Health Reform’s Hidden Victims
By JOHN FUND
President Barack Obama’s health-care sales pitch depends on his ability to obfuscate who is likely to get hurt by reform. At Wednesday’s news conference, for example, he was asked “specifically what kind of pain and sacrifice” he would ask of patients in order to achieve the cost savings he promises.
He insisted he “won’t reduce Medicare benefits” but instead would “make delivery more efficient.” The most Mr. Obama would concede is that some people will have to “give up paying for things that don’t make you healthier.” That is simply not credible.
While Democrats on Capitol Hill dispute claims that individuals will lose their existing coverage under their reform plans, on other issues many Democrats privately acknowledge some people will indeed get whacked to pay for the new world of government-dominated health care.
Democrats have been brilliant in keeping knowledge about the pain and sacrifice of health reform from the very people who would bear the brunt of them. They’ve done so by convincing health-care industry groups not to run the kind of “Harry and Louise”-style ads that helped sink HillaryCare in 1993.
Sen. Tom Coburn (R., Okla.) says the pressure not to run ads has been “intense, bordering on extortion.” “Groups were told if they did they’d give up their seat at the table,” says former House Speaker Newt Gingrich. “What they weren’t told is that they’d be at the table as lunch.”
Here are some of the groups on the menu if anything like the existing Senate or House health plans become law:
• Young people. If the government mandates that everyone must have health insurance, healthy young people will have to buy policies that don’t reflect the low risk they have of getting sick. The House and Senate bills do let insurers set premiums based on age, but only up to a 2-to-1 ratio, versus a real-world ratio of 5 to 1. This means lower prices for older (and wealthier) folks, but high prices for the young. “They’ll have sticker shock,” says Rep. Paul Ryan, ranking Republican on the Budget Committee.
• Small Businesses. Employers who don’t provide coverage will have to pay a tax up to 8% of their payroll. Yet those who do provide coverage also have to pay the tax—if the law says their coverage is not “adequate.” Amazingly, even if a small business provides adequate insurance but its employees choose coverage in another plan offered through the government, the employer still must pay.
• Health Savings Account (HSA) holders. Eight million Americans, according to the Treasury Department, are covered by plans with low-cost premiums and high deductibles that are designed for large, unexpected medical costs. Money is also set aside in a savings account to cover the deductibles, and whatever isn’t spent in one year can build up tax-free. Nearly a third of new HSA users, according to Treasury figures, previously had no insurance or bought coverage on their own.
These policies will be severely limited. The Senate plan says a policy deemed “acceptable” must have insurance (rather than the individual) pay out at least 76% of the benefits. The House plan is pegged at 70%. That’s not the way these plans are set up to work. Ray Ramthun, who implemented the HSA regulations at the Treasury Department in 2003, says the regulations are crippling. “Companies tell me they could be forced to take products off the market,” he said in an interview.
• Medicare Advantage users. Mr. Obama and Congressional Democrats want to cut back this program—care provided by private companies and subsidized by the government. Medicare Advantage grew by 15% last year; 10.5 million seniors, or 22% of all Medicare patients, are now enrolled.
The program is especially popular with those in badly served urban areas and with those who can’t afford the premiums for Medicare supplemental (MediGap) policies. A total of 54% of Hispanics on Medicare have chosen Medicare Advantage, as have 40% of African-Americans, according to the Centers for Medicare and Medicaid Services at the Department of Health and Human Services.
These plans tend to provide better coordinated and preventive care, and richer prescription drug coverage. But Democrats dislike Medicare Advantage’s private-sector nature, and they have some legitimate beefs with its unevenly generous reimbursement rates. This week Mr. Obama told the Washington Post that the program was “a prime example” of his efforts to cut Medicare spending, because he claims people “aren’t getting good value” from it.
That’s not what others say. In January, Oregon’s Democratic Gov. Ted Kulongoski wrote the Obama administration expressing his concern about its efforts “to scale back Medicare Advantage” because the plans “play an important role in providing affordable health coverage.” He noted that 39% of Oregon’s Medicare patients had chosen Medicare Advantage, and that in “some of our Medicare Advantage plans . . . with proper chronic disease management for such conditions as heart disease, asthma and diabetes, hospitalization admission rates have declined.”
The $156 billion in Medicare Advantage cuts over the next decade proposed by Mr. Obama will force many seniors to go back to traditional Medicare at greater expense. A new study for the Florida Association of Health Plans found that because Medicare Advantage plans have richer benefits and lower deductibles and copayments than traditional Medicare, seniors in that state would face dramatically higher payments if forced to give up their Medicare Advantage plans. Cost increases would range from $2,214 a year in Jacksonville to $3,714 a year in Miami.
There are reasons that Blue Dog Democrats in Congress are leery of their party’s health-care reform plans. Many are in districts or states carried by John McCain, and they worry about the political fallout when these groups realize they will be paying for health-care reform.
They also know that every government entitlement winds up becoming a money pit. In 1965, Sen. Allen Ellender (D., La.) dismissed promises that Medicare would be a modest program to save seniors from bankruptcy. “Let us not be so naďve as to believe that the Medicare program will not be increased from year to year to the point that the government will have to impose more taxes on the little man or else take the necessary money out of the Treasury,” he told colleagues.
Ellender was right, and his warning is even more relevant in our era of skyrocketing deficits and Medicare costs. The only way the House and Senate health plans can pass is if the costs they impose on vulnerable parts of the population continue to be hidden.
Mr. Fund is a WSJ.com columnist.
