Last week, I wrote about how the Patient Freedom Act—introduced by senators Bill Cassidy (R-LA) and Susan Collins (R-ME)—would dramatically expand taxpayer funding of abortions, even when compared to Obamacare.
But that’s not the only way in which their bill (S. 191) exceeds Obamacare’s standards for government intervention. Other details of their legislation reveal why its short title serves as a misnomer.
1. It Has More Spending Than Obamacare
The PFA (text available here, and a summary available here) gives states a choice of three options regarding the health care system within their borders. They can either 1) essentially keep Obamacare in place; 2) use an allotment, based on 95 percent of a state’s Obamacare spending, to create their own insurance regime (albeit with several federal mandates remaining); or 3) go out on their own and not receive any federal funds.
Section 104 of the bill contains a complicated formula to determine state allotments for option two—the default option for states under the PFA. Section 104(b)(2) provides that states that did not expand Medicaid under Obamacare will receive 95 percent of the amount they would have received had they accepted the Medicaid expansion.
In other words, rather than reducing Obamacare’s spending, the Patient Freedom Act could well increase it—by giving new Medicaid funds to states that declined to expand.
Medicaid reform should not disadvantage states that did not expand Medicaid under Obamacare. But the proper solution to that problem does not lie in adding to Obamacare’s nearly $2 trillion in spending over the coming decade. Instead, it lies in freezing enrollment in the Medicaid expansion, unwinding that new spending, and transitioning beneficiaries over time off the rolls and into work.
2. It Repeals Health Savings Accounts (Not Obamacare)
The Patient Freedom Act includes what amounts to “Lie of the Year” redux: if you like your Health Savings Account (HSA), you can’t keep it. While the bill does not repeal any of Obamacare—the word “repeal” appears exactly zero times in its 73 pages—it effectively ends the current HSA regime, making Health Savings Accounts less attractive to individuals.
Current law makes HSAs tax-privileged in two ways. First, contributions to an HSA can be made on a pre-tax basis—either via a payroll deduction through an employer, or an above-the-line deduction on one’s annual tax return. Second, HSA distributions are not taxable when used for qualified health expenses under Obamacare.
The Patient Freedom Act would abolish the first tax preference while retaining the second. Individuals must contribute to an HSA using after-tax dollars, but their contributions could grow tax-free, and distributions would be tax-free when used for qualified health expenses, as under current law. Section 201(b) prohibits additional contributions to “traditional” HSAs following enactment of the bill, instead diverting new contributions to the Roth (i.e., after-tax) HSAs created by the measure. While the bill does not require individuals to convert their existing HSAs to the new Roth HSAs, account administrators (e.g., banks, mutual funds, etc.) could require their customers to do so at some point—and individuals could face a hefty tax bill when they do.
Health Savings Accounts are a proven vehicle to help control the growth of health costs. While Obamacare included new restrictions on HSAs, Democrats did not upend the accounts nearly as much as contemplated by the Patient Freedom Act. Significantly reducing the tax preferences for Health Savings Accounts would not lower health care costs. If anything, it would raise them.
3. It Supports Government-Imposed Price Controls
In recent years, some Americans have faced the problem of “surprise” medical bills. These can occur when individuals seek emergency care at (or are taken by ambulance to) an out-of-network hospital, or when some providers at a facility remain outside an insurer’s network (e.g., a surgeon and the hospital are in-network, but the anesthesiologist is out-of-network). To address these issues, Section 1001 of Obamacare included new mandates that insurers not impose prior authorization requests on emergency care, and require only in-network cost-sharing for all emergency care, regardless of whether the patient was treated at an in-network hospital or not.
Section 121(a)(2) of the Patient Freedom Act goes further than Obamacare, imposing maximum charges for emergency services: 85 percent of insurers’ usual, customary, and reasonable charges for physician care; 110 percent of Medicare payment rates for inpatient and outpatient hospital care; and acquisition costs plus $250 for drugs and biological pharmaceuticals.
While the issue of “surprise” medical bills does present a policy problem—individuals caught in the middle of stand-offs between providers and insurers regarding payment rates—there are other ways to resolve it short of government price controls. To borrow a medical metaphor, the PFA uses a blunt knife when a sharp scalpel would be more appropriate.
4. It Would Create an Automatic Enrollment Program
Sections 105(c) and 107(c) of the PFA create parameters through which states can automatically enroll their residents in health insurance—complete with restrictions on the type of coverage states can auto-enroll individuals into. While individuals can opt out of insurance should they wish to do so, this mandate-without-a-mandate could prove even more problematic than Obamacare’s requirement that all individuals purchase health coverage.
Over at the Weekly Standard, Jeffrey Anderson explains all the reasons why automatic enrollment represents bad policy. Much of it comes down to two questions: With the most recent enrollment estimates in Obamacare’s Exchanges dating back to June 30—seven months ago—how on earth will states determine who is insured, and who should be auto-enrolled in coverage, in real time? And even if states could compile all that data, why should individuals have to give their personal insurance details to another government database?
Nearly four years ago, then-Rep. Bill Cassidy said this about the IRS’ power in enforcing Obamacare:
Obamacare requires thousands of IRS agents to implement the law…They’re going to go through the small businesswoman’s books, to make sure that she actually has the number of employees that she claims, and that she has adequate insurance. That’s a little scary when you see what the IRS has been doing with their political targeting.
Granted, the PFA doesn’t have an employer mandate to enforce, but why is Sen. Cassidy’s “solution” to big government overreach at the federal level allowing states to impose their own intrusive requirements on individuals and businesses…?
Conservatives looking to repeal Obamacare should be disappointed by the ways in which the Patient Freedom Act exceeds Obamacare in several key respects, while liberals will undoubtedly oppose its (insufficient) attempts to devolve or deregulate health care to the states. Its Senate sponsors notwithstanding, the bill appears to lack a natural constituency. Or, to put it another way, if the Patient Freedom Act is the answer, then what exactly is the question?