Tag Archives: affordability

On Health Care Bill, Federalism to the Rescue

Temporary setbacks can often yield important knowledge that leads to more meaningful accomplishments—a lesson senators should remember while pondering the recent fate of their health-care legislation. This past week, frictions caused by federalism helped create the legislative stalemate, but the forces of federalism can also pave the way for a solution.

Moderates opposed to the bill raised two contradictory objections. Senators whose states expanded Medicaid lobbied hard to keep that expansion in their home states. Those same senators objected to repealing all of Obamacare’s insurance mandates and regulations, insisting that all other states keep adhering to a Washington-imposed standard.

But those Washington-imposed regulatory standards have prompted individual insurance premiums to more than double since Obamacare first took effect four years ago. While the current draft of the Senate bill allows states to waive out of some of those regulations, it outright repeals none—repeat, none—of them.

The High Prices Are The Fault of Too Many Rules

As the Congressional Budget Office score of the legislation indicates, the lack of regulatory relief under the bill would create real problems in insurance markets. Specifically, CBO found that low-income individuals likely would not purchase coverage, because such individuals would face a choice between low-premium plans with unaffordable deductibles or low-deductible plans with unaffordable premiums.

The budget analysts noted that this affordability dilemma has its roots in Obamacare’s mandated benefits package. Because of the Obamacare requirements not repealed under the bill, insurers would be “constrained” in their ability to offer plans that, for instance, provide prescription drug coverage or coverage for a few doctor visits before meeting the (high) deductible.

CBO concluded that the waiver option available under the Senate bill would, if a state chose it, ease the regulatory constraints on insurers “at least somewhat.” But those waivers only apply to some—not all—of the Obamacare regulations, and could be subject to changes in the political climate. With governors able to apply for—and presumably withdraw from—the waiver program unilaterally, states’ policy decisions could swing rapidly, and in ways that exacerbate uncertainty and instability.

If You Want Obamacare, You Can Enact It at the State Level

The Senate should go back to first principles, and repeal all of the Obamacare insurance regulations, restoring the balance of federalism under the Tenth Amendment, and the principle of state regulation of insurance that has existed since Congress passed the McCarran-Ferguson Act in 1947. If Obamacare is as popular as its supporters claim, states could easily reprise all its regulatory structures—as New York, New Jersey, and others did before the law’s passage. Likewise, senators wanting their colleagues to respect their states’ wishes on Medicaid expansion should respect those colleagues’ wishes on eliminating the entire Obamacare regulatory apparatus from their states.

On Medicaid, conservatives have already granted moderates significant concessions, allowing states to keep their expansions in perpetuity. The controversy now stems around whether the federal government should continue to keep paying states a higher federal match to cover childless adults than individuals with disabilities—a proposition that tests standards of fairness and equity.

However, critics of the bill’s changes to Medicaid raise an important point. As CBO noted, states “would not have additional flexibility” under the per capita caps created by the bill to manage their Medicaid programs. Without that flexibility, states might face greater pressure to find savings with a cleaver rather than a scalpel—cutting benefits, lowering reimbursement rates, or restricting eligibility, rather than improving care.

Several years ago, a Medicaid waiver granted to Rhode Island showed what flexibility can do for a state, reducing per-beneficiary spending for several years in a row by better managing care, not cutting it. When revising the bill, senators should give all Medicaid programs the flexibility Rhode Island received from the Bush administration when it applied for its waiver in 2009. They should also work to ensure that the bill will not fiscally disadvantage states that choose the additional flexibility of a block grant compared to the per capita caps.

If senators’ desire to protect their home states helped prompt this week’s legislative morass, then a willingness to allow other senators to protect their home states can help unwind it. Maintaining Obamacare’s regulatory structure at the federal level, while cutting the spending and taxes used to alleviate the higher costs from that structure, might represent the worst of all possible outcomes—an unfunded mandate passed down to millions of Americans. By contrast, eliminating the Washington-based regulatory apparatus and giving states a free choice whether to re-impose it would represent federalism at its best.

This post was originally published at The Federalist.

Democrats’ Obamacare “Fix”

front-page story in Saturday’s Washington Post discussing Republican candidates’ positions on the Affordable Care Act included a curious quote from Rep. Steve Israel, chairman of House Democrats’ campaign committee, who said that Republicans are “promising fixes but won’t be specific.”

Actually, many conservatives have outlined numerous alternatives to Obamacare. Republicans in the House have written at least 200 separate bills showing their ideas on health care, large and small. My own organization, America Next, released its blueprint for health reform earlier this year.

Conversely, the comparatively small universe of “fixes” advocated by supporters of the health legislation omit major fiscal details. Here are three examples:

In a March Politico op-ed, several Democratic senators (and one independent, Sen. Angus King) proposed allowing the broader sale of low-cost, high-deductible health plans, whose availability is currently limited under the ACA. The senators also advocated expanding the law’s tax credits for small business—making them available to more firms and for longer periods—and further diluting the ACA’s employer mandate on businesses, which already has been delayed twice.

Former President Bill Clinton last year called for fixing a provision that disqualifies families for insurance subsidies if one member of the family can get “affordable” health coverage from an employer.

Others have discussed repealing a provision in the law that would slow the growth in premium subsidies beginning in 2019.

Most of these “fixes” come with price tags—and potentially large ones at that. A 2011 study by the Employment Policies Institute found that fixing the affordability definition, as President Clinton proposed, could increase spending by nearly $50 billion per year.

Supporters of the Affordable Care Act suggesting modifications have a duty to explain whether and how any spending increases would be paid for—through tax increases or other spending reductions.  Because proposing new federal spending without a way to pay for it could put Democrats—and taxpayers—in, well, a bit of a fix.

This post was originally published at the Wall Street Journal’s Think Tank blog.

For Low-Income Families, Obamacare is the UNAFFORDABLE Care Act

Yesterday the Associated Press published an article summarizing how Obamacare’s supposed benefits may well turn out to be a mirage for many low-income workers:

It’s called the Affordable Care Act, but President Barack Obama’s health care law may turn out to be unaffordable for many low-wage workers, including employees at big chain restaurants, retail stores and hotels….Because of a wrinkle in the law, companies can meet their legal obligations by offering policies that would be too expensive for many low-wage workers. For the employee, it’s like a mirage — attractive but out of reach.

The company can get off the hook, say corporate consultants and policy experts, but the employee could still face a federal requirement to get health insurance.

Here’s how it could work: Obamacare includes numerous mandates that will raise premiums. CBS News reported this week that one survey of employers showed “Obamacare may cost more than previously thought” for many firms. Due to these new mandates, some employers may feel forced to scale back the employer’s percentage of premium costs. But as long as the employer’s insurance policies cost less than 9.5 percent of an employee’s income, the employer will not face taxes under the employer mandate—and the employee will not qualify for subsidies on the exchange.

The end result could be a no-man’s land for many low-income workers. The AP notes that a worker making $21,000 could face premium costs of as much as $1,995—and that coverage would still be viewed as “affordable” under Obamacare’s standards. In reality, the worker may not be able to pay that much in premiums—but under the law would have no other coverage option.

That’s not the only way Obamacare harms low-income families. The non-partisan Congressional Budget Office (CBO) concluded that under Obamacare, many workers could work fewer hours or give up working altogether. Thanks to the law’s perverse incentives, which according to CBO “will effectively increase marginal tax rates,” work will be discouraged.

What has been the Administration’s reaction to the plight of low-income families? In a word, complacency. From the AP:

White House senior communications advisor Tara McGuinness downplayed concerns. “There has been a lot of conjecture about what people might do or could do, but this hasn’t actually happened yet,” she said. “The gap between sky-is-falling predictions about the health law and what is happening is very wide.”

American families of all incomes deserve better than to be placed in a poverty trap that deprives them of health coverage while simultaneously discouraging work. They deserve better than Obamacare.

This post was originally published at the Daily Signal.