Tag Archives: medical-device tax

Obamacare Backlash: What Comes Next?

The firestorm over comments made by MIT economist Jonathan Gruber has not helped the cause of the White House and defenders of the ACA in Congress. The historical landslide in the recent mid-term elections will also bring a major legislative backlash in the new House of Representatives and U.S. Senate early in 2015.

I had high hopes for the ACA. I have been a supporter of healthcare reform dating back to my college days and at graduate school many decades ago. The goals of universal coverage, elimination of pre-existing condition limitations and allowing dependents to stay on their parents plan until age 26 are all things I fully support.

However, the rollout of the ACA was a debacle. The campaign promise that, “You can keep your plan if you like it” and that “you can keep your doctor” was given 4 Pinocchios by the Washington Post, not exactly a friend of the GOP. Ask Nixon.

Now after the self-proclaimed architect of the ACA touts the lack of transparency in the design of the ACA to fool the American voters and how stupid “we” are, don’t expect a warm and fuzzy reaction in a GOP-controlled Congress. House Democratic leader and the White House are now busy “misremembering” the major role that Gruber played in drafting the ACA and are hoping the public will eventually, too.

What’s next? Both the House and the Senate will vote to repeal Obamacare in January. The House has already done this a few dozen times, but now Harry Reid can’t block a vote in the Senate. The president will veto this legislation. There will be political grandstanding with press conferences and dire predictions on both sides. Nothing will happen. There is a very little, if any chance, the GOP will have the votes to override a presidential veto.

What will most likely pass is a repeal of the tax on medical device manufacturers, which reportedly has bipartisan support. This will be problematic to the president and ACA supporters, because this will directly affect the proposed financing of the ACA. That lost revenue will have to be accounted for. Let me guess? Higher costs to consumers and companies providing health benefits to employees and their families? Is that correct, Mr. Gruber?

What will also likely pass Congress is a bill repealing the little-known provision providing a safe harbor to health insurance companies under the ACA, which essentially allowed a federally financed bailout if they end up losing money.

The ACA is here to stay, in my opinion, but incremental changes will be attempted. The GOP will support legislation to lower malpractice costs, allow small employers to band together in purchasing cooperatives, allow health insurance to be sold across state lines and make the implementation and administration of the ACA a state responsibility and not run by the federal government.

The president’s own recent in-house advisory group recommended that the ACA be run by the states, because healthcare, like politics, is all local. This received very little, if any, play in the mainstream media. In fact, at least two major, national, mainstream news outlets have yet to even mention the controversy surrounding Jonathan Gruber’s videotaped comments and the firestorm it has created.  I guess they misremembered to run the story.

Finally, for other possible changes, see a previous article of mine at Insurance Thought Leadership on April 9, 2014, regarding how the ACA has gutted major elements of the bipartisan healthcare reform efforts in Massachusetts by virtually eliminating experience rating for small to mid-size employers.

Gruber predicted health insurance premiums are going down because of the ACA. Please tell that to all the small and mid-sized employers across the U.S.  I have not heard from one whose costs are going down. Maybe they misremembered.

It’s time to fix the ACA with a bipartisan effort and study what works and what doesn’t, and certainly not be based on what someone in an ivory tower believes. He thinks we all are stupid anyway.

How a GOP Congress Could Fix Obamacare

Republicans are primed to take over Congress. A new FiveThirtyEight.com projection gives the GOP a 60% chance of winning the Senate this fall. And, according to RealClearPolitics, there’s virtually no chance Democrats will take the House.

If the GOP succeeds, public displeasure with Obamacare may be why. A recent poll from Bankrate.com found that more than two-thirds of voters say that Obamacare will play a role in how they vote in the coming election. Nearly half said it would influence them “in a major way.”

Of course, the next Congress has little hope of repealing Obamacare outright. The president would just issue a veto. Overriding it — though technically possible — would be difficult with an intransigent Democrat minority.

A GOP majority should instead focus on incremental reforms with bipartisan support — like tax cuts, regulatory reforms and repeal of some of Obamacare’s most unpopular mandates. That’s the most effective way for lawmakers to move our health care system toward one that puts markets and patients at its center.

Step one? Repeal Obamacare’s medical-device tax. This 2.3% excise charge on all device sales is expected to collect $29 billion over the next decade, according to government data.

Device firms are compensating by cutting jobs. Stryker, for instance, has cut 5% of its workforce — about 1,000 people. Zimmer Holdings has chopped 450 jobs. In total, Obamacare’s device tax could kill 43,000 jobs, according to Diana Furchtgott-Roth, an economist at the Hudson Institute.

Getting rid of the tax is a no-brainer. In March 2013, 79 senators — including 34 Democrats — approved a non-binding resolution calling for its repeal. It’s time to make that vote binding.

Second, a GOP-controlled Congress should strengthen health savings accounts. These financial vehicles allow patients to stow away money tax-free for medical expenses. HSAs are typically coupled with high-deductible health insurance. Patients bear the cost of routine care, and coverage kicks in when needed, like in the event of a medical emergency.

HSAs give patients a financial incentive to avoid unnecessary medical expenses. Converting someone to HSA-based insurance drops her annual health expenses by an average of 17%.

This year, 17.4 million people are enrolled in HSA-eligible plans — a nearly 14% increase over 2013. Among large employers, 36% now offer HSA/high-deductible plans, up from 14% five years ago.

Annual HSA contributions are currently capped at $3,350 for an individual and $6,550 for a family. Congress should raise them to $6,250 and $12,500, respectively. And patients with HSA coverage through the exchanges should be eligible for a one-time, $1,000 refundable tax credit to be deposited directly into their account.

Third, the new Congress should reform medical malpractice. Frivolous lawsuits and the threat of baseless litigation are increasing health costs and degrading quality of care.

Excessive malpractice suits drive “defensive” medicine, in which doctors order unnecessary procedures and tests simply to shield against accusations of negligence. This practice costs the country an estimated $210 billion every year, according to PricewaterhouseCoopers. Injecting common sense into the medical tort system would bring down that bill.

Earlier this year, the House Energy and Commerce Committee passed a bill that restricted lawsuits against doctors by, among other things, limiting non-economic damage judgments to $250,000. It was effectively ignored once it moved out of committee. Republicans should dust it off and pass it.

Finally, the GOP should repeal Obamacare’s employer mandate, which slaps midsize and large companies with a fine if they don’t provide sufficiently “robust” health coverage to full-time employees.

The mandate is destroying jobs. Employers are holding off on hiring and ratcheting back workers’ hours to avoid additional insurance costs. A Gallup poll found that 85% of businesses are not looking to hire. Nearly half cited rising healthcare costs.

There’s ample political support for repealing the employer mandate. The administration has already unilaterally — and maybe illegally — delayed its implementation. Several prominent backers have openly called for repeal.

All of these reform ideas are imminently actionable. They could find broad bipartisan backing and avoid a veto. Most importantly, they would move U.S. healthcare closer to a consumer-driven system, with patients empowered to control their own spending and market forces pushing costs down.