Articles

ObamaCare's Ever-Rising Price Tag

June 01, 2010

White House Senior Adviser David Axelrod argued earlier this year that health-care reform would become more popular after it passed, boosting Democrats in the midterm elections. "We have to go out and sell it," he told the National Journal, adding in an interview in Newsweek that "people [will] see the benefits that accrue to them."

That's not quite how it has worked out. ObamaCare is becoming more, not less, unpopular. The Rasmussen poll reported the week after health reform's passage in March that 55% of likely voters supported its repeal while 42% did not. A Rasmussen poll last month showed that 56% backed repeal; 39% did not.

Some may argue that President Obama has been able to extol the legislation's supposed virtues only sporadically, instead having to confront other challenges from the Gulf oil spill to foreign policy controversies. But the real problem is ObamaCare's substantive defects, some only now coming to light. Consider the April 22 analysis by Medicare's chief actuary, Richard Foster, which blasted to smithereens many of Mr. Obama's claims for the bill.

For starters, Mr. Foster estimated Americans would pay $120 billion in fines for not having adequate insurance coverage and that 14 million people would lose their coverage as rising costs led companies to dump it. Those effects are not in keeping with Mr. Obama's promises that if people liked the health insurance they had they could keep it, and that the reforms would provide universal coverage.

Finding it hard to cover costs under the bill's formulas, according to Mr. Foster's analysis, doctors would refuse new patients and one out of every six hospitals and nursing homes could start operating in the red. And while Medicaid would cover 16 million more people, there might not be enough doctors to treat them.

Because of new taxes, Mr. Foster rightly claimed that sick people would face "high drug and device prices" and everyone would pay higher premiums—again, exactly the opposite of what Mr. Obama said.

Then in May, the Congressional Budget Office updated its cost projections. It found that the new health legislation would cost $115 billion more than estimated when it was enacted.

That's not the end of the bad news. October will see the first round of Medicare cuts. Up to half of seniors will lose their Medicare Advantage coverage (a program that allows seniors to receive additional services through a private health plan), or at least some of their benefits under this program. Watch for the administration to try to keep companies from notifying their customers of benefit cuts or premium increases before the election. Meanwhile, the Daily Caller website reported yesterday that the administration has missed deadlines for issuing four sets of regulations specified by the bill and lacks a master time-line for the other required regulations.

Drug and medical device companies are already making provisions for the new taxes that kick in next year. This means less investment in plants and equipment and smaller R&D budgets. Big layoffs, especially in the pharmaceutical industry, will result as companies confront this expensive new reality.

All of this represents a great political challenge to the administration and the Democratic Party this fall. Doctors, nurses and hospital workers impacted by health-care reform's adverse effects will speak more often to more people and with greater passion and credibility than will the president and his allies. So too will the millions of people who work for insurance companies, drug companies, device manufacturers and other health-care providers.

Then there are employers and their workers. According to a survey by Towers Watson, a human resources consulting firm, 88% of companies plan to pass on increased health-care benefit costs to employees, 74% plan to reduce benefits, and up to 12% will drop all coverage for employees. Retirees won't fare well either: 43% of employers that now provide retiree medical benefits are likely to reduce or eliminate them thanks to the new health legislation.

Employers will not wait until the last moment to spring changes on their workers. They understand it is in their best interest to full educate employees about the ramifications of the new health-care bill. Many have already begun helping employees understand why companies are being forced to make inevitable changes.

The health-care concerns of millions of Americans will ripple through the electorate before November. When joined with other voter concerns on jobs, spending and deficits, these ripples are likely to create what analysts call a "wave" election, which will wash away effective Democratic control of Congress.

This article originally appeared on WSJ.com   on Wednesday, June 2, 2010.

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