PIPES PLANT H E T O P T E N WAYS T O D I S M A N T L E A N D R E P L AC E O BA M AC A R EPresident and Chief Executive Ofcer of the Pacic Research Institute FOREWORD BY ARTHUR B. LAFFER

THE

SALLY C. PIPES

Copyright 2012 by Sally C. Pipes All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopy, recording, or any information storage and retrieval system now known or to be invented, without permission in writing from the publisher, except by a reviewer who wishes to quote brief passages in connection with a review written for inclusion in a magazine, newspaper, or broadcast. Library of Congress Cataloging-in-Publication Data Pipes, Sally, 1945The pipes plan / Sally C. Pipes. p. cm. Includes bibliographical references and index. ISBN 978-1-59698-310-6 1. Health care reform--United States. 2. Medical care--United States. 3. Medical policy--United States. I. Title. RA395.A3P56 2012 362.10973--dc23 2011047344 Published in the United States by Regnery Publishing, Inc. One Massachusetts Avenue NW Washington, DC 20001 www.regnery.com Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1 Books are available in quantity for promotional or premium use. Write to Director of Special Sales, Regnery Publishing, Inc., One Massachusetts Avenue NW, Washington, DC 20001, for information on discounts and terms or call (202) 216-0600. Distributed to the trade by Perseus Distribution 387 Park Avenue South New York, NY 10016

ForeworDbY arThur b. laFFer

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his is the book that will lead the way to repealing one of the most disastrous pieces of legislation in modern American history. The Patient Protection and Affordable Care ActObamacares official nameexceeds 2,000 pages and aims to put one-sixth of the U.S. economy under the federal governments control. Thousands more pages of dense regulations are currently being cobbled together by a bizarre cabal of government bureaucrats, politically favored special interests, and well-connected ideologues. Not surprisingly, Obamacare is gumming up the American health care systemand the entire economywith alarming speed. Sally Pipes was among the first to lay bare the implications, deceptions, and economic insanity of the act now, think later mentality that drove the laws passage. Her 2010 book The Truth About Obamacare became an overnight sensation, educating countless Americans in simple terms about the contents of President Obamas signature piece of legislation. Her new book, The Pipes Plan, lays the groundwork for the laws repeal. Sally has given us an essential handbook for rolling the Affordable Care Act backand replacing it with real reforms that improve American health care and reduce long-term costs.

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Foreword

In ten succinct and well-argued chapters, Sally surveys what Obamacare actually doesand what will happen if the law is not scrapped soon. She shows how Obamacare is already undermining the American medical systems ability to provide revolutionary cures and treatments to patients. The heavy hand of government could curtail an era of ground-breaking innovation in health care before it even starts. Our lives literally depend on the outcome of this fight. In courtrooms around the country, judges are rendering their verdicts on the constitutionality of the presidents reform plan. The Supreme Court will surely have its say. But the American people can have the final word, by pressuring their elected representatives to repeal and replace Obamacare. Of course, full repeal can only happen in early 2013 if Republicans take the presidency and Senate and hold onto their majority in the House. In the meantime, bills have been introduced to repeal specific parts of the law. There was a time when we could go about our lives secure in the knowledge that the uniquely American dynamic of freedom and enterprise would continue to govern our society. Obamacare threatens that dynamic. The Pipes Plan sounds the alarmand provides us with the intellectual firepower to make a difference. So whether youre a patient with an acute or long-term medical issue struggling to make sense of the future, a legislator in search of sensible alternatives, or a concerned citizen looking to engage in the public debate, The Pipes Plan is an essential resource. Read it, put it on your bookshelf, and pass it on to your family, friends, and colleagues.

introduction

Making rePeal a realiTY

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n March 23, 2010, President Obama forever altered the American health care system by signing the Patient Protection and Affordable Care Act (PPACA) into law. Its advocates promised that the measure would reinvent American health care and reinvigorate the American economy. As House Minority Leader Nancy Pelosi (D-CA) put it, This bill is not only about the health security of America, its about jobs. In its life it will create 4 million jobs, 400,000 jobs almost immediately.1 Boy, were they wrong. Its becoming more apparent with each passing day that Obamacare will devastate American health care as well as the health of our citizensand further damage our countrys fragile finances. The PPACA is expected to cost in excess of $2.5 trillion over the decade beginning in 2014 because of the expansion of Medicaid, federal tax subsidies, the hiring of 16,000 new IRS agents, and the bans on lifetime and annual coverage caps and on discrimination based on pre-existing conditions.2 Implementing the law has been extremely challenging. Its tough to completely remake our health care system overnight.xiii

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After all, it already accounts for one-sixth of the American economy, about $2.5 trillionand in July 2011 authors from the Centers for Medicare & Medicaid Services (CMS) reported in the journal Health Affairs that by 2020, national health care spending will rise to $4.6 trillion, one-fifth of the American economy.3 Certain provisions of the presidents reform plan kicked in immediately. But many of Obamacares main provisions and cost drivers do not take effect until 2014. As of mid-July 2011, there are more than 9,000 pages of rules and Federal Register notices related to Obamacare.4 Consequently, there is still time to reverse course. Our congressional leaders can repeal Obamacare and replace it with marketbased reforms that actually expand access to coverage, provide quality care, and reduce the cost of health care. This book provides a blueprint and a roadmap for accomplishing that mission. It examines ten key components of Obamacare and shows why each one doesnt work, how to eliminate it, and what reform to put in its place. In Chapter One, well see how Obamacare is already failing in two key respects: it isnt dramatically expanding coverage or bringing down health care costs. These were the two main goals President Obama wanted to achieve with Obamacare. But several analyses of the law released since its passage portend fiscal and health care disaster in the very near future. Solution: Stop the madness and early in 2013, under a new Congress and a new administration, repeal the legislation and replace it with a plan that delivers affordable, accessible, quality care for all. Start by implementing reforms that empower patients,

Introduction

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increase their autonomy, and foster competition among insurers and providers. Chapter Two examines Obamacares mandates on health insurers. These new controls, many of which were implemented on September 23, 2010, will dramatically inflate the cost of insurance. Solution: Allow for a real health insurance market to develop with high-deductible plans coupled with deregulated health savings accounts. Chapter Three takes a look at Obamacares state-based insurance exchanges, where the law expects individuals and small businesses to shop beginning in 2014 for tightly regulated coverage bearing a government seal of approval. Not only will these exchanges limit consumers choicestheyll also be incredibly expensive for taxpayers and patients alike. Solution: Allow consumers to purchase insurance across state lines. Chapter Four breaks down the notorious individual mandate requiring Americans to obtain coverage and the employer mandate that penalizes employers of more than fifty employees if they dont provide them with insurance. These mandates could backfire and actually diminish the availability of insurance, as several prominent studies from the likes of McKinsey & Company, the National Federation of Independent Business, and former Congressional Budget Office Director Douglas Holtz-Eakin have outlined. Solution: Eliminate both mandatesand then reform the antiquated tax system underpinning employer-based insurance in this country. Allow

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individuals as well as businesses to purchase insurance with pre-tax dollars. And once a competitive market is working, remove the tax advantage for both employer-based and individual insurance. Chapter Five examines the new taxes Obamacare imposes on drug, medical device, and insurance companies. These new fees will hamper medical innovation and threaten the supply of high-tech treatments that improve and extend our lives. Solution: Repeal Obamacares new taxes. Chapter Six details how the Obama administration has taken to exempting certain favored parties from some of the laws most stringent dictates, including annual benefit limits and minimum medical loss ratios. Officials have granted waivers to nearly 1,800 organizations covering 3.4 million workers, over half of whom are union members. In June 2011, HHS announced that no more waivers would be granted after September of that same year.5 If the rules are so consumer-friendly, why the need for so many waivers? These rules distort the health care marketplace and unwittingly limit the availability of affordable insurance options. Solution: Repeal the annual benefit requirements and medical loss ratio rules. Chapter Seven shows how Obamacare exacerbates Medicaids fiscal problems. The law adds at least 18 million more patients to the program without addressing any of its structural flaws. Solution: Replace the existing joint federal-state Medicaid funding structure with vouchers and/or block grants.

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Next, in Chapter Eight, well dig into the CLASS Acta component of Obamacare that establishes a new federal long-term care insurance program. While billed as fiscally responsible, CLASS is yet another unfunded public entitlement set to saddle the federal government with billions in future liabilities. Even several Democrats want to see it repealed, including Sen. Kent Conrad (D-ND), who called it a Ponzi scheme, 6 and in October of 2011, Secretary of Health and Human Services Kathleen Sebelius announced that financial problems would prevent the implementation of CLASS at this time.7 Solution: Repeal the CLASS Act so that it can never be implemented, and strengthen the private longterm care insurance market. Chapter Nine takes a look at another program benefiting seniors and facing an uncertain fiscal futureMedicare. Obamacare fails to fix the insurance entitlements problemsand actually makes some of them worse. Solution: Move to a system of means-tested Medicare vouchers, so that consumers have an incentive to shop around and save money on their care. Raise the eligibility age for Medicare. And curtail governments undue influence in the health care market for seniors. Finally, Chapter Ten lays out how we can care for the chronically illand why Obamacares approach to this segment of the patient population is flawed. The law has failed to expand coverage to high-risk patients even as it raises prices for everyone else. Solution: The federal government must invest sufficient resources in high-risk pools and empower

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state-level officials to operate their programs without undue federal interference until the country has a properly functioning individual insurance market. Since the day the president signed the Affordable Care Act into law, a clear majority of American votersreaching as high as 63 percenthas favored its repeal.8 Prior to Obamacares passage Nancy Pelosi famously stated that Congress would have to pass the bill so that you can find out what is in it.9 The American people have found out what is actually in the lawand theyre not pleased. The clock is ticking: our health care systemand our nations fragile economyare under imminent threat from the presidents poorly conceived attempt at reform. Lets now see how our leaders can go about repealing and replacing Obamacare with a law that actually does provide affordable, accessible, quality care for all Americans.

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