The Business of Health Care

Health Care Law Supporters Ought to Be Sentenced to Serve as Governors

During the debate two years ago over the health care law—which I called an historic mistake because it expanded a health care delivery system we already knew was too expensive, instead of taking steps to reduce its cost two years ago—I suggested to our colleagues on the other side of the aisle who were supporting it that, if they voted for it, they ought to be sentenced to go home and run for governor and see whether they could implement it over an eight-year period.

Governors have long wrestled with the rising costs of Medicaid, paid for partly by the states according to rules set in Washington, and the question of how to deal with public education, especially higher education. Some 30 years ago, when I was a young governor, I was still struggling with the fact that at the end of the budget process, we had money either to put into higher education or into Medicaid – but the rules from Washington said it had to go to Medicaid.

I remember going to see President Reagan and asking: ‘Why don’t we just swap it, Mr. President? Let the federal government take all of Medicaid. Let the states take elementary and secondary education.’ That didn’t happen, and gradually, the increasing Washington-directed costs have distorted state budgets so much that now 24 percent of the state budgets go to the Medicaid program.

Because of the health care law, we are going to add 25.9 million more Americans to Medicaid, according to the Medicaid Chief Actuary.

Our former governor, Governor Bredesen, a Democratic governor, estimated that between 2014 and 2019 the expansion of Medicaid would add $1.1 billion in new costs to the state of Tennessee.

Most people do not realize the effect this will have on higher education. For one thing, the health care law is raising costs for students who borrow money to pay for school. Most people are not aware that the federal government borrows money at 2.8 percent and loans it to students at 6.8 percent— and it has taken $8.7 billion in those so-called profits and spent it to pay for the health care bill. If it did not do that, it could lower the interest rates on student loans, according to the Congressional Budget Office, to 5.3 percent and save the average student $2,200.

It also raises the price of tuition. Last year in Tennessee, the state’s Medicaid costs went up by 15.8 percent. Spending for the University of Tennessee and community colleges went down 15 percent. Then the result of that was tuition went up in our state by about 8 percent. That was true all across our country.

The health care law mandates that the states spend more money on Medicaid, and, as a result, the state cuts the money it is spending for the University of Tennessee. In order to keep the quality of education up, tuition has to go up. So students are paying more for tuition and they are paying more for interest rates on their student loans directly because of the health care law.

President Obama should not be blamed for the last 30 years of rising Medicaid costs, but he should be held responsible for making it worse.

And it’s not just the states that will suffer from the high cost of the new law. Businesses are already suffering, too.

After the health-care law passed, I met with a number of representatives from chain restaurants, which are among the largest employers in America. Many of those companies offer some health insurance to their employees. The CEO of Ruby Tuesday, headquartered in Tennessee, told me the cost of the health care law to his company would equal the profit of the company that year. And this is a company with several billion dollars in revenue.

Another chain told me they had decreased its goal for “employees per restaurant” from 90 to 70 employees in order to comply with the cost of the health care law. This not only raises the cost of business, but it reduces employment in the United States.

Millions of Americans, because of the health care law, are going to lose their employer-sponsored insurance, and millions of Americans will not have as many jobs because of the costs imposed on businesses such as these restaurants. With all the consequences this bill will have on state budgets, higher education, and the businesses we hope will grow, we need to start over with real insurance reforms that lower the cost of health insurance for all Americans.

Lamar Alexander is a senator from Tennessee.

10 replies »

  1. Although Lamar Alexander seems like a decent man and always has, he omits a major item:

    1. The last time I read about TennCare, the failed Medicaid expansion in Tennessee, my memory was that Tennesee has no state income tax.

    No wonder $1 billion over 5 years seems unaffordable! No wonder TennCare seemed extravagant!

    Truthfully, if the southern boundary of America was the Mason Dixon line, we would have have had universal health years decades ago. Michael Lind has written eloquently on the fatal latitude we give to Southern states.

    2. I feel certain about #1 above. Now let me try a new thought for item #2.

    The president of Singapore a few years ago proposed a new tax on small employers (I forget the reason for the tax, but bear me out.)

    An opposition party member complained that this tax might force some low-wage employers to go out of business.

    President Kwan replied, if i may paraphrase, that he wanted the stingiest employers to go out of business, so that Singapore would create better jobs.

    Honestly I do not know if this is right, or if it would cause starvation in America. But it is worth thinking about.

    2. There

  2. Ridiculous for any Republican to complain about no efforts being made to reduce costs in the ACA given that they vigorously oppose the several sensible if limited efforts to do so. But of course being ridiculous is an essential qualification for most Republicans in Congress. Until like Lamar’s former colleague Bill Frist, they leave office and then can all of a sudden talk sensibly about the topic.

    Which suggests that Sen Alexander knows the reality of what he’s saying but with the nutjobs in the Teaparty drumming Bennet and others out of Congress, what else can he say?

  3. The Affordable Care act is an attempt by the government to Regulate the Health Care Industry and to make Medical Insurance more affordable for all Americans.Health Insurance is usually less expensive when you are healthy .The benefits to Consumers with the new cahnges taking effect provides more security for Families and Individuals with preexesting medical conditions.

  4. The Health Care law may need some changes but the government have to do something to protect consumers as well as control cost and Make Health Care Cost More Affordable which does have an effect on all americans. Some people choose not to buy Health Insurance and rely on the emergency room for medical care , there are others that can not afford the cost and then there are others who want to buy but have pre exesting medical conditions .What do you do if you have to make a decision to protect the health care system and consumers. The health care system is not Broccoli you can choose not to eat broccoli for your own Health benefits it wont affect any one else neither will it affect the broccoli Market .

    If you get sick with no health Insurance and visit the emergency room the Hospital must provide care .Who pays the medical cost?. We all do. Collecting a fee from every one who file a tax return and have no health Insurance makes perfect sense. Comparing Health Insurance to Broccli i think is awfully silly . Health Insurance Is about Life and Death .If we dont treat the sick then we will have people dead in the streets of this Great Country.America is better than that.The courts i think will up held the law for the Good of the Country.They will leave Politics to the politician.

  5. “Most people are not aware that the federal government borrows money at 2.8 percent and loans it to students at 6.8 percent”

    Maybe Sen. Alexander can tell us the rates and terms for private student loans?

    “Because of the health care law, we are going to add 25.9 million more Americans to Medicaid”

    Do you mean the people now with no coverage? What would you have those people do for healthcare Senator?

    “it has taken $8.7 billion in those so-called profits and spent it to pay for the health care bill.”

    I never agree with government budgeting that robs from one program to pay for another, but both Repugs and Demos do it all the time to give the allusion that they don’t have to raise taxes or fees. Kick it on down the road.

    “Many of those companies offer some health insurance to their employees.”

    Care to tell us how many and what “some” means? Maybe we can get an idea of wages in the “chain” restaurant business to understand why those employees can’t afford health care.

    “The CEO of Ruby Tuesday, headquartered in Tennessee, told me the cost of the health care law to his company would equal the profit of the company that year.”

    Maybe we could get an idea of how much the meal cost would need to rise for patrons with full (or most) company paid good health care that would extend that benefit to restaurant employees? Why is it that restaurants depend on tips to cover their paltry wages?

    “but it reduces employment in the United States”

    Yea, employment that does not offer health insurance that maybe Medicaid has to pick up.

    Maybe the Senator can come up with a plan to cut provider costs so that more people can afford health insurance.

  6. Another question I have that nobody seems to answer. Given that states like Tennessee, Mississippi, Alabama, basically all the red states, take in SO MUCH more federal money than they give out in federal taxes, how do they justify their hatred of the federal government?

    Can we just implement a plan where states that hate the federal government so much can opt out of federal programs? The federal government bathes Tennessee in cash, and yet they do nothing but complain about it. Why is that?

  7. Complaining about the Medicaid expansion from a budget perspective is disingenous. Given that the state of Tennessee currently spends about $2 Billion per year on Medicaid, it’s hard to see how the expansion, which is almost fully federally funded, could add $1 Billion in new costs over 5 years. Even if it does, that $1 Billion in new costs would necessarily be accompanied by over $20 Billion (state contributes 0% in years 2014, 2015, 2016 and 10% in years 2017,2018 and 2019) in new federal spending for the state. That sounds like a good deal to me and it eases the burden on the state’s hospitals of caring for the uninsured.

    Hearsay from obviously biased parties like the CEO of Ruby Tuesday isn’t convincing evidence either. Liberals would like nothing more than for employers to get out of the insurance business all together and go to single payer or go to exchanges with a public option or really anything else. It’s business owners who know that providing health insurance gives them power over their employees that want to keep that status quo.

  8. Lamar was my Governor when I lived in Tennessee. We thought he was pretty good. But, then, he Peter Principled up to Congress.

    I would just get rid of Medicaid.

  9. Wow, none of the usual suspects are touching this post? I guess everyone has left early for their Easter weekend. Hope it is all wonderful and warm.

    By the way, I agree, if you are going to dump this kind of fiscal responsibility on the states, why not show by example how you are going to balance those MANDATED balance budgets that have to be passed with these medicaid expenses. Oh, details, they are so annoying.

    By the way, where oh where is that Senate budget proposal from back in 2009 onwards? I didn’t know Harry R’s lower gastointestinal cavity could hold all that paper!