Americans consistently have said controlling health costs is their number one priority for reform. But Washington didn’t listen, and President Obama and congressional Democrats muscled through a 2,700-page bill that will actually cause health costs to soar even higher.
So now – with the ink barely dry on ObamaCare – some in Congress realize they need to focus on health costs. But their plans involve even more heavy-handed government regulation which is unlikely to succeed and may cause even more wreckage in our health sector.
I testified on Tuesday before a Senate committee considering legislation that would give the federal government authority to review health insurance premiums and impose penalties on companies if their premiums are deemed “irresponsible.” Many states have authority over health insurance rates today, yet rising prices remain a big concern for their residents.
That’s because, as Sen. Tom Coburn explained, Congress is focused on the symptoms rather than the causes of rising health premiums. Defensive medicine that leads to overuse of tests and procedures and a third-party-payment system that keeps patients in the dark about the costs of their medical care are just a few of the many contributing factors.
The National Association of Insurance Commissioners points out that giving the federal government the authority to review rates, “can do nothing to reduce claims expenses, which are the biggest component of the premium dollar.”
But rather than attack the real cost drivers, ObamaCare will exacerbate them with a host of provisions sure to increase health insurance premiums, including $569 billion in new taxes on individuals, small businesses, drugs, medical devices, and insurance companies.
So in order to hide the harmful impact of ObamaCare’s cost increases, Sen. Dianne Feinstein (D-CA) has introduced legislation that would allow the federal government to essentially cap health insurance premiums in dozens of states. Capping premiums without addressing the forces that are driving up costs would be like putting a lid on a pressure cooker and turning up the heat. Something would have to blow.
With ObamaCare, the non-partisan Congressional Budget Office says health insurance premiums will continue their steady upward climb and that they will accelerate faster in the individual market as a result of the new health reform law. It’s estimated that families purchasing insurance in this market would see a premium increase of an additional $2,100 in the year 2016. That means those families would be paying $15,200 in 2016 for health insurance as a result of passage of health reform, and $13,100 otherwise.
Why? Because the bill is littered with new taxes and mandates, including the $20 billion tax on medical devices, $60 billion in taxes on health plans, $27 billion in taxes on prescription drug companies, and more expensive federally-mandated benefits packages. These costs will be borne by – you guessed it – consumers in the form of higher health insurance premiums.
Massachusetts has experience with a health overhaul plan similar to ObamaCare, and high health costs continue to be a serious problem there. Onerous state regulations and expensive mandated benefits have made its health insurance premiums the highest in the nation.
And the state’s requirements that all insurers sell coverage, even if people wait until they are sick to buy a policy, has led thousands of people in the Bay State to game the system by purchasing insurance for short periods of time when they expect to incur large medical claims.
The Boston Globe reported that, “The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month.” These rising costs have led insurers to petition the state to allow them to increase their premiums to cover the claims.
A political uproar and court battles have ensued as the state tries to strictly limit their increases in health insurance premiums. But the major health insurers in Massachusetts say if they can’t raise their rates, they collectively could lose more than $100 million – “losses that will deplete their individual reserves, weaken their financial stability, and in some instances threaten their near-term solvency.”
As health care costs continue to soar – spurred on by ObamaCare’s taxes, mandates, and regulations – Massachusetts could be a harbinger of things to come at the federal level. Higher and higher premiums, court battles between government and insurers, companies becoming insolvent, and people having fewer and fewer choices of affordable private coverage.
Not exactly what the president promised with his health overhaul plan.
Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on patient-centered solutions to health reform. She can be reached at P.O. Box 320010, Alexandria, VA, or at turner@galen.org.