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The Truth About Obamacare’s Exchanges

Maggie Mahar at The Health Beat Blog writes bout the exchanges.

Paul Krugman: “There are two remarkable things about this kind of doomsaying. One is that the doomsayers haven’t rethought their premises despite being wrong again and again — perhaps because the news media continue to treat them with immense respect.”

If you Google “Obamacare,” “Exchanges,” and “Disaster,” more than 20 million articles will pop up.

One month into a six-month enrollment process, the Media Pundits have spoken.

In truth, there are two tales to be told: one that is getting widespread coverage, and one that is not.

The stories that you are Not hearing come from folks like Michael Cadigan, the president of a New Mexico law firm who enrolled his firm’s four employees the day his state’s Exchange opened. “I thought it was going to be an administrative nightmare,” he confesses. Instead, he quickly found a policy “that will cost $1,000 less a month than I’m currently paying.”

 

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Ripping Off College Students’ Economic Future

Previously, I had written on Fair Market Value and its use by the CBO’s Douglas Elmendorf to rate the risk of Student Loans as advocated by both The New America Foundation and the Heritage Foundation. A rebuttal answer to a partisan CBO, the right-leaning New America Foundation, and the conservative Heritage Foundation on the usage of Fair Market Valuation methodology in the same manner as what I would have used it for to rate the return on a piece of capital equipment is simple. It is inappropriate for student Loans as there is little or no risk to loaning students money which can not be discharged through bankruptcy. The news media has been pandering to students promoting  a generational war by advocating the theft of student’s futures by such programs as Social Security, Medicare, Medicaid, etc. The Tom Friedmans, James Freemans, and others suggest baby boomers are ripping-off the X, Y, and Z generations with these programs.  From the well-heeled segment and do not have to work anymore 1-percenter population, we find Stan Druckenmiller, Pete Peterson, the Koch brothers, etc. spending portions of their $billions advocating the discontinuance of Social Security to save the country, students, and themselves. Some are taking to college campuses with false data and advising students to protest the rip-off of their futures in a Days of Rage manner. All tend to ignore the real threat to students and their future. The threat is not likely to come from Social Security, Medicare, etc.

What is threatening the future wealth and income of college students is the increasing debt taken on by students seeking the education necessary to have a chance in a global economy where investments are seeking fewer Labor intensive opportunities.  The increased funding necessary to go to college is the result of decreased governmental funding of schools, declining or stagnant household incomes, financial strategies delineating the increased risk of student loans  (CBO, The New America Foundation, Heritage Foundation, etc.), and the increased cost of attending colleges and universities (which as Alan Collinge of Student Loan Justice Org. states cost increases have outstripped CPI and even Healthcare) .

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7 Million Insured versus 2.7 Million Millenials

The argument has been the ACA depends on a number of the young to sign up for healthcare insurance on the PPACA or at least this is what S.E. Cupp believes and suggested on This Week with George Stephanopoulis.

There’s two problems, one is the technological, sort of mechanics of this. Obamacare relies on Millennials, these young invincibles who have never bought health insurance in the past, to suddenly change their behavior and buy something they don’t think they need. And in some cases can’t afford. That mechanical issue remains to be seen and the web site rollout has affected that. But it also reads as an inability to speak their language. Donna, you might call an 800 number and sit on the phone for 20 minutes  .  .  .  Millennials are not used to that. They do not meet in person with Insurance agents  .  .  .  They need a website that works, tat gets them  .  .  . ”

Howard Dean:

I would have to disagree with S.C. This has been written on by many, many people, so I am not just picking on her. It is not true that if young people do not sign up the program is not going to work. That is false and the reason it  .  .  .

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Insurers “Had a Seat at the Table” when Reformers Hammered Out the ACA, but Things Didn’t Work Out Quite As They Expected . . . –

Maggie and I have discussed this topic on several occasions and she tackled it here at: The Health Beat Blog. In the general public, it always surfaces as accusations of a sell out to the insurance companies. It is unfortunate we could not have Medicare for all or single payor; but, the political environment at the time was not conducive to such a venture.

What This Means for Health Insurance Stocks–and Your Premiums

When Congress passed the Affordable Care Act (ACA) in 2010, liberal critics feared that the Obama administration had “cut a deal” with for-profit insurers. Single-payer advocates,were particularly incensed when reformers invited the insurers’ lobbyists to the table to help hammer out the details of the legislation. Some charged that, in return for the industry’s support, the administration agreed to a mandate that would force 30 million uninsured to buy private-sector insurance (or pay a penalty,) thus guaranteeing carriers millions of new customers, and billions in new revenues.

“It pays to be one of the few sellers of a product the government is going to force everyone to buy and provides subsidies to help them do it,” one Obamacare opponent sniped.

Why Health Industry Insiders Were Offered Seats at the Table

At the time, I didn’t believe that the administration was selling out to the health care industry. Reform’s architects offered insurers, drug makers and device-makers seats at the negotiating table, in part because because they hoped to persuade them to help fund reform – and they succeeded.

Ultimately, the industry agreed to shell out over $100 billion in new fees and taxes to help fund the legislation. Those contributions are critical to financing subsidies for low-income and middle-income Americans.

The Obama administration also did not want to watch re-runs of the “Harry & Louise” television ads that helped torpedo “HillaryCare.” Here too, they prevailed. In a new series of 2009 ads, the make-believe TV couple were all smiles: “A little more cooperation, a little less politics, and we can get the job done this time,” Louise declares.

Still, some feared that the administration was giving away the store. “No wonder the cost of reform keeps going up and up and up,” said Bill Moyers. “Could it be” he asked, “that Harry and Louise are happier because, this time, they’re in on the deal?”

But Didn’t the Administration Capitulate On the “Public Option”?

Skeptics on the Left also believed that reformers agreed to quash the “public option”—a government insurance plan that would compete with private sector carriers.

The truth is that Connecticut Senator Joe Lieberman ( sometimes known as “the Senator from Aetna”) almost single-handedly killed “Medicare for Everyone.” When Lieberman said “I’m not going to let this happen,” Congress was on the verge of passing legislation that would let Exchange shoppers choose between a public option and private sector insurance.

Then, in the fall of 2009 ,Lieberman, who was supposedly a Democrat, stood up and brazenly announced that if reformers didn’t drop the public option from the plan, he might join the Republicans in a filibuster that would stop the health care reform bill come to the Senate floor. In other words, he was threatening tote kill reform.(At that moment in time, Lieberman could have drummed up just enough votes from moderate Democrats to help him do this.)

In October of 2009, I wrote:: “This is vintage Lieberman. He’s an opportunist. I knew him many years ago, back in Connecticut, when I was working for a a reform candidate in New Haven who was challenging the Democratic machine. Lieberman wavered on the sidelines, waiting to see who was going to win. He didn’t want to risk picking a losing team.” For Lieberman, politics was not about issues and what might be best for his constituents. It was all about Joe.

Was he doing the administration’s bidding?

Hardly.Lieberman and Obama were never soul-mates.. Indeed, in 2008, Lieberman, nominally a Democrat, appeared at the Republican convention where he endorsed John McCain– and criticized Obama.

In 2009, many observers agreed that Lieberman wanted to stop the public option, not just out of loyalty to the Connecticut insurance industry, but out of spite. He was still furious that Democratic party leaders allowed liberal Ned Lamont to run against him in the state primary. Lieberman wanted to “show” the Obama administration what happens to anyone who dares to cross him.

What Investors Did Not Understand

In 2012, two years after President Obama signed the bill, the myth persisted that the administration had gotten into bed with the insurance industry,. As proof, critics pointed out that from 2010 to 2012 Aetna’s shares gained 33%, market leader UnitedHealth Group soared 65% and Humana climbed 76% Clearly Wall Street knew that in 2014, insurers were going to clean up.

But strangely, in just the past two months–on the eve of the Exchanges’ opening– investor confidence has weakened:

What is going on?

Wall Street is beginning to figure out that under Obamacare, for-profit insurers are not going to make out like bandits.

Investors who drove carriers’ shares to record heights were misled by media reports that the White House had “sold out” to insurers. Meanwhile, they overlooked the many ways that Exchange regulations would whack carriers’ profit margins:

  • Insurers can no longer shun customers suffering from “pre-existing conditions”—and they cannot charge them more.
  • All policies must offer free preventive care.
  • The amount that a carrier can ask patients to pay out of pocket is capped.
  • But insurers cannot cap the amount they pay out in a given year, or over the course of a life time.
  • All Exchange policies must cover the 10 essential benefits—no more “Swiss Cheese” policies filled with holes.
  • Perhaps worst of all, from the industry’s point of view, if carriers don’t spend at least 80 cents of every premium dollar on medical care for individual and small business policyholders (85 cents for large groups), must send rebates to customers, letting them know they were overcharged.

In order to keep their seats at the table, insurers also agreed to pay annual fees to help fund reform. The fees begin at $8 billion in 2014, grow to 14.3 billion in 2018, and then rise to track any growth in premiums.

Finally, Wall Street ignored the provision in the ACA that reins in overpayments to Medicare Advantage insurers. Last week, when UNH announced earnings, it cited this as a reason it is lowering projections for next year’s profits.

Virtually No One Actually Read the Bill

Why didn’t investors recognize the many ways the ACA would squeeze carriers? Like most Americans, they hadn’t taken in the details that make the ACA both strong and complicated, with checks and balances embedded on virtually every page.

Most of the reporters who spread the rumor that the administration had “caved” to insures also hadn’t read the legislation: “Too long, too complicated, too many details,” they groused. It was easier to simply repeat what the grand generalizations that the pundits offered.

To be fair, by 2010, print journalists were trapped on a high-speed information highway where they were trying to compete with bloggers working in “real-time.” Flogged by editors who wanted the story “Now” the just didn’t have the time to hunker down with the Affordable Care Act.

Meanwhile, by then, most publications had eliminated the fact-checkers who would have realized that the text of the legislation was their only reliable “red check.”

I Was Just Plain Lucky

Fortunately, in 2010, I was no longer on staff of a daily newspaper or a weekly magazine. Back then, the non-profit foundation where I worked was run by old-fashioned bosses who gave me great freedom to do in-depth research– and try to make sure that what I wrote was true. As a result, I had the time to read the Affordable Care Act, more than once. That was my job. (When I explained this to Lou Dobbs, at first he was incredulous, then he laughed. But ultimately, I think he was convinced.)

Because I understood how the ACA’s regulations would hem in insurers’ profits, in the Spring of 2010, I wrote that under Obamacare, for-profit insurers would not be big winners. Quite the opposite.

How the Insurance Industry Mis-Calculated

Okay, maybe investors and reporters did not read the bill. But the insurers’ lobbyists did. After all, they were “at the table.” Why, then, did they swallow the new rules and fees that would

“Because there is nothing the health insurance industry wanted more than an individual mandate to force people to buy their product,” explains Consumer Watchdog’s Carmen Balber.

As the Center for Public Integrity (CPI) points out, when the reform law passed in 2010, “the Democratic Party controlled the White House and both houses of Congress. By supporting the law, the industry was able to stay in the game on a very complex piece of legislation.”

Privately, the insurers’ lobbyists believed that Obama would not be re-elected in 2012. Down the road, they assumed that conservatives would help them overturn the parts of the bill that they didn’t like. This is why, even while loudly professing their support for Obamacare insurers were quietly funneling two-thirds of their campaign contributions to Republicans.

As they hoped, by October of 2011, the political environment had changed dramatically. “Democrats no longer hold a filibuster-proof majority in the Senate, the House is controlled by Republicans and the president is in a tight race for re-election,” CPI noted.

Insurers now began publicly criticizing Obamacare. At this point they openly lobbied for new legislation that “would effectively gut” the provision that insurers must spend 85% of premiums on medical care.

But to the industry’s utter chagrin, in November, President Obama won.

Ultimately, carriers would lose on every provision in the Affordable Care Act that they had hoped to see repealed.

State Regulators Develop Spine

Then came the final blow: Last summer, as carriers began proposing rates for the policies they hoped to sell in the Exchanges, state regulators flexed new muscles.

The ACA had set aside $250 million for state insurance departments to support an “enhanced rate review process.” Meanwhile the administration encouraged regulators to get tough– and many clamped down..

In response to the federal law, Colorado, Maryland, New Mexico and New York, all passed legislation giving their regulators more authority to review health insurance rates.

Insurers selling plans in Portland, Oregon ultimately were forced to reduce their rates by nearly 10% on average. Three of the 12 insurance companies in that market had to lower their rates more than 20% compared with what they requested.

In Maryland, Aetna filed a proposal with state insurance regulators to raise its rates 25.4 percent, the highest of any carrier. The rate the state approved July 26 was 29 percent lower than what Aetna sought, while other carriers saw their proposals cut back by as much as 33 percent.

Aetna backed out of Maryland.

In the end,, Aetna also fled California, New Jersey, New York, Georgia –-and Connecticut. “As corporate identity crises go, this is like L.L. Bean quitting Maine or Apple leaving California–for the Moon ”The Wall Street Journal commented.

Aetna is now participating in Exchanges in just 16 states.

Even in states where regulators didn’t reject bids, the Exchanges forced insurers to compete on price. Brand-name carriers who able counting on high premiums to offset the costs of the new regulations soon realized they couldn’t compete with non-profit insurers who don’t have to deliver profits to investors.

For consumers, this is good news. When it comes to the quality of the care that they deliver, and customer satisfaction, non-profit carriers get the highest marks..

In the end, the biggest for-profit insures backed away from the exchanges. WellPoint wound up participating in Exchanges in only eight states. UnitedHealth will be peddling policies in four. .

“It’s almost surreal to see the most dominant company in the industry completely sitting out the launch of the . . . exchanges,” observes Deutsche Bank’s Scott Fidel.

Reportedly UnitedHealth is now eying insurance markets overseas.

So much for having a seat at the table

(Note to readers: A shorter version of this post appeared on Health Insurance.org.

Soon, I plan to write about how drug-makers, device-makers and hospitals will fare under Obamacare, and where there shares are likely to be headed over the long term.

Maggie Mahar at The Health Beat Blog

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Oh Mein Gott! President Obama Lied . . .

Click on the title to view the YouTube link.

If you like your plan and doctors, you can keep them . . . even if it will cost you twice as much as it might under the PPACA . . . huh??? What idiot would pay more for a plan with similar or fewer benefits than under the PPACA with lesser cost? I guess some might on Angry Bear and other places as well.

Florida Blue CEO Patrick Geraghty plays the straight man to Meet the Press David Gregory Sunday morning and defended Obamacare. Florida Blue is dropping 300,000 policy holders because the healthcare plans do not hold up under the scrutiny of PPACA requirements, and, and the policy holders may be able to obtain similar or better coverage at the same or lower insurance rates.

Maybe we should impeach?

HT Crooks and Liars”

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The Young, the Shutdown, Austerity, and Wealth

I can not help but wonder if Friedman takes delight in the predicament of the Young and Baby Boomers as he writes about Druckenmiller excursions on to college campuses . I envision  a bit of Schadenfreude as evidenced by his choice of titles for his latest column. October 15, 2013, Tom Friedman writes in the NYT about the young being screwed by the baby boomer generation and trumpets  for rebellion against the kicking of the can down the road of higher costs and taxes due to Social Security, Medicare, Medicaid, and entitlements. Tom Friedman’s NYT article “Sorry Kids, We Ate It All” masks the real threat to student and their productivity going into the future.

“as our politicians run for the hills the minute someone accuses them of ‘fixing the deficit on the backs of the elderly’ or creating ‘death panels’ to sensibly allocate end-of-life health care. Could this time be different? Short of an economic meltdown, there is only one thing that might produce meaningful change: a mass movement for tax, spending and entitlement reform led by the cohort that is the least organized but will be the most affected if we don’t think long term — today’s young people.” “Sorry Kids, We Ate It All”

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Damon Silvers Smackdown of CNBCs Kelly Evans and Simon Hobbs on Social Security

Damon Silvers appears to have his wheels on correctly answering two CNN talking heads on their version of Social Security.

Kelly Evans: “Of course people want to make sure that our citizens are taken care of. But that’s almost not the point.” (It’s not?) Evans proceeds to assail Silvers and the AFL-CIO for refusing to “negotiate” over seniors’ well-being.”

Simon Hobbs: “Are you as clear on the reality that if you don’t cut entitlement benefits this country may well go bankrupt.”

Damon Silvers answers: “‘That’s frankly not true,’ he says. ‘That’s a lie put forward by billionaires who don’t want to pay higher taxes. The only people who believe what you just said,’ he added, ‘are people who are worried that their very large incomes will be taxed.'”

Damon Silvers promises: “We’re not embarrassed about that whatsoever,” he replies. “If you cut Social Security benefits or Medicare benefits to our seniors, to our most vulnerable people in the country, you are going to get no support on it.”

It is time for people to hold Democrats feet to the fire in a similar manner that Teabaggers held their representatives accountable.

Hat Tip to Crooks and Liars

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Health Wonk Review – Rich and Varied Offerings

Maggie Mahar reviews other blogs on healthcare within the blogosphere

 

Joe Paduda has hosted the newest edition of Health Wonk Review, a bi-weekly roundup of some of the best healthcare posts in the blogosphere. You will find it at Joe’s blog, Managed Care Matters.:

Here are just a few highlights:

  • Over at HealthBusinessBlog David E Williams responds to a relative’s question : Why are Obamacare’s opponents so vehement?The bottom line, says David, is that “some opponents have whipped themselves into a lather over their revulsion to all things Obama and are living in an echo chamber where these views seem rational. It would be better for everyone if they went back to the Birther madness.”

    I agree. This is not about healthcare, and it is not about money. The Congressional Budget Office has told us that the ACA will not add to the deficit.. As David points out many of the ideas in the Affordable Care Act were originally Republican ideas. It is not a radical plan for health care reform; it is a moderate plan. And Obama himself is a moderate. Why then do they hate him with such a passion? I’ll leave it to you to answer that question.

  • In a post titledWe’re all in this together” Louise Norris confides that under the Affordable Care Act, her family’s insurance premiums will rise sharply. (They had a high deductible plan with low premiums. The ACA outlaws such high deductibles because in too many cases, insurers sell them to low-income and lower-middle income families who then cannot afford to use them. So they put off getting healthcare until they are very, very sick.)Meanwhile, Louise and her husband earn too much to qualify for premiums. But they’re not angry. “We support [reform]” she explains, “because something like this isn’t supposed to be all about us. In the case of healthcare reform, our higher premiums will help ensure that our friends and neighbors and fellow citizens have access to affordable health insurance.” Joe writes: “Thanks for the reminder, Louise!” I agree wholeheartedly. (btw Louise is a health insurance broker.)

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IMF Says Tax the Rich to Make Up the Deficits and Fight Income Inequity

Recent article by AFP cites an IMF report suggesting that countries fighting deficit spending should simply “Tax the Rich” in income more.

in its Fiscal Monitor report, subtitled “Taxing Times”, the Fund advanced the idea of taxing the highest-income people and their assets to reinforce the legitimacy of spending cuts and fight against growing income inequalities.

“Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution,” the IMF wrote, noting “steep cuts” in top rates since the early 1980s.

According to IMF estimates, taxing the rich even at the same rates during the 1980s would reap fiscal revenues equal to 0.25 percent of economic output in the developed countries.

“The gain could in some cases, such as that of the United States, be more significant,” around 1.5 percent of gross domestic product, said the IMF report, which also singled out deficient taxation of multinational companies.

In the US alone, legal loopholes deprive the Treasury of roughly $60 billion in receipts, the global lender said.

Hat Tip to Crooks and Liars

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Breast Cancer: Catching Up With Amy Berman, a Woman Who Chose Life Over Longevity

On Breast Cancer and the chose of life over longevity, Maggie Mahar; The Healthbeat  Blog Life Over Longevity

HealthBeat readers may remember the two-part post that I wrote about Amy Berman back in October of 2011.

Part 1 began: “When Amy Berman was diagnosed with Stage IV breast cancer a year ago, she made a courageous choice. Instead of fleeing death, she decided to pursue life. Rejecting chemotherapy, radiation and surgery, she chose palliative care instead.” 1/

Our War on Cancer

Berman knew that her stage IV cancer could not be cured. As a nurse, she also knew what women who undergo aggressive treatment endure—and that, despite that treatment, many will never escape the disease.

As Clifton Leaf points out in his new book The Truth in Small Doses, when people talk about the strides that we have has made in our War On Cancer, they greatly exaggerate our success. When it comes to breast cancer, for example, 30 years after we launched the way, the number of women per 100,000 who die of breast cancer had actually grown from 28.4 per 100,000 in 1970 to 29.2 per 100,000 in 2000.

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