The Empress of ObamaCare

The recently passed health care law grants sweeping new powers to Secretary of Health and Human Services Kathleen Sebelius. Our June cover story -- "America's Most Powerful Woman."

By From the June 2010 issue

Nancy Pelosi has often been referred to as "the most powerful woman in America" for her ability to wrangle votes for major legislation. But, after muscling through the massive new national health care law this March, the House Speaker has some tough competition.

As Democrats in Congress rushed to pass a health care overhaul of stunning scope, they didn't bother working out key details about how the new law would be implemented. Instead, they left many crucial decisions in the hands of one woman: Secretary of Health and Human Services Kathleen Sebelius.

There are more than 2,500 references to the secretary of HHS in the health care law (in most cases she's simply mentioned as "the Secretary"). A further breakdown finds that there are more than 700 instances in which the Secretary is instructed that she "shall" do something, and more than 200 cases in which she "may" take some form of regulatory action if she chooses. On 139 occasions, the law mentions decisions that the "Secretary determines." At times, the frequency of these mentions reaches comic heights. For instance, one section of the law reads: "Each person to whom the Secretary provided information under subsection (d) shall report to the Secretary in such manner as the Secretary determines appropriate."

The powers given to Sebelius are wide ranging. In the coming years, if she remains in office, the former Kansas governor will be able to determine what type of insurance coverage every American is required to have. She can influence what hospitals can participate in certain plans, can set up health insurance exchanges within states against their will, and even regulate McDonald's Happy Meals. She'll run pilot programs that Democrats have set up in an effort to control costs, and be in a position to dole out billions of dollars in grant money.

But the full breadth of her powers will be known only over time, due to the ambiguity of the language in many parts of the health care legislation. As conservatives make the case for repealing ObamaCare over the course of the next several years, it will be imperative to highlight the arbitrary new powers given to an unelected bureaucrat.

KATHLEEN SEBELIUS IS NO STRANGER to wielding power as a regulator. As a former director of the Kansas Trial Lawyers Association and a state legislator, her first foray into statewide office came when she was elected Kansas insurance commissioner in 1994. It was a position she would hold for eight years, until she assumed the governorship in 2003.

During her tenure at the helm of the regulatory body, Sebelius won praise from the national media for her battles with insurers. Governing magazine named her one of its "public officials of the year" in 2001 for upgrading the department's technological capabilities and putting more pressure on insurance companies. She also served as president of the National Association of Insurance Commissioners. The following year, Modern Healthcare magazine listed her as one of the 100 most powerful people in health care because of her "aggressive campaigns to force insurers to promptly pay claims."

In 2002, the year she ran for governor, Sebelius took her boldest action as commissioner when she decided to block a planned merger of two large insurance companies, Indiana-based Anthem and Blue Cross Blue Shield of Kansas. "I am denying this takeover because it would have cost Kansas businesses, small employers and families millions of dollars in additional health insurance premiums," she said at the time, according to Newsweek. She forced insurance company executives to appear before the state legislature to expose the fact that they wouldn't be able to promise not to raise premiums, and put together a commission to investigate them. Her decision to block the deal was appealed to the state supreme court, but she won the case.

As a prominent female chief executive, Gov. Sebelius provided a key endorsement to Barack Obama in January 2008, when he found himself in a bitter primary battle with Hillary Clinton for the Democratic presidential nomination. Sebelius had been floated as a possible vice-presidential choice because many political observers thought Obama would have to pick a female running mate to mollify women voters still miffed about the outcome of the nomination fight. Though she didn't ultimately get chosen for the number-two slot, Sebelius emerged as a natural pick for secretary of HHS after President Obama's first choice, Tom Daschle, had to withdraw for failure to pay taxes. Despite objections among conservatives to her record on life issues, specifically donations she received from late-term abortion provider George Tiller, Sebelius was confirmed to her post with 65 votes in the Senate.

The 2,409-page comprehensive health care law, along with its companion 153-page reconciliation package, spells out many of the steps that will put America on the pathway to a government-run health care system. The law forces individuals to purchase insurance coverage or else hits them with a tax. It adds 15 million people to Medicaid rolls. It creates a raft of new regulations on the health care industry. And it provides hundreds of billions of dollars in subsidies to individuals to purchase government-designed insurance policies on government-run insurance exchanges.

The legislation is so expansive that even thousands of pages of legislative text were insufficient to spell out how huge chunks of the new program will operate in reality. One Republican health care staffer in the Senate complained that those who drafted the health care bill were so "incompetent and out of their depth" that whenever they couldn't grasp how an idea would translate into reality, they simply left it to the secretary of HHS to work out.

When the federal government gives itself the power to force individuals to purchase insurance coverage, it also has to define what constitutes insurance. The new health care law provides the broad outlines of the "essential health benefits" that every insurance policy must have. But as for the details, the law states that "the Secretary shall define the essential health benefits..." Thus, with the stroke of a pen, Sebelius could coerce every American, under the threat of a tax penalty, into purchasing any health benefit she deems "essential."

Government-run health insurance exchanges, similar to the one Mitt Romney set up as governor of Massachusetts, form the spine of ObamaCare. While the plans offered by the exchanges are ostensibly private, government will effectively design them. And under the new law, once again, it's the Secretary who "shall, by regulation, establish criteria for the certification of health plans as qualified health plans."

There are a number of problems with having the government dictate such benefits. Most importantly, in a free society, individuals should have the right to purchase a health care plan with as many or as few benefits as they want, or to go without health insurance at all. Setting such requirements makes a mockery out of the idea that the exchanges will offer more competition and choice to consumers. And in financial terms, mandating additional benefits will jack up the cost of premiums and help drive up health care spending.

According to the Congressional Budget Office, the new law will increase health care premiums by 10 to 13 percent in the individual market in 2016 as a result of the more generous benefits that will have to be offered. To be clear, that's not relative to today's prices, but relative to what prices would have been in 2016 had we stuck with the status quo that President Obama consistently called "unsustainable." In addition, the chief actuary at the Centers for Medicare and Medicaid Services determined that the new health care law will increase health spending as a percentage of gross domestic product, because an expansion of insurance coverage will lead to wider use of health services. This means that the determinations by Sebelius, or any future HHS secretary, on what constitutes "minimum essential benefits" or a "qualified health plan," will have a tremendous impact on the nation's health care costs.

While the health care law specifies who qualifies for certain benefits and who is subject to the mandates, at the margins, the Secretary would also be given leeway to determine eligibility and to make exceptions. This gives her influence over how large the expansion of Medicaid will end up being, who counts as a "dependent" for the purposes of forcing insurers to allow young adults to stay on their parents' insurance policies until age 26, and who gets to claim the religious exemption to the individual mandate.

But dictating what type of coverage all Americans must purchase wouldn't be an end to the Secretary's influence over the insurance market. As part of her duties in helping to set up insurance exchanges, she has been tasked with creating a government rating system to evaluate all plans offered on the exchanges on quality and price, thus giving her the ability to steer consumers toward certain plans. The Secretary must also establish enrollment periods for the plans.

ANOTHER NEW AUTHORITY given to the Secretary would represent a troubling expansion of federal control over the states. While the law allows the states some flexibility in setting up the new health insurance exchanges, it says that if the Secretary determines that a given state will not have a functioning exchange by January 1, 2014, "the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements." In other words, whether citizens in a state like it or not, Sebelius will be setting up a government-run insurance exchange for them.

One of the major differences between the two main versions of Democrats' health care legislation was that the original House-passed bill had a national exchange, while the Senate bill created state-based exchanges. This issue was supposed to have been resolved when the chambers merged the two bills into one. But then Sen. Scott Brown got elected in Massachusetts, and to avoid a filibuster, Democrats had to jam through the health care legislation using the procedural maneuver of reconciliation, which didn't allow them to alter the structure of the exchanges. As a result, the Senate plan for state-based exchanges was adopted.

While there is disagreement among those who are intimately familiar with the legislation, some argue that the Secretary's power to set up exchanges for states that refuse to participate could provide an opening for her to move toward a national exchange. If a large number of states choose not to set up exchanges, there doesn't appear to be anything in the law that would prohibit Sebelius from determining that the most efficient way to respond would be to set up one exchange for all the non-participating states. But like much of the law, it remains debatable whether she could take such action.

OVER THE COURSE of the health care push, Democrats tried to argue that the purpose of the legislation was to rein in costs that were spiraling out of control. But due to political pressure, they didn't go as far as nations with single-payer health care systems in adopting wholesale rationing of medical services. They also rejected the free market approach that would drive down costs by putting American consumers in control of their own health care dollars. Instead, they adopted the Jackson Pollock method of legislating: throw a bunch of ideas against the canvas and see what sticks. The law that we ended up with thus contains a series of "pilot programs" and "demonstration projects" aimed at containing costs. And as with other parts of the law, it will fall on the Secretary to fill in the details of the experiments.

The new initiatives to be spearheaded by the Secretary include: a wellness program in 10 states, programs for bundling payments for health care services, a national payment system for Medicaid, an "individualized wellness plan" for "at-risk populations," a program to train low-income Americans to work in the health care field, and "national demonstration projects on culture change and use of information technology in nursing homes."

As a result of these pilot programs, as well as other aspects of the law, Sebelius is in a position to dole out billions of taxpayer dollars in the form of grants. This opens the door for the administration to reward its political allies, such as unions and liberal activist groups, and offer political favors to well-connected private companies.

One aspect of the bill calls for creating a payment structure for "rewarding quality," the guidelines of which are left up to Sebelius. The law specifies that a qualified health plan is allowed to contract with a hospital with more than 50 beds only if that hospital abides by certain requirements. But it says that the Secretary "may establish reasonable exceptions" and "may by regulation adjust the number of beds..." Ultimately, the qualified health plan can contract with a health care provider "only if such provider implements such mechanisms to improve health care quality as the Secretary may by regulation require."

As part of new labeling requirements, she'll also have the power to regulate a wide variety of foods -- even Happy Meals. A clause of the law titled "MENU VARIABILITY AND COMBINATION MEALS" reads: "The Secretary shall establish by regulation standards for determining and disclosing the nutrient content for standard menu items that come in different flavors, varieties, or combinations, but which are listed as a single menu item, such as soft drinks, ice cream, pizza, doughnuts, or children's combination meals, through means determined by the Secretary, including ranges, averages, or other methods."

Not entirely satisfied with the sweeping new powers already given to the Secretary under the comprehensive health care law, Sen. Dianne Feinstein has offered a measure that would give Sebelius the authority to reject rate increases deemed unacceptable. "Water and power are essential for life,"Feinstein said in justifying the proposal, according to the New York Times. "So they are heavily regulated, and rate increases must be approved. Health insurance is also vital for life. It too should be strictly regulated so that people can afford this basic need."

While Sebelius does not yet have that authority, she does have to establish, along with the states, "a process for the annual review, beginning with the 2010 plan year...of unreasonable increases in premiums for health insurance coverage." And insurers will have to submit to her justification for any increases deemed "unreasonable."

PRESIDENT EISENHOWER CREATED HHS in 1953 when he merged several agencies into a Department of Health, Education and Welfare. At the time, the functions of the new entity were to be narrow in scope relative to today, as he tasked it with overseeing health care research and distributing educational materials. Like many government programs, it expanded over time, especially when Medicare and Medicaid were created and it took charge of the mammoth new entitlements. (The major exception to this trend being that Eisenhower originally put the department in charge of Social Security, a responsibility that it has since relinquished.) In 1979 the name was changed to the Department of Health and Human Services.

The introduction of ObamaCare will require the largest expansion of the department's duties since the Great Society. In response to the passage of the law, it has already created an Office of Consumer Information and Insurance Oversight to police insurance company compliance. This new office is being headed by Jay Angoff, who worked previously as a lobbyist for Ralph Nader's Congress Watch.

The most worrisome aspect of the new powers granted to Sebelius, and whichever HHS secretary may follow her, is that the full extent of her powers remain unknown even to experts at interpreting legislative language. A recent analysis by the Congressional Research Service struggled in several cases to interpret the powers given to her by certain sections of the law.

And CRS isn't the only government entity struggling to figure out the new authorities. There actually is a section of the health care law titled "TRANSPARENCY IN GOVERNMENT" requiring that "Not later than 30 days after the date of enactment of this Act, the Secretary of Health and Human Services shall publish on the Internet website of the Department of Health and Human Services, a list of all of the authorities provided to the Secretary under this Act (and the amendments made by this Act)." But as of this writing, more than 30 days have passed since President Obama signed the health care bill into law, and Sebelius still has not complied with this requirement. In its place, the website has posted what is essentially the table of contents of the new health care legislation. Either the new powers and responsibilities given to the Secretary are too complicated for even HHS to figure out, or they're so arbitrary that Sebelius can pick and choose how she'll comply with parts of the law.

Speaker Nancy Pelosi infamously declared that, "[W]e have to pass the bill so that you can find out what is in it." In much the same way, the breadth of the new powers granted to Sebelius will become known only over time.

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About the Author

Philip Klein is The American Spectator's Washington correspondent. You can follow him on Twitter at: http://twitter.com/Philipaklein