Forcing the Obama Administration to Admit Obamacare’s Real Costs (Part I)

We all know that regulations come at a cost to consumers, but what are those costs and how are they calculated?

In an attempt to justify the onerous new mandates for health insurance plans the Obama Administration has included some peculiar cost estimates as part of their new regulations implementing the Obamacare legislation.

But who checks up on the Obama Administration’s estimates of their regulations’ potential costs and benefits?

We do.

Through the regulation comment process we are bringing to light federal agencies’ undervalued estimates of the true costs of Obamacare.

For example, we just submitted a comment to the Department of Health and Human Services on an Interim Final Rule regarding preventive services.1 The Obama Administration claims that its prohibition of cost-sharing for “recommended preventive services” will result in cost-savings.2 But on closer examination, we find that they ignored significant data to the contrary.

This particular regulation implements Section 1001 of the Obamacare legislation.3 It prohibits insurance companies from charging individuals co-pays (or using other cost-sharing mechanisms) when seeking medical services on a statutory list of “recommended preventive services.” The recommended preventive services list includes things like childhood and adult immunizations, cholesterol screening, screening for colorectal cancer, counseling for breastfeeding, recommending aspirin to help with cardiovascular disease, recommending oral fluoride supplementation, and screening for sexually transmitted diseases, to name a few.4

The Obama Administration uses four examples to justify its cost-savings claim: childhood immunizations, discussing the use of aspirin with high-risk individuals, tobacco use screening and intervention, and obesity screening and counseling.5

Admittedly, childhood immunizations offer clear cost-savings.6 However, they are not the only immunizations listed as “recommended preventive services.” Adult immunizations do not offer the same cost-savings effectiveness as those for children. For instance, a study the Obama Administration references in this regulation gave childhood immunizations a cost-efficiency rating of 5 (on a scale of 5)meaning that it is cost-saving. But the Administration ignored the fact that the same study gave tetanus-diphtheria booster shots for adults its lowest cost-efficiency rating of 1 meaning that it costs between $165,000 and $450,000 for each “quality of life year” saved.7

With the exception of childhood immunizations and maybe diet counseling, the prohibition on cost-sharing for the Administration’s example preventive services will have no impact on how often they are utilized. The Obama Administration provides no evidence that the absence of a co-pay will encourage a patient to go to the doctor to be screened for obesity or smoking or to be told that he should take aspirin for his heart condition. Patients do not say, “I need a doctor to tell me not to smoke. I would go to the doctor’s office to have him tell me this, but I don’t want to pay the co-pay.” These examples simply do not prove the cost benefit of this regulation.

But even if each example given by the Administration was a suitable example of cost-savings, at the very best, the Administration has committed the logical fallacy of composition by assuming that because certain parts of the whole are cost-saving, the entire list of recommended preventive services as a whole is also cost-saving.

Ignoring Prominent Evidence
Indeed, after examining the evidence, the Director of the Congressional Budget Office, Douglas W. Elmendorf, in a letter to Congressman Nathan Deal ( R-GA), stated that “[T]he evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.”8

And such evidence is not obscure. A 2008 study published in the New England Journal of Medicine, reviewed 599 studies that examined the cost-effectiveness of preventive services. The study reported that “[a]lthough some preventive measures do save money, the vast majority reviewed in the health economics literature do not.”9 The results showed that fewer than 20% of the services surveyed provided cost-savings.

Blind to Contrary Evidence
Had the Obama Administration merely ignored this evidence we might assume that they were merely negligent in their analysis. But they have also ignored data from the same study they used to support three of their four cost-savings examples. This study actually examined 25 preventive services but found only 5 to be cost-saving!10

This is more than negligence—it demonstrates a reckless disregard for the truth.

The Regulation Comment Process
In writing regulations, federal agencies are required to explain how they came to a conclusion on a particular issue and they must deal with discrete issues that are pointed out by commenters. In so doing the agency must respond with “reasoned analysis” that explains how they reached the conclusion and not just why a particular decision was made. This is why those believing in limited government must be involved in the regulation comment process. We do not expect that the Obama Administration will admit they are wrong about the cost-savings nature of preventive services—but by using the comment process we force the government to look at the evidence and to answer for neglecting to consider it.

In next month’s edition we’ll look how Federal Agencies are underestimating the paperwork cost of complying with Obamacare regulations.

1 RIN 0938-AQ07. This comment is available at
2 Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act, 75 Fed. Reg. 41,726, 41735-41736 (July 19, 2010)(to be codified at 26 C.F.R. pt. 54, 26 C.F.R. pt. 2590, and 26 C.F.R. pt. 147.)
3 Id. at 41,727.
5 Supra note 2.
6 Michael V. Maciosek et al., Priorities Among Effective Clinical Preventive Services: Results of a Systematic Review and Analysis, 31 Am. J. Preventive Med. 52, 54-56 (2006).
7 Id.
8 Letter from Douglas W. Elmendorf, Director, Congressional Budget Office, to the Honorable Nathan Deal, Ranking Member, Subcommittee on Health of the Committee on Energy and Commerce of the U.S. House of Representatives, (August 7, 2009), 1.
9 Joshua T. Cohen et al., 358 New Eng. J. Med. 661, 662-663 (2008).
10 Maciosek, supra note 6.