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At a recent family party, someone asked me what I thought of ObamaCare.  “It’s O.K., but it doesn’t go far enough,” I said.  The reply: “Well, we can’t pay for everybody.”  Actually, we can.  It’s just a matter of deciding what we want to spend our money on.  The cost of healthcare reform is projected to be about $1.1 trillion over the next 10 years — or $110 billion per year.  Here are five things that cost at about that much.

1. War: U.S. Defense Dept. spending on war (e.g., Iraq and Afganistan) has averaged $130 billion annually over the past decade.  Source: Costs of War

2. Wall Street Bailout of 2008: The total amount outstanding (mostly loans and net of TARP funds and liquidity loans already paid back by banks and financial companies) is $1.56 trillion. Source: SourceWatch

3. Tax Cuts for the Wealthy. Since 2001, the Bush tax cuts have saved the wealthiest 5% of Americans $1 trillion.  Source: Costoftaxcuts.com

4. Health Insurance Administrative Costs: At about 7% of total healthcare spending, administrative costs associated with health insurance total about $160 billion annually — a figure that could be reduced by $100 billion by simply achieving international benchmarks.  Source: The Commonwealth Fund

5. The New York Yankees Payroll.  All right, it’s actually “only” $200 million annually, but give it time.

Special Bonus Update: For those of you who argue that ObamaCare is just a handout for freeloaders, I ask you this:  Do you own a home?  Do you deduct mortgage interest payments from your taxes?  Good, because the mortgage interest deduction costs the federal goverment about $100 billion annually — or nearly the entire cost of ObamaCare.  Source: The Tax Foundation

The irony surrounding the individual health insurance mandate continues to mount.  As Mitt Romney pointed out in the Republican presidential debate yesterday, the idea of the individual mandate came from conservatives — specifically the Heritage Foundation.  There appears to have been a difference in scope between the version in ObamaCare and the one Heritage proposed — along with some other twists to the story (Heritage later repudiated the mandate) — but as James Taranto of The Wall Street Journal notes, “the Heritage mandate was indistinguishable in principle from the ObamaCare one.” (Hat tip, Avik Roy).

As I’ve noted before, Obama never wanted the mandate and had to be dragged on board.  Now he takes heat from conservatives (who invented the concept) for something he didn’t want in the first place.  As for the health insurance industry, it pushed hard for a mandate to protect against adverse selection (i.e., only the sick buying insurance) and to ensure membership growth. 

I think the health insurance industry is right, and so was the Heritage Foundation before it was wrong.  Universal coverage works best if everyone is in the pool.

Here’s a slide from a recent WellPoint presentation showing projected membership by type of healthcare coverage pre and post reform.  While the biggest gains are in government programs like Medicaid and Medicare, the analysis also suggests the commercial market will expand.

Click here to watch David Blitzer of Standard & Poor’s discuss rising healthcare costs withMark Haines of CNBC.  Below is an excerpt

Blitzer: Despite all the excitement about technology and drugs, healthcare is a very labor intensive activity, and people — labor — costs a lot of money, and that seems to be the key factor driving it up.”

Haines: “Logically, then you would find the worst or the most inflation occurring in hospitals.”

Blitzer: “You would and indeed on the commercial side you do.  On the Medicare side you don’t, and I think that brings up a different aspect.  Over the last few years, we’ve heard a lot of arguments about single-payer plans versus other kinds of plans.  Single payer means Uncle Sam pays for all the healthcare.  We pay him.  Medicare for people over 65 is a single-payer plan, and indeed we consistently see smaller rates of increase in Medicare items than we do in commercial insurance — the kind of insurance that employers provide for their employees.”

Haines: “O.K., I’m going to leave that lying there because some of our viewers right now are going apoplectic, thinking that you have just endorsed single-payer healthcare.”

Blitzer: “I haven’t.  I’ve only reported the numbers.  I’m not endorsing anything.”

Haines: “Believe me, I  understand you’re just quoting the facts.  Some people think facts are partisan.  I don’t know how they get there, but they do.”

CMS Administrator (for now) Donald Berwick in a speech comparing the U.S. and U.K. healthcare systems:

Excellent healthcare is by definition redistribution…

…of wealth, that is. 

Berwick, a recess appointment who requires Senate confirmation to keep his job, seems like a decent enough guy with ideas worth trying to address rising cost and lagging quality in the U.S. healthcare system.  Unfortunately, he won’t get much more of a chance.  Last week, 42 Republican senators sent a letter urging President Obama to withdraw the Berwick nomination.

According to Politico, “Democratic senators and the White House are backing down.”

From the Kaiser Family Foundation February 2011 Health Tracking Poll (hat tip: PBS Newshour). 

Sen. Lamar Alexander (R-TN) on political rhetoric following the attempted assassination of Rep. Gabrielle Giffords (D-AZ):

We ought to cool it, tone it down, treat each other with great respect, respect each other’s ideas, and even on difficult issues like immigration or taxes or the health care law, do our best not to inflame passions.

(Hat tip: Politico)

From the White House Executive Office of the President statement alerting House Republicans that President Obama will veto legislation aimed at repealing healthcare reform, specifically H.R. 2, The Repealing the Job-Killing Health Care Law Act:

The Administration strongly opposes House passage of H.R. 2 because it would explode the deficit, raise costs for the American people and businesses, deny an estimated 32 million people health insurance, and take us back to the days when insurers could deny, limit or drop coverage for any American.

Click here for a handy “Factbox” from Reuters listing the basic provisions and timeline for healthcare reform.  When presented like this – without spin from liberals or conservatives – the benefits of the legislation to average Americans really jump out.  That’s why I think Republicans will fail in their attempts to repeal or scale back the law.  People are going to realize there’s a lot of good stuff in here for them.  Or as former GE chief Jack Welch summed it up: “Freebies are now coming my way.”

We keep talking about the healthcare market shifting toward “consumerism.”  Well, here’s what consumers surveyed by PricewaterhouseCoopers had to say about healthcare and reform.  From PWC’s annual Top Health Industry Issues report:  

• Only half of consumers said they would stay within an ACO-like organization for all of their care.
• Less than half of consumers know what a health insurance exchange is.
• Nearly three-fourths of consumers said they would trade employer-sponsored insurance for higher pay.
• Currently, eighty-six percent of consumers do not access their medical records electronically.
• More than one-third of consumers said costs and waiting times would increase as a result of healthcare mergers.
• Consumers seek health information from media companies more than from government, healthcare companies, and consumer companies combined.

Here’s the link to proposed HHS regulations released today, which would make health plan premium rate hikes of 10% or more in the individual and small group markets subject to regulatory review and require insurers to publicly justify and list the assumptions behind the increases.  States would make the final call on whether a rate hike is “unreasonable,” unless the state doesn’t have an effective rate review process — in which case HHS would handle the review.  HHS says that 43 states already have some form of rate review, and a “significant majority” are expected meet the standards of an effective review process.  HHS and state officials at a press conference made clear the goal isn’t to supplant state authority, but rather to provide a backstop.  A 10% hike isn’t necessarily “unreasonable,” but could be deemed so “if the actuarial assumptions underlying the increase were invalid or unreasonable.”  Even in cases where states don’t have the regulatory authority to reject a rate hike, the thinking is the very process of making public and questioning the assumptions behind the increases will help moderate trends.  The 10% national threshold is only a starting point and is expected to be made state-specific over time.  In setting the 10% threshold, HHS found that “the majority of increases in the individual market exceeded 10% each year for the past three years.”

Click here for a copy of today’s ruling, in which U.S. District Judge Henry Hudson in Virginia found that the mandate included in the healthcare reform law requiring virtually every American to purchase health insurance by 2014 or pay a penalty is unconstitutional.  Given that a federal judge in Michigan ruled otherwise, the next stop for this dispute is the U.S. Supreme Court.  Hudson also ruled that the mandate could be invalidated without finding the entire law unconstitutional.

The decision is already being described as a defeat for Obama that could further erode political support for reform.  But the irony is thick.  Obama, who didn’t want the mandate in the first place, had to be dragged on board.  Yet Republican state attorneys general are the ones litigating against the mandate.  Meanwhile, the health insurance industry — also an opponent of reform — favors the mandate to protect against adverse selection (i.e., only the sick buying insurance) and to ensure membership growth.

Kevin Klobucar, chief executive of Blue Care Network (the HMO unit of Blue Cross Blue Shield of Michigan), on why healthcare reform won’t likely be repealed:

It’s hard to argue against all the things reform stands for.

President Obama’s National Commission on Fiscal Responsibility and Reform — i.e., the deficit reduction commission — recommends that all 9 million dual-eligible Medicare-Medicaid members be placed into managed Medicaid plans.  There are currently about 1 million dual eligibles in managed Medicaid, according to estimates from Scott Fidel of Deutsche Bank.  “This is one of largest markets that has not yet been highly penetrated by managed care,” he says.  Medicare would continue to pay its share of the costs under the proposal.  According to the commission, “Medicaid has a larger system of managed care than does Medicare, and this would result in better care coordination and administrative simplicity.”

Here’s an interesting chart from UnitedHealth CFO Mike Mikan from the company’s recent investor conference.  It suggests some of the varying payment models that may serve different types of provider organizations.

Citi analyst Carl McDonald says that minimum medical cost ratio requirements released by HHS this week (see prior post) will result in lower individual health plan premiums or at least dampen the rate of premium increase. 

It won’t be universal, but yes. If you’re running an individual health plan that has a 60% loss ratio today, and after all the adjustments plans are allowed, the adjusted MLR is 70%, the plan is still going to owe a big rebate to get to the 80% minimum. I think what you’ve started to see and will be seeing more of is plans lowering premium rates to bring that adjusted loss ratio closer to 80%. The thought is that a lower priced product will be better at attracting new members than maintaining the same price and writing a rebate check in July 2011. Doesn’t always mean that absolute premium dollars go down, but it could mean that a plan that was planning on raising rates 10% because of increasing cost trends doesn’t have to do that anymore.

You’ll recall during the healthcare reform debate, there was a lot of arguing over the likely impact of reform on health plan premiums.  The Congressional Budget Office projected a year ago that under reform premiums for 134 million people in large groups would be flat to down, premiums for 25 million people in small groups would be flat to down, costs for 18 million people with subsidized individual plans would be down (a lot) — and costs for 14 million unsubsidized individuals would be up 10% to 13% because they’re getting much better coverage.

If you believe McDonald, the “premiums will fall” crowd may indeed have been right.

New minimum medical cost ratio regulations could force health plans to rebate $600 million to $1.4 billion to customers annually from 2011 through 2013, or an average of about $1 billion per year, according to the U.S. Dept. of Health and Human Services.  The regulations, which HHS adopted on the recommendation of state insurance regulators, require 80% of individual and small group premiums to go toward medical care and quality improvement activities; 85% in the large group market.  HHS estimates 2.8 million to 9.6 million Americans could be eligible for rebates each year. 

But Carl McDonald of Citi thinks the HHS estimate is too low.  

The biggest issue is that the forecast is based on 2009 data, while commercial MLRs have improved dramatically in 2010 because of lower medical costs….WellPoint has quantified its exposure to minimum medical loss ratios at approximately $300 million, while we think United will talk about rebates of around $600 million at its investor day next week. So between these two plans alone, we’re nearly to $1 billion in rebates. Granted, these are the two largest plans in the industry, but we think rebates for the industry would easily exceed $1.5 billion based on this year’s margins.

Either way, MCR rebates will reduce health plan profits by 3% to 6% — assuming total industry profits in the $25 billion to $30 billion range.

Michael Moore and Wendell Potter on Countdown with Keith Olbermann.  (Video here)

Health plans can deduct state and federal taxes from premiums when calculating medical cost ratios, according to new regulations issued by the U.S. Dept. of Health & Human Services.  It’s a big win for health plans, but not a big surprise.  The language in the legislation was pretty clear (see prior post).  Plans won’t be allowed to deduct taxes on investment income and capital gains.  The regulations on taxes are in keeping with recommendations from the National Assn. of Insurance Commissioners, which crafted the MCR rules. Expanded coverage appears in the Nov. 22 issue of Health Plan Market Trends.

Former Cigna PR man Wendell Potter, author of the new book Deadly Spin, talks about how health plans influence public policy and the future of healthcare reform in this video interview from the Nasdaq Market Site in New York, Nov. 16, 2010.  (See my review of of Deadly Spin here).

Remember when news broke earlier this year that trade group America’s Health Insurance Plans had secretly funnelled up to $20 million to the U.S. Chamber of Commerce to run ads aimed at killing or significantly watering down healthcare reform?  Turns out the sum was $86.2 million — more than AHIP’s entire budget from the previous year – according to a Bloomberg report.  As John Wanamaker said, ”Half the money I spend on advertising is wasted.  The trouble is I don’t know which half.”

CMS has chosen eight states to participate in a medical home demonstration project “to evaluate the effectiveness of doctors and other health professionals across the care system working in a more integrated fashion and receiving more coordinated payment from Medicare, Medicaid, and private health plans.”  The states are Maine, Vermont, Rhode Island, New York, Pennsylvania, North Carolina, Michigan and Minnesota.  The Multi-Payer Advanced Primary Care Practice Demonstration is expected to include 1200 medical homes serving up to 1 million Medicare members.

CMS also announced the formation of the new Center for Medicare and Medicaid Innovation to help find ways to improve care and reduce cost for Medicare and Medicaid.  Donald Berwick, M.D., CMS Administrator, says:

For too long, health care in the United States has been fragmented — failing to meet patients’ basic needs, and leaving both patients and providers frustrated.  Payment systems often fail to reward providers for coordinating care and keeping their patients healthy reinforcing this fragmentation…The Innovation Center will help change this trend by identifying, supporting, and evaluating models of care that both improve the quality of care patients receive and lower costs.

The answer is deep in the polling numbers from the Kaiser Family Foundation.  Yes, topline survey results show 49% of the 1502 respondents say repeal all or part of the law, compared to 40% who say keep the law as is or expand it. 

But when asked about specific sections of the law, the vast majority (more than 70%) supports benefits like tax credits for small businesses that offer coverage to employees, closing the Medicare drug doughnut hole, subsidies for the uninsured, and guaranteed issue. 

Even more striking, at least half of those who voted Republican in the midterm elections favor tax credits, closing the doughnut hole and guaranteed issue.  Most striking of all, among the 49% who say the law should be repealed all or in part, half to two-thirds say we should retain tax credits for small businesses, subsidies for the uninsured, guaranteed issue, and closing the doughnut hole.

So basically, the majority of those who say repeal all or part of the law also say we should leave key elements of the law intact.  Perhaps the answer to this contradiction is in this data point from the survey: about 32% of respondents say the word “angry” describes their feelings about healthcare reform.  However, the vast majority (76%) of those who feel “angry” say it’s not specifically about healthcare reform; rather it’s about “the general direction in Washington and health reform is one of many upsetting things.”

A Kaiser Family Foundation poll finds that healthcare reform wasn’t the dominant factor influencing voters in the midterm elections.  Instead, it was the economy.  Only 17% of voters said healthcare reform was the “one factor that mattered most,” compared to 29% for the economy.

Republicans took the House in last night’s midterm election.  Democrats retained the Senate.  Last I checked President Obama was still in the White House.  All of which suggests gridlock in Washington and little or no change to healthcare reform.  Repeal?  Forget it.  Not that there was much of a possibility of that any way.  Republicans also gained at least 10 state governorships, according to CNN’s latest projections – a significant swing given that so many healthcare regulations are decided at the state level. 

As for the election being a referendum on Obama’s leadership, it’s hard to deny the scope of the defeat.  Still, the party of the President tends to lose ground in the midterms, and when the economy is in the doldrums nobody is safe. 

Other notes: Sen. Harry Reid (D-NV), who helped shepherd Obamacare through the Senate, retained his seat in a close race.  And Democrat Jerry Brown — who inspired the Dead Kennedys’ song California Uber Alles: “Your kids will meditate in school.”  – took the California governorship.  Brown last served as governor of California from 1975 to 1983.  Expanded coverage of the election appears in this week’s Health Plan Market Trends Letter.