Tag Archives: Washington Examiner

A Fiscally Irresponsible Bill

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

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

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

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

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

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

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

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

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

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

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

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

This post was originally published at the Washington Examiner.

How to Repeal Obamacare–And What Comes Next

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 This post was originally published in the Washington Examiner.

More CBO Transparency Could Have Prevented Obamacare’s CLASS Debacle

Mere days into a Republican Congress, Democrats are making charges of ideological bias when it comes to the majority’s handling of the Congressional Budget Office (CBO). Last Friday, a group of leading Senate Democrats wrote a letter to Speaker Boehner specifically noting that “a CBO director should not be required to revise the score of the Affordable Care Act in order to please partisan interests.” It’s an ironic charge, given that it’s far from partisan to question why the CBO failed to perform analyses that could have predicted the collapse of an $86 billion Obamacare program—exactly what happened under its current director, Doug Elmendorf.

The program in question, Community Living Assistance Services and Supports, or CLASS, was designed to provide cash benefits for those needing long-term services and supports. CLASS made it into Obamacare at the behest of then-Sen. Ted Kennedy, and over the objections of both Republicans and moderate Democrats, who considered it fiscally unsustainable; then-Senate Budget Committee Chairman Kent Conrad (D-ND) famously dubbed CLASS “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.” And so it proved—in October 2011, less than two years after the law’s passage, the Department of Health and Human Services determined CLASS could not be implemented in a fiscally solvent manner, and in January 2013, Congress repealed it entirely.

But Congress and the American people could have been spared this trouble had CBO performed a more thorough analysis of CLASS. In 2009, the budget agency assumed that CLASS’ administrative expenses would remain confined to three percent of premiums, even though HHS’ own actuary later called this requirement “unrealistic and undesirable.” The actuary hired by HHS went on to estimate total expenses at 20 percent of premiums—nearly seven times the level specified in the law.

The unrealistically low administrative expenses go to the heart of CLASS’ structural flaws. The program proved fiscally unsustainable because it faced a classic actuarial death spiral—a lack of healthy people paying into the pool to fund benefits for those needing care.

Had CBO formally analyzed CLASS’ administrative expenses, it likely would have concluded that the unrealistic assumptions written into the law meant premiums would eventually have to rise, benefits fall, or both, to meet the shortfall—making the program even more unattractive to healthy individuals, and further imperiling its solvency. The Congressional Budget Office does have models to estimate the cost of insurance; with Obamacare, it stated in November 2009 that insurance Exchanges would reduce the administrative costs of individually-purchased coverage. But when it came to CLASS, CBO did not perform a similar analysis.

Likewise, CBO at no point attempted to quantify the potentially massive costs to states that CLASS would have imposed. The program would have required state Medicaid programs to create a benefit eligibility system similar to that used by the Social Security disability insurance program. That program costs nearly $3 billion to administer every year—meaning CLASS could easily have imposed costs to states of $20-30 billion over a decade.

Within HHS, officials expressed concern that CLASS would “create significant new burdens on the states.” Coming at a time when governors of both parties were criticizing the “mother of all unfunded mandates” in the form of Obamacare’s Medicaid expansion, a CBO finding that CLASS imposed mandates on states in the billions, or tens of billions, would have prompted bipartisan outrage—and could have scuttled the program entirely. But from its introduction to its repeal, CBO at no point even acknowledged the significant cost to states associated with CLASS.

In fairness to CBO, the months leading up to Obamacare’s passage were by far the busiest in my time as a Capitol Hill staffer. Lack of enough hours and lack of sleep could, and did, cause details to slip through the cracks; to quote Nancy Pelosi, we really did have to pass the bill to find out what was in it. But that neither excuses nor explains why CBO has not publicly acknowledged the shortcomings outlined above, and what if anything it needs to change—whether in resources, oversight, or both—to improve its analysis going forward.

Judging from his silence on CLASS, Dr. Elmendorf may view protecting his office’s budget analysts as a prime objective of a CBO director. As much as I value loyalty, CBO’s prime loyalty should lay to Congress—and ultimately to the public, which funds both CBO and the programs it analyzes. While Dr. Elmendorf has taken measures to release more information publicly—developments I welcome—such steps generally fall into the realm of making CBO less opaque, rather than truly transparent.

Democrats’ political posturing aside, it’s not partisan to ask for a public explanation why an independent budget office did not produce analyses that could have revealed the instability of an $86 billion “Ponzi scheme” before Congress enacted it into law. In fact, the principles of good governance should compel the Congressional Budget Office in exactly this direction. Hopefully CBO’s next director, whoever he or she is, will move more rapidly down the road of this much-needed transparency.

This post was originally published at the Washington Examiner.

Obamacare’s Terrible, Horrible, No Good, Very Bad Week

It’s now been seven days since Obamacare’s exchanges officially launched. In reality, however, the “launch” has more closely resembled a blooper reel of rocket failures than a smooth takeoff. Here is but a sampling of the problems, failures, and glitches that have turned the exchanges into a comedy of errors:

TUESDAY

  • Some state exchanges delay their opening to address technical problems; Maryland’s exchange postpones its launch by four hours.
  • When the federally run exchanges in 36 states open, they are immediately overwhelmed by massive volume and technical errors. One MSNBC reporter spends more than half an hour trying in vain to establish an account and compare insurance options.
  • Reuters reports that in total, 47 state exchange websites “turned up frequent error messages.”

WEDNESDAY

  • The Los Angeles Times reports that California’s state exchange vastly overstated its first-day web traffic. Instead of receiving 5 million hits, the exchange actually received 645,000 visitors.
  • The Washington Examiner notes that new co-operative health insurance programs funded by billions of Obamacare dollars featured “sites [that] were difficult to navigate and provided little understandable insurance information on topics like eligibility, costs, and benefits.”

THURSDAY

  • The Washington Post’s Sarah Kliff writes a story, illustrated with a picture of a unicorn, asking whether anyone has actually purchased health insurance on from the federally run exchange—or whether these individuals are just “mythical creature[s].”
  • An Arizona television station profiles a leukemia survivor who “just got a letter from his insurance carrier saying as of January 1, he would be dropped from coverage because of new regulations under Obamacare. His doctor at the Mayo Clinic may be gone as well.”

FRIDAY

  • Liberal blogger Ezra Klein admits that the Administration “did a terrible disservice by building a website that, four days into launch, is still unusable for most Americans.”
  • CNBC reports that “as few as 1 in 100 applications on the federal exchange contains enough information to enroll the applicant in a plan.”
  • One of the few individuals claiming to have enrolled in a federally run insurance exchange admits that “he has not in fact enrolled in a health-care plan.”
  • The Department of Health and Human Services (HHS) announces it will take major portions of its website offline over the weekend for repairs and major upgrades.

SATURDAY

  • Reuters interviews IT experts who believe the exchange contains major design flaws: “so much traffic was going back and forth between [exchange] users’ computers and the server hosting the government website, it was as if the system was attacking itself.”
  • The San Jose Mercury News profiles people suffering premium increases due to Obamacare—including one whose premiums may increase by nearly $10,000 for his family of four.

SUNDAY

  • Treasury Secretary Jack Lew refuses to tell Fox News’s Chris Wallace how many people have, or have not, enrolled in coverage.
  • The Charlotte Observer profiles one Charlotte family, whose premiums could rise from $228 per month to $1,208 per month—a 430 percent increase—because their current health insurance does not meet Obamacare’s standards.
  • The Wall Street Journal quotes technology consultants as saying that the federal exchange site “appeared to be built on a sloppy software foundation,” and that “basic Web-efficiency techniques weren’t used…clog[ging] the website’s plumbing.”

MONDAY

  • Politico finds many individuals are resorting to paper applications for coverage, due to the continued problems with online exchanges.
  • The New York Post reports that navigators were entirely unprepared for the launch of Obamacare’s exchanges last week; many staffers working for purported navigators seemed unaware the program existed.
  • HHS announces it is taking the exchange website offline again for more repairs.

Given this track record, some may find the words of Saturday’s Reuters piece prescient: “Five outside technology experts interviewed by Reuters…say they believe flaws in system architecture, not traffic alone, contributed to the problems” with the exchanges.

That quote is an apt metaphor for the entire law itself. Just as the exchanges’ problems stem from fundamental “flaws in system architecture,” so do these “glitches” prove that the entire law is unworkable—not just parts of the measure. It’s why Congress should act now to save America from this unpopular, unfair, and unworkable law.

This post was originally published at the Daily Signal.

Secretary Sebelius Focuses on Saving One Job: Hers…

The Examiner reported on Friday that HHS Secretary Sebelius “will soon be back to doing what she does best — campaigning for President Obama.”  The Secretary was scheduled to appear at several events over the weekend in New Hampshire.  This development shouldn’t surprise most observers, for playing politics has been a major part of Secretary Sebelius’ time in office:

Meanwhile, while the Secretary keeps playing politics, the actual work of governing goes unaddressed:

  • The Secretary admitted in April that the Administration didn’t have a backup plan in place should the Supreme Court strike down Obamacare – even though it would “probably” have been wise for the Department to have one;
  • Perhaps because the Secretary was derelict in her duties to prepare for the consequences of the Court’s decision, the nation’s governors have been waiting months for official guidance from HHS on how to interpret the ruling – to say nothing of the myriad other implementation issues still bogged down within HHS;
  • As we pointed out last week, HHS has allowed up to $11 billion in abusive and potentially fraudulent increases in Medicare payments to go unquestioned for years.

Given this abysmal track record, some might think Secretary Sebelius should spend less time trying to save her job and more time trying to do it.

“Get Me Rewrite!”

That’s what several prominent Democrats might be saying about their speeches and comments about the CLASS Act.  The DC Examiner released this helpful video compilation of Democrats arguing that the CLASS program was solvent; among the highlights:

Leader Reid:  “[CLASS is] fully paid for – CBO said in the far future, decades and decades in the future, paid for.  I didn’t use a penny of that money in the bill that’s before the Senate.”  (For the record, the CLASS Act’s demise took place 570 days after it was signed into law.)

Then-OMB Director Orszag:  “There are a variety of tweaks that are being explored to make sure that the CLASS Act is on a firm financial footing on its own.”  (There were in fact “tweaks” suggested, but they never made it into the bill – and Orszag and the rest of the Administration never raised alarms when these “tweaks” were left out.)

HELP Committee Chairman Harkin:  “The CBO has scored this – this is completely paid for over 75 years, over 75 years.  I don’t understand why anyone wants to strike it.”  (If anyone has such a 75-year CBO score, by all means pass it on, because I’ve never seen it…)

Majority Whip Durbin:  “The fact that this program is virtually solvent for 30 straight years is an indication of the wisdom of that idea and the way it is planned.”

Perhaps these Democrats didn’t bother to consult with the many independent experts who questioned the program’s viability from Day One.  But they can’t say they weren’t warned about CLASS’ significant, and ultimately fatal, structural flaws – they just chose to disregard them.

We’ve previously commented about the deafening silence from prominent Democrats about the CLASS Act’s demise.  But if these or other Democrats wish to revise and extend their earlier remarks about the program’s solvency, we’re all ears…