Small Biz Health Care Daily: Massachusetts and Health Care

When it comes to the health care issue, Massachusetts certainly is a hot spot.

Earlier this week, of course, State Senator Scott Brown pulled off a historic upset in the race to succeed Ted Kennedy in the U.S. Senate, with the health care issue playing a central role in the campaign.

But there’s more. In 2006, Massachusetts passed a health care measure that has served as one of the examples upon which the health care measures being pushed in Congress are based.

The Cato Institute has just published a new report by Aaron Yelowitz and Michael F. Cannon titled “The Massachusetts Plan: Much Pain, Little Gain.”

The authors conclude:

Our analysis of CPS data for 2008 shows that Massachusetts’ health law has had a smaller impact on insurance coverage levels and a much higher cost than supporters claim. Gains in coverage have been overstated by nearly 50 percent, while costs have been understated by at least one-third, and likely more. The law has done little to improve overall self-reported health, though it does appear to have crowded out private health insurance and made Massachusetts a less attractive place to relocate, particularly for young people.

These findings hold lessons for the legis- lation moving through Congress, which largely resembles the Massachusetts law. As in Massachusetts, there has been no effort to estimate the full cost of the legislation—that is, including the mandates it would impose on individuals and employers. The costs of that legislation are therefore far greater than members of Congress and voters believe, while the benefits may be smaller than the conventional wisdom about Massachusetts suggests.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Brown's Win in Massachusetts

The word "historic" gets overused in politics to the point that it has little meaning. But the upset by Republican Scott Brown in the Massachusetts race to fill the late Ted Kennedy's Senate seat was historic in the truest sense of the word...

Read the rest of Raymond J. Keating's Cybercolumn analyzing the Massachusetts Senate race here.

Small Biz Health Care Daily: SBE Council to House -- Reject Idea to Vote on Reid Bill

Karen Kerrigan, President & CEO of the Small Business & Entrepreneurship Council, sent a letter to members of the U.S. House of Representatives today urging them to not vote on the Reid bill that passed the Senate.

Kerrigan explains:

Neither H.R. 3590 (the Reid bill) or the House-passed health care bill are acceptable to small business. While SBE Council has previously communicated our concerns and opposition to the House bill (as a reminder, the legislation was Key Voted by our group -- a vote for the bill was a vote against small business), I am taking the opportunity to educate you about SBE Council's opposition to the Reid health care bill.

H.R. 3590 does not reflect the daunting economic reality in which our nation's small business owners operate. The cumulative cost load that H.R. 3590 imposes on small firms is, quite simply, irrational policy. The bill's taxes, regulations, mandates, and compliance initiatives are staggering - costly and time-consuming requirements that will further chip away at what little time and capital small business owners currently have to compete and survive in a difficult economy. The nation is looking to entrepreneurs to dig us out of the recession. Small business owners need every penny of capital they can muster in order to save and create jobs, and invest in their firms. H.R. 3590 raises their taxes, and raises business costs. Job creation and our economy will suffer with Washington taking more capital and resources from small business owners.

Health care reform should lower health coverage costs, not drive them higher. H.R. 3590 will increase costs for small businesses, period. The premiums of the self-employed will spike, as will those of businesses with employees. The $6.7 billion tax on insurance companies will be directly passed onto small businesses. Minimum benefit requirements dictated by the federal government will be "richer" than those currently offered by many small businesses, which means their costs will go higher. The expansion of Medicaid in the bill will result in additional cost-shifting to privately insured patients, which means higher insurance premium costs for small employers. Higher taxes on health-related industries will get passed down to health consumers. The tax on "high-cost plans" will disproportionately hit small businesses. The bill unfairly targets small construction firms with an employer mandate that other smaller businesses are exempt from, and new IRS reporting requirements will drive regulatory costs higher for entrepreneurs.

Kerrigan concludes: "SBE Council urges you to strongly oppose efforts to put H.R. 3590 up for a vote in the House. Our members urge you to begin the legislative process anew, and produce health care reform that meets the needs of entrepreneurs. We urge you to work on a bipartisan basis and produce a reform bill that will help, not punish, our nation's small business owners."

Small Biz Health Care Daily: Health Care Costs

On the New York Times “Prescriptions” blog on January 12, David Herszenhorn asks, “Why Does Health Care Cost So Much?”

This is a critical question in the current health care debate, especially given the fact that the cause for rising costs has been badly misdiagnosed by advocates for more government involvement in health care.

While Herszenhorn says that he looks at both sides of the political spectrum for an answer, in reality, he leans heavily on the liberal side in his analysis, and therefore, largely misses key points.

While health care costs certainly go higher with new, improved and expanded health care treatments and services, that’s not a bad thing. That’s a positive.

But in terms of negative costs, Herszenhorn misses three critical points. First, while briefly and vaguely hinted at in his piece, central to the cost problem are third-party payments. That is, when someone else – whether employer-provided coverage or the government – picks up the tab, then consumers and providers have no reason to be concerned with costs. Second, the third-party payer problem grows worse when the third-party payer is the government, as politicians and their appointees are spending other people’s money. The result is runaway costs, with the eventual response being rationing of care. Third, regulations and mandates drive health care coverage costs higher.

Unfortunately, the current direction on health care reform would make each of these problems far worse.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Internet Regulation will Cause Retraction in Investment and Hurt Small Business

On January 14, SBE Council filed comments regarding new Internet regulations being proposed by the Federal Communications Commission (FCC). SBE Council's President Karen Kerrigan wrote that the regulations would undermine investment, innovation and economic recovery. The proposed “net neutrality” regulations are “risky and unwarranted” wrote Kerrigan. She also asserted that such interference will work against the FCC’s priority of bringing broadband access to every American.

“SBE Council strongly believes ‘net neutrality’ regulations are a dangerous risk to the dynamism of the Internet, and will have unintended consequences for entrepreneurs who innovate within this space, and those who benefit from its use,” wrote Kerrigan in comments filed on behalf of the organization.

Access to broadband has been a critical development for small businesses. Still, many small firms and self-employed individuals do not have access to broadband, or have not yet adopted high-speed Internet services. That is why SBE Council is highly engaged in initiatives that support broadband investment and encourage adoption. Kerrigan believes the new regulations would hurt investment, and therefore deployment to those small businesses and communities without access.

“The U.S. economy will move more quickly to recovery if policy leaders and the private sector work together to advance pro-growth, pro-opportunity measures that bring the benefits of broadband to all Americans,” wrote Kerrigan in her comments.

According to Kerrigan, the proposed FCC Internet regulations are “dramatic, far-reaching and risky.”

She wrote: “In the face of overwhelming evidence that the telecommunications market is vibrant, competitive and succeeding, the FCC is embarking on a whimsical and costly regulatory track where no intrusion is necessary. There is no reason for the FCC to radically depart from the restraint that previous Commissions and Administrations have shown toward the Internet.”

Kerrigan wrote that “the competitive and innovative spirit driving Internet openness will be forever changed by new FCC regulation. Complex government rules and uncertainty will hurt investment. A government-driven market -- where regulation and industrial- policy politics rule decisions -- will harm innovation, entrepreneurship and consumer choice. It will also put small players in this industry at a competitive disadvantage.”

Kerrigan urged the FCC to maintain its “pro-investment model.” A radical departure from current policy, she argued, adds uncertainty and risk for investors.
Kerrigan urged the FCC to withdraw the proposed “open Internet” regulations, and instead focus on completing a collaborative “national broadband plan” that will help bring opportunity to more Americans and small businesses.

More than 12,000 comments have been filed in response to these proposed Internet regulations that will be developed by the FCC.