Tag Archives: Broken promise

A Fiscally Irresponsible Bill

Last week the Wall Street Journal, in endorsing House Republicans’ American Health Care Act, highlighted the legislation’s “fiscal bonus.” Yes, the bill’s Medicaid reforms warrant praise as a good effort to control entitlement spending. But that meritorious effort notwithstanding, the bill contains numerous structural flaws, with potentially more on the way, that could bust budgets for decades to come.

Some of the same leaders decrying or explaining away Congressional Budget Office scores showing large coverage losses due to the bill have proved far too willing to take the bill’s supposed deficit savings at face value. But a good CBO score doesn’t necessarily mean legislation will reduce the deficit; instead, it means that lawmakers and staff have worked hard to achieve a good CBO score.

CBO scores have inherent limitations — notably, the discipline (or lack thereof) on the part of lawmakers to adhere to a bill’s parameters. Two years ago this month, the Wall Street Journal endorsed a Medicare “doc fix” bill that increased the deficit by more than $140 billion in its first decade alone. In doing so, the editorial page argued that Congress’ “cycle[s] of fiscal deception” required a return to “honest budgeting,” stopping budget games by making spending increases more transparent.

Given this history, one question naturally follows: Does the American Health Care Act engage in similar cycles of fiscal deception likely to bust future budgets? Many signs point to yes. First, the bill expands access to Obamacare’s subsidy regime for calendar years 2018 and 2019. CBO believes the bill will reduce entitlement spending only slightly in its first few fiscal years — by $29 billion next year, and $42 billion the following — as the individual mandate’s repeal will cause some to drop coverage.

But in fiscal year 2020 — when the Obamacare entitlements would end and the new tax credit would begin — the bill assumes a massive $100 billion net reduction in entitlement spending. Net entitlement spending would fall still further, to $137 billion in fiscal year 2021, which begins on October 1, 2020, mere weeks before the presidential election.

With the bill’s major “cliff” in entitlement spending coming in a year divisible by four, it’s fair for conservatives to question whether these reductions will ever go into effect, and the promised deficit reduction will ever be achieved. If the “transition” provisions end up extended in perpetuity, conservatives will end up with “Obamacare Max” — an expanded Obamacare subsidy regime available to millions more individuals.

Second, the bill does not even attempt to undo the fraudulent entitlement accounting created by Obamacare. Section 223 of the reconciliation measure passed in January 2016 transferred $379.3 billion of that bill’s deficit savings back to the Medicare trust fund. That provision represented a recognition that, as vice presidential candidate Paul Ryan said on the campaign trail back in August 2012, “President [Obama] took $716 billion from the Medicare program—he raided it—to pay for Obamacare.” Not only does Speaker Ryan’s bill not attempt to make Medicare whole from the Obamacare “raid,” the managers amendment released Monday evening consumed much of the bill’s supposed savings.

Third, while conservatives have focused on the bill’s tax credits as a new entitlement, the measure effectively creates a second new entitlement, this one for insurers. CBO’s estimate of possible premium reductions by 2026 hinged in no small part on creation of a “Patient and State Stability Fund,” and use of grants from the fund to subsidize insurers’ high-cost patients. However, the bill stops federal payments to the “Stability Fund” in 2026—and therefore the score does not take into consideration that this $10-15 billion annual bailout fund for health insurers could become permanent.

Fourth, reports suggest that House lawmakers are relying upon a bipartisan group in the Senate to repeal outright Obamacare’s “Cadillac tax” (delayed until 2026 in the most recent bill), which would worsen deficits in future decades. Leadership sources pushing this move would then argue that the bill blows a hole in the budget not because it spends more money, but because it reduces revenue.

However, the 2016 reconciliation bill repealed all of Obamacare’s tax increases and its new entitlements, while leaving the deficit virtually unchanged over the next 50 years. By contrast, if lawmakers create two entitlements — the new tax credit regime and the “Stability Fund” — while also repealing the “Cadillac tax,” they will create a fiscal hole likely to reach into the trillions. To borrow a phrase, the American Health Care Act doesn’t have a revenue problem, it has a spending problem.

Budgetary “out-years” gimmicks brought us the Medicare “doc fix” mess in the first place, which should embolden conservatives to recognize fiscal chicanery and legerdemain when they see it.

Positive Medicaid reforms notwithstanding, the structure on which the American Health Care Act is based does fiscal responsibility a disservice. A conservative-controlled Congress can and should do better.

This post was originally published at the Washington Examiner.

How A Meghan Trainor Song Explains the Obamacare Debate

Meghan Trainor may not be known as a policy wonk, but her lyrics could prove surprisingly useful for health care analysts. In constructing an Obamacare alternative, the debate really is all about that base—or, to be more specific, multiple baselines.

Despite the lyrics to Trainor’s famous hit, the intersection of those baselines—the coverage and fiscal baselines, along with the beliefs of the Republican Party base—has caused “treble” in replacing the health law.

Health Insurance Versus Health Care Prices

The first baseline—and the one currently driving the discussion—involves the number of Americans with health insurance. Right now, many Republicans believe they must try to extend coverage to the 20 million individuals Obamacare has supposedly provided with insurance.

Of course, some of those Americans—such as yours truly—had lost their prior coverage and were forced to buy exchange policies, or obtained coverage through Obamacare’s mandate for coverage of young adults under age 26, a provision ancillary to the law’s main entitlements. Moreover, other studies suggest the 20 million number is both inflated and driven largely by Obamacare’s massive expansion of Medicaid, not individuals purchasing policies on state insurance exchanges.

The alternative to Obamacare released by America Next nearly three years ago, which I helped draft, decided to focus on what bothers Americans most about the health care system: rising costs. Any Republican alternative to Obamacare that excludes an individual mandate or employer mandate likely will not cover as many individuals as Obamacare, perhaps by a good number. That’s one reason the America Next plan centered on controlling health costs, not implementing a coverage expansion designed to compete with Obamacare.

Although conservatives would historically focus on how their policies will lower health costs, right now many Republicans appear fixated on chasing coverage numbers. House Speaker Paul Ryan and Health and Human Services Secretary Tom Price both support refundable, advanceable tax credits, a policy Ryan has supported for many years. While incorporating a refundable tax credit into an Obamacare alternative will result in more Americans with health coverage—mitigating the first baseline issue—it could have other ramifications.

The Tax and Spend Baseline

The second baseline to consider when talking about Obamacare alternatives is the tax and spending baseline. If a replacement plan pre-supposes repeal of the law, should an alternative be viewed as raising or lowering taxes and spending relative to what existed with the law, or relative to what existed prior to the law?

For instance, the Congressional Budget Office estimated in 2015 that Obamacare will raise nearly $1.2 trillion in taxes over a decade. If an alternative to Obamacare would change that $1.2 trillion number to $800 billion, should that be viewed as a $400 billion tax cut relative to Obamacare itself, or a $800 billion tax increase, because Obamacare should be assumed as fully repealed?

Then There’s the Republican Base

On this front, the third base involved in this discussion, the Republican political base, has made its voice clear. Asked in a March 2014 poll conducted by America Next whether “any replacement of Obamacare must repeal all of the Obamacare taxes and not just replace them with other taxes,” 55 percent of the general public agreed. More concerning for Republican members of Congress, self-identified Republicans and conservatives agreed by much larger margins, approaching three to one. They would view any attempt to leave some of the law’s taxes or spending intact as inconsistent with pledges to repeal the law entirely.

Therein lies Republicans’ dilemma. Some Republicans believe that any credible Obamacare alternative must offer some insurance subsidy to those newly covered by the law. Several Republican alternatives already released would re-direct the funds raised by the law—whether through taxes, spending, or both—to finance new subsidy options.

However, based on the polling available, Republican voters disagree with this strategy. With Obamacare little discussed during the presidential campaign, and President Trump sending decidedly un-conservative signals about his policy priorities, Tea Party supporters may be more than a little surprised if an alternative to the law ends up retaining chunks of its spending and taxes.

This interplay among the base of new insureds, the spending and tax baselines, and the beliefs of the conservative base will define the House Republican alternative to Obamacare, and the legislative debate that continues to unfold. Meghan Trainor may never serve as a Washington policy analyst, but her mantra that it’s all about that base will ring true in the debate surrounding Obamacare.

This post was originally published at The Federalist.

How to Repeal Obamacare–And What Comes Next

Secretary of Health and Human Services Tom Price’s confirmation early Friday morning marks both an end and a beginning. While his installation after a bitter nomination battle formally begins the Trump administration’s work on healthcare, Price will also seek to bring about the end of former President Barack Obama’s unpopular and unaffordable healthcare law.

Dismantling Obamacare should be a three-fold process, involving coordination among HHS, the rest of the administration, and the Republican-led Congress. The steps can occur concurrently, but all must take place to prevent people from suffering any further from Obamacare’s ill effects.

Having assumed his post, Price should use the regulatory apparatus at his disposal to bring immediate relief from Obamacare. Press reports indicate the administration has already taken steps in that regard, sending a package of insurance stabilization rules to the Office of Management and Budget for clearance prior to their release, potentially as soon as Friday afternoon.

The reports suggest the administration is considering many of the proposals to provide regulatory flexibility that I included in a report analyzing repeal last month. Specifically, the administration may reduce the length of the annual open enrollment period and require verification of individuals seeking special enrollment periods outside of open enrollment. These are two critical steps to prevent individuals from signing up for insurance after they become sick.

The administration is also considering additional flexibility with regards to Obamacare’s benefit mandates, allowing additional variation in the expected percentage of health costs plans cover, for instance.

In many cases, the administration and Price have significant latitude to provide flexibility, but that latitude is not unlimited. Until Congress acts, Obamacare remains on the statute books. While regulators can reinterpret the law, they cannot ignore it. Already, the liberal-leaning AARP has threatened legal action over one of the new administration’s rumored regulatory changes.

These legal constraints illustrate why Congress should act, preferably sooner rather than later, in passing legislation repealing Obamacare. Congress should use as the basis for action the repeal bill it passed in the fall of 2015, which Obama vetoed early last year. That bill repealed all of the law’s tax increases, and sunset the law’s coverage expansions after a two-year period to allow for an appropriate transition.

While the 2015 legislation should represent the initial template for Obamacare’s repeal, Congress can and should go further. Legislators should also seek to repeal the law’s insurance regulations, which have raised premiums and caused millions to receive cancellation notices.

Although some assume Congress cannot repeal the regulations using budget reconciliation — the special process that allows legislation to pass with a 51-vote majority, rather than the usual 60 votes, in the Senate — that may not be accurate. The Congressional Budget Office and others have made estimates showing the significant budgetary impact of these costly regulations. Republicans should use those cost estimates, and past Senate precedent, to enact repeal of the major insurance provisions using the special budget reconciliation procedures.

While adding repeal of the insurance regulations to the 2015 measure, Congress should also ease the transition away from Obamacare by freezing enrollment in the law’s new entitlements upon enactment of the repeal bill. It makes no sense to allow millions of individuals to continue enrolling in a program Congress has just voted to end. Especially with respect to the law’s massive expansion of Medicaid to the able-bodied, freezing enrollment would allow individuals currently on Obamacare to retain their coverage, while starting a process to transition away from the law’s spending and allow individuals to transition off the rolls and into employer-based coverage.

When thinking about a post-Obamacare world, Congress and the new administration should have three priorities: lowering costs, lowering costs and lowering costs.

Americans of all political stripes view lowering health costs as their number-one priority, and it isn’t even close. While candidate Obama promised in 2008 that his health plan would lower costs by an average $2,500 per family per year, the bill he signed into law instead raised costs and premiums for millions.

The answer to the top health concern lies not in new spending and taxes to subsidize health insurance (the failed Obamacare formula) but in reducing the underlying costs of care.

Reducing costs involves equalizing the tax treatment of health insurance, limiting current tax preferences that encourage over-consumption of health insurance and health care. But this must be done in a way that does not raise tax burdens overall. Lowering costs should include incentives for wellness and promote health savings accounts, the expansion of which could reduce health expenditures by billions of dollars.

States have a big role to play in the health debate, both in lowering costs and protecting individuals with pre-existing conditions.

Congress can and should provide states with incentives to reduce insurance benefit mandates that drive up the cost of care. Congress should guarantee that individuals with pre-existing conditions have access to coverage, but give states funding, and let them decide the best route — whether through high-risk pools, or some other risk transfer mechanism — to ensure access to care. While not the panacea President Trump and others have claimed, Congress should allow individuals to shop across state lines for the coverage that best suits their needs.

These changes will not require a 2,700-page piece of legislation like Obamacare. They should not even be considered a “replacement” for Obamacare. But they would have an impact in reducing health costs, the issue Americans care most about. They would represent a new beginning after the canceled policies and premium spikes associated with Obamacare.

 This post was originally published in the Washington Examiner.

John Cornyn Illustrates Republicans’ Obamacare Problem in One Tweet

As the Senate’s second-ranking Republican, John Cornyn holds significant sway in policy-making circles. In his third term, and serving on both the judiciary and finance committees—the latter of which has jurisdiction over Medicare and Medicaid—Cornyn should have a good working knowledge of health policy.

All of that makes this tweet, sent Friday from his account, so surprising:

How can advocates tout Obamacare a success when, among many other flaws, it leaves 30 million people uninsured?

The tweet essentially complains that Obamacare wreaked massive havoc on the health care system, while leaving 30 million uninsured. It’s similar to the Catskills joke cited by Woody Allen in “Annie Hall”: “The food at this place is really terrible—and such small portions!”

Observers on Twitter noted the irony. Some asked Cornyn to support more government spending on subsidies; some asked him to have his home state of Texas expand Medicaid; some asked for a single-payer system that would “end” the problem of uninsurance entirely.

For that matter, increasing the mandate tax to thousands of dollars, or putting people in jail if they do not purchase coverage, would also reduce the number of uninsured. Does that mean Cornyn would support those efforts?

It’s the Costs, Stupid!

There are many reasons conservatives should not remain fixated on the number of people with health insurance when designing an Obamacare alternative.

Insurance Does Not Equal Access: The narrow networks and high deductibles plaguing Obamacare exchange plans—imposed because federally mandated benefits force insurers to find other ways to cut costs—impede access to care, making finding an in-network physician both more difficult and more costly.

Similarly for Medicaid—the prime source of Obamacare’s coverage expansions—beneficiaries themselves don’t even consider a Medicaid card “real insurance,” because they cannot find a physician who will treat them: “You feel so helpless thinking, something’s wrong with this child and I can’t even get her into a doctor….When we had real insurance, we would call and come in at the drop of a hat.”

Insurance Does Not Equal Better Health: The Oregon Health Insurance Experiment compared a group of individuals selected from a random lottery to enroll in Medicaid with similarly situated individuals who did not win the lottery and did not enroll in coverage. It found that Medicaid coverage brought no measurable improvement in physical health outcomes. Likewise, prior studies have suggested that, for health outcomes Medicaid coverage may be worse than having no health insurance at all.

Beneficiaries Do Not Value Health Insurance: Another study from the Oregon Health Insurance Experiment released last year found that most Medicaid beneficiaries valued their health insurance at between 20 and 40 cents on the dollar. In other words, if given a hypothetical choice between a Medicaid insurance policy valued at $3,000, and cash in the amount of $1,500, most beneficiaries would choose the cash.

Obama Promised to Lower Costs—And Failed to Deliver: During his 2008 campaign, Barack Obama didn’t promise to reduce the number of uninsured by a certain amount. He did, however, promise to cut the average family’s health insurance costs and premiums by an average of $2,500 per year. On that count, his health law failed miserably. Since the law passed, employer-sponsored coverage has risen by more than $4,300 per family. Exchange policies spiked dramatically in 2014, when the law’s mandated benefits took effect, and are set to rise again this coming year.

Voters Care Most About Costs: Prior polling data indicates that, by a more than two-to-one margin, voters prioritize the cost of health care (45 percent) over the lack of universal coverage (19 percent). Likewise, voters prefer a health plan that would lower costs without guaranteeing universal coverage to a plan that would create universal coverage while increasing costs by a 13-point margin.

Buying into a Liberal Shibboleth

The responses from liberals to Cornyn’s tweet indicate the extent to which health coverage has become a shibboleth on the Left. There are few things liberals will not do—from spending more money on subsidies, to creating a single-payer system, to expanding coverage to illegal immigrants—to ensure everyone has a health insurance card. (Some liberals might object to putting people in jail for not buying health coverage. Might.)

The liberal fixation—some would call it an obsession—over the number of people with health insurance comes despite evidence suggesting insurance coverage does not necessarily equate with access or improved health outcomes. Over the past 40 years, 90 percent of the growth in safety net spending has come in the form of higher spending on health programs. That spending could have been more effective in alleviating poverty by improving the education system, changing transportation patterns, or enhancing nutritional options in poor communities, all of which also could foster better health outcomes. But because liberals remain singularly focused on the number of Americans with insurance cards, that’s where they want to focus all the federal government’s time and energy.

So, apparently, does John Cornyn. Rather than pledging to lower health costs—Americans’ top health care goal—or questioning the effectiveness of Democrats’ focus on health insurance above all else, his tweet looks like pure kvetching about a problem he has no interest in solving. If one wants to understand Republicans’ problems on health care—both their poor messaging, and their single-minded policy focus on replicating liberal solutions in a slightly-less-costly manner—they need look no further than this one tweet.

This post was originally published at The Federalist.

On Health Care, It’s the Costs, Stupid

At his first post-election press conference Monday, President Obama attempted to sound gracious on the topic of repealing his signature health law, while simultaneously laying down a clear policy gauntlet: the number of Americans with insurance coverage under a Republican replacement.

If they can come up with something better that actually works, a year or two after they’ve replaced [Obamacare] with their own plan, and 25 million people have health insurance and it’s cheaper and better and running smoothly, I’ll be the first one to say that’s great. Congratulations (emphasis mine).

In other words, as I noted last month, the president will happily support others’ legislation—so long as it accomplishes exactly what he wants. Ironically enough, when campaigning for the presidency eight years ago, Barack Obama campaigned on one number, but one that had nothing to do with the number of Americans with health coverage. It was $2,500—the premium reduction he promised to the average family.

While Obama said his law would reduce health costs—Americans’ top health-care concern—the media has yet to focus either on how his law singularly failed to keep that promise, or how a Republican alternative would affect premium levels. Perhaps unsurprisingly, the media has thus far viewed the debate on an Obamacare replacement entirely through one liberal policy frame: How many people have health insurance cards.

Obamaspeak: ‘Lower Premiums’ Means Massive Increases

President Obama’s 2016 focus on how many people have health insurance coverage stands in stark contrast to candidate Obama, circa 2008. In the Democratic primaries against Hillary Clinton, he famously opposed an individual mandate to purchase health insurance, because “the reason people don’t have health insurance isn’t because they don’t want it; it’s because they can’t afford it.”

While then-senator Obama did not promise to achieve a certain level of health insurance coverage, he did make a very specific promise to lower premiums. As this video shows, Obama promised—over and over and over again—that his health-care plan would lower premiums by an average of $2,500 per family. Note also that Obama promised to “lower” and “cut” premiums. That means he didn’t promise that premiums would rise by slightly less than predicted—he pledged to reduce them in absolute terms.

On any count, President Obama’s pledge lies in tatters. Since he signed Obamacare in 2010, the average employer-sponsored health plan has risen by more than $3,300 per family—from $13,770 in 2010 to $18,142 this year. Obamacare’s massive benefit mandates raised the average premium for individually purchased coverage by about 40 percent overnight, as the main provisions of the law took effect in 2014. Premiums are also set to spike on Obamacare exchanges again, with an average of another 25 percent rise for the plan year beginning January 1.

Cost Is Voters’ Top Concern

In reality, Obamacare stands as living proof that affordability matters most for health care and health insurance. While the Medicaid rolls have exploded far beyond most states’ original estimates—perhaps because the program charges no premiums to most beneficiaries—enrollment in exchange plans remains far below projections. Obamacare’s benefit mandates have so raised the cost of coverage that everyone but individuals qualifying for the richest subsidies has stayed away from the exchanges in droves.

Polling data also speaks to voters’ concern about reducing health costs. A survey conducted for America Next in February 2014 (while I served as America Next’s policy director) reveals that voters judge costs as a larger concern than universal coverage by a more than two-to one margin. In addition, by 13 percentage points voters prefer a system that lowers costs but does not guarantee coverage over a system that guarantees health insurance but increases costs.

The Media Is Out of Touch with Americans

In covering a post-Obamacare universe, most media stories in the past week have focused solely on the number of individuals with health insurance. That’s one key metric, but so are whether health insurance results in access to actual health care, whether coverage improves health outcomes, and the extent to which individuals value health insurance over other goods.

Voters care most about reducing the underlying cost of health care. Only lowering costs, not creating new ways for the federal government to subsidize them, will make health care fiscally sustainable in the long term, while increasing the number of Americans with health coverage. That’s the prime metric for judging Obamacare, a metric by which, according to its eponymous creator, it has fallen short, and the metric for judging Republican proposals to replace it.

This post was originally published at The Federalist.

Barack Obama’s Anti-Democratic Speech

In Miami on Thursday afternoon, President Obama gave a speech ostensibly updating the American people on the status of his health care law. But beneath the wonky explanations lay several dark—one might even call them intolerant—undercurrents.

As much as Donald Trump’s recent comments suggesting he won’t accept the results of November’s election violate democratic norms—and they do—President Obama’s demeanor provides a more subtle, but perhaps no less insidious, threat to democratic pluralism.

When it comes to his eponymous law, President Obama thinks only policy outcomes to his liking warrant an end to debate, will only acknowledge ideas and philosophies consonant with his own, and refuses to acknowledge the extent of the deception needed to pass the measure in the first place.

Granted, the President didn’t follow Donald Trump’s (bad) example in saying he would only accept the election results “if I win.” But when it comes to the policy consequences arising from said elections, the President’s attitude essentially echoes Trump’s: The outcomes only matter if he wins.

“Going Back” to Hillarycare

As his is wont, the President on Thursday cited multiple votes on repeal bills in Congress, and questioned why Republicans wouldn’t want to “go back” to the days before Obamacare. But to this historian, it’s worth taking at least minute to do just that.

A certain former Secretary of State often likes to point out that “it was called Hillarycare before it was called Obamacare.” She’s right, of course. It was called Hillarycare—and the voters overwhelmingly rejected it, handing control of both chambers of Congress to Republicans for the first time in 40 years. And before that, voters and legislators rejected universal coverage schemes under Presidents Nixon, Truman, and both Presidents Roosevelt, to name but a few.

Viewed from this prism, why did Democrats in 2009 “go back” to try and enact Hillarycare after voters soundly rejected it—not just during the Clinton Administration, but time after time after time over a span of nearly a century? Because, for good or for ill, they believed in the objective of universal coverage—and they would not take repeated “nos” from the voters for an answer.

Why then should those concerned about the impact of Obamacare—or for that matter, any program promoted by this President—not demonstrate the same level of passion, and the same level of sustained enthusiasm, to obtain their objectives? The answer is simple: They absolutely should—at least, if you believe in democracy. But to judge from his speech, President Obama apparently places a higher priority on denigrating those who would undermine his agenda.

Granted, if you believe government only exists to provide an ever-larger amount of largesse to individuals—a boundless array of programs, generating an ever-growing level of federal munificence—you might think the only outcomes that matter are ones that increase government’s scope and reach. But if you believe that lawmakers, in their rush to obtain short-term political advantage, might be spending their way into unsustainable levels of debt for future generations, you probably take issue with the President’s one-sided perspective.

Differing Goals

Likewise, the President refuses to acknowledge that conservatives have any “serious alternatives” to the law. As someone who helped draft not one, but two, such alternatives, I can categorically call that claim false. President Obama likely knows such alternatives exist—but because they disagree with his objectives, he refuses to acknowledge them.

There’s an ironic contradiction between the President’s refusal to acknowledge conservative alternatives to Obamacare and his self-proclaimed willingness to accept ideas from any quarter. In his speech Thursday, the President joked that he would even change the name of Obamacare to “Reagancare” or “Paul Ryancare,” if Republicans would agree to improve the measure.

But there’s a not-insignificant catch: President Obama will discuss ideas from anyone—but only if they accomplish his objectives. If the ideas don’t synch up with his objectives—if he doesn’t win on the policy, to echo Trump—then to the President, those ideas simply don’t exist.

The President once again talked about Obamacare’s program of state waivers, which he claimed would provide flexibility to states. But as I have previously noted, the law permits states to waive some of the law’s requirements only if they agree to accomplish the law’s objectives. States can impose more mandates and regulations, and cover more people, but not fewer. Conservatives who wish to emphasize solutions that focus on lowering health care costs over expanding coverage will find little comfort from the law’s waivers—and little acknowledgement from this President.

Win at All Costs?

One might not recognize it at first glance, but the President’s speech implicitly admitted many of the deceptions needed to pass Obamacare in the first place. In calling the law a “starter home,” and calling for increased subsidies, he conceded that his remarks to Congress stating “the plan I’m proposing will cost around $900 billion” amounted to a bait-and-switch. Ditto his claims that premiums are rising at their slowest rate—far from the $2,500 per family premium reduction he promised in 2008.

But to President Obama, when it comes to policy, winning is all that matters. And just as with Trump’s comments on the election in November, the only outcomes that matter to President Obama—and the only ideas he will acknowledge—are those in agreement with him. Regardless of whether you believe Obamacare should be preserved, improved, or repealed, that’s bad for democracy.

This post was originally published at The Federalist.

Explaining Both of the Obamacare Risk Corridor Bailouts

It never rains that it doesn’t pour. Even as nonpartisan experts at the Government Accountability Office concluded that the Obama administration broke the law with Obamacare’s reinsurance program, the Washington Post reported the administration could within weeks pay out a massive settlement to insurers through another Obamacare slush fund—this one, risk corridors.

The Post article quoted Republicans criticizing risk corridor “bailouts.” But in reality, the Obama administration itself has admitted using risk corridors as a bailout mechanism—trying to pay insurers to offset the costs of unilateral policy changes made to get President Obama out of a political jam. These two interlinked bailouts—one political, the other financial—explain this administration’s rush to pay off insurers on its way out the door.

Let’s Go Back to 2013

To understand the risk corridor story, one must head back to fall 2013. Millions of Americans received cancellation notices in the mail, informing them that their existing health insurance would disappear once Obamacare’s major provisions took effect. Those individuals also faced long odds to buy replacement policies, given that healthcare.gov and related insurance exchanges remained in a near-constant state of meltdown. Amid the controversy, President Obama had to apologize publicly for misleading the American people with his “like your plan” pledge—which Politifact later dubbed the “Lie of the Year.”

To fix the problem, the Centers for Medicare and Medicaid Services (CMS) tried a stopgap solution. Essentially, CMS said it would ignore the law’s requirements, and allow people to keep their prior coverage—albeit temporarily. States and insurers could allow individuals who purchased coverage after the law’s enactment, but before October 2013, to keep their plan for a few more months (later extended until December 2017). The final paragraph of CMS’ November 14, 2013 announcement of this policy included an important message:

Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.

CMS offered insurers a quid pro quo: If you let Americans keep their existing plan a little longer—getting the administration out of the political controversy President Obama’s repeated falsehoods had caused—we’ll turn on the bailout taps on the back end to make you whole. You scratch my back…

I’ll Pay You Tax Dollars to Play

But this arrangement created several problems. First, CMS cannot decide that it just doesn’t feel like enforcing the law. In a paper analyzing the administration’s implementation of Obamacare, University of Michigan professor Nicholas Bagley called the non-enforcement of the law’s provisions “bald efforts to avoid unwanted consequences associated with full implementation of” the law. He argued the administration’s inaction abdicated the president’s constitutional obligation to “take care that the laws be faithfully executed:”

The Administration thus used the public pronouncements of its non-enforcement policies to encourage the regulated community to disregard provisions of [the law]. Prospectively licensing large groups of people to violate a congressional statute for policy reasons is inimical to the Take Care clause.

While disagreeing that “President Obama has systematically disregarded” the text of the statute, Bagley explicitly conceded that—with respect to the “like your plan” fix and other administrative delays—“the President appears to have broken the law.”

That law-breaking brought with it major financial implications. While healthy individuals kept their existing plans and stayed out of the Obamacare risk pool, sicker individuals signed up in droves. Because the Obama administration unilaterally—and unlawfully—changed the rules after the exchanges had opened, insurers found they had substantially under-priced their products. A 2014 House Oversight Committee report found major impacts after the administration announced the “like your plan” fix:

Insurers immediately started lobbying for additional risk corridor payments, meeting with and e-mailing Valerie Jarrett the day after the Administration’s announcement;

Insurers actually enrolled many fewer young people, and many more older people, than their original estimates made before the Exchanges opened for business on October 1, 2013—consistent with other contemporaneous news reports and industry analyses; and

‘One insurer told the Committee that it expects greater risk corridor receipts because of a sicker risk pool than it anticipated on October 1, 2013 due, in part, to the President’s transitional policy.’

All these developments are entirely consistent with CMS’ November 2013 bulletin announcing the arrangement. CMS pledged to use risk corridors to make insurers whole because it knew insurers would suffer losses as a result of the administration’s unilateral—and illegal—“like your plan” fix.

How About You Pay for Me to Break the Law

To sum up: The administration conjured a political bailout. It pledged not to enforce the law, so people could keep their plans, and President Obama could get off the hook for misleading the American people. This necessitated a financial bailout through risk corridors. Actuaries can debate how much of the unpaid risk corridor claims stem from this specific policy change, but there can be no doubt that the “like your plan” fix increased those claims. CMS itself admitted as much when announcing the policy.

Ironically, Bagley admits the first bailout, but denies the second. His paper concedes the “like your plan” violated the law, and the president’s constitutional duties, largely for political reasons. But he believes the administration can, and should, pay outstanding risk corridor claims using the Judgment Fund. All of this raises an interesting question: Why should the executive be allowed to break the law, abdicate its constitutional obligations, and then force Congress—and ultimately taxpayers—to pay the tab for the financial consequences of that lawbreaking?

The answer is simple: It shouldn’t. While insurers stand in the middle of this tug-of-war, they could have acted differently when President Obama announced his “like your plan” fix. They could have cancelled all pre-Obamacare plans regardless of the president’s announced policy, demanded the opportunity to adjust their premium rates in response, pulled off the exchanges altogether, taken legal action against the administration—or all of the above. They chose instead to complain behind closed doors, get their lobbying machine to work, and hope to cut yet another backroom deal to save their bacon.

But there are two political parties, and two branches of government. To say that Congress should have to write bailout checks to insurers as a result of the executive’s lawbreaking quite literally adds injury—to taxpayers, to the legislative power of the purse, and to the separation of powers—to insult. Any judges to whom the administration will try to bless a risk corridor settlement with insurers should ask many questions about the linked bailouts motivating this corrupt bargain.

This post was originally published at The Federalist.

What Blue Cross Blue Shield Didn’t Tell You About Reinsurance

An hour ago, the Blue Cross Blue Shield Association released a blast e-mail to Hill staff trying to justify their support for Obamacare’s reinsurance bailout. The full e-mail is pasted below, but here is a quick fact check of their claims:

CLAIM: “Health plans were required to reduce their premiums based on the federal reinsurance rules in place.”

FACT: What this talking point fails to mention is that reinsurance “assessments” — $63 per person in 2014, $44 in 2015, and $27 this year — RAISED premiums for the majority of Americans with employer-provided health plans — 175 million in 2014 — so that a select few individuals with Exchange coverage could have slightly lower rates.  Raising premiums for some people to lower people for others is “spreading the wealth around,” to use Barack Obama’s famous phrase — but it doesn’t lower underlying health costs, and it doesn’t represent the $2,500 in lower premiums Barack Obama repeatedly promised.

CLAIM: “The transitional reinsurance program receives no federal funds.”

FACT: The reinsurance program uses the coercive power of the federal government to collect the dollars — making them federal funds.  Even the BCBS-distributed literature admits reinsurance funds were collected by “assessments” — i.e., a non-voluntary requirement on all health plans to pay the federal government.

Most federal entitlement programs — Social Security, Medicare, welfare, food stamps — are by their nature redistributive, taking money from some people and giving them to others.  Do Republicans believe THOSE programs do not represent “federal funds?”  Of course not.  The same principle applies here.  Or do BCBS representatives believe all Americans with employer plans would willingly pay $63 per year in higher premiums to help out their friendly health insurers?

CLAIM: “Reinsurance payments to health plans have been below the amounts specified in the statute.”

FACT: This claim misses two points.  First, on a per-enrollee basis, insurers in 2014 received nearly 50% more in reinsurance funds than they assumed when setting premiums for that year. And you don’t have to take my word for it — that conclusion comes from a paper released by the Commonwealth Fund, not exactly a bastion of conservatism.

Second, in 2014 the federal Treasury received exactly ZERO dollars from the reinsurance program — even though the Congressional Research Service and other independent experts have said the law is clear: The Treasury Department, and NOT insurers, stand first in priority for reinsurance assessment funds.

CLAIM: “The privately funded reinsurance program reduced costs for taxpayers.”

FACT: First, because the Obama Administration illegally prioritized insurers over the Treasury as explained above, the reinsurance program stands to stiff taxpayers out of billions of dollars in repayments.  Second, any supposed reduction in the cost of federal insurance subsidies came solely as a result of “assessments” — i.e., taxes — on employer-provided health plans.  Whether taxpayers pay as a result of a front-end reinsurance “assessment” or as a result of the back-end cost of federal insurance subsidies is essentially immaterial — a tax is a tax is a tax.

The fact of the matter remains: The reinsurance program remains an illegally-manipulated system of corporate welfare, and insurers are fighting to retain money that legally belongs in the Treasury.  It’s worth noting that nowhere in the BCBS documents do the Blues even attempt to argue the legality of the program as rejiggered by the Obama Administration.  Their argument to Congress therefore amounts to, essentially, “We stole that money fair and square!”

Members of Congress who want to 1) stand on the side of taxpayers, 2) oppose crony capitalism, and 3) oppose Obamacare should support every attempt to reclaim funds from the reinsurance program — and prevent a risk corridor bailout.

From: ”Pray, Jason”
Date: September 7, 2016 at 11:11:55 AM EDT
To: ”Pray, Jason”
Subject: H.R.5904 – Taxpayers Before Insurers Act

Hi everyone – I hate to come out of the post-recess box like this but, in the strongest possible terms, we encourage your office to not get on this bill as a cosponsor.

In short – Congress should oppose efforts to eliminate or limit the ACA reinsurance program; here are facts about the program:

• Health plans were required to reduce their premiums based on the federal reinsurance rules in place;

• The transitional reinsurance program receives no federal funds;

• Reinsurance payments to health plans have been below the amounts specified in the statute; and

• The privately funded reinsurance program reduced costs for taxpayers.

Limiting or eliminating the reinsurance program simply amounts to a retroactive tax on insurance companies and higher premiums going forward.

Please see the attached documents and feel free to contact me with any questions.

-          Jason

Jason Pray

Executive Director, Congressional Relations

BlueCross & BlueShield Association

Liberals’ Agenda: Tax Health Benefits to Fund Corporate Welfare

A feature article in Sunday’s Washington Post provided the latest summary of Obamacare’s woes: Premiums set to spike dramatically, insurers leaving in droves, and millions of Americans held hostage to a lengthening comedy of errors. But liberals stand ready with their answer: More of the same government taxes and spending that created the problem in the first place. To wit, the Left would tax Americans’ employer-provided health benefits to fund a permanent bailout fund for insurance companies.

In a brief released earlier this month, the liberal Robert Wood Johnson Foundation had several possible “solutions” to solve the problem of low enrollment, and low insurer participation, in Obamacare’s health insurance exchanges. In the document, the foundation suggested making program of reinsurance now scheduled to expire at year’s end permanent:

Extending [Obamacare’s] reinsurance program and its mechanism of financing would more likely have a stabilizing influence [on insurers]. The program could be authorized permanently…or for a set period of time, with authority for CMS [the Centers for Medicare and Medicaid Services] to continue it if needed….Funds for the reinsurance pool would need to be, as they are currently, collected from individual market insurers, group market insurers, and self-funded plans.

In other words, individuals who do not purchase coverage from an exchange should have their benefits taxed, to fund more corporate welfare subsidies to health insurers, in the hopes that they will continue to offer exchange coverage.

That was the basic premise of the law’s reinsurance mechanism. Put slightly more charitably, Section 1341 of Obamacare imposed an assessment on Americans with employer-provided coverage, or those who purchase health coverage directly from an insurance carrier rather than through a government-run exchange, to help subsidize exchange insurers with high-cost patients.

The assessments were set to last three years—from 2014 through 2016—serving as a transition while the new marketplaces developed. But after three years, the exchanges are in worse shape than ever. Healthy and wealthy individuals have not purchased coverage, making the exchange population sicker than the average employer plan.

Rather than fixing a problem that onerous government regulations—a mandated package of benefits, and rating requirements that have raised premiums so substantially for healthy individuals that many have chosen to forgo coverage—the Left just wants more of the same. The Robert Wood Johnson Foundation paper included numerous “solutions” straight out of the liberal playbook: Requiring insurers to participate on exchanges; a government-run “public option” intended to destroy private coverage, richer subsidies; and new penalties for late enrollment. In other words, more of the taxes, spending, and regulations that brought us this mess in the first place—not to mention the permanent insurer bailout fund.

Two clear ironies stand out when it comes to the reinsurance proposal. First, the Obama administration has already given insurers far more than they expected—or the law allows—on the reinsurance front. Government officials have repeatedly increased reinsurance reimbursement levels, giving insurers nearly 50% more support from the program in 2014 than they originally expected. And the non-partisan Congressional Research Service believes that the Administration has violated the law by prioritizing payments to insurers over payments to the Treasury—giving insurers billions of dollars in extra funding that legally should be returned to taxpayers.

Second, Barack Obama himself campaigned vigorously against “taxing health benefits” in 2008. He ran ads attacking John McCain for making health insurance subject to income tax, saying the tax would fund subsidies that would go straight to insurance companies. Yet Obamacare contained not one, but two, separate “assessments” (read: taxes) on health plans—the first to fund comparative effectiveness research that could be utilized by health plans reimbursement and coverage decisions, and the second for the “temporary” reinsurance program. After violating his campaign pledge not once, but twice, in Obamacare itself, the president’s allies want Congress to make permanent the tax on health benefits—to finance a bailout fund that will go—you guessed it!—straight to the insurance companies.

With labor force participation still historically low, and Americans struggling with high health costs, now is certainly not the time to tax the health coverage that businesses provide to working families so that insurers can receive billions more dollars in bailout funds. Congress should not even think about throwing good money after bad in a vain attempt to keep the sinking Obamacare ship afloat.

The Daunting Math Behind the House Republican Health Plan

A House Republican alternative to Obamacare is coming this week, and some reports suggest it will include a refundable tax credit to subsidize health insurance. This would present some tough political and policy choices about whether and how to pay for a new program of tax credits.

Changing the tax treatment of employer-provided health insurance could provide one of the largest potential sources of financing for a new refundable credit. It also would bring hefty trade-offs. On the political side, capping the deductibility of employer-based health plans to finance refundable credits that are considered government spending would not please some Republicans. Put another way: Repealing Obamacare’s tax increases to replace them with other revenue increases is unlikely to go over well with conservative voters, as I wrote in Think Tank late in 2014.

On a more technical level, such tax changes pose a “Goldilocks” problem. Some believe that an Obamacare alternative could cap the deductibility of employer-based insurance in a way that would raise enough revenue to fund subsidies for most, if not all, of those newly covered by the law, while leaving employer-based coverage unchanged for the vast majority of plans and workers. Achieving one of these goals would be difficult; achieving both simultaneously could be impossible.

Financing a refundable tax credit through reforms to Medicaid would raise other concerns. Some noteworthy examples suggest that giving states additional flexibility over benefit parameters would flatten the growth of Medicaid spending. But the Congressional Budget Office might conclude that such changes would cause states to reduce the number of individuals covered by Medicaid. Liberal advocates of Obamacare’s coverage expansions are almost certain to argue this. And if achieving coverage gains is an objective of an Obamacare alternative, budget scorekeepers are likely to note that reforming Medicaid to finance a refundable tax credit could work at cross-purposes.

House Republicans could decide to use Medicare savings to finance a new refundable tax credit. That, however, could lead to charges of hypocrisy because of the political attacks Republicans have leveled against President Barack Obama for funding the 2010 health-care law this way and because of the optics of using one entitlement program to fund another. Likewise, Republicans could, in theory, propose a new refundable credit without any method of paying for it—but such a proposal may not receive enough support to ensure passage.

It’s also possible that House Republicans’ proposal may attempt to obscure the conflicts and trade-offs that come with crafting a health plan. Mr. Obama arguably did that as a presidential candidate in 2008, and it’s a major reason his health-care efforts enjoyed widespread popularity through early 2009. Once the messy trade-offs necessary to construct the law—the individual mandate, tax increases, and Medicare reductions—were clear, the effort’s approval ratings plummeted. They remain low today. Given what happened with Obamacare’s crafting and rollout, Republicans’ failure to acknowledge the policy trade-offs necessary to enact an alternative to that law could win a short-term political battle—but cost them a long-term policy war.

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