Tag Archives: deficit

Memo to Congress on Obamacare: Take My Coverage–Please!

Last week, Vox ran a story featuring individuals covered by Obamacare, who live in fear about what the future holds for them. They included people who opened small businesses because of Obamacare’s coverage portability, and worry that the “career freedom” provided by the law will soon disappear.

Unfortunately, but perhaps unsurprisingly, Vox didn’t ask this small business owner—who also happens to be an Obamacare enrollee—for his opinions on the matter. Like the enrollees in the Vox profile, I’m also incredibly worried about what the future holds, but for a slightly different reason: I’m worried for our nation about what will happen if Obamacare ISN’T repealed.

What Obamacare Hasn’t Done For Me

Unlike many of the individuals in the Vox story, I am a reluctant Obamacare enrollee—literally forced to buy coverage on the District of Columbia’s Exchange because Washington, D.C. abolished its private insurance market. (While I did contemplate moving to Virginia, where I could at least purchase an Obamacare-compliant plan without going through an Obamacare-mandated website, such changes aren’t easy when one owns one’s own home.)

While in generally decent health, I have some health concerns: mild hypertension (controlled by medications), mild asthma, and allergies that have worsened in the past few years. I’ve gone through two reconstructive surgeries on my ankle, which I’ve chronicled in a prior article. Under “research” previously published by the Obama Administration, my health conditions classify me as one of the 129 million people with a pre-existing condition supposedly benefiting from the law.

Yet while my health hasn’t changed much since Obamacare passed and was implemented, my health insurance policy has already been cancelled once. The replacement I was offered this year included a 20 percent premium increase, and a 25 percent increase in my deductible.

If Obamacare was repealed, or if insurers stopped offering coverage, it would be an inconvenience, no doubt. I don’t know what options would come afterwards. That would depend on actions by Congress, the District of Columbia, and the insurance community. But having already lost my coverage once, and gone through double-digit premium and deductible increases, how much worse can it really get?

Obamacare Will Raise the Deficit

Conversely, I am greatly worried about what will happen if Congress doesn’t repeal Obamacare. Our nation is nearly $20 trillion in debt—yet Obamacare would spend nearly $2 trillion more on health coverage in the next 10 years.

I know what liberals are saying: “But Obamacare will reduce the deficit!” Yes, the Congressional Budget Office did issue a score saying the law will lower the deficit. But consider all the conditions that must be met for Obamacare to lower the deficit. If:

  • Annual Medicare payment reductions that will render more than half of all hospitals unprofitable within the next 10 years keep going into effect; and
  • Provisions that will, beginning in 2019, reduce the annual increase in Exchange insurance subsidies—making coverage that much more unaffordable for families—go into effect; and
  • An unpopular “Cadillac tax” that has already been delayed once—and which the Senate voted to repeal outright on a bipartisan 90-10 vote in December 2015—actually takes effect in 2020 (which just happens to be an election year); then

The Congressional Budget Office estimates that the law will reduce the deficit by a miniscule amount. But if any of those conditions aren’t met, then the law becomes a budget-buster. And if you think all those conditions will actually come to pass, then I’ve got some land to sell you.

Obamacare’s Unspoken Opportunity Costs

Even if you believe in raising taxes to reduce the deficit, Congress has already done that. Except that money wasn’t used to lower the deficit—it’s been used to pay for Obamacare. Even some liberals accept that you can only tax the rich so much, at which point they will stop working to avoid paying additional income in taxes. Obamacare brought us much closer to that point, without doing anything to put our fiscal house in order.

Likewise, the law’s Medicare payment reductions are being used to both pay for Obamacare and extend the life of the Medicare trust fund (at least on paper, if not in reality). If it weren’t for the gimmick of this Obamacare double-counting, the Medicare trust fund would have become insolvent this year. Instead, budgetary smoke-and-mirrors have allowed Democrats to postpone the day of fiscal reckoning—making the day that much worse when it finally arrives.

We Just Can’t Afford Obamacare

Whether they’re liberal websites, Democratic leaders, or Republican politicians attempting to cover as many Americans as Obamacare in their “replacement,” no one dares utter the four words that our country will soon face on any number of fronts: “We can’t afford it.”

But the fact of the matter is, we can’t afford Obamacare. Not with trillions of dollars in debt, 10,000 Baby Boomers retiring every day, and the Medicare trust fund running over $130 billion in deficits the past eight years. Our nation will be hard-pressed to avoid all its existing budgetary and financial commitments, let alone $2 trillion in spending on yet more new entitlements.

So, to paraphrase Henny Youngman, take my health coverage—please. Repeal Obamacare,  even if it means I lose my health coverage (again). Focus both on reducing health costs and right-sizing our nation’s massive entitlements.

Failing to do so will ultimately turn all 300-plus million Americans into the “faces of Obamacare”—victims of a debt crisis sparked by politicians and constituents who want more government than the public wants to pay, and our nation can afford.

This post was originally published at The Federalist.

Three Concerns with Rand Paul’s Obamacare Replacement Act

On Wednesday, Politico reported that the House Freedom Caucus, an influential group of House conservatives, was considering whether to give its official endorsement to Sen. Rand Paul’s Obamacare Replacement Act (S. 222). The report indicated that word from the Freedom Caucus about an endorsement could come as soon as next week.

To this conservative health policy analyst, this development raises some serious concerns. Although not as objectionable as the Collins-Cassidy Patient Freedom Act, Paul’s legislation contains several features that, if widely embraced by conservatives, could lead to strategic and policy missteps going forward.

1. Doesn’t Repeal Obamacare

While the Paul bill provides an alternative vision for health care, it does not repeal most of Obamacare. The bill does repeal virtually all of the law’s major mandates: the individual and employer mandates to obtain insurance, the guaranteed issue and community rating regulations, the essential health benefits, and other various insurance mandates that have raised premiums.

However, the bill does not repeal either of Obamacare’s new entitlements—the subsidies for exchange health insurance, and the massive Medicaid expansion to the able-bodied—leaving in place nearly $2 trillion in spending over the coming decade. Likewise, the bill does not repeal any of the Obamacare taxes used to fund that spending, except those associated with the individual and employer mandates.

Paul’s office may view the bill as a successor and complement to the reconciliation bill that Congress passed, but President Obama vetoed, in 2016. That bill would have repealed the law’s entitlements (after two years), and its tax increases (effective immediately), but not its regulations. Paul’s office might argue that his bill repeals the critical portions of Obamacare not included in last year’s reconciliation bill—the major insurance regulations—while providing a replacement vision to go beyond repeal.

But that position assumes last year’s reconciliation bill will be the starting point for this year’s discussion—and it may not be. Politico reported Tuesday evening that Republicans were having difficulty figuring out how to square Medicaid reform with Obamacare’s massive Medicaid expansion. Likewise, some Republicans have discussed not repealing the law’s tax hikes. On these controversies, the Paul bill, by omitting any provisions relating to the entitlement expansions and tax increases, contains a deafening silence.

Paul’s bill repealed the individual and employer mandates, even though last year’s reconciliation measure also effectively repealed them. Why didn’t his bill repeal all the other tax hikes and spending increases as well? Is it because Paul, whose home state expanded Medicaid to the able-bodied under Obamacare, wants to avoid taking a position on whether to keep that expansion?

2. Tax Credit Slippery Slope

The Paul bill does provide tax credits for health coverage, but largely of the non-refundable kind, an arcane but important difference. Paul’s bill provides a $5,000 tax credit to individuals who contribute to Health Savings Accounts (HSAs), but only to the extent such individuals have income tax liability. The Paul bill does include a refundable tax credit for health insurance premiums, but the refundable portion of the credit only applies up to the limit of an individual’s payroll taxes paid.

Many Republican health reform plans would offer refundable tax credits to individuals in excess of tax liabilities, which represents pure welfare/outlay spending—the government issuing “refunds” to people with no net income or payroll tax obligations. By contrast, the Paul bill would ensure that credits only apply to individuals with actual payroll and income tax obligations.

However, this critically important distinction will likely be lost on many members of the press—and perhaps members of the Freedom Caucus themselves. “House Freedom Caucus Endorses Tax Credits” will blare the headlines. Having endorsed tax credits once, the pressure on Freedom Caucus members to then go further and endorse the House leadership plan for refundable tax credits will be immense. Put simply, the slippery slope to endorsing a major spending package in the form of refundable tax credits starts with the Paul bill.

3. Budget-Busting Health Care Giveaways

While the Paul bill includes no outlay spending—its incentives all come via tax cuts—those incentives are numerous, and costly. The legislation would supplement the current, uncapped exclusion on employer-provided health insurance with a new, uncapped deduction for individual-provided health insurance. It would eliminate contribution limits to HSAs, and introduce a new federal subsidy (via the tax credits) of up to $5,000 for HSA contributions.

Apart from the fiscal implications of the tax incentives, are these tax cuts smart tax cuts? Evidence suggests they may not be. Economists on all sides of the political spectrum believe that the current uncapped exclusion for employer-provided health insurance encourages over-consumption of health insurance, and thus health care. Rather than reining in this tax incentive as one element of pro-growth tax reform, Paul’s bill goes in the other direction, creating two new uncapped tax incentives for health insurance.

As a medical doctor, Paul has shown little inclination to rein in health care spending. He voted for budget-busting Medicare physician payment legislation in 2015 that raised the deficit by more than $140 billion in its first decade alone, while failing to solve the long-term problems it purported to address. He has also previously proposed budgets with minimal reductions in Medicare spending, although he has introduced more substantive reforms in recent years.

But with health care already consuming nearly one-fifth of our economy, and our national debt approaching $20 trillion, does the solution to these problems really lie in creating new, uncapped incentives for tax-free spending on health care and health insurance?

Therein lies but one of the Paul bill’s problems. While ostensibly promoting market-oriented solutions, the legislation contains several strategic trip-wires that could contaminate any attempt to repeal Obamacare, or enact a conservative alternative. Members of Congress should tread cautiously.

This post was originally published at The Federalist.

“Doc Fix” Bill Makes Things Worse

Proponents of the “doc fix” legislation the House passed before Congress’s Easter recess have argued that it would permanently solve the perennial issue of physician reimbursements in Medicare. But an analysis by Medicare’s nonpartisan actuary all but cautions: “Not so fast, my friends!

The estimate of the legislation’s long-term impacts by Medicare’s chief actuary is sober reading. The legislation provides for a bonus pool that physicians can qualify for over the next 10 years but applies only in 2019 to 2024. The budgetary “out-years” provide for minimal increases in reimbursement rates. Beginning in 2026, physicians would receive a 0.75 percent annual increase if they participate in some alternative payment models or a 0.25 percent annual increase if they do not. Both are significantly lower than the normal rate of inflation.

Such paltry increases could have daunting effects over time. “We anticipate that payment rates under [the House-passed bill] would be lower than scheduled under the current SGR [sustainable growth rate formula] by 2048 and would continue to worsen thereafter,” the report said. By the end of the 75-year projection, physician reimbursements under the House-passed bill would be 30% lower than under the SGR. Critics have called the current system unsustainable, but over time the House bill’s “fix” would result in something worse.

The actuary said that the inadequacies of the House-proposed payment increases “in years when levels of inflation are higher.” Under the House-passed bill, physicians would receive a 2.3% increase in reimbursements over a three-year period. According to the Bureau of Labor Statistics, the inflation rate was 11.3% in 1979, 13.5% in 1980, and 10.3% in 1981. If high inflation returned, doctors could effectively receive a paycut after inflation.

While physician groups are clamoring to avoid the 21% cut that would take effect this month if some sort of “doc fix” is not enacted, the House’s “solution” could result in larger real-term cuts in future years. Medicare’s chief actuary explains the results of these reimbursement changes over time:

“While [the House-passed bill] addresses the near-term concerns of the SGR system, the issues of inadequate physician payment rates are ultimately greater. . . . [T]here would be reason to expect that access to physicians’ services for Medicare beneficiaries would be severely compromised, particularly considering that physicians are less dependent on Medicare revenue than are other providers, such as hospitals and skilled nursing facilities.”

In sum, “we expect that access to, and quality of, physicians’ services would deteriorate over time for beneficiaries.”

The House “doc fix” legislation involved increasing the deficit by $141 billion, purportedly to solve the flaws in Medicare’s physician reimbursement system. But Medicare’s actuary thinks this legislation will make the long-term problem worse. When will Congress figure out that if you’re in a fiscal hole, it’s best to stop digging?

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

CBO’s Assumptions About the Health Care Law

In its re-estimate of the health care law in light of the Supreme Court’s ruling and new cost estimate for repealing the legislation, the Congressional Budget Office made some interesting assumptions that are worth examining in greater detail.

First, CBO opined that “the Supreme Court’s decision upholding the constitutionality of the ACA’s provision requiring most individuals to obtain insurance coverage or pay a penalty tax does not change CBO and JCT’s assessment of the mandate’s effect on coverage.”  Some observers had argued that the Court’s ruling upholding the mandate as a tax rather than a penalty would undermine CBO’s behavioral assumptions — because the mandate can be easily circumvented by paying the tax, and individuals would not feel they were “breaking the law” by doing so.  CBO generally declined to change its assumptions regarding compliance with the mandate in light of the ruling, although it did allow that the Court’s decision will likely result “in an increase in the number of people who will be eligible for hardship exemptions [from the mandate], which will slightly reduce the prevalence of coverage and thus the strength of the social norm to obtain insurance.”

Second, CBO assumed that the law’s Medicaid maintenance of effort requirements “were not directly affected by the Court’s decision” and remain in place.  However, there is significant uncertainty and ambiguity about this assumption.  While the Administration believes the requirements were unaffected by the ruling, some states believe the Court’s decision nullified the maintenance of effort mandates, have said they will not be bound by those mandates, and are prepared to litigate their position accordingly should the Administration attempt to enforce requirements that states believe have been nullified by the Court.

Third, and perhaps most importantly, CBO assumed HHS would give states significant flexibility in determining how they will expand their Medicaid programs:

CBO anticipates that, instead of choosing to expand Medicaid eligibility fully to 138 percent of the FPL [federal poverty level] or to continue the status quo, many states will try to work out arrangements with the Department of Health and Human Services (HHS) to undertake partial expansions.  For example, some states will probably seek to implement a partial expansion of Medicaid eligibility to 100 percent of the FPL, because, under the ACA, people below that threshold will not be eligible for subsidies in the insurance exchanges while people above that threshold will be if they do not have an offer of affordable coverage from an employer and meet other eligibility requirements.  Other states may seek to expand coverage to levels above their existing thresholds but below 100 percent of the FPL….How the current Administration and future ones will respond to states’ interest in pursuing these various approaches is unclear.

This is very much an open question, given that HHS has not opined on the impact of the Court’s ruling — except to deny states flexibility to modify their Medicaid programs.  If HHS takes a similarly absolute “all-or-nothing” approach to the entire Medicaid expansion, CBO’s assumptions could be vastly different indeed.

Finally, as one observer noted, CBO’s score of the law’s repeal “also assumes that a controversial tax on high-cost health insurance plans goes into effect as scheduled in 2018, though critics argue Congress will act to avoid that.”  If Congress does act to avoid that tax, then the law will INCREASE the deficit — because the $111 billion in revenue from this insurance tax on the middle class (to say nothing of the additional $216 billion in various tax-related interactions) outweighs the $109 billion in supposed deficit savings CBO assumes.  It’s pretty ironic that, given candidate Obama’s “firm pledge” not to raise taxes on the middle class, the only thing keeping Obamacare from raising the deficit is a tax increase on the middle class.

News Flash: Obamacare Did NOT Lower Health Costs

We interrupt this wall-to-wall coverage of the Supreme Court’s ruling to point out yet more evidence that Obamacare did nothing to reduce health costs.  Reuters reported yesterday on a report on health spending from the Organization for Economic Cooperation and Development (OECD):

Growth in health spending reversed a long-term trend of rapid increase and either slowed or fell in real terms in most OECD countries in 2010…Overall health spending grew by nearly 5 percent a year in real terms in the 34 countries…between 2000-2009, but this was followed by zero growth in 2010…The OECD also said preliminary figures for a limited number of countries suggest there was little or no growth in health spending in 2011.

In other words, the slowdown in American health care spending is nothing unusual – it’s happening worldwide.  And it is NOT occurring because of Obamacare; it’s taking place because of the global economic recession.  Spending growth has been slower than projected NOT because Obamacare worked, but because the Obama “stimulus” didn’t.

What IS unusual about American health care is the growth in government spending on health programs.  The OECD found that “the health in total health spending in 2010 was driven by a fall of 0.5 percent in public spending for health, following an increase of over 5 percent per year in 2008 and 2009.”  So while other governments are reducing spending on health programs and entitlements, the United States – at a time of trillion-dollar deficits – is embarking on a $2.6 trillion coverage expansion.  It’s one more sign that under Obamacare, government spending really is doing fine.

Obamacare & Identity Fraud

This morning the Treasury’s Inspector General for Tax Administration testified before two Ways and Means subcommittees about the prevalence of identity theft and fraud within the tax system. Although the IRS identified 1.1 million incidents of identity theft affecting the tax system in 2011 alone, the Inspector General’s testimony found that even this level of fraud was merely the tip of the iceberg:

However, the IRS does not know how many identity thieves are filing fraudulent tax returns or the amount of revenue being lost….Our analysis found that, although the IRS detects and prevents a large number of fraudulent refunds based on false income documents, there is much fraud that it does not detect. We identified approximately 1.5 million additional undetected tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion. If not addressed, we estimate the IRS could issue approximately $26 billion in fraudulent tax refunds resulting from identity theft over the next five years.

These findings have troubling implications for the president’s unpopular 2,700-page health care law, on several levels:

  1. Rather than increasing efforts to combat identity fraud in the existing tax system, much of the IRS’ time over the next few years will instead be spent on creating and implementing a brand new entitlement — health insurance subsidies administered through the tax code.
  2. The massive amounts spent on Obamacare’s insurance subsidies — $632 billion between now and 2022, according to the Congressional Budget Office’s most recent baseline – will only provide further incentives for identity thieves to engage in tax fraud, so they can receive insurance subsidies to which they are not entitled.
  3. Obamacare will only require applicants for insurance subsidies to verify citizenship, NOT identity; the verification process will check that John Doe is a citizen, but will not confirm that the applicant is in fact John Doe. Today’s inspector general report highlights that identity fraud is rampant within the current tax system. Therefore, it is not unreasonable to conclude that non-citizens will commit identity theft — as millions already do by filing bogus tax returns every year — to obtain subsidized insurance. This scenario would violate the President’s promise made before a joint session of Congress in 2009, that individuals illegally present would not be able to obtain insurance under his plan.

The American people have already questioned why, at a time of trillion-dollar deficits, Democrats want to spend $2.6 trillion creating massive new entitlement programs. Today’s inspector general report raises the further question of whether and why such spending will be diverted for fraudulent purposes by identity thieves preying on unsuspecting American families and taxpayers alike.

What You Missed Over Recess

Shocker: Obamacare Will Increase the Deficit: Medicare public trustee Chuck Blahous released a report last week explaining how, after taking into account Medicare double-counting and other unrealistic assumptions, Obamacare will likely increase the deficit by hundreds of billions of dollars. The White House’s response to the report noted favorable scores from the Congressional Budget Office — even though CBO itself admitted that the major savings assumptions in the law were unrealistic and unlikely to be sustained over the long term. It’s also worth noting that Democrats’ claims Obamacare will reduce the deficit come from the same party that said the CLASS Act would be solvent for 75 years – which turned out to be a slight over-estimate, as the program was killed as unsustainable before it ever even got off the ground.

Another Obamacare Flop: The Administration attempted to trumpet its latest round of accountable care organization (ACO) participants as a remarkable achievement. However, as National Journal pointed out, the number of participating hospital and doctor groups (59 total) is less than one-fourth of the 270 ACOs the Administration predicted would participate last October — indicating that many providers remain reluctant to embrace the Administration’s top-down, government-centric approach to “controlling” health costs.

Thanks to Obamacare, You Can’t Spell Insurance without I-R-S: The Hill reported that the Internal Revenue Service is in the process of receiving approximately half a billion dollars from a government “slush fund” to implement provisions of Obamacare.  This development comes after liberals derided Republican claims that Obamacare could result in the hiring of thousands of new IRS employees. Moreover, the “slush fund” transfers come outside of the usual appropriations process, thus leading to a lack of accountability regarding this new funding, as Ways and Means Committee Chairman Camp pointed out in a letter to the IRS.

Liberal Advocate Admits Medicaid Stigmatizes the Poor…  One analyst at a liberal advocacy group told the Salt Lake City Tribune last week that “Medicaid and SCHIP already have a negative connotation in the community.” A study by the Manhattan Institute bolstered this claim, as it quantified how Medicaid patients suffer from longer wait times and poorer health outcomes. According to a recent report by the Medicare actuary, Obamacare will ensnare 25.9 million more Americans in a program that even liberals admit stigmatizes the poor.

…As Conservatives Show a Way to Reform the Program: Even as liberals admitted that the current Medicaid program carries negative connotations, an editorial in the Wall Street Journal illustrated how the program can be enhanced through state flexibility, thereby improving care for patients and saving money as well. The editorial highlighted a December study by non-partisan analysts at the Lewin Group on Rhode Island’s global compact waiver. According to Lewin, the flexibility afforded Rhode Island’s Medicaid program “had a positive impact on controlling Medicaid expenditures,” and when it comes to disabled beneficiaries “reduced expenditures for this population while at the same time generally resulting in improved access to physician services.” The contrast between flexibility yielding success in Rhode Island and Washington’s top-down mandates is stark — at a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing new unfunded mandates of at least $118 billion, thus undermining rather than supporting efforts like Rhode Island’s success story.

Freedom under Renovations; Omen for SCOTUS’ Consideration of Obamacare?  According to the Architect of the Capitol’s office, workers began renovations on the statue of Freedom Triumphant in War and Peace above the Capitol on April 2. The restoration and cleaning work is scheduled to be completed by mid-May. Some may find the timing of this work ironic, as the renovations began the week after Supreme Court arguments on Obamacare, and will be completed by the expected June ruling.  Here’s hoping that Freedom is restored — both literally and metaphorically — later this spring.

New Polls Confirm Obamacare’s Unpopularity: A new poll of physicians under 40 showed their disapproval of the health care law — more than twice as many young doctors thought the law would have negative effects (49%) compared to positive outcomes (23%), and Obamacare (along with its myriad regulations) was the number one reason 57% of young physicians were pessimistic about the future of American health care. A separate Fox News poll found that two-thirds of Americans believe the Supreme Court should strike down all of Obamacare (42%) or its unpopular individual mandate (24%). The Fox poll also found that a majority (56%) of Americans believe President Obama was trying to intimidate the Supreme Court through his “unprecedented” attack on the Court (which fact-checkers debunked as being wildly inaccurate).

Read the Bill and It Won’t Pass: A majority (55%) of Americans also told last week’s Fox poll they did not believe Obamacare would have passed if every member of Congress actually read the bill before voting on it. Recall that multiple Democrats publicly stated that reading the bill was a waste of time, because “we have to make judgments very fast,” and because “we hire experts to read the bill instead.