New study says healthcare reforms make business owners nervous

The National Federation of Independent Businesses released a study this month called "Small Businesses and Health Insurance: One Year After Enactment of PPACA". It appears they have found that small business owners are a bit nervous...

Read the full report here.

A finding that stuck out to me was that businesses not currently offering health insurance have no incentive to start offering this benefit after the enactment of the Patient Protection and Affordable Care Act. Once again we see that government intervention in the marketplace discourages incentives for the individual and business and ends up costing everyone more money and fewer choices.

Generally when the government meddles in the private sector, it is bad news and results in limited choice. Say for instance, investing in electric cars or providing tax incentives to theme parks.

HHS cuts premiums in Kentucky

This week, Health and Human Services (HHS) cut premiums in 17 states by 40 percent for individuals with pre-existing conditions. Kentucky is one state that will see these premiums decline.

One reason for the cut is the low enrollment in the law's Pre-Existing Condition Insurance Plan. To date only 18,000 Americans have signed up for the plan, while the government had predicted that 375,000 Americans would enroll in this plan in 2010.

The question remains, why have the numbers for enrollment in the high-risk pool remained so low? Will the federal government's incentives be enough to move hundreds of thousands to this plan? And beyond that, what will the impact be to the private insurance market, specifically in Kentucky?

Is this the type of reform that will drive costs down and spur innovation in the market? The federal government's increasing role in our health care should cause concern. In Kentucky, we remember the failed state-run experiment in the 90's all too well.

The perverse incentives of federal funding

Medicaid spending across the country continues to grow at an unsustainable rate. We know this all too well in Kentucky.

The Federal Medical Assistance Percentage (FMAP) rate creates perverse incentives for states to grow their Medicaid programs unnaturally and beyond state capacity in order to receive more federal funds. The matching rate's design intends to provide a greater percentage of funds to the most impoverished states.

However, new research by Pamela Villarreal and Michael Barba at the National Center for Policy Analysis shows that the federal government's funding has led to significant disparities.

Despite the fact that poor states like Kentucky receive a higher matching percentage from the federal government, more populous states with larger programs actually end up receiving more funds. Because there is no limit to federal Medicaid funding, states can continue to grow their Medicaid programs without facing any penalty.

A 2008 comparison of states' poverty rates and their percentages of federal funding shows the discrepancies in spending. Villarreall and Barba write, "On one end of the spectrum, high-spending New York state receives 87 percent more federal funding than it would based on its poverty population."

ObamaCare only worsens the problem with its massive expansion in 2014 of Medicaid eligibility standards to 133 percent of the Federal Poverty Limit (FPL). The federal government will fund 100 percent of this expansion at the outset, but the matching rate will decline in the years to follow. States will continue to feel the burden of strapped Medicaid budgets, but with no real incentives to stop spending.

The solution? The authors suggest increased state flexibility and capped federal funding.

Kentucky desperately needs increased flexibility and spending restraint if our Medicaid program will ever get on a path towards fiscal solvency.

ObamaCare, Medicaid and emergency rooms

According to NPR, some emergency room doctors say the Patient Protection and Affordable Care Act ("ObamaCare") will make emergency room overcrowding worse:

Hospital emergency rooms, the theory goes, get overcrowded because people without health insurance have no place else to go.

But that's not the view of the doctors who staff those emergency departments.

The real problem, according to a new survey from the American College of Emergency Physicians, isn't caused by people who don't have insurance — it's caused by people who do, but still can't find a doctor to treat them.

A full 97 percent of ER doctors who responded to the ACEP survey said they treated patients "daily" who have Medicaid (the federal-state health plan for the low-income), but who can't find a doctors who will accept their insurance...."The results are significant," said ACEP President Sandra Schneider in prepared comments. "They confirm what we are witnessing in Massachusetts — that visits to emergency rooms are going to increase across the country, despite the advent of health care reform, and that health insurance coverage does not guarantee access to medical care."

(h/t Peter Suderman)

What can Kentucky do about Obamacare?

Not only will failing to bring down Obamacare result in a loss of our personal liberties, it will also offer the equivalent of a "do not resuscitate order" for one of America's greatest founding principles -- federalism, writes the Heritage Foundation's Robert Moffit.

Moffit notes the uniquely American principle of federalism "was already on life support before the individual mandate."

In a recent edition of The Insider , he makes a strong case for state officials going to battle with the federal government over this issue -- not just because of what it will do to our health care system, but due to the precedent it will set in opening the floodgates for other government intrusion.

Of course, Kentucky officials have been very partisan, choosing to side with their political pals in Washington on this issue rather than serve the citizens they committed to protect and the Constitution they swore to uphold.

He urges state officials to:

* "Move ahead with their own agenda for health reform, not just play a waiting game until 2014, listening for Washington to tell them what to do and how to do it.

* "Seize every inch of territory in the health policy debate within the law, such as health insurance market reform."

* "Challenge every transgression of their legitimate authority if and when federal officials violate it."

* "Hold their own public hearings on the impact of the federal law on their citizens, employers, employees, insurers and medical professionals, and state agencies."

* "U.S. senators who voted to impose costly mandates on their states should be invited to state legislative hearings to give an account of their actions and explain why they believe such mandates advance the true interests of the states they represent." (Since neither Kentucky U.S. senator voted for this fiasco, we would urge, instead that House members who support it be invited to Frankfort.)

* "Invite federal officials to appear and explain how they intend to implement mandates and make them justify their proposed rules in broad daylight."

* "State legislators, in cooperation with colleagues in sister states, should make it clear that dumping hundreds of pages of complex federal rules into the Federal Register for public notice and comment is no longer sufficient."

We wonder when our Governor and Attorney General might quit just feeling good about sending out meaningless press releases full of warm fuzzies about ribbon cuttings and start getting serious about fulfilling their constitutional obligations to protect Kentuckians from an ever-encroaching federal government.

Medicaid flexibility bill proposed in Congress

Yesterday, House and Senate Republicans announced a new bill that would provide states with more flexibility to run their Medicaid programs. The proposed legislation would repeal the maintenance of effort (MOE) requirements of ObamaCare.

While ObamaCare's official Medicaid expansion does not take place until 2014, states are not allowed to scale back their eligibility levels in the interim.

An initial estimate from the Congressional Budget Office (CBO) reported that over the next five years this increased flexibility granted to states would save the federal government $3 billion. Supporters of the bill argue that the inability of state officials to manage their Medicaid eligibility standards will inevitably result in cuts to providers.

The commonwealth watched as state officials struggled to shore up the Medicaid budget deficit during this year's session, and the scrutiny will only continue until savings are realized. This type of legislation could have significant implications for future budget discussions.

The future of 'absurd' Obamacare machine

Getting rid of Obamacare's unconstitutional individual mandate will, essentially, be the end of the entire misguided health care policy.

"The individual mandate is crucial: if you knock it out, the whole Rube Goldberg machine ... simply ceases to function," said Ilya Shapiro, a senior fellow in constitutional studies at the Cato Institute, in the latest edition of Cato's Letter (not yet online).

While Kentucky's elected officials have refused to push back against this assault from Washington on our individual liberties, others, like Shapiro and the attorneys general from several states, have been warning that allowing Obamacare to stand will result in an unprecedented -- and unconstitutional -- foray of government into our personal lives.

"Upholding the legislation would allow the federal government to mandate that Americans engage in assorted activities, turning citizens into subjects," Shapiro said. "Without exaggeration, nobody would be able to claim the Constitution limits federal power."

Ultimately, the matter will be decided by the Supreme Court, which -- if history is any indication -- will do what our state should already have done: throw out the absurd policy. Of course, as Shapiro notes, that's not a certainty.

"On the one hand, it refrained from striking down such facially unconstitutional pieces of fundamental legislation as Social Security," he observes. "On the other, that legislation was unpopular and came during a time of great social upheaval.

But Shapiro ends on this positive note:

"If, as the old saw goes, 'the Court follows the election returns,' the rise of the Tea parties ... may have steeled judicial spines."

By the way, one description of a Rube Goldberg machine described it as "an expression to describe any system that's confusing or complicated and came about from Goldberg's illustrations of absurd machines."

Confusing. Complicated. Most of all, absurd. That certainly describes Obamacare and Kentucky officials' refusal to vigorously oppose it.

How ObamaCare reduces incentives to work

"We have to pass the bill so you can find out what is in it." -House Speaker Nancy Pelosi, March 2010

These infamous words take on a new meaning as we continue to discover more implications of the 2,800 page health care reform law, commonly referred to as ObamaCare.

Today in The Wall Street Journal, Daniel Kessler writes how ObamaCare impacts yet another part of our lives: it actually "punishes work." How?

Kessler points to the government-funded subsidies designed to Americans purchase health care coverage. With the onset of government-run health care exchanges in 2014, the cost of coverage will grow so much that government will offer subsidies to help citizens buy insurance. However, as incomes rise for individuals and families, the amount of their government subsidies will decrease. Kessler explains the damaging impact of such a sliding scale:

"Consider a wife in a family with $90,000 in income. If she were to earn an additional $3,700, her family would lose the insurance subsidy and be more than $10,000 poorer. In addition, she would also pay more in income and Social Security taxes. Taken together, these policies impose a substantial punishment on work effort."

In effect, the law will punish those who earn more. As the example above shows, families and individuals will all too often be incentivized to remain in lower income brackets to qualify for higher government insurance subsidies.

Kessler closes with this poignant question:

"For middle-income families, should economic success be determined by work and savings, or by participation in a government program?"

Is this what Congress was hoping to find when they passed the law?

Happy birthday, RomneyCare!

This week marks five years since then-Gov. Mitt Romney signed "RomneyCare" into law in Massachusetts. That legislation provides a sober reminder that state policy that assaults freedom can give rise to federal policy that assaults freedom. Here's a video I produced last year with the help of the Cato Institute's David Boaz and Michael Cannon that describes the trouble Romney might have as he pursues the Presidency for the next two years.



Oddly enough, Romney announced the formation of an exploratory committee for President on anniversary.

Watch Bluegrass Institute videos at our YouTube channel.

First portion of Obamacare repealed

One of many egregious portions of Obamacare, the 1099 provision, posed a particularly onerous burden on small business owners. The provision required businesses to file a 1099 form every time a vendor sold them $600 or more.

Yesterday, with a bipartisan vote of 87-12, the Senate voted to repeal this specific provision. This is the first portion of Obamacare Congress has repealed. The bill now will go to the President, whose staff has already praised the passage of the bill.

While this vote is only one small step in changing the course of the health care law, small business owners can breathe a sigh of relief not to face this burdensome provision.