Consumer-Directed Healthcare Reform

As the U.S. Supreme Court nears its decision on the constitutionality of federal health care reform, the Montana Policy Institute endeavors to emphasize the need for true reform centered on the patient consumer. We believe that patients and their doctors are best equipped to make decisions about what care is best, not bureaucrats in Washington, DC, or our state capital of Helena. The root problem lies in the fact that there is a vast wedge between patients and their healthcare providers caused by heavy government intervention and the unintended consequences of a third-party payer system. The following consumer-directed options will help individuals and families make – and own – their decisions.

Individual ownership of insurance policies. Equalize tax treatment by extending to individuals the tax deduction that allows employers to own insurance. Also make those plans portable when workers leave or change jobs.

Leverage health savings accounts. Coupled with affordable high-deductible plans, HSAs empower individuals to monitor their health care costs while establishing incentives for individuals to use only those services that are necessary. HSAs are growing in popularity but will be undermined by federal healthcare reform.

Allow interstate purchase of healthcare insurance. Allowing consumer to shop for plans beyond their state borders will enhance competitiveness in the health insurance market. Because of fewer state regulations, plans in other states are more affordable. Because it will empower consumer choice through competition, interstate purchase will drive down prices and, possibly, force states to deregulate.

Reduce mandated benefits. Other than consumer overutilization caused by insulation from actual cost, there is nothing that contributes more to the inflation of healthcare costs than state benefit mandates. States should reduce or eliminate mandated benefits to empower consumers to work directly with health insurers to tailor plans to their needs. Consumers won’t be able to do this unless health insurers have flexibility to fulfill the needs of individuals. In a freer health care market, there is no reason to assume that insurers will treat the insured any differently than, say, the grocery store treats its customers by providing many products at prices consumers are willing to pay.

Block grant federal Medicaid funding to give states flexibility to create voucher programs for low-income individuals to purchase their own insurance. An income-based sliding scale voucher program is an effective reform option that states such as Florida have enacted to give low-income individuals more control, fight costly fraud and abuse, and save on considerable administrative costs of running a large bureaucracy.

Eliminate unnecessary scope of practice laws and allow non-physician healthcare professionals to practice to the extent of their education and training. Enhancing the provider pool increases competition without compromising access to quality care. It empowers patients to decide how best to get the care they need.

Reform tort liability laws. Defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.


The President’s Healthcare Law

President Obama wanted to make sure that every individual had health insurance coverage. That is a worthy goal. But in practice, it just won’t work. It will create a multi-trillion dollar government takeover of healthcare that gives too much control to Washington, DC, and not enough to patients and their doctors.

The simple truth is that the President’s law is unaffordable and doesn’t deliver the real reform for Americans that he promised.

It’s unaffordable. According to a recent study by a Trustee on the Medicare Board, the President’s healthcare law is projected to add $530 billion to federal deficits and increase spending by more than $1.15 trillion over the next decade. A health care policy analyst at the Cato Institute calculates the deficit impact at $823 billion and spending at $2.7 trillion over the same period.

Under the law, the mandate to expand Medicaid eligibility will cost Montana taxpayer’s as much as $155 billion from 2014 to 2019.

Americans wanted real reform, but the President’s law just isn’t it. More federal spending and expensive state mandates are not the way to control healthcare costs for all Americans.

It’s irresponsible and wasteful. Rather than making common sense reforms, the President’s healthcare law takes $500 billion from Medicare’s trust fund to pay for new Washington, DC, spending and does little to combat the waste.

Real healthcare reform is efficient, effective, and patient-centered. A wasteful, Washington, DC, centered plan is simply not what Americans want or need. A Montana Chamber of Commerce survey of 600 Montana voters shows that 60% do not support the President’s law even though they overwhelmingly see rising healthcare costs as their biggest “pocketbook” concern.

It’s unaccountable. Buried inside President Obama’s 2,700-page healthcare bill was the creation of a new board – called “IPAB,” a 15-member board of unelected healthcare bureaucrats in charge of making decisions about your access to healthcare.

The President’s plan gives too much control to Washington, DC. Healthcare reform must be patient centered, giving patients and their doctors full control over their personal healthcare decisions.

It’s unconstitutional. The law forces you to buy insurance even if you don’t want it or it’s not right for you. And if you don’t, the government penalizes you by taking even more of your hard-earned money.

We can do better. Let’s bring everyone together – Democrats and Republicans – to find the best ideas that produce real results. Let’s work to replace this law with a patient-centered approach that can deliver real reform for the American people.


Government Healthcare Takeover

President Obama and his allies in Congress said they wanted to provide quality health care to all Americans at a lower cost. Those are worthy goals. But the law they passed in March 2010 simply doesn’t do those things. It will create a multi-trillion dollar government takeover of healthcare that gives too much control to Washington, DC, and not enough to patients and their doctors, and imposes a top down one size fits all “solution” on all Americans.

UNCONSTITUTIONAL: Americans are faced with an unprecedented action taken by Washington, DC – forcing consumers to purchase a good or service – in this case health insurance. Most Americans are dumbfounded that the government would meddle so cavalierly in something as personal as one’s healthcare decisions.

COST: The law will increase spending by $1.15 trillion and will add as much as $530 billion to the federal deficit over the next 10 years. Cato Institute analysts believe that spending will be $2.7 trillion while adding $823 billion to the deficit over the same period. Medicaid expansion in Montana will cost as much as $155 million by 2019.

MORE TAXES…REALLY?: While the national and state economies are deep in the doldrums of the Great Recession, the law creates or increases 18 separate taxes that will cost $629 billion over the next 10 years. It actually taxes health insurance plans, brand-name prescription drugs, and medical devices. Amazingly, it limits the deductibility of medical expenses.

WRONG REFORM: Intended or not, the new law will insert the government’s tentacles even deeper into the lives of consumers and health care markets to the point that single payer, government-run health care is an inevitability. The law undermines consumer-directed reforms such as Health Savings Accounts, incentivizes employers to drop health insurance benefits, and forces the young and healthy to subsidize care for the old and wealthy. The proponents of the law promised Americans that they’d be able to keep their healthcare plans but independent experts believe that the law will force Americans into government plans.

ROBBING PETER TO PAY PAUL: The law takes $417 billion over 10 years from Medicare’s trust fund. This includes $136 billion in cuts to Medicare Advantage, which allows beneficiaries to receive their coverage through private insurance plans. 10.2 million use Medicare Advantage and Medicare’s chief actuary predicts that 7 million will be forced out and back into traditional Medicare. This represents an obvious disdain for the private market.

PICK POCKETING: The law authorizes the federal government to penalize individuals for not obtaining, and employers for not providing, health insurance coverage. The Congressional Budget Office estimates that from 2014 to 2019 individuals will pay $17 billion in penalties while employers will pay $52 billion.

UNACCOUNTABLE BUREAUCRATS: One of citizens’ biggest fears is unelected bureaucrats making decisions that affect our most fundamental decisions. The government healthcare takeover creates a panel of 15 of these bureaucrats – called the IPAB – to determine what treatments patients can receive.

DUD: Because the law has government written all over it, it should be no surprise that analysts don’t think it will do anything to combat waste, fraud, abuse, and rampant inflation in the system. What the government has excelled at is causing these problems in the first place, and then rushing in to fix the problems it caused, and proceeding to make the problems even worse. The solution is to get the government out of the healthcare market as much as possible and allow people the freedom to make health care decisions based on their circumstances.


Issues and Likely Outcomes of Pending U.S. Supreme Court Decision on PPACA

The U.S. Supreme Court (the Court) is about to proffer its decision on various issues relating to the Patient Protection and Affordable Care Act (PPACA). The following Q & A outlines the issues before the Court and likely outcomes:


Q: What is the actual name of the case and who is involved?

A: NFIB v. Sebelius. The NFIB stands for the National Federation of Independent Business and is the plaintiff in the case. The NFIB is joined by a couple individual citizens and 26 states through their Attorneys General. Montana’s Attorney General elected not to join the suit. The defendants in the case include U.S. Secretary of Health and Human Services Katherine Sebelius, U.S. Secretary of the Treasurer Timothy Geithner, U.S. Secretary of Labor Hilda Solis, and their respective agencies.


Q: When is the Court likely to rule on the case?

A: It could happen at any time. The Court has to clear its docket by June 30. This case is one of the most anticipated in American history. The U.S. Constitution created the Supreme Court for cases such as this to preserve the original intent by “checks and balances” on power. This case gets to the essence of the American Experiment in limited government, states’ rights and individual liberty.


Q: There’s talk that the Court may not even be able to rule on the case. Is this true?

A: Yes. The theory is that the Anti-Injunction Act (AIA) may regard the individual mandate to purchase healthcare insurance as a tax. If so, the AIA would call into question whether the Court has the jurisdiction to rule on the case prior to the 2014 effective date for the individual mandate. Legal experts predict that the Justices will unanimously reject application of the AIA to the case.


Q: What are the substantive issues before the Court?

A: There are four issues before the Court:

1. As mentioned, whether the Anti-Injunction Act strips the Court of jurisdiction in the case.

2. Whether the new law’s requirement that individual Americans must purchase and maintain federally-approved forms of health insurance starting in 2014 exceeds Congress’ powers under the Commerce and Necessary and Proper Clauses of the U.S. Constitution.

3. Whether the new law’s mandate to the states to expand Medicaid coverage to 133 percent of the federal poverty level exceeds Congress’ authority under the Spending Clause of the U.S. Constitution and thereby violates state sovereignty under the 10th Amendment, which of course stipulates that powers not expressly granted to Congress are reserved to the states.

4. If the Court strikes down one part of the new law – e.g. the individual mandate or the Medicaid expansion – whether any remaining part of the law can be “severed” and implemented.


Q: What are the likely outcomes?

A: There are three likely outcomes:

1. The Court upholds the law. This would mean that at least five of the nine members of the Court agree that the individual mandate and Medicaid expansion do not violate the Commerce, Necessary and Proper, or Spending Clauses of the U.S. Constitution. The entire law would go into effect in 2014. Justice Anthony Kennedy will be the swing vote, in particular on the constitutionality of the individual mandate. Justice Kennedy said during oral arguments that the individual mandate “changes the relationship of the government to the individual in a fundamental way.” He also suggested that a federal requirement to buy insurance is “unprecedented” and, therefore, the government has a “heavy burden” of justification.

2. The Court strikes down particular aspects of the law but leaves the remainder intact. There are several variations of this outcome. What would be most likely under this general outcome is the Court strikes the individual mandate and leaves the rest of the law in place. The employer mandate, Medicaid expansion, exchanges, new and increase taxes, and other provisions would move forward. This outcome would leave the Act’s major expenditure provisions in place but remove the primary means of funding those expenditures, requiring further action by Congress. The Court may also choose to sever the Medicaid expansion as a “coercive” use of federal power over the states.

3. The Court rules that the law is unconstitutional and nonseverable. If the individual mandate or the Medicaid expansion is struck down, the Court could argue that the remaining provisions no longer function “in a manner consistent with the intent of Congress.” This decision would also dismantle provisions of the new healthcare law that have already implemented, which would include exchanges and co-ops set up in the states. Congress and the health care industry have indicated they would act quickly in this case to salvage the Act’s most popular and economically sustainable provisions (e.g. children remaining on parents’ policies) pending further legislative actions.


Potential Scenarios on the SCOTUS ruling of the PPACA

The United States Supreme Court will rule within days on the constitutionality of president Obama’s Patient Protection and Affordable Care Act (PPACA). We’ve taken a look at what we feel are the three most likely outcome scenarios and attempted to unravel them.

But before we do that, let’s break down the four main issues that were argued before the Court:

1) Whether or not the federal Anti-Injunction Act is applicable to this case – This rarely-invoked Act is from the 19th century and basically states that a tax cannot be challenged in court until it has actually been assessed. Since the individual mandate’s penalties wouldn’t go into effect until 2014, the Supreme Court could not hear challenges to it until taxes are collected in 2015. Virtually all legal scholars and analysts agree it is very unlikely the court will find the Act applicable.

2) Whether the individual mandate is a tax – The individual mandate, also known as the “minimal coverage provision,” is the core of the PPACA. It requires that all individuals purchase health insurance regardless of their health, economic situation, or wishes. The question whether this mandate exceeds the constitutional limits of the “Commerce Clause”, which allows Congress’ regulate commerce between and among the states. While the federal government has routinely regulated terms of commerce, it has never before required it in order that it could regulate it.

3) Severability – If the Supreme Court rules some provisions of the PPACA unconstitutional, will the remaining portions stand, or must the whole Act be scrapped? The individual mandate is what funds the Act’s major provisions. Without out the Act becomes fiscally ruinous. Rather than the Supreme Court creating health care policy themselves, many argue that if they find the mandate unconstitutional they should allow congress to start over. The PPACA does not contain a severability clause, which some see as a simple oversight and others see as a fatal flaw.

4) PPACA’s Medicaid expansion constitutionality – As of now, the PPACA requires states to expand their Medicaid programs to cover more people, or risk losing all federal dollars for Medicaid. While federal dollars routinely come with restrictions, the states’ argument is that a threat of cutting off Medicaid dollars is too forceful, or “coercive” deeming it unconstitutional.

Potential Outcome #1: Court upholds the entire law

The Court concludes the individual mandate is not unconstitutional and the bill stands as written. The timeline for implementing exchanges and other provisions of the law continue as scheduled, pressing states that have not been complying with the law until after the Supreme Court ruling to scramble to get up to speed to meet the deadlines or risk the federal government entering into their states to enforce the law. States will need to comply with all of the law or risk losing all of their Medicaid funding, and ultimately this forces the states to take over the care of all those individuals that qualify. Furthermore, the precedent will be set giving the federal government the authority to order people into enter into a contract and/or purchase a product, and therefore fundamentally changing our system of government.

Potential Outcome #2: Court overturns a portion of the law

This is a very broad grouping of all the possibilities that could occur, but let’s point out the major portions that are most likely being focused on and their implications.

The Court invalidates the individual mandate, but decides to let the remainder of the bill stand. The question then turns to what portions of the bill are considered essential to the mandate. Community rating and guaranteed issued insurance reforms would most likely be removed. Insurers simply could not provide them without the funds the mandate would genererate. Without forcing consumers to buy insurance, the young and the healthy will continue to opt out. Without the removal of the community rating and guaranteed issue reforms, it will mostly likely result in the bankruptcy of many insurance providers, and ultimate death, of the health care industry.

Another portion of the law that could be struck down is the forced expansion of Medicaid. This would have serious impacts on the exchanges, as most of the insurance subsidies provided through them will likely be to newly Medicaid-eligible participants. The question of coercion has never been decided by the Court.

If only the individual mandate and/or the forced expansion of Medicaid are overturned, there are still many provisions remaining, such as the forced state exchanges and the employer mandate, to name just a few. The fate of these provisions will likely be decided by congress and the Executive in 2013.

Potential Outcome #3: Court overturns the entire law

Due to lack of a severability clause, if the Court invalidates the individual mandate, it could strike down the entire bill. It would deem that if indeed the individual mandate were struck down, the remaining provisions would no longer function “in a manner consistent with the intent of Congress”.

Yes, some people will be back where they were before the ACA for a short time, left without insurance, but this opens the floodgates for new, free-market based ideas to be presented to not only create actual permanent change and affordability for Americans, but to change the mindset and practices of insurance providers, as well.


For more resources on free-market based health care reform, please see the footnotes attached as well as the following:

• Arduin, Laffer, & Moore Econometrics. (2009). The prognosis for national health insurance: a Montana perspective. Montana Policy Institute. <>

• Issue Brief: Pitfalls of the Patient Protection and Affordable Care Act for Montanans. Montana Policy Institute.

• Montana Policy Institute – Free-Market Health Care Resource Page

• Patient Centered Reform Online <>


A Montana Perspective on Healthcare and Health Insurance Reform (2011)

A Project of the Montana Policy Institute and Arduin, Laffer, & Moore Econometrics


Montana residents are much like the residents in other states—they are concerned about health care and rising medical costs. The mandated federal health care policies and increased federal regulation will have great negative impacts on the state’s citizens. The Patient Protection and Affordable Care Act (PPACA) will be very expensive for Montanans. There are also concerns about the mandatory health care requirements—and the costs and confusions that the system will bring. Many Montana residents would end up in the publicly provided health care pool—and a large number would still lack coverage. Couple these concerns with concerns about the growing deficit and rising taxes to pay for the program. One of our goals should be patient centered health care and health insurance that is owned by the individual and portable from job to job and state to state.


No one disputes that our healthcare and health insurance could stand improvement. Too often the heated arguments and public policy itself ignore the impacts of incentives and disincentives, focusing on emotions and benefits without looking at costs and benefits. The recent election helped highlight this fact as the candidates who ran to repeal and replace the (PPACA) were the majority of winners elected to serve us.

• The PPACA is rejected by the majority of those whom it is supposed to serve. Turns out most Americans don’t want the government deciding who gets treated, for what, and at what price. It has a negative public connotation and creates more overbearing government while creating a massive unfunded burden on Montana taxpayers.

• MT’s own Dept. of HHS estimates our state’s share of Medicaid payments will increase by $70m in 2019 because of PPACA’s increased eligibility and increased administrative costs.

• Medicare/Medicaid’s chief actuary has said that the PPACA will increase costs, increase coverage, but arguably not care and bend the cost curve up, not down. Don’t confuse coverage with care.

• The non-partisan CBO, CMS, and IMF have all discredited the idea that the PPACA will reduce the deficit. And federal budget gaps will be passed onto the states, and that means the government is reaching in our pockets to pry open the wallets and our children’s wallets.

 Cost projections are unrealistically low and not comprehensive. “Doc Fix” assumes decreased reimbursement rates which also impact quality and accessibility to care. There is no historical precedent for removing billions from Medicare or other entitlements.

 1967 Medicare projected 1990 costs at $12B. Actual is $110B.Compliance costs to business and consumers are real costs to our state’s overall economy.

• We are watching and we don’t buy into the federal government’s gimmicks of spending money twice, counting revenues on cash basis and expenditures on accrual and much more. We expect our citizen legislators to make decisions based on hard data, the need for a limited government and a respect for our fellow Montana’s individual liberty.

The government health care program is too complex and is already causing unintended changes.

• The fallacy of “you can keep your insurance” under PPACA has been exposed. More and more businesses will weigh the costs of compliance and continuing coverage for their employees versus dumping them. Ex: The provisions designed to expand dependent coverage spurred an SEIU local in NY to drop 6,000 dependents leaving them uninsured.

• There is a large and growing government health care wedge – an economic separation of effort from reward, of consumers (patients and their families) from producers (health care providers), caused by government policies.

• Rising government expenditures on health care the main factor driving the growth in the wedge. The wedge is a primary driver in rising health care costs, i.e. inflation in medical costs.

• The PPACA will further increase the wedge, and thus be expected to increase medical price inflation. A public health insurance exchange, mandated minimum coverage, mandated coverage of preexisting conditions, required purchase of health insurance- do not address the growing wedge and its role as the fundamental driver of health care costs.

• PPACA’[s anti-consumer regulations are not the only way to provide coverage for the medically-unisurable. For example, high-risk pools can insure those with pre-existing conditions without decimating the private insurance market.

The PPACA cannot deliver cheaper insurance without killing the private sector. Many government programs have often already been tried—or are underway—and are recognized as failures

Individual Mandate: The thinking here is that f only everybody had to buy insurance, and then we’d all share the costs. This is designed as each according to his ability, and to each according to his needs. Big insurance and health industry companies love mandates because they effectively lock out competition and lock in profits.

Mandates do not control costs. Mandates kill jobs. If employers are forced to either insure or pay a fine on their low wage employees, then those employers lose incentives to retain those employees or hire more. Low wage earners are the people most easily replaced through outsourcing and mechanization, and the ones who will be most hurt by mandates. Market Control. Since the government decides what coverage satisfies the mandate, they effectively control the market. Government programs typically don’t reduce costs or improve services, especially once they achieve the monopoly level and control. The debt-ridden monopolistic postal service is a good example of these failed programs.

Exchanges: Bureaucrats want to put in place measures to “protect” patients/consumers by having big government decide which insurance companies can be included in a government structured and state funded internet site to link insurers and patients/consumers. Bureaucrats dictating what they must cover, what they can charge, and what products) they can make available. They will begin with billions of taxpayer dollars, initially receive billions more in taxpayer subsidies, put states on the hooks for administrative costs, and be run by government appointees. No matter the name, the program is too expensive. Montanans are unfortunately very familiar with the “success” and administrative costs of numerous state technology “improvements.”

We all agree that health care and health insurance programs need change We believe that Patients receiving the care and their families are the ones best able to make decisions on what is best for them. The key is connecting the patient with the cost and the PPACA removes the patients even further from it. So long as there’s no incentive to be responsible consumers of health care, we shouldn’t expect the system to be responsive to concerns about costs and quality. The patient-centered options listed below will help individuals and families make—and own—their decisions.

o Individual ownership of insurance policies. Equalize tax treatments. The tax deduction that allows employers to own insurance should instead be given to the individual.

o Leverage Health Savings Accounts (HSAs). HSAs empower individuals to monitor their health care costs and create incentives for individuals to use only those services that are necessary.

o Allow interstate purchasing of insurance. Policies in some states are more affordable because they include fewer bells and whistles. Consumers will decide which benefits they need and what prices they are willing to pay independent of what government bureaucrats think consumers should be forced to buy in a mandated government exchange.

o Reduce the number of mandated benefits that insurers are required to cover. Empowering consumers to choose which benefits they need are effective only if insurers are able to fill these needs. PPACA imposes its highest taxes on young adults, who must buy government-mandated health insurance at inflated premiums.

o Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance. An income-based sliding scale voucher program would eliminate much of the massive bureaucracy needed to implement today’s complex and burdensome Medicaid system. It would also produce considerable cost savings. We can better take care of our own.

o Eliminate unnecessary scope-of-practice laws and allow non-physician health care professionals practice to the extent of their education and training. Retail clinics have shown that increasing the provider pool safely increases competition and access to care and empowers patients to decide from whom they receive their care.

o Reform tort liability laws. Defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.

Federally mandated health care reforms such as PPACA will weaken our nation’s health care system while increasing medical inflation prices. It will also pressure the Montana state budget through increased expenditure levels. PPACA costs will only go up for Montana as the federal government forces more responsibilities—and costs—of the program down to the state levels. PPACA and U.S. Department of Health and Human Services Secretary Kathleen Sebelius’s forthcoming federal regulations will incur costs that Montana taxpayers don’t want and can’t afford.


The Montana Policy Institute is a 501(c) (3) policy research organization that equips Montana citizens and decision makers to better evaluate state public policy options from the perspective that policies based upon limited government, individual rights, and individual responsibility will result in the greatest common good. To find out more or for copies of the complete Cap-and-Trade study, visit us at NOTHING WRITTEN here is to be construed as an attempt to influence any election or legislative action. PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the authors, the American Council for Capital Formation, and the Montana Policy Institute.

Copyright © 2011


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2010 Pork Report

2010 analysis of big government and big spending in Montana. 2012 Pork Report to be presented at the Montana Policy Institute’s 3rd Biennial Legislative Forum, November 16-17, 2012 in Helena.











2010 Pork Report