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Latest from Cascade Policy Institute


ObamaCare Unraveling―And It Gets Worse in 2014 


By Sally C. Pipes

With ObamaCare’s health insurance exchanges unraveling (especially, the federally run portal for the 36 states that decided not to set up their own exchanges), it’s safe to say that President Obama’s effort to expand coverage isn’t going well.

It’s about to get worse. Once the calendar flips to 2014, ObamaCare intends to expand Medicaid—the joint federal-state health insurance program for low-income Americans—to an additional 8.7 million people. But Medicaid isn’t working for the 62 million Americans it currently covers.

Taxpayers are struggling to shoulder the program’s $400-billion-plus price tag. Beneficiaries, meanwhile, are finding that doctors won’t accept their coverage. Expanding the program will only exacerbate both problems. Fortunately, some states are experimenting with reforms that inject private-sector discipline into Medicaid, thereby improving access to care and reducing costs. Other states should take note and adopt similar reforms.

At present, states largely determine who qualifies for Medicaid. Next year, ObamaCare will instruct them to cover everyone earning less than 138% of the poverty level. To entice states to follow through, the feds will cover the cost of the expansion for new enrollees for the first three years. States will have to share in the cost thereafter. Nevertheless, over half the states are refusing to follow ObamaCare’s dictates and not taking federal funds, exercising the right the U.S. Supreme Court gave them in June 2012 to do so.

Many states are wary of expanding Medicaid because those already in the program struggle to secure care. Between 2011 and 2012, about a third of primary care physicians weren’t accepting new Medicaid patients. A study from 2011 found that two-thirds of children on Medicaid couldn’t get an appointment with a specialist.

Doctors are reluctant to accept Medicaid because the program pays them so little. The entitlement reimburses physicians a little more than half the amount that private insurers do. In some cases, Medicaid’s reimbursements don’t cover the costs doctors incur seeing beneficiaries.

It’s no surprise, then, that the program fails to improve its beneficiaries’ health. A randomized study of Oregon’s Medicaid program published earlier this year in the New England Journal of Medicineconcluded that “Medicaid coverage generated no significant improvements in measured physical health outcomes.”

For a failing program, Medicaid costs a lot. States spend more on Medicaid than anything else in their budgets—and collectively shoulder approximately one-third of the program’s more than $400 billion in annual costs.

ObamaCare’s Medicaid expansion will only add to these costs. A new survey of state Medicaid offices shows that, in 2014, spending on the program will increase by 13% in states that have agreed to broaden eligibility in accordance with the law. It’s no wonder that many state leaders are looking to buck the Medicaid status quo.

In September 2013, Arkansas Gov. Mike Beebe secured a waiver enabling his state to use federal funds set aside for Medicaid to provide private coverage to 218,000 residents. The state’s Department of Health reports that more than 56,000 people have asked to participate in the Arkansas Healthcare Independence Program.

Arkansas officials believe they’ll save $670 million over 10 years, thanks to the waiver. Leaders in Indiana, Ohio, Pennsylvania, Iowa, and Tennessee have expressed interest in creating similar “private options.” Arkansas’s approach empowers individuals to shop for insurance that suits their needs, rather than settling for one-size-fits-all policies.

Privately delivered Medicaid also permits state officials and patients to expand the availability of tax-advantaged health savings accounts (HSAs) to low-income families. These accounts give families the ability to shop around for care—and to save tax-free for the future whatever they don’t spend now. Encouraging such consumer-driven behavior in the health care marketplace will be crucial to reducing overall costs.

North Carolina Gov. Pat McCrory has adopted a different approach, proposing that private managed-care firms administer his state’s Medicaid program. Dubbed “Comprehensive Care Entities,” these companies would be tasked with overseeing patient care in a way that improves health outcomes while keeping costs down. They’d also compete against one another, creating an incentive to improve customer service, economic efficiency, and quality of care.

More state leaders should look for ways to use choice and competition to move past Medicaid’s status quo. If they don’t, they’ll simply perpetuate ObamaCare’s strategy of expanding failed programs and calling it progress.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by Investors Business Daily.


Court Says “No” to Forced Insurance Subsidy 


The federal government’s website has been nearly useless for a month. Now,millions of Americans are beginning to receive letters informing them of the cancellation of their current health insurance policies―proving the inaccuracy of President Obama’s promise that “if you like your health care plan, you can keep your health care plan.”

But news reports on ObamaCare as the calendar turned to November largely missed another important story. A controversial provision of the Patient Protection and Affordable Care Act (ObamaCare) suffered a judicial setback in the D.C. Circuit Court of Appeals on November 1. Writing on behalf of the court, the judge highlighted an important civil libertarian concept which is also at the heart of many principled objections to the health care law.

In Gilardi v. U.S. Department of Health and Human Services, the D.C. Circuit Court granted the plaintiffs, who own a family business, a preliminary injunction against the imposition of the HHS Mandate requiring inclusion of contraception and abortifacient drugs in employee health insurance plans. The Gilardi family, who are Catholics, contend that the HHS Mandate requiring coverage for contraception, sterilization, and abortion-inducing drugs violates their religious beliefs and that requiring their company to cover employees’ contraception, or else pay a $14 million penalty to the IRS, is unduly burdensome. The court sided 2-1 with the Gilardis. In her ruling, Judge Janice Rogers Brown made a distinction between “noninterference” with a person’s choices and the “compelled subsidization” of those choices by another party.

The Obama Administration has consistently held that the HHS Mandate requiring contraceptive coverage is necessary to protect women’s reproductive and abortion rights. The Administration argues that women’s right to have access to contraception trumps the First Amendment rights of those who object to providing these services on religious or moral grounds. The President has refused to accommodate the conscience objections of policyholders, religious and secular employers, and charitable organizations during ObamaCare rulemaking.*

However, Judge Brown wrote on behalf of the court that “it is clear the government has failed to demonstrate how such a right―whether described as noninterference, privacy, or autonomy―can extend to the compelled subsidization of a woman’s procreative practices.”

The distinction between “noninterference” and “compelled subsidization” is important for reasons broader than conscience objections alone, and it should strike a chord with civil libertarians. The expansion of government programs and entitlements (including medical benefits specifically handpicked by the government) pits the newly created “rights” of some to receive additional products and services, against the rights of other people who may be paying for them in whole or in part (as employers, policyholders, or taxpayers).

Charles Krauthammer recently explained the connection between ObamaCare’s health care entitlements and coercion this way:

“The planners knew all along that if you force insurance buyers to overpay for stuff they don’t need, that money can subsidize other people. Obamacare is the largest transfer of wealth in recent American history. But you can’t say that openly lest you lose elections. So you do it by subterfuge: hidden taxes, penalties, mandates, and coverage requirements that yield a surplus of overpayments. So that your president can promise to cover 30 million uninsured without costing the government a dime. Which from the beginning was the biggest falsehood of them all. And yet the free lunch is the essence of modern liberalism. Free mammograms, free preventative care, free contraceptives for Sandra Fluke. Come and get it.”

Once the government has successfully compelled all Americans to purchase health coverage―even against their will―under ObamaCare’s individual mandate in order to make this wealth transfer possible, it is a short slide into compelling Americans to subsidize other people’s benefits to which they morally object.

To protect Americans’ constitutional rights, and rein in the entitlement culture, the courts need to affirm consistently that not interfering with another person’s choices does not mean forcing others to provide, subsidize, or enable those choices. According to the Becket Fund for Religious Liberty,77 cases representing 200 plaintiffs have been filed against the HHS Mandate on First Amendment grounds. Regardless of Americans’ disagreements over the ethics of contraception and abortion, the freedom not to be financially complicit in the choices of others to which one morally objects ought to be a value on which many of us can unite. The First Amendment may end up being one of the last legal defenses citizens have against the unfettered expansion of the entitlement state.


* The HHS Mandate has an extremely narrow conscience exemption which does not apply to for-profit businesses or to organizations which may be religious by any common-sense standard but are not run by a church.


Metro’s War on Single-Family Housing Continues 


For more than a decade, the regional government, Metro, has been quietly herding people into high-density neighborhoods. For those unaware of this policy, the recently announced plans for 80 acres of development near the light rail station at Sunset Transit Center should be a wake-up call: The developers plan to build 2,175 new housing units, and none of them will be single-family homes. In order to meet Metro-imposed density requirements, the project will be dominated by mid-rise apartment complexes, along with commercial and retail buildings.

Metro anticipates that virtually all future development projects will be similar. In draft documents for a planning exercise called “Climate Smart Communities,” Metro notes that the current number of Portland-area households in mixed-use neighborhoods is 26%. By 2035, that number likely will rise to at least 36%. No options for reducing density are being studied.

Metro’s vision of ubiquitous apartment bunkers means that the region will slowly become a childfree zone, because few parents wish to raise their children in vertical housing. Portland parents, and those who hope to become parents, should ask hard questions about why the Metro Council thinks this is a great leap forward for livability.


The ObamaCare Exchanges: Nowhere Near As Competent As the Post Office 


By Sally C. Pipes

What was the worst product launch in history? New Coke, perhaps? How about Colgate’s Dinner Entrees, the frozen food packages with a label mimicking that company’s brand of toothpaste? The Santa Dreidel? They’re all marketing masterpieces compared to the rollout of ObamaCare’s health insurance exchanges—particularly those accessible through, the portal operated by the federal government that “serves” 36 states. Though these online marketplaces officially opened October 1, they’ve thus far proven abject failures in their stated mission of expanding the availability of health insurance.

As of October 19, federal officials claimed that 476,000 people had applied online for health coverage. But there’s a big difference between the number of folks who have begun applications—and the number of people who have actually enrolled. According to insurance industry consultant Robert Laszewski, that enrollment figure could be less than five figures. Through its first week, the federal system, which was supposed to work for millions of Americans, had reportedly enrolled about 5,000 people in the 36 states it covers.
Insurers estimate that just one percent of applications submitted through the federal exchange contain sufficient information to actually enroll a person in a health plan. It’s no wonder that the Obama Administration has been mum about official enrollment figures. Visitors have often found that they can’t even log in. A CNN reporter, for instance, couldn’t do so for a whole week. A New York Times researcher failed to log in over 40 separate attempts covering 12 days.

The disastrous rollout of the federal exchange has caused even champions of ObamaCare to train their fire on the president’s team. Washington Post columnist Ezra Klein has said that the Affordable Care Act’s launch this fall has been not been “troubled” or “glitchy” but a “failure.” Robert Gibbs, President Obama’s former press secretary, wants heads to roll, saying, “I hope they fire some people that were in charge of making sure that this thing was supposed to work.”

The Administration has asked the contractors hired to build the system to perform necessary repairs in hopes of re-launching the exchange November 1. But that’s unrealistic, according to the contractors as well as outside experts. One told the New York Times that as many as five million lines of code may need to be rewritten.

Fourteen states and the District of Columbia have set up their own online exchanges. They’re faring little better than the federal exchange. Take Vermont. In the Green Mountain State, 4,300 residents created state insurance accounts. But only 700 were able to apply for insurance—and just 115 of these folks were able to enroll. In Maryland just 1,121 of the 25,781 people who created accounts were able to finish their online applications and get enrolled. That’s less than 5 percent. And the exchanges in Vermont and Maryland are among the better-working ones.

Nine of the 14 states and Washington, D.C. won’t release enrollment data. Oregon admits that its system isn’t fully operational. Hawaii’s exchange launched October 1 but couldn’t enroll anyone for two weeks. Idaho’s and New Mexico’s systems were so hopeless that the states had to turn operations over to the troubled federal system.

Meanwhile, a wide range of experts say that ObamaCare’s online systems are lacking in cyber-security measures and thus invite identity theft. The site’s designers appear not to have included ordinary protections against automated attempts by rogue hackers to falsely log into the system. So cyber criminals can potentially see a user’s social security number, where he lives, how much he makes, and so forth. According to the founder of the McAfee cyber-security company, the exchanges have “no safeguards” and their lack of protection is “outrageous.”

Then there’s the possibility of fraud. The Department of Health and Human Services will not verify the self-reported incomes of all applicants—just those of a sample. Consequently, the federal government could end up doling out millions in unmerited subsidies.

The cause of this mess is not a lack of money. The federal government has spent $634 million on its system—more than the combined cost to design and build LinkedIn and Spotify. That’s nearly seven times the original projected cost. The Obama Administration should have seen this debacle coming. A principal designer of the system, CGI Federal, was fired by the provincial government of Ontario in Canada in September 2012 for botching the province’s online medical registry. The contractor had missed three years of deadlines.

But CGI may have had an impossible task. According to the New York Times, the firm did not begin writing code for the exchange website until the spring of 2013—because the government had been so slow to issue specifications.

One month in, it’s clear that ObamaCare’s exchanges were not ready for primetime, even though Health and Human Services Secretary Kathleen Sebelius repeatedly assured the American public that the marketplaces would launch—and work—as planned. These online marketplaces must function properly if the law is to expand coverage as it promises—and if Americans are to be able to comply with its requirement that they obtain insurance. With each passing day, both are looking less likely.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by Forbes.





Latest from Cascade Insider





Government-Imposed Health Care Demand Spells “Ration” 


By William B. Conerly, Ph.D.

What’s the problem with ObamaCare? Recent technical problems call that question to mind, but the answer is not what you may be thinking.

ObamaCare’s website is getting help in what administration officials called a “tech surge.” The Department of Health and Human Services announced that it is bringing in “the best and brightest from both inside and outside government to scrub in with the team and help improve” The youngsters in the administration probably don’t know that “the best and the brightest” is the label given to those who ran the Vietnam War. They may not even know how that war turned out. (I feel old just mentioning such a long past event.)

The tech surge flies in the face of one of the classic books on computer programming, The Mythical-Man Month by Fred Brooks. In what is now known as Brooks’ Law, the author wrote: “Adding manpower to a late software project makes it later.” Like all simplifications, this one may be overdone, but it has two key truths behind it. First, it takes time for the new people to come up to speed on the project, during which time the experienced programmers are helping the newbies instead of writing code. Second, everyone has to spend more time on communications because the team is so much larger.

Critics of ObamaCare are chortling over the fiasco, but everyone should remember that big technical projects frequently run amok. That includes public sector projects as well as private sector projects. It’s unfortunate but true. At some point the bugs will be crushed. The project is technically feasible, and even ham-fisted programmers will eventually get the code right. This is not the underlying problem, though it’s certainly a stumbling block.

ObamaCare suffers from several defects, but the one that seems most likely to bite us is the absence of supply side change. The focus of the program is demand: getting more people enrolled so that they can get care. The new law will certainly enroll more people in the program, but it does not provide more doctors or nurses or medical technicians. Stimulating demand makes sense when there are unemployed resources, but how many health care professionals are sitting around idly waiting for patients? Certainly there are efficiencies possible. We may be able to reduce wasteful demand, such as surgery that could have been prevented by earlier care in a clinic. It’s unlikely, though, that we’ll get efficiency improvements fast enough to offset the increase in demand.

When demand goes up without a supply response, price normally rises. However, fee restrictions in the Affordable Care Act are likely to prevent that. With demand greater than supply, care will be rationed. It may not be officially rationed, but appointments will become harder to get and waiting times will lengthen. Some people will get better on their own without treatment. A few will die. This is how demand will be limited to the available supply.

ObamaCare tries to impose top-down direction on a complex system. The economy normally provides bottom-up direction, through the individual choices of consumers and suppliers. We have learned many times over which approach works better. We’ll learn the lesson once more when the technical glitches are fixed.

William B. Conerly, Ph.D. is the principal of Conerly Consulting, an economic and financial consulting firm, and chairman of the board of Cascade Policy Institute. A version of this article originally appeared on