Tag Archives: Wall Street Journal

Tomi Lahren Is What’s Wrong with Obamacare

Over the weekend, as commentators Chelsea Handler and Tomi Lahren engaged in a political debate, a comment by the latter unwittingly pointed to one of the singular problems of Obamacare. When Handler asked what health plan she belonged to, Lahren responded, “Luckily I am 24 so I am still on my parents’…” Cue sarcastic laughter from the crowd.

The liberal audience in Pasadena mocked Lahren for her hypocrisy—attacking Obamacare while benefiting from it by staying on her parents’ health insurance—but they weren’t wrong in their criticism. While Lahren rightly pointed out that Obamacare “fails the very people that it’s intended to help,” if she wants to know the root cause of that failure, she should look in the mirror.

The Slacker Mandate Is Aptly Named

One report on the incident claimed that “extending insurance to older ‘dependents’ is not typically targeted by conservatives who criticize Obamacare.” In reality, though, conservatives have targeted this mandate—for instance, the paper released in 2012, while I worked for the Senate Republican staff of the Joint Economic Committee. It noted that mandates such as the under-26 provision raise premiums by a minimum of several hundred dollars per year, and that proposals to provide health insurance to 20-something “dependents” like Mark Zuckerberg (then 28) would create definite costs to achieve questionable benefits.

Since then, the case against this particular mandate has only increased. A National Bureau of Economic Research paper released last year found a significant economic impact: “We find evidence that employees who were most affected by the mandate, namely employees at large firms, saw wage reductions of approximately $1,200 per year. These reductions appear to be concentrated among workers whose employers offer employer-sponsored health insurance; however, they do not seem to be only borne by parents of eligible children or parents more generally.”

As the Wall Street Journal noted last year, the paper made clear that “no alleged government benefit is free and people should be allowed to make the trade-offs for themselves.” Apparently, however, alleged “conservative” Lahren believes otherwise.

The Tomi Lahren Case Study

Lahren’s comments provide a perfect case study against the under-26 mandate, in two respects. First, the “dependent” mandate has few statutory limits—whether income, lack of access to employer coverage, or both. That a pundit like Lahren can hold lucrative media contracts while remaining on her parents’ health coverage speaks to the absurdity of Obamacare’s definition of “dependent.”

Second, it proves Lahren’s criticism of Obamacare that the law “fails the very people it’s intended to help.” Because Lahren refuses to buy her own insurance plan, she raises premiums 1) for her parents’ co-workers, who have to pay for Lahren’s health costs as part of their coverage and 2) on insurance exchanges, where individuals are older and costlier than average precisely because many young adults remain on their parents’ policies.

With upper-middle-class households largely obtaining coverage through employers, and households of more modest means going through exchanges instead, the under-26 mandate represents a sizable transfer of wealth from the working class—who pay higher premiums—to the affluent—who gain the benefit of “free” coverage for their children. So Lahren is correct that Obamacare “fails the very people it’s intended to help”—because of people like her, who grab government “benefits” irrespective of the other individuals those “benefits” harm.

The end of the 2012 Joint Economic Committee paper noted that “a welfare state administered by the private sector, yet mandated by government, remains a welfare state at its core.” If Lahren wants to help the people Obamacare hurts, or even if she just wants to adhere to the conservative political beliefs she purports to follow, then perhaps she should use the coming weeks to explore her own health insurance options, rather than remaining part of the Obamacare welfare state she claims to abhor yet perpetuates.

This post was originally published at The Federalist.

Remembering Joe Rago

As someone who makes his living as a writer, working to influence and persuade others, I’ve often aspired to the description of the Suffering Servant depicted in Isaiah: “The Lord God hath given me a well-trained tongue, that I might know how to speak to the weary a word that will rouse them.” The Lord certainly gave Joe Rago, the Pulitzer Prize-winning Wall Street Journal writer who died last week at the too-young age of 34, a well-trained tongue, and he used his ample talents to rouse readers and policy-makers alike.

As a writer for the Journal’s editorial page, who spearheaded the paper’s editorial coverage of Obamacare and health care, Joe excelled at a medium requiring precision and discipline. While the Internet permits discursive, even plodding, analysis, the space limitations of an editorial page necessitate crisp, clear prose.

Joe’s great skill lay in his ability to weave developments—a government report here, a congressional hearing there—into a coherent yet concise narrative explaining and persuading readers on an issue. It was a skill honed by years as a writer and editor, one I wish I had.

Rago leavened his writing with facts and arguments gleaned through his innate curiosity. He spent time cultivating sources—on Capitol Hill and elsewhere—traveling to Washington frequently during the health care debate, and asking questions everywhere along the way. In discussing a recent op-ed of mine in the Journal, Joe initially thought he hadn’t seen it, then proceeded to repeat the piece’s argument back to me. He allowed that he probably had “absorbed the argument by osmosis”—an apt description of his prodigious reading and research.

Seriousness for Serious Matters, Levity for Others

In his writing, as in his life, Joe Rago coupled wisdom with a wit demonstrating his detached bemusement at the human condition. Seeing the daily protests outside his office—home to both the Journal and Fox News—since last November’s election brought a wry smile to his face. One day he pulled aside a protestor and asked for a stack of pamphlets by making an ironic claim: “I work in the building—I can help spread the word on the inside!” I hope his Journal co-workers, upon cleaning out Joe’s desk and discovering this stack of pamphlets condemning Fox News’ “fascism,” will remember fondly their late colleague’s impish sense of humor.

While Rago took politics and policy seriously, he never took anyone too seriously, least of all himself. As others have noted, the unsigned editorial format served Joe’s self-effacing personality perfectly. Modest and humble to a fault, he never bragged about his affiliations, or advertised his achievements—a Pulitzer before the age of 30 would give most people cause to brag, but not Joe. Even at a young age, he respected old-school journalistic traditions, respecting sources and confidences, and never making himself part of the story.

As single, 30-something conservatives who spent our time writing about health policy, Joe and I crossed paths on numerous occasions over the years. We debated politics and policy, often into the evening—for as Paul Gigot said, he was someone you could easily have a drink with. While it never came to anything, I still consider it an honor that Joe once suggested I join the Journal’s editorial team. If the measure of one’s life is the company one keeps, having someone like Joe consider you a potential colleague stands as high praise indeed.

Rest in Peace, Joe

I saw Joe Rago for the last time little more than a week before his death. We hadn’t chatted much since the presidential primaries began in earnest, and I used a work trip to New York to reach out so we could catch up. We spent several hours having dinner and drinks, and Joe was in good spirits, chatting with the bartender at his local hangout. We talked about the Obamacare debate, my transition to life as a consultant and entrepreneur, and his work at the Journal. (Joe had always told me he wanted to stay at the Journal for as long as Gigot, his mentor and friend, would have him; I never thought his tenure would end on such a tragic note.) He said he might be in Washington to cover the health-care debate in two weeks—that is, this week—and I offered to meet with him then. I only wish that I still could.

For me at least, my work in the years 2009-10 represented the perfect life opportunity: to write on an issue of national importance, with a platform ready-built for someone with a powerful message. Working for the Wall Street Journal, Joe Rago had a similar opportunity, and he made the most of it, developing a distinct and influential voice, and winning himself acclaim in the process. While we mourn his passing, we give thanks for the person—the wisdom, wit, and warmth—we got to know, and admire, all too briefly.

This post was originally published in The Federalist.

Are Senate Republicans Going Soft on Obamacare’s Taxpayer Funding of Abortions?

Senate Republican leadership continue to draft their “repeal-and-replace” health care bill in secret, but it sure looks like staff are preparing for the bill to endorse Obamacare’s funding of plans that cover abortion, by re-characterizing—and mischaracterizing—how current law treats the procedure. While text is not yet publicly available and will not be until Thursday at the earliest, here’s how anonymous sources described the “new” insurance subsidies to the Wall Street Journal:

Tax credits are likely to be structured in ways similar to the [Obamacare] subsidies as a way to preserve restrictions on abortion funding, according to Senate GOP aides. Provisions restricting the use of the House bill’s tax credits to pay for abortion hit procedural hurdles in the Senate.

The [Obamacare] subsidies, which are advance tax credits paid to insurance companies to lower the cost of health-insurance premiums, currently can’t be used to cover the cost of abortions.

The problem is, though, that Obamacare does have “taxpayer-funded abortions.” And that’s not what I said—that’s what Senate Majority Leader Mitch McConnell has said. Here’s his speech on March 17, 2010, as the House was preparing to vote on Obamacare (all emphasis added):

Americans woke up yesterday thinking they had seen everything in this debate already. Then they heard the latest….They heard that Democrats over in the House want to approve the Senate bill without actually voting on it. These Democrats want to approve a bill that rewrites one-sixth of the economy, forces taxpayers to pay for abortions, raises taxes in the middle of a recession, and slashes Medicare for seniors, without leaving their fingerprints on it.

Here’s McConnell the next week, the day after House Democrats voted for Obamacare and one day before it was signed into law: “Here is what the Democrats voted for last night: a vast expansion of the entitlement state that we cannot afford, massive cuts to Medicare, higher taxes, higher health care costs, worse care, taxpayer-funded abortions.”

Don’t consider McConnell a reliable source? The current vice president, Mike Pence, speaking in March 2010 during debate on the reconciliation bill intended to “fix” parts of Obamacare, noted that no provision in the reconciliation bill would fix its funding of abortion:

Mr. Speaker, the bill before us tonight doesn’t fix anything. It doesn’t fix the fact that this is a government takeover of health care that’s going to mandate that every American buy health insurance whether they want it or need it or not. It doesn’t fix the fact that it includes about $600 billion in job-killing tax increases in the worst economy in 30 years. It doesn’t fix the fact this bill provides public funding for elective abortion for the first time in American history.

And then there’s former House Speaker John Boehner. During his infamous “Hell no, you can’t!” speech on the House floor as that chamber was preparing to pass Obamacare, here’s what he said about the bill (soon to become law) and abortion:

Can you go home and tell your constituents with confidence that this bill respects the sanctity of all human life and that it won’t allow for taxpayer funding of abortions for the first time in 30 years? No, you cannot.

The current majority leader, current vice president, and former House speaker are all correct, of course—or at least they were seven years ago. Obamacare provides subsidies to plans that cover abortion, a significant break from the precedent used by the federal employee health plan, and one that will see more than $700 billion in taxpayer funds in the coming decade go toward plans that could cover abortion.

To repeat, the bill text is not yet available, but if it has strict pro-life protections in it, why are Senate staff suddenly trying to claim that a bill McConnell said has “taxpayer-funded abortions” in it actually prevents funding for the procedure? Are anonymous staff trying to lay the groundwork for a massive flip-flop that will alienate the entire pro-life community? Time will tell, but for those concerned about taxpayer funding of abortion, the initial soundings do not look good.

This post was originally published at The Federalist.

Don’t Blame Trump When Obamacare Rates Jump

Insurers must submit applications by next Wednesday to sell plans through HealthCare.gov, and these will give us some of the first indicators of how high Obama Care costs will skyrocket in 2018. ObamaCare supporters can’t wait to blame the coming premium increases on the “uncertainty” caused by President Trump. But insurers faced the same uncertainty last year under President Obama.

Consider a recent press release from California Insurance Commissioner Dave Jones. He announced that “in light of the market instability created by President Trump’s continued undermining of the Affordable Care Act,” he would authorize insurers to file two sets of proposed rates for 2018—“Trump rates” and “ACA rates.” Among other sources of uncertainty, Mr. Jones’s office cited the possibility that the Trump administration will end cost-sharing reduction payments.

Those subsidies reimburse insurers for discounted deductibles and copayments given to certain low-income individuals. Congress has never enacted an appropriation for the payments, but the Obama administration began disbursing the funds in 2014 anyway.

Thus the uncertainty: The House filed a lawsuit in November 2014, alleging that the unauthorized payments were unconstitutional. Judge Rosemary Collyer ruled in the House’s favor and ordered a stop to the payments. As the Obama administration appealed the ruling, the cost-sharing reduction payments continued.

The House lawsuit and the potential for a new administration that could cut off the payments unilaterally should have been red flags for regulators when insurers were preparing their rate filings for 2017. I noted this in a blog post for the Journal last May.

To maintain a stable marketplace regardless of the uncertainty, regulators should have demanded that insurers price in a contingency margin for their 2017 rates. It appears that Mr. Jones’s office did not even consider doing so. I recently submitted a Freedom of Information Act request to his office requesting documents related to the 2017 rate-filing process, and “whether uncertainty surrounding the cost-sharing reduction payments was considered by the Commissioner’s office in determining rates for the current plan year.” Mr. Jones’s office replied that no such documents exist.

What does that mean? At best, not one of the California Insurance Commission’s nearly 1,400 employees thought to ask whether a federal court ruling stopping an estimated $7 billion to $10 billion in annual payments to insurers throughout the country would affect the state’s health-insurance market. At worst, Mr. Jones—a Democrat running for attorney general next year—deliberately ignored the issue to avoid exacerbating already-high premium increases that could have damaged Hillary Clinton’s fall campaign and consumers further down the road.

The California Insurance Commission is not alone in its “recent discovery” of uncertainty as a driver of premium increases. In April the left-liberal Center for American Progress published a paper claiming to quantify the “Trump uncertainty rate hike.” The center noted that the “mere possibility” of an end to cost-sharing payments would require insurers to raise premiums by hundreds of dollars a year.

Following insurers’ June 21 deadline, expect a raging blame game over next year’s premium increases. Conservatives shouldn’t hesitate to ask regulators and liberal advocates now pointing the finger at uncertainty where they were this time last year when the future of those payments was equally uncertain.

This post was originally published in The Wall Street Journal.

How the Media Care More About Obamacare Than the Constitution

Fewer than 12 months ago, some people—aka, yours truly—raised a warning about Obamacare’s cost-sharing reductions. The text of the law nowhere provided an appropriation for them, meaning that, as I wrote last May, the next President could shut them off unilaterally. At the time, I contacted several reporters, pointing out that such a move could have major implications for the health care law. None showed any interest in writing on the topic, and to the best of my knowledge, few if any reporters did.

Having now under-reacted regarding the issue during most of 2016, the media are compensating by over-reacting now. Since the House failed to pass “repeal-and-replace” legislation, breathless articles in multiple publications have examined the issue, whether the Trump Administration will cut off the subsidies, and whether insurers will bail on the Exchanges en masse as a result.

There’s just one little detail about the issue that many of these articles are missing. You may have heard of it: it’s called the United States Constitution.

What Exactly Is Going On With Obamacare Subsidies?

For the uninitiated, the dispute involves one of two types of Obamacare subsidies: premium subsidies to lower monthly premium costs, and cost-sharing reductions that help with things like deductibles and co-payments. The law requires insurers to reduce cost-sharing for certain low-income individuals, and provides for a system of reimbursements to repay insurers for providing said reductions.

However, Obamacare itself failed to provide any appropriation for the reimbursement payers to insurers. The lack of an explicit appropriation violates Article I, Section 9 of the Constitution, which requires that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Congress has the “power of the purse,” and Members of Congress believe that the Obama Administration violated that power.

To remedy that violation, the House of Representatives authorized legal action in July 2014, and filed suit in November 2014 seeking to stop the subsidies. Last May, Judge Rosemary Collyer ruled that the Obama Administration had in fact violated the Constitution by spending money without an express appropriation. The case, House v. Price (formerly House v. Burwell), remains on hold; the Obama Administration appealed Judge Collyer’s ruling last year, and the Trump Administration and the House are attempting to resolve the status of that appeal.

Over Obamacare’s first four fiscal years, the disputed payments to insurers would total approximately $20.9 billion—$2.1 billion in fiscal year 2014, $5.1 billion in fiscal year 2015, $6.1 billion in fiscal year 2016, and an estimated $7.6 billion if they continue through fiscal year 2017 (which ends September 30). Over the next 10 years, the Congressional Budget Office estimates that the payments will total $135 billion.

What’s The Media Saying About All This?

Given that background, it’s worth examining press coverage on the issue since Republicans’ “repeal-and-replace” efforts collapsed, bringing questions about the lawsuit, and the subsidy payments, to the fore:

  • Politico noted that the House’s suit argued that the Obama Administration “had paid for [the subsidies] without congressional authority”—but also quoted an expert as saying failure to appropriate funds for the subsidies would “shoot [Obamacare] in the head.”
  • A separate Politico opinion piece said that “if the Republicans want to avoid a major mess, they need to make the suit go away and make sure the subsidies keep flowing.”
  • A Wall Street Journal article said that the House calls the payments “illegal.”

All three of these stories omitted one simple word: “Constitution.” As in, a federal judge said Barack Obama’s Administration violated the Constitution. As in, one analyst thinks the House needs to make a suit protecting its constitutional authority “go away.” As in, the payments weren’t ruled “illegal”—they were ruled unconstitutional.

Granted, other stories have at least mentioned the constitutional element of the dispute. But there haven’t been many stories focusing on the constitutionality of President Obama’s actions (which even Obamacare supporters have questioned), or even how the court ruling could rein in executive unilateralism. Instead of reading about how—by spending money without an appropriation—Barack Obama “sabotaged” the Constitution, or even “shot it in the head,” the public has seen all sorts of articles suggesting that President Trump may “sabotage” Obamacare—by upholding the Constitution.

Thanks For The Double Standard, American Media

Remember: The cost-sharing subsidies involve an issue where a federal judge has already ruled that the Obama Administration violated the Constitution by giving insurers tens of billions of dollars without an appropriation—yet the press seems more focused on whether or not those payments will continue.

That response merits a thought experiment in word substitution: If a federal court had ruled that the George W. Bush Administration violated the Constitution by giving tens of billions of dollars to—let’s pick a company at random here—Halliburton, do you think the press would be more focused on the violation of the rule of law and the unconstitutional payments, or on the chaos that would result if those payments to Halliburton suddenly ceased? If you think the latter, I’ve got some land I want to sell you.

If you’re still unconvinced that reporters are in the tank for Obamacare—or at minimum guilty of significant, and quite selective, double standards when it comes to their constitutional outrage—consider this recent Politico piece about a Donald Trump tweet threatening to change libel laws:

Trump’s comments on libel, coupled with his regular attacks on reporters and news organizations, have alarmed First Amendment advocates and his critics, who warned over the course of the campaign that his posture toward news organizations revealed a lack of respect for the role a free press plays in a democracy.

This high-minded rhetoric came one paragraph after Politico, citing various legal experts, pointed out “that there are virtually no steps within the President’s power to ‘open up libel laws,’ as Trump has suggested.”

When President Trump makes an empty threat against the press—one that he has no power to follow through on—the media piles on with all manner of self-righteous indignation about the integrity of the First Amendment and undermining democracy.

But when a federal judge rules that President Obama violated (not threatened to violate, mind you, but actually violated) the Constitution by paying insurers tens of billions of dollars, the media focuses largely on how remedying that violation will impact the health care law. They seem to care more about protecting Obamacare than protecting the Constitution. Is it any wonder why people boo the press?

Spare Me Your Self-Righteousness

Within that double standard lies the major problem: the presumption that Obamacare is “too big to fail,” irrespective of whether or not the Obama Administration’s payments to insurers violated the Constitution. Some could be forgiven for thinking that the press coverage provides a disturbing lesson to future Presidents: If you violate the Constitution long enough and badly enough, it will become a norm, such that people will expect future leaders to accommodate the violation.

To all those reporters worried about President Trump’s attacks on reporters, I’ll simply posit that the Constitution is a binary choice: You either support it—all of it, even or especially the portions you find inconvenient—or you don’t. If you want the public to care about the Trump Administration’s stance towards the First Amendment, then it might be wise to give a damn about the other portions of the Constitution too.

This post was originally published at The Federalist.

A Fiscally Irresponsible Bill

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

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

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

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

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

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

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

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

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

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

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

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

This post was originally published at the Washington Examiner.

Trump’s Solyndra? Oscar Health as a Test Case in “Draining the Swamp”

Earlier this month, I wrote a piece noting that Donald Trump had 47.5 million reasons to support Obamacare bailouts. That’s the amount an insurer formerly owned by his influential son-in-law (and transition team Executive Committee member) Jared Kushner, and currently owned by Jared’s brother Josh Kushner, had requested from the Obama administration’s bailout funds.

Unfortunately, that story proved inaccurate, or at worst premature. Trump now has more than 100 million reasons to support Obamacare bailouts. That’s because the Centers for Medicare and Medicaid Services (CMS), on the Friday before Thanksgiving, quietly released a document listing risk corridor claims for calendar year 2015. Overall, insurers requested a whopping $5.8 billion in risk corridor funds—more than double the claims made for 2014—while Oscar, the health insurer Trump’s in-laws own, requested $52.7 million.

Insurers’ growing losses come as the risk corridor program faces a crossroads. While some within the Obama administration wish to settle lawsuits insurers have filed against the program, settling those suits with billions of dollars in taxpayer cash, the Justice Department just achieved a clear-cut victory defending the federal government against the insurer lawsuits.

The incoming Trump administration will face a choice: Will it side with taxpayers, and prevent the payment of Obamacare bailout funds to insurers, or will it side with Trump’s in-laws, and allow the payment of tens of millions of dollars to an insurer owned by Josh Kushner?

The Obama Administration Wants a Bailout. Will Trump?

Considered one of Obamacare’s “risk mitigation” programs, risk corridors have been an unmitigated disaster for the administration. In theory, the program was designed so insurers with excess profits would pay into a fund to reimburse those with excess losses. Unfortunately, however, a product many individuals do not wish to buy, coupled with unilateral—and unconstitutional—decisions by the administration created massive losses for insurers, turning risk corridors into a proverbial money pit.

Nearly two years ago, Congress passed legislation prohibiting taxpayer funds from being used to bail out the program. The program’s only source of funding would be payments in from insurers with excess profits. Those have proved few and far between. As a result, insurers received only 12.6 cents on the dollar for their 2014 claims, with more than $2.5 billion in claims unpaid. The meagre takings for 2015 were insufficient to pay off last year’s $2.5 billion shortfall, let alone the $5.8 billion in additional claims insurers made on risk corridors last year.

Given these mounting losses, insurers have filed suit against the administration seeking payment of their unpaid claims. Some within the Obama administration have sought to settle the lawsuits, using the obscure Judgment Fund to circumvent the spending restrictions Congress imposed in 2014.

But even as those settlement discussions continue behind closed doors, the Justice Department won a clear victory earlier this month. In the first risk corridor lawsuit to be decided, a judge in the Court of Federal Claims dismissed a lawsuit by the failed Land of Lincoln health insurance co-operative on all counts. Not only did Land of Lincoln not have a claim to make against the government for unpaid risk corridor funds now, the court ruled, it would never have a claim to make against the government.

Oscar: Bailouts to the Rescue?

While the risk corridor program faces its own problems, so does start-up Oscar. Owner Josh Kushner wrote this month that Obamacare “undoubtedly helped get us off the ground.” Unfortunately for Oscar, however, the law has seemingly done more to drive it into the ground.

In part due to regulatory decisions from the Obama dministration—allowing individuals to keep their pre-Obamacare plans temporarily—Oscar has faced an exchange market full of people with higher costs than the average employer plan. The Wall Street Journal recently reported that “Oscar lost $122 million in 2015 on revenue of $126 million, according to company regulatory filings.” To repeat: Oscar’s losses last year nearly totaled its gross revenues.

My earlier article explained how Oscar has already received $38.2 million in payments from Obamacare’s reinsurance program—designed to subsidize insurers for expenses associated with high-cost patients—in 2014 and 2015. That money came even as the Government Accountability Office and other nonpartisan experts concluded the Obama administration acted illegally in paying funds to insurers rather than first reimbursing the U.S. Treasury for the $5 billion cost of another program, as the text of Obamacare states.

In 2014, Oscar made a claim for a total of $9.3 million in risk corridor funds, of which it received less than $1.2 million, due to the shortfalls explained above. For 2015, the insurer made a claim of a whopping $52.7 million—more than five times its 2014 risk corridor claim—while receiving only $310,349.58 in unpaid 2014 payments.

From the risk corridor program, Oscar now has $52.7 million in 2015 claims, not a dime of which were paid, along with approximately $7.8 million in unpaid 2014 claims. For an insurer that lost $122 million in 2015, this more than $60 million in outstanding risk corridor funds are nothing to be trifled with.

Who Comes First: Taxpayers, or Family?

In a recent post-election appraisal of the policy landscape, Oscar owner Josh Kushner complained about severe shortcomings in implementing Obamacare:

The government has also not fixed or not funded [Obamacare] programs designed to help insurers deal with the uncertainty of the first few years of the market. Doing so could have prevented the plan withdrawals that have so destabilized the market.

In complaining specifically that the risk corridor programs were “not funded,” Kushner takes aim at Congress, when in reality he might want to look more closely at President Obama’s actions in letting individuals keep their pre-Obamacare health plans, which upended insurers’ expectations for the new market. Congress, let alone taxpayers, should not have to fund a blank check for the president’s decision to violate the law for political reasons.

In the past two years, Oscar has claimed $38.2 million in reinsurance funds, even though nonpartisan experts believe those funds were illegally diverted to insurers and away from the U.S. Treasury. While it has received only about $1.5 million in risk corridor payments, it has claims for more than $60 million more, and its claims on the federal fisc are likely to rise much higher. The $100 million total doesn’t even include reinsurance and risk corridor claims for this calendar year, which are likely to total tens of millions more, given Oscar’s ongoing losses during the year to date.

Four years ago, Donald Trump sent out this tweet:

After Solyndra, @BarackObama is stil intent on wasting our tax dollars on unproven technologies and risky companies. He must be accountable.

Trump was correct then, but the question is whether he will remain so when his in-laws’ sizable financial interests are at stake. Signing off on a taxpayer-funded bailout of the risk corridor program—already at $8.3 billion in unpaid claims, a total which could easily rise well above $10 billion—to help prop up his in-laws’ insurer would represent “Solyndra capitalism” at its worst. Instead, the Obama administration—and the Trump administration—should refuse to settle the risk corridor lawsuits, and encourage Congress to pass additional legislation blocking use of the Judgment Fund to pay risk corridor claims. Taxpayers deserve nothing less.

This post was originally published at The Federalist.

Donald Trump’s 47.5 Million Reasons to Support Obamacare Bailouts

Last Friday afternoon, Donald Trump caused a minor uproar in Washington when he signaled a major softening in his stance towards President Obama’s unpopular health-care law. “Either Obamacare will be amended, or it will be repealed and replaced,” Trump told the Wall Street Journal—a major caveat heretofore unexpressed on the campaign trail.

Why might Trump—who not one month ago, in a nationally televised debate, called Obamacare a “total disaster” that next year will “implode by itself”—embark on such a volte face about the law? Politico notes one possible answer lies in the story of Oscar, a startup insurer created to sell plans under Obamacare:

Oscar is about to have an unusually close tie to the White House: Company co-founder Josh Kushner’s brother Jared is posted to plan an influential role in shaping his father-in-law Donald Trump’s presidency. The two brothers in 2013 were also deemed ‘the ultimate controlling persons in Oscar’s holding company system,’ according to a state report.

In other words, the individual who multiple sources report personally influenced the selection of the next White House chief of staff also holds a controlling interest in a health insurance company whose primary business is selling Obamacare policies. Might that be why Trump has suddenly changed his tune on Obamacare repeal?

Government of the People—Or of the Cronies?

In 2000, while contemplating a run for the White House, Trump told Fortune magazine: “It’s very possible that I could be the first presidential candidate to run and make money on it.” That previously expressed sentiment—of using political office for personal pecuniary gain—would not rule out Trump assuming policy positions designed to enrich himself and his associates.

That need might be particularly acute in the case of Oscar, of which Jared Kushner was a controlling person, and in which Josh Kushner’s venture capital firm Thrive Capital has invested. On Tuesday, the insurer reported $45 million in losses in just three states, bringing Oscar’s losses in those three states to a total of $128 million this calendar year. Bloomberg said the company “sells health insurance to individuals in new markets set up by [Obamacare,]” and described its future after last week’s election thusly:

Trump’s election could be a negative for the insurer. The Republican has promised to repeal and replace [Obamacare,] though he’s softened that stance since his victory. The uncertainty could discourage some people from signing up for health plans, or Republicans could eliminate or reduce the tax subsidies in the law that are used to help pay for coverage.

Replace “the insurer” with “Trump’s in-laws” in the above paragraph, and the president-elect’s evolving stance certainly begins to make more sense.

Pimp My Obamacare Bailout?

In last month’s second presidential debate, Trump described Democrats’ position on health care: “Their method of fixing [Obamacare] is to go back and ask Congress for more money, more and more money. We have right now almost $20 trillion in debt.”

It’s an ironic statement, given that government documents reveal how Oscar—and thus Trump’s in-laws—have made claims on Obamacare bailout programs to the tune of $47.5 million. Those claims, including $38.2 million from reinsurance and $9.3 billion from risk corridors, total more than Oscar’s losses in the past quarter. The $47.5 million amount also represents a mere fraction of what Oscar could ultimately request, and receive, from Obamacare’s bailout funds, as it does not include any claims for the current benefit year.

Given that most of the things Trump should do on Day One to dismantle Obamacare involve undoing the law’s illegal bailouts, it’s troubling to learn the extent to which a company run by his in-laws has benefited from them. Following are some examples.

Reinsurance: Administration documents reveal that during Obamacare’s first two years, Oscar received $38.2 million in payments from the law’s reinsurance program, designed to subsidize insurers for the expense associated with high-cost patients. Unfortunately, these bailout payments have come at the expense of taxpayers, who have been shortchanged money promised to the federal Treasury by law so the Obama administration can instead pay more funds to insurers.

In 2014, when Oscar only offered plans in New York, the company received $17.5 million in Obamacare reinsurance payments. In 2015, as Oscar expanded to offer coverage in New Jersey, the insurer received a total of more than $20.7 million in reinsurance funds: $19.8 million for its New York customers, and $945,000 for its New Jersey enrollees.

While reinsurance claims for the 2016 plan year are still being compiled and therefore have not yet been released, it appears likely that Oscar will receive a significant payment in the tens of millions of dollars, for two reasons. First, the carrier expanded its offerings into Texas and California; more enrollees means more claims on the federal fisc. Second, Bloomberg quoted anonymous company sources as saying that part of Oscar’s losses “stem from high medical costs”—which the insurer will likely attempt to offset through the reinsurance program.

While the Obama administration has doled out billions of dollars in reinsurance funds to insurers like Oscar, they have done so illegally. In September, the Government Accountability Office ruled that the administration violated the text of Obamacare itself. Although the law states that $5 billion in payments back to the Treasury must be made from reinsurance funds before insurers receive payment, the Obama administration has turned the law on its head—paying insurers first, and stiffing taxpayers out of billions.

wrote last week that Trump can and should immediately overturn these illegal actions by the Obama Administration, and sue insurers if needed to collect for the federal government. But if those actions jeopardize tens of millions of dollars in federal payments for the Kushners, or mean the Trump administration will have to take Trump’s in-laws to court, will he?

Risk Corridors: Oscar also has made claims for millions of dollars regarding Obamacare’s risk corridor program, which as designed would see insurers with excess profits subsidize insurers with excess losses. In 2014, Oscar was one of many insurers with excess losses, making a claim for $9.3 million in risk corridor payments.

However, because Congress prohibited taxpayer funds from being used to bail out insurance companies, and because few insurers had excess profits to pay into the risk corridor program, insurers requesting payouts from risk corridors received only 12.6 cents on the dollar for their claims. While Oscar requested more than $9.3 million, it received less than $1.2 million—meaning it is owed more than $8.1 million from the risk corridor program for 2014.

CMS has yet to release data on insurers’ claims for 2015, other than to say that payments to the risk corridor program for 2015 were insufficient to pay out insurers’ outstanding claims for 2014. In other words, Oscar will not be paid its full $9.3 million for 2014, even as it likely makes additional claims for 2015 and 2016.

However, Oscar yet has hope in receiving a bailout from the Obama administration. In September, the administration said it was interested in settling lawsuits brought by insurance companies seeking reimbursement for unpaid risk corridor claims. The administration hopes to use the obscure Judgment Fund to pay through the backdoor the bailout that Congress prohibited through the front door.

As with reinsurance payments, a President Trump should immediately act to block such settlements, which violate Congress’ expressed will against bailing out insurers. However, given his clear conflict-of-interest in protecting his close relatives’ investments, it’s an open question whether he will do so.

Cost-Sharing Reductions: Like other health insurers, Oscar has benefited by receiving cost-sharing subsidies—even though Congress never appropriated funds for them. In May, Judge Rosemary Collyer agreed with the House of Representatives that the Obama administration’s payments to insurers for cost-sharing subsidies without an appropriation violate the Constitution. Although the text of the law requires insurers to reduce deductibles and co-payments for some low-income beneficiaries, it never included an explicit appropriation for subsidy payments to insurers reimbursing them for these discounts. Despite this lack of an appropriation, the Obama administration has paid insurers like Oscar roughly $14 billion in cost-sharing subsidies anyway.

Here again, Trump should immediately concede the illegality of the Obama administration’s actions, settle the lawsuit brought by the House of Representatives, and end the unconstitutional cost-sharing subsidies on Day One. But given his close ties to individuals whose insurance model is largely based on selling Obamacare policies, will he do so? To put it bluntly, will he put the interests of Oscar—and his in-laws—ahead of the U.S. Constitution?

Ask Congress for More and More Money?’

In general, health insurance companies have made record profits during the Obama years—a total of a whopping $15 billion in 2015. But while insurers have made money selling employer plans, or contracting for Obamacare’s massive expansion of Medicaid, few insurers have made money on insurance exchanges. That dynamic explains why Oscar, which has focused on exchange plans, has suffered its massive losses to date.

However, as Trump rightly pointed out just one short month ago, the answer is not to “ask Congress for more money, more and more money.” He should end the bailouts immediately upon taking office. Duty to country—and the constitutional oath—should override any personal familial conflicts.

This post was originally published at The Federalist.

How Bailing Out Health Insurers Will Lead to Single Payer Health Care

The bad news for Obamacare keeps on coming. Major health carriers are leaving insurance exchanges, and other insurance co-operatives the law created continue to fail, leaving tens of thousands without health coverage. Those on exchanges who somehow manage to hold on to their insurance will face a set of massive premium increases—which will hit millions of Americans weeks before the election.

Many on the Right believe Obamacare was deliberately designed to fail, and fear that we’re on a slippery slope toward single-payer. On the other side of the spectrum, the Left hopes conservatives’ fears—and liberals’ dreams—will be answered. But is either side right?

The reality is more nuanced than the rhetoric would suggest. Whether government runs all of health care is less material than whether government pays for all of health care. The latter will, sooner or later, lead to the former. That’s why the debate over bailing out Obamacare is so important. Ostensibly “private” health insurers want tens of billions of dollars in taxpayer-funded subsidies—because they claim these subsidies are the only thing standing between a government-run “public option” or a single-payer system.

But the action insurers argue will prevent a government-run system will in reality create one. If insurers get their way, and establish the principle that both they and Obamacare are too big to fail, we will have created a de facto government-run insurance system. Whether such system is run through a handful of heavily regulated, crony capitalist “private” insurers or government bureaucrats represents a comparatively trifling detail.

The Biggest Wolf Is Not the Closest

In considering the likelihood of single-payer health care, one analogy lies in the axiom that one should shoot the wolf outside one’s front door. Single-payer health care obviously represents the biggest wolf—but not the closest. While liberals no doubt want to create a single-payer health care system—Barack Obama has repeatedly said as much—they face a navigational problem: Can you get there from here?

The answer is no—at least not in one fell swoop. Creating a single-payer system would throw 177.5 million Americans off their employer-provided health insurance. That level of disruption would be orders of magnitude greater than the cancellation notices associated with the 2013 “like your plan” fiasco, which itself prompted President Obama to beat a hasty, albeit temporary, retreat from Obamacare’s mandates. Recall too that the high taxes needed to fund a statewide single-payer effort prompted Vermont—Vermont—to abandon its efforts two years ago.

Understanding the political obstacles associated with throwing half of Americans off their current health insurance, liberals’ next strategy has focused on creating a government-run health plan to “compete” with private insurers. Hillary Clinton endorsed this approach, and Democratic senators made a new push on the issue this month. When stories of premium spikes and plan cancellations hit the fan next month, liberals will inevitably claim that a government-run plan will solve all of Obamacare’s woes (although even some liberal analysts admit the law’s real problem is a product healthy people don’t want to buy).

Can the Left succeed at creating a government-run health plan? Probably not at the federal level. Liberals have noted that only one Democratic Senate candidate running this year references the so-called “public option” on his website. Thirteen Senate Democrats have yet to co-sponsor a resolution by Sen. Jeff Merkley (D-Oregon) calling for a government-run plan. Such legislation faces a certain dead-end as long as Republicans control at least one chamber of Congress. Given the failure to enact a government-run plan with a 60-vote majority in 2009, an uncertain future even under complete Democratic control.

What About Single-Payer Inside States?

What then of state efforts to create a government-run health plan? The Wall Street Journal featured a recent op-ed by Scott Gottlieb on this subject. Gottlieb notes that Section 1332 of Obamacare allows for states to create and submit innovation waivers—waivers that a Hillary Clinton administration would no doubt eagerly approve from states wanting to create government-run plans. He also rightly observes that the Obama administration has abused its authority to approve costly Medicaid waivers despite supposed requirements that these waivers not increase the deficit; a Clinton administration can be counted on to do the same.

But another element of the state innovation waiver program limits the Left’s ability to generate 50 government-run health plans. Section 1332(b)(2) requires states to enact a law “that provides for state actions under a waiver.” The requirement that legislation must accompany a state waiver application will likely limit a so-called “public option” to those states with unified Democratic control. Because Obamacare, and the 2010 and 2014 wave elections it helped spark, decimated the Democratic Party, Democrats currently hold unified control in only seven states.

Even at the state level, liberals will be hard-pressed to find many states in which to create their socialist experiment of a government-run health plan. In those few targets, health insurers and medical providers—remember that government-run health plans can only “lower” costs by arbitrarily restricting payments to doctors and hospitals—will make a powerful coalition for the Left to try and overcome. Also, in the largest state, California, the initiative process means that voters—and the television ads health-care interests will use to influence them—could ultimately decide the issue, one way or the other.

So if single-payer represents the biggest wolf, but not the one closest to the door, and government-run plans represent a closer wolf, but only a limited threat at present, what does represent the wolf at the door? Simple: the wolf in sheep’s clothing.

Too Big To Fail, Redux

The wolf in sheep’s clothing comes in the form of insurance industry lobbyists, who have been arguing to Republican staff that only making the insurance exchanges work will fend off calls for a government-run plan—or, worse, single-payer. They claim that extending and expanding the law’s current bailouts—specifically, risk corridors and reinsurance—can stabilize the market, and prevent further government intrusion.

Well, they would say that, wouldn’t they. But examining the logic reveals its hollowness: If Republicans pass bad policy now, they can fend off even worse policy later. There is of course another heretofore unknown concept of conservative Republicans choosing not to pass bad policy at all.

That’s why comments suggesting that at least some Republicans believe Obamacare must be fixed no matter who is elected president on November 8 are so damaging. That premise that Congress must do something because Obamacare and its exchanges are “too big to fail” means health insurers are likewise “too big to fail.” If this construct prevails, Congress will do whatever it takes for the insurers to stay in the marketplace; if that means turning on the bailout taps again, so be it.

But once health insurers have a clear backstop from the federal government, they will take additional risk. Insurers have said so themselves. In documents provided to Congress, carriers admitted they under-priced premiums in the law’s first three years precisely because they believed they had an unlimited tap on the federal fisc to cushion their losses. Republican efforts in Congress to rein in that bailout spigot have met furious lobbying by health insurers—and attempts by the Obama administration to strike a corrupt bargain circumventing Congress’ restrictions.

Efforts to end the bailouts and claw back as much money as possible to taxpayers would shoot the wolf at the door. Giving insurers more by way of bailout funds—socializing their risk—will only encourage them to take additional risk, exacerbating a boom-and-bust cycle that will inevitably result in a federal takeover of all that risk. When the federal government provides the risk backstop, you have a government-run system, regardless of who administers it.

While the insurance industry may view more bailouts as their salvation, Obamacare’s version of TARP looks more like a TRAP. By socializing losses, purportedly to prevent single-payer health care, creating a permanent insurer bailout fund will effectively create one. While remaining mindful of the other wolves lurking, Congress should focus foremost on eliminating the one at its threshold: Undo the Obamacare bailouts, and prove this law is not too big to fail.

This post was originally published at The Federalist.

Obamacare’s Taxing Complications

We’ve seen few administrative controversies with Obamacare’s second open-enrollment season, but as a Wall Street Journal article noted last week, the start of the 2014 tax-filing season could bring a new wave of public discontent.

This tax-filing season brings the first enforcement of the Affordable Care Act’s individual mandate–the complexity of which could become a boon for tax-preparation firms. The instructions for completing the mandate exemption form run 12 pages, list 19 types of exemptions (with multiple codes), and include worksheets that may require individuals to go to their state exchange’s Web site to find the monthly premiums that will determine whether they had access to “affordable” coverage.

This added documentation could confuse those used to filing short, simple tax returns. Potential bad outcomes include: filers could give up, and pay the mandate tax even though they qualify for an exemption; filers could feel compelled to hire a tax preparer to sort through the issues for them; or filers could complete the form incorrectly and find their refund held in limbo while the IRS works to resolve the errors.

Meanwhile, Americans who purchased insurance last year and obtained federal premium subsidies will have to reconcile their income and taxes owed with the subsidies they received—which were based on estimated income. The Journal article cited an H&R Block analysis that as many as half of the 6.8 million individuals who received subsidies will have to repay a portion of them.

One tax model estimates the average repayment at $208, but some families may owe more. Congress has twice raised the repayment amounts to as much as $2,500 for families at the higher end of the income-eligibility range, the Journal noted. In addition, families whose income exceeds the eligibility range—more than four times the federal poverty level, or $95,400 for a family of four last year—by even one dollar have to repay their entire subsidy, which could run many thousands of dollars.

Because many families of modest means rely on their tax refund as the major financial windfall for the year, provisions in the health law that reduce, or eliminate, those refunds could prove quite unpopular. Significantly, many filers hit by the individual mandate or the subsidy repayment provisions will not discover the impact on their tax returns until after Obamacare’s open-enrollment period ends on Feb. 15; as things stand, those individuals will not be able to adjust their insurance options, and they could face penalties for both 2014 and 2015 as a result.

More complexity for filers, more work for tax preparers, and smaller refunds for millions of Americans are a recipe for more controversy around the health-care law—as well as bureaucratic and political headaches in the weeks leading up to April 15.

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