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March 27 2013

Sebelius Admits Health Costs Will Rise

Hadley Heath

In an unusual moment of honesty, Department of Health and Human Services Secretary Kathleen Sebelius admitted that the "Affordable Care Act" will cause premiums to go up.  As Charlotte highlighted, this makes it clear that there's nothing "affordable" about this badly named health legislation.

Importantly, Sebelius and many other ObamaCare supporters pointed to high health costs as the justification for government intervention.  She promised lower costs in this January 2012 opinion article in the Washington Post:

"One of the major reasons we passed the Affordable Care Act was to bring down costs, something the health-care law does in three ways: by increasing insurance-market competition, assisting those who can’t afford coverage, and tackling the underlying cost of medical care."

Let's examine those three ways in light of what we know now, three years after the law was passed.

Increasing Market Competition?

I can't imagine what else the Secretary might be referring to besides the state-based "exchanges."  The Department of Health and Human Services has recently switched the language used to name these governmental bodies.  Instead of "exchanges," they will now be called "marketplaces" (another misnomer).  What these exchanges really do is monitor the employment and insurance status of citizens to enforce mandates on employers and individuals who might be out of line.  You call that a market?  It's more like Big Brother.  

On the other hand, ObamaCare includes many mandates to insurance companies: which customers to take, which products to offer, and how to price these products.  Standardizing these variables across the industry will not make for a more robust, competitive insurance market. In fact it will discourage competition and choice.

Assisting Those Who Can't Afford Coverage?

The exchanges are also the main distribution mechanism for the law's subsidies and tax credits.  While these subsidies may help some Americans, they do not actually reduce costs.  They simply move the cost onto other taxpayers who are facing high health insurance costs themselves.  This week Sebelius again touted the law's "community rating" provision, saying women and older customers will see their rates drop while men and younger customers will see their rates increase.  Industry research shows that prohibiting insurers from using categorical variables like age and gender to price premiums results in inefficiencies that can drive higher premiums overall as companies must charge more to cover for the uncertain assessment of risk... So women and seniors, I would not hold my breath for a lower premium.

Tackling the Underlying Cost of Medical Care?

Sebelius points to Medicare and Medicaid as areas ripe for reform.  I would agree.  But the health law does little to address their root problems.  The solution, according to ObamaCare, is to expand Medicaid (a strained program that already shows poor health outcomes) to millions more recipients.  This will break state budgets as well as pull many lower-middle-class Americans off of private insurance onto government insurance that one third of doctors already refuse to accept.  And Medicare?  Yes. Here ObamaCare will cut costs.  But much like Sequestration, the reductions (in future spending) will be decided according to a formula and a board of bureaucrats - not Congress or representatives accountable to the voting public.  Reducing spending isn't the problem... It's how the reductions are made. 

A real "tackling" of the underlying costs in care would address health over-regulation, open up the insurance market to a 50-state market, equalize the tax treatment of the employer and individual markets, address tort laws, free charity care, reform Medicaid and Medicare to allow for more private options, privatize student loans for medical students (and all students!), encourage more transparency in provider pricing, and allow insurance companies to innovate new strategies to make payment for unexpected health costs more efficient.

Sebelius likes to talk about marketplaces and competition, but the proof in the pudding is that ObamaCare doesn't do anything to reduce costs.  I'm glad she is finally able to at least admit that "there may be a higher cost." 

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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