Pelosi Health Bill Would Expand Fraud, Undermine Federalism

Anyone who thought the defeat of Sen. Bernie Sanders in the Democrat presidential primaries ended the left’s quest for government control of health care should think again. Legislation introduced last week by House Democratic leaders, to be voted on by the House this week, would substantially expand Washington’s role in the welfare state, encouraging wasteful and fraudulent Medicaid spending and undermine the constitutional principles of federalism.

It seems bad enough that House Democrats decided to raid Medicare to the tune of nearly half a trillion dollars to fund their legislation. That these raided funds would go towards more than $200 billion in new Medicaid spending on individuals potentially ineligible for the program seems especially irresponsible.

Increased Fraud Risk

While expanding federal subsidies for exchange plans, the legislation would accelerate Obamacare’s movement to federalize Medicaid by placing additional requirements and mandates on states. For instance, the bill requires all Medicaid plans — even in states with approved Medicaid waivers — to cover individuals determined eligible for a minimum of 12 months.

Government audits have demonstrated that this policy of continuous eligibility leaves Medicaid programs ripe for waste, fraud, and abuse. In November 2018, Louisiana’s legislative auditor published a study showing individuals initially deemed eligible for Medicaid remained on the rolls despite having incomes as high as $145,146. Following the audit, Louisiana began more frequent eligibility checks and removed more than 30,000 ineligible individuals from the rolls — including at least 1,672 with incomes of over $100,000 — saving taxpayers approximately $400 million.

Broader economic studies confirm the experience of Louisiana. One report released last summer found that most of Obamacare’s coverage gains came from Medicaid and not insurance exchanges — even at income levels well above the threshold for Medicaid expansion. At a time a growing amount of evidence suggests millions of ineligible individuals are enrolling in Medicaid, the new House bill would sharply restrict states’ ability to remove ineligible individuals from the rolls.

On Friday, the Congressional Budget Office released its fiscal analysis of the Democrat legislation. The CBO concluded the continuous eligibility provision alone would result in $216.8 billion in new federal spending plus additional unfunded costs on states. A descriptive analysis of this provision was not provided by the CBO, but it is likely much of the $216.8 billion would fund Medicaid spending on individuals who beforehand would have lost eligibility for the program.

Unconstitutional Orders on States

Importantly, the bill undermines the flexibility of states in other ways, punishing any that have not accepted Obamacare’s Medicaid expansion to able-bodied adults. It would phase in a 10-percentage point reduction in non-expansion states’ federal match rate for administrative expenses — even as it imposes more administrative costs in the form of new reporting requirements. The move directly violates the Supreme Court’s 2012 opinion in NFIB v. Sebelius, which said Congress cannot “penalize states that choose not to participate in that new program [i.e., Medicaid expansion] by taking away their existing Medicaid funding.”

In permanently extending the State Children’s Health Insurance Program, the bill would eliminate the caps on federal funding that have defined the program since its creation nearly a quarter-century ago. It would also perpetually expand provisions first included in Obamacare that prohibit states from restricting eligibility. Together, these changes would essentially convert a program originally designed as a block grant into a permanent entitlement for states and individuals.

Wasteful Spending Is Obamacare on Steroids

Despite all these new restrictions on Medicaid and children’s health insurance programs, the bill does expand state flexibility in one important way: by eliminating all income eligibility thresholds for children. If states want to provide government-funded health care to the children of millionaires, the legislation would give them federal funds to do so, demonstrating that House Speaker Nancy Pelosi and her fellow Democrats only support Medicaid flexibility when states expand the number of people receiving government health care.

As Pelosi argues for a trillion-dollar bailout of state and local budgets, she has offered an excellent reason for Congress to reject both the bailout and the Obamacare “enhancement” act. Rather than giving states additional flexibility to remove ineligible individuals and narrow their budget gaps, the bill’s additional — and in at least one case, unconstitutional — mandates would cause Medicaid spending to balloon, leading to more state bailouts in subsequent years. Both taxpayers and the Constitution deserve better than this latest plan to put Obamacare on steroids.

This post was originally published at The Federalist.

Democrats Raid Medicare to Pay for Obamacare (Again!)

As Ronald Reagan would say, “There they go again.” A decade after Democrats raided Medicare by more than half a trillion dollars to fund Obamacare, House Speaker Nancy Pelosi (D-Calif.) and her Democratic colleagues recently introduced new Obamacare legislation that would raid Medicare by nearly another half-trillion dollars.

Sadly, the House plans to vote on this legislative package before the Independence Day holiday. Lowering spending in one unsustainable entitlement to fund another represents the height of fiscal irresponsibility. For Democrats, however, it looks like par for the course.

Obamacare on Steroids

Democrats have titled their bill the Obamacare “enhancement” act — and for good reason, because it would effectively put the law on quite the figurative steroids. The bill would stymie recent efforts by the Trump administration to offer more insurance options to consumers, such as short-term, limited-duration insurance and association health plans.

Instead, it would make skyrocketing premiums “affordable” by dedicating more taxpayer dollars towards Obamacare exchange subsidies, while also directing $10 billion per year to insurance companies via a new — and permanent — federal bailout fund.

The legislation would also balloon Obamacare’s Medicaid expansion to able-bodied Americans. It would require states to keep individuals on the rolls for 12 months, allowing affluent individuals to remain in this “low-income” program. The income cap on coverage for children would also be eliminated, permitting states to cover children of millionaires while receiving federal dollars for doing so if they choose.

At a time evidence already suggests significant waste and fraud takes place among individuals receiving Medicaid coverage, the Pelosi legislation would add to the ever-increasing budget woes of numerous states by forcing them to keep ineligible individuals on the rolls.

Socialist-Style Price Controls

How would Democrats fund all this new spending? From Medicare.

The Obamacare “enhancement” legislation includes drug pricing provisions that the House of Representatives passed last December. The provisions would require drug companies to “negotiate” prices with the Department of Health and Human Services (HHS),  which would effectively dictate prices to drug companies based on benchmarks laid out in the bill. Companies that do not “negotiate” would face excise taxes that could cause the manufacturer to lose money on every drug it sells in the United States.

The Congressional Budget Office confirmed back in December that these “negotiation” provisions would lead to the development of fewer drugs, as companies invest less in research and development. The CBO also said, however, that the blunt price controls would reduce Medicare and Medicaid spending. So Democrats used these price controls to fund their recent Obamacare expansion bill.

Raiding Medicare (Again)

According to CBO, the vast majority of the savings from drug pricing — a total of $448.2 billion over ten years, to be exact — used to fund the Obamacare bill comes from Medicare. That the Democrats are effectively raiding Medicare to expand entitlements for younger Americans makes the Obamacare “enhancement” legislation all the more odious and irresponsible, though, at this point, we really shouldn’t be surprised.

We’ve seen this act before. Indeed, the Obama administration spent years trying to justify the raid on Medicare. Kathleen Sebelius, then the HHS secretary, testified before Congress that provisions in the law would “both” extend Medicare’s solvency and pay for Obamacare. This is a position that defies both logic as well as common sense.

As it stands, Medicare has already become functionally insolvent. The year before Obamacare’s passage, the program’s trustees projected the Hospital Insurance Trust Fund would run out of money to pay all its bills in 2017 — three years ago. The Obamacare double-counting gimmicks that Sebelius testified about may appear to have extended the program’s solvency, but if only on paper. But the true cost of these things cannot remain hidden forever. According to current projections, even the funds from these phony solutions will run out by 2026.

Doing the Wrong Thing About Medicare’s Insolvency

Yet what would Pelosi and House Democrats do about Medicare’s looming insolvency? Not just nothing — worse than nothing. Rather than using the savings from their socialistic price controls to make Medicare solvent, they would take that money and throw it at health insurers to prop up Obamacare. As shocking as it may seem to some, this behavior echoes Pelosi’s 2011 interview with CNBC, when she bragged about how Democrats “took half a trillion dollars out of Medicare” to pay for Obamacare.

The Obamacare “enhancement” demonstrates how Pelosi and her fellow Democrats don’t care about fiscal responsibility or protecting America’s seniors. Instead, they view Medicare just as they did in 2010: A slush fund to raid on a whim as part of their effort to expand government-run health care at any cost.

This post was originally published at The Federalist.

Reduce Nursing Home Populations to Limit Coronavirus’ Spread

Why have so many nursing home patients died from coronavirus nationwide? The key to answering that question lies in many of the nation’s leading politicians’ policy responses to the pandemic. Most notably, Gov. Andrew Cuomo (D-N.Y.) issued an ill-conceived order requiring nursing homes to accept COVID-positive patients.

Forcing institutions to accept positive patients “seeded” coronavirus in nursing homes, where it spread like wildfire. Although Cuomo eventually rescinded that measure, the decision was too late to save the thousands of nursing home patients who died before it could undo the damage initially wrought. Last Thursday, in a display of callous indifference to the loved ones of deceased patients desperate for answers, Cuomo called the focus on his order a “shiny object” and “pure politics.”

But the high death toll in nursing homes also reflects underlying policy differences that preceded coronavirus: Some states house more individuals in nursing homes than others. These disparities, coupled with the inherent infection risk present in nursing homes, should provide states new motivation to accelerate the movement of seniors and individuals with disabilities out of institutional facilities wherever and wherever possible.

Differences Among States

As of 2017, more certified nursing facilities operated in Florida than in New York. But the larger average size of New York’s facilities means the state has nearly 35 percent more nursing home beds than Florida — even though Florida has 35 percent more seniors older than age 65 than New York does. New York’s nursing homes average 185.1 beds per facility, the highest in the country by far. With a larger nursing home population and larger facilities, the virus had more room to rampage than in other states with smaller facilities and smaller nursing home populations.

During the past several weeks, the growing death toll in nursing homes prompted state and federal officials to surge resources to facilities, from testing to personal protective equipment to infection control specialists. But policymakers should ask a more fundamental question: Why do we still have so many individuals in nursing homes at all? The spread of COVID is likely reduced by home-based care while providing an environment most patients prefer, and often at lower costs than nursing homes.

Over the past several decades, Congress and states have begun to redirect Medicaid spending from institutional care towards home and community-based services. From 1988 to 2016, the percentage of Medicaid long-term care spending directed toward home-based services grew from 10 percent to 57 percent.

But in some states, the powerful nursing home lobby still thwarts policy efforts that would empty facility beds. As of 2016, for one example, New York spent more on institutional care than Florida and California did combined.

A Better Solution

By contrast, Rhode Island’s global compact, approved in January 2009, consolidated myriad Medicaid waivers into a single effort increasing access to home-based care. The state’s experiment succeeded: The number of individuals receiving institutional care declined 6.2 percent, while those receiving community-based care rose by 25.8 percent. Rhode Island’s rebalancing towards community-based care helped keep overall Medicaid spending flat during a time of enrollment growth, and did so by increasing access to care, not limiting it.

States like Rhode Island that have moved individuals needing long-term care out of nursing homes wherever possible have the potential to see fewer incidents of mass deaths. Indeed, vulnerable populations will still need to take precautions to avoid COVID regardless. But moving seniors out of congregate settings like nursing homes would minimize the risk of a “super-spreader” incident in which a single individual infects dozens or even hundreds of patients.

Congress Inhibits Reform

With its ability to reduce health-care spending and the risk of infection, the coronavirus pandemic should have given states added incentive to transition Medicaid beneficiaries into home-based care — had Congress not gotten in the way. Legislation passed in March giving states an increase in the federal Medicaid match conditioned the additional dollars on states not limiting benefits. As a result, more aggressive attempts by states to direct spending to community-based care — for instance, by capping nursing home slots, or requiring beneficiaries to try home-based care first — could jeopardize states’ additional federal matching funds.

When I served on the congressional Commission on Long-Term Care in 2013, one of my colleagues often said the next person who told him she wanted to enter a nursing home would be the first person to express such a desire. That adage holds as true today as it did seven years ago, and this truth should compel states to promote home and community-based care wherever possible at all times. During the coronavirus pandemic, however, such a transition won’t just give seniors better care in a way that saves health-care costs — it could save seniors’ lives.

This post was originally published at The Federalist.

New Study Confirms How the Welfare State Perpetuates Poverty

Ronald Reagan had an old adage about the nine most terrifying words in the English language: “I’m from the government and I’m here to help.” Recently, a new paper reinforced that truth and adds to the existing literature showing how America’s welfare state often traps generations in a cycle of poverty.

At its core, a complicated set of welfare programs and tax breaks generate sizable incentives for many low-income Americans not to increase their incomes and improve their station in life. This “poverty trap” results in well-intentioned government programs hurting those they were designed to help.

Marginal Tax Rates

The study, published by the National Bureau of Economic Research (NBER), examined marginal net tax rates on American households. Their analysis included the phase-out effects of various government programs and the extent to which those phase-outs discourage work.

For instance, consider the $1,200 payments in March’s coronavirus “stimulus” legislation. Individuals with incomes under $75,000 qualified for the full $1,200 payment, while the payment was reduced by 5 percent for each dollar of income over $75,000. As a result of this phase-out rate, individuals with incomes over $99,000 receive no payment.

For every additional dollar of income a person making $75,000 received, he will lose five cents of his “stimulus” payment, plus have to pay regular federal income taxes (likely at a 22 percent rate), payroll taxes (7.65 percent), and state and local income taxes where applicable.

Put another way, the coronavirus checks gave people making between $75,000-$99,000 added incentive to reduce their income. By working fewer hours, sheltering income from taxes, or both, people could “maximize” their “free” payment from the federal government.

The researchers studied data from 2016, well before this year’s “stimulus” (or the coronavirus). But as the paper’s introduction notes, many other federal programs and laws have similar distortionary effects:

Earn $1 too much two years back and your Medicare Part B premiums will rise by close to $800. Earn $1 too much and, depending on the state, lose thousands of dollars in your own or your family’s Medicaid benefits. Hold $1 too much in assets and forfeit thousands in Supplemental Security Income. Earn an extra dollar and receive thousands of dollars in Obamacare subsidies. Earn $1 beyond Social Security’s earnings ceiling and watch your Social Security payroll tax drop to zero. Earn $1 too much and flip onto the Alternative Minimum Tax (AMT), reducing your marginal income-tax bracket from a rate as high as 37 percent to 28 percent. Earn $1 too much and lose 22 cents, in the Earned Income Tax Credit and the list goes on.

If this appears to look almost like a game, you’re not far off. It’s hard not to view it as the government picking winners and losers through its various program parameters. Made an extra $1 of income? Too bad — now we’re taking your subsidy away. Do not pass go, do not collect $200.

Worst Effects on the Poor

Unfortunately, these distortionary effects hit poor and near-poor households the hardest. As Gene Steuerle of the Urban Institute has documented, phase-outs of programs like cash welfare, food stamps, the Earned Income Tax Credit, and Obamacare subsidies mean households making roughly $10,000-$40,000 can lose almost as much in government benefits as they gain in added income by working additional hours.

The new NBER study further quantifies this phenomenon. It finds that, both over the current year and over their lifetimes, individuals in the lowest income quintile (the bottom 20 percent) face higher marginal tax rates than those in the next three income quintiles (from the 20th percentile of income through the 80th percentile). Essentially, when taking the phase-out of government benefits into account, the poor face more disincentives to work than the middle class.

It gets worse. One in four low-income households (those with income in the bottom 20 percent) face lifetime marginal net tax rates of more than 70 percent. As the authors put it: “One in four of our poorest households, regardless of age, make between two and three times as much for the government than they make for themselves in earning an extra $1,000.” Given the construct of the modern welfare state, it seems less logical to ask why poor people wouldn’t work and instead to ask why they would.

There is, however, one silver lining in the paper: States can help undo the damage caused by poorly crafted federal policy. The NBER researchers found that a “typical household can raise its total remaining lifetime spending by 8.1 percent by moving from a high-tax to a low-tax state.”

Break the Cycle of Poverty

Obamacare didn’t create the phenomenon of the welfare state discouraging work, but it did make this worse. The Congressional Budget Office noted repeatedly that the phase-outs in the law’s insurance subsidies penalize individuals who earn more income. Its most recent in-depth analysis, conducted in February 2014, concluded the law would reduce the labor supply by the equivalent of about 2.5 million full-time jobs.

More recently, of course, lawmakers in the CARES Act provided a $600 per week federal supplement to unemployment insurance, further discouraging work. Because more than two-thirds of unemployed individuals can now make more money on unemployment than they did while working, businesses face difficulty recruiting furloughed employees back to their jobs.

At a time our country faces a massive recession brought on by the coronavirus lockdowns, America’s welfare state exacerbates that stagnation. Reforming the system to eliminate work disincentives could save taxpayer funds. More importantly, it would encourage all Americans to embrace the dignity of work.

This post was originally published at The Federalist.

End the Absentee Congress

When House Speaker Nancy Pelosi (D-CA) met with protestors on the East Front of the Capitol last Wednesday, she echoed the nation’s outrage over the horrific killing of George Floyd while in police custody. She also provided ample justification for ending the constitutionally questionable experiment in proxy voting that the House recently authorized.

It raises an obvious question of double standards: If Pelosi can gather with masses of protestors in Washington, why can’t she convene Congress in person? Officials in Congress have come up with numerous protocols to protect members of Congress as well as their staff from contracting the coronavirus—measures not always used by the protestors. Yet in the past week, several members who refused to travel to Washington for votes in late May personally attended protests in their districts.

These elected officials have their priorities backward. If members can protest in mass gatherings with their constituents, they can engage in another mass gathering to represent their constituents—by flying to Washington and doing the job that taxpayers paid them to do.

Resolution Passed in May

On May 15, Democrats in the House of Representatives voted along party lines on a resolution permitting the speaker to authorize remote voting by proxy for 45-day periods. The following week, Pelosi issued such an authorization, citing health issues surrounding the coronavirus. The House utilized proxy voting during three sessions from May 26-28, after which House Democratic leaders said they would keep the chamber in recess for most of June.

Pelosi did not count herself alone among House Democrats in deciding the Floyd protests superseded prior health concerns over large public events. A review of their Twitter accounts reveals that at least one-fifth of the 70 House Democrats who utilized proxy voting to avoid assembling in Washington attended some form of mass gathering—whether a roundtable, press conference or protest—in the days following Floyd’s killing.

Pelosi wore a mask when meeting with the protestors, and many of the House Democrats who attended protests did likewise. But particularly given the new social distancing precautions at the Capitol, it becomes difficult to square the notion of voting by proxy, or keeping the House in recess, to avoid gathering 435 House members in Washington during the pandemic when some of those very same folks attend even larger gatherings in their home districts.

The ironies of these circumstances abound. House Democrats who voted to impeach President Trump for abuse of power have increased the authority of Pelosi and House leaders, passing a resolution that permits as few as 20 members physically present in Washington to convene the House of Representatives. Those protesting systemic injustices have temporarily curtailed their ability to change that system, by absenting themselves from Washington for weeks at a time.

A Better Alternative

Of course, some members of Congress have understandable health-related reasons for avoiding travel to Washington. Others may feel a need to quarantine to protect vulnerable family members, or after possible exposure to the virus themselves.

In those circumstances, the longstanding legislative custom of pairing can allow members on both sides of an issue to express their views in a way that will not affect legislative votes. For instance, in October 2018 Sen. Steve Daines (R-MT) wanted to support the Supreme Court nomination of Brett Kavanaugh—but his daughter’s wedding prevented him from making the Saturday vote. In this case, Sen. Lisa Murkowski (R-AK), who opposed the nomination, voted “present” rather than “no,” so that her vote would essentially “cancel out” Daines’ non-vote.

End the Proxy Charade

Proxy voting in Congress presents numerous issues. For one, it raises questions about whether members not physically present in Washington count towards the quorum required by the Constitution for each chamber of Congress to conduct business. House Republicans have already filed a lawsuit against the proxy voting system on that basis.

Proxy voting also empowers party leaders over the rank-and-file, by keeping the latter more distant from the Capitol for long periods. The bosses in Congress make too many decisions unilaterally as it is—House members should halt the Pelosi power grab by stopping the charade of proxy voting.

For those whose health issues preclude travel, both parties should facilitate a pairing process through the usual channels. In all other cases, Congress should return to in-person voting, with appropriate social distancing and health protocols in place. It’s time to end proxy voting, and nix Pelosi’s Potemkin Congress.

This post was originally published at The Federalist.