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Be Afraid, Be Very Afraid: The Unaffordable Health Choices Act Of 2009

Written by Stephen Hyde

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I just spent the better part of a Colorado summer Saturday reading the worst parts of something called The Affordable Health Choices Act of 2009. Purported to constitute health care reform, its thousand pages were introduced this past week by the chairmen of the three congressional House committees with jurisdiction over health policy.

 

 It is the single most egregious piece of health care legislation to cross my desk in four decades. Hillary Care (yes, I read that one too), nonsensical as it was, represented an order of magnitude more thought than this bill which is so blind to basic economics on so many levels that I marvel at the ability of the three chairmen, Speaker Pelosi, President Obama, and the AMA to praise it with straight faces.

You may have read mainstream news accounts of the CBO chairman's pointed testimony that this bill will do nothing but drive up health costs. If that were its only problem, we might actually survive it, but buried in the bill's bowels are the ingredients of a toxic brew that will kill jobs, turn much of the middle class into a new welfare class, lay waste to America's private health insurance infrastructure, drive thousands of doctors and hospitals into bankruptcy and/or onto the public dole, and herd Americans like cattle into an unsustainable government-run public health insurance plan that will be forced into wholesale rationing of medical care.

The bill requires virtually all employers to offer minimum health benefit plans that far exceed anything most of them offer today, including comprehensive preventive benefits with no employee cost sharing. If that seems somehow reasonable to you, ponder this: the vast majority of preventive services cost more than they save. This mandate alone will drive insurance premiums up, not down as you repeatedly hear from our leaders (I know; this surprises a lot of people, but industry insiders have known it for decades-did you ever wonder why the once-dominant Health Maintenance Organizations with their ubiquitous and near-free preventive services never came close to preventing diseases that now account for 75% of total health expenditures?).

The bill also wipes out employee cost-sharing and consumer-focused provisions like coinsurance and high-deductible health plans (and apparently Health Savings Accounts) that have augured the immense potential for consumer-driven health care in recent years. And if the bill's own massive benefit excesses aren't enough, it piles them all on top of the additional trough of benefits mandated by the states-except apparently for the bill's own public insurance plan. Completely lost is any concept of insurance as financial protection against the risks of unaffordable costs of necessary medical care.

Loyal readers already know that employers are not the real payers for their employees' insurance-the employees themselves are. To pay the new premiums, taxes, and penalties imposed on them by the Health Choices Act, employers will be forced either to cut the take-home pay of their employees or to cut the number of employees. A provision in the bill discouraging the former will inevitably require the latter. How's that for economic stimulus during a recession: bail out the failed giants while further burdening the only job-creation engine we've ever had-small businesses.

This unimaginably clueless bill creates a new public insurance plan, claiming it will operate on a level playing field with private payers and keep private insurers honest. In fact, the bill tilts the playing field so nearly vertical that no private insurer can conceivably compete with it for long. Not only will the public plan base its premiums on under-reported non-benefit costs, but the bill allows it to piggyback onto Medicare's low provider reimbursement rates. This will keep public plan premiums artificially low while requiring America's beleaguered doctors and hospitals to make up the difference with higher charges to the private plans (so much for President Obama's pledge last month that the public plan will have to negotiate provider rates just like the private insurers).

Immediately mortally wounded by the bill will be America's insurers that provide affordable, individual (non-employer) coverage to 18 million Americans. Employer-based insurers will be given a temporary grace period on benefit mandates before they too face the public reaper's scythe. And the government's new insurance exchange will now directly regulate and control private insurance premiums with legislated restrictions that will virtually forbid effective cost controls, member incentives, innovative care management, or reasonable returns on investment. As private insurers are forced to withdraw from the market-forcing more patients into the public plan's Medicare reimbursement regime-expect to see thousands of doctors and hospitals facing bankruptcy. To avoid that, the government will have no choice but to increase provider reimbursements (or at least appear to), leaving one last avenue for cost containment-wholesale rationing of care per the Canadian and English models. I promise you won't like it.

Despite the claim that the bill will require all Americans to buy health insurance (except for certain "conscience objectors"-I'm not making this up.), it's guaranteed-issue provisions and hamstrung age-rating allowances will signal open season for millions of Americans to game the system by avoiding insurance when they're healthy and then opting in for a few months to get treatment whenever medical conditions arise. It is just this "adverse selection" problem that is currently killing the Massachusetts "universal" health insurance program, leading its leadership to call for the imposition of, in effect, a statewide HMO for all residents, hospitals, and doctors.

Even the British National Health Service allows people who can afford it to opt out and buy private health insurance and to be treated by doctors and hospitals outside the socialized system. But the Affordable Health Choices Act forbids even that with a nasty triple whammy. First, insurers will not be allowed to sell any individual coverage outside the Orwellian walls of the government's monopoly health insurance exchange. Second, employers that can't afford to offer such inflated coverage to their employees will be required to pay an eight percent fee that their employees cannot use to defray their costs of individual coverage through the exchange-this is money that effectively comes out of employees' pockets to help pay the government's inflated bill to extend welfare relief to families making up to $88,000 per year. Third, any individual not buying the massively rich government-mandated insurance will be charged an excise tax by the IRS (although clever consumers may view this as a cheap option allowing them to buy health insurance only when they're sick-as in Massachusetts).

Left out of the bill are any incentives for people not to smoke, become obese, abuse alcohol, or to control their cholesterol, blood sugar, and hypertension. Instead, it requires those who pursue healthy lifestyles to subsidize those who don't. And it misplaces the financial incentives to control such individual misbehavior on America's health care providers, most of whom will actually encounter their noncompliant, fat, drunk, smoking patients-if they show up at all-for less than an hour every year.

If  I appear to be in high dudgeon, thanks for noticing. Now send a message (and maybe this one too) to your congressperson (https://writerep.house.gov/writerep/welcome.shtml) demanding that this mockery of a bill die a quick, unlamented death. And while you're at it, check to see if he/she is one of the committee members who voted for it last week. If so, send a campaign contribution to someone-anyone-who runs against him/her next year.

The real tragedy of this bill is that its sponsors assume there is no solution for our dysfunctional health care system other than total government control of it-itself a triumph of hope over experience. In fact, there is an alternative that hews to American values of individual rights and self determination that can allow everyone to have affordable health insurance and necessary medical care with twice the quality at half the cost. It's called the American Choice Health Plan, but that's a story for calmer times.

More about the author and his website

Stephen S. Hyde has been a public company CEO and chairman and board member of numerous health care companies. A successful health care entrepreneur, consultant, actuary, insurance expert, medical group CEO, and federal government managed care regulator, he has nearly 40 years of experience in virtually every major aspect of health regulation, insurance, and care delivery. 

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