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Year Two of the Obamacare Era

March 26, 2012

By Avik Roy

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act into law. The law’s advocates confidently predicted that it would cut bankruptcies by half, save tens of thousands of lives every year, create 400,000 jobs “almost immediately,” and even ensure that no one would ever again have to die of cancer.

In Year One of the Obamacare era, we got a preview of what is to come. We know that Year Three will be pivotal for the law’s future, between the Supreme Court and the November election. But it was what we learned in the last twelve months that set the stage for this pivotal, upcoming year.

MAY 2011

Massachusetts continued to give us a preview of what Obamacare would do to the country. In May, studies found that, contrary to what was promised, the new health-care regime increased emergency-room crowding, and increased already-long wait times for doctors’ appointments.

We also learned that the Massachusetts Uncompensated Care Pool, which was meant to cover hospital care for the uninsured, was being quietly used to subsidize the state’s expanded Medicaid program.

JUNE 2011

June was a big month for the law, as many of the constitutional challenges to Obamacare — most notably Florida v. HHS — made their way into federal appeals courts. In that case, Eleventh Circuit chief judge Joel Dubina asked the most fundamental question of all: “If we uphold the individual mandate in this case, are there any limits on Congressional power?” Unfortunately, in my view, advocates for the states whiffed in making the case that the law, in its entirety, should be uninformed.

In a separate case in the Sixth Circuit, Thomas More Law Center v. Obama, the court ruled that the individual mandate was indeed constitutional. Notably, Judge Jeffrey Sutton, a George W. Bush appointee and a Federalist Society favorite, opined that the “government has the better of the arguments” because “few people escape the need to obtain health care at some point in their lives.”

In oral argument in that case, Neal Katyal, the acting solicitor general for the Obama administration, argued that the individual mandate wasn’t a big deal because it “only kicks in after people have earned a minimum amount of income. . . . Someone doesn’t need to earn that much income.”

Outside the courtroom, the McKinsey Quarterly published an important survey that found that 30 percent of employers intended to “definitely or probably” stop offering health insurance to their workers after 2014, when Obamacare’s taxes and subsidies kick in. Among employers who were most familiar with the law’s features, 50 percent intended to drop coverage. Democrats flipped out, futilely attempting to portray McKinsey as a right-wing conspirator. (McKinsey’s employees gave far more to Obama than McCain in 2008.)

Having succeeded at exempting labor unions and other Democrat-friendly organizations from Obamacare’s regulations — the “waivers for favors” program — the Obama administration said that it would not grant waivers to additional organizations.

A survey published in the New England Journal of Medicine found that two-thirds of children on Medicaid were denied a doctor’s appointment for an acute condition, such as uncontrolled asthma or a broken forearm, compared to only 11 percent with private insurance. Obamacare adds another 17 million people onto Medicaid. A glitch in the law, it was discovered, placed 3 million additional Americans onto the program.

In response to the NEJM study, the government announced it was going to sponsor its own study, in which “government snoops” would pose as patients, in an attempt to figure out which doctors weren’t accepting Medicaid and Medicare patients. After a public outcry — or as HHS put it, “feedback received during the public comment period” — the government abandoned the idea.

JULY 2011

The Government Accountability Office conducted a survey finding that children on Medicaid have worse access to physicians than those with no insurance at all. The Daily Caller published a James O’Keefe investigation that showed Ohio Medicaid workers advising two men posing as wealthy drug smugglers to lie on their Medicaid applications. Michael Cannon published an important article documenting how Medicaid and Medicare fraud costs the government at least $87 billion per year.

The House of Representatives held hearings on Obamacare’s Medicare rationing board, the Independent Payment Advisory Board, where Scott Gottlieb among others pointed out that the board was designed to fail in its mission to reduce Medicare spending.


In August, the Eleventh Circuit issued its ruling in Florida v. HHS, in which the court declared the individual mandate unconstitutional, but otherwise overturned a lower-court decision which had struck down Obamacare in its entirety. I called their opinion “the most rigorous and complete repudiation of the mandate ever written . . . [the judges] have marshaled facts and arguments in their ruling that will be impossible for the high Court’s swing voters to ignore.”

In a sign of what is to come, the Obama administration blocked a slate of modest Medicaid reforms in cash-strapped, Democrat-dominated Illinois, where legislators had sought to require that Medicaid applicants prove their residency and income by providing a month’s worth of pay stubs.

The Medicare chief actuary, Richard Foster, put out a report finding that Obamacare will triple the growth rate of net insurance costs. A new study by Richard Burkhauser brought to light the fact that Obamacare’s exchanges won’t cover family members of lower-income workers, contrary to what people had thought.

While liberal health wonks touted “accountable-care organizations” as Obamacare’s vehicles for health-care reform, actual ACOs said it would be “difficult, if not impossible“ to participate in the program as initially designed.

On the bright side, a new report from HHS showed what can happen when the government applies market forces to health-care programs. Premiums in the Medicare prescription-drug program actually went down in 2011.

Peter Orszag, former Obama budget chief who shepherded the health law through Congress, stated that another individual mandate may be necessary to save CLASS, the law’s new entitlement for long-term care.


Bob Yee, actuary of the CLASS program, sent an e-mail to friends and colleagues saying that the administration had shut CLASS down. The White House furiously denied it. Meanwhile, internal e-mails showed that the administration knew all along that the program was insolvent; it was only included in the law to make it look like Obamacare would not add to the deficit in its first ten years of implementation.

David Hogberg discovered a drafting error in the law, such that federally sponsored insurance exchanges, under Obamacare, were not eligible for the law’s subsidies.

Howard Dean went on television to argue that it was a “very, very good thing” that employers would dump coverage of their workers onto the exchanges. A new survey found that insurance premiums jumped 8–9 percent in 2011, compared with 3–5 percent in 2010. Another study from the Medicaid Payment Advisory Commission found that 64 percent of hospitals lose money on government-funded Medicare patients.

A new book showed that President Obama knew all along that the individual mandate was vulnerable to constitutional challenges. “Obama, never much for the mandate, was concerned about legal challenges to it,” wrote Ron Suskind in Confidence Men, “but was impressed by DeParle’s coverage numbers. Without the mandate, the still-sketchy Obama plan would leave twenty-eight million Americans uninsured; with the mandate, the estimates of the number left uninsured were well below ten million.”

The Obama administration caved in to reality — partially — and admitted that it was “suspending” implementation of the CLASS program. The Congressional Budget Office reduced its scoring of CLASS to zero, taking away about 40 percent of Obamacare’s alleged deficit-reducing potential.

The Joint Committee on Taxation put out a report saying that Obamacare’s subsidies take another 8 million Americans off the income-tax rolls, further separating taxpayers from subsidy recipients.

As polling continued to show that the law was unpopular, Democrats in Congress decided to block usage of the word “Obamacare” in congressional mailings. California sued the federal government because poor Medicaid payments were driving health-care providers out of business, pitting Democrats against Democrats.


In another Obamacare challenge, Seven-Sky v. Holder, Judge Laurence Silberman, a highly regarded conservative, upheld the individual mandate. The Supreme Court agreed to hear the Obamacare challenges in its current term, setting the stage for a June 2012 decision. Surprisingly, the Supremes also agreed to hear arguments that the law’s dramatic expansion of Medicaid was excessively coercive to the states.

Donald Berwick, the controversial head of the Centers for Medicare and Medicaid Services who once railed against “the darkness of free enterprise,” resigned from his post, in accordance with what his recess appointment required. Before he did so, CMS denied Indiana the waiver necessary for the state to continue its innovative, market-based Medicaid program.

A commissioner for the Federal Trade Commission stated that Obamacare’s accountable-care organizations would likely lead to “higher costs and lower quality health care,” because merged providers would be able to force insurers to accept higher prices.


Rick Ungar, a progressive columnist at Forbes, crowed that Obamacare’s regulation of “medical loss ratios” would “ultimately lead to the death of large parts of the private, for-profit health insurance industry.”

The administration implemented regulations designed to prevent insurers from enacting “unreasonable” premium increases, defined as “more than 10 percent.”

A report from the Joint Committee on Taxation found that Obamacare creates a massive new penalty on married tax filers.


The President gave his State of the Union address, in which he barely mentioned his signature legislative achievement.


HHS issued its now-infamous contraception mandate, in which religiously affiliated institutions would be forced to provide first-dollar coverage of birth control. Aside from being an egregious infringement of religious liberty, the ruling is likely to drive up the cost of contraception, harming the very people it is intended to help.

CLASS, the zombie-like “suspended” long-term-care entitlement, continued to make news. A new report from the Congressional Research Service stated that courts could force HHS to implement the program, despite its future insolvency, unless Congress formally repealed it.

A new HHS report disclosed that per capita spending in Obamacare’s high-risk pools was double what states had previously projected.

The New York Times, frustrated by the law’s enduring unpopularity, shuttered its Prescriptions blog, which had been devoted to covering — and defending — Obamacare.

MARCH 2012

The Congressional Budget Office’s new baseline established that eleven-year spending on Obamacare would equal $1.7 trillion, far more than the initial ten-year projection of $900 billion (over a different time frame). CBO also estimated that under the law 2 million fewer people would gain insurance coverage than previously projected.

Congress attempted, unsuccessfully, to repeal a drafting error in Obamacare that mistakenly awarded $4.3 billion in funds to Louisiana, instead of the $200 million originally intended under the law’s “Louisiana Purchase,” a special favor used to gain Senator Mary Landrieu’s support for the bill in 2009.

It turned out that Jonathan Gruber, who had stated in 2009 that the law would “for sure” reduce the cost of non-group health insurance, was quietly telling state governments that the law would increase premium costs by 19 to 30 percent by 2016.


With the drip-drop of bad news for two years, it’s no surprise that opposition to the law remains steady, with 56 percent of likely voters favoring repeal. But there are two key dates this year that will determine the future of health care in America.

The first is June 30, by which time we will likely learn of the Supreme Court’s decision on the constitutionality of the law. The second is November 6, when the 2012 election will take place.

The Supreme Court is very unlikely to overturn the law in its entirety — and if the mandate and some related provisions are overturned, many other unwise and unaffordable aspects of the law will remain on the books. If Republicans don’t manage to capture both the Senate and the White House in November, Obamacare is likely to be with us forever.

If we’re lucky, Year Three of the Obamacare Era will be its last.

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