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ObamaCare’s Crony Capitalism: Worse than We Thought

At times it seems like the sheer magnitude of bad news about ObamaCare can redound to its own benefit. It’s easy for individual pieces of bad news to get lost in the sea of failure that has characterized the Obama administration’s signature “achievement.” That might be the case with the most important story to appear about ObamaCare this week, from Tuesday’s edition of the New York Times.

The paper reported that the Obama administration has ruled that the federal health-care program be exempted from the category of laws considered “federal health care programs.” Now, this is obviously dishonest: the federal government is running insurance exchanges, funding health-care subsidies under the law, and employing federal workers to help manage the law–all of which are clearly “federal health care programs.” So why would the administration choose not to label them according to observable reality? Because, as the Times explained, this decision–believe it or not–exempts ObamaCare from kickback restrictions and anti-fraud protections:

The surprise decision, disclosed last week, exempts subsidized health insurance from a law that bans rebates, kickbacks, bribes and certain other financial arrangements in federal health programs, stripping law enforcement of a powerful tool used to fight fraud in other health care programs, like Medicare.

The main purpose of the anti-kickback law, as described by federal courts in scores of Medicare cases, is to protect patients and taxpayers against the undue influence of money on medical decisions. …

Under the Affordable Care Act, millions of people will be able to buy insurance from “qualified health plans” offered on exchanges, or marketplaces, run by the federal government and by some states.

Most of the buyers are expected to be eligible for subsidies to make insurance more affordable. The subsidies, paid directly to insurers from the United States Treasury, start in January and are expected to total more than $1 trillion over 10 years.

Ms. Sebelius said the Health and Human Services Department “does not consider” the subsidies to be federal health care programs. She reached the same conclusion with respect to federal and state exchanges, built with federal money, and with respect to “federally funded consumer assistance programs,” including the counselors, known as navigators, who help people shop for insurance and enroll in coverage through the exchanges.

This has two effects on the law: first, it encourages precisely the kickback schemes this statute was put in place to prevent; and second, it could easily produce an enormous financial burden on the government. The prescription drug “kickback” scheme is how federal law enforcement officials describe the practice in which drug companies give customers coupons to purchase their brand-name medications instead of lower-cost alternatives. The coupons reduce the cost for consumers, but not for insurers or government agencies paying out reimbursement costs. This creates a windfall for the drug companies at high cost to insurers and the government.

So why would the government actively facilitate corruption under ObamaCare, especially at the risk of ballooning its own costs and collapsing its budget estimates?

The answer has to do with the revelations of major drug companies’ cooperation with President Obama on shepherding ObamaCare to the finish line. In June 2012, the Wall Street Journal explained how this particular partnership formed. In 2009, drug companies were concerned that an Obama-led health-care reform effort would emphasize price controls and re-importation allowance–the latter being the process by which drugs sold cheaper abroad could be re-sold here, a case of foreign quasi-socialist health-care systems undermining the market forces in the U.S. that enable companies to be able to conduct the research and development that produces the drugs in the first place.

The administration worked out a deal with the pharmaceutical giants, but then Democratic Representative Henry Waxman demanded further concessions from the drug industry. The White House stepped in to protect them, and the drug companies responded with more pro-ObamaCare advertising.

That appeared to be the extent of the already-nauseating crony capitalism at the heart of ObamaCare. But the Times story suggests otherwise. And the inconsistency is the giveaway: the Justice Department is prosecuting high-profile companies (like Johnson & Johnson) for a practice the government plainly considers an illegal kickback scheme. And yet now that same government is giving the green light to the practice, which will be a financial boon to the companies that helped ObamaCare pass in the first place.



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