Part 1 of 2/Medicare reimburses healthcare providers less than the cost of care now. The new Obama healthcare plan could overlay 48 million people at this reimbursement rate to $13.4 trillion of existing unfunded obligation. Even before we get a handle on the effects of the Obama 'stimulus,' we are now faced with the prospect of Congress making sweeping changes to nearly 20% of the economy. This ambitious plan is comprehensive in scope, sparse in detail and uncertain in its cost and savings estimates.
What we do know is that the plan represents an unprecedented grab by Washington for control of healthcare dollars and decisions - and accelerating the federal domination of the US healthcare system.
Let us be clear that there is little new in the Obama plan, with most initiatives recycled from the ill-fated 1993 Hillary plan, the 2004 Kerry plan and proposals from the Commonwealth Fund, a prominent liberal think tank. This latest attack uses the honey of offering affordable, comprehensive and portable coverage; containing spiraling healthcare costs and improving quality of care; and promoting and strengthening public health.
While these goals are appealing, the coercive means to accomplish them will be far less attractive.
How the Obama plan will seize control. The Obama plan proposes a massive expansion of federal regulatory power over healthcare, including the definition of what constitutes "quality" care. This is a radical departure from the decentralized decision-making system that sets the United States from other developed countries. The plan includes several initiatives that would give the government extensive control of the financing, delivery and management of healthcare.
These initiatives include:
- New federal provision and control of healthcare. Obama's new government-run national health plan would compete directly with private health plans in a National Health Insurance Exchange. Federal officials would not only run the new government plan but also use the exchange as a "watchdog" over participating private health plans. The federal government would decide the level of health benefits that Americans would receive through the exchange.
- Additional federal involvement in employer-based coverage. The Obama plan would mandate that employers provide a federally approved level of health benefits to their workers or pay a tax to help finance the government’s new health plan. The plan does not specify the level of the employer contribution, value of the required health benefits package, or size of the payroll tax. The federal government would also assume the high-end costs of employer-based coverage and provide a new taxpayer subsidy to small businesses to encourage them to offer coverage. In any case, the Obama prescription would end employer-based health insurance as millions of Americans know it.
- Expansion of existing government health programs, restrictions on state experimentation, and mandated coverage for children. The plan calls for unspecified expansions of Medicaid and SCHIP and would severely limited states’ ability to develop health care reform proposals on their own.
- Federal regulation of health care delivery. The federal government would regulate the delivery of medical care through specific initiatives, such as those that would govern medical reimbursement and determine the "comparative effectiveness" of medical treatments and procedures. It would also increase the federal regulation of medical liability reform, prescription drugs, and health insurance.
Differing Estimates
Analyzing proposals based on campaign documents and media accounts is inherently difficult, as these materials lack the level of detail necessary for a rigorous econometric analysis.
The best independent research shows that the Obama plan would cover roughly half of the 45 million uninsured through an expansion of public coverage; rely on soft methods of cost-savings; and require significant increases in federal expenditures.
Coverage. According to the Lewin Group, the Obama plan would reduce the number of uninsured by 26.6 million in 2010 if fully implemented in that year. The plan would also bring about significant shifts in sources of coverage. While 21.6 million people would lose their private health insurance, 48.3 million people are projected to obtain public coverage through Medicaid, SCHIP, or the new National Plan. Private employer-sponsored coverage would decline by 13.9 million, and private non-group coverage would decline by 7.7 million. Meanwhile, 18.6 million employees would buy into the new public plan through their workplace (as their employers switched to this plan from private coverage), 13.1 million individuals would buy into the public plan in the non-group market, and 16.6 million individuals would become newly enrolled in Medicaid or SCHIP. Therefore, the expansion of coverage under the Obama plan would be driven by enrollment in public coverage. This would entail a crowd-out of existing private non-group and private employer-sponsored insurance.
Estimates of sources of coverage, however, are sensitive to assumptions about the level at which provider reimbursement is set for the National Plan. The figures above are based on the assumption that the National Plan would reimburse providers at a level halfway between private market rates and the lower rates set by Medicare. In an alternative scenario modeled by Lewin, reimbursement was reduced to Medicare payment levels. Enrollment in the National Plan reached as much as 42.9 million, contributing to a 32-million-person decrease in private health insurance and a 60.1-million-person increase in public coverage. While sources of coverage would change significantly, there would not be a significant change in the net reduction of the uninsured.
Lewin applied a type of model known as a micro-simulation. Health Systems Innovations Network (HSI) conducted an analysis (funded by the McCain campaign) also using this type of approach. It found that the plan would reduce the uninsured by 25.5 million. It also found that 24.6 million people would enroll in the new public plan through employers or in the non-group market. However, the HSI study did not look at the proposed expansions of Medicaid and SCHIP that would further increase enrollment in public coverage.
In contrast, the Tax Policy Center (TPC) applied a different type of model known as an elasticity-based approach. The TPC estimated the Obama plan would reduce the number of uninsured by 18.4 million in 2009. In that year, 4.3 million people would gain employer sponsored insurance, 5.8 million would obtain non-group coverage, and 8.3 million would enroll in public coverage. The TPC did not take into account the differences in provider reimbursement between the National Plan and private insurance. Moreover, the results are somewhat confusing because it is impossible to determine enrollment in the National Plan.
Currently, there are 44 million Medicare beneficiaries.
The Medicare hospital trust fund will exhaust its reserves in 2017, rendering it insolvent two years earlier than the trustees predicted last year. Its unfunded obligation is $13.4 trillion, $1 trillion higher than last year's estimate. That amount would have to be deposited in an interest-earning account today in order for Medicare's hospital trust fund to be able to pay all its scheduled benefits over the next 75 years. Medicare's total unfunded obligations, including its programs that use general revenues to pay for doctors' fees and prescription drugs, have reached $37.8 trillion.
Medicare reimburses healthcare providers less than the cost of care now. The new Obama healthcare plan could overlay 48 million people at this reimbursement rate to the new national health plan.
The government is currently unable to fund the existing Medicare program, let alone fund what is essentially doubling the federal healthcare insurance program's size.
All one really needs to do is briefly review Adam Smith's Wealth of Nations to get an idea of what the future looks like. The number of 'unapproved' or 'non-covered' services will increase...and age limits for procedures will start high and start coming on down.
