The Other Epidemic Plaguing Washington: Bailouts and Moral Hazard

While lawmakers face tough decisions about the economic impact of coronavirus, they should keep in mind that they face battles on two fronts. They want to promote a healthy economy (or as close to one as is feasible) during the coronavirus downturn, but they also don’t want to exacerbate moral hazard.

Moral hazard reared its ugly head during the 2008-09 recession, particularly in the form of the infamous (and unpopular) TARP program. The concept holds that policy actions supporting people who engaged in “bad” behavior—for instance, bailing out the Wall Street firms that caused the financial crisis—will only encourage such behavior in the future. Multiple examples in recent days, featuring both corporations and individuals, suggest the concept remains alive and well in Washington.

Corporations and Buybacks

On the corporate side, individuals as varied as Rep. Alexandria Ocasio-Cortez (D-NY) and billionaire investor Mark Cuban have highlighted prior actions by airlines, who now seek a government bailout totaling $50 billion. Both noted that the airline industry as a whole spent 96 percent of its free cash flow over the past decade buying back shares—an act that might juice company stock prices, while leaving little cash on hand should a major calamity like a pandemic emerge.

Some have argued that because the Internal Revenue Code currently taxes corporations’ accumulated earnings, airlines have a strong disincentive to build up larger “rainy day funds,” notwithstanding the historically volatile nature of their industry. But the optics of this potential bailout reek of moral hazard, by privatizing gains (i.e., stock buybacks) and socializing losses.

Student Debt

The issue of moral hazard has not remained confined only to corporations. For instance, Sen. Elizabeth Warren (D-Mass.) has demanded that Congress include “broad student loan forgiveness,” along the lines of her presidential campaign proposal, as part of any “stimulus” legislation.

That student loan bailout proposal, originally released in May 2019, “cancels $50,000 in student loan debt for every person with household income under $100,000,” and “provides substantial debt cancellation for every person with household income between $100,000 and $250,000.”

That type of proposal has all sorts of flaws to it. Most notably, by rewarding individuals who picked costlier, private institutions (e.g., Harvard University), it punishes those who chose a less expensive school (e.g., a public institution or community college) to save money. It likewise punishes those who chose their degree based upon earning potential (e.g., an MBA) compared to those who decided to study what they love, even if it would not help their future earning prospects (e.g., art history).

Of course, such a massive (and expensive) bailout would have little to do with the immediate task at hand, in the form of the virus’ economic impacts. A household with income last year of $80,000, but where the income-earners telework, would receive far more debt forgiveness than the owner of a restaurant who earned far more last year but whose small business now lies in ruin because of the virus.

One can cite the present circumstances to make a case for some student loan assistance. Forbearance, a waiver of interest, and suspension of collections—all make sense, particularly for families suffering financial turmoil. But outright loan forgiveness? That would only exacerbate the rising cost of college education, as future students would spend away, thinking Washington will erase their debts in a similar fashion.

Don’t Pick Winners and Losers

Various publications have noted that the “stimulus” activity represents a bonanza for K Street. Lobbyists continue to make their pitch for bailing out various industries, and using coronavirus as a justification to enact agenda items that existed well before the epidemic.

But Congress should avoid the temptation to enact bailouts targeted at particular industries. Such activity only picks winners and losers, further entrenching Washington in the nation’s economy. Moreover, some of the industries seeking assistance have a less-than-critical role in the nation’s economy.

Cruise lines—most of whom base their ships in other countries anyway—how do they represent a vital national interest? Casinos—does anyone really think Americans won’t want to gamble again once the coronavirus restrictions get lifted?

Lawmakers always feel the need to “do something,” seemingly irrespective of what that “something” is. The current pandemic only exacerbates that dilemma. But Congress should proceed very cautiously, because the “cure” for the coronavirus economy could in the long run end up worse than the disease.

This post was originally published at The Federalist.

The Sorry Story of Congress’ Latest “Stimulus” Bill

As Yogi Berra’s infamous saying goes, it’s déjà vu all over again—and not in a good way.

I refer not just to the rapid economic slowdown, panicky markets, and multiple Federal Reserve bailouts related to the coronavirus epidemic, all of which echo the financial crisis of 2008. I speak also of Nancy Pelosi’s infamous comments a decade ago this month about Obamacare:

The House of Representatives—both Democrats and most (all but 40) Republicans—went along with legislation that not only wasn’t paid for, and didn’t contain any long-term reforms to programs desperately in need of them. They passed a bill whose cost still remains unknown (the Congressional Budget Office has yet to issue a cost estimate), which none of them had time to read—and might not even accomplish its supposed objectives.

Word emerged over the weekend that flaws in the bill require at least one, and possibly more than one, correction. The Wall Street Journal reported the House will attempt to pass “a technical fix on Monday.” But even as Treasury Secretary Steven Mnuchin, who negotiated the package with Pelosi despite being “relatively green” on such matters, tried to minimize the objections, others weighed in more strongly.

The Capitol Hill publication Roll Call said the bill may need a “do-over” regarding its paid family leave provisions. The National Federation of Independent Business weighed in with objections after the bill’s passage in the House, saying that small firms wouldn’t receive the tax credits quickly enough, and could face cash-flow problems as a result.

A congressional source confirmed to me that concerns about the family leave provisions could prompt a rewrite that’s more than technical in nature. These developments should surprise no one acquainted with prior slapdash attempts to legislate on the fly, but they should force Congress to slow down such a ridiculous process.

TARP and Obamacare

This past weekend, House leaders released the final version of their “stimulus” legislation at 11:45 p.m. Friday night. The House’s vote on the bill ended at 12:51 a.m. Saturday—just more than an hour later. Members of Congress had a whopping 66 minutes to review the 110-page bill before voting on it. Even the Republican Study Committee, a conservative caucus in the House, barely had time to issue a 10-page summary of the bill before the vote gaveled to a close.

That the legislation needs a technical fix (and possibly more than one) merely continues Congress’ practice of passing complicated legislation members do not understand. For instance, in March 2009 Sen. Chris Dodd (D-CT) had to accept responsibility for inserting a provision into the “stimulus” at the behest of Obama administration officials that allowed AIG officials to collect more than $1 billion in bonuses, despite the firm requiring a massive bailout from the federal government via the Troubled Assets Relief Program. The entire controversy demonstrated that no one, not even the lawmakers who drafted the “stimulus” and TARP bills, fully understood the bills or their effects.

Consider too this description of the infamous Obamacare bill:

The Affordable Care Act contains more than a few examples of inartful drafting. (To cite just one, the Act creates three separate Section 1563s.) Several features of the Act’s passage contributed to that unfortunate reality. Congress wrote key parts of the Act behind closed doors, rather than through ‘the traditional legislative process.’…. As a result, the Act does not reflect the type of care and deliberation that one might expect of such significant legislation.

That description comes from Supreme Court Chief Justice John Roberts’s 2015 ruling in King v. Burwell, a case about whether individuals purchasing coverage from the federal exchange qualified for subsidies. Roberts’s ruling called the language a drafting error, and permitted individuals in all states to receive the subsidies. But if an innocent drafting error, the mistake had potentially far-reaching implications, which few if any members of Congress realized when they voted for the bill—without reading it, of course.

Rushing for the Exits

To call the nascent controversy surrounding the “stimulus” legislation a fiasco would put it mildly. Worse yet, much of the controversy seems unnecessary and entirely self-inflicted.

Congress had absolutely no reason to pass the bill just before 1 a.m. on Saturday. Financial markets had closed for the weekend, and the Senate had adjourned until Monday afternoon. Voting early Saturday morning, as opposed to later in the day on Saturday, or even on Sunday, didn’t accelerate passage of the bill one bit. However, it did allow members of Congress to leave Washington more quickly.

In other words, the leaders of both parties—who agreed to the rushed process leading up to the vote—made getting members out of town a bigger priority than giving members the time to do their due diligence as lawmakers. It’s an understandable instinct, given the serious consequences of the coronavirus on all Americans, particularly the older profile of many legislators. But it’s also an abdication of Pelosi’s own claim last week that “we’re the captains of this ship.”

This post was originally published at The Federalist.

Don’t Just Bail Out a Flawed Medicaid Program

In recent days, some observers have discussed the possibility of targeted assistance to state Medicaid programs affected by the coronavirus outbreak. Unfortunately, the legislation proposed by House Speaker Nancy Pelosi (D-CA) falls far short of that marker, providing a gusher of new spending with no long-term reforms to the program. Conservatives should insist on better.

The House’s bill, introduced late in the night Wednesday, contains several noteworthy flaws. By increasing the federal Medicaid match for all states by 8 percentage points for the entire public health emergency, it prevents the targeting of assistance to those states most affected by coronavirus cases.

Increasing the federal match for able-bodied adults to 98 percent encourages states to prioritize these individuals over disabled populations, while discouraging states from rooting out fraud. The legislation also precludes states from making any changes to their Medicaid programs for the duration of the bailout, reinstituting the fiscal straight-jacket contained in President Obama’s “stimulus” bill.

Like that 2009 package, Pelosi’s legislation proposes tens of billions in new spending for an already-sprawling Medicaid program without any structural changes. But if Pelosi or conservatives wish to pay for the short-term largesse via long-term changes to Medicaid, they need not look far: President Obama’s budgets included several proposals that, if enacted into law, would change incentives in Medicaid for the better.

One area ripe for reform: Medicaid provider taxes. Hospitals and other medical providers often support these taxes—the only entities that ever endorse new taxes on themselves—because they immediately come right back to the health care industry, after states use the tax revenue to draw down additional Medicaid matching funds. In 2011, none other than Joe Biden reportedly called this form of legalized money laundering a “scam.”

At minimum, Congress should immediately enact a moratorium on any new provider taxes, or any increases in existing provider taxes, cutting off the spigot of federal dollars via this budget gimmick. Lawmakers can echo President Obama’s February 2012 budget submission, which would have saved $21.8 billion by reducing states’ maximum provider tax rate.

That proposal delayed its effective date by three years, “giv[ing] states more time to plan”—which would in this case delay the changes until the coronavirus outbreak subsides. Another positive solution: Codifying the Trump administration’s Medicaid fiscal accountability rule, which includes welcome reforms reining in states’ most egregious accounting gimmicks, effective a future date.

More broadly, Congress should also consider the ways the existing matching rate formula encourages additional Medicaid spending by states. For instance, current law provides all states with a minimum 50 percent match rate, encouraging richer states to spend more on Medicaid. Absent that floor, 14 states—11 of them blue—would face a lower match; Connecticut’s rate would plummet from 50 percent to 11.69 percent.

Gradually lowering or eliminating the federal floor on the match rate, beginning 2-3 years hence, would discourage wealthier states from growing their Medicaid programs beyond their, and the federal government’s, control. Had lawmakers enacted this proposal as part of the 2009 “stimulus,” New York—which would have a federal match rate of 34.49 percent in the current fiscal year absent the 50 percent minimum—might have right-sized its Medicaid program well before the program’s current budget crunch.

Alternatively, Congress could embrace Obama’s budget proposal for a blended Medicaid matching rate. Replacing the current morass of varying federal match rates for different populations could save money, and eliminate the perverse incentives included in Obamacare, which gives states a higher match rate to cover able-bodied adults than individuals with disabilities.

Judging from her initial bid in the “stimulus” wars, Pelosi has taken Rahm Emanuel’s advice never to let a serious crisis go to waste. If she wishes to emulate Obama’s first chief of staff, conservatives should insist that she also enact some of the Medicaid changes proposed in Obama’s own budgets, to begin the process of reforming the program.

This post was originally published at The Federalist.

Hospitals Seek to Defend Their Questionable Accounting Scams

With the federal government more than $23 trillion in debt, why should taxpayers continue to fund states’ accounting scams designed to bilk Washington out of additional Medicaid matching funds? It’s a good question, but one hospital lobbyists don’t want you to ask.

Late last year, the Trump administration released a proposed regulation designed to bring more transparency and accountability into the Medicaid program. The hospital sector in particular has begun an all-out blitz to try and overturn the rulemaking process. The need for the regulations demonstrates the problems with the current American health-care system, and how hospitals stand as one of the biggest obstacles to reform.

How the ‘Scam’ Works

The proposed regulations call for more transparency about supplemental payments within the Medicaid program. These payments, which take a variety of different forms, are considered supplemental in nature because they are not directly connected to the treatment of any one particular patient.

Many of these supplemental payments represent a way for states—and hospitals—to obtain a greater share of Medicaid matching dollars from the federal government. Hospitals, local governments, or other entities “contribute” funds to the state for the express purpose of obtaining additional Medicaid funds from Washington. Those matching funds then get funneled right back to many of the same entities that “contributed” the funds in the first place. As the old saying goes, it’s nice work if you can get it.

Over the years, even liberal groups have expressed concern about these shady funding mechanisms. In 2011, then-Vice President Joe Biden reportedly called provider taxes—in which hospitals and nursing homes pay an assessment, which gets laundered through state coffers to receive—a “scam.” Think about it: How often do you ask to pay higher taxes? Hospitals and nursing homes often propose new or higher provider taxes because they believe they will get their money back, and then some, via greater Medicaid payments.

Likewise, in 2000 the liberal Center on Budget and Policy Priorities decried the use of “Rube Goldberg-like accounting arrangements” that “use complex accounting gimmicks to secure additional federal funds for states without actual state matching contributions.” Yet two decades later, the scams continue to proliferate, because, as a 2005 government audit noted, most states have hired contingency-fee consultants for the sole purpose of bilking additional Medicaid matching funds from the federal government.

Hospitals’ Scare Tactics Rationalize Theft

The Trump administration’s proposal would make these accounting arrangements more transparent, with the goal of phasing out several of the most egregious arrangements altogether. This has prompted hospital executives to consider the proposed rule something just short of Armageddon.

During a 2008 debate on a similar set of Medicaid regulations put forward by the Bush administration, very few members of Congress even debated the regulations, as opposed to their effects on hospitals. Likewise, most hospital lobbyists and executives don’t try to defend the merits of these accounting scams. Instead, they just focus on the effects, with the typical “parade of horribles” examples: “If you end these payments, Tiny Tim will die.”

Hospitals’ reluctance to defend these opaque funding arrangements on their merits represents an implicit admission: They never should have received this money in the first place. Translation: “We stole that money fair and square—and you better let us keep stealing that money, or else” the hospital will close, people will lose their jobs, etc.

Hospitals’ Disingenuous Tactics

Some lobbyists on Capitol Hill claim they “only” want to delay the regulations, to allow for additional feedback and give hospitals time to adjust. It’s a ridiculous argument on multiple levels. First, as the policy paper from 2000 reveals, hospitals have engaged in these types of tactics for more than two decades, and they continue to grow and proliferate. The idea that hospitals need additional time to adjust to a problem they created seems laughable on its face.

Consider also what happened in 2008, when the Bush administration proposed a similar set of regulations designed to crack down on Medicaid financing abuses. Democrats passed a one-year moratorium preventing the administration from finalizing the rules, blocking them from taking effect.

Why only a one-year delay and not an outright ban? At the time, staff for the House Energy and Commerce Committee publicly stated that the moratorium “intended to delay the implementation of the Medicaid rules just long enough so that a future Administration can withdraw them.”

That’s exactly what ended up happening: The Obama administration withdrew the regulations upon taking office in 2009, so Congress didn’t have to pay for the cost associated with blocking them permanently. Hospital lobbyists asking for a delay of the regulations are hoping a Democrat wins the White House this fall, and can withdraw the regulations next year. They just won’t tell Republican staffers that their strategy is premised upon President Trump losing his re-election bid.

Let the Regulations Proceed, And Let States Decide

If the regulations went into effect today, they wouldn’t automatically lead to any hospitals closing down, or even hospitals losing any money. The Centers for Medicare and Medicaid Services (CMS) said it would work with states to transition away from the offending transactions over time.

That said, some governors oppose the regulations for the same reason hospitals do: It would force state governors and lawmakers to make difficult choices. If the loopholes that allow states to bilk more funds out of Washington end, then states would have to pony up “real” money from their coffers to maintain payments to providers, rather than funds obtained via accounting gimmicks. Hospitals would have to compete with other important state priorities—transportation, education, corrections, etc.—to maintain their existing payments.

But as the old saying goes, to govern is to choose. Better for a state to raise taxes—and be up-front and honest about doing so—to fund its Medicaid program than for that same state to use opaque gimmicks to squeeze out more federal dollars. The latter situation amounts to a (deferred) tax increase anyway, by adding more dollars to Washington’s ever-growing debt.

After decades of delays, and with our country’s debt growing ever-larger by the day, Medicaid deserves the fiscal integrity these new regulations would bring. They should go into full effect, and sooner rather than later.

This post was originally published at The Federalist.

Michael Bloomberg: Against Obamacare Before He Was For It

Last week, old footage emerged of former New York City mayor, and current Democratic presidential candidate, Michael Bloomberg talking about health care rationing. In his comments from 2011, he advocated denying costly care to older patients:

If you’re bleeding, they’ll stop the bleeding—if you need an X-ray, you’re going to have to wait. That’s just…All of these costs keep going up, nobody wants to pay any more money, and at the rate we’re going, health care is going to bankrupt us….You know, if you show up with prostate cancer, you’re 95 years old, we should say, ‘Go and enjoy. Have a nice life. Live a long life. There’s no cure, and we can’t do anything.’ If you’re a young person, we should do something about it.

Perhaps more important is why Bloomberg made those particular comments. At the time, in February 2011, he was paying condolences to a Jewish family that had lost a loved one. One of the deceased man’s family noted that the man “was in the emergency room for 73 hours before he died and…that overcrowding in emergency rooms in New York had become out of control.”

This entire episode undermines the message of Bloomberg’s current ad blitz claiming that as mayor, he expanded access to health care in New York City. Plus, what did the mayor say about ER overcrowding back in 2011? “It’s going to get worse with the health care bill [i.e., Obamacare].” He also predicted that hospitals would close as a result.

Obamacare a ‘Disgrace’

During last week’s Democrat primary debate in Las Vegas, former Vice President Joe Biden brought up some of Bloomberg’s other comments about Obamacare. Biden correctly noted that Bloomberg had called Obamacare a “disgrace.” In a June 2010 speech at Dartmouth University just after the law’s enactment, Bloomberg said “We passed a health care bill that does absolutely nothing to fix the big health care problems in this country. It is just a disgrace.”

Reporters in the past several days have highlighted some of Bloomberg’s prior comments about the law:

  • In his Dartmouth speech, Bloomberg also pointed out that Democrats “say they’ve insured or provided coverage for another 45 million people…except there’s no more doctors for 45 million people.”
  • In a 2011 radio appearance, Bloomberg said that Obamacare “did not solve the basic problems, two basic problems with health care, which…got lost in all of the negotiations as every special interest in Congress got a piece or lost a piece or negotiated about a piece.”
  • In a December 2009 appearance on “Meet the Press,” Bloomberg criticized Democrats for not reading or understanding the legislation: “I have asked congressperson after congressperson, not one can explain to me what’s in the bill, even in the House version, certainly not in the other version. And so for them to vote on a bill that they don’t understand whatsoever, really, you’ve got to question the kind of government we have.”

It’s notable that Biden didn’t mention Bloomberg’s last quote—about members of Congress not reading or understanding the legislation—in Wednesday’s debate. Of course, that might have something to do with Biden’s own recent admission that “no one did understand Obamacare”—presumably including himself, at the time the vice president of the United States.

Changing His Tune

Now that Bloomberg is running for the Democratic nomination, he’s come around to supporting Obamacare. When asked about his prior comments, a Bloomberg campaign spokesman told CNN Obamacare’s only flaw lay in the fact that it didn’t go far enough. As a result, Bloomberg’s health plan proposes more government spending, funded by higher taxes, and—in a first—price controls on the entire health-care sector, including what you can and cannot pay your doctors.

On the merits of his policy platform, I’ll give the last word to Bloomberg himself, in his June 2010 speech at Dartmouth University. While Bloomberg said President Obama started out with good intentions, he said Congress “didn’t pay attention to any of those big problems and just created another program that’s going to cost a lot of money.”

It’s an apt description of Bloomberg’s own health care plan—to say nothing of his competitors for the Democratic presidential nomination.

This post was originally published at The Federalist.

Why Pete Buttigieg’s Health Plan Might Be More Radical than Bernie Sanders’

During the most recent Democratic primary debate in New Hampshire, former South Bend Mayor Pete Buttigieg claimed that his health-care plan, unlike the single-payer proposal advocated by Vermont Sen. Bernie Sanders, would “not polarize the American people.” But contra the candidate’s claims, Buttigieg’s health plan advocates a policy—government price controls on the entire health-care sector—even more far-reaching than Sanders’s socialist approach.

Others have exposed how Buttigieg’s plan would force people to buy insurance costing thousands of dollars, whether they want it or not. But his proposal for government price controls across a $4 trillion health-care sector represents the most radical idea yet—because, unlike Sanders’s plan, individuals appear to have no way to opt out.

National Price Controls

Buttigieg’s plan, released in September, would “prohibit health care providers from pricing irresponsibly by capping their out-of-network rates at twice what Medicare pays.” (Upon entering the race for the Democratic presidential nomination last November, New York Mayor Michael Bloomberg also adopted this rate-capping provision in his health plan.) Buttigieg admits that, by capping out-of-network rates, his proposal would give insurers leverage to demand lower prices for in-network care, creating a de facto system of national price controls for the entire health-care sector.

Imposing price controls on nearly 20 percent of the American economy, and linking those price controls to Medicare rates, would have substantial distortionary impacts. For starters, Medicare often does not reimburse medical providers at a rate to recover their costs. The Medicare Payment Advisory Commission estimated last March that hospitals would incur a -11 percent margin on their Medicare patients in 2019.

Moreover, because Medicare payment rates reflect the cost of treating the over-65 population—not many Medicare beneficiaries need maternity care, for instance—even supporters of capping rates have questioned the wisdom of linking such caps to Medicare levels.

More broadly, a national system of price controls could create health-care shortages. Facing reductions in pay, doctors could decide to retire early, and aspiring physicians could avoid the profession entirely. With the United States already facing a shortage of up to 121,900 physicians between now and 2032, Buttigieg’s price controls would reduce the physician supply still further.

Pathway to Single Payer—With No Exit

Despite the contrast he attempts to draw with Sanders’s plan, Buttigieg’s price controls would likely lead to a fully government-run system. Buttigieg admits a desire for his plan to provide a “glide path” to single-payer; its price controls provide an easy mechanism for such a transition.

By reducing the payments that private health insurers can offer doctors and hospitals, Buttigieg would slowly sabotage individuals’ existing coverage, throwing all Americans into a government-run health system. Indeed, his price caps provide an easy mechanism to force more and more individuals off their private coverage. While Buttigieg says he wants to cap payments at double Medicare rates, he could lower that cap over time. Of course, capping private health-care reimbursements at less than Medicare rates would all-but-guarantee private health insurance would cease to exist, because few doctors would agree to accept it.

Patients facing long waits for care would have no way to get around queues created by Buttigieg’s socialistic price controls. Sanders’s single-payer legislation allows physicians and patients to contract privately by paying cash for health-care services. But Buttigieg’s plan does not envision a mechanism for Americans to opt out of his price control regime. If Medicare pays $50 for a service, a patient could not pay a physician more than $100 for that service—no matter how experienced or qualified the physician, and no matter how desperate the patient.

The questionable constitutionality of Buttigieg’s plan belies its purportedly moderate nature. On the one hand, he would compel all individuals to pay for health insurance—whether they want it or not, and whether they use it or not. On the other, he would prohibit individuals from engaging in private transactions with their own doctors and hospitals if the amounts of those transactions exceed federally defined limits.

Differences in tone notwithstanding, Sanders and Buttigieg represent two halves of the same general approach to health care, expanding a technocratic leviathan that will attempt to micromanage nearly one-fifth of the economy from Washington. Doctors and patients, take note.

This post was originally published at The Federalist.

What John Oliver Didn’t Mention about Single Payer Health Care

During the first episode of this season of “Last Week Tonight,” HBO host John Oliver used his monologue to make the case for the United States to adopt a single-payer health-care system. While Oliver articulated many of the shortcomings of the current system, much of his arguments in favor of a single-payer system missed the mark.

As Oliver noted in his program, whether to adopt single payer represents a debate between the devil one knows and the devil one doesn’t. Skeptics of single payer have the advantage of inertial bias—that is, people may not want to give up what they currently have.

On the other hand, supporters of single payer can characterize the future however they like—even if it doesn’t always line up with the facts. That dynamic has allowed supporters to frame single-payer health-care as “Medicare for All,” even though the legislation introduced by Sen. Bernie Sanders (I-Vt.) would abolish the current Medicare program.

In his program, Oliver acknowledged some of the trade-offs associated with a move to a government-financed health-care system. But he also minimized others, and failed to explain some of the fundamental flaws in Sanders’ approach.

Cost Explosion

Oliver’s segment attempted to tackle the three primary critiques of a single-payer system: It will cost too much; lead to lines and waiting lists for care; and undermine individual choice. On the cost front, Oliver noted that estimates will vary as to whether the Sanders bill will lead to an increase in overall health-care spending. After admitting that the bill could either reduce health spending or cost “a f-ck of a lot more,” Oliver basically threw up his hands, calling the exact amount of spending under the new system unknowable.

On this front, Oliver didn’t analyze why health costs would likely rise under single payer. He mentioned (correctly) that Sanders’s bill would essentially abolish all premiums, deductibles, and co-payments for health care in the United States, making the new system much more generous than the current Medicare program, and much more generous than single-payer systems in places like Canada and Great Britain.

But Oliver did not mention four critical words that majorly affect costs: “Induced demand for care.” In other words, because Sanders’ legislation would make all health care “free” to patients, they would demand much more of it. According to the Urban Institute, a liberal think-tank, a single-payer system that eliminated cost-sharing would result in nearly $1 trillion more in health spending per year than a single-payer system that retained a system of co-pays and deductibles roughly equivalent to Obamacare’s Gold health insurance plans.

Along with many liberals, Oliver views eliminating cost-sharing as a feature of Sanders’ single-payer proposal. But at containing the costs of such a system, it represents a major bug—one Oliver never acknowledged.

Waiting Lists

Oliver did concede that waiting lists for care exist in other countries’ single-payer systems. However, he contended that patients wait primarily for non-emergency care, using knee replacements as an example. (Many patients wouldn’t call the concept of waiting nearly 10 months for a knee replacement—the average wait in Canada for an orthopedic procedure—a non-urgent matter.) He also didn’t point out that 4.56 million individuals in Britain—roughly 7 percent of that country’s population—were on waiting lists for care as of last fall, an increase of roughly 40 percent in the past five years.

Oliver’s discussion of waiting lists also missed a critical point: Sanders’s legislation would go further than other countries with single-payer systems, because it would prohibit individuals from purchasing private health insurance. Canadian and British patients who object to government waiting lists can purchase private coverage, and obtain care via that route.

Under Sanders’s proposal, American patients would not have that choice: They could only opt-out of the single payer system by paying for their treatment entirely in cash. Because not even a family making several hundred thousand dollars per year could afford the full costs of a heart transplant or chemotherapy, the vast majority of Americans would have no choice but to wait for care until the government system got around to treating them.

Choice

That brings up Oliver’s discussion of choice, and whether taking choice away matters. He points out—rightly—that many Americans do not have a substantive choice of either insurers or doctors, because their employers control the former, and by definition the latter.

But it doesn’t require the federal government taking over the entire health-care system to solve this problem, and give Americans a true choice among insurance plans and doctors. I have pointed out on many occasions the ways the Trump administration has acted to make coverage more portable, so that individuals, not employers, and not the federal government, choose the coverage options they prefer.

Oliver talks about the choices some patients currently face: whether to seek treatment they cannot pay for, or rationing medicines based on cost grounds. But patients would face similar choices under a government-run system—just for different reasons.

Oliver acknowledged the likelihood of waiting lists under a single-payer system, as have other supporters. For instance, the head of the People’s Policy Project has argued that costs won’t rise under single payer because “there is still a hard limit to just how much health care can be performed because there are only so many doctors and only so many facilities.” In other words, people will seek care, but not be able to obtain it.

In such circumstances, people won’t have a “choice” at all. Because they cannot purchase private insurance to cover treatments the government plan does not, they can either wait for care or they can…wait for care. That’s not just not giving patients choices, it’s harming patients by prohibiting them from buying the insurance they want to buy with their own money.

Towards the end of the segment, Oliver revealed his own bias against giving American patients any choices. After a clip of former South Bend Mayor Pete Buttigieg’s claim that “I trust Americans to make that right choice” on health care, Oliver responded to laughs: “Okay, well, hold on there. You trust Americans to make the right choice? You know Americans choose to drink Bud Light, right?”

Even as he tries to rebut conservative claims that single-payer would undermine Americans’ choices, Oliver admits that he doesn’t really want to give Americans a choice at all. He would rather use government to impose his beliefs on others, and force them to comply.

At minimum, Oliver’s program acknowledged the very real trade-offs associated with a single-payer health-care system. But had he explained those trade-offs fully, the American people would understand why single payer would result in adverse consequences to both our health-care system and our economy as a whole.

This post was originally published at The Federalist.

No, $400 in Routine Health Care Costs is Not a Reason to Socialize Medicine

Sometimes, even heated discussions on Twitter can bring both light and heat by illuminating policy discussions. On Wednesday evening, Elizabeth Bruenig wrote a since-deleted tweet, using her transition from a writing position at the Washington Post to one at The New York Times to argue for single-payer health-care system:

Vance made a compelling point on policy, but one that conflated two issues. I wholeheartedly agree with his position on wanting to make coverage portable. But I don’t believe that a movement to de-link health coverage from employment means the government should pay for the health costs of comparatively affluent individuals.

Need for Portability

In her tweet, Bruenig admitted her period of uninsurance came from switching jobs. As a mother of two, including a newborn, Bruenig quite likely—and understandably—arranged some time between her two positions to spend with her young children.

On that front, I agree with both Bruenig and Vance about the good policy reasons to move away from individuals obtaining health coverage from their employers. As I outlined in prior writings, much of the problem of pre-existing conditions comes from our employer-based health insurance system: When you lose your job, you lose your coverage, which causes understandable worry for employees who have pre-existing conditions.

Making health coverage portable would allow individuals to take their insurance from job to job. This change would eliminate the friction people like Bruenig face when they’re between jobs, and greatly reduce (but not eliminate) the problem of pre-existing conditions, because people who develop such conditions during their working careers would own their own coverage, purchased before they became ill. The Trump administration has taken big strides on that front, publishing a regulation that will allow individuals—not their employers—to select and own their own health coverage, while still receiving an employer subsidy to cover some or all of the cost of their premiums.

However, people on the left talk about making health coverage portable not by giving power to individuals but by giving power to government. To borrow a medical metaphor, most liberals and socialists focus on the symptom (pre-existing conditions) rather than the underlying disease (lack of portable insurance). They favor either government regulation regarding pre-existing conditions, which encourages people to wait until they become sick to buy insurance, or in Bruenig’s case, an entirely government-run system.

Affordability for Individuals—And Taxpayers

While I agree with both Bruenig and Vance on the need to improve coverage portability (even if I disagree with the former on the way to go about it), I disagree in this instance about the separate question of who should pay for those costs.

But context matters, and in this case, the context looks quite different. Bruenig’s husband Matt also works; a former attorney for the National Labor Relations Board, he heads the People’s Policy Project, a socialist think-tank. As a result, their family has a second source of income, and another source of employer-based health insurance. (While Bruenig referenced health bills for her children, she didn’t say that her children faced an insurance gap. Given that context, I assume, but do not know for certain, that her husband’s insurance covers her children.)

Consider also the most recent breakdown of IRS tax filing data by income. As of 2017, households with adjusted gross income exceeding $97,870 represented the top quintile (i.e., top 20 percent) of filers, and households with adjusted gross income exceeding $145,135 represented the top 10 percent of filers. Bruenig and her husband almost certainly exceed the threshold to put themselves in the top 20 percent, and quite possibly the top 10 percent as well. Do I believe someone with that kind of income should receive government assistance for health insurance costs? In a word, no.

I haven’t yet completed my tax returns for 2019, but based on my paperwork compiled to date, I expect to declare just over $100,000 in income from my business last year. Of course, because I run my own business, I have to pay my own health insurance premiums. And my age (I’m roughly ten years older than Bruenig) means I pay more in premiums for Obamacare exchange coverage than she would if she bought temporary insurance there—and I do it month after month, not just when I have a gap between jobs.

In short, the Twitter mob calling me an “elite” for my tone and comments about savings ignore the fact that, based upon their station in life, Bruenig and her husband qualify on that front too. Unlike them, however, I don’t believe the federal government has a place subsidizing my insurance costs.

A Question of Priorities

I’ll give the last word to a Democrat: Maryland Rep. Steny Hoyer. As I mentioned in my book, in 2009, Hoyer, then as now the House majority leader, took to the House floor to make this compelling statement about entitlement spending and federal priorities:

At some point in time, my friends, we have to buck up our courage and our judgement and say, if we take care of everybody, we won’t be able to take care of those who need us most. That’s my concern. If we take care of everybody, irrespective of their ability to pay for themselves, the Ross Perots of America, frankly, the Steny Hoyers of America, then we will not be able to take care of those most in need in America. [Emphasis added.]

I agree with both Vance and Bruenig on the need to make health coverage more portable. But on the separate question of who pays, and saving scarce taxpayer resources for those who need them most, I stand with Hoyer.

This post was originally published at The Federalist.

Christmas Eve Vote on Obamacare Showed Washington Still Has Shame

A decade ago this morning, 60 Senate Democrats cast their final votes approving the legislation that became Obamacare. The bill took a circuitous route to enactment after Scott Brown’s surprise victory in the Massachusetts Senate contest, which occurred a few weeks after the Senate vote, in January 2010.

Brown’s election meant Republicans gained a 41st Senate seat, giving them the necessary votes to filibuster a House-Senate conference report on Obamacare. Because Democrats lacked the 60 votes to overcome a filibuster, they eventually agreed to a process amending certain budgetary and fiscal elements of the Senate bill through the reconciliation process on a 51-vote threshold.

The grubby process leading up to Obamacare’s enactment, full of parochial politics and special interest pork, cost Democrats politically. But many Americans do not realize that such machinations occur all the time in Washington—indeed, occurred just last week. When one party participates in a corrupt process, it becomes a scandal; when both parties partake, few outside the Beltway bother to notice.

Backroom Deals

The process among Democrats leading up to the final health vote resembled an open market, with each Senator making “asks” of Majority Leader Harry Reid (D-NV). Reid needed all 60 Democrats to vote for Obamacare to break a Republican filibuster, and the parochial provisions included in the legislation showed the lengths he would go to enact it:

Cornhusker Kickback:” The most notorious of the backroom deals came after Sen. Ben Nelson (D-NE) requested a 100 percent Medicaid match rate for his home state of Nebraska. The final manager’s amendment introduced by Reid included this earmark—Nebraska would have its entire costs of Medicaid expansion paid for by the federal government forever. But the blowback from constituents and the press became so great that Nelson asked to have the provision removed; the reconciliation measure enacted in March 2010 gave Nebraska the same treatment as all other states.

Gator Aid:” This provision, inserted at the behest of Sen. Bill Nelson (D-FL), and later removed in the reconciliation bill, sought to exempt Florida seniors from much of the effects of the law’s Medicare Advantage cuts.

Louisiana Purchase:” This provision, included due to a request from Sen. Mary Landrieu (D-LA), adjusted the state’s Medicaid matching formula. Landrieu publicly defended the provision—which she said reflected the state’s circumstances after Hurricane Katrina—and it remained in law for several years, but was eventually phased out in legislation enacted February 2012.

While these three provisions captivated the public’s attention, other earmarks and pork provisions abounded inside Obamacare too—a Medicaid funding provision that helped Massachusetts; exemptions from the insurer tax for two Blue Cross carriers; a $100 million earmark for a Connecticut hospital, and health benefits for miners in Libby, Montana, courtesy of then-Senate Finance Committee Chairman Max Baucus (D-MT).

Not only did senators try to keep these corrupt deals in the legislation—notwithstanding the public outrage they engendered—but Reid defended both the earmarks and the horse-trading process that led to their inclusion:

I don’t know if there’s a senator who doesn’t have something in this bill that’s important to them. And if they don’t have something in it that’s important to them, then it doesn’t speak well for them.

It was a far cry from Barack Obama’s 2008 (broken) campaign promise to have all his health care negotiations televised on C-SPAN, “so we will know who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.” And it looked like Democrats didn’t really believe in the merits of the underlying legislation, but instead voted to restructure nearly one-fifth of the American economy because they got some comparatively minor pork project for their district back home.

Déjà Vu All Over Again

Democrats lost control of the House in the 2010 elections, and political scientists have attributed much of the loss to the impact of the Obamacare vote. One study found that Obamacare cost Democrats 6 percentage points of support in the 2010 midterm elections, and at least 13 seats in Congress.

But did the rebuke Democrats received for their behavior prompt them to change their ways? Only to the extent that, when they want to ram through a massive piece of legislation no one has bothered to read, they include Republicans in the taxpayer-funded largesse.

Consider last week’s $1.4 trillion spending package: Two bills totaling more than 2,300 pages, which lawmakers introduced on Monday and voted on in the House 24 hours later. Democrats wanted to repeal one set of Obamacare taxes—and in exchange, they agreed to repeal another set of taxes that Republicans (and their K Street lobbying friends) wanted gone. The Obamacare taxes went away, but the Obamacare spending remained, thus increasing the deficit by nearly $400 billion.

And both sides agreed to increase spending in defense and non-defense categories alike. Therein lies the true definition of bipartisanship in Washington: An agreement in which both sides get what they want—courtesy of taxpayers in the next generation, who get stuck with the bill.

It remains a sad commentary on the state of affairs in the nation’s capital that the Obamacare debacle remains an anomaly—the one time when the glare of the spotlight so seared Members seeking pork projects that they dared consider forsaking their ill-gotten gains. To paraphrase the axiom about casinos, in Washington, The Swamp (almost) always wins.

“Cadillac Tax” Repeal “Deal” Is What’s Wrong with Washington

News articles over the weekend reported that Congress later this week may repeal would Obamacare taxes—the “Cadillac tax” on high-cost health plans, and the medical device tax—as part of a larger spending bill. In reality, however, Democrats eventually agreed to repeal not one but two Obamacare industry taxes—the health insurer tax, which costs approximately $150 billion over a decade, along with the medical device tax—in exchange for repeal of the Cadillac tax, which labor unions want because of their cushy health insurance offerings.

According to The Hill:

On a separate front on ObamaCare, the spending deal repeals three major taxes that had helped fund the law’s coverage expansion. The deal will repeal a 40 percent tax on generous “Cadillac” health plans, the 2.3 percent medical device tax and the health insurance tax.

Those are major wins for the health insurance and medical device industries, which had long lobbied to lift those taxes. The Cadillac tax, in addition to providing about $200 billion in funding over 10 years, had been intended to help lower health care spending by incentivizing employers to lower costs to avoid hitting the tax.

On its face, the news sounds like a win for conservatives. Far from it. The way Congress has addressed these issues illustrates all the problems with politics, both procedural and substantive, in the nation’s capital.

Problem 1: Awful Process

Obvious considerations first: Congressional leaders in both parties want to enact the annual spending bills—which run thousands of pages, and spend trillions of dollars—before breaking for the Christmas holidays at week’s end. But congressional leaders only released text of the two bills publicly on Monday night, so there’s no way American citizens, let alone rank-and-file lawmakers, can digest it before Congress decides. As one lawmaker famously said:

The spending bills are 1,773 pages and 540 pages, respectively. (The health care provisions are in the larger of the two bills.) According to the Joint Committee on Taxation, the repeal of the three health care taxes will cost the federal government $387 billion over ten years.

Nearly ten years after a Democratic-controlled Senate passed the massive Obamacare statute on Christmas Eve—laden with pork-barrel provisions like the “Cornhusker Kickback,” the “Louisiana Purchase,” and the “Gator Aid”—a Senate run by Republicans wants to pass a similarly pork-laden spending bill. It brings to mind the old adage attributed to former House Speaker Sam Rayburn: “There is no education in the second kick of a mule.”

President Trump has likewise confronted the problem of Congress passing huge spending bills on short notice before. When presented with a similarly massive—and pork-laden—omnibus bill in March 2018, he famously proclaimed “I will never sign another bill like this again.” Time will tell if he follows through on his promise, but Congress sure isn’t acting like they think he will.

Problem 2: Raising Health Care Costs

The “Cadillac tax” in particular represents one way to address the problem of ever-increasing health costs. Current law allows employers to offer tax-free health benefits to their workers without limit. This dynamic encourages firms to provide overly generous benefits to their employees, leading to the over-consumption of health care.

By encouraging employers and employees to consume health insurance, and thus health care, more wisely, the “Cadillac tax,” despite its flaws, should work to moderate the growth in health care costs. That is, if Congress ever allows it to take effect as scheduled.

As I noted earlier this year, the left has an easy “solution” to the problem of rising health care costs: Regulations and price controls designed to bring down costs through government fiat. These price controls will lead to consequences for our health system, of course—rationing of care most notably—but they do “work,” insofar as they will arbitrarily reduce health spending.

Conservatives who oppose government price controls should embrace solutions like the “Cadillac tax” (or something like it) as one way to slow the growth in health care spending—not least because Democrats enacted the tax as part of Obamacare. Instead, many conservative lawmakers appear poised to endorse its repeal, without an alternative strategy to control health costs instead, because they find it easier to pursue the path of least resistance.

Problem 3: Lack of Discipline

The Congressional Budget Office previously estimated that repealing the “Cadillac tax” would cost the government nearly $200 billion in revenue over a decade, and larger sums in the decades after that. How does Congress propose to replace that revenue? By repealing the medical device and health insurer taxes, of course!

Therein lies the problem in Congress: The current definition of a bipartisan “deal” occurs when both sides get what they want—at the expense of taxpayers, or more specifically future generations. One article notes that “in general medical device tax repeal is more of a priority of Republicans and ‘Cadillac tax’ repeal for Democrats.” That makes this agreement combining repeal of both taxes like an episode of “Oprah’s Favorite Things,” where everyone wins a car.

Except for one minor detail: Our country already faces $23 trillion in debt, and trillion-dollar deficits as far as the eye can see. The “deal” on these two taxes alone will increase that debt by another quarter-trillion dollars (give or take). That number doesn’t include the increased spending arising from Congress’ agreement to bust its spending caps, or all the other ancillary provisions (like a bailout for coal miners) hitching a ride on the “Christmas tree” omnibus.

At some point soon, Congress’ lack of discipline—its inability to say no to spending pledges our country cannot afford—will harm our economic growth and fiscal stability. At that point, the American people will realize that, by constantly trying to play Santa Claus, lawmakers have left a multi-trillion-dollar lump of coal to the next generation, in the form of our rapidly skyrocketing debt.

UPDATE: This post was edited after publication to reflect late-breaking developments concerning the omnibus spending bills.

This post was originally published at The Federalist.