Arnold Katz, CLU
The national health care law, often referred to as "Obamacare" in the press, is an enormous bill, and I have often said that I believe it would cost the country at least $3 trillion in the next ten years. As it was being passed, the administration claimed that it would cost $800 billion.
Many of you may have seen the recent press releases where the Secretary of Health & Human Services made a decision to do away with the CLASS program. This was the portion of “Obamacare” called the Community Living Assistance Services and Support Act. The administration had indicated in its projections that this act would have saved $200 to $300 billion dollars. How did they come to the conclusion that they would save $200 to $300 billion dollars? The answer is fairly obvious. Since no benefit would have been paid out for five years after implementation, the premiums coming in would have counted as revenue and would be used to offset the cost of the reform law in its entirety. It made it attractive to include it in the Healthcare Reform Act. Now, the actuaries have sat down and reviewed the actual costs, and they have demonstrated that not only will there not be any savings, but it is an unsustainable program. By doing away with the program, we probably saved the country $400 to $500 billion dollars. My opinion is that it’s a good thing. It also points out that there were mistakes made in doing the calculations in the first place.
How did the Congressional Budget Office come to the conclusion that ”Obamacare” would only be a cost of $800 billion over the next ten years? When the Congressional Budget Office was given guidelines to evaluate the program, and that is all they can work with is the guidelines, they were told to use employee costs and not employee/spouse/child(ren) costs. The provisions of this healthcare bill cover both employees and their dependents, but a lot of people never focused on that. They were not asked, in anything I can find, to calculate the cost for family members. It may have happened and someone may be able to show it to me, but I have not been able to find it anywhere.
I, for one, have learned many new things about this bill and I’ve adjusted my opinion. Former Speaker of the House Nancy Pelosi said, ”We have to pass the bill to find out what’s in it.” I no longer believe that it will be a $3 trillion cost, but the cost is moving rapidly to $4.5 to $5 trillion over the next ten years. The economy cannot sustain this type of spending, now or at any time in the future. None of us knows how the Supreme Court will rule and they certainly won't ask my opinion or yours, but they will express an opinion based on experience, knowledge, training and the Constitution. I do think they may expedite this because it is such a serious matter and will have such a dramatic impact on the country. It is conceivable that we will have a ruling from them by next June, July or August since it seems to be moving fast.
This law falls into the category of unintended consequences. Hospitals are beginning to feel the cost increases with their malpractice insurance because of the ACO program that was intended to improve patient care and improve the economics, but has actually caused a major increase in costs. Physician risk rates are going up at a rate of about 45% while hospitals and other institutions are going up at about 8%, specifically because of this law. Eventually it gets passed along to the consumer one way or another!
Small group insurance has become far less competitive and medical costs are going up at a very rapid compounded rate. The rate increases have been as much as 30% per year with few alternative carriers available. As a result of the law, the carriers will have to waive the pre-existing condition clause and provide guaranteed issue coverage. In states such as Pennsylvania where I am based, they have gone to medical underwriting to protect their future rates and to stay competitive. Also, the impact of the cost for covering children to age 26, has caused a dramatic increase in costs. When you tie the actual costs of the plan itself, the impact it is having on employers and individuals in paying premiums, and then the substantial reduction in benefits that is taking place across the country, it causes me to reach the conclusion that this bill will cost the country at least $4.5 to $5 trillion in the next 10 years and probably a great deal more.
This is only one man's opinion but as many of you have said to me, I do have some meaningful knowledge in this area. My $3 trillion cost came on the back of a piece of paper at a lunch without a computer or advisors around me, but now that I have the computer and the advisors, I'm seeing more and more problems with this every day.
Arnold Katz is a NAIFA member from Bryn Mawr, Pennsylvania. He is a past president of AHIA, NAIFA's former health care conference.
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