Tag Archives: secondary indexing

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future holds, but for a slightly different reason: I’m worried for our nation about what will happen if Obamacare ISN’T repealed.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If Obamacare was repealed, or if insurers stopped offering coverage, it would be an inconvenience, no doubt.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.

Hillary Clinton’s Obamacare “Fix”

In a recent interview with the Des Moines Register, Hillary Clinton outlined several elements of Obamacare that she said she would seek to change as president. Her proposals illustrate how the fiscal impact of the law could increase significantly from what was expected when the legislation passed in March 2010.

Among the things Mrs. Clinton cited was “how to fix the family glitch.” In short, if an individual qualifies for “affordable” health insurance through an employer, that person’s family will not qualify for federal insurance subsidies–even if the employer does not offer family coverage or if family coverage is unaffordable for the household.

Supporters of the health-care law may call this a “glitch,” but it is far from an unintended consequence. This provision has worked exactly how Congress wrote it into the Affordable Care Act. As I noted in an earlier Think Tank post, the Joint Committee on Taxation outlined the specifics behind this policy in a footnote on Page 33 of a 157-page summary of the law released the week of its passage. While some congressional Democrats have attempted to argue since then that the provision, as codified by the Internal Revenue Service, was “simply incongruent” with the text, or a “wrong interpretation of the law,” the legislative history indicates otherwise. The provision may have harsh consequences for affected families, but its inclusion was deliberate.

When Congress considered the legislation in 2010, the bill needed to adhere to President Barack Obama’s September 2009 pledge that it would “cost around $900 billion over 10 years.” But to keep the total cost of insurance subsidies—the “gross cost of coverage provisions” in Table 4 here—under $1 trillion, lawmakers made numerous tough choices. For instance, Congress delayed the start of subsidized insurance from January 2013 to January 2014. Congress increased Medicaid payment rates to improve access—but let that increase expire after two years. To pay for higher levels of upfront spending on insurance subsidies, Congress included provisions that slow their growth after 2019—a back-dated reckoning that future Congresses, and families, will have to contend with. And Congress passed—whether lawmakers knew it or not—the “family glitch” provision.

As I wrote in January, undoing all these fiscal constraints will cost money. Mrs. Clinton and other supporters of the law have wish lists of enhanced benefits, but proposals to pay for this new spending have been scarce. Moreover, to the extent that skeptics have likened Obamacare to a subprime mortgage—with “teaser” provisions passed in 2010 and a balloon payment still to come—the long lists of additional spending proposals, with few instances of budgetary restraint, will reinforce those comparisons.

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

Who’s Going to Pay for This Obamacare Wish List?

I wrote in this space last June that supporters of the president’s health-care law had not made many specific suggestions about how to amend or otherwise change the Affordable Care Act. Last week, the advocacy group Families USA attempted to change that, releasing its “Health Reform 2.0” agenda of how to expand on Obamacare. But the paper also raises an important question for the law’s supporters—including presidential candidates running in 2016: How to pay for the myriad promises that liberal groups want to add to the health-care agenda?

The Families USA paper includes a full—and costly—wish list of new spending programs related to the law, including:

* Fixing the “family glitch,” in which families are ineligible for federal insurance subsidies if one member of the family has an offer of “affordable” employer-sponsored health coverage;

* Extending funding for children’s health insurance, a program that Obamacare funded only through September;

* Increasing federal cost-sharing subsidies—raising the amount of subsidies, currently provided to families with incomes under 250% of the federal poverty level, so as further to reduce deductibles and co-payments, and potentially raising the income cutoff for subsidies;

* Making permanent an increase in Medicaid reimbursement rates included in Obamacare that expired on Dec. 31, 2014;

* Extending coverage to immigrant populations (the report does not specify whether such coverage should also apply to the undocumented); and

* Increasing federal premium subsidies. Amending the current subsidy set-up in this way would necessitate two changes to current law, both of which would require an increase in federal spending. Congress would need to repeal the provision, set to kick in after 2019, scheduled to reduce the subsidies’ annual rate of growth; then lawmakers would have to pass the subsidy increase that Families USA advocates.

The proposal also contains numerous mandates on insurance plans—for instance, to cover adult dental care, all forms of pediatric care, and expand access to provider networks. These would come at a cost, raising insurance premiums for individuals and families—and raising costs for the federal government as well, related to the 87% of exchange participants receiving premium assistance subsidies.

While specific cost estimates for these proposals are unavailable, they are likely to be substantial. Cost concerns meant that the children’s health insurance program received funding for just a two-year extension in Obamacare. Likewise, the Medicaid reimbursement bump was so expensive—$8.3 billion—that lawmakers financed it for only 2013 and 2014 as part of the law. And Families USA’s proposed changes to the subsidy regime could cost far more: a 2011 study found that fixing just the “family glitch” could increase spending by nearly $50 billion per year.

In other words, a liberal group has proposed spending hundreds of billions—at minimum—on expanding Obamacare programs. And other than some suggestions about using government-imposed price controls—“direct intervention in pricing may ultimately be necessary”—the Families USA report contains precious little on paying for these expanded entitlements. It may have answered the “What?” when it comes to proposed “fixes” to the law, but it did not answer the “How much?” And as the law remains divisive, and federal debt continues to rise, the latter question must remain on the public agenda for some time to come.

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

Democrats’ Obamacare “Fix”

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

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

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

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

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

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

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

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

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

Premium Increases and Obamacare Subsidies

In his Monday Think Tank post previewing political and policy battles over insurance premium increases, Drew Altman wrote that “85% of those who purchase insurance in the new marketplaces will get a government subsidy in the form of a tax credit to help defray the cost of the premium. That means that most people buying in the exchanges won’t pay much even if their premium cost goes up significantly” in 2015.

But in a few years, many exchange purchasers could face the full brunt of premium increases.

An obscure component of the Affordable Care Act, the secondary indexing provision, was added during the budget reconciliation process to help reduce the bill’s costs after the first 10 years. Wonky details can be found in a May 2011 Congressional Budget Office (CBO) analysis, but two points stand out:

One, if spending on exchange subsidies exceeds a defined percentage of gross domestic product, beginning in 2019 the subsidies will grow much more slowly in future years.

Two, since the 2012 Supreme Court decision made Medicaid expansion optional for states, the CBO projects more individuals will qualify for exchange subsidies—making it highly likely that overall spending on subsidies will exceed the GDP cap established in the health-care law, and triggering the secondary indexing starting in 2019.

The 2011 CBO analysis included a hypothetical example of the impact secondary indexing could have on federal insurance subsidies and premium increases: a 6 percent annual premium increase would require enrollees to pay 10.2% to 12% more for their health insurance because federal subsidies would rise only 2.7% to 5.5%.

In other words, a significant share of costs would shift from the federal government to individuals. That’s why the CBO previously called some of the law’s provisions “difficult to sustain for a long period.”

With such indexing looming in the not-too-distant future, there are two questions: whether this provision of the Affordable Care Act will be amended—and, if so, how: by raising taxes or cutting other programs to pay for this new spending, or by increasing the federal deficit substantially. Or whether the country would accept a new status quo in which the Affordable Care Act requires Americans to purchase increasingly unaffordable health insurance.

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