The article discusses the impact of the U.S. health care bill signed into law by U.S. President Barack Obama in 2010. When provisions begin to take effect in 2014, government spending will reportedly increase such that it would expand the deficit and Americans\u27 freedom will be reduced. The new system turns health insurance companies into government agents with the government determining the premiums, benefits and types of policies to be issued

Hoff, John S.

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Notre Dame Law School: NDLScholarship

Notre Dame Journal of Law, Ethics & Public PolicyVolume 25Issue 2 Symposium On Health Care: Health, Ethics, &the LawArticle 61-1-2012Obamacare: The Birds Still Sing as Freedom ErodesJohn S. HoffFollow this and additional works at: http://scholarship.law.nd.edu/ndjleppThis Essay is brought to you for free and open access by the Notre Dame Journal of Law, Ethics & Public Policy at NDLScholarship. It has beenaccepted for inclusion in Notre Dame Journal of Law, Ethics & Public Policy by an authorized administrator of NDLScholarship. For more information,please contact lawdr@nd.edu.Recommended CitationJohn S. Hoff, Obamacare: The Birds Still Sing as Freedom Erodes, 25 Notre Dame J.L. Ethics & Pub. Pol'y 381 (2012).Available at: http://scholarship.law.nd.edu/ndjlepp/vol25/iss2/6OBAMACARE: THE BIRDS STILL SINGAS FREEDOM ERODESJOHN S. Hor*President Obama has taunted those who say that the legisla-tion overhauling the American health care system is a disaster("Armageddon"). He observed that the birds are still singingand that no asteroids have hit the earth.' This clever statementof the obvious is an entirely evasive rhetorical device.The effects of the legislation will not be felt for some time.The main provisions do not begin to kick in until 2014,2 but mostobservers believe that when they do, the new entitlement willincrease government spending far beyond what has been esti-mated and dangerously explode the deficit. As if that were notbad enough, the legislation will significantly reduce Americans'freedom. Even then, the birds still will be singing (they sing alsoin countries governed by totalitarian regimes), but Americanswill have lost a chunk of their individual freedom.The Administration has attempted to sell the new programby promising that it increases peoples' choices, reins in abuses ofinsurance companies, and provides coverage to most of the unin-sured. But the bill is a grand opportunity lost. There are betterways to achieve these goals. Increasing individuals' ability to buyand own their own insurance could provide coverage for theuninsured and lay the foundation for real reform of the healthcare system in a fiscally responsible way. President Obama andhis colleagues in the Congressional leadership, however, rejectedthis approach and forced through a program that enhances gov-ernment power and reduces individual choice.* John S. Hoff, a lawyer and trustee of the Galen Institute, was a deputyassistant secretary in the Department of Health and Human Services during theGeorge W. Bush Administration.1. David M. Herszenhorn, Obama to Boehner: Where's the Armageddon?, N.Y.TIMES (Apr. 1, 2010, 5:59 PM), http://prescriptions.blogs.nytimes.com/2010/04/01/obama-to-boehner-wheres-the-armageddon/.2. See Memorandum from Richard S. Foster, Chief Actuary, Ctrs. forMedicare & Medicaid Servs., Dep't of Health & Human Servs., on the EstimatedFinancial Effects of the "Patient Protection and Affordable Care Act," asAmended (Apr. 22, 2010), http://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf.3. The legislation is entitled the Patient Protection and Affordable CareAct (PPACA), Pub. L. No. 111-148, 124 Stat. 119 (2010) (to be codified as381382 NOTRE DAME JOURNAL OF LAW ETHICS & PUBLIC POLICY [Vol. 25The new system turns health insurance companies intoagents of the federal government. The government determineswhat policies they may sell through the new American HealthBenefit Exchanges; only these policies are eligible for subsidiesto purchasers.' Qualified plans must fit into homogenized cate-gories labeled platinum, gold, silver, and bronze, with the onlyvariation being the level of copayments. 5 The governmentdefines the "essential health benefits" that must be covered.6Indeed, the government is obliged to determine what is the"appropriate balance" among various categories of health ser-vices and thus is obliged to set the percentage of coverage forinpatient care, outpatient care, laboratory services, and the othercategories of service listed in PPACA and any added by theDepartment of Health and Human Services.' The policies mustcover preventive care without copayments; the governmentdefines preventive care.' The government will determine thecomposition of insurers' risk pools,' and it will determine thegeographic areas to be used in setting rates."Insurers will be required to accept everyone who applies forcoverage." They must charge everyone the same premium,regardless of expected health care usage, with adjustment onlyfor family size, age (less than the actual cost differential), andsmoking status.12At the same time, the government will also control howmuch the insurers can charge. The new law requires insurers tospend a stated percentage of premiums on claims and qualityimprovement efforts." This acts as a limit on insurers' profitsand on the amount they can spend on activities that the govern-ment decides are not related to claims or quality improvement.Insurers may have to curtail programs to manage their members'care and efforts to prevent fraud and to reduce costs. The gov-ernment will also ensure that "unreasonable increases" in premi-amended in scattered sections of 25 U.S.C., 26 U.S.C., 29 U.S.C., and 42U.S.C.). For ease of reference, PPACA as used here also includes amendmentsmade to it by the Health Care and Education Reconciliation Act of 2010, Pub.L. No. 111-152, 124 Stat. 1029.4. See generally PPACA §§ 1001-1563, 124 Stat. at 130-271.5. Id. § 1302(d), 124 Stat. at 167-68.6. Id. § 1302, 124 Stat. at 163-68.7. Id. § 1302(b), 124 Stat. at 163-64.8. Id. § 1001, 124 Stat. at 131-32.9. Id. § 1312(c), 124 Stat. at 182.10. Id. § 1201, 124 Stat. at 155.11. Id. § 1201, 124 Stat. at 154-55.12. Id. § 1201, 124 Stat. at 155.13. Id. § 1001, 124 Stat. at 137.2011] OBAMA CARE: THE BIRDS STILL SING AS FREEDOM ERODESums are publicized.14 There is no standard in the statute forwhat is an unreasonable increase.The federal government will also control insurance compa-nies through the exchanges through which individual and smallgroup insurance will be sold (the states are given the option ofincluding employees of large employers) ." Each state isrequired to organize an exchange (if it does not, the federal gov-ernment will set up one for it)." The exchange will determinewhich insurance companies can participate." The federal gov-ernment will give money to states to support state rate-review pro-grams.' 8 States receiving this money must makerecommendations to the exchange about excluding insurers thatshow a pattern of "unjustified" increases.' 9 It is expected that theexchanges will use their purchasing power to bargain withplans;o with the power to include or exclude plans from partici-pation, they can insist that insurers do their bidding on any mat-ter. It is a simple equation: do as the exchange wants, or do notsell through the exchange. While there is a pretense that theexchanges are state activities, the federal government sets thestandards for their operation and for the certification of plans toparticipate in them. Rules promulgated by the federal govern-ment override inconsistent rules of the exchanges.2 ' Insurers arerequired to charge the same rates for people buying in theexchange and for people who buy outside the exchange.22On the surface, this complex and pervasive regulatory struc-ture appears to involve only insurers. But it affects everyone.The regulatory scheme restricts what products the insurancecompanies can sell; they can offer only policies that fit the fed-eral mold. Any deviation to accommodate the market must meetfederal standards. This will impair their ability to meet consumerdesires and will reduce the choices available to people. Squeezedbetween implicit or actual price controls and the federal govern-ment's ability to dictate what they must cover, the insurers may14. Id. § 1003, 124 Stat. at 139-40. See also id. § 1311(e) (2), 124 Stat. at178 ("[H]ealth plans seeking certification as qualified health plans [must] sub-mit a justification for any premium increase prior to implementation of theincrease.").15. Id. § 1312(f), 124 Stat. at 183.16. Id. §§ 1311, 1321, 124 Stat. at 173-81, 186-87.17. Id. § 1311(d), 124 Stat. at 176-78.18. Id. § 1003, 124 Stat. at 140.19. Id. § 1003, 124 Stat. at 139.20. See Six Ways Health Reform will Help Small Businesses, WHTTE HouSE,http://whitehouse.gov/healthreform/small-business (last visited Apr. 2, 2011).21. PPACA § 1311(k), 124 Stat. at 181.22. Id. § 1301 (a) (1) (C) (iii), 124 Stat. at 163.383384 NOTRE DAME JOURNAL OF LAW ETHICS & PUBLIC POLICY [Vol. 25not be able to survive in business. The federal government maydecide it is not worth maintaining insurance companies as defacto agents and take over the payment system itself (with insur-ance companies being reduced explicitly to contract claims-pay-ing agents). The single-payer system that many liberals preferwill thus be achieved. The government will directly control eve-ryone's health care.Even before the system deteriorates into a single payer, thegovernment will be requiring people to buy insurance that itdetermines they should have, and at the price it effectively sets.This scheme assumes the wisdom of regulators to make a veryfine calibration, and to do it for everyone, regardless of theirvarying circumstances. They are certain to be wrong in manycases.The government is forcing people to buy insurance coveragethat is more comprehensive and more expensive than they wouldchoose on their own. This is particularly true with respect to theyoung and healthy. By requiring insurers to charge the samepremium for all members of a plan regardless of health risk andwith only a modest adjustment for age, the new system dictatesthat the young and healthy subsidize the cost of insurance forthose who are older or sicker. Significantly, the mandate on indi-viduals to buy insurance is not an effort to be certain that peoplehave coverage to protect themselves. The mandate in the cur-rent scheme is a way of taxing the young and healthy. Those whohave healthy life styles will be subsidizing insurance for those whoengage in risky behavior that results in illness and increases theirhealth costs.The new system reduces individuals' choices in a more fun-damental way. When insurance companies have to attract cus-tomers (employers or individuals), they must develop a productthat best satisfies consumer needs at a price they are willing topay given the economic context in which they operate. Buyerscan choose among competing products that have different mech-anisms for reducing costs and different coverages. Under thenew system, however, the federal government makes these deci-sions-in the first instance by Congress and then by the govern-ment agencies that will implement the legislation.The federal government is the main decision maker, replac-ing insurers, customers, and state regulators. States have a role-but only if consistent with federal requirements. Insurers,employers, and consumers have choices-but only in the tightbox constructed by the federal government. Government deci-sions will increasingly supplant individual choice.2011] OBAMACARE: THE BIRDS STILL SING AS FREEDOM ERODESThe government does not have to meet a market test. Theonly test it must meet is a political one-and of course it hasbeen politically advantageous to offer benefits and require othersto pay the cost (those buying insurance and the taxpayer subsi-dizing the purchase).Stakeholders will attempt to influence the government'sdecisions to win favorable treatment for themselves. There willbe an ongoing orgy of lobbying. While people may find this dis-tressing, it is inevitable that people directly affected by govern-ment action attempt to influence those decisions. The lobbyingand deal making that greased enactment of the new regime werenot ended by its passage. On the contrary, they will be a perma-nent feature of the health care landscape.Special interests with the money to successfully lobby for afavorable ruling by an administrative agency or a change in thelaw by Congress will benefit. Individuals' choices will be limitedto what the government and the special interests agree on. Thebiggest loss of freedom that the new program entails is that indi-viduals' ability to choose what they want from competing insur-ance plans is subordinated to government decisions made on thepremise that it knows best what individuals should have and howmuch they should pay. The scheme is the quintessential one-size-fits-all model. Americans will bridle at this approach. Theyalready are, even though the birds are still singing.385

Obamacare: The Birds Still Sing as Freedom Erodes

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Obamacare: The Birds Still Sing as Freedom Erodes

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