The Better Solution for Our Health Insurance System: A Plan You Can Actually Keep

Sometimes, liberals and conservatives agree on a policy problem, but disagree strongly on the best solutions to that problem. Our health insurance system presents one case of such a disconnect between problems and solutions.

In the last Democratic presidential debate, hosted by CNN in March, Vermont Sen. Bernie Sanders said that the coronavirus pandemic made the “dysfunctionality of the current health care system … obviously apparent.” He elaborated in an April op-ed in Politico, in which he noted that “already, an estimated 9.2 million workers have lost their employer-sponsored insurance, and as many as 35 million people might lose coverage by the end of the crisis.”

Sanders makes a valid point: The pandemic does illustrate the shortcomings of our system of health coverage. But his single-payer health care plan — or even Joe Biden’s proposal for a (purportedly) voluntary government-run “option” in which individuals could enroll — would take the system in the exact opposite direction.

The dysfunctionality of the system exists largely because employers control most Americans’ health insurance. Most conservatives would therefore support letting individuals control their health coverage, rather than liberals’ plan to replace employer control with government control. Thankfully, the Trump administration has moved health policy in that exact direction, laying the groundwork for a movement toward more personalized insurance options.

The Problem: Employer-Provided Health Insurance

Sanders cited a study from Health Management Associates stating that as many as 35 million individuals could lose access to employer-sponsored insurance due to coronavirus-related layoffs. A revised paper, released in late May, did not specifically update estimates for the number of people losing employer insurance, but still showed significant coverage losses. Other estimates have indicated similarly large numbers of Americans losing their employer coverage.

The sudden job losses sparked by coronavirus lockdowns have illustrated one of the three major problems with employer-provided health insurance. Individually and collectively, these flaws have represented a problem hidden in plain sight for decades.

Lack of choice: The largest survey of employer-provided health insurance found that in 2019, exactly three-quarters of firms (75%) offered only one type of health insurance plan. In general, large firms offer more choices than small businesses, but even among the largest firms — those with more than 5,000 workers.

Because the employer and not the employee owns the insurance policy, workers often end up stuck with whatever plan their employer chooses. An individual who doesn’t want to enroll in an HMO, or whose doctors lie outside his or her employer’s provider network, might have few choices but to switch jobs or accept a plan that does not meet his or her needs.

In its first season, the U.S. version of “The Office” satirized this dynamic, when resident megalomaniac Dwight Schrute got charged with picking the office health plan — and let the power go to his head. While Americans don’t have to worry about contracting “Count Choculitis,” one of the fictitious diseases Schrute’s co-workers invented to needle him in the episode, they do face the very real worry that their employer’s choices and wishes regarding health care might not align with their own.

Flawed incentives: A conversation with one of my friends several years ago illustrated this problem. My friend said he loved the insurance plan his employer provided: “I can go to the doctor and it only costs me a $5 co-pay.”

I posed a thought experiment: What if your health insurance suddenly became taxable, and you had to pay $1,500 or so in taxes on that coverage? (At the time, a top-of-the-line plan cost about $6,000 for an individual, and I assumed a 25% state and local tax rate.) He responded immediately: “I wouldn’t want the plan — I would tell them to raise my co-pays and deductibles.”

That response illustrates the policy problem of employer-sponsored insurance: Everyone thinks they’re spending everyone else’s money. Employees don’t pay taxes on employer coverage; an IRS ruling during World War II, later codified by Congress, exempts employer-provided benefits from both income and payroll taxes.

All the incentives regarding employer-provided health care point in the wrong direction. Exempting employer coverage from taxation encourages individuals to take more compensation in untaxed health insurance benefits rather than taxable wages. Many employees don’t even realize that the employer’s share of the contribution for their coverage — which averaged nearly $15,000 for a family policy in 2019 — comes out of their own wallets in the form of lost wages.

All the flawed and misaligned incentives mean that the co-pay of “only” $5 my friend talked about years ago costs far more than that — to workers, employers and the economy as a whole. It’s one major reason why our health care system represents such a large, and rising, share of our economy.

Lack of portability: This issue arises because employers and not individuals own their health plans. As a result, when individuals lose their jobs, they also lose their health coverage. That dynamic results in the double whammy Americans have experienced during the pandemic, when workers lose their coverage at the same time they have unexpectedly lost their job — compounding families’ financial distress.

Lack of portability also exacerbates the problem of pre-existing conditions. Upon entering the workforce in their teens or 20s, most individuals have yet to develop a pre-existing condition like cancer or diabetes. But every time individuals switch jobs, they lose their employer-provided health coverage — making them vulnerable if they have developed a condition in the intervening time.

The worst kinds of situations occur when individuals must leave their jobs because they have become too sick to work. These patients face not one but two potential sources of financial ruin: They have lost their source of income, and face the prospect of astronomical medical bills without a means to fund them.

Cure the Disease, Not the Symptoms

In the past several years, Democrats have spent lots of time talking about the need to protect individuals with pre-existing conditions. But in focusing on pre-existing conditions, the left focuses on the symptom, rather than the underlying problem.

Remember: When Obamacare went into effect in January 2014, at least 4.7 million individuals received cancellation notices, according to The Associated Press. These individuals had plans that they liked, and wanted to keep — but the Obama administration wouldn’t let them. Politifact called the promise that Americans could keep their plan the 2013 “Lie of the Year,” and that lie affected many individuals who had developed, or feared that they would develop, a pre-existing condition. Let’s spare the notion that Democrats want to “protect” people with pre-existing conditions, when they “protected” millions of people right out of their coverage.

Liberals don’t talk about the underlying policy issue that creates the pre-existing condition problem — that people don’t own their own health coverage — because they don’t want people to own their own insurance. They want Washington to control health care decisions, not individual patients. It’s the classic example of former President Ronald Reagan’s nine most terrifying words in the English language: “I’m from the government and I’m here to help.”

But if individuals could buy an insurance policy upon joining the workforce — one that they owned, not their employer — and retain that policy from job to job for decades, most individuals could buy coverage well before they develop a pre-existing condition, and keep that coverage after they do so, the pre-existing condition problem would rapidly diminish. (Yes, a small percentage of Americans, most notably those born with congenital illnesses, develop pre-existing conditions very early in life, but other policy solutions can address this population.)

Trump Administration’s Solution

You wouldn’t know it, given all the carping and hostility from the left, but the Trump administration has put forward a very positive solution that answers the policy problems associated with employer-provided health coverage. It should increase portability in ways that help solve the pre-existing condition problem, while also providing additional choice and competition.

The administration’s policy, implemented through regulations finalized in 2019, allows employers to contribute funds to workers on a pre-tax basis through Health Reimbursement Arrangements. These HRAs allow individuals to purchase coverage that they own, not their employers — making the coverage portable from job to job.

The HRA concept provides wins for employers, employees and the economy as a whole:

• Employers get predictability when it comes to their health insurance offerings. By providing employees a fixed sum (say, $300 or $500 a month) into the HRA, they will not have to worry about changing plans from year to year, a sudden spike in costs because of a sick employee, or many of the other paperwork hassles associated with offering coverage.
• Employees get both choice and portability. They can select the insurance plan that best meets their needs — the doctors, deductibles and plan features that they want. Not only can they keep the plan when they switch jobs, the fact that they and not their employer chose the coverage in the first place will make them more likely to do so.
• The economy will benefit from individuals selecting the plans they want, rather than the plans employers select for them. Insurers will have to provide better, more customized plans that fit individuals’ needs, and employees will have incentives to make better choices to stretch the HRA dollars their employers provide them.

Ideally, Congress would amend the law regarding Health Savings Accounts, to allow individuals to use HSA dollars to fund health insurance premiums. Because HSA funds cannot pay insurance premiums in most cases under current law, the Trump administration had to use Health Reimbursement Arrangements (which are owned by employers) rather than Health Savings Accounts (which are always owned by individuals) to fund individual coverage.

Providing contributions via an HSA, as opposed to an HRA, would allow employees to control any unused employer contributions upon leaving a job. That way, individuals would not only have a source of coverage in the event of a layoff, they could develop a source of savings to pay for that coverage while unemployed. But until Congress acts, the Trump administration’s Health Reimbursement Arrangement regulations represent a tremendous step forward toward a more logical, patient-centered insurance system.

Empower Patients, Not Government

Coronavirus has made the problems with government control of health care apparent. As Joe Biden (of all people) noted in the March CNN debate, Italy has a single-payer system — and that nation had to ration access to ventilators, whereas the United States did not.

The pandemic has exposed the flaws in our health insurance system. But it comes just as the Trump administration has shown a better path forward. By empowering patients rather than government bureaucrats, Health Reimbursement Arrangements can help transform the coverage system into something that lowers costs and provides the care American patients prefer.

This post was originally published at the Daily Caller’s American Renewal blog.

Why Republicans Get No Points for Opposing Democrats’ $3 Trillion Coronavirus Bill

On May 15, Speaker Nancy Pelosi (D-Calif.) will bring to the floor of the House a sprawling, 1,815-page bill. Released mere days ago, the bill would spend roughly $3 trillion—down from the $4 trillion or more that lawmakers on her socialist left wanted to allocate to the next “stimulus” package.

Most House Republicans will oppose this bill, which contains a massive bailout for states and numerous other provisions on every leftist wish list for years. But should anyone give them credit for opposing the legislation? In a word, no.

Conservatives shouldn’t give Republican lawmakers any credit for opposing bills that have no chance of passage to begin with—bills they never should vote for anyway. I didn’t go out and rob a bank yesterday. Should I get a medal for that? Of course not. You don’t get credit for doing the things you’re supposed to do.

Conservatives should demand more than the soft bigotry of low expectations that Republican lawmakers’ miserable track record on spending has led them to expect. For starters, instead of “just” voting no on the Pelosi bill’s additional $3 trillion in spending, why not come up with a plan to pay for the $3 trillion Congress has already spent in the past several months?

Yes, government needs to spend money responding to coronavirus, not least because government shut down large swathes of the economy as a public health measure. But that doesn’t mean Congress can or should avoid paying down this debt—not to mention our unsustainable entitlements—starting soon.

Decades of ‘Conservative’ Grifters

Two examples show how far Republican lawmakers stray from their rhetoric. In July 2017, former House Majority Leader Eric Cantor (R-Va.) said of his prior rhetoric regarding Obamacare, from defunding the law to “repeal-and-replace”: “I never believed it.” Of course, he waited to make this admission until he had left office and taken a lucrative job at an investment bank.

Cantor’s comments confirmed conservatives’ justifiable fears: That Republican lawmakers constantly play them for a bunch of suckers, making promises they don’t believe to win power, so they can leverage that power to cash in for themselves.

Perhaps the classic example of the “all hat and no cattle” mentality comes via former House Speaker Paul Ryan (R-Wis.). Notwithstanding Ryan’s reputation as a supposed fiscal hawk, consider his actions while in House leadership:

  • Instead of reforming entitlements, Ryan led the charge to repeal the first-ever cap on entitlement spending. He could have nixed Obamacare’s Independent Payment Advisory Board, a group of unelected officials charged with slowing the growth of Medicare spending, while keeping the spending cap. Instead, he got Congress to repeal the board and the spending cap that went with it—worsening our entitlement shortfalls.
  • For years, Ryan proposed various reforms to the tax treatment of health insurance, because economists on both the left and the right agree it encourages the growth of health-care costs. But as speaker, Ryan supported delays of a policy included in Obamacare that, while imperfect, at least moved in the right direction towards lowering health care costs. The delays allowed Congress to repeal the policy outright late last year, in a massive spending bill that shifted both spending and health-care costs the wrong way.
  • As chairman of the House Ways and Means Committee, Ryan gave then-House Speaker John Boehner (R-Ohio) the political cover he needed to pass a Medicare physician payment bill that increased the deficit and Medicare premiums for seniors. The legislation did include some entitlement reforms, but at a high cost—and didn’t even permanently solve the physician payment problem.

Ryan’s “accomplishments” on spending as a member of leadership echo his prior votes as a backbench member of Congress. Ryan voted for the No Child Left Behind Act; for the Medicare Modernization Act, which created a new, unpaid entitlement costing $7.8 trillion over the long term; and for the infamous Troubled Asset Relief Program Wall Street bailout.

Over his 20-year history in Congress, I can’t think of a single instance where Ryan took a “tough vote” in which he defied the majority of his party. Instead, he always supported Republicans’ big-spending agenda. In that sense, tagging Ryan as a RINO—a Republican in Name Only—lacks accuracy, because it implies that most Republican lawmakers have a sense of fiscal discipline that only Ryan lacks.

It doesn’t take a rocket scientist to draw the line from Ryan’s brand of “leadership” to Donald Trump. The latter spent most of his 2016 campaign illustrating how Republican elected officials failed to deliver on any of their promises, despite talking up their plans for years.

Stand for Principle, or Stand for Nothing

When Republicans enter the House chamber on Friday to cast their votes against Pelosi’s bill, they should take a moment to contemplate her history. In the 2010 elections, Pelosi lost the speakership in no small part because of Obamacare. One scientific study concluded that the Obamacare vote alone cost Democrats 13 seats in the House that year.

Pelosi did not relinquish the speakership gladly; few would ever do that. But she proved willing to lose the speakership to pass the law—and would do so again, if forced to make such a binary choice.

I know not on what policy grounds, if any, Republicans would willingly sacrifice their majorities in the way Pelosi and the Democrats did to pass Obamacare. (Reforming entitlements? Tax cuts? Immigration?) That in and of itself speaks to the Republican Party’s existential questions, and the ineffective nature of the party’s “leadership.”

It also provides all the reason in the world that House Republicans should not trumpet their votes against the Pelosi legislation on Friday.

This post was originally published at The Federalist.

How Government-Run Health Care Worsened the Coronavirus Crisis

Leftist politicians have spent a great amount of time over the past two months attacking President Trump for his handling of the coronavirus crisis. But instead of reflexively criticizing the administration, those liberals might want to examine how the left’s dream of government-run health care has exacerbated the crisis within the United States.

One of the major causes of the dearth of testing over the past several months: Low payments from Medicare, which led to low payment rates from private insurance plans. It may come as a shock to people like Rep. Alexandria Ocasio-Cortez (D-NY), but guess what labs did when low payments meant they suffered a financial loss for every coronavirus patient tested? They performed fewer tests.

Low Reimbursements Equals Fewer Tests

A recent expose in USA Today highlighted how Medicare “lowballed payments” to labs for coronavirus tests, leading those labs to restrict the number of tests they performed. An executive at one lab, Aaron Domenico, told the paper that “I’m an American first, and if I could do it for cost, I’d be happy to do it for the people at cost.” But Medicare initially reimbursed laboratories only $51 for a coronavirus test, much less than Domenico’s costs of $67 per test.

Paying $51 for a diagnostic test sounds like a lot, but Medicare gives laboratories nearly twice that amount, or approximately $96, to test for the flu. And government bureaucrats setting unrealistically low prices meant that private insurers followed Medicare’s lead. Little wonder that the head of the National Independent Laboratory Association said “a number of labs are holding back” on performing additional tests “because they didn’t want to lose money.”

Thankfully, on April 14 Medicare raised its reimbursement for a coronavirus test from $51 to $100. Unsurprisingly, the number of tests performed daily has roughly doubled since that point. Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma said she “recognized that there may have been some issues with reimbursement” discouraging labs from performing coronavirus tests.

Bureaucrats Can’t Micromanage Health Care

Therein lies one of the major problems with government-run health care: The notion that federal bureaucrats can determine the correct price for every prescription drug, laboratory test, physician service, or hospital procedure across the country. Donald Berwick, a former CMS administrator who helped develop Sen. Elizabeth Warren’s single-payer proposal, once said, “I want to see that in the city of San Diego or Seattle there are exactly as many MRI units as needed when operating at full capacity. Not less and not more.”

Berwick’s comments suggest that the federal government can determine the “right” amount of MRI units in each city, and use policy levers to achieve that “correct” outcome. But the coronavirus testing fiasco demonstrates how federal bureaucrats often do a poor job of trying to micromanage health care from Washington. Paying doctors and laboratories too much will encourage over-consumption of care, while paying too little discourages providers from even offering the service.

Low Payments Lead to Job Losses, Too

The problems with coronavirus testing also preview the left’s efforts to expand government-run health care. For instance, Joe Biden’s campaign platform calls for a government-run health plan that “will reduce costs for patients by negotiating lower prices from hospitals and other health care providers.”

But all these proposals—whether they would abolish private insurance outright, as Warren and Sen. Bernie Sanders support, or offer a government-run “option,” as in Biden’s platform—would have the government “negotiate” prices by forcing doctors, nurses, and hospitals to accept less money. By lowering payment levels, those plans would lead to massive job losses—as many as 1.5 million jobs in hospitals alone under a transition to single-payer, according to one estimate in the prestigious Journal of the American Medical Association.

The pay cuts and furloughs affecting many front-line health workers—the health-care sector lost 1.4 million jobs during the month of April—provide a preview of the future. Instead of suffering temporary revenue declines due to the coronavirus pandemic, hospitals and medical practices would face permanent reductions in revenue from lower-paying government programs.

Worse yet, care will suffer when people cannot access the care they need at the paltry prices government programs will pay. While the left lays the coronavirus testing flaws at the feet of President Trump, they should look instead at the government-run programs they support as a major source of the problem. Voters being asked to endorse the movement towards socialism in November should take note as well.

This post was originally published at The Federalist.

Medicaid’s Blue State Bailout

In discussing future coronavirus legislation, Senate Majority Leader Mitch McConnell (R-Ky.) has taken a skeptical view towards additional subsidies to states, including a potential “blue state bailout.” But current law already includes just such a mechanism, giving wealthy states an overly generous federal Medicaid match that results in bloated program spending by New York and other blue states.

Section 1905(b) of the Social Security Act establishes Federal Medical Assistance Percentages, the matching rate each state receives from the federal government under Medicaid. The statutory formula compares each state’s per capita income to the national average, calculated over a rolling three-year period. Poorer states receive a higher federal match, while richer states receive a lower match.

However, federal law sets a minimum Medicaid match of 50 percent, and a maximum match of 83 percent. No poor states come close to hitting the 83 percent maximum rate, but a total of 14 wealthy states would have a federal match below 50 percent absent the statutory minimum. (In March, Congress temporarily raised the federal match rate for all states by 6.2 percentage points for the duration of the coronavirus emergency.)

Absent the statutory floor, Connecticut would receive a match rate of 11.69 percent in the current fiscal year, according to Federal Funds Information Service, a state-centered think-tank. At that lower federal match, Connecticut would receive approximately one federal dollar for every eight the state spends on Medicaid, rather than the one-for-one ratio under current law.

Federal taxpayers pay greatly because the overly generous match rate for wealthy states leads to additional Medicaid spending. In fiscal year 2018, Connecticut spent far more on its traditional Medicaid program ($6.5 billion in combined state and federal funds) than similarly sized states like Oklahoma ($4.9 billion) and Utah ($2.5 billion). Those totals exclude the dollars Connecticut received from Obamacare, which guarantees all states a 90 percent Medicaid match for covering able-bodied adults.

The budget crisis in New York that preceded the pandemic stems in large part from Washington’s overly generous match for wealthy states. Absent the statutory floor, the state would receive a Medicaid match of 34.49 percent this fiscal year, meaning it would have to spend approximately two dollars to receive an additional federal dollar.

But the one-to-one Medicaid match guaranteed under federal law led New York to expand its program well beyond most states’. At more than $77 billion in 2018, New York Medicaid cost taxpayers more than three times the $23.4 billion spent by the larger state of Florida. And a federal audit last summer concluded that New York Medicaid spent $1.8 billion on more than 600,000 ineligible enrollees in just a six-month period. Little wonder that Gov. Andrew Cuomo in January called the state’s fiscal situation “unsustainable” after the state announced a $6 billion budget deficit, most of which came from Medicaid.

To his credit, Cuomo proposed changes to crack down on Medicaid fraud and enact other program reforms. He also criticized Congress when it passed legislation to block New York and other states from changing their Medicaid programs during the pandemic. But he has not acknowledged the underlying flaws in federal law that, by encouraging profligate blue state spending, created the problem in the first place.

Of the 14 wealthy states that benefit from the guaranteed 50 percent minimum Medicaid match, Hillary Clinton won 11. If the dramatic drop in oil and commodity prices in recent weeks persists, the three traditionally red states—Alaska, North Dakota, and Wyoming—that benefit from the statutory floor may no longer do so, should those states’ income decline. In the number of states affected and overall spending levels, the 50 percent minimum Medicaid match encourages overspending by blue states at the expense of federal taxpayers in red states.

In December 2018, the Congressional Budget Office estimated that removing the guaranteed 50 percent Medicaid match would save $394 billion over ten years. If McConnell and his colleagues want to tackle rising federal debt while stopping blue state bailouts, they should amend the Medicaid statute accordingly.

This post was originally published at The Federalist.

“Medicare at 60” Shows Democrats’ Lust for Government-Run Health Care

The day after socialist Sen. Bernie Sanders, I-Vt., suspended his campaign for the Democratic presidential nomination, presumptive nominee and former Vice President Joe Biden announced his support for a smaller version of Sanders’ signature single-payer proposal. In a Medium post, Biden said he had “directed [his] team to develop a plan to lower the Medicare eligibility age to 60.”

As with many Democratic plans, the proposal sounds like a moderate option. After all, near-seniors will join Medicare soon enough, so how much harm would this plan cause?

But viewed from another perspective, Biden’s proposal looks like a major step toward Sanders’s goal of a government-run health care system. As a way to reduce the number of uninsured, the idea seems like a solution in search of a problem. But as a method to replace private coverage with government-run health care, the Biden plan could accomplish its goals effectively.

Most Eligible People Already Have Coverage

The consulting firm Avalere Health, founded by a Democrat and with liberal leanings, recently released an analysis indicating nearly 23 million people may qualify for coverage under the Biden proposal. But the firm’s headline cleverly attempted to bury the lede, obscuring the fact that the vast majority of eligible people already have health insurance.

As the below graph shows, Avalere found only 7 percent, or 1.7 million, of the 22.7 million people potentially eligible for the Biden proposal lack coverage. The majority of the 60-64 population (13.4 million, or 59 percent) obtain coverage not from government, but from their current or former employer.

Composition of Individuals Newly Eligible for Medicare Under Biden Proposal, Ages 60–64, 2018

The Avalere analysis more accurately depicts how 16.6 million people (13.4 million with employer coverage and 3.2 million with individual plans) could lose their existing private coverage. It also demonstrates how taxpayers could face major costs — particularly if people with private insurance drop that coverage and join the Biden Medicare plan — to reduce the uninsured population by a comparatively small amount.

Near-Retirees Are Comparatively Wealthy

Biden didn’t say how he would structure his proposal to allow people to buy into Medicare at age 60. But he did imply that enrolled individuals would receive some type of federal subsidy when he stated, “Any new federal cost associated with this option would be financed out of general revenues to protect the Medicare trust fund.”

Here again, many near-retirees, in the peak years of their earning potential, don’t need federal subsidies for health insurance. Various surveys show the median household income of near-retirees ranges between $85,000 and over $90,000.

At that income level, even those people who have to pay their entire insurance premiums — Obamacare Exchange policies can easily exceed $1,000 per month for the 60-64 population — could do so without a subsidy. Indeed, a family of three making $86,880 in 2020 would not qualify for any subsidy under the present regime, although Biden’s original health care plan calls for increasing the richness of the Obamacare subsidies.

‘Medicare at 60’ Is a Slingshot to Single-Payer

If Biden’s “Medicare at 60” proposal wouldn’t significantly reduce the number of uninsured — it wouldn’t — and wouldn’t lower costs for people who can’t afford coverage — the comparatively small number of uninsured among people ages 60-64 demonstrates the fallacy of that proposition — then why did Biden propose it in the first place?

Apart from serving as an obvious political sop to the Sanders crowd, the Biden “Medicare at 60” proposal would function as a major cost-shift. By and large, it wouldn’t help the previously uninsured obtain coverage nearly as much as it would use federal dollars to supplant funds already spent by the private sector (whether individuals or their employers).

By doing so, it would build the culture of dependence that represents the left’s ultimate aim: crowding out private insurance and private spending, and putting more people on the government rolls. That Biden would propose a plan so obviously centered around that objective shows he doesn’t fundamentally disagree with Sanders’s single-payer plan at all. He just doesn’t want to disclose his intentions before bringing socialized medicine to the American health-care system.

This post was originally published at The Federalist.

The Bigger Problem with SCOTUS’ Obamacare Bailout Ruling

I’ll start with the bad news: The Supreme Court granted insurers nearly $12 billion in Obamacare bailout funds. And now the worse news: It allowed the executive to stick Congress with the bill for unconstitutional actions lawmakers never authorized.

The ruling, issued on Monday after the Court heard oral arguments in December, made the case sound simple: Obamacare created an obligation on the federal government to pay insurers’ risk corridor claims. Congress refused to appropriate the money. Therefore insurers can go to court and obtain the $12 billion in question from the Judgment Fund, which has a permanent, unlimited appropriation to pay legal claims against the government.

But the reality doesn’t match the ruling’s cut-and-dried approach. Unilateral actions by the executive paved the way for risk corridors’ massive losses, a fact neither insurers nor liberal Obamacare supporters like to admit.

The Bailout’s Origins

In many ways, the Supreme Court case has its roots in guidance released by the Obama administration in November 2013. At that point, millions of people had received plan cancellation notices, but couldn’t buy health insurance plans while healthcare.gov remained in meltdown. President Obama faced withering and justified criticism for his “Lie of the Year”—the promise that “If you like your plan, you can keep it.”

The Department of Health and Human Services (HHS) tried to stanch the political bleeding. Instead of sending cancellation notices, states and insurers could allow individuals to retain plans purchased after Obamacare’s March 2010 enactment, but before the major insurance regulations went into effect on January 1, 2014.

Coming at a very late date, HHS’s unilateral action threatened to create more chaos for insurers. The carriers had priced their policies assuming millions of individuals with pre-Obamacare policies would lose their existing plans and sign up for exchange coverage. Instead, these largely healthy individuals would remain outside of Obamacare, as millions of sicker individuals flooded onto exchanges to obtain the richer Obamacare coverage.

How did HHS propose to offset insurers’ potential losses from this late change to their enrollee profile? The same November 2013 guidance allowing pre-Obamacare policies to remain in place proposed risk corridors as the solution:

Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.

In theory, risk corridors required plans with outsized profits on Obamacare policies to subsidize insurers with outsized losses. But because many insurers kept their pre-Obamacare policies in place, many more insurers suffered losses than gains. The program suffered approximately $12 billion in losses during its three years (2014-16), losses which prompted insurers’ suit, to recover the billions they consider themselves owed.

Unconstitutional Actions

But as law professor Nicholas Bagley (an Obamacare supporter) and others have pointed out, HHS’s November 2013 guidance came with a big catch: It violated the president’s constitutional duty to “take care that the laws be faithfully executed.” In essence, the Obama administration had stated that it would not enforce the law—the new insurance regulations coming into effect, which had led insurers to send the cancellation notices in the first place—because it found doing so politically inconvenient. (Sadly, the Trump administration has continued the unconstitutional behavior, by similarly allowing the plans to remain in effect.)

Those unconstitutional actions imposed major financial losses on insurers, an assertion that comes not just from the HHS guidance quoted above, but from the insurers themselves. An amicus brief submitted in the Supreme Court case by Americans for Prosperity noted that the insurer plaintiffs themselves admitted the administration’s unilateral actions represented the root cause of much of their financial losses:

As one Petitioner notes, this ‘unexpected policy change had marked and predictable effects.’ It lowered enrollment and since ‘the announcement came after premiums had been set[,]’ Petitioners were stuck with the prices they set, forced to ‘[b]ear greater risk than they accounted for[.]’ Petitioners argue that HHS recognized ‘that its unexpected policy shift could subject insurers on the exchanges to unanticipated higher average claims costs … [b]ut,’ the agency allayed their fears by providing reassurance that the risk corridors program would cover any losses. The Petitioners go through a lengthy history of HHS’s actions, pinning much of the blame on HHS’s ‘rosy scenario’ of how things would work out. [Internal citations omitted.]

Sticking Taxpayers with the Tab

Insurers could have responded in a different manner to the HHS guidance. They could have cancelled all their pre-Obamacare policies anyway, or they could have challenged the guidance in court. Some took the former action, because some states forced carriers to cancel all pre-Obamacare plans—but none took the latter course. In the main, insurers decided to take their chances, roll the dice, and not take a confrontational tack with the Obama administration, largely hoping they would receive the risk corridor bailout HHS alluded to in its guidance.

But Congress can, and should, have a say in the matter. A policy enacted unilaterally, and unconstitutionally, by HHS resulted in a financial impact (in the form of risk corridors) to the tune of billions of dollars.

Yes, Congress could have passed more stringent language blocking any appropriation for a risk corridor bailout. But following that logic to its conclusion would have effectively turned the Constitution on its head: The executive can make a unilateral, and unconstitutional, change, and both Congress and taxpayers have to pay the bill for it—unless and until Congress passes legislation by a veto-proof majority to undo the financial consequences of an action the executive never had authority to take in the first place.

A Costly ‘Bait-and-Switch’

Insurers decried the risk corridor funding shortfall as a “bait-and-switch” by Congress: Lawmakers authorized the payments as part of Obamacare, but never ponied up an appropriation for an obligation Congress created.

Risk corridors did suffer from a “bait-and-switch,” but it came from the Obama administration, not Congress. HHS changed the rules of the game, causing insurers major losses on their Obamacare plans—and sticking taxpayers with much of that tab via risk corridors.

But neither the majority opinion in the Supreme Court ruling, nor Justice Alito’s dissent, addressed the Obama administration’s “bait-and-switch.” As a result, the court created a bad precedent that empowers the executive, further diminishes the role of Congress, and places taxpayers at risk for more unilateral bailouts in the future.

This post was originally published at The Federalist.

We Should Move Away from Employer-Based Insurance, But NOT Towards Single Payer

The left continues to seek ways to politically capitalize on the coronavirus crisis. Multiple proposals in the past several weeks would replace a potential decline in employer-provided health insurance with government-run care.

One analysis released earlier this month found the coronavirus pandemic could cause anywhere from 12 to 35 million Americans to lose their employer-provided coverage, as individuals lose jobs due to virus-related shutdowns. Of course, these coverage losses could remain temporary in some cases, as firms reopen and rehire furloughed workers.

But these lefties do have a point: The United States should move away from employer-provided health coverage. It just shouldn’t rely upon a government-run model to do so.

Biden: Let’s Expand an Insolvent Program

Days after his last remaining rival, Vermont Sen. Bernie Sanders, dropped out of the race for the Democratic presidential nomination, former vice president and presumptive nominee Joe Biden endorsed a plan to expand Medicare. Biden’s statement didn’t include details. Instead, he “directed [his] team to come up with a plan to lower the Medicare eligibility age to 60.”

One big problem with Biden’s proposed expansion: Medicare already faces an insolvency date of 2026, a date the current economic turmoil will almost certainly accelerate. He claimed that “any new federal cost associated with this option would be financed out of general revenues to protect the Medicare trust fund.” But Biden didn’t explain why he would choose to expand a program rapidly approaching insolvency as it is.

Another problem for Biden seems more political. As this space has previously noted, in 2017 and 2018, the former vice president and his wife received more than $13 million in book and speech revenue as profits from a corporation rather than wage income. By doing so, they avoided paying nearly $400,000 in payroll taxes that fund—you guessed it!—Medicare.

It doesn’t take a rocket scientist to ask the obvious question: If Biden loves Medicare so much that he wants to expand it, why didn’t he pay his Medicare taxes?

Medicare Extra

Other liberals have proposals that would expand the government’s role in health care still further. Examining the impact of coronavirus on coverage, and analyzing a movement away from employer-provided care, Ezra Klein endorsed the Medicare Extra plan as superior to Biden’s original health-care proposal for a so-called “public option.” Towards the end of his analysis, Klein makes crystal clear why he supports this approach:

[Medicare Extra] creates a system that, while not single-payer, is far more integrated than anything we have now: A public system with private options, rather than a private system with fractured public options.

Medicare Extra, originally developed by the Center for American Progress and introduced in legislative form as the Medicare for America Act by Rep. Rosa DeLauro (D-Conn.), goes beyond the Biden plan. Both would likely lead to a single-payer system, but Medicare Extra would do so much more quickly.

Biden’s original health care plan would create a government-run “option,” similar to Medicare, into which anyone could enroll. Individuals could use Obamacare subsidies (which Biden’s proposal would increase) to enroll in the government-run plan.

Notably, Biden’s proposal eliminates Obamacare’s subsidy “firewall,” in which anyone with an offer of “affordable” employer coverage does not qualify for subsidized exchange coverage. Removing this “firewall” will encourage a migration towards the exchanges, and the government-run plan.

By contrast, Medicare Extra would go three steps further in consolidating government-run care. First, it would combine existing government programs like Medicare and Medicaid into the new “Medicare Extra” rubric. Second, the legislation would automatically enroll people into Medicare Extra at birth, giving the government-run program an in-built bias, and a clear path towards building a coverage monopoly.

Third, Medicare Extra would not just allow individuals with an offer of employer-sponsored coverage to enroll in the Medicare Extra program, it would require the employer to “cash out” the dollar value of his contribution, and give those funds to the employee to fund that worker’s Medicare Extra plan.

The combination of this “cash out” requirement (not included in Biden’s proposal) and the other regulations on employer coverage included in Medicare Extra would result in a totally government-run system within a few short years. After all, if businesses have to pay the same amount to fund their employees’ coverage whether they maintain an employer plan or not, what incentive do they have to stay in the health insurance game?

Let Individuals Maintain Their Own Coverage

Both Biden’s proposals and Medicare Extra would consolidate additional power and authority within the government system—liberals’ ultimate objective. By contrast, the Trump administration has worked to give Americans access to options other than employer-provided insurance that individuals control, not the government.

Regulations finalized by the administration last year could in time revolutionize health insurance coverage. The rules allow for employers to provide tax-free contributions to employees through Health Reimbursement Arrangements, which workers can use to buy the health insurance plans they prefer. Best of all, employees will own these health plans, not the business, so they can take their coverage with them when they change jobs or retire.

It will of course take time for this transition to take root, as businesses learn more about Health Reimbursement Arrangements and workers obtain private insurance plans that they can buy, hold, and keep. But if allowed to flourish, this reform could remove Americans’ reliance on employers to provide health coverage, while preventing a further expansion of government meddling in our health-care system—both worthy objectives indeed.

This post was originally published at The Federalist.

Hospitals’ Corona Cash Crunch Shows Problems of Government-Run Care

The coronavirus pandemic has inflicted such vast damage on the American economy that one damaged sector has gone relatively unnoticed. Despite incurring a massive influx of new patients, the hospital industry faces what one executive called a “seismic financial shock” from the virus.

The types of shocks hospitals currently face also illustrate the problems inherent in Democrats’ proposed expansions of government-run health care. Likewise, the pay and benefit cuts and furloughs that some hospitals have enacted in response to these financial shocks provide a potential preview of Democrats’ next government takeover of health care.

Massive Disruptions

The health-care sector faces two unique, virus-related problems. The lockdowns in many states have forced physician offices to close, or scale back services to emergencies only. The cancellation of routine procedures (e.g., dental cleanings, check-ups, etc.) has caused physician income to plummet, just like restaurants and other shuttered businesses.

While many physician practices have seen a dramatic drop-off in patients, hospitals face an influx of cases—but the wrong kind of cases. According data from the Health Care Cost Institute, in 2018 a hospital surgical stay generated an average $43,810 in revenue, while the average non-surgical stay generated only $19,672.

The pandemic has raised hospitals’ costs, as they work to increase bed capacity and obtain additional personal protective equipment for their employees. But as one Dallas-based hospital system noted, coronavirus’ true “seismic financial shock” has come from the cancellations of elective surgeries that “are the cornerstone of our hospital system’s operating model.”

This rapid change in hospitals’ case mix—the type of patient facilities treat—has inflicted great damage. Replacing millions of higher-paying patients with lower-paying ones will rapidly unbalance a hospital’s books. Changing patient demographics, in the form of additional uninsured patients and patients from lower-paying government programs, only compounds hospitals’ financial difficulties.

A Preview of Democrats’ Health Care Future

The shock hospitals face from the rapid change in their case mix previews an expansion of government-run health care. The Medicare Payment Advisory Commission noted in a report released last month that in 2018, hospitals incurred a 9.3 percent loss on their Medicare inpatient admissions. To attempt to offset these losses as hospitals treat coronavirus patients, Section 3710 of the $2 trillion stimulus bill increased Medicare payments for COVID-related treatment by 20 percent.

With respect to the single-payer bill promoted by Sen. Bernie Sanders (I-VT), neither the conservative Mercatus Center nor the liberal Urban Institute assumed the higher reimbursement rates included in the stimulus bill. Mercatus’ $32.6 trillion cost estimate assumed no increase in current Medicare hospital or physician payments, while Urban’s $32 trillion cost estimate assumed a 15 percent increase in hospital payments and no increase in physician payments. Raising Medicare reimbursements to match the 20 percent increase included in the stimulus bill would substantially hike the cost of Sanders’ plan.

Conversely, presumptive Democratic nominee Joe Biden believes his “public option” proposal, by making enrollment in a government plan voluntary, represents much less radical change. But his plan increases the generosity of Obamacare subsidies and repeals current restrictions prohibiting workers with an offer of employer coverage from receiving those subsidies—both of which would siphon patients toward the government plan.

In 2009, the Lewin Group concluded that a government plan open to all workers would result in 119 million Americans dropping their private coverage. Such a massive influx of patients into a lower-paying government system would destabilize hospitals’ finances much the same way as coronavirus.

Economic Cutbacks and Job Losses

Sadly, the coronavirus pandemic has allowed us to see what a rapid influx of lower-paying patients will do to the hospital sector. A few weeks into the crisis, many systems have already resorted to major cost-cutting measures. Tenet Healthcare, which runs 65 hospitals, has postponed 401(k) matches for employees. In Boston, Beth Israel Deaconess has withheld some of emergency room physicians’ accrued pay, a measure sure to harm morale as first responders face long hours and difficult working conditions.

This economic damage from a rapid change in hospitals’ payer mix echoes a study in the Journal of the American Medical Association last spring. That study concluded that a single-payer health care system paying at Medicare rates would reduce hospital revenues by $151 billion annually, resulting in up to 1.5 million job losses for hospitals alone. Robust enrollment in the government-run health plan Biden supports would have only marginally lower effects.

Hospitals, like the rest of our economy, will in time recover from the financial impacts of the coronavirus pandemic. But they may not bounce back quickly, or at all, from another expansion of government-run health care—a fact that hospital workers facing cutbacks, and patients needing care, should take to heart in November.

This post was originally published at The Federalist.

The Shameful Spectacle of Friday’s Coronavirus “Vote”

Ten years ago, House Speaker Nancy Pelosi (D-Calif.) infamously proclaimed that we had to pass Obamacare to find out what was in it. On Friday, she and her House colleagues enacted one of the largest pieces of legislation in American history, a more than $2 trillion bill that represented Congress’ third piece of coronavirus-related legislation, all while refusing to take a recorded position on it.

The first coronavirus bill, signed into law on March 6, provided $8.3 billion in spending to fight the virus; the second bill, signed into law on March 18, spent another $100 billion on testing, food stamps, paid family leave, and additional subsidies to to state Medicaid programs; and the third bill, which President Trump signed last Friday, contained a broader package of unemployment and economic bailouts to businesses and families.

That Pelosi would resort to such procedural chicanery should surprise few Americans. In 2010 she wanted the House to enact Obamacare without actually voting on the legislation—the so-called “deem-and-pass” maneuver—although she eventually abandoned that strategy after a massive public outcry.

But unlike the Obamacare debate, House Republican leaders and many rank-and-file members of Congress actively participated in Pelosi’s successful attempt to deny the American people a vote on the legislation. In so doing, they abdicated their responsibilities as lawmakers and leaders out of a mixture of fear and spite.

Members of Congress Are Essential

The fear came because House lawmakers did not want to travel back to Washington to vote on the “stimulus.” The combination of several representatives and senators testing positive for coronavirus (with several others in self-isolation due to potential exposure), public advisories against large gatherings and travel, the close quarters in which members congregate in the Capitol, and the advanced age of some members made them understandably nervous about a return to Washington.

But members of Congress do not have any ordinary job. Their roles as our elected lawmakers make them essential to our democracy—and Article I, Section 6 of the Constitution recognizes them as such: “They shall in all cases, except Treason, Felony, and Breach of the Peace, be privileged from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place.”

While the Supreme Court has since narrowed the scope of members’ privilege from arrest, its inclusion in the nation’s founding document shows how the Framers considered full participation by all members essential to American self-rule.

Pelosi’s Incompetence Prompted the Debacle

Much of the member frustration regarding the process came not just from the fact that they had to travel to Washington, but were asked to do so on short notice—a particular difficulty given airlines’ dramatic reductions to their flight schedules. Some members could not arrive back in Washington by the time of Friday’s debate and “vote.”

But why did members have to rush back late Thursday for proceedings in the House on Friday morning? Because Pelosi mismanaged the process and then sought to blame others for her mistakes.

For starters, House members remained in their districts for most of last week only because Pelosi had sent them there. Early on March 14, House leaders dismissed members to their districts, in an attempt (ultimately successful) to force the Senate to accept the second coronavirus bill without amendments. Had the Senate made any changes to the legislation, the House would have had to return into session to ratify the Senate amendments, holding up passage. Senate Majority Leader Mitch McConnell told his colleagues to “gag and vote for it anyway.”

Ironically enough, Pelosi not three days before dismissing her colleagues claimed, “We are the captains of the ship—we are the last to leave.” Had Pelosi kept the House in session as the Senate passed the second coronavirus bill and debated the third, members would not have needed to travel back to Washington in the first place—they would have remained here.

The speaker claimed she would give members 24 hours’ notice prior to any votes, should they become necessary. But she waited until late Thursday to tell members they would have to attend proceedings in the House beginning at 9:00 Friday morning.

Following Senate passage of the third coronavirus bill early Thursday morning, Pelosi and House Minority Leader Kevin McCarthy (R-Calif.) should have instructed all members to report to Washington the following day. Instead, they wasted most of Thursday playing a game of “chicken” with the rank-and-file—daring someone to demand all members attend, and then blaming that member, Rep. Thomas Massie (R-Ky.), when he insisted the House assemble a quorum of 216 members to conduct business.

A very similar scenario happened in Congress’ upper chamber two years ago. McConnell (R-Ky.) tried to ram through a spending bill at the last minute, but miscalculated when Sen. Rand Paul (R-Ky.) raised objections. Rather than blaming McConnell for mis-managing the Senate floor, leadership staffers—and the reporters who rely on leadership staffers to spoon-feed them gossip and stories—decided to blame Paul instead.

Rep. Thomas Massie Did Not Grandstand

House leaders took the same tack with Massie last week, enlisting President Trump to attack the congressman. On Friday morning, Trump called Massie a “third rate grandstander” for insisting that members of Congress return to Washington to vote on the legislation.

But to someone well-versed in House procedure, the facts indicate otherwise. Massie had multiple other opportunities to throw sand in the proverbial gears regarding Friday’s coronavirus bill, but did not do so:

  • The House passed the rule governing debate on the bill by unanimous consent. Massie (or any member) could have objected to the House even considering the rule on Friday morning. Such an objection would have required the House Rules Committee to hold an emergency meeting, and could have postponed consideration of the bill by 24 hours. He raised no objections.
  • Massie could have demanded a vote on the rule. Demanding that vote would have required House leaders to muster a quorum of 216 members at 9:00 on Friday—a time many members were still rushing back to Washington. Massie raised no objections.
  • Massie could have demanded one or more votes on a motion to adjourn—a frequent stalling tactic the minority party in the House uses to express outrage when it feels the majority has committed a “process foul.” He never did.

If Massie truly wanted to act like a “glass-bowl,” to paraphrase a tweet by former Sen. John Kerry (D-Mass.), he could have done so. He could have wound the House in knots for much of Friday with procedural objections, parliamentary inquiries, motions to adjourn, and other dilatory tactics.

To his credit, he didn’t do any of that. Massie cared about one thing: That members of Congress have an up-or-down vote—“yay” or “nay”—on the massive, multi-trillion-dollar bill. House leaders conspired against that reasonable request.

‘Mean Girls’ Try Their Tricks in Washington

Massie, or any member of Congress, can object that the House lacks a quorum to conduct business. Article I, Section 5 of the Constitution prescribes that a majority of members (216 at present, given several vacancies) constitutes a quorum. Given Massie’s publicly stated intent to object, the House could not pass the coronavirus bill without a majority of members present in the chamber. Hence the frantic messages from congressional leaders Thursday night seeking member attendance the next morning.

But no one member can demand a roll call vote, in which each takes a recorded “yay” or “nay” position. Article I, Section 5 of the Constitution also states that “the Yeas and Nays of the Members of either House on any question shall, at the Desire of one-fifth of those Present, be entered on the Journal.”

When debate on the bill concluded Friday afternoon, Massie suggested the absence of a quorum. The presiding officer counted, and concluded that a majority of members, many sitting in the House gallery above the chamber to observe social distancing protocols, were present. But when Massie requested a roll call vote, one-fifth of members (somewhere between 43 and 85, depending on the number of congressman present in the House chamber) would not agree, meaning the $2 trillion-plus bill passed on a voice vote, with lawmakers’ positions not recorded.

Under the most charitable interpretation, members didn’t want to force a vote when at least dozens of their colleagues could not participate, either because they remained in quarantine or couldn’t get back to Washington in time. But consider Clause 10 of Rule XX of the rules of the House for the current Congress:

The yeas and nays shall be considered as ordered when the Speaker puts the question on passage of a bill or joint resolution, or on adoption of a conference report, making general appropriations, or on final adoption of a concurrent resolution on the budget or conference report thereon. [Emphasis added.]

In just about every other circumstance, House rules require a roll-call vote on an appropriations bill like the one the House passed on Friday. This requirement did not apply to Friday’s coronavirus legislation only because the House considered it as a message from the Senate, rather than as an original bill or the report of a House-Senate conference committee.

As noted above, members had to come into town anyway, to ensure the House had a quorum to conduct business. Usual practice, as indicated by the excerpt from the House’s own rules, suggests members would record their votes publicly.

They did not even need to congregate in mass groups to vote electronically on the House floor. The clerks could have engaged in an actual roll call vote, which would have allowed members sitting in the House gallery to respond verbally from their places. Rather than following this usual practice—to say nothing of giving their own voters the respect of making their positions known on a $2 trillion bill —the House instead decided to take a passive-aggressive approach, turning Friday’s session into another real-life episode of “Mean Girls.”

To put it bluntly, members did not approve a roll-call vote to spite Massie, because Massie had the temerity to force them to come to Washington and do the job they are paid to do. Pelosi, McCarthy, and their leadership teams likely instructed rank-and-file members not to “reward bad behavior” (as one senator described the McConnell-Paul incident two years ago) and to deny Massie a recorded vote.

The members, either due to their own irritation at Massie, or fear of the consequences from leadership, politely complied. In so doing, they abdicated their responsibilities as lawmakers, prioritizing revenge and anger at Massie over conducting an open, transparent, and fully recorded vote.

Do Your Job, Congress!

Early in my career, a boss of mine offered some matter-of-fact advice that members of Congress should think about: “If you don’t like the job, don’t take the check.”

As Massie noted, grocery store clerks and many others such as nurse’s aides and orderlies in hospitals get paid far less than members of Congress’ $174,000 salary. They continue to show up on the frontlines of this pandemic day-in, day-out, performing heroically in grueling conditions. But when members of the House get asked to do their duties in public for one day, they lash out like preschoolers at the individual forcing them into service.

Massie’s solitary stand against his colleagues may cost him re-election. He faces a primary challenge in June (possibly fomented by House Republican leaders), and his opponent will no doubt use Trump’s Twitter tirade against him.

But Massie acted as he did out of the belief that our elected representatives should not add more than $2 trillion to the national debt without accepting public responsibility for their actions. Of course, to many of his congressional colleagues, Massie’s actions represent a novel—and truly revolutionary—concept: Standing up for principle.

This post was originally published at The Federalist.

The Tough Cost-Benefit Choices Facing Policymakers Regarding Coronavirus

Right now, the United States, like most of the rest of the world, faces two critical, yet diametrically opposed, priorities: Stopping a global pandemic without causing a global economic depression.

Balancing these two priorities presents tough choices—all else equal, revitalizing the economy will exacerbate the pandemic, and fighting the pandemic will worsen economic misery. Yet, as they navigate this Scylla and Charybdis, some policymakers have taken positions contrary to their prior instincts.

In his daily press briefing Tuesday, Gov. Andrew Cuomo (D-NY) discussed the false choice between the economy and public health. He made the following assertions:

My mother is not expendable, your mother is not expendable, and our brothers and sisters are not expendable, and we’re not going to accept the premise that human life is disposable, and we’re not going to put a dollar figure on human life. The first order of business is to save lives, period. Whatever it costs….

If you ask the American people to choose between public health and the economy then it’s no contest. No American is going to say accelerate the economy at the cost of human life because no American is going to say how much a life is worth.

On this count, Cuomo is flat wrong. Entities in both the United States and elsewhere—including within his own state government—put a dollar figure on human life on a regular basis.

Rationing on Cost Grounds Already Happens

Consider the below statement describing the National Institute of Health and Care Excellence (NICE), a British institution that determines coverage guidelines for the country’s National Health Service (NHS). NICE uses the quality-adjusted life year (QALY) formula, which puts a value on human life and then judges whether a new treatment exceeds its “worth” to society:

As a treatment approaches a cost of £20,000 [about $24,000 at current exchange rates] per QALY gained over existing best practice, NICE will scrutinize it closely. It will consider how robust the analysis relating to its cost- and clinical-effectiveness is, how innovative the treatment is, and other factors. As the cost rises above £30,000 [about $36,000] per QALY, NICE states that ‘an increasingly stronger case for supporting the technology as an effective use of NHS resources’ is necessary.

Entities in the United States undertake similar research. The Institute for Clinical and Economic Review (ICER) also performs cost-effectiveness research using the QALY metric. The organization’s website notes that “the state of New York has used [ICER] reports as an input into its Medicaid program of negotiating drug prices.” In other words, Cuomo’s own administration places a value on human life when determining what the state’s Medicaid program will and won’t pay for pharmaceuticals.

Cost-Effectiveness Thresholds

Cuomo represents but one example of the contradictions in the current coronavirus debate. Donald Berwick, an official in the Obama administration and recent advisor to the presidential campaign of Sen. Elizabeth Warren (D-MA), infamously discussed the need to “ration with our eyes open” While many liberals like him have traditionally endorsed rationing health care on cost grounds, few seem willing to prioritize economic growth over fighting the pandemic.

Conversely, conservatives often oppose rationing as an example of government harming the most vulnerable by placing an arbitrary value on human life. Nonetheless, the recent voices wanting to prioritize a return to economic activity over fighting the pandemic have come largely from the right.

The calls to reopen the economy came in part from an Imperial College London study examining outcomes from the pandemic. The paper concluded that an unmitigated epidemic (i.e., one where officials made no attempt to stop the virus’ spread) would cost approximately 2.2 million lives in the United States. Mitigation strategies like social distancing would reduce the virus’ impact and save lives, but would prolong the outbreak—and harm the economy—for more than a year.

The paper’s most interesting nugget lies at its end: “Even if all patients were able to be treated”—meaning hospitals would not get overwhelmed with a surge of patients when the pandemic peaks—“we predict there would still be in the order of…1.1-1.2 million [deaths] in the US.” Based on the Imperial College model, shutting down the economy so as not to let the virus run rampant would save approximately 1 million lives compared to the worst-case scenario.

A Cost of $1 Million Per Estimated Life Saved

Some crude economic math suggests the value a pandemic-inspired economic “pause” might place on human life. Based on a U.S. gross domestic product of approximately $21 trillion, a 5 percent reduction in GDP—which seems realistic, or perhaps even conservative, based on current worldwide projections—would erase roughly $1.05 trillion in economic growth. The Imperial College estimate that mitigation and social distancing measures would save roughly 1 million lives would therefore place the value of each life saved at approximately $1 million.

Of course, these calculations depend in large part on inputs and assumptions—how quickly the virus spreads, whether large numbers of Americans have already become infected asymptomatically, whether already infected individuals gain immunity from future infection, how much the slowdown harms economic growth in both the short and long-term, and many, many more. Other assumptions could yield quite different results.

But if these types of calculations, particularly when performed with varying assumptions and inputs, replicate the results of the crude math above, policymakers likely will sit up and take notice. Given that Britain’s National Health Service makes coverage decisions by valuing life as worth tens of thousands of pounds, far less than millions of dollars, it seems contradictory to keep pursuing a pandemic strategy resulting in economic damage many multiples of that amount for every life saved.

Tough Cost-Benefit Analysis

Unfortunately, lawmakers the world over face awful choices, and can merely attempt to select the least-bad option based on the best evidence available to them at the time. Slogans like “Why put your job over your grandmother?” or “If you worry about the virus, just stay home” belie the very real consequences the country could face.

Consider possible scenarios if officials loosen economic restrictions while the pandemic persists. Some individuals with health conditions could face the prospect of returning to work in an environment they find potentially hazardous, or losing their jobs. Individuals who stay home to avoid the virus, yet develop medical conditions unrelated to the virus—a heart attack, for instance—could die due to their inability to access care, as hospitals become swarmed with coronavirus patients. And on and on.

The president said on Tuesday he would like to start reopening the economy by Easter, a timeline that seems highly optimistic, at best. If by that time the situation in New York City deteriorates to something resembling Italy’s coronavirus crisis—and well it could—both the president and the American people may take quite a different view towards reopening the economy immediately. (And governors, who have more direct power over their states, could decide to ignore Trump and keep state-based restrictions on economic activity in place regardless of what he says.)

Nonetheless, everyone understands that the economy cannot remain in suspended animation forever. Hopefully, better data, more rapid viral testing, and the emergence of potential treatments will allow the United States and the world to begin re-establishing some sense of normalcy, at the minimum possible cost to both human life and economic growth.

This post was originally published at The Federalist.