27 Ways Obamacare Increases Your Health Insurance Premium

May 27, 2013 by Linda Gorman · Comments Off
Filed under: Issue Backgrounder, Publications 

IB-C-2013 (May 2013)
Author: Linda Gorman

PDF of full Issue Backgrounder

Executive Summary:
Supporters of the Patient Protection and Affordable Care Act claim that it will reduce Colorado health care costs and health insurance premiums. Nonsense. Even economist Jonathan Gruber, an ObamaCare architect, estimated that it would increase premiums in Colorado’s individual market by 19 percent. Don’t be fooled when the businesses, bureaucrats, and non-profits who benefit from increasing your premiums choose to blame your higher costs on everything but the ObamaCare law.

Colorado Medicaid expansion would make 86,000 college students eligible

January 24, 2013 by jlongo · Comments Off
Filed under: Op-Eds, Publications 

by Linda Gorman

Gov. John Hickenlooper wants yet another expansion of Colorado Medicaid. This one will cover the more than 86,000 college students in Colorado that the Census Bureau estimates have incomes below the federal poverty level. It also will cover the unknown number of otherwise healthy single students above the poverty level who have incomes up to $15,414 a year. (Income figures do not include additional subsidies received for things like housing, child care, energy assistance and food.)

As the Hickenlooper Administration claims the expansion would enroll an additional 160,000 people, it seems that college students will be its primary beneficiaries.

Many Colorado colleges already require students to buy health coverage. But Medicaid enrollment is free and it covers everything from unnecessary emergency room visits and major surgery to over-the-counter drugs with $5 copays and no deductible. Students and their parents know a good deal when they see one.

Under the Hickenlooper plan, rational observers expect droves of students to drop their private coverage in favor of Medicaid. Since Medicaid enrollment is also open to anyone who can produce a driver’s license, photo ID or other proof of residence in Colorado, the expansion offers equal opportunity for the state’s taxpayers to pay for the health care of both in-state and out-of-state students.

The plan will cost taxpayers a bundle. Medicaid medical services premiums for the program’s least expensive adults are $3,000 a year per enrollee, according to the legislature’s Joint Budget Committee. Capitated payments (one flat fee for everyone) to regional organizations that provide mental health care will add another $278 for each adult without dependent children.

Groups that have managed care contracts with the state Medicaid program receive these payments for each person enrolled, whether services are used or not. This arrangement creates a financial incentive to encourage the state to enroll people in Medicaid regardless of need.

This may explain why people hear so little about the Colorado Indigent Care Program, a state program that already underwrites needed medical care for people who cannot afford it and are ineligible for Medicaid. It also may explain why the state continues to try to herd Medicaid recipients into managed care, even though it has admitted that managed care increases Medicaid expenditures. The Robert Wood Johnson Foundation also has concluded that Medicaid managed care does not save money.

In addition to paying for the new costs arising from the Medicaid caseload increase, Colorado taxpayers will have to make up for the tax revenues lost when people stop making payments to private insurers and start receiving benefits from the government.

Assuming that the federal government picks up the entire cost of medical service premiums for the first few years of the expansion, the Hickenlooper Administration estimates that state taxpayers will be on the hook for an additional $1.4 billion over the next 10 years. That assumption may understate the cost, given the state of the federal budget and the fact the Obama Administration has already proposed reducing federal funds.

Since increasing Colorado taxes is likely to trigger an exodus to other states with lower taxes, spending is a zero sum game. An additional $1.4 billion for the healthy college students means $1.4 billion less for expenditures on schools, roads, law enforcement and other core functions of state government.

This article originally appeared in Health Policy Solutions, January 24, 2013.

Medicaid expansion has hidden costs

January 6, 2013 by jlongo · Comments Off
Filed under: Op-Eds, Publications 

by Linda Gorman

The federal Patient Protection and Affordable Care Act (Obamacare) has radically restructured federal subsidy programs for medical care. For the first time in decades, Colorado can begin bringing state expenditures in line with tax revenues by using federal money to reverse the excessive growth in its Medicaid and child health insurance programs.

Shrinking Medicaid and CHP could make a lot of people better off. Obamacare makes subsidized commercial health coverage available for a large fraction of the healthy adults and children who make up the bulk of the state’s Medicaid and CHP caseloads. The catch is that people have to be ineligible for Medicaid and CHP in order to be eligible for the federally subsidized coverage.

Compared to Medicaid, commercial policies have historically reimbursed at significantly higher rates, making it easier to find a physician and to arrange for timely care. Low reimbursements generally translate into less care. A number of recent papers in medical literature report that Medicaid coverage is an independent predictor for increased mortality, extended hospital stays and higher costs. In some cases, Medicaid patients even have worse outcomes than uninsured patients.

Obamacare annual premiums for commercial coverage for people at 100 percent of the federal poverty level ($11,170 in money income in 2012) are limited to $217 for a single person. They increase by about $75 for each additional person. Federal poverty level income refers only to cash income.

It does not take into account subsidies from programs like those that provide means-tested assistance for food, housing, transportation, child care or heat. According to the 2010 Consumer Expenditure Survey, people with under $10,000 a year in pretax income spent about $1,000 on entertainment, $1,000 on food away from home, and more than $2,000 on private vehicle transportation.

Because Medicaid puts severe limits on the price that can be charged for care, Medicaid patients often have to wait. This increases the time price of care. Unpredictable waiting times are especially burdensome for hourly workers who aren’t getting paid while they wait.

Many low-income people would rather pay nominally higher prices for care than miss work, but Medicaid rules prevent this. When North Carolina Medicaid reduced the allowable one-stop supply of Medicaid prescription medications from 100 days to 34 days and raised the co-pay from $1 to $3, raising the time price led to a much greater reduction in the needed drugs obtained by chronically ill patients than increasing the price.

Even if Obamacare didn’t offer the opportunity to make many Medicaid clients better off by switching them to private insurance plans, Medicaid expansion makes little fiscal sense. Even though the federal government promises to cover the medical costs of Medicaid expansion through 2019, it does not cover the state share of additional administrative costs, which average an estimated $2.48 for each additional $100 of state Medicaid spending.

Plus, the Obama administration’s FY 2013 budget has already proposed making states pay more.

Even without expanding the program, Colorado Medicaid costs are set by an unknown amount.

Thanks to Obamacare’s individual mandate, some fraction of the one-third of the uninsured who are already Medicaid eligible but simply have not signed up because they don’t need health care will now sign up, swelling caseloads and costs. People who are eligible for Medicaid but who currently have private coverage will add to the rolls as employers respond to Obamacare by cutting hours and dropping employer coverage.

The state budget will also face increased demands for provider subsidies. Medicaid pays most providers less than cost, so increasing Medicaid caseloads can increase uncompensated care costs.

Finally, Obamacare makes deep cuts in Medicare reimbursements, a loss that will lead to calls for more taxpayer subsidies for Colorado’s government-owned hospitals.

This article originally appeared in the Pueblo Chieftan, January 6, 2013.

The Real Cost of ObamaCare

August 22, 2012 by Linda Gorman · 2 Comments
Filed under: Issue Backgrounder, Publications 

IB-C-2012 (August 2012)
Author: Linda Gorman

PDF of full Issue Backgrounder

Executive Summary:
Having someone else pay for your medical care is the most expensive way to pay for it because it adds insurer overhead costs to the cost of the actual service. Colorado’s private sector began switching to consumer directed health policies (CDHPs) when they became more widely available in 2003. CDHPs encourage cash pay- ment for inexpensive and predictable care. Health savings accounts (HSA) qualified plans save excess funds in tax-free accounts that accumulate until retirement.

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