Liberals’ New Plan to Take Over the Health Care System

The Center for American Progress proposed a plan for government-run health care Thursday, which the liberal think tank calls “Medicare Extra.”

Unlike Bernie Sanders’ single-payer system, which would abolish virtually all other forms of insurance, the plan would not ban employer coverage outright — at least not yet. In broad strokes, CAP would combine Medicaid and the individual insurance market into Medicare Extra, and allow individuals with other coverage, such as employer plans, traditional Medicare or VA coverage, to enroll in Medicare Extra instead.

The goal of CAP’s plan is to grow government, and to grow dependence on government. The paper omits many important policies, such as how to pay for the new spending. Here are some of the major objectives and concerns.

If You Like Your Obamacare, Too Bad

After attacking Republicans for wanting to “taking away health insurance from millions,” CAP would … take away health insurance from millions. The plan would effectively eliminate Obamacare’s insurance exchanges, and all individual health insurance: “With the exception of employer-sponsored insurance, private insurance companies would be prohibited from duplicating Medicare Extra benefits, but they could offer complementary benefits during an open enrollment period.”

Other sections of the plan (discussed further below) suggest that private insurers could offer Medicare Choice coverage as one element of Medicare Extra. CAP indicates that persons purchasing coverage on the individual market would have a “choice of plans.” But didn’t Obamacare promise that already — and how’s that working out? For that matter, what happened to that whole “If you like your plan, you can keep it” concept?

Mandatory Health Insurance — And A $12,550 Tax

The plan reinstates a mandate to purchase health insurance: “Individuals who are not enrolled in other coverage would be automatically enrolled in Medicare Extra … Premiums for individuals who are not enrolled in other coverage would be automatically collected through tax withholding and on tax returns.”

While the plan says that those with incomes below the tax filing threshold “would not pay any premiums,” it excludes one important detail — the right to opt out of coverage. Therefore, the plan includes a mandate, enforced through the tax code, and with the full authority of the Internal Revenue Service. (Because you can’t spell “insurance” without I-R-S.) The plan indicates that for families with incomes between 150 and 500 percent of the poverty level, “caps on premiums would range from 0 percent to 10 percent of income. For families with income above 500 percent of [poverty], premiums would be capped at 10 percent of income.”

In 2018, the federal poverty level stands at $25,100 for a family of four, making 500 percent of poverty $125,500. If that family lacks employer coverage (remember, the plan prohibits individuals from buying any other form of private insurance), CAP would tax that family 10 percent of income — $12,550 — to pay for its Medicare Extra plan.

Wasteful Overpayments Controlled By Government Bureaucrats

As noted above, the plan would allow insurers to bid to offer Medicare Choice coverage, but with a catch: Payments provided to these plans “could be no more than 95 percent of the Medicare Extra premium.” CAP claims that “this competitive bidding structure would guarantee that plans are offering value that is comparable with Medicare Extra.”

It does no such thing. By paying private plans only 95 percent of the government-run plan’s costs, the bidding structure guarantees that private plans will provide better value than the government-run plan. Just as CAP decried “wasteful overpayments” to private insurers in Medicare Advantage, the CAP proposal will allow government bureaucrats to control billions of dollars in wasteful federal government spending on Medicare Extra.

Costs To States

As noted above, CAP envisions the federal government taking over Medicaid from the states, “given the continued refusal of many states to expand Medicaid and attempts to use federal waivers to undermine access to health care.”

But the plan also requires states to continue to make maintenance-of-effort payments even after the federal government takes Medicaid away from state jurisdiction. Moreover, the plan by its own admission “giv[es] a temporary discount [on the maintenance-of-effort provisions] to states that expanded their Medicaid programs” under Obamacare — effectively punishing states for a choice (i.e., to expand or not expand) that the Supreme Court made completely voluntary. And finally, it requires “states that currently provides benefits … not offered by Medicare Extra … to maintain those benefits,” leaving states perpetually on the hook for such spending.

Would Employer Coverage Really Remain?

The plan gives employers theoretical options regarding their health coverage. Employers could continue to offer coverage themselves, subject to certain minimum requirements. Alternatively, they could enroll their employees in Medicare Extra, with three possible sources of employer funding: Paying 70 percent of workers’ premiums, making maintenance-of-effort payments equal to their spending in the year preceding enactment, adjusted for inflation, or “simpler aggregated payments in lieu of premium contributions,” ranging from 0 to 8 percent of payroll. (The plan would exempt employers with under 100 full-time equivalent workers from making any payments.)

Two questions linger over these options: First, would employer coverage remain? CAP obviously wishes that it would not in the long-term, while recognizing the political problems associated with an abrupt transition. Second, could employers game the system among the various contribution options? While details remain unclear, any plan that sets up two systems (let alone four) represents a classic arbitrage opportunity. If employers act rationally, they could end up reducing their own costs in a way that significantly increases the federal government’s obligations.

Higher Health Spending

CAP advertises its plan as providing “zero or low deductibles, free preventive care, free treatment for chronic disease” — the source of 75 percent of American health care spending — and “free generic drugs.” It would also expand coverage of long-term care services not covered by Medicare (and only partially covered by Medicaid). But all this “free” stuff won’t come cheap.

In analyzing Bernie Sanders’ health care plan, the liberal Urban Institute estimated that it would increase overall health spending by 22.1 percent. Notably, the Urban researchers estimated that Sanders’ plan would raise spending by people who currently have health insurance by almost the same amount, or 15.1 percent, because the lack of cost-sharing will encourage individuals to increase their consumption of care. With the CAP plan apparently proposing that government fully subsidize more than three quarters of health care spending, its proposal will increase health care costs almost as much as Sanders’.

The CAP plan proposes measures to lower costs — namely price controls (i.e., Medicare dictating prices to doctors, hospitals, and drug companies), with some token references to other policies like bundled payments and limiting the tax preference for employer-sponsored insurance. But if those proposals go the way of Obamacare’s “Cadillac tax” — potentially never implemented because politicians of both parties lack the discipline to control health care spending — then the plan will only raise health costs rather than lower them.

Something For Nothing

The plan proposes that families with incomes below 150 percent of poverty ($37,150 for a family of four this year) pay for their coverage the princely sum of … zero dollars. No premiums, no deductibles, no co-payments. Zero. Zip. Zilch. Nada.

And while CAP does not include specific ideas to pay for all the associated new spending, the concepts it does propose largely involve taxing “the rich” (which includes small businesses).

While it doesn’t work as it should — most people “get back” far more than they “pay in” — at least Medicare makes an attempt to have all individuals pay for coverage through the payroll tax. CAP’s plan amounts to a transfer of wealth from one group to another.

Even The New York Times this week highlighted dissent from middle-class families upset at the thought of having to pay for low-income individuals to receive “free” Medicaid. So, CAP might want to rethink what Bill Clinton called “the craziest thing in the world” — making middle-class families pay even more for mandatory insurance ($12,550, anyone?) while certain families contribute not so much as a dime for coverage — along with just about every other element of its health care plan.

This post was originally published at The Federalist.

Dr. Nick Riviera Explains Obamacare

Dr. Nick Riviera From ‘The Simpsons’ Explains Obamacare

He graduated from Hollywood Upstairs Medical College, thinks “choc-o-tastic” qualifies as a food group, and has a strange habit of jumping out of windows when called to the coroner’s office. He’s also an animated character, for what it’s worth. So what does Dr. Nick Riviera, Springfield’s resident quack on “The Simpsons,” have to do with Obamacare?

As it happens, plenty. Dr. Nick provides a humorous example of what may happen in future years, as cascading reductions in reimbursements due to Obamacare wreak havoc on our health care system—and could make “doctors” like Dr. Nick the only access option for some patients.

Productivity Adjustments Ahead

Most economists consider health care a superior good. That is, as income rises, people want more of it. Moreover, in many cases patients equate price with quality. People generally want the most, and best, health care money can buy, even if the most expensive care does not always equate to the best care. In Springfield, that high-cost care gets provided by giggling physician Dr. Julius Hibbert.

Obamacare included several major changes to reimbursement systems that attempted to change this drive for more, and more expensive, care, but also included arbitrary payment reductions that will lead to abysmally low payment levels. Most notably, the law included so-called “productivity adjustments” to the Medicare formula for hospitals and other providers, reducing the growth of their payments every year.

The CEO of a major hospital trade association admitted back in 2010 that this trade-off—a one-time increase in insured patients for hospitals in exchange for lower payments from Medicare forever—probably didn’t amount to a great deal for his industry in the longer term. Nonpartisan budget experts agree.

The Congressional Budget Office in September 2016 released an analysis showing the Obamacare productivity adjustments could more than double the number of unprofitable hospitals nationwide by 2025. In the longer term, the independent Medicare actuary believes that the productivity adjustments will become unsustainable. As Medicare payment levels keep dropping relative to private insurance, they will make 70 percent of skilled nursing facilities and 80 percent of home health agencies unprofitable, “raising the prospect of access and quality-of-care issues for Medicare beneficiaries.”

Although set by another formula—one created in 2015 rather than in Obamacare itself—Medicare physician payment rates face the same dilemma, as simulations also project payments to decline substantially over time when compared to other forms of coverage.

‘You’ve Tried the Best—Now Try the Rest!’

Into this payment breach steps none other than Dr. Nick Riviera. In season three of “The Simpsons,” the title family had to rely on Dr. Nick to perform open-heart surgery on Homer. Because Homer’s insurance wouldn’t cover the operation, the family turned to Dr. Nick upon seeing his television ad, in which he pledged to undertake any surgery for the ridiculously low price of $129.95. (“Call 1-600-DOCTORB—The B is for bargain!”)

The following scenes show an inept Dr. Nick attempting to learn bypass surgery on the fly. Only a well-timed intervention from smarty-pants daughter Lisa allows Dr. Nick to complete the surgery successfully, resulting in a happy ending for the Simpson clan.

Coming to a Hospital Near You?

Liberals might argue that this episode makes the case for Obamacare, by preventing the kind of care denials that led Homer to Dr. Nick in the first place. But in reality, Obamacare insurance plans currently provide increasingly narrow provider networks that could impede access to care. Moreover, the law’s productivity adjustments, by making hospitals and other providers unprofitable, will increasingly limit access to care for seniors in Medicare over time.

Democrats claim Obamacare made no changes to Medicare, and that reducing reimbursement levels amounts to no more than cutting “waste” out of the system. “Your guaranteed benefits won’t change,” House Minority Leader Nancy Pelosi argues.

That argument only holds merit to the extent that providers will accept lower and lower reimbursement levels in perpetuity. Medicare could lower payments for all surgeries to $129.95, but I doubt anyone other than our good friend Dr. Nick will perform them at that price.

So the next time Democrats try to argue that Obamacare didn’t harm Medicare, or will have a positive effect on our health-care system, think of Dr. Nick. In less time than you expect, his real-life equivalent could be coming to a doctor’s office or hospital near you.

This post was originally published at The Federalist.

What You Need to Know about the Proposed Short-Term Plans Rule

On Tuesday morning, the Trump administration issued a proposed rule regarding short-term health insurance plans. The action represents the second prong of the Trump administration’s strategy, outlined in last October’s executive order, to offer regulatory relief to insurance markets. The Department of Labor acted on the first prong, issuing a proposed rule expanding access to association health plans, in January.

As I noted in October, the Obama administration issued a rule in October 2016 designed to limit short-term plans. The Public Health Service Act specifically exempts “short-term, limited-duration insurance” from the definition of “individual health insurance coverage,” exempting such plans from all of Obamacare’s new, federally imposed regulatory regime (though they are regulated by states).

The Trump Administration’s Proposal

The Trump administration’s proposed rule would revise the disclosure slightly (in part to reflect the repeal of Obamacare’s individual mandate, set to take effect in January 2019), and restore the prior definition of short-term coverage to “less than 12 months.”

The proposed rule also requests comment on the ways to facilitate streamlined renewal of short-term plans. As I noted in an article last year, limiting individuals’ ability to renew policies harmed people who develop illnesses while on short-term plans:

Jimmy Kimmel forgot to mention it, but prohibiting coverage renewals harms individuals with pre-existing conditions, because it forbids customers who develop a pre-existing condition while on short-term plans from continuing their coverage. In discouraging these short-term plans, the Obama administration preferred individuals going without coverage entirely over seeing anyone purchase a policy lacking the full panoply of ‘government-approved’ benefits.

The Trump administration can and should rescind this coercive rule and its perverse consequences immediately.

Effective Dates and Impact

The administration estimates that the proposed rule would lead only about 100,000-200,000 individuals to switch from individual coverage to short-term plans, only about 10 percent of whom would have qualified for Obamacare insurance subsidies on exchanges. The administration also estimates the rule would raise spending on premium subsidies by $96-168 million annually. Because the individuals shifting to short-term coverage would be younger and healthier than average, they would slightly increase premiums, and thus premium subsidies, on the insurance exchanges.

However, these comparatively modest estimates on both the coverage and cost fronts suggest that short-term plans may have less of an impact than conservatives had hoped—or liberals have feared. Time will tell if the predictions prove an over-estimate or under-estimate; perhaps more definitive actions to allow for the guaranteed renewal of short-term coverage will increase their popularity.

What Should Be the Next Steps?

Now that it has proposed this rule, the administration should take regulatory action on another front, by stopping a movement in Idaho to offer non-compliant health plans. Last month, the state’s insurance department offered guidance to insurers about new coverage offerings. The new plans could:

  • Impose limits on pre-existing conditions for individuals without continuous coverage;
  • Limit benefits provided to $1 million annually;
  • Not offer maternity care in all cases (although each carrier must sell one plan with maternity coverage); and
  • Charge older individuals up to five times as much as younger individuals when calculating premium rates.

But the Idaho guidance hints at one big problem. It instructs insurers selling the plans in question to disclose to consumers that “This policy is not fully compliant with federal health insurance requirements.”

Therefore, as a matter of law, I cannot support the Idaho effort, not because I support or want to sustain Obamacare—I don’t—but because I support and want to sustain the rule of law, which is more important than any single piece of legislation. Unfortunately in this instance, federal law supersedes state law, which means the federal law must prevail.

I wrote in January 2017 that the Trump administration had an obligation to enforce the individual mandate. Likewise here, the administration has an obligation to enforce the Obamacare statute, and either redirect Idaho’s efforts to bring them into compliance with the law—perhaps through a Section 1332 innovation waiver, although that waiver may not bring the state sufficient flexibility—or quash them. The administration has a constitutional obligation to “take care that the laws be faithfully executed,” and it should not follow the Obama administration’s example of picking and choosing which laws it wishes to enforce.

Better yet, Congress can and should repeal the regulations that represent the beating heart of Obamacare. They have a roadmap to do so, even with a slim Senate majority. Such action would allow Idaho, and 49 other states, to innovate to their heart’s content to provide more affordable coverage to their residents—an outcome consistent with the rule of law, and federalism, that conservatives could embrace whole-heartedly.

This post was originally published at The Federalist.

Who Really Proposed the Obamacare Bailout in the Trump Budget?

Maybe it was Colonel Mustard in the conservatory with the revolver. Or Professor Plum in the library with the candlestick.

The story behind the Obamacare bailout proposed in last week’s budget has taken on a mysterious tone, akin to a game of Clue. My Thursday story focusing on the role played by White House Domestic Policy Council Chair Andrew Bremberg prompted pushback from some quarters about the actual perpetrator of the proposal. As a result, I spent a good chunk of Friday afternoon trying to gather more facts—and found definitive ones hard to come by.

As to the accuracy of my initial theory, people I trust and respect arrived at strikingly different views. However, I found surprising unanimity on one count: No one—but no one—wants to take credit for inserting the proposal to pay $11.5 billion in risk corridor claims. As someone told me: “You raise a valid question. If Andrew Bremberg didn’t insert the proposal into the budget”—and this person didn’t think he did—“then how did it get in there?”

Therein lies a huge problem. To call the inclusion of a $11.5 billion proposal in the president’s budget that no one in the administration seemed to know about, or wants to take credit for, a prime example of managerial incompetence would put it mildly. Either career staff inserted it in the budget, and the political staff did not have the antennae or bandwidth to understand its consequences and take it out, or a few political appointees and career staff hijacked the budget process, with most other individuals unaware of the situation until the budget’s public release.

To borrow a politically loaded phrase, someone—or a group of someones—colluded to get this language included in the budget. Its inclusion could cost federal taxpayers literally billions of dollars.

Why It Matters

By submitting a budget proposal to “request mandatory appropriations for the risk corridors program,” the White House completely undermined and undercut the arguments its own Justice Department had made in court a few short weeks ago, that the federal government owes insurers nothing.

In other words, whomever inserted this policy U-turn into the budget, just as the judges ponder a ruling in the insurer lawsuits, may have effectively “tanked” the government’s case. Either by leading to an adverse ruling, or by prompting the Justice Department to settle the case at a much higher cost, this move could cost taxpayers billions.

A Pro-Life Administration, Or Not?

Unfortunately, it gets worse. While the budget did include new funds for insurers, including the controversial risk corridors bailout described above, it did not include a single word proposing that such funds prevent taxpayer dollars from going to plans that cover abortion.

There’s a reason for the deafening silence: Republicans know that any legislation that funds insurers and provides robust pro-life protections will not pass. Democrats will object to its inclusion. Given the choice between passing up on an Obamacare bailout or abandoning their pro-life principles, Republicans have given every expectation that they will choose the latter course. (They shouldn’t bail out Obamacare regardless, but that’s a separate story.)

Regardless of who proposed these, it doesn’t take a detective to understand how a policy reversal that could cost taxpayers billions and a pending U-turn by Republicans to fund abortion coverage represent a major one-two punch against conservatives. But the mysterious origins and mangled management of the risk corridor proposal adds a further layer of insult to injury, a triple whammy of a tough week for the administration.

This post was originally published at The Federalist.

Politico’s Dumbest Headline Ever Trivializes Rand Paul’s Budget Protest

So much for the romance surrounding the famous scene in “Mr. Smith Goes to Washington” where the title character successfully filibusters a bill, rousing the public to his side. Politico claimed that similar tactics surrounding a budget agreement last week led to the “dumbest shutdown ever.” In reality, however, the brief lapse in appropriations had serious underlying causes, and the flip way its correspondents covered the incident led to arguably the dumbest headline in Politico’s history.

To explain the shutdown in brief: Congressional leaders arrived at a budget agreement last week, just before the existing spending bill expired on Thursday at midnight. Having only introduced the bill hours previously, Senate leaders pushed to pass it Thursday afternoon, before the prior spending bill expired.

Paul’s actions protested two important issues: Skyrocketing spending and deficits, and Congress passing massive spending bills without reading them or allowing anyone to offer amendments. But the Politico report by Rachael Bade and Seung Min Kim trivialized the incident, calling it a “spectacle,” “extraneous drama,” and a “sideshow” full of “absurdity.” Their own phraseology amplified quotes such as those from an unnamed Republican aide, who called the floor drama “even more stupid than the name of the new Kardashian baby.”

So Paying for Stuff Congress Buys Is ‘Stupid’?

Why would reporters take such a cavalier attitude toward otherwise weighty matters? Four possible reasons come to mind.

First, the natural inclination to blame the individual or individuals perceived as responsible for causing havoc with the schedule. Few politicians or reporters on Capitol Hill expected to spend Thursday evening and much of Friday morning covering all-night drama surrounding the appropriations bill. The missed flights, cancelled dinner plans, and other last-minute chaos largely redounded on Paul’s head, even though Senate leaders could, and should, have avoided that drama by planning more than a few hours ahead.

If, instead of the headline at issue, Politico had led its story by pointing out that tactical stupidity by Senate Majority Leader Mitch McConnell (R-Kentucky) led to the shutdown—belying his November 2014 and December 2017 statements that “We will not be shutting down the government”—how quickly do you think the majority leader’s press staff would have responded to Politico reporters’ questions this week?

Always Selective ‘Concern’ for Process

Third, reporters’ natural bias towards bipartisan agreements, underpinned by an implicit assumption that bipartisan agreements are inherently good. Whereas last year’s partisan attempts to “repeal-and-replace” Obamacare led to myriad stories about Republicans violating their pledges for transparency (an exception to rule two above), the bipartisan budget deal aroused much less indignation from the press about the secretive process used to craft it.

A contrarian might ask the obvious question: If the bill is so good, why not give lawmakers time to read and understand its contents, rather than ramming through a 652-page bill spending hundreds of billions of dollars in a 24-hour period?

Of course not. But when officials at the Centers for Medicare and Medicaid Services (CMS) earlier this month tried to shut out a reporter for what CMS officials viewed as an inaccurate article—or, to coin a phrase, “bad behavior” by a journalist—the Association of Health Care Journalists filed protests with CMS, and published multiple stories on the kerfuffle (which Politico dutifully covered).

If they care about democracy as much as they claim, the reporters who consistently hyperventilate every time President Trump makes (idle) threats towards the press might spend more time promoting sunshine and accountability throughout government. But instead of highlighting Paul’s efforts to enhance transparency in government—is a single amendment vote on a 652-page bill really too much to ask?—the “dumbest shutdown ever” story ridiculed these efforts. It’s why the story represents Politico’s dumbest headline ever.

This post was originally published at The Federalist.

The White House’s Plan to Bail Out Obamacare AND Fund Abortion Coverage

The White House released its budget proposal this morning. Apart from the fact that the budget abandons any attempt to get to balance within ten years (or ever), a footnote buried deep in the document hides key proposals: Bailing out Obamacare health insurers to the tune of tens of billions of dollars, and taxpayer funding of abortion coverage.

On page 141, footnote 6 of Table S-6, showing the president’s policy proposals, includes the following admission: “The Budget requests mandatory appropriations for the risk corridors program and for cost-sharing reduction payments.”

There you have it: At least $11.5 billion in corporate welfare payments to insurers for risk corridors, and more for cost-sharing reductions.

About Risk Corridors

While risk corridors have faded in the public debate over the past two years, they remain a potent issue for health insurers. See a full explanation of the issue, but here’s a summary.

To prevent the Obama administration from using funds from elsewhere to subsidize corporate welfare to insurers, Congress enacted restrictions prohibiting the use of taxpayer funds to bail out risk corridors. Under these restrictions, insurers with losses could only receive as much money from the risk corridor program as insurers with gains paid into the program.

In Obamacare’s first few years, most insurers suffered massive losses, so the money coming in to the risk corridor program by no means equaled the requests for funds from the program. As a result, several insurers sued in the Court of Federal Claims, requesting payment from the Judgment Fund of the Treasury for their unpaid risk corridor obligations. Many of those cases remain on appeal.

While both the White House and HHS budgets include few details about this proposal, it appears that they would pre-emptively surrender the pending legal cases by paying insurers more than $11.5 billion in risk corridor obligations that insurers claim they are owed. The budget further proposes making these payments exempt from the budget sequester.

About Cost-Sharing Reductions

The White House’s proposal on CSRs looks downright conservative, however, compared to the budget gimmick being contemplated by Speaker of the House Paul Ryan (R-WI). The White House budget indicates that spending on CSRs would have no deficit effect, because the Gramm-Rudman-Hollings statute requires budgetary agencies to assume full funding of entitlements (including CSR payments) when developing their fiscal baselines.

Ryan, however, finds this legal requirement an inconvenient truth. He wants to direct the budget agencies to raise the spending baseline artificially, so Congress can then “lower” the spending baseline right back to where it is now—and spend the phony “savings” from this gimmick on more corporate welfare to insurers.

Forcing Taxpayers to Fund Abortion Coverage

Another point of note: Passing either one of these proposals would by definition result in taxpayer funding of plans that cover abortion. The administration did not include any language prohibiting the use of CSR or risk corridor funds for plans that cover abortion. Therefore the White House presumably endorses federal taxpayer funding of abortion coverage.

The budget proposal means Trump administration is now actively working to codify not one but two Obamacare bailouts that a Republican Congress denied to the Obama administration—doing liberals’ bidding for them. Moreover, the failure to include any pro-life protections on these bailouts represents at best a massive managerial oversight, and at worst an insult to the pro-life community. For those who thought that last week’s budget deal represented the nadir for conservative principles among this administration, think again.

This post was originally published at The Federalist.

The Insurer Bailout Inside the Senate Budget “Deal”

I noted in my prior summary of the Senate budget “deal” that, as with Obamacare itself, Senate leaders wanted to pass the bill so that we can find out what’s in it. And so it proved.

My summary noted that the bill includes a giveaway to seniors, by accelerating the process Obamacare started to close the Part D prescription drug “donut hole.” I also pointed out that this attempt to buy seniors’ votes in the November elections by promising them an extra benefit in 2019 might backfire, because encouraging seniors to choose more expensive brand-name pharmaceuticals over cheaper generics will raise overall Medicare spending and increase premiums.

How the ‘Donut Hole’ Currently Works

The Part D prescription drug benefit Republicans and the George W. Bush administration created in 2003 included a “donut hole” to reduce the bill’s overall costs. During his 2000 presidential campaign, Bush proposed creating a limited drug benefit that provided only catastrophic protection for seniors with very high costs.

But political pressure (to give “benefits” to more seniors) and actuarial concerns (if the federal government covered only catastrophic costs, only very sick people who would incur those costs would enroll, creating an unstable risk pool) prompted Republicans to expand the Part D program. The “donut hole” resulted from these twin goals of providing basic coverage to seniors and catastrophic coverage for those with high medical costs, with the coverage gap or “donut hole” occurring between the end of the former and the start of the latter.

As part of their “rock-solid deal” with the Obama administration, the pharmaceutical industry and Democrats agreed to close the “donut hole” as part of Obamacare. The law required branded drug manufacturers to provide 50 percent discounts for seniors in the “donut hole,” with the federal government gradually increasing its subsidy (provided through Part D insurers) and beneficiaries’ co-insurance gradually declining to 25 percent (the same percentage of costs that beneficiaries pay before reaching the “donut hole”).

The budget “deal” changes the prior law in several ways. First, it reduces the beneficiary co-insurance from 30 percent to 25 percent in 2019, thus filling in the “donut hole.” But in so doing, it also increases the manufacturer’s “discount” from 50 percent to 70 percent, beginning next year.

That second change effectively shifts 20 percent of the cost of filling in the “donut hole” from Medicare, and insurers that offer Medicare drug plans, to drug manufacturers. In other words, it bails out health insurers, who in the future will have to bear very little risk (only 5 percent) of the cost of their beneficiaries’ drug spending.

No Crocodile Tears

That said, drug companies don’t have much reason to cry about the budget “deal” overall. The industry saw the repeal of Obamacare’s Independent Payment Advisory Board (IPAB), an important, albeit flawed, way to control skyrocketing Medicare costs. While Republicans in prior Congresses insisted on paying for legislation repealing IPAB, the party changed its tune at the beginning of this Congress—reportedly at the behest of Big Pharma.

The enacted legislation repeals the IPAB spending controls without a replacement mechanism to contain Medicare costs. This is total derogation of conservatives’ belief in reforming entitlements, and one enacted at the behest of drug company lobbyists.

Moreover, the budget “deal” included another huge win for pharma, by excluding legislation supported on both sides of the aisle to accelerate the approval of lower-cost generic drugs. Pharmaceutical lobbyists claimed the measure would lead to more lawsuits, and those objections meant the provision got left on the proverbial cutting room floor.

More Bailouts Ahead

Given that Kentucky-based health insurer Humana holds a large market share in the Medicare arena—with 5.3 million of the roughly 25 million seniors enrolled in stand-alone drug plans, and more enrollment in Medicare Advantage besides—and that Sen. Mitch McConnell (R-KY) has fought hard, and publicly, on behalf of Humana’s interests in the past, it doesn’t take a rocket scientist to ask whether the Senate majority leader proposed a backroom deal to help his insurer constituents.

Moreover, as we’ve previously reported, Republican leaders want to pass an even bigger bailout, this one for Obamacare, in next month’s omnibus spending agreement. One news outlet reported earlier this week that Republicans’ desire to bail out Obamacare—to “lower” premiums by throwing more of taxpayers’ money at the problem—has risen to such a level “that Democrats don’t feel like they have to push very hard” to ensure its enactment.

Insurer bailouts, measures to raise rather than lower health costs, and an abdication of any pretense of fiscal responsibility or restraint towards our looming entitlement crisis. The Republican Party circa 2018 is truly a pathetic spectacle to behold.

This post was originally published at The Federalist.

Lowlights of Senate “Budget” Deal

In the budget agreement announced Wednesday between Republican Sen. Mitch McConnell and Democrat Chuck Schumer, McConnell’s negotiating position can be summed up thusly: “Give us the money we want for defense spending, and you can run the rest of the country.”

The result was a spending bonanza, with giveaways to just about every conceivable lobbying group, trade association, and special interest possible. The unseemly spectacle resembles “Oprah’s Favorite Things:” “You get a car! You get a car! You get a car! EVERYONE GETS A CAR!!!”

Even reporters expressed frank astonishment at the bipartisan profligacy. Axios admitted that “there’s a ton of health care money in the Senate budget deal,” while Kaiser Health News noted that the agreement “appear[s] to include just about every other health priority Democrats have been pushing the past several months.”

Of course, McConnell and Schumer want to ram it through Congress and into law by Thursday evening—because we have to pass the bill to find out what’s in it.

Lowlights of the Health Legislation

Repeal of Medicare Spending Restraints: The bill would repeal Obamacare’s Independent Payment Advisory Board (IPAB), a board of unelected bureaucrats empowered to make rulings on Medicare spending. I noted last year that conservatives could support repealing the power given to unelected bureaucrats while keeping the restraints on Medicare spending—restraints which, once repealed, will be difficult to reinstitute.

Congressional leaders did nothing of the sort. Instead the “deal” would repeal the IPAB without a replacement, raising the deficit by $17.5 billion. Moreover, because seniors pay for a portion of Medicare physician payment spending through their Part B premium, repealing this provision without an offset would raise seniors’ out-of-pocket costs. While a Congressional Budget Office (CBO) score of the bill as a whole was not available as of press time Wednesday evening, this provision, on its own, would raise Medicare premiums by billions of dollars.

Big Pharma Giveaway: In a further giveaway to the pharmaceutical industry, the bill would close the Medicare Part D prescription drug “donut hole” a year earlier—that is, beginning in 2019 rather than 2020. Having failed to repeal Obamacare, Republicans apparently want to expand this portion of the law, in the hopes of attracting seniors’ votes in November’s mid-term elections.

Extension of an Unreformed SCHIP Program: The bill would extend for another four years the State Children’s Health Insurance Program—a mandatory spending program that Republicans extended for six years just last month. I previously explained in detail that last month’s reauthorization failed to include at least ten different conservative reforms that Republicans previously supported. By extending the program for another four years, the “deal” would prevent conservatives from enacting any reforms for a decade.

Back in 2015, Republican aides pledged that “Republicans would like to reform and improve this program, and the next opportunity will be in two years when we have a new President.” Not only have Republicans done nothing of the sort, the additional extension will prevent this president—and potentially the next one as well—from reforming the program.

Mandatory Funding for Community Health Centers: The bill provides for $7.8 billion in mandatory spending for community health centers over the next two years, once again extending a mandatory program created by Obamacare.

While many conservatives may support funding for community health centers, they may also support funding them through the discretionary appropriations process, rather than by replenishing a pot of mandatory spending created by Obamacare to subvert the normal spending cycle. The normal appropriations process consists of setting priorities among various programs; this special carve-out for community health centers subverts that process.

Mandatory Opioid Funding: The bill also provides $6 billion in mandatory spending over the next two years to address the opioid crisis. As with the community health center funding, some conservatives may support increasing grants related to the opioid crisis—through the normal spending process.

The Schumer-McConnell “deal” would bust through the Budget Control Act spending caps, increasing the amount of funds available for the normal appropriations bills. (Most of this spending increase would not be paid for.) Additional mandatory health care spending on top of the increase in discretionary funding represents a spendthrift Congress attempting to have its cake and eat it too, while sticking future generations with the bill in the form of more debt and deficits.

But Wait—There’s More!

Surprisingly, the bill does not include an Obamacare “stabilization” (i.e., bailout) package. But other reports on Wednesday suggest that will arrive in short order too. One report noted that Democrats want to increase Obamacare premium subsidies. They not only want to restore unconstitutional payments that President Trump cancelled last fall, “but to expand it—and to bolster the separate subsidy that helps people pay their premiums.”

Republican leaders want to pass a massive Obamacare bailout in the next appropriations measure, an omnibus spending bill likely to come to the House and Senate floors before the Easter break. In a sign of Republicans’ desperation to pass a bailout, Wednesday’s report quoted a Democratic aide as saying that corporate welfare to insurers in the form of a reinsurance package “has become so popular among Republicans that Democrats don’t feel like they have to push very hard.”

There are two ways to solve the problem of rising premiums in Obamacare. One way would fix the underlying problems, by repealing regulations that have led to skyrocketing premiums. The other would merely throw money at the problem by giving more corporate welfare to insurers, providing a short-term “fix” at taxpayers’ ultimate cost. Naturally, most Republicans wish to choose the latter course.

Moreover, in bailing out Obamacare, Republicans will be forced to provide additional taxpayer funding of abortion coverage. There is no way—zero—that Democrats will provide any votes for a bill that provides meaningful pro-life protections for the Obamacare exchanges. Republicans’ desperation to bail out Obamacare will compel them to abandon any pretense of pro-life funding as well.

Most Expensive Parade Ever?

Press reports this week highlighted Pentagon plans to, at President Trump’s request, put on a military spectacle in the form of a massive parade. Trump tweeted his support for the Schumer-McConnell deal on Wednesday, calling it “so important for our great Military.”

It’s an ironic statement, on several levels. First, the hundreds of billions in new deficit spending coming from the military buildup included in the agreement would make the parade the most expensive ever, by far. Second, Michael Mullen, the former chairman of the Joint Chiefs of Staff, called our rising debt levels our biggest national security threat, because it makes us dependent on other countries to buy our bonds. Given that statement, one can credibly argue that this deficit-driven spending binge will harm our national security much more than the defense funds will help it.

Time will tell whether or not the legislation passes. But if it does, at some point future generations will look back and wonder why the self-proclaimed “king of debt” imposed a financial burden on them that they will not be able to bear easily—if at all.

This post was originally published at The Federalist.

Super Bowl LII Raises Profile of Brain Injuries

At first glance, football and health care might seem incongruous topics. But the growing focus on athletes—not just professional ones—and brain injuries has drawn widespread public interest. This week’s Wall Street Journal poll found that a 53 percent majority of mothers would encourage their children to play other sports due to concerns about concussions in football, up from 40 percent four years ago.

Into that dynamic stepped six specialists in neuroscience, including several former athletes, for the annual Brain Health Summit hosted in conjunction with the Super Bowl. More than 100 attendees braved a Minneapolis snowstorm (with others watching online) to discuss the increasingly prominent topic. (Full disclosure: I have a longstanding friendship with Nicole Fisher, organizer of the summit and a Federalist contributor, but the views in this post are, as always, mine alone.)

He spoke of the first concussion summit he organized in 1994—nearly a quarter-century ago, well before the issue captured national attention—and being branded a “fearmonger” for his efforts to raise awareness.

Despite the recent attention drawn to the relationship between football and concussions, and the obvious Super Bowl connections to the event, most brain trauma occurs well away from the gridiron. Prior to the event, I joked with the crew setting up the lighting that they needed to tape down cords running across the floor, lest someone trip and hit their head at the Brain Health Summit. But the joke has more than its share of reality: Moderator Jessica Schwartz noted that falls represent the leading cause of traumatic brain injuries nationwide.

This year’s summit focused on women, and the effects of brain injuries on all walks of women’s lives. Army veteran Jackie Garrick spoke of her work with women in the armed forces, specifically the psychological impact on veterans returning from the battlefield, which includes delineating between symptoms of traumatic brain injury (TBI) and post-traumatic stress disorder (PTSD). Psychologist Katherine Snedaker spoke of her new initiative, Pink Concussions, that will work with the Veterans Administration to develop a brain bank for women, and encourage women to donate their brains to science. Interesting fact: Becoming an organ donor on a driver’s license does not cover the brain.

Alicia Duerson, widow of Chicago Bears safety Dave Duerson, shared some of the details surrounding Dave’s battle with chronic traumatic encephalopathy (CTE). Duerson committed suicide in 2011, just as CTE began attracting national attention, and asked that his brain be donated to science, so others might be spared from the syndrome that plagued the last decade of his life. Alicia powerfully depicted a man with incredible skills and talents away from football—a Harvard MBA graduate, and successful business owner, dead at only 50 years young, with so much potential left unfulfilled.

Despite—and in some ways because of—these heartrending stories, signs of hope abound. Steinberg noted that “there’s now a profit motive in finding solutions,” whether better helmets to protect against hits, better tools to detect concussions, or better drugs and devices to treat the symptoms of brain injuries. Former NFL quarterback Gus Frerotte also appeared at the summit, discussing efforts to create apps that monitor brain health, offering proactive intervention in close-to-real time, rather than only after major concussive events.

Just as important, the national attention on the issue has helped re-orient priorities, discouraging players from trying to “tough it out” and get back on the field. Researcher Gil van Bokkelen, explaining how concussions affect the immune system even after visible symptoms disappear, told how he refused to let his son play hockey for several weeks after clinical symptoms from his concussion ended. It’s an interesting statement, given that New England Patriots tight end Rob Gronkowski will play in Sunday’s Super Bowl only two weeks after suffering a concussion, and three days after clearing the NFL’s concussion protocol.

This post was originally published at The Federalist.

Medicaid Reforms Can Stave Off Louisiana’s Fiscal Cliff

As the old saying goes, when you’re in a hole, stop digging. Unfortunately, Gov. John Bel Edwards keeps digging Louisiana’s fiscal hole deeper, looking for tax increases to “solve” the state’s fiscal shortfall. He should instead examine the massive Medicaid expansion under Obamacare, the spending on which will only add to Louisiana’s budgetary woes.

Only two years ago, Gov. Edwards took office pledging that expanding Medicaid to able-bodied adults—that is, adults of working age without dependents—would see “only” 300,000 individuals added to the government health care rolls. Then, within weeks of taking office, Gov. Edwards revised his numbers upward, claiming that expansion could cover up to 450,000 individuals. But by November 2017—less than eighteen months after the expansion took effect in Louisiana—the state had already exceeded the maximum number of individuals ever projected to enroll in the program.

Louisiana’s explosion in Medicaid enrollment should not come as a surprise, as dozens of other states that expanded Medicaid under Obamacare face the same problem. According to a November 2016 study by the Foundation for Government Accountability, in 24 states that expanded Medicaid, enrollment exceeded maximum projections by an average of 110%.

Unfortunately, this enrollment explosion puts Louisiana’s budget situation in even greater peril. State officials admitted in 2016 that enrollment exceeding 300,000 would reduce the supposed “savings” from Medicaid expansion. As enrollment has now exceeded the even higher projection of 450,000, costs will continue to rise.

Other states that expanded Medicaid before Louisiana have faced similar problems, with rising spending on Medicaid crowding out other important budgetary priorities. One Democratic legislator from New Mexico noted that “The most vulnerable of our citizens—the children, our senior citizens, our veterans, individuals with disabilities—I get concerned that those could be areas that get hit” because of Medicaid expansion.

Medicaid expansion could indeed hurt vulnerable citizens, because it prioritizes the needs of able-bodied adults. Even as Louisiana expanded Medicaid to the able-bodied, the state’s Department of Health and Hospitals advertises a seven year—yes, seven year—wait for individuals with developmental disabilities to be evaluated for personal care services. Any state’s policy that prioritizes coverage of able-bodied adults, yet makes the most vulnerable individuals wait for years and years to receive care, needs a major re-assessment.

As a new Pelican Institute paper makes clear, Louisiana should start phasing out the Medicaid expansion to the able-bodied—both to right the fiscal ship and to right the state’s wrong priorities. The state should freeze enrollment in expansion, allowing those currently participating in the program to remain so long as they stay eligible, while transitioning people into employer-sponsored insurance or other coverage as they lose Medicaid eligibility. One study found that this policy, if implemented nationwide, could save states between $56-64 billion, while generating additional savings for federal taxpayers.

As the state winds down its expansion, lawmakers should work with federal policy-makers to develop a comprehensive waiver program to reform Medicaid in Louisiana. Such a waiver program could include work requirements, to accelerate the transition from welfare to work. But it should also include improvements in care management—providing better care to beneficiaries, and home-based care where possible. Reforming Medicaid could encompass other important elements, including incentives for wellness and healthy behaviors, better coordination with employer-based insurance where applicable, and improved program integrity to crack down on Medicaid fraud.

Louisiana has suffered enough from the near-constant turmoil of annual budget crises. Instead of digging deeper with more taxes and spending, lawmakers should put down their spades, and freeze enrollment in Medicaid expansion. Once they have done so, the state can work to build the reformed and modernized Medicaid program Louisiana desperately needs.

This post was originally published in The Advocate.