- - Wednesday, July 23, 2014

We miss the point and get bogged down by debating Obamacare subsidies via state exchanges vs. federal exchanges. What we should be asking is: Why do health care and insurance cost so much?

About 5 million Americans face quadrupled health insurance premiums if they lose their Obamacare subsidies, as one federal appeals court has decreed this week.

For those people, the subsidy averages about 74 percent of their premiums, worth thousands of dollars a year. They’re paying only one-fourth of the premiums so their cost quadruples without a subsidy. That simply brings their payments into line with everybody else’s, and the savings to taxpayers would be tens of billions annually. (The exception: Some would keep their subsidies since they bought through state exchanges.)


SEE ALSO: Contrasting judgments on Obama’s health care hours apart; appeals court calls subsidies unlawful


But we’ve been distracted from the real debate: Why do health care and insurance cost so much?

Plenty of blame belongs on decades of federal policies that have overregulated health care; constantly expanded what insurance coverage is mandatory and forced consumers to pay for other people’s care in addition to their own — a hidden tax.

Sadly, Obamacare has worsened all those trends, especially with more regulations and more mandates, and by shifting costs more than ever through subsidies.


SEE ALSO: Undercover probe finds health law failings


Hospitals are regulated by 30 federal agencies, plus state overseers. Even before Obamacare, a major study counted 130,000 pages of federal rules and regulations on health care — three times the elaborate red tape of the IRS code. The study noted, “Paperwork adds at least 30 minutes to every hour of patient care provided and, in some settings, adds an hour of paperwork to every hour of patient care.” The extra cost of time doctors spend dealing with this bureaucracy is stupendous. And non-productive.

One Duke University researcher calculated in 2004 that medical regulations create extra annual costs of $339 billion, twice the value of any benefits added, concluding, “The high cost of health services regulation is responsible for more than 7 million Americans lacking health insurance. …. Moreover, 4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000).”

Medication costs soar because the Food and Drug Administration process is a nightmare. If a new drug can be approved within seven years and “only” costs a few hundred million dollars, it’s considered fast and a bargain. Again, blame federal regulations.

How about holding down premiums by buying bare-bones insurance? Over 2,000 state laws dictate mandatory state-level add-ons that range from eye care to acupuncture to hairpieces. Taken alone, each may be small, but collectively they accumulate to build massive expense into each policy. And you’re not allowed to buy from a low-mandate state unless you live there. On top of state laws, Obamacare requires “free” contraception and plenty of other dictates. Massachusetts and Washington state now interpret the mandate to require sex-change surgery as a mandatory benefit.

None of these benefits are ever covered for free. All are factored back into the premiums, just as adding options drives up the cost of an auto, a washing machine, a computer or any other product.

Even for the same services, medical providers bill widely varying amounts to different patients and different insurers. The lowest rates are usually those paid by Medicare and Medicaid, often less than the cost of providing care. This happens because politicians make sweeping promises of benefits but like many debtors they become evasive when having to pay. Doctors, hospitals and clinics accept these lower amounts rather than turn away patients, and make up the difference by raising their charges to their other patients. (Some physicians instead have quit accepting those patients.) The highest charges are billed to uninsured patients who have no champion to negotiate volume discounts.

These underpayments from Medicare and Medicaid are covered by charging everybody else more — yet another “hidden tax.” The massive variables make it impossible to calculate each overcharge with precision, so there’s spirited debate about how much cost-shifting adds to overall health care bills and thus to insurance.

These government intrusions into the health care marketplace have driven costs up, not down. Obamacare doubles down on these trends. It increases regulation, increases mandatory benefits, and shifts costs via billions of dollars in subsidies.

President Obama promised that the Affordable Care Act would save a typical family $2,500 a year in premiums. Instead, it has raised their premiums.

Story Continues →