Tag Archives: Kathleen Sebelius

AARP’s Medicare Amnesia

Based on its statements the past few weeks, if Obamacare extended to non-profit organizations, AARP might need to seek coverage for memory loss. While the seniors’ group opposes House Republicans’ extension of children’s health insurance because it includes provisions means-testing Medicare benefits for wealthy seniors, the Obamacare legislation it endorsed in December 2009 did the very same thing.

Obamacare Included Means-Testing

A letter the AARP sent to the House Energy and Commerce Committee last week objected to the House’s proposals to increase Medicare means-testing, noting that wealthy seniors already pay a greater share of their Part B (outpatient care) and Part D (prescription drug) premiums. That statement is true—in part because of Obamacare, which AARP endorsed.

Section 3402 of that law increased the number of affluent individuals subject to means-testing for Part B premiums, by freezing the inflation measure used to calculate the means-testing thresholds from 2010 through 2019. With no annual adjustment for inflation this decade, more seniors will find themselves with income exceeding the threshold limits.

In addition, Section 3308 of Obamacare applied means-testing for affluent seniors to the Part D prescription drug program for the first time.

Obamacare Used Medicare Savings

Last week’s AARP letter also claimed that “not only is it wrong to continue to ask Medicare beneficiaries to shoulder the burden for non-Medicare expenditures, but it will make it harder to finance actual improvements and address long-term challenges in the Medicare program.” That statement contains no small amount of irony, considering that Obamacare, as House Minority Leader Nancy Pelosi herself admitted, “took half a trillion dollars out of Medicare in [Obamacare], the health care bill”—to spend on new entitlements.

Moreover, by using savings from the Medicare Part A (hospital insurance) trust fund, Obamacare gamed the accounting to make the program’s shortfalls look less severe. When then-Secretary of Health and Human Services Kathleen Sebelius was asked whether the Medicare savings were being used “to save Medicare, or to fund health reform [Obamacare],” Sebelius replied, “Both.”

Some would argue that Obamacare’s financial chicanery has actually undermined Medicare’s solvency by giving lawmakers an excuse to postpone needed reforms. While this year’s Medicare trustees report claimed the Part A trust fund would become insolvent in 2029, the last trustees report released prior to Obamacare measured the program’s insolvency date at 2017—this year.

If it weren’t for the double-counting in Obamacare—a bill that AARP proudly endorsed—lawmakers would likely be confronting Medicare’s structural deficits this year. Instead, comforted by the false hope of Obamacare’s accounting gimmicks, Congress seems unlikely to embark on comprehensive Medicare reform to solve those deficits in the near future, which will only exacerbate the impact of legislative changes when they do take place.

The history of Obamacare lends support to AARP’s current argument that Medicare savings not finance other government spending. But given its own history in supporting Obamacare, AARP seems singularly unqualified to make it.

This post was originally published at The Federalist.

Three Ways Kathleen Sebelius Sabotaged the Rule of Law

Of all the people crying “sabotage” when it comes to Obamacare, Kathleen Sebelius might be the most qualified on the subject. Presiding over the disastrous “launch” of healthcare.gov in the fall of 2013, then-Health and Human Services Secretary Sebelius famously testified before Congress: “Hold me accountable for the debacle—I’m responsible.”

Likewise, in her claims this week that the Trump administration “has consistently tried to undermine the law that is the law of the land,” Sebelius knows of which she speaks. She presided over numerous actions that violated the text of Obamacare, and the Constitution, to thwart the will of Congress and undermine “the law of the land”—Obamacare as it was actually written, not as Democrats wished it were written—and the rule of law in general.

1. Unconstitutional ‘Like Your Plan’ Fix

As Sebelius presided over the healthcare.gov “debacle,” the Obama administration faced a serious political crisis. While the federally run exchange melted down, millions of Americans received cancellation notices in the mail, learning that because their plans did not meet Obamacare’s myriad new regulations, they would lose their coverage effective January 1, 2014.

The notices demonstrated the emptiness of Obama’s repeated promises that individuals who liked their plans could keep them—PolitiFact’s “Lie of the Year.” Moreover, the malfunctioning website created the possibility that millions of Americans could lose their existing coverage while having no way to purchase a replacement policy.

In response to the uproar, the Obama administration essentially decided to take the law into its own hands. Sebelius’ department issued a memo saying it would refuse to enforce the law for certain categories of insurance policies, allowing states and insurers the latitude to maintain individuals’ prior coverage. Even supporters of Obamacare like Nicholas Bagley said the administration’s actions violated the Constitution—the executive refusing to enforce provisions of a law it found politically inconvenient.

This space has previously argued that the Trump administration must enforce Obamacare’s individual mandate, despite any opposition to the mandate on policy grounds, given that the executive must faithfully execute the laws—all of them. But given that Sebelius failed to enforce parts of the law as written for political reasons, who is she to argue that Trump cannot do likewise?

2. Illegal Reinsurance Subsidies

The Government Accountability Office last year ruled that the Obama administration “undermined the law that is the law of the land,” as Sebelius alleges of the Trump administration. Specifically, GAO found that the Obama administration illegally prioritized health insurance companies over American taxpayers, funneling billions of reinsurance dollars that should have remained in the U.S. Treasury (to pay for a separate Obamacare program) to corporate welfare payments to insurance companies. After this rebuke from nonpartisan auditors, the Obama administration still made no attempt to comply with the law as interpreted by GAO.

If Sebelius is as concerned about “undermin[ing] the law that is the law of the land” as she claims, she should have publicly demanded that the Obama administration comply with the law, and the GAO ruling. She did no such thing then, and is unlikely to ask the Trump administration to claw back the corporate welfare payments to insurers now.

3. Unconstitutional Payments to Insurers

The Obama administration did not just violate the law in making payments to health insurers, it violated the Constitution as well. The text of Obamacare—“the law that is the law of the land,” in Sebelius’ words—included no appropriation making payments to insurers to reimburse them for cost-sharing reductions provided to individuals. The Obama administration made the payments anyway.

A federal judge ruled against the Obama administration’s actions last year, stating that they violated the Constitution for spending money without an appropriation. While the payments have continued pending an appeal, if Sebelius worries about preserving “the law that is the law of the land,” then she would support implementing the law as written, and stopping the payments immediately, unless and until Congress approves an explicit appropriation.

Ends and Means

Sebelius’ comments show a fundamental disconnect between means and ends. The Obama administration’s actions suggest a concern largely, if not solely, about signing up as many individuals for taxpayer-funded coverage as possible. If achieving that object meant violating the law, or the Constitution, so be it—the ends justified the means.

Sebelius’ real disagreement therefore doesn’t lie with the Trump administration on “undermining the law.” She did plenty of that herself, likely with full knowledge she was doing so. Instead, her true objection lies in the fact that the Trump may have different policy ends than ones she supports.

If Sebelius wants to espouse different policy positions than the current administration, that is her right. But given the ways in which the last administration repeatedly violated Obamacare to suit its own purposes, conservatives should take no lessons from Sebelius on how to avoid “undermining the law.” Physician, heal thyself.

This post was originally published at The Federalist.

Liberals’ Hypocrisy on Per Capita Caps

It was, to borrow from Arthur Conan Doyle, the dog that didn’t bark. In releasing the annual report on its finances, Medicare’s actuary last month found that the program would not trigger requirements related to the Independent Payment Advisory Board (IPAB) this year—or for several years to come. Although the Senate and House health-care bills avoided altering Medicare, the IPAB development—or non-development, as it were—should inject some important perspective into the legislative debate.

Many liberal critics of the Republican bills have attacked proposals to impose per capita caps on state Medicaid programs, while conveniently forgetting that Obamacare imposed similar spending caps on Medicare. In fact, Section 3403 of the law empowers IPAB—a board of unelected bureaucrats—to make binding recommendations to Congress reducing program spending if Medicare will exceed statutory limits for spending per beneficiary.

The IPAB non-event should therefore put the harsh rhetoric surrounding Medicaid caps in perspective. After all, how damaging can per capita caps be if spending remains sufficiently low not to trigger them? And why do liberals who claim that health-care delivery reforms implemented by Obamacare can slow Medicare spending not believe that, given sufficient flexibility, states could similarly reform their Medicaid programs to lower costs—as states like Rhode Island already have done?

We Care More About Politics than Policy

Some Obamacare supporters claim that statutory restrictions on IPAB—in enforcing Medicare spending caps, the board may not change Medicare benefits or “ration health care”—will protect Medicare beneficiaries in a way that the current bills do not protect Medicaid recipients. But IPAB’s supposed “protections” have their own flaws. The statute does not define “rationing,” and then-Secretary of Health and Human Services (HHS) Kathleen Sebelius testified in 2011 that HHS would need to draft regulations to do so. But the Obama administration never even proposed rules “protecting” Medicare beneficiaries from rationing under the IPAB per capita caps—so how meaningful can those protections actually be?

When push comes to shove, few liberals can justify their support for per capita caps on Medicare, but opposition to similar caps in Medicaid. One day on Twitter, I posed a simple question to Topher Spiro, of the Center for American Progress (CAP): If the Republican proposals for per capita caps in Medicaid included the same beneficiary “protections” as IPAB creates for Medicare recipients, would he support them? I never received a substantive answer.

Therein lies the problem: Many critics of the Republican Medicaid proposals seem to prioritize political partisanship over policy consistency. Five years ago, CAP made very clear it supports IPAB’s per capita caps on Medicare spending, denouncing a 2012 legislative effort to repeal the board. But earlier this year, the organization denounced as “devastating” Republican proposals for per capita caps on Medicaid. So why exactly does this purportedly non-partisan organization support per capita caps when a Democratic Congress enacts them, but oppose similar caps proposed by a Republican Congress?

It’s Okay, It’s Just Hypocrisy

Likewise, the disability community has raised concerns about the proposed changes to Medicaid, attacking per capita caps as causing “massive cuts in Medicaid services.” But when issuing comments on the bill that became Obamacare in January 2010, the major coalition representing disability groups proposed 73 different recommendations in a document exceeding 5,500 words yet included not a sentence on the Medicare per capita caps ultimately included in the law.

Democratic senators appearing with disability advocates at events to denounce spending caps for Medicaid fail to recognize that they voted for similar caps in Medicare, which provides health coverage to 9 million Americans with disabilities. Moreover, despite being in place for several years, the Medicare caps have yet to be breached. So how damaging is a policy that hasn’t affected Medicare beneficiaries in the slightest, and which Democratic lawmakers themselves have voted for?

In his Sherlock Holmes story “Silver Blaze,” Doyle wrote of the guard dog that didn’t bark because it was friendly with an intruder. Likewise, many liberal advocates and Democratic lawmakers are quite friendly with per capita entitlement caps, already having imposed such caps for Medicare. Particularly given the non-factor of such caps in the Medicare program in recent years, they should perhaps “bark” less in opposing similar caps in Medicaid. Both beneficiaries and taxpayers deserve better than opportunistic—and politically inconsistent—scaremongering.

This post was originally published at The Federalist.

AARP’s Own “Age Tax”

Over the past few weeks, AARP—an organization that purportedly advocates on behalf of seniors—has been running advertisements claiming that the House health-care bill would impose an “age tax” on seniors by allowing for greater variation in premiums. It knows of which it speaks: AARP has literally made billions of dollars by imposing its own “tax” on seniors buying health insurance policies, not to mention denying care to individuals with disabilities.

While the public may think of AARP as a membership organization that advocates for liberal causes or gives seniors discounts at restaurants and hotels, most of its money comes from selling the AARP name. In 2015, the organization received nearly three times as much revenue from “royalty fees” than it did from member dues. Most of those royalty fees come from selling insurance products issued by UnitedHealthGroup.

Only We Can Profit On the Elderly

As documented on its tax returns and in congressional oversight reports, AARP royalty fees from UnitedHealthGroup come largely from the sale of Medigap supplemental insurance plans. As the House Ways and Means Committee noted in 2011, while AARP receives a flat-sum licensing fee for branding its Medicare Advantage plans, the organization has a much sweeter deal with respect to Medigap: “State insurance rate filings show that, in 2010, AARP retained 4.95% of seniors’ premiums for every Medigap policy sold under its name. Therefore, the more seniors enroll in the AARP-branded Medigap plan, the more money AARP receives from United.”

So in the sale of Medigap plans, AARP imposes—you guessed it!—a 4.95 percent age tax on seniors. AARP not only makes more money the more people enroll in its Medigap plans, it makes more money if individuals buy more expensive insurance.

Even worse, AARP refused good governance practices that would disclose the existence of that tax to seniors at the time they apply for Medigap insurance. While working for Sen. Jim DeMint in 2012, I helped write a letter to AARP that referenced the National Association of Insurance Commissioners’ Producer Model Licensing Act.

Specifically, Section 18 of that act recommends that states require explicit disclosure to consumers of percentage-based compensation arrangements at the time of sale, due to the potential for abuse. DeMint’s letter asked AARP to “outline the steps [it] has taken to ensure that your Medigap percentage-based compensation model is in full compliance with the letter and spirit of” those requirements. AARP never gave a substantive reply to this congressional oversight request.

Don’t Screw With Obamacare, It’s Making Us Billions

AARP’s silence might stem from the fact that its hidden taxes have made the organization billions. Between 2010—the year Obamacare was signed into law—and 2015, the most recent year for which financial information is available, AARP received $2.96 billion in “royalty fees” from UnitedHealthGroup. During that same period, AARP made an additional $195.6 million in investment income from its grantor trust.

Essentially, AARP makes money off other people’s money—perhaps receiving insurance premium payments on the 1st of the month, transferring them to UnitedHealth or its other insurance affiliates on the 15th of the month, and pocketing the interest accrued over the intervening two weeks. That’s nearly $3.2 billion in profit over six years, just from selling insurance plans. AARP received much of that $3.2 billion in part because Medigap coverage received multiple exemptions in Obamacare. The law exempted Medigap plans from the health insurer tax, and medical loss ratio requirements.

Most importantly, Medigap plans are exempt from the law’s myriad insurance regulations, including Obamacare’s pre-existing condition exclusions—which means AARP can continue its prior practice of imposing waiting periods on Medigap applicants. You read that right: Not only did Obamacare not end the denial of care for pre-existing conditions, the law allowed AARP to continue to deny care for individuals with disabilities, as insurers can and do reject Medigap applications when individuals qualify for Medicare early due to a disability.

The Obama administration helped AARP in other important ways. Regulators at the Department of Health and Human Services (HHS) exempted Medigap policies from insurance rate review of “excessive” premium increases, an exemption that particularly benefited AARP. Because the organization imposes its 4.95 percent “age tax” on individuals applying for coverage, AARP has a clear financial incentive to raise premiums, sell seniors more insurance than they require, and sell seniors policies that they don’t need. Yet rather than addressing these inherent conflicts, HHS decided to look the other way and allow AARP to continue its shady practices.

The Cronyism Stinks to High Heaven

Obama administration officials not only did not scrutinize AARP’s insurance abuses, they praised the organization as a model corporate citizen. Then-HHS Secretary Kathleen Sebelius, when speaking to its 2010 convention, called AARP the “gold standard” in providing seniors with “accurate information”—even though the organization declined requests to disclose the conflicts arising from its percentage-based Medigap “royalties.” However, Sebelius’ tone is perhaps not surprising from an administration whose officials plotted with AARP executives to enact Obamacare over AARP members’ strong objections.

AARP will claim in its defense that it’s not an insurance company, which is true. Insurance companies must risk capital to pay claims, and face losses if claims exceed premiums charged. By contrast, AARP need never risk one dime. It can just sit back, license its brand, and watch the profits roll in. Its $561.9 million received from UnitedHealthGroup in 2015 exceeded the profits of many large insurers that year, including multi-billion dollar carriers like Centene, Health Net, and Molina Healthcare.

But if the AARP now suddenly cares about “taxing” the aged so much, Washington should grant them their wish. The Trump administration and Congress should investigate and crack down on AARP’s insurance shenanigans. Congress should subpoena Sebelius and Sylvia Mathews Burwell, her successor, and ask why each turned a blind eye to its sordid business practices. HHS should write to state insurance commissioners, and ask them to enforce existing best practices that require greater disclosure from entities (like AARP) operating on a percentage-based commission.

And both Congress and the administration should ask why, if AARP cares about its members as much as it claims, the organization somehow “forgot” to lobby for Medigap reforms—not just prior to Obamacare’s passage, but now. AARP’s fourth quarter lobbying report showed that the organization contacted Congress on 77 separate bills, including issues as minor as the cost of lifetime National Parks passes, yet failed to discuss Medigap reform at all.

Given that AARP made more than $3 billion in profits from the status quo—denying care to individuals with pre-existing conditions, and earning more money by generating more, and higher, premiums—its silence makes sense on one level. But if AARP really wants to make insurance markets fair, and stop “taxing” the aged, all it has to do is look in the mirror.

This post was originally published at The Federalist.

How to Repeal Obamacare

A PDF version of this document is available here.

For years, the American people have suffered from the ill effects of Obamacare’s federal intrusions into the health care system. Millions of Americans received cancellation notices telling them that the plans they had, and liked, would disappear—a direct violation of President Obama’s repeated promises.[1] Insurance premiums have skyrocketed, rising nearly 50 percent in 2014, followed by another increase of over 20 percent this year.[2] Insurance options have disappeared, with Americans in approximately one-third of all U.S. counties having the “choice” of only one insurer in 2017.[3]

But as the 115th Congress begins, the new Republican majority, and President-elect Donald Trump, have pledged to bring the American people desperately needed relief, by fulfilling their long-stated promise to repeal Obamacare. Congressional leaders have stated their intention to bring forward legislation that repeals key portions of Obamacare using budget reconciliation procedures. Such legislation would likely resemble the reconciliation bill that the prior 114th Congress passed, but President Obama vetoed on January 8, 2016.

That legislation, H.R. 3762 of the last Congress, repealed funding for Obamacare’s new entitlements—Medicaid expansion to the able-bodied, and coverage subsidies for individuals of low and moderate incomes purchasing coverage on insurance Exchanges—effective January 1, 2018, approximately two years after enactment. It repealed all of the law’s tax increases—including the tax penalties associated with the individual and employer mandates—beginning January 1, 2016, effectively coinciding with the date of enactment. The bill also included other important provisions, restricting federal Medicaid payments to certain providers.[4]

Critics have argued that, having voted for this legislation once under President Obama, Members of Congress should not pass this bill again, sending it to President Trump’s desk for immediate signature.[5] These critics argue that Congress cannot repeal Obamacare’s costly insurance regulations under the special budget reconciliation procedures, which require all provisions in reconciliation legislation to have a significant budgetary impact. The critics fear that passing such legislation would effectively nullify Obamacare’s individual and employer mandates immediately, and its subsidies eventually, while keeping in place its costly insurance regulations that have significantly raised premiums. They believe that these steps would exacerbate adverse selection—a scenario whereby only sick individuals purchase health insurance coverage—de-stabilize insurance markets, and lead more insurers to drop out of insurance Exchanges altogether.

Those concerns, while legitimate, are misplaced on several fronts. First, Congress has not yet litigated whether or not some or all of the major Obamacare insurance regulations are budgetary in nature, and can be considered as part of reconciliation legislation. Second, Congress can and should take steps to modify last year’s reconciliation bill in ways that will stabilize insurance markets in the near-term, and create a transition to alternative legislation Congress constructs. Third, the incoming Trump Administration has significant regulatory powers within its purview, which can minimize the adverse selection effects critics fear from repeal legislation, and modify the federal mandates that have driven up premiums in recent years.

While not perfect, and less ideal than starting from scratch, last year’s reconciliation legislation represents a solid base from which to construct a legislative and regulatory framework for repealing Obamacare. It also represents the fastest approach for Congress to deliver on the promise it has made to its constituents for over six years: Unwinding an unaffordable and unworkable health care law.

What Congress Should Do

Last year’s reconciliation measure provides a good starting point for Congress when drafting repeal legislation to consider this year. However, Congress should attempt both to expand and revise the measure. These efforts would both mitigate against any adverse selection concerns, and stabilize insurance markets while Congress considers alternative legislation.

Expand Reconciliation to Insurance Regulations:               Critics have claimed that Obamacare’s major insurance regulations “were not altered in H.R. 3762; they could not be altered in a reconciliation bill taken up in 2017, either,” due to procedural restrictions inherent in the budget reconciliation process.[6] Such a definitive assertion is at best premature. Observers have noted that “Congress chose not to litigate” the issue of whether and what restrictions are budgetary in nature, and therefore eligible for repeal in reconciliation legislation, when considering H.R. 3762 in the fall of 2015.[7]

However, Congress can, and should, choose to litigate those issues with the Senate parliamentarian now. Rulings by the Senate parliamentarian will guide lawmakers as they determine which provisions of repeal legislation meet budget reconciliation guidelines, and can therefore be approved using a simple, 51-vote majority without being subject to the 60-vote threshold used for other legislation subject to a filibuster.

The Congressional Budget Office, think-tanks, and other actuarial organizations have produced estimates showing the significant costs of many of Obamacare’s insurance mandates—including requirements related to pre-existing conditions; essential health benefits; community rating requirements; actuarial value; medical loss ratios; preventive care coverage requirements; and other major mandates. The Obama Administration itself has produced cost estimates for several of the law’s mandates—and argued twice before the Supreme Court that its regulatory mandates are critical to the law’s structure.[8]

Congress can and should expand the scope of last year’s reconciliation bill to include the major insurance regulations. Doing so would be consistent with both the existing scoring estimates and past practice under budget reconciliation. Moreover, expanding the scope of repeal to include the largest insurance mandates would mitigate against adverse selection effects that might result if Congress repealed the individual mandate while leaving the major insurance regulations in place.

Freeze Enrollment in Entitlements:            Consistent with the transition period provided for in the 2015 reconciliation legislation, any repeal measure should also include steps to freeze enrollment in the law’s new entitlements. Such actions would be particularly pertinent to Obamacare’s massive expansion of Medicaid—the source of most of the law’s spending, and the vast majority of its coverage expansions.[9]

Research indicates that past states that froze enrollment in Medicaid allowed the vast majority of enrollees to transition off of the program, and into work, within a short period of time.[10] Moreover, another study published by the National Bureau of Economic Research concluded that Tennessee’s decision to roll back its unsustainable Medicaid expansion in 2005 led to “large increases in [the] labor supply” and increases in employment, as individuals dis-enrolled from Medicaid looked for—and obtained—employment, and employer-sponsored health insurance.[11] Freezing enrollment would hold existing beneficiaries harmless, while beginning to transition away from Obamacare’s unsustainable levels of spending—and encouraging economic activity and job growth.

Beginning this year, states that expanded Medicaid under Obamacare will also face added fiscal burdens, as they must finance a portion (in 2017, 5 percent) of the cost of coverage for the first time. Even Democratic state legislators in “blue states” like Oregon and New Mexico have raised concerns about what the cost of this massive expansion of Medicaid to the able-bodied will do to other important state programs targeting “the most vulnerable of our citizens.”[12] For all these reasons, Congress should insert language into the reconciliation freezing enrollment upon enactment—or perhaps shortly after enactment, to allow expansion states time to submit amendments to their existing state plans reflecting this legislative change.

Congress should also explore freezing enrollment in the law’s program of Exchange subsidies. In the spring of 2015, as the Supreme Court considered the case of King v. Burwell—which affected subsidies provided to individuals in states using the federal insurance Exchange, healthcare.gov—multiple Members of Congress introduced legislation that would have frozen enrollment. These bills would have allowed individuals who qualified for subsidies prior to the Court’s ruling to continue to receive them for a transitional period of time, but made other individuals ineligible for such subsidies.[13]

Though the Supreme Court ultimately upheld the subsidies in King v. Burwell, ruling that the words “an Exchange established by the State” also referred to an Exchange run by the federal government, Congress could utilize a similar regime in the reconciliation bill with respect to insurance subsidies—that is, freezing eligibility and enrollment effective the date of the bill’s enactment.[14] However, Congress should only act to freeze eligibility for insurance subsidies if it believes doing so would not cause existing insurance market risk pools to deteriorate during the transition period.

Appropriate Cost-Sharing Subsidies:            Any repeal measure should include a temporary, time-limited appropriation for cost-sharing subsidies currently in dispute. Those subsidies reimburse insurers for the expense of cost-sharing reductions—lower deductibles and co-payments—provided to certain low-income enrollees under Obamacare. In the case of House v. Burwell, the House of Representatives has argued that the text of Obamacare nowhere provides an explicit appropriation for the cost-sharing subsidies, and that the Obama Administration violated the Constitution by funding this spending without an express appropriation.

On May 12, 2016, United States District Court Judge Rosemary Collyer agreed with the House’s position, imposing an injunction (stayed pending appeal) prohibiting the Administration from appropriating funds for the cost-sharing subsidies.[15] The Court of Appeals for the District of Columbia is currently considering the Obama Administration’s appeal of Judge Collyer’s ruling, with further actions on hold until the new Administration takes office.

Some insurers argue that, should the incoming Trump Administration withdraw the cost-sharing subsidies, they have the right to terminate their plans from the Exchanges immediately. The arguments that insurers can withdraw from the markets in 2017 lack merit.[16] Furthermore, analysts have warned for months that an incoming Administration could withdraw the cost-sharing subsidies unilaterally upon taking office.[17] Insurers saw fit to ignore those warnings, and signed up to offer 2017 coverage knowing full well that the cost-sharing subsidies could disappear on short notice, through either court rulings or regulatory action by a new Administration.

However, to provide certainty, Congress should appropriate funds for the cost-sharing subsidies as part of the repeal bill—but only for the length of the transition period provided for in that measure. The Trump Administration should encourage Congress to appropriate funds for the transition period. Once Congress does so, the Trump Administration’s Justice Department can move to dismiss the Obama Administration’s appeal of the case against the House of Representatives, conceding the point that the executive never had authority to appropriate funds for cost-sharing subsidies absent express direction by Congress.

Utilize the Congressional Review Act:            The election outcome notwithstanding, President Obama’s outgoing Administration continues to use the regulatory process to attempt to “box in” his successor. On December 22, 2016, the Administration published a Notice of Benefit and Payment Parameters for the 2018 plan year.[18] In doing so, the Administration specifically waived provisions of the Congressional Review Act, which generally requires a 60-day delayed effective date for major rules. The Department of Health and Human Services (HHS) claimed that such a delay was impracticable for good cause reasons.[19] The 2018 Notice of Benefit and Payment Parameters will therefore take effect 30 days following its display, on January 17, 2017—during President Obama’s last week in office. As a result, President Trump will be unable simply to revoke this regulation unilaterally upon taking office.

However, the Congressional Review Act does provide a vehicle for Congress, in concert with a President Trump, to take action revoking the newest Obamacare regulation. Specifically, the Act provides that a resolution of disapproval, passed by both houses of Congress, will have the effect of nullifying the rule or administrative action proposed.[20] Of particular import, the Congressional Review Act provides for expedited consideration of resolutions of disapproval in the Senate; those limits on debate preclude filibusters, meaning that resolutions of disapproval require a simple, 51-vote majority to pass, rather than the usual 60 votes for legislation subject to a filibuster.

Congress should explore using the Congressional Review Act to pass a resolution of disapproval nullifying the Obama Administration’s last-minute 2018 Notice of Benefit and Payment Parameters. Regardless of whether or not Congress strikes down this last-minute rule, the Trump Administration should act expeditiously—including through use of the “good cause” exemption the Obama Administration cited to rush through its own regulations last month—to provide needed relief to consumers.

What the Administration Should Do

The Trump Administration can also play its part in bringing about the promise of repeal, by acting in concert with Congress to undo the effects of Obamacare’s major insurance mandates. Consistent with the actions Congress should take listed above, the incoming Administration should immediately use flexibility to provide relief from Obamacare’s regulatory regime. Whether through a new 2018 Notice of Benefit and Payment Parameters, a series of interim final regulations, or both, these regulations would provide a vehicle for incorporating many of the changes needed to undo Obamacare’s harmful effects, including those listed below.

While the Administration cannot unilaterally change the law—such actions lie solely within the purview of Congress—it can and should take steps to soften the impact of existing mandates, and provide maximum flexibility wherever possible. These steps would stabilize insurance markets during the period following repeal, and provide for an orderly transition to an alternative regime.

Limit Open Enrollment:      Obamacare gives the Secretary of HHS the authority to “require an Exchange to provide for…annual open enrollment periods, as determined by the Secretary for calendar years after the initial enrollment period.”[21] The law requires insurers to accept all applicants without regard to pre-existing conditions or health status—in industry parlance, guaranteed issue—but only within certain limits. Specifically, health insurers may “restrict enrollment in coverage described in such subsection [i.e., guaranteed issue coverage] to open or special enrollment periods.”[22] In other words, the requirement that insurers accept all applicants only applies during open enrollment periods—and the HHS Secretary has the sole power to determine when, and for how long, those open enrollment periods run.

The existing Code of Federal Regulations states that for the 2018 benefit year, open enrollment for individual health insurance will run from November 1, 2017 through January 31, 2018—the exact same three-month period as the 2016 and 2017 open enrollment periods.[23] The incoming Administration can—and should—issue new regulations limiting those open enrollment periods to a much narrower window, to prevent individuals from “gaming the system” and enrolling only after they incur costly medical conditions.

At minimum, it appears eminently reasonable for the new Administration to shorten the open enrollment window down to 30 days—a significant reduction from 2016 and 2017, which saw open enrollment last for one-quarter of the year. If logistical obstacles can be overcome—i.e., could Exchanges process applicants in a shorter period?—the Administration could restrict the open enrollment period even further, to a period of perhaps a couple of weeks. Other observers have suggested tying open enrollment to a period surrounding an individual’s birth date, thus preventing a surge of applicants at one particular point in the year.

Narrowing the length of open enrollment periods, coupled with restrictions on special enrollment periods outlined below, will provide a more controlled and contained environment for insurers to issue policies. Limiting enrollment periods will mitigate against an insurance market that requires carriers to issue policies without imposing financial penalties on individuals who fail to purchase insurance—indeed, will mitigate against the adverse selection insurers suffer from currently, even with the individual mandate in full effect. Because Obamacare gives the Secretary of HHS extremely broad authority to define “open enrollment periods”—other than stating these must occur annually, the statute includes few prescriptions on administrative authority—the Trump Administration should use this authority to maximum effect.

Restrict Special Enrollment Periods:            Insurers have raised numerous complaints about individuals using special periods outside open enrollment to obtain coverage, incur large medical claims, and then drop that coverage upon regaining health. Early in 2016, Blue Cross Blue Shield calculated that special enrollment period customers were 55 percent more costly than those enrolling during the usual annual enrollment period. Likewise, Aetna found that one-quarter of its entire enrollment came from these “special” enrollment periods, and that said enrollees remained on the rolls for an average of fewer than four months—an indication that many only enrolled in the first place to obtain coverage for a specific medical condition or ailment.[24]

Even as insurers demonstrate that individuals have abused special enrollment periods to incur costly medical bills and subsequently cancel coverage, the Obama Administration actually exacerbated the problem its last-minute 2018 Notice of Benefit and Payment Parameters. That rule expanded the number of special enrollment periods, codifying an additional five exemptions allowing eligible individuals to qualify for coverage outside of open enrollment periods.[25]

That said, the Obama Administration has taken some steps to restrict abuse of special enrollment periods. In June 2016, it implemented a process announced in February 2016, which requires documentation from applicants seeking special enrollment periods for the most common conditions—a move, loss of coverage, marriage, birth, or adoption.[26] The Centers for Medicare and Medicaid Services (CMS) claims this documentation requirement reduced the number of special enrollment period applicants by 20 percent.[27] However, a separate effort to require verification of special enrollment period eligibility prior to enrollment will not begin until this coming June, with results only coming in spring 2018.[28]

With respect to special enrollments, the incoming Administration should 1) eliminate all special enrollment periods, other than those required under existing law; and/or 2) accelerate the process of pre-enrollment verification for all special enrollment periods.[29]

Use Exchange User Fees to Lower Premiums:     In its Notice of Benefit Parameters, the Obama Administration has annually imposed a 3.5 percent surcharge, dubbed an “Exchange user fee,” on issuers offering coverage using healthcare.gov, the federally-run Exchange, which those insurers then pass on to consumers. The 2018 version of the document, released December 22, specifically suggested that the 3.5 percent fee paid by insurers (and ultimately by consumers) now exceeds the costs associated with running the federal Exchange:

We have received feedback suggesting that the FFEs [federally-facilitated Exchanges] would be able to increase enrollment by allocating more funds to outreach and education, a benefit to both consumers and issuers. We sought comment on how much funding to devote to outreach and education, and on whether HHS should expressly designate a portion or amount of the FFE user fee to be allocated directly to outreach and enrollment activities, recognizing the need for HHS to continue to adequately fund other critical Exchange operations, such as the call center, healthcare.gov, and eligibility and enrollment activities.[30]

Some commenters regarding the Exchange user fee proposal specifically requested that the Exchange “user fee rate should decrease over time.” HHS rejected this approach for 2018. It did note that “we do anticipate gaining economies of scale from functions with fixed costs, and if so, may consider reducing the FFE user fee based on increased enrollment and premiums in the future.”[31]

Upon taking office, the Trump Administration should act immediately to ensure that the Exchange user fee funds essential Exchange operations only. With the Exchanges now in their fourth year of operation, HHS will not need to spend as much on technological infrastructure as the Department did while standing up the Exchange—and should not, as the Obama Administration suggested, spend the difference on new “slush funds” designed to promote enrollment outreach.

Because the Exchange user fee is based on a percentage of premium, this year’s 20 percent spike in premiums for Obamacare plans has significantly increased funding for the federal Exchange as it is.[32] Moreover, the vast majority of Exchange participants—84 percent, per the most recent enrollee data—receive federal subsidies for their health insurance premiums.[33] Because those federal subsidies directly relate to premium costs, federal taxpayers—and not enrollees themselves—are in many cases paying for any additional, and unnecessary, spending undertaken by the federal Exchange.

To save taxpayers, and to lower premiums for all consumers, the Trump Administration should take immediate steps to reduce the Exchange user fee to the minimum necessary to support Exchange operations—and instruct insurers to rebate the difference to consumers in the form of lower premiums.

Revise Medical Loss Ratio:  Obamacare requires insurers to spend a minimum percentage of premiums on medical claims—a medical loss ratio (MLR).[34] Insurers in the individual market face an 80 percent MLR, while employer plans have an 85 percent requirement. Plans that do not meet the minimum MLR thresholds must return the difference to beneficiaries in the form of rebates.

During Obamacare’s first several years, the MLR requirements have not proven a concern to insurers—largely because they significantly under-estimated premiums for 2014, 2015, and 2016. In fact, the average MLR for individual market plans skyrocketed from 62.3% in 2011 to 93.3% in 2015.[35] Because enrollees proved sicker than anticipated, insurers have paid out a high percentage of premiums in medical claims—indeed, in some cases, have paid out more in claims than they received in premium payments from enrollees (i.e., an MLR over 100%).

However, should the Trump Administration desire to provide additional flexibility for insurers, it could take a more expansive view of “activities that improve health care quality,” considered equivalent to medical claims paid under the MLR formula.[36] Obamacare required the National Association of Insurance Commissioners (NAIC) to, by December 31, 2010, “establish uniform definitions of the activities” under the MLR, including the definition of activities to improve health care quality.[37] However, the statute makes those definitions “subject to the certification of the Secretary,” and while then-HHS Secretary Kathleen Sebelius accepted the NAIC recommendations, the new Administration is not necessarily obliged to do so.

The interim final rule regarding the medical loss ratio requirement provides a roadmap for a Trump Administration to provide regulatory flexibility regarding the MLR, including the definition of “activities that improve health care quality.”[38] The new Administration could also provide relief regarding agents’ and brokers’ fees and commissions—an issue HHS acknowledged in the rule, but did little to ameliorate—and taxes and fees paid by insurers due to regulatory and other requirements.

Reform State Innovation Waivers:            Section 1332 of Obamacare provides for “state innovation waivers,” which can take effect beginning on or after January 1, 2017. The waivers allow states to obtain exemptions from most of the law’s major insurance requirements, as well as the employer and individual mandates, to provide an alternative system of health insurance for its residents. However, the statute requires that any waiver must:

  1. “Provide coverage that is at least as comprehensive as the coverage” defined under the law, as certified by the Medicare actuary;
  2. “Provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable” as the law;
  3. “Provide coverage to at least a comparable number of its residents;” and
  4. “Not increase the federal deficit.”[39]

The Obama Administration released a final rule regarding the process for applying for a Section 1332 waiver in early 2012.[40] However, it did not release information regarding the substance of the waivers themselves until late 2015—and then did so only through informal guidance, not a formal regulation subject to notice-and-comment.[41]

The December 2015 guidance exceeded the requirements of the statute in several ways. First, it said the Administration would not consider potential combined savings from a Section 1332 state innovation waiver when submitted in conjunction with a Medicaid Section 1115 reform waiver. In other words, when meeting the deficit neutrality requirement of Section 1332, Medicaid savings could not be used to offset higher costs associated with Exchange reforms, or vice versa.[42]

The guidance also said the Obama Administration would impose additional tests with respect to coverage and affordability—not just examining the impact on state populations as a whole, but effects on discrete groups of individuals.[43] For instance, the guidance noted that “waivers that reduce the number of people with insurance coverage that provides both an actuarial value equal to or greater than 60 percent and an out-of-pocket maximum that complies with Section 1302(c)(1) of [Obamacare] would fail” the affordability requirement.[44] These new mandates effectively prohibit states from using waiver programs to expand access to more affordable catastrophic coverage for individuals.

Due to the four statutory requirements listed above, the Section 1332 waiver program suffers from inherent shortcomings.[45] But because the added restrictions proposed in December 2015 came through informal regulatory guidance, the Trump Administration can and should immediately withdraw that guidance upon taking office. It should also work immediately to establish a more flexible rubric for states wishing to utilize Section 1332 waivers—with respect to both the application process itself and more flexible insurance design that can expand access and affordability for a state’s residents.

Withdraw Contraception Mandate:            Among the “early benefits” of the law taking effect six months after its enactment was a mandate for preventive care. Specifically, the law requires first-dollar coverage (i.e., without cost-sharing) of several preventive services, including women’s preventive health screenings.[46]

On December 20, 2016, the Health Resources and Services Administration (HRSA) released the most recent women’s preventive services guidelines. These guidelines, as before, required that “the full range of female-controlled U.S. Food and Drug Administration approved contraceptive methods, effective family planning practices, and sterilization procedures be available as part of contraceptive care.”[47]

The Trump Administration should upon taking office withdraw the HRSA benefit mandates—including the requirement to provide contraception coverage. While these particular mandates may have a slight impact on premiums, removing them would reduce premiums nonetheless. More importantly, they would restore the rights of conscience to those individuals and organizations who have been forced to violate their deeply-held religious beliefs to cover contraception and other procedures they object to.[48]

Modify Essential Health Benefits and Actuarial Value:        Among Obamacare’s many new mandated insurance benefits, two in particular stand out. First, the law provides for a series of “essential health benefits”—ten categories of health services that all qualified plans must cover.[49] While the essential health benefits address the breadth of health insurance coverage, actuarial value—or the percentage of annual health expenses paid by an insurance policy on average—addresses the depth of that coverage. The law categorizes individual health plans in four “tiers” based on actuarial value: Bronze plans with an average actuarial value of 60 percent; silver plans, 70 percent; gold plans, 80 percent; and platinum plans, 90 percent.[50]

Both directly and indirectly, the essential health benefits and actuarial value requirements raise premiums—by forcing individuals to buy richer coverage, and then by inducing additional demand for health care through that richer coverage. The Administration’s own rule regarding essential health benefits admitted that the law’s requirements include provisions not previously covered by most forms of health insurance, including “rehabilitative and habilitative services and devices.”[51] Likewise, a study in the journal Health Affairs concluded that the actuarial value requirements would raise premiums, as most pre-Obamacare individual market policies did not meet the new mandated benefit thresholds.[52]

However, the final rules regarding essential health benefits and plan actuarial value provide opportunities to expand benefit flexibility.[53] For instance, the new Administration could provide states with more options for declaring benchmark plans that meet the essential health benefit requirements under the statute. The new Administration could also expand the de minimis variation standards for actuarial value measures required by the law.[54] Allowing for additional variation and flexibility could have a significant impact in reducing premiums, as the Congressional Budget Office concluded in 2009 that the essential benefits and actuarial value standards would collectively raise premiums by 27 to 30 percent, all else equal.[55]

Enhanced Flexibility for Businesses:             On September 13, 2013, the Treasury Department issued Notice 2013-54, which stated that an arrangement whereby an employer reimburses some or all of an employee’s expenses for the purchase of individual health insurance—whether through a Health Reimbursement Arrangement (HRA) or some other means—would be considered a group health plan.[56] As a result, businesses using HRAs need to meet all of Obamacare’s regulatory reforms, such as prohibiting annual limits on the dollar value of essential health benefits.[57] Group health plans failing to meet those requirements trigger a penalty of $100 per day, per individual.[58]

This provision sparked widespread uproar when it first went into effect in July 2015, as the Obama Administration threatened fines of $36,500 per employee for employers who helped fund their employees’ health coverage.[59] Members of Congress introduced standalone legislation exempting small businesses from this requirement.[60] This provision was eventually incorporated into the 21st Century Cures Act, which President Obama himself signed into law on December 13, 2016.[61] As a result, small businesses with under 50 employees can now provide contributions to their workers’ individual health insurance premiums without triggering Obamacare’s regulatory regime.

Expanding upon the precedent of a law President Obama himself signed, the Trump Administration should withdraw Notice 2013-54, build on Congress’ actions, and allow businesses of all sizes the ability to reimburse employees’ premium costs without triggering massive fines. Actions in this vein would have salutary benefits in two respects: They would remove more businesses from Obamacare’s onerous regulatory requirements, while encouraging the use of defined contribution health insurance for employees.

Next Steps and the Pathway Forward

Following more than six years of frustration for the American people, the promise of repealing Obamacare is finally within reach. While passing legislation that unwinds Obamacare in an orderly, stable manner will require policy-makers to act with care, Congress and the new Trump Administration can use last year’s reconciliation legislation as the basis for action. Specifically, Congress should:

  • Seek to expand the scope of last year’s reconciliation legislation to encompass Obamacare’s major insurance regulations, consistent with budgetary scores and past practice and precedents within the Senate;
  • Add a provision to last year’s reconciliation legislation freezing enrollment in Medicaid expansion, effective either upon enactment or shortly thereafter;
  • Explore adding a provision to last year’s reconciliation legislation freezing enrollment in Exchange subsidies, provided doing so will not de-stabilize insurance markets;
  • Appropriate funds for the cost-sharing subsidies in reconciliation legislation, but only for the defined length of the Obamacare transition period; and
  • Explore use of the Congressional Review Act to pass a resolution of disapproval nullifying the Obama Administration’s last-minute Notice of Benefit and Payment Parameters for 2018.

Likewise, the Trump Administration can take several regulatory steps to enhance flexibility and provide certainty during the transition period:

  • Limit annual open enrollment to the shortest period feasible, and in no case longer than one month;
  • Restrict the use of special enrollment periods, by withdrawing all those added by the Obama Administration and not included in statute, and/or requiring pre-enrollment verification for all special enrollment periods;
  • Provide that, for states using the federal Exchange, any portion of the 3.5 percent Exchange user fee not used to cover annual operating costs be refunded to enrollees, thus lowering their premiums;
  • Revise the medical loss ratio requirements to provide more flexibility for insurers;
  • Immediately withdraw the December 2015 guidance regarding Section 1332 state innovation waivers, and provide maximum flexibility within the existing statutory requirements for states seeking to mitigate the harmful effects of Obamacare’s insurance mandates;
  • Withdraw the contraception mandate that raises premiums and hinders freedom of conscience;
  • Modify essential health benefits and actuarial value requirements to provide maximum flexibility within the statutory framework;
  • Expand upon Congress’ efforts allowing small businesses to reimburse their employees’ health insurance premiums without facing massive fines, by withdrawing the September 2013 IRS notice and extending flexibility to as many employers as possible; and
  • Drop the Obama Administration’s appeal of House v. Burwell once Congress provides a temporary, time-limited appropriation for cost-sharing subsidies as part of the repeal reconciliation bill.

Collectively, this menu of actions would help to unwind most of Obamacare’s harmful effects, provide for an orderly transition, and pave the way for Congress to consider and pass alternative legislation designed to lower health care costs. The promise of Obamacare repeal is within reach; it’s time for Congress and the new Administration to seize it.



[1] “Policy Notifications and Current Status, by State,” Associated Press December 26, 2013, http://finance.yahoo.com/news/policy-notifications-current-status-state-204701399.html; Angie Drobnic Holan, “Lie of the Year: ‘If You Like Your Health Care Plan, You Can Keep It,’” Politifact December 12, 2013, http://www.politifact.com/truth-o-meter/article/2013/dec/12/lie-year-if-you-like-your-health-care-plan-keep-it/.

[2] Drew Gonshorowski, “How Will You Fare in the Obamacare Exchanges?” Heritage Foundation Issue Brief No. 4068, October 16, 2013, http://www.heritage.org/research/reports/2013/10/enrollment-in-obamacare-exchanges-how-will-your-health-insurance-fare; Department of Health and Human Services, “Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace,” ASPE Research Brief, October 24, 2016, https://aspe.hhs.gov/sites/default/files/pdf/212721/2017MarketplaceLandscapeBrief.pdf.

[3] Cynthia Cox and Ashley Semanskee, “Preliminary Data on Insurer Exits and Entrants in 2017 Affordable Care Act Marketplaces,” Kaiser Family Foundation, August 28, 2016, http://kff.org/health-reform/issue-brief/preliminary-data-on-insurer-exits-and-entrants-in-2017-affordable-care-act-marketplaces/.

[4] Section 206 of H.R. 3762 had the effect of preventing Medicaid plans from providing reimbursements to certain providers, including Planned Parenthood.

[5] Joe Antos and Jim Capretta, “The Problems with ‘Repeal and Delay,’” Health Affairs January 3, 2017, http://healthaffairs.org/blog/2017/01/03/the-problems-with-repeal-and-delay/.

[6] Ibid.

[7] Paul Winfree and Brian Blase, “How to Repeal Obamacare: A Roadmap for the GOP,” Politico November 11, 2016, http://www.politico.com/agenda/story/2016/11/repeal-obamacare-roadmap-republicans-000230.

[8] Ibid.

[9] Congressional Budget Office, baseline estimates for federal subsidies for health insurance, March 2016, https://www.cbo.gov/sites/default/files/recurringdata/51298-2016-03-healthinsurance.pdf, Table 3, p. 5; Edmund Haislmaier and Drew Gonshorowski, “2015 Health Insurance Enrollment: Net Increase of 4.8 Million, Trends Slowing,” Heritage Foundation Issue Brief No. 4620, October 31, 2016, http://thf-reports.s3.amazonaws.com/2016/IB4620.pdf.

[10] Jonathan Ingram, Nic Horton, and Josh Archambault, “Welfare to Work: How States Can Unwind Obamacare Expansion and Restore the Working Class,” Forbes December 3, 2014, http://www.forbes.com/sites/theapothecary/2014/12/03/welfare-to-work-how-states-can-unwind-obamacare-expansion-and-restore-the-working-class/#455cad6923ec.

[11] Craig Garthwaite, Tal Gross, and Matthew Notowidigdo, “Public Health Insurance, Labor Supply, and Employment Lock,” National Bureau of Economic Research Working Paper 19220, July 2013, http://www.nber.org/papers/w19220.

[12] Christina Cassidy, “Medicaid Enrollment Surges, Stirs Worry about State Budgets,” Associated Press July 19, 2015, http://www.bigstory.ap.org/article/c158e3b3ad50458b8d6f8f9228d02948/medicaid-enrollment-surges-stirs-worry-about-state-budgets.

[13] See for instance Section 4 of Winding Down Obamacare Act, S. 673 (114th Congress), by Sen. Ben Sasse (R-NE), and Section 4(b) of Preserving Freedom and Choice in Health Care Act, S. 2016 (114th Congress), by Sen. Ron Johnson (R-WI).

[14] King v. Burwell, 576 U.S. __ (2015).

[15] United States District Court for the District of Columbia, Civil Action No. 14-1967, House v. Burwell, ruling by Judge Rosemary Collyer, May 12, 2016, https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2014cv1967-73.

[16] The contract between CMS and insurers on the federal Exchange notes that insurers developed their products based on the assumption that cost-sharing reductions “will be available to qualifying enrollees,” and can withdraw if they are not. However, under the statute, enrollees will always qualify for the cost-sharing reductions—that is not in dispute. The House v. Burwell case instead involves whether or not insurers will receive federal reimbursements for providing the cost-sharing reductions to enrollees. This clause was poorly drafted by insurers’ counsel, and therefore has no applicability to House v. Burwell; insurers have no ability to withdraw from Exchanges in 2017, even if the Trump Administration stops reimbursing insurers. See https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Plan-Year-2017-QHP-Issuer-Agreement.pdf, V.b, “Termination,” p. 6.

[17] Chris Jacobs, “What if the Next President Cuts Off Obamacare Subsidies for Insurers?” Wall Street Journal May 5, 2016, http://blogs.wsj.com/washwire/2016/05/05/what-if-the-next-president-cuts-off-obamacare-subsidies/.

[18] Department of Health and Human Services, interim final rule regarding “2018 Notice of Benefit and Payment Parameters,” Federal Register December 22, 2016, https://www.gpo.gov/fdsys/pkg/FR-2016-12-22/pdf/2016-30433.pdf.

[19] Ibid., pp. 94159-60.

[20] 5 U.S.C. 802. For more information, see Maeve Carey, Alissa Dolan, and Christopher Davis, “The Congressional Review Act: Frequently Asked Questions,” Congressional Research Service Report R43992, November 17, 2016, https://fas.org/sgp/crs/misc/R43992.pdf.

[21] 42 U.S.C. 13031(c)(6)(B), as codified by Section 1311(c)(6)(B) of Patient Protection and Affordable Care Act, P.L. 111-148.

[22] Section 2702(b)(1) of the Public Health Service Act, 42 U.S.C. 300gg-1(b)(1), as modified by Section 1201(2)(A) of PPACA.

[23] 45 C.F.R. 155.410(e)(2).

[24] Paul Demko, “Gaming Obamacare,” Politico January 12, 2016, http://www.politico.com/story/2016/01/gaming-obamacare-insurance-health-care-217598.

[25] 2018 Notice of Benefit and Payment Parameters, pp. 94127-31.

[26] Centers for Medicare and Medicaid Services, “Fact Sheet: Special Enrollment Confirmation Process,” February 24, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-02-24.html.

[27] Centers for Medicare and Medicaid Services, “Pre-Enrollment Verification for Special Enrollment Periods,” https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/pre-enrollment-sep-fact-sheet-final.pdf.

[28] Ibid.

[29] 42 U.S.C. 13031(c)(6)(C), as codified by Section 1311(c)(6)(C) of PPACA, requires the Secretary to establish special enrollment periods for individual coverage as specified by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) for group coverage, codified at 26 U.S.C. 9801.

[30] 2018 Notice of Benefit and Payment Parameters, p. 94138.

[31] Ibid., p. 94138.

[32] HHS published an average 2017 premium increase for healthcare.gov states of 25 percent, and a median increase of 16 percent. See HHS, “Health Plan Choice and Premiums in 2017,” Table 2, p. 6.

[33] Centers for Medicare and Medicaid Services, “First Half of 2016 Enrollment Snapshot,” October 19, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-10-19.html.

[34] Section 2718 of the Public Health Service Act, 42 U.S.C. 300gg-18, as revised by PPACA Sections 1001(1) and 10101(f).

[35] Centers for Medicare and Medicaid Services, “The 80/20 Rule Increases Value for Consumers for Fifth Year in a Row,” November 18, 2016, https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Medical-Loss-Ratio-Annual-Report-2016-11-18-FINAL.pdf.

[36] Section 2718(a)(3) of the Public Health Service Act, 42 U.S.C. 300gg18(a)(3), as revised by PPACA Sections 1001(1) and 10101(f).

[37] Section 2718(c) of the Public Health Service Act, 42 U.S.C. 300gg-18(c), as revised by PPACA Sections 1001(1) and 10101(f).

[38] Department of Health and Human Services, interim final rule regarding “Implementing Medical Loss Ratio Requirements under the Patient Protection and Affordable Care Act,” Federal Register December 1, 2010, https://www.gpo.gov/fdsys/pkg/FR-2010-12-01/pdf/2010-29596.pdf.

[39] 42 U.S.C. 18052(b)(1)(A), as codified by Section 1332(b)(1)(A) of PPACA.

[40] Departments of Treasury and Health and Human Services, final rule regarding “Application, Review, and Reporting Process for Waivers for State Innovation,” Federal Register February 27, 2012, https://www.gpo.gov/fdsys/pkg/FR-2012-02-27/pdf/2012-4395.pdf.

[41] Departments of Treasury and Health and Human Services, guidance regarding “Waivers for State Innovation,” Federal Register December 16, 2015, https://www.gpo.gov/fdsys/pkg/FR-2015-12-16/pdf/2015-31563.pdf.

[42] Ibid., p. 78134.

[43] Ibid., p. 78132.

[44] Ibid., p. 78132.

[45] Chris Jacobs, “What’s Blocking Consensus on Health Care?” Wall Street Journal July 17, 2015, http://blogs.wsj.com/washwire/2015/07/17/whats-blocking-consensus-on-health-care/.

[46] Section 2713 of the Public Health Service Act, 42 U.S.C. 300gg-13, as revised by PPACA Section 1001(1).

[47] Health Resources and Services Administration, “Women’s Preventive Services Guidelines,” December 20, 2016, https://www.hrsa.gov/womensguidelines2016/index.html.

[48] United States Conference of Catholic Bishops, “The HHS Mandate for Contraception/Sterilization Coverage: An Attack on Rights of Conscience,” January 20, 2012, http://www.usccb.org/issues-and-action/religious-liberty/conscience-protection/upload/preventiveqanda2012-2.pdf.

[49] 42 U.S.C. 18022, as codified by Section 1302 of PPACA.

[50] 42 U.S.C. 18022(d), as codified by Section 1302(d) of PPACA.

[51] Department of Health and Human Services, final rule on “Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation,” Federal Register February 25, 2013, https://www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/2013-04084.pdf, pp. 12860-61.

[52] Jon Gabel, et al., “More Than Half of Individual Health Plans Offer Coverage That Falls Short of What Can Be Sold through Exchanges as of 2014,” Health Affairs May 2012, http://content.healthaffairs.org/content/early/2012/05/22/hlthaff.2011.1082.abstract.

[53] HHS, final rule on “Essential Health Benefits and Actuarial Value.”

[54] 42 U.S.C. 18022(d)(3), as codified by Section 1302(d)(3) of PPACA.

[55] Congressional Budget Office, letter to Sen. Evan Bayh regarding health insurance premiums, November 30, 2009, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/11-30-premiums.pdf, pp. 9-10.

[56] Internal Revenue Service, Notice 2013-54, September 13, 2016, https://www.irs.gov/pub/irs-drop/n-13-54.pdf.

[57] Section 1563(f) of PPACA added Section 9815 to the Internal Revenue Code, which incorporated most of the regulatory requirements of the law to group health plans.

[58] 26 U.S.C. 4980D(b)(1).

[59] Grace-Marie Turner, “Small Businesses Threatened with $36,500 IRS Fines for Helping Employees with Health Costs,” Forbes June 30, 2016, http://www.forbes.com/sites/gracemarieturner/2015/06/30/small-businesses-threatened-with-36500-irs-fines-for-helping-employees-with-health-costs/#53750b3d4a0e.

[60] The Small Business Healthcare Relief Act, introduced by Reps. Charles Boustany (R-LA) and Mike Thompson (D-CA), H.R. 2911 of the 114th Congress; a companion measure was introduced by Sens. Chuck Grassley (R-IA) and Heidi Heitkamp (D-ND) as S. 1697 of the 114th Congress.

[61] Section 18001 of 21st Century Cures Act, P.L. 114-255.

For Presidential Candidates, Some Inconvenient Truths on Entitlements

News coverage regarding Hillary Clinton’s proposal to allow individuals under age 65 to buy into Medicare has focused largely on describing how her plan might work, or how it fits into her Democratic primary battle with socialist Bernie Sanders — the left hand trying to imitate what the far left hand is doing. But these political stories mask a more important policy paradigm: While Sanders and Clinton both want to expand Medicare, the program is broke — and neither Sanders, nor Clinton, nor Donald Trump have admitted that inconvenient truth, or have proposed any specific solutions to fix the problem.

Astute readers may note the verb tense in the preceding sentence. It’s not that Medicare will become insolvent in ten or twenty years’ time — it’s practically insolvent now. The program’s Part A (hospital insurance) trust fund lost a whopping $128.7 billion between 2008 and 2014, according to the program’s trustees. The Congressional Budget Office projected earlier this year that the trust fund would become insolvent within the decade.

But in reality, the only thing keeping Medicare afloat at present is the double-counting budget gimmicks created by Obamacare. In the year prior to the law’s enactment, the program’s trustees estimated that the Part A trust fund would become insolvent by 2017 — just a few short months from now. But within months after Obamacare became law, the trustees pushed back their insolvency estimate twelve years, from 2017 to 2029.

The trustees’ estimates notwithstanding, Medicare hasn’t become more solvent under President Obama — far from it. Instead, the Medicare payment reductions and tax increases used to fund Obamacare are simultaneously giving the illusion of improving Medicare’s insolvency. When former Health and Human Services secretary Kathleen Sebelius was asked at a congressional hearing whether those funds were being used “to save Medicare, or#…#to fund health care reform [Obamacare],” Sebelius replied, “Both.”

The Madoff-esque accounting schemes included in Obamacare do not improve Medicare’s solvency one whit. In fact, they undermine the program, because the illusion of solvency has encouraged politicians to ignore Medicare’s financial shortfalls until it’s too late.

And ignore it they have. Sanders has proposed a “Medicare for all” plan that a liberal think tank this week estimated would cost the federal government $32 trillion over ten years. Hillary Clinton has proposed creating another new entitlement — this one a refundable tax credit of up to $5,000 per family to cover out-of-pocket medical expenses, for which many of the 175 million Americans with employer-sponsored coverage could qualify. And Donald Trump has run ads, in states including Pennsylvania, claiming he will “save Social Security and Medicare without cuts.”

But none of them have provided specifics about how they would reform our existing entitlements to prevent a fiscal collapse and preserve them for current seniors and future generations. The collective silence might stem from the fact that Medicare alone faces unfunded obligations of $27.9 trillion over the next 75 years — and that’s after the Obamacare accounting gimmicks that make Medicare’s deficits look smaller on paper. Shortfalls that large will require making tough choices; greater economic growth will make the deficits more manageable, but we can’t grow our way out of a $28 trillion shortfall.

Reaction to Speaker Paul Ryan’s comments about Trump last week has largely focused on the latter’s tone and temperament in his presidential campaign. But if Ryan has stood for anything in Washington, it is fiscal responsibility and entitlement reform. Conversely, by claiming he can “save Social Security and Medicare without cuts,” Trump is effectively signing Republicans up for a $28 trillion tax increase to “save Medicare” — and more besides for Social Security. Little wonder, then, that the Speaker expressed his reluctance to endorse Trump; at their meeting today, they could well address this topic in detail.

Four decades ago, as Britain plunged into its Winter of Discontent, Prime Minister James Callaghan returned from a South American summit and denied any sense of “mounting chaos.” The next day, the Sun’s famous headline shouted “Crisis? What Crisis?” Clinton, Trump, and Sanders should take note. For while the remaining candidates for president seem more interested in creating new entitlements than in making existing ones sustainable, ultimately voters will not look kindly on those who fiddled while our fiscal future burned.

This post was originally published at National Review.

Is Controversy over Mammograms Looming?

The issue of mammogram coverage is about to return to the Washington agenda.

draft recommendation from the U.S. Preventive Services Task Force last month echoes a similar recommendation made in the fall of 2009. Namely, the task force recommends mammogram screening every two years for women ages 50 to 74 but does not recommend universal screening before age 50: “The decision to start regular, biennial screening mammography before the age of 50 years should be an individual one and take patient context into account.”

That contradicts guidelines issued by the American Cancer Society and other groups for women in their 40s and is part of a long-standing debate about whether the benefits of early detection and treatment offset the costs, including false positives and additional radiation exposure.

Obamacare moved that debate from the clinical realm into the policy world by giving the task force jurisdiction over which preventive services insurers must cover. The law references the task force more than a dozen times. Any preventive service the task force grades “A” or “B” must be covered by private insurers, Medicare, and Medicaid without cost-sharing such as co-pays or deductibles. Because the draft recommendations give a “B” grade only to biennial screening between ages 50 to 74, insurers would not be required to cover mammograms for women younger than 50 or screenings more frequent than the every-two-years regimen recommended by the task force.

When the task force issued its recommendations during the fall of 2009—at the height of the Obamacare debate—critics of the bill questioned the task force’s role in the proposed regime. Sarah Palin wondered whether cutting costs played a role in the recommendations, and a group of Republican congresswomen called them a “slippery slope” on the way to rationing. Then-Health and Human Services Secretary Kathleen Sebelius issued a statement and said that the task force had no policy-making role—statements belied by the text of the bill before Congress.

In the end, the law explicitly instructed the Department of Health and Human Services to disregard the controversial 2009 guidelines, reverting instead to a prior series of recommendations that allowed for annual coverage of mammograms for all women 40 and older. If, however, the task force re-issues the same recommendations later this year—as its April draft suggested–that would supersede all its prior reports, again raising questions about coverage of annual mammograms.

A bipartisan group from Congress has already written to HHS, asking that the draft mammogram recommendations be disregarded. Congress may in time take more explicit action to overrule the task force. But the controversy in 2009 showed that the final recommendations issued by the U.S. Preventive Services Task Force are not likely to go unnoticed—in Washington or around the country.

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

Will the “Doc Fix” Include a Compromise on Children’s Health Insurance?

Democrats on the Senate Finance Committee issued a news release Saturday expressing concern about provisions for children’s health insurance in the Medicare “doc fix” bill taking shape in the House. Media coverage of the children’s health program has largely focused on the length of the extension: Senate Democrats want a four-year extension, while a summary of the House agreement released Friday has a two-year reauthorization. But there are other, fundamental policy disagreements.

The disagreements are rooted in a letter issued by the Centers for Medicare and Medicaid Services (CMS) in August 2007. Congress was due to reauthorize the children’s health insurance program that fall, and the letter applied two principles to state programs: It targeted resources first toward families making less than 200% of the federal poverty level (now $48,500 for a family of four). If states wished to expand children’s health insurance to families with incomes greater than 250% of the federal poverty level, they had to first cover at least 95% of children in the lowest income group. The letter also instructed states to take steps to ensure that children and families were not dropping private, employer-provided coverage to enroll in taxpayer-funded programs.

Democrats reacted to the letter by refusing to vote on President George W. Bush’s nominee for CMS administrator in the Senate. The Democratic-controlled Congress passed legislation expanding children’s health insurance October 2007 and January 2008, but President Bush, viewing the bills as inconsistent with the policy goals his administration had outlined, vetoed the measures. House Republicans sustained his veto on both occasions.

Upon taking office, President Barack Obama ordered his secretary of health and human services, Kathleen Sebelius, to rescind the August 2007 memo. In February 2009 congressional Democrats enacted the children’s health insurance program expansion that had previously eluded them. Many Republicans believe the program should be targeted toward the lowest-income families, as it was initially designed. Draft reauthorization language issued by the House Energy and Commerce Committee last month would focus “funding on low-income families” to “address concerns about crowding out private coverage and subsidizing upper-middle-class families,” according to a summary.

The bipartisan deal to amend Medicare’s “doc fix” includes a two-year reauthorization of the children’s health insurance program, but policy details of that extension haven’t been released. Unless Republicans and Democrats can agree on a compromise—which eluded Congress and the Bush administration in 2007-08—one party may have to renege on policies it has adhered to for years. There are questions about the fiscal sustainability of the “doc fix,” but the philosophical questions may be no less difficult.

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

Phantom Savings in Obama’s Budget

In the president’s budget released this week, the Obama administration proposed approximately $400 billion in health-care savings. While that sounds impressive, the number might actually be less—for one proposal relies on a board that does not yet exist and that the administration has made no effort to establish.

As it has in previous years, the president’s 2016 budget proposal relies on savings achieved by strengthening the Independent Payment Advisory Board–this time to the tune of more than $20 billion. Created as part of Obamacare, IPAB was intended to be a group of non-partisan experts, nominated by the president and confirmed by the Senate, who would make recommendations on slowing the growth of Medicare costs. The recommendations were to take effect automatically unless overruled by Congress.

Although the health-care law was enacted nearly five years ago, the administration has made no attempt to constitute IPAB:

* The president has not nominated members to the board for Senate confirmation;

* The president has signed appropriations legislation rescinding spending reserved for the board, most recently in Section 522 of last year’s “cromnibus” legislation;

* While secretary of health and human services, Kathleen Sebelius testified before Congress in 2011 that her agency would undertake a rule-making process to define “rationing.” Obamacare prohibits IPAB from rationing, but the term is not defined in statute. The administration, however, has not begun such a regulatory process.

When questioned on this issue, the administration has argued that the slowdown in Medicare spending makes the board unnecessary at the moment. Administration officials could also make the accurate—if politically unpopular—assertion that the Department of Health and Human Services has the power to implement Medicare savings proposals unilaterally in the absence of a fully functioning board.

Nevertheless, the administration continues to rely on budgetary savings presumed to come from “strengthen[ing]” a board that President Obama has not moved to establish. That raises questions about its commitment to budgetary savings—and to IPAB itself.

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

Gruber, Transparency, and IPAB

The administration faced a political firestorm last week, when videos emerged featuring MIT professor—and paid Obamacare consultant—Jonathan Gruber making comments on “the stupidity of the American voter,” and claiming that only a deliberately opaque and deceptive process was essential to the law’s enactment. But the administration may soon face a policy controversy as well—for the law features a board that can operate in nontransparent ways, and which will empower technocrats like Mr. Gruber himself.

While the Independent Payment Advisory Board, or IPAB, may bring to mind the latest Apple product offering, the reality is far different. Designed to control health spending, the board of 15 experts—nominated by the president, based in part on suggestions from congressional leaders, and confirmed by the Senate—will have the power to make binding rulings to slow the growth in Medicare outlays. Furthermore, the administration’s budget proposed giving IPAB even more authority, by reducing the caps on Medicare spending the board will be charged to enforce.

IPAB has yet to be constituted. The budget sequester and other savings proposals have thus far kept Medicare spending below the targets that would trigger IPAB recommendations, and Republican leaders have indicated to President Barack Obama their disinclination to provide the White House suggestions for nominees. As a result, the president has yet to make formal nominations—not least because, if the Medicare spending target is reached, requiring IPAB to make formal recommendations to Congress, but IPAB does not do so, that power would then lie within the Department of Health and Human Services itself.

IPAB faces several characteristics that could imbue it with the lack of transparency Mr. Gruber infamously discussed in his speeches:

  • Former Obama administration official Peter Orszag wrote a piece for the New Republic in which he cited IPAB as one way to “counter the gridlock of our political institutions by making them a little less democratic.” In 2012, Politico stated that, while in the White House, Mr. Orszag had “pushed” to include the board in the law.
  • Section 3403 of Obamacare, which creates IPAB, does not require the board to conduct any open meetings. The law merely says that “the board may hold such hearings…as the board considers advisable;” it does not require IPAB to do so.
  • Likewise, while the law prohibits IPAB from “ration[ing] health care,” the term “rationing” is nowhere defined in statute. Former Health and Human Services Secretary Kathleen Sebelius conceded this point, and acknowledged that HHS would likely have to define “rationing” before the board could begin its work—but it has yet to do so.

Prior to the recent controversies, Mr. Gruber seemed like exactly the type of expert—an “individual with national recognition for [his] expertise in health finance and economics”—that might have received an appointment to IPAB. Interviewed for a 2011 article about who might serve on the board, Mr. Gruber didn’t rule it out entirely, while admitting that statutory restrictions on IPAB members’ outside activities might dissuade individuals from applying.

As it happens, Mr. Gruber currently serves on the board of the Massachusetts Connector, an entity charged with implementing the Commonwealth’s health care overhaul. However, to judge from comments made to reporters last week, an aide to Gov. Deval Patrick seemed keen to downplay his influence: “When his term expires at some point, that will be a decision for someone else at that time.”

But beneath the political controversy lies a philosophical question. Fifty years ago last month, Ronald Reagan summarized the concern in his “A Time for Choosing” speech:

This is the issue of this election—whether we believe in our capacity for self-government, or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capital can plan our lives for us better than we can plan them ourselves.

Therein lies the Obama administration’s bigger problem—how to reconcile a law that increases the influence of independent experts with a high-profile example of such an expert who repeatedly treated American voters with open hostility and contempt. At a time when both the health care law and the federal government itself remain historically unpopular with voters, the Gruber controversy only heightens the perceived distance between the governing and the governed.

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