March 2, 2015

King v. Burwell: A Quick Preview

Last month, constitutional law expert Josh Hawley visited with Show-Me Institute supporters to discuss a wide array of health care policy issues. While he was with us, he offered some great insights into this Wednesday’s King v. Burwell oral arguments. If you can set aside about 45 minutes, watch the video of the whole event; you’ll be glad you did.

If you’re short on time, however, the case deals with what happens when a state declines to set up an insurance exchange under Obamacare, forcing the federal government to do so instead. Here’s the big question in King: Does the Affordable Care Act (ACA) block federal subsidies from going to insurance plans purchased in government exchanges that were not, as the law says, “established by the State”? If the answer is yes, it could simultaneously take subsidies away from millions of insurance plans and protect millions of taxpayers from the law’s mandates. It’d be a body blow to the law.

Why would Congress condition subsidies on states building their own exchanges? The answer is reasonably straightforward: Congress didn’t want the burden of creating exchanges to be on the federal government—that is, Healthcare.gov—and thought offering the subsidy as a carrot would get states to do the heavy lifting. Congress never thought the federal government would be running the exchanges for basically two-thirds of the country, as it’s doing today. Healthcare.gov’s rollout disaster was part and parcel of this miscalculation by Congress.

Supporters of Obamacare now contend the “established by the State” language was a drafting error, but there is lots of evidence that runs against that claim. The state exchange “carrot” strategy had appeared in prior, contemporaneous bills that were combined to form the ACA—suggesting that at least some legislators were well aware of the system they were creating. In fact, in the years that followed, Obamacare architect Jonathan Gruber famously repeated what the consequences of states not building their own exchanges would be:

With most states declining to create their own exchanges, the Internal Revenue Service then wrote rules that would extend the federal subsidies not only to exchanges “established by the State,” but also to federal exchanges. The problem is that since the federal subsidies are the basis for penalties that, thanks to the IRS, would suddenly apply to tens of millions of Americans in states that didn’t create exchanges, those subsidies could be an illegal tax. Thus, we have the King litigation.

After Wednesday’s oral arguments, we’ll likely see a decision handed down on the case sometime this summer. How will it turn out? We’ll keep you posted.

February 26, 2015

Constitutional Law Expert Joshua Hawley Weighs in on Obamacare at Policy Forum

Joshua Hawley, a professor of law at the University of Missouri, was gracious enough to join the Show-Me Institute in Columbia last month to talk about a wide array of health care and Obamacare issues, including King v. Burwell, a case before the Supreme Court the week of March 2.

Much could be said about Hawley. A graduate of Stanford University and Yale Law, Hawley went on to clerk for Chief Justice John Roberts. He was one of the attorneys for Hobby Lobby in last year’s Burwell v. Hobby Lobby case, and he has been a highly sought-after speaker on a wide variety of legal and historical matters for a number of years. His book, Theodore Roosevelt: Preacher of Righteousness (2008), is available on Amazon. Hawley also happens to be a graduate of my alma mater, Rockhurst High School, in Kansas City.

His talk is definitely worth your time. A short version is embedded below, and the complete talk can be found here.

February 9, 2015

Tennessee, Wyoming Reject Obamacare’s Medicaid Expansion (Again)

Medicaid is back in the news as pushes to implement Obamacare’s expansion in Tennessee and Wyoming came to a head last week—with both states rejecting the expansion.

First, Tennessee:

Tennessee was widely seen as the next Republican state that could expand Medicaid under Obamacare, with Haslam negotiating with federal officials for months on an approach that included conservative policy elements. But Insure Tennessee always faced significant obstacles in getting legislative approval, and it was killed even though hospitals had agreed to cover the state’s share of the costs.

The 7-4 vote against the plan by the state Senate Health and Welfare Committee came after impassioned testimony on both sides of the debate. The plan has little chance of being revived during the regular legislative session.

The “hospitals will cover the cost” proposal is becoming a common sleight of hand in the realm of conservative Obamacare apologetics. Those costs would be passed on to customers, either directly through their bills or indirectly through their taxes. It’s not free money.

And then there’s Wyoming:

Several senators said Friday they don’t trust federal promises to keep paying. Some said they don’t want to contribute to the national debt by accepting more federal dollars in any case.

“Make no doubt about it, this saddles more debt upon your children and your grandchildren,” said Sen. Larry Hicks, R-Baggs, who voted against the bill.

[Sen. Michael] Von Flatern said that Friday’s vote could make it harder to get expansion in the future because the bill to the state will be higher.

Mr. Hicks is exactly right that the expansion is being funded out of debt, and Mr. Von Flatern is similarly right that the direct costs of the expansion are on the way and will make later expansion fights tougher for Obamacare proponents. Right now supporters are relying on the “no money down” provisions of Medicaid expansion; once that’s gone, then the question of how a state actually pays for the program comes into sharper focus.

Missouri should continue rejecting bad policy like the expansion. It certainly isn’t alone in doing so.

January 23, 2015

Thoughts on Gov. Nixon’s State of the State Address

The president’s State of the Union address is always filled with lots of pomp and formality. It’s the closest thing we have to a monarch addressing Parliament. On Wednesday evening, we had the mini version of that same spectacle when Gov. Nixon gave his State of the State address at the Missouri Capitol. In it, he outlined his priorities for the upcoming year. You can watch the speech here or read a transcript here.

There were some appealing aspects to his speech, like his thoughts on how to address our transportation infrastructure. Gov. Nixon stated:

One option is a toll road on Interstate 70. The Highway Commission’s recent report showed that this approach could make I-70 better and safer … and free up tens of millions of dollars for other roads around the state. Trucks and out-of-state vehicles that do the most damage to I-70 would have to pay their fair share. That deserves serious consideration. Here’s another option: the gas tax. Missouri’s gas tax hasn’t gone up a penny in nearly 20 years. It’s the fifth-lowest in the nation.  With gas prices as low as they are now, this is worth a very close look.

Kudos to Gov. Nixon for at least considering user fees as a way to finance transportation in the state. My colleague Joe Miller has written extensively about the benefits of tolling and how gas taxes are a better way to fund roads than the sales tax. Tolling is a fair way of financing improvements to Interstate 70 because it can be done in such a way as to get much, or even most, of its revenues from commercial vehicles, which cause the most damage to our roads and highways.

However, not everything in Gov. Nixon’s address was good policy. The governor still insists on expanding Medicaid.

Now I’d like to talk about another challenge … but an even greater opportunity: Strengthening and reforming Medicaid. Let me remind you, a lot has changed since last year. Since I stood here last year, Missouri taxpayers have sent $2 billion to Washington. Those dollars are being used right now, in other states, to reform and improve their Medicaid systems. That’s 2 billion Missouri taxpayer dollars.  And this year, there’s another $2 billion at stake. If we keep standing still, that’s $4 billion Missourians will have lost to other states by the end of this year. Across the country, people are moving past the politics.

To help you decipher politico speak, when the governor talks about reforming Medicaid, he really means expanding Medicaid. Show-Me Institute Senior Analyst Patrick Ishmael has done a tremendous job explaining why expanding Medicaid is a bad idea. Not only would it strain future Missouri budgets by adding billions in new spending (Medicaid already takes up 22 percent of Missouri General Revenue expenditures, up from 17.5 percent just 10 years ago), but the program doesn’t work. The poor should get decent health care; Medicaid fails on that front.

Gov. Nixon raises the point about Missouri taxpayers sending money to Washington, and by failing to expand Medicaid, other states get to spend our money. This is also false. Patrick lays out why this claim is wrong in his most recent Forbes piece. First, Missouri is a net recipient of federal tax dollars. This means that Missouri gets more in federal aid than it sends out in tax dollars. Also, the money for Medicaid expansion is not like some large pie that gets distributed to the states that participate in the expansion. Each state has its own allotment of money to help pay for expansion. If the state doesn’t expand Medicaid, the money isn’t reallocated. That’s why you are seeing the overall cost of Medicaid dropping. Fewer states are signing up for expansion, and thus the actual cost growth of Medicaid is falling below what was projected. If the money was being redistributed, actual cost growth would be closer to projections.

Gov. Nixon’s speech was a mixed bag. The legislature should feel free to ignore the bad ideas. I hope, though, that the good parts mentioned above do more than just receive serious attention. There are serious issues in this state that need addressing, and we need pro-market solutions.

January 7, 2015

What Do Home Care Union Executives Really Want: A Wage Increase for Their Workers or a Union Contract?

residentialworker1On Christmas week, while many Missourians were exchanging presents or grabbing Chinese food, members of the Missouri Home Care Union were hard at work lobbying the governor. Ostensibly seeking higher pay for the home care attendants the union represents, the union placed carolers outside the governor’s mansion singing Christmas songs with lyrics altered to convey their message. Irving Berlin’s “White Christmas” became “I’m Dreaming of a Fair Governor,” and St. Louis Public Radio captured union members singing several bars of “home care workers are coming to town.”

The odd thing about this press junket is that the governor wants to give home care workers the pay increase the union is asking for, but the union objects to the method the governor proposes to give home care workers this pay bump. From the governor’s Office of Administration:

“The governor supports the wage range provision of the labor agreement between the Missouri Quality Home Care Council and the Missouri Home Care Union that provides a pay raise for home health care workers. To ensure the wage range provision of the agreement has the full force and effect of the law, the administration will be implementing the wage range recommendation through an administrative rule.”

Jeff Mazur, executive director of the union, responded by calling the governor’s proposal to enact the pay raise “unnecessary and unwise.” It appears union executives like Mazur are really after a governor’s order implementing a collective bargaining agreement. We’ve seen this before in other states.

Home health care unions, like the Missouri Home Care Union, formed to represent home care attendants who received Medicaid funding for acting as a personal assistant of a person in need of care. In many states, such as Illinois and Michigan, once home care unions were formed, they negotiated a union contract that forced all home care workers to pay a portion of their check to the union, whether or not the worker wanted union representation.

Imagine you’re enrolled in Missouri’s home care program and you’re getting a check from the government to help offset the cost of taking care of a disabled relative. Now imagine that the state bound you to a union contract against your will, and a portion of your check is going to union executives and their pet political causes.

Governor Nixon is right to be cautious of the union’s demands. If Missouri is better off increasing payments to people enrolled in the home care program, it can do so without entering a collective bargaining agreement. Such collective bargaining agreements can have bad consequences for the home care assistants subject to them, who often cannot afford to have their benefits tapped into by a union that they do not support.

December 11, 2014

Obamacare’s Medicaid Expansion as “Job Creator”? Not So Fast

One of the Left’s favorite talking points for why states should expand Medicaid is that doing so will mean more jobs at Missouri’s hospitals. That argument is attractive, at least superficially; if the government spends more money on health care, the assumption could be that more people will be hired by hospitals. In other words, it’s “the stimulus” debate all over again: If you spend it, there will be jobs.

But is it true that Medicaid expansion actually leads to hospital job growth? So far, it sure doesn’t look like it (emphasis added).

U.S. healthcare employment began to accelerate after the first three months of the year and the uptick caught the attention of economists with the Altarum Institute, who conducted the analysis to determine whether hiring grew faster in Medicaid expansion states. It did not, they found. In fact, growth was faster in states that did not expand Medicaid, said Ani Turner, deputy director of Altarum’s Center for Sustainable Health Spending.

Proponents of expansion have touted the economic benefits of increased Medicaid enrollment, as they make their case to reluctant state governors and lawmakers. Indeed, hospitals in states that expanded eligibility are seeing less bad debt and fewer uninsured patients. But it might become harder to argue that Medicaid expansion is a jobs engine if the numbers don’t bear it out.

Healthcare averaged 14,271 new jobs a month from April to October in states that did not expand Medicaid, up 117% from the preceding 12 months. The healthcare employment increase in Medicaid expansion states over 2013, meanwhile, was 92%.

You can find one of Altarum’s briefings on the subject here. Missouri is fortunate that by rejecting the expansion it can carefully watch the experiences of other states who did expand their Medicaid programs—decisions oftentimes based on the specious promises of special interests and ambitious politicians. As the numbers come in and oft-cited expansion states like Arkansas consider reversing course, the Show-Me State’s hesitance to jump into the Medicaid expansion pool looks all the more appropriate.

December 9, 2014

Gruber on Arkansas Private Option: “Mathematically Impossible” to Be Budget Neutral

November was a bad month for Obamacare. Over just a few weeks, voters not only handed a series of punishing defeats to Obamacare at the ballot box, but the Supreme Court unexpectedly granted a hearing to the lawsuit King v. Burwell, which poses a serious threat to the future of the law.

Those setbacks haven’t quite kept Missouri’s Obamacare supporters from pushing ahead with their Medicaid expansion plans. In fact, some Missouri politicians have tried to use Arkansas’ Medicaid “transformation” as a reason to expand Medicaid in Missouri. But recent video revelations confirm that the state’s decision not to follow Arkansas’ lead was the right call.

In April 2013, Arkansas passed a Medicaid expansion more commonly known as the “Private Option.” The expansion uses federal Medicaid dollars to pay for Obamacare exchange health care plans for newly eligible Medicaid beneficiaries. Supporters claimed that the plan would save Arkansas money, but as it turns out, that was likely never going to be the case. Indeed, Obamacare architect Jonathan Gruber, who hailed his law’s lack of transparency, said as much . . . in October 2013, in a video only now coming to light:

The video is only the latest setback for Arkansas Obamacare supporters. After losing his State Senate primary, Arkansas’ chief Obamacare Medicaid architect won’t be returning next year to the legislature, largely due to his support of the expansion. And after last month’s general election, Arkansas might actually roll back its Obamacare expansion.

Missourians are being sold a bill of goods on Obamacare’s Medicaid expansion, just like Arkansas was before them. We deserve better than tired, old political strategies, and rather than look at Arkansas as an example to be followed, Missouri should look at it as a cautionary tale to be avoided.

October 29, 2014

Indebting Missouri’s Children and Expanding Government? That’s Just Wimpy

Although the Popeye the Sailor cartoons were made long before I was born, I was a connoisseur of the VHS copies I had as a kid. Along with Popeye, the shows typically featured his nemesis, Bluto, and his love interest, Olive Oyl, but perhaps the most memorable character from the series outside of Popeye himself was his companion J. Wellington Wimpy. Unfortunately, he’s memorable for all the wrong reasons.

Wimpy is soft-spoken, very intelligent, and well educated, but also cowardly, very lazy, overly parsimonious and utterly gluttonous. He is also something of a scam artist and, especially in the newspaper strip, can be notoriously underhanded at times.

In the animated cartoons, Wimpy comes off as someone who not only is unreliable in his words but, ultimately, self-aggrandizing in his behavior. His signature phrase, “I’ll gladly pay you Tuesday for a hamburger today,” hints that Wimpy will never pay you at all.

Even as a kid, Wimpy’s character was troubling because, like most children, I was well-acquainted with the idea of “fairness.” Wimpy was always willing to make others worse off for his own immediate benefit, and because of Wimpy’s generalized character issues, it was just hard to like him.

Wimpy would make you worse off . . . and he’d do it with a smile. When I think about how government and its politicians operate, that is, unfortunately, one of the images that comes to mind.

Perhaps this Wimpy image is most appropriate when it comes to the Obamacare debate in Missouri. On the one hand are the true believers who, despite evidence to the contrary, believe that government health care is the best health care. On the other hand are the Wimpys of the debate, whose support of Obamacare’s Medicaid expansion has more to do with their near-term interests than the long-term consequences of their actions. Those consequences include billions of dollars in new spending and debt saddled on future generations to fund a failing and flailing health care program, meant to explicitly benefit the well-connected and highly profitable hospital industry. So before we pick up the Obamacare expansion fight in 2015, let’s be clear: that’s just wrong.

I have no problem disagreeing with and debating folks who have a worldview that expanded government is better policy than small government. We can win that debate on the facts. But I have a serious problem with those out there who have concluded that expanded government is better politics—the contingent that’s calculated that they won’t be paying for their hamburger when the bill comes due.

That’s just Wimpy. Missouri needs genuine Medicaid reform. Fix Medicaid. Don’t expand it.

October 22, 2014

Missouri’s Medicaid Program Striking Out Intended Beneficiaries

In baseball, getting a hit three out of 10 at-bats could make you an All-Star, and maybe even a Hall of Famer if you do it consistently enough. But while batting .300 is pretty good for the National Pastime, in most other contexts succeeding only three out of 10 times won’t get you accolades.

That point was hit out of the ballpark over the past few days.

Last week mid-Missouri’s ABC 17 reported on the story of a pregnant woman who had been trying to sign up for Medicaid benefits, only to have her paperwork lost and her calls unreturned by the Department of Social Services (DSS). When the issue came up at a House hearing, the DSS admitted it had to do better, but it also admitted something astonishing (emphasis mine).

The Department says thirty percent of its callers are having their needs met, which Campbell acknowledges is too low. She says staff are being reassigned to taking calls and other changes are being made to improve that percentage, but [State Rep. Sue] Allen says the situation remains frustrating.

“In a company, in a private business, people would be gone,” observes Allen.

Missouri’s Medicaid program is deeply broken, and yet some of our politicians think now is the time to expand it with Obamacare. It isn’t. In baseball and business, step one would be to fix what is wrong and then build upon successes, not to double-down on a bad system and bad players. That’s what Missouri should be doing: fixing Medicaid, not making an already bad situation worse—especially for the patients the program was supposed to help.

Missouri’s Medicaid system is institutionally well below the Mendoza line. It’s time to rethink the program.

October 15, 2014

Increasing the Health Care Supply to Meet Health Care Demand

Robert Graboyes is a senior research fellow for the Mercatus Center. Later this month Dr. Graboyes will release a report about health care innovation, which I intend to talk about at some length on this blog. In the meantime, I want to re-up the Reason video from earlier this year. The video features Dr. Graboyes talking about a wide array of reforms that would get care to the neediest among us. If you’ve read our work before, you’ve probably heard of many of the recommendations he talks about, including regulatory, Medicaid, certificate of need, and scope of practice reforms. I highly recommend the video, particularly the section about prosthetics and 3-D printing, which captures well how quickly the market for health care could change in the coming years.

October 14, 2014

Free-Market Health Practitioners Get a Group

Late last month, supporters of the newly established Free Market Medical Association (FMMA) converged on Oklahoma City for the organization’s first ever annual conference. As the name suggests, the organization is intended to bring doctors and providers together to share ideas and defend “the practice of free market medicine without the intervention of government or other third parties.” Given the sorts of reforms American health care needs these days, the FMMA’s entry onto the national stage is a welcome one.

Along with noting the FMMA’s existence, there’s also a reason worth teasing out for why the FMMA held its first conference in Oklahoma City. The short answer is “it’s where the FMMA’s organizers are based,” but a more complete answer is it’s where some very interesting free-market business models are being put into practice.

Advocacy of free market health care is the longtime passion of Dr. Keith Smith, co-founder of the Surgery Center of Oklahoma [and the FMMA]. The center began to post fixed prices for common medical procedures years ago, and has provoked widespread admiration within the medical profession for efficiency, reasonable cost and frequent support for those who are less fortunate.

At the Surgery Center, Dr. Keith Smith and Dr. Steve Lantier have established an operational structure and market-oriented billing as explicit alternatives to the third-party payer systems that now dominate U.S. health care.

The center posts online an up-front price for medical procedures in diverse areas of practice, including orthopedics, ear/nose/throat, general surgery, urology, ophthalmology, foot and ankle, and reconstructive plastics. In all, a total of 112 procedures are listed.

Translation? Transparent pricing plus direct pay works out to a pretty good business model premised on competition and service. Price transparency is huge because it’s generally pretty difficult to price shop in the U.S. health market, in part because the third-party payer system disincentivizes it, and because many providers aren’t willing to publish those prices. That makes it difficult to force prices down through competition. Posting prices should be common practice in the industry; unfortunately, it’s not.

It’s good to see folks in the movement getting organized when it comes to demonstrating that, yes, free-market reforms to health care do exist and can work. In the coming months, Show-Me readers will hear a lot more about free-market health care alternatives. Stay tuned.

August 1, 2014

Show Me Better (Part 4): Certificate Of Need And Market Power

How far are you from the nearest hospital? Maybe you wonder why there is a single mega-hospital 10 miles away but aren’t any smaller ones nearby. Part of the explanation may be certificate of need (CON) regulations.

A 2004 report by the U.S. Department of Justice and Federal Trade Commission found that CON programs “pose serious anticompetitive risks that usually outweigh their purported economic benefits.” So far, I have written about how CON regulations can limit access to care and have been shown to not effectively control costs. CON regulations have the potential to stifle competition and grant existing hospitals monopolies over certain regions. Some existing hospitals may even attempt to use these regulations to prevent competition from entering the market.

How does this play out in Missouri?

In the past, any time a new hospital wanted to open up in Missouri, it had to apply for a CON – irrespective of its size and cost. A revision to Missouri’s CON rules changed the criteria for review from every new hospital to every new hospital whose cost is at least $1 million.

In April 2010, Patients First Community Hospital expressed its intent to build a small hospital in Saint Louis County that did not meet the new threshold for certificate of need review. Shortly thereafter, a regional rival, St. John’s Mercy Health System, filed a lawsuit against the Missouri Health Facilities Review Committee and Patients First. St. John’s challenged the legitimacy of the new $1 million amendment and construction of the new hospital. In 2012, the Missouri Supreme Court ruled that the new criteria for review was perfectly legal, thus giving Patient’s First the green light for the project.

Despite the ruling against St. John’s, this is an excellent example of a hospital using the legal system in an attempt to stomp out the competition, all under the pretense of CON regulation. It took about two years for Patients First to have its plan approved. These sorts of delays can deprive patients of new, much-needed medical facilities.

The state should not allow such an environment to exist.

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