If you like your health care plan, you can keep your health care plan.” More Americans are beginning to understand that ObamaCare will have grave implications for their families and their health coverage.
Insurance is getting more expensive for small businesses to their employees. When insurance coverage gets too expensive, businesses can dump their employees into a government-run pool called an “exchange” and pay a $2,000 fine for each employee after the first 30 workers.
Since most companies pay as much as 80% of the premium costs for their workers, ObamaCare has a perverse incentive for them to dump coverage and drop their workers into the exchange where taxpayers pick up most of the cost.
Companies can also avoid providing insurance by limiting non-salaried employees’ hours to 30 or less a week. Then they escape any penalty for failing to provide coverage.
Already, restaurants, fast food joints, hotels and others in the hospitality sector are moving to limit non-salaried workers to 30 hours or less a week.
This will cause real hardship. Many servers, hotel workers, or fast food employees need to 34 or 35 hours a week plus tips just to make ends meet. They are hearing they’ll get 30 hours and no more from their current employer and have to find the other hours they need somewhere else. Not an easy task in today’s economy.
This trend is likely to affect some retail and other service industries as well. I recently talked with an executive in the auto parts industry who says franchise owners are moving in this direction.
On a more personal note, a family friend recently lost his sales job despite being the leading performer two years running for his company. He’s being replaced by a 30-hour a week non-salaried employee.
Last year, the annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care found that more than two in five employers are at least somewhat likely to direct part-time and temporary workers into exchanges.
For these workers and their families, it doesn’t matter if they like their health care plans. They won’t be able to keep them. And that has consequences for ObamaCare’s price tag.
When the Affordable Care Act passed in March 2010, the Congressional Budget Office (CBO) estimated that 24 million Americans would get coverage through the exchange, 21 million of them previous uninsured and 3 million who would lose their employer provided coverage.
In its March 18, 2010 score the CBO said the cost for this would be $466 billion, offset by $52 billion in employer penalty payments, with the exchange started in 2014 and being fully operational by 2016. Ninety-five percent of the outlays for the exchange would be paid in the last four years of ObamaCare’s first decade, 2016 to 2019.
This February, the Congressional Budget Office revised its estimates. Now it believes 8 million Americans, not its original estimate of 3 million, will lose their employers provided coverage. That would mean a total of 29 million people, not 24 million, would be covered through the exchange. That would point to the real cost of the exchange being about 17% higher than originally forecast.
The CBO also issued a new projection for the cost of the exchange between 2014 and 2023. This would include the cost for the two years spent phasing in the exchange (2014 and 2015) and the cost for eight years of their operation. That number is now $949 billion.
And the CBO’s new estimate is on the low side.
The actuary’s office at the Centers for Medicare and Medicaid Services (CMS) at the Department of Health and Human Services says 14 million Americans will lose their employers provided coverage, raising to 35 million the total number who would be covered through the exchange. That would suggest costs being roughly 46% higher than projected.
The Lewin Group, a respected healthcare policy research and management-consulting firm, estimates 17.2 million Americans will lose employer provided insurance so that 38.2 million are covered through the exchange. If the Lewin Group is correct and those in the exchanges number 38.2 million, then ObamaCare’s tab is approximately 59% more than the original estimate.
And economists at the American Action Forum (AAF) suggest 35 million will lose employers provided coverage, putting 56 million into the exchange. If AAF’s estimate of 56 million is accurate, then the cost of ObamaCare’s exchange could be as much as 133% of CBO’s estimate, more than twice the cost Mr. Obama told Americans it would be.
But the Affordable Care Act’s price tag could be even larger. A survey by McKinsey & Company suggests 30% of employers will stop offering health insurance coverage.
Around 61% of firms offer insurance plans per Kaiser’s 2012 Employer Health Benefit report with roughly 170 million Americans having heath insurance tied to their jobs, according to the latest U.S. Census data.
So a 30% decrease in employer provided insurance would mean as many as 53 million lose coverage, bringing the total in the exchange to 71 million. You work the math.
Whatever the final price tag for the exchange, virtually all of the new cost will be deficit financed. It’s hard to see much of the cost being covered by the $2,000 a person fine since it appears most of the workers dumped into the exchange will come from small businesses or workers who are now part-time, non-salaried employees.
The bottom line, then, is that huge problems related to ObamaCare are emerging. Companies – especially small businesses -- are holding back hiring in order to avoid the rising costs of providing health insurance that are being imposed by ObamaCare.
Employers are trying to find ways to limit the hours of non-salaried workers to 30 hours or less a week to avoid ObamaCare’s requirements altogether. And the administration’s estimate of how many people will receive taxpayer subsidized insurance coverage through the exchange may be terribly low, grossly understating ObamaCare’s cost. All these trends are likely to be accelerating as the November 2014 midterm elections approach.
During his press conference last week the president said, “even if we do everything perfectly, there will still be glitches and bumps.”
The problem is that the president constructed an unworkable plan and he’s implementing it incompetently. The result is not “glitches and bumps;” it’s “sinkholes and craters.” And the result is that ObamaCare will become even greater political deadweight for the president and his party.
No wonder Democrats from Senator Max Baucus to liberal favorites like Elizabeth Colbert Busch are running from what Mr. Baucus calls an impending “train wreck.” And there’s not a thing in the world they can do to avoid it.