Healthcare Is An Expense Problem, A Law Problem, Not A Revenue Problem
January 26, 2017 by Jon B. Hurst, President
ObamaCare (ACA) is under the microscope for repeal and replacement this year in Washington DC. And here in Boston, yet another state commission on healthcare provider prices is grappling with the fact that in the 11 years since we passed RomneyCare, our healthcare costs have annually increased about 4 times the rate of inflation. Unfortunately for Main Street, those increases haven’t been spread equally either—small businesses and their employees have seen far higher premium increases than those experienced by big business or big government programs.
Despite a good economy, these are troubling times in Massachusetts due to the interwoven healthcare cost issues affecting employers, consumers and taxpayers.
Local small businesses, employees and consumers have seen their premiums rise far faster than their sales and family incomes. RAM members have reported average annual premium increases of 12% each year over the past decade. Likewise, state government has seen their costs for subsidized commercial and Medicaid plans under ObamaCare rise as well, as a significant number of consumers have made the ACA incented, financial decision to take the very generous, low cost, taxpayer subsidized options through the Connector.
And now, the Baker Administration is proposing a costly $2000 per employee tax on businesses employing 11 or more full time equivalents, and having less than 80% employee participation in their health plan. That 80% requirement is a near impossible participation rate for private employers—large and small, and likely only taxpayer funded public employers regularly achieve such a high take up rate.
This tax translates to a $1 per employee, per hour tax for Massachusetts employers. The tax is applied even though small businesses have neither the “carrot”—low premiums compared to big government and big business alternatives—to incent their employees to take their offer; nor do they have the “stick”—a disqualification from taxpayer subsidized plans for employees turning down the offer of coverage.
Employees make common sense economic decisions on their health plan purchases—whether to take a spouse’s plan, a parent’s, Medicare, or a subsidized Connector plan. Under the Baker Medicaid Tax, it doesn’t matter—you are taxed under all of those scenarios. Employers who do the right thing by offering coverage shouldn’t be blamed for—or taxed for—an employee’s decision to forgo coverage. This is especially true when such decisions are influenced by government created inequities in the marketplace. If you have a two earner family; one spouse works for a private employer (particular a small business), and the other for a taxpayer-funded government entity, you are almost certain to see that family choose the very generous, lower premium, taxpayer funded plan supplied by the municipality or the state agency.
And equally important, employers should not be expected to pay for out of control healthcare costs resulting from a lack of regulatory action against the healthcare industry which continues to grow far more rapidly than the rest of the economy.
The Commonwealth has a $600 million MassHealth or Medicaid “deficit”—not surprising given the fact that the tax expenditures have more than doubled over the last decade since we “reformed” healthcare. Small business premium costs have increased even more over the same period, so we certainly feel the bureaucrats’ pain. So what are the alternatives to just slapping Main Street with a harmful and job killing new tax? Here are some thoughts:
- Reform the ACA by Eliminating Small Employer Discrimination Under the Law & By Creating More Affordable Public Policies. Give small employers the ability to offer similar plans with similar premiums as large employers. Unfair risk pool cross subsidies; more mandated benefits; and the lack of tools under the law including cooperative buying options, and consumer premium incentives for provider shopping and wellness activity—all add up to far higher premiums due to government created discrimination. Furthermore, extremely generous incentives embedded in the ACA have driven more consumers to make logical financial decisions, and to be dependent upon government for their healthcare. Under the old RomneyCare standard passed in the Commonwealth 11 years ago, taxpayer subsidized plans were available to those up to 300% poverty level. ObamaCare upped that incentive nationally for government coverage to 400% of poverty level. Though politically difficult, lower the eligibility cap nationally down to 300% poverty level for taxpayer subsidized plans.
- Empower the Consumer Not the Provider with True Market Reforms. While some would call for very stringent regulatory solutions, or even government run healthcare to deal with the spiraling healthcare costs, we should first implement overdue, fair, market oriented payment solutions to reform the problem. We should properly weight provider reimbursements on consumer value; and consumer plan choices and premiums should be based on the real price differentials of one high cost provider system versus a lower cost option. Limited networks in both the commercial and Medicaid populations should be the norm; and commercial premium differentials for limited networks (now capped at 14%) should be market based (closer to 40%). Real cost based pricing creates financial incentives for consumer and provider alike to make good decisions. Current government restrictions, as well as the lack of consumer pricing transparency and incentives, benefit high cost systems by limiting payment differentials, perpetuating both the provider charged expense and consumer choice problem.
- Spend Budget Dollars Wisely. State government should keep their spending in line with economic reality for working families, taxpayers, and employers. Increasing Medicaid line items—such as the 23%, or $130 Million increase this fiscal year for the unionized personal care attendants, was neither affordable nor warranted. Furthermore we need more state “fix-it” thinking on MassHealth, like we have seen with the MBTA. Employers neither caused the problem, nor asked for the ACA—providers did. The dollars you currently have from taxpayers should be sufficient for those healthcare providers with never ending appetites. Tell the providers: “This is what you are getting; cut your expenses, find new customers, change your business model—whatever you need to do, just like any other employer in the state must do to stay in business and to grow.”
Healthcare costs in Massachusetts are the highest in the country; and over the last decade the new state agencies and commissions have created countless studies placed on shelves to collect dust. Instead of placing blame on employers, we need our government leaders to look in the mirror and fix the problems, not pass the bill for a problem we didn’t create.