Three Obstacles to Senate Democrats’ Health Care Vision

If Democrats win a “clean sweep” in the 2020 elections—win back the White House and the Senate, while retaining control of the House—what will their health care vision look like? Surprisingly for those watching Democratic presidential debates, single payer does not feature prominently for some members of Congress—at least not explicitly, or immediately. But that doesn’t make the proposals any more plausible.

Ezra Klein at Vox spent some time talking with prominent Senate Democrats, to take their temperature on what they would do should the political trifecta provide them an opportunity to legislate in 2021. Apart from the typical “Voxplanations” in the article—really, did Klein have to make not one but two factual errors in his article’s first sentence?—the philosophy and policies the Senate Democrats laid out don’t stand up to serious scrutiny, on multiple levels.

Problem 1: Politics

The first problem comes in the form of a dilemma articulated by none other than Ezra Klein, just a few weeks ago. Just before the last Democratic debate in July, Klein wrote that liberals should not dismiss with a patronizing shrug Americans’ reluctance to give up their current health coverage:

If the private insurance market is such a nightmare, why is the public so loath to abandon it? Why have past reformers so often been punished for trying to take away what people have and replace it with something better?…

Risk aversion [in health policy] is real, and it’s dangerous. Health reformers don’t tiptoe around it because they wouldn’t prefer to imagine bigger, more ambitious plans. They tiptoe around it because they have seen its power to destroy even modest plans. There may be a better strategy than that. I hope there is. But it starts with taking the public’s fear of dramatic change seriously, not trying to deny its power.

Democrats’ “go big or go home” theory lies in direct contrast to the inherent unease Klein identified in the zeitgeist not four weeks ago.

Problem 2: Policy

Klein and the Senate Democrats attempt to square the circle by talking about choice and keeping a role for private insurance. The problem comes because at bottom, many if not most Democrats don’t truly believe in that principle. Their own statements belie their claims, and the policy Democrats end up crafting would doubtless follow suit.

Does this sound like someone who 1) would maintain private insurance, if she could get away with abolishing it, and 2) will write legislation that puts the private system on a truly level playing field with the government-run plan? If you believe either of those premises, I’ve got some land to sell you.

In my forthcoming book and elsewhere, I have outlined some of the inherent biases that Democratic proposals would give to government-run coverage over private insurance: Billions in taxpayer funding; a network of physicians and hospitals coerced into participating in government insurance, and paid far less than private insurance can pay medical providers; automatic enrollment into the government-run plan; and many more. Why else would the founder of the “public option” say that “it’s not a Trojan horse” for single payer—“it’s just right there!”

Problem 3: Process

Because Democrats will not have a 60-vote margin to overcome a Republican filibuster even if they retake the majority in 2020, Klein argues they can enact the bulk of their agenda through the budget reconciliation process. He claims that “if Democrats confine themselves to lowering the Medicare age, adding a [government-run plan], and negotiating drug prices, there’s reason to believe it might pass parliamentary muster.”

Of course Klein would say that—because he never worked in the Senate. It also appears he never read my primer on the Senate’s “Byrd rule,” which governs reconciliation procedures in the Senate. Had he done either, he probably wouldn’t have made that overly simplistic, and likely incorrect, statement.

Take negotiating drug prices. The Congressional Budget Office first stated in 2007—and reaffirmed this May—its opinion that on its own, allowing Medicare to negotiate drug prices would not lead to any additional savings.

That said, Democrats this year have introduced legislation with a “stick” designed to force drug companies to the “negotiating” table. Rep. Lloyd Doggett (D-Texas) introduced a bill (H.R. 1046) requiring federal officials to license the patents of companies that refuse to “negotiate” with Medicare.

While threatening to confiscate their patents might allow federal bureaucrats to coerce additional price concessions from drug companies, and thus scorable budgetary savings, the provisions of the Doggett bill bring their own procedural problems. Patents lie within the scope of the House and Senate Judiciary Committees, not the committees with jurisdiction over health care issues (Senate Finance, House Ways and Means, and House Energy and Commerce).

While Doggett tried to draft his bill to avoid touching those committees’ jurisdiction, he did not, and likely could not, avoid it entirely. For instance, language on lines 4-7 of page six of the Doggett bill allows drug companies whose patents get licensed to “seek recovery against the United States in the…Court of Federal Claims”—a clear reference to matter within the jurisdiction of the Judiciary Committees. If Democrats include this provision in a reconciliation bill, the parliamentarian almost certainly advise that this provision exceeds the scope of the health care committees, which could kill the reconciliation bill entirely.

But if Democrats don’t include a provision allowing drug manufacturers whose patents get licensed the opportunity to receive fair compensation, the drug companies would likely challenge the bill’s constitutionality. They would claim the drug “negotiation” language violates the Fifth Amendment’s prohibition on “takings,” and omitting the language to let them apply for just compensation in court would give them a much more compelling case. Therein lies the “darned if you do, darned if you don’t” dilemma reconciliation often presents: including provisions could kill the entire legislation, but excluding them could make portions of the legislation unworkable.

Remember: Republicans had to take stricter verification provisions out of their “repeal-and-replace” legislation in March 2017—as I had predicted—due to the “Byrd rule.” (The provisions went outside the scope of the committees of jurisdiction, and touched on Title II of the Social Security Act—both verboten under budget reconciliation.)

If Republicans had to give up on provisions designed to ensure illegal immigrants couldn’t receive taxpayer-funded insurance subsidies due to Senate procedure, Democrats similarly will have to give up provisions they care about should they use budget reconciliation for health care. While it’s premature to speculate, I wouldn’t count myself surprised if they have to give up on drug “negotiation” entirely.

1994 Redux?

Klein’s claims of a “consensus” aside, Democrats could face a reprise of their debacle in 1993-94—or, frankly, of Republicans’ efforts in 2017. During both health care debates, a lack of agreement among the majority party in Congress—single payer versus “managed competition” in 1993-94, and “repeal versus replace” in 2017—meant that each majority party ended up spinning its wheels.

To achieve “consensus” on health care, the left hand of the Democratic Party must banish the far-left hand. But even Democrats have admitted that the rhetoric in the presidential debates is having the opposite effect—which makes Klein’s talk of success in 2021 wishful thinking more than a realistic prediction.

This post was originally published at The Federalist.

Another Study Confirms Obamacare as the Unaffordable Care Act

Despite the high level of partisanship in the United States, both sides can agree on something even as controversial as health care: Both Democrats and Republicans believe Obamacare has failed to deliver.

Based on their last primary debate, Democrats running for the 2020 presidential nomination can’t give away more health care subsidies fast enough. Some of them want to abolish Obamacare outright. But all of them agree the law has not lived up to Barack Obama’s claims during the 2008 campaign, when he repeatedly promised that hisplan would reduce premiums by $2,500 for the average family.

Shrinking Without Subsidies

The CMS analysis of risk adjustment data submitted by insurers focuses on the unsubsidized marketplace. These individuals, who make more than 400 percent of the federal poverty level ($103,000 for a family of four in 2019), do not receive any subsidies from the federal government to offset their premiums.

The analysis concludes that, while the subsidized marketplace has remained steady for the past several years, the number of unsubsidized people purchasing insurance has steadily shrunk as premiums continue to decline. In 2018, even as average monthly subsidized enrollment increased by a modest 4 percent, average monthly unsubsidized enrollment plummeted by 24 percent.

From 2016 through 2018, the unsubsidized market shrank by an even larger amount. Successive price increases — an average 21 percent premium rise in 2017, followed by another 26 percent jump in 2018 — priced many people out of the market.

During those two years, the average monthly enrollment by unsubsidized people fell by 40 percent, from 6.3 million to 3.8 million. Six states saw their unsubsidized enrollment drop by more than 70 percent, with Iowa’s unsubsidized enrollment shrinking by a whopping 91 percent.

The large percentages of unsubsidized people dropping coverage in many states — in most cases, because they could not afford their rapidly escalating premiums — show the unstable nature of the Obamacare “marketplaces.” With only people who qualify for subsidies able to afford their premiums, most states’ insurance markets have become dependent on the morphine drip of subsidies from Washington.

‘Popular’ Preexisting Conditions?

Why have premiums skyrocketed so that only people receiving federal subsidies can afford to pay their insurance rates? A Heritage Foundation analysis from last year provides a clear answer:

A cluster of [Obamacare] insurance-access requirements — specifically the guaranteed-issue requirement and the prohibitions on medical underwriting and applying coverage exclusions for pre-existing medical conditions — accounts for the largest share of premium increases.

In other words, the preexisting condition provisions have proven the largest factor in pricing literally millions of people out of their health insurance coverage. This means, ironically enough, such people now have no coverage should they develop any such condition.

The left does not want to talk about these people. While the liberal Kaiser Family Foundation will survey Americans about the supposed popularity of the preexisting condition provisions, the organization refuses to survey Americans about the cost of these regulations — for instance, whether people think those “protections” are worth spending an extra several thousand dollars a year in higher insurance premiums. As the old legal saying goes, “Don’t ask a question to which you don’t want to know the answer.”

But the American people need to know the answers and need to understand the effects of Obamacare. Liberals wouldn’t have you know it, but families care more about the affordability of health coverage than about losing their coverage due to a preexisting condition. Reforms codified by the Trump administration will help provide portable and more affordable coverage to many Americans and represent one of several better solutions to tackle the preexisting condition problem.

The left’s “solutions” to Obamacare’s skyrocketing premiums represent more of the same — more taxes, more spending, and more subsidies to make coverage “affordable” for a select few. But sooner or later, the left will eventually run out of other people’s money. The Unaffordable Care Act’s failure to deliver demonstrates that the American people need and deserve a better approach than the left can devise.

This post was originally published at The Federalist.

Joe Biden’s Health Care Plan: SandersCare Lite

On Monday morning, former vice president Joe Biden released the health care plan for his 2020 presidential campaign. The plan comes ahead of a single-payer health plan speech by Sen. Bernie Sanders (I-VT) scheduled for Wednesday.

Biden’s plan includes several noteworthy omissions. For instance, it does not include any reference to health coverage for foreign citizens illegally present in the United States. That exclusion seems rather surprising, given both Democrats’ embrace of health benefits for those unlawfully present in last month’s debate, and Biden’s repeated references to the issue.

Biden said later on Monday that illegally present foreign citizens should have access to “public health clinics if they’re sick,” but not health insurance. He also claimed that last month’s debate format did not give him enough time to explain his position.

Overall, however, Biden’s plan includes many similarities to Sanders’. While both Sanders and Biden want to draw contrasts on health care—Sanders to attack Biden as beholden to corporate interests, and Biden to attack Sanders for wanting to demolish Obamacare—their plans contain far more similarities than differences.

Losing Coverage

Sanders’ bill would, as the American people have gradually learned this year, make private insurance “unlawful,” taking coverage away from approximately 300 million Americans. Biden’s plan specifically attacks single payer on this count, for “starting from scratch and getting rid of private insurance.”

As with Obamacare, Biden’s promise will echo hollow. By creating a government-run “public option” like Sanders’, the Biden plan would also take away health coverage for millions of Americans. As I have previously explained, a government-run plan would sabotage private insurance, using access to Treasury dollars and other in-built structural advantages.

In 2009, the Lewin Group concluded that a government-run health plan, available to all individuals and paying doctors and hospitals at Medicare rates (i.e., less than private insurance), would lead to 119.1 million individuals losing employer coverage:

More Spending

Biden would also expand the Obamacare subsidy regime, in three ways. He would:

  1. Reduce the maximum amount individuals would pay in premiums from 9.86% of income to no more than 8.5% of income, with federal subsidies making up the difference.
  2. Repeal Obamacare’s income cap on subsidies, so that families with incomes of more than four times the poverty level ($103,000 for a family of four in 2019) can qualify for subsidies.
  3. To lower deductibles and co-payments, link insurance subsidies to a richer “gold” plan, one that covers 80% of an average enrollee’s health costs in a given year, rather than the “silver” plan under current law.

All three of these recommendations come from the liberal Urban Institute’s Healthy America plan, issued last year. However, they all come with a big price tag. Consider the following excerpt from Biden’s plan:

Take a family of four with an income of $110,000 per year. If they currently get insurance on the individual marketplace [i.e., Exchange], because their premium will now be capped at 8.5% of their income, under the Biden Plan they will save an estimated $750 per month on insurance alone. That’s cutting their premiums almost in half. [Emphasis original.]

That’s also making coverage “affordable” for families through unaffordable levels of federal spending. By its own estimates, Biden’s plan will give a family with an income of $110,000 annually—which is approximately double the national median household income—$9,000 per year in federal insurance subsidies. Some families with that level of income may not even pay $9,000 annually in federal income taxes, depending upon their financial situation, yet they will receive sizable amounts of taxpayer-funded largesse.

Price Controls and Regulations

The drug price section of the Biden plan includes the usual leftist tropes about “prescription drug corporations…profiteering off of the pocketbooks of sick individuals.” It proposes typical liberal “solutions” in the form of price controls, whether importing price-controlled pharmaceuticals from overseas, or allowing “an evaluation by…independent board members” (i.e., bureaucrats) to determine prices.

Ironically, Biden’s plan implicitly acknowledges Obamacare’s flaws. In talking about prescription drug pricing, Biden omits any discussion of the “rock-solid deal” that the Obama administration cut with Big Pharma, so that pharmaceutical companies would run ads supporting Obamacare.

Likewise, Biden’s plan notes that “the concentration of market power in the hands of a few corporations is occurring throughout our health care system, and this lack of competition is driving up prices for consumers.” Yet it fails to note the cause of much of this consolidation: Obamacare encouraged hospitals to gobble up physician practices, and each other, to obtain clout in negotiations with insurers. Typically, after acknowledging government’s failures, Biden, like Sanders, prescribes yet more government as the solution.

In the leadup to debate on “repeal-and-replace” legislation several years ago, conservative Republicans said they did not want any replacement to become “Obamacare Lite.” Just as history often repeats itself, Democrats seem ready to embark on a similar intra-party debate. That’s because, no matter how much Biden wants to draw distinctions between his proposals and single payer, his plan looks suspiciously like “SandersCare Lite.”

This post was originally published at The Federalist.

Why Republicans Should Preserve Obamacare’s Cadillac Tax

Those seeking to understand why the United States faces out-of-control health-care costs need look no further than this week’s congressional agenda. On Wednesday, the House of Representatives will likely vote on legislation to repeal Obamacare’s “Cadillac tax” on high-cost health plans, a provision Congress has already delayed repeatedly.

Most economists agree that reforming the tax treatment of health insurance represents one key way to slow the growth of health-care costs. Yet neither party wants to take the courageous decisions required to do just that — even when, in this case, the “action” involved merely requires allowing a legislative provision already enacted to take effect.

The Conservative Approach to Controlling Costs

But from a conservative perspective, controlling health care costs in a broader sense involves getting incentives right. Reforming incentives can involve injecting more competition into the health care system — for instance, by improving generic drugs faster to help bring down prices. But it also requires reforms that encourage people to serve as smarter consumers of health care.

Health costs continue to skyrocket, in large part because individuals love to spend other people’s money. Few people can afford to pay for all their health care, such as major surgeries, out-of-pocket. Funding more care through third-party payments — a majority of Americans consume most of their health care through an insurer, and many insurers are chosen by an employer — increases spending.

The tax code exacerbates the third-party payment problem by allowing employers to provide health insurance to their workers on a tax-free basis. Economists agree that this tax preference encourages people to use more expensive health insurance than they need, and thus more health care than they need.

Why Do Conservatives Oppose a Conservative Reform?

However, the law used a clumsy approach to imposing this tax, on two levels. First, it applied the same 40 percent rate to all employer-provided policies, regardless of whether the particular affected workers came from a high-tax bracket, such as corporate CEOs, or a low-tax bracket, such as office janitors. Second, it imposed the tax as part of an overall package of revenue increases used to fund Obamacare.

Nonetheless, the “Cadillac tax” represents an important measure to control health care costs. Because Congress included this provision as part of Obamacare, Republicans could easily allow the measure to take effect while disclaiming responsibility for having enacted it. After all, everyone knows Obamacare passed with only Democratic votes.

Yet Republicans have spent the better part of the past decade trying to repeal this measure, without enacting a similar or better replacement that could control health care costs. Moreover, the House will apparently vote on the repeal this week without a full Congressional Budget Office score showing the sizable fiscal impact of that action.

Liberals’ Approach To Controlling Health Costs

Conservatives might not think a battle over the “Cadillac tax” is worth fighting. President Barack Obama’s attack ads from 2008 showed that “taxing health benefits” can prove incredibly politically powerful. (All the more ironic since the Obama White House insisted on including the “Cadillac tax” as part of Obamacare.)

But after watching the Democratic debates last month, conservatives should know that liberals have an “easy solution” to controlling health care costs: price controls, greater regulations, and more government control. After all, Sen. Bernie Sanders’ single-payer legislation exists in no small part to extend Medicare’s price controls over health care goods and services to all Americans, rather than just seniors.

If conservatives cannot support and implement changes that reform the incentives in the health care system, including reasonable limits on the tax treatment of employer-provided health coverage, they may end up bringing about the liberal alternative. And sooner than they think.

This post was originally published at The Federalist.

How Democratic Health Proposals Will Take Your Coverage Away

Following her performance in last week’s Democratic presidential debates, California Senator Kamala Harris once again tripped up over the issue of health care. For a second time, Harris attempted to claim that she would not eliminate private health coverage. In reality, however, virtually all Democrats running for president would enact policies jeopardizing Americans’ health insurance. The candidates differ largely in their level of honesty about their proposals’ effects.

During the debates on Wednesday and Thursday, only Harris, New York Mayor Bill DeBlasio, Massachusetts Sen. Elizabeth Warren, and Vermont Sen. Bernie Sanders said they supported eliminating private insurance. But in an interview Friday morning, Harris claimed she heard the question as asking whether she would give up her insurance, not whether she would take others’ coverage away.

The facts defy Harris’ lawyerly parsing. Section 107(a) of the bill that Sanders introduced, and which Harris, Warren, and New Jersey’s Cory Booker have co-sponsored, would make it “unlawful for a private health insurer to sell health insurance coverage that duplicates the benefits provided” under the legislation.

In May, Harris claimed that Sanders’ legislation would permit private health insurance to supplement the government-run program. But as CNN’s Jake Tapper pointed out at the time, Sanders’ bill would provide such comprehensive benefits that supplemental coverage could only cover treatments like cosmetic surgery. It raises an obvious question: Who would want to buy “insurance” covering breast implants and Botox injections? Harris’ Hollywood constituents, perhaps, but few middle-class Americans.

Other candidates have similarly tried to disguise their intentions when it comes to taking away Americans’ health coverage. During last week’s debates, New York Senator Kirsten Gillibrand—another co-sponsor of Sanders’ legislation to make private coverage “unlawful”—did not raise her hand when asked about eliminating health insurance. She said she supported a government-run “public option” instead: “I believe we need to get to…single payer. The quickest way you get there is you create competition with the insurers.”

But individuals with private coverage cannot, and should not, rest easy. The fact that Gillibrand says she supports a government-run health system as an eventual outcome means that she would work to sabotage the private health insurance system, to drive all Americans into a government-run program.

Even Democratic candidates who claim they oppose Sanders’ single-payer legislation have proposed policies that would eventually lead to such a government-run health system. In Thursday’s debate, Sen. Michael Bennet claimed that his proposal for a “public option” “could easily” see 35 million people enroll. Bennet proved off in his estimate by only about 100 million individuals. In 2009, the Lewin Group estimated that a plan similar to Bennet’s could enroll as many as 131.2 million Americans.

A review of Bennet’s legislation demonstrates how it would sabotage private coverage, by giving the government plan major structural advantages. Bennett’s bill grants the government plan $1 billion in start-up funding from taxpayers—with additional bailout funds likely should the plan ever run into financial distress. It would require all doctors participating in Medicare to join the government plan. And it would pay doctors and hospitals the much lower rates that Medicare pays, even though nearly three-quarters of hospitals lost money on their Medicare patients in 2017.

Among the Democrats running for president, Sanders has remained outspoken in his desire to take away Americans’ health coverage, and ban private insurance. While most of the other candidates say that they want to preserve private coverage, their policies would do the exact opposite. Just as Barack Obama eventually had to apologize for his infamous “If you like your plan, you can keep it” broken promise, so too will most of this year’s candidates have to explain why American families couldn’t keep their insurance if and when their policy plans go into effect.

In accepting his party’s nomination for president at the 1984 Democratic National Convention, Minnesota Senator Walter Mondale infamously claimed that “[Ronald] Reagan will raise taxes, and so will I. He won’t tell you; I just did.” Thirty-five years later, virtually all Democrats have embraced a position almost as unpopular as raising taxes: Taking away Americans’ health insurance. Unlike Mondale, most of this year’s candidates won’t tell you the full truth about their policies. I just did.

This post was originally published at Fox News.

The Trump Administration’s Innovative Solution Regarding Pre-Existing Conditions

Last Thursday afternoon, the Trump administration released its final rule regarding Health Reimbursement Arrangements (HRAs). The 497-page document will take lawyers and employment professionals weeks to absorb and digest fully. But in a nutshell, the rule will help to make coverage more portable and affordable—while also going a long way to resolve the problem of pre-existing conditions.

As I first explained when the administration proposed this HRA rule back in October, much of the problem surrounding pre-existing conditions revolves around portability. Because most Americans don’t own their own health coverage—their employers do—when people lose their job, they lose their health coverage. The pre-existing condition problem emerges when people develop a costly medical condition while at one job, then have to switch jobs or otherwise leave their employer plan.

But if people owned their own insurance policies, they could change jobs easily, without fear of losing their coverage. Moreover, they would get to pick the kinds of benefit designs and doctor networks they want, rather than being stuck with what their employer picks for them.

The final rule accomplishes both objectives. It enhances portability by allowing employers to give their workers a (tax-free) contribution to an HRA, so employees can buy the plan that works best for them. If there’s any difference between the employer’s contribution and the total premium—for instance, an employer contributes $300 per month, and the worker selects a plan with a $350 monthly premium—the worker can pay the difference on a pre-tax basis, so long as he purchases the plan outside of the Obamacare exchanges. Best of all, because employees own the plans and not the employer, they can keep their coverage when they change jobs.

This change also improves affordability, in two key respects. First, individuals can buy just the coverage they want, rather than the coverage their employer gives them. Currently, if an employer plan offers particular benefits that an employee does not value, or a provider network a worker does not need, the worker can only buy an alternative plan by forfeiting their employer’s subsidy towards their health insurance—an unattractive and irrational option for most. The HRA option will allow workers to retain their employer’s subsidy, yet purchase more tailored coverage.

Second, more people purchasing coverage individually will create a more robust marketplace, increasing competition. Carriers may move into the market for individual coverage, and even create new options to attract additional business—both changes that will help consumers, and mitigate premium increases.

The final rule does include important safeguards to ensure that businesses don’t just try to “dump” their sickest employees onto individual insurance plans, raising premiums on the Obamacare exchanges. Most notably, if they elect the HRA option, firms must apply it to an entire class of workers—for instance, all full-time workers, or all workers in a certain geographic area. Moreover, employers cannot vary their contributions to workers’ HRAs, except by the employee’s age and number of dependents.

The rule could eventually lead to dramatic changes in Americans’ health-coverage options, but it includes provisions designed to phase those changes in over time. Under the rule, employers cannot offer traditional group health coverage to any class of workers that has access to an individual coverage HRA. In other words, employers can choose the “new” HRA model to deliver benefits to their workers, or the “old” (i.e., existing) model for their workers, but not both (at least not for the same class of workers).

However, the final rule also includes a critically important grandfathering provision, which will provide businesses the option for a smoother transition. Under this provision, an employer can apply the HRA model to new hires, while allowing existing employees to maintain their traditional group insurance. For instance, an employer could state that any worker joining the firm after the HRA rule takes effect (on January 1, 2020) would receive health coverage using the new rules, while current workers would remain on the firm’s existing employer plan.

Conservatives concerned about pre-existing conditions should study this rule closely, and cite it every time the left mounts political attacks over the issue. Liberals want the government to control all of health care, as evidenced by their single-payer push. Conversely, conservatives want doctors and patients to make their own health-care decisions. Last week’s HRA rule will accomplish just that.

This post was originally published at The Federalist.

Why Do Louisiana Republicans Want to Replace Obamacare with Obamacare?

For the latest evidence that bipartisanship occurs in politics when conservatives agree to rubber-stamp liberal policies, look no further than Louisiana. Last week, that state’s senate passed a health-care bill by a unanimous 38-0 margin.

The bill provides that, if a court of competent jurisdiction strikes down all of Obamacare, Louisiana would replace that law with something that…looks an awful lot like Obamacare. Granted, most remain skeptical that the Supreme Court will strike down all (or even most) of Obamacare, not least because the five justices who upheld its individual mandate in 2012 all remain on the bench. Notwithstanding that fact, however, the Louisiana move would codify bad policies on the state level.

If a federal court strikes down the health-care law, the bill would re-codify virtually all of Obamacare’s major insurance regulations on the state level in Louisiana, including:

  • A prohibition on pre-existing condition exclusions;
  • Limits on rates that insurers can charge;
  • Coverage of essential health benefits “that is substantially similar to that of the essential health benefits required for a health plan subject to the federal Patient Protection and Affordable Care Act as of January 1, 2019,” including the ten categories spelled out both in the text of Obamacare and of the Louisiana bill;
  • “Annual limitations on cost sharing and deductibles that are substantially similar to the limitations for health plans subject to the federal Patient Protection and Affordable Care Act as of January 1, 2019”;
  • “Levels of coverage that are substantially similar to the levels of coverage required for health plans subject to the federal Patient Protection and Affordable Care Act as of January 1, 2019”;
  • A prohibition on annual and lifetime limits; and
  • A requirement for coverage of “dependent” children younger than age 26.

The Louisiana bill does allow for slightly more flexibility in age rating than Obamacare does. Obamacare permits insurers to charge older individuals no more than three times younger enrollees’ premiums, whereas the Louisiana bill would expand this ratio to 5-to-1. But in every other respect, the bill represents bad or incoherent policy, on several levels.

First, the regulations above caused premiums to more than double from 2013 through 2017, as Obamacare’s main provisions took effect. Reinstating these federal regulations on the state level would continue the current scenario whereby more than 2.5 million people nationwide were priced out of the market for coverage in a single year alone.

Second, the latter half of the Louisiana bill would create a “Guaranteed Benefits Pool,” essentially a high-risk pool for individuals with pre-existing conditions. Given that the bill provides a clear option for individuals with pre-existing conditions, it makes little sense to apply pre-existing condition regulations—what the Heritage Foundation called the prime driver of premium increases under Obamacare—to Louisiana’s entire insurance market. This provision would effectively raise healthy individuals’ premiums for no good policy reason.

Third, the legislation states that the regulations “shall be effective or enforceable only” if a court upholds the Obamacare subsidy regime, “or unless adequate appropriations are timely made by the federal or state government” in a similar amount and manner. Curiously, the bill does not specify who would declare the “adequa[cy]” of such appropriations. But should a court ever strike down most or all of Obamacare, this language provides a clear invitation for Democratic Gov. John Bel Edwards to demand that Louisiana lawmakers raise taxes—again—to fund “adequate appropriations” reinstating the law on the state level.

As on the federal level, conservatives in Louisiana should not fall into the trap of reimposing Obamacare’s failed status quo for pre-existing conditions. Liberal organizations don’t want to admit it, but the American people care most about making coverage affordable. Obamacare’s one-size-fits-all approach undermined that affordability; better solutions should restore that affordability, by implementing a more tailored approach to insurance markets.

Recognizing that they will get attacked on pre-existing conditions regardless of what they do, conservatives should put forward solutions that reduce people’s insurance costs, such as those previously identified in this space. Conservatives do have better ideas than Obamacare’s failed status quo, if only they will have the courage of their convictions to embrace them.

This post was originally published at The Federalist.

Analyzing the Trump Administration’s Proposed Insurer Bailout

The more things change, the more they stay the same. On a Friday, the Trump administration issued a little-noticed three paragraph statement that used seemingly innocuous language to outline a forthcoming bailout of health insurers—this one designed to avoid political controversy prior to the president’s re-election campaign.

Republicans like Sen. Marco Rubio (R-FL) quite rightly criticized President Obama for wanting to bail out health insurers via a crony capitalist boondoggle. They should do the same now that Trump wants to waste billions more on a similar tactic that has all the stench of the typical Washington “Swamp.”

Explaining the President’s Drug Pricing Proposal

At present, drug manufacturers pay rebates to PBMs in exchange for preferred placement on an insurer’s pharmacy formulary. PBMs then share (most of) these rebates with insurers, who pass them on to beneficiaries. But historically, PBMs have passed those rebates on via lower premiums, rather than via lower drug prices to consumers.

For instance, Drug X may have a $100 list price (the “sticker” price that Manufacturer Y publicly advertises), but Manufacturer Y will pay a PBM a $60 rebate to get Drug X on the PBM’s formulary list. It sounds like a great deal, one in which patients get the drug for less than half price—except that’s not how it works at present.

Instead, the PBM uses the $60 rebate to lower premiums for everyone covered by Insurer A. And the patient’s cost-sharing is based on the list price (i.e., $100) rather than the lower price net of rebates (i.e., $40). This current policy hurts people whose insurance requires them to pay co-insurance, or who have yet to meet their annual deductible—because in both cases, their cost-sharing will be based on the (higher) list price.

The Policy and Political Problems

The administration’s proposed rule conceded that the proposed change could raise Medicare Part D premiums. The CMS Office of the Actuary estimated the rule would raise premiums anywhere from $3.20 to $5.64 per month. (Some administration officials have argued that premiums may stay flat, if greater pricing transparency prompts more competition among drug manufacturers.)

The rule presents intertwined practical and political problems. From a practical perspective, the administration wants the rule to take effect in 2020. But the comment period on the proposed rule just closed, and the review of those comments could last well beyond the June 3 date for plans to submit bids to offer Part D coverage next year.

The political implications seem obvious. The administration doesn’t want to anger seniors with Part D premium increases heading into the president’s re-election bid. And while the administration could have asked insurers to submit two sets of plan bids for 2020—one assuming the rebate rule goes into effect next year, and one assuming that it doesn’t—doing so would have made very explicit how much the change will raise premiums, handing Democrats a political cudgel on a hot-button issue.

Here Comes the Bailout

That dynamic led to the Friday announcement from CMS:

If there is a change in the safe harbor rules effective in 2020, CMS will conduct a demonstration that would test an efficient transition for beneficiaries and plans to such a change in the Part D program. The demonstration would consist of a modification to the Part D risk corridors for plans for which a bid is submitted. For CY2020, under the demonstration, the government would bear or retain 95% of the deviation between the target amount, as defined in section 1860D-15(e)(3)(B) of the Social Security Act (the Act) and the actual incurred costs, as defined in section 1860D-15(e)(1) of the Act, beyond the first 0.5%. Participation in the two-year demonstration would be voluntary and plans choosing to participate would do so for both years. Under the demonstration, further guidance regarding the application process would be provided at a later date.

To translate the jargon: Risk corridors are a program in which the federal government subsidizes insurers who incur large losses, and in exchange insurers agree to give back any large gains. I explained how they worked in the Obamacare context here. However, unlike Obamacare—which had a risk corridor program that lasted only from 2014-2016—Congress created a permanent risk corridor program for Medicare Part D.

It all sounds well and good—until you look more closely at the announcement. CMS says it will “bear or retain 95% of the deviation…beyond the first 0.5%.” That’s not a government agency sharing risk—that’s a government agency assuming virtually all of the risk associated with the higher premium costs due to the rebate rule. In other words, a bailout.

Déjà Vu All Over Again

The use of a supposed “demonstration project” to implement this bailout echoes back to the Obama administration. In November 2010, the Obama administration announced it would create a “demonstration project” regarding Medicare Advantage, and Republicans—rightfully—screamed bloody murder.

They had justifiable outrage, because the added spending from the project, which lasted from years 2012 through 2014, seemed purposefully designed to delay the effects of Obamacare’s cuts to Medicare Advantage. Put simply, the Obama administration didn’t want stories of angry seniors losing their coverage due to Obamacare during the president’s re-election campaign, so they used a “demonstration project” to buy everyone’s silence.

In response to requests from outraged Republicans, the Government Accountability Office (GAO) conducted multiple reviews of the Medicare Advantage “demonstration project.” Not only did GAO note that the $8 billion cost of the project “dwarfs all other Medicare demonstrations…in its estimated budgetary impact and is larger in size and scope than many of them,” it also questioned “the agency’s legal authority to undertake the demonstration.” In other words, the Obama administration did not just undertake a massive insurer bailout, it undertook an illegal one as well.

The current administration has yet to release official details about what it proposes to study in its “demonstration project,” but, in some respects, those details matter little. The real points of inquiry are as follows: Whether buying off insurance companies and seniors will aid Trump’s re-election; and whether any enterprising journalists, fiscal conservatives, or other good government types will catch on, and raise enough objections to nix the bailout.

Congress Should Stop the Insanity

On the latter count, Congress has multiple options open to it. It can obtain request audits and rulings from GAO regarding the legality of the “demonstration,” once those details become public. It can explore passing a resolution of disapproval under the Congressional Review Act, which would nullify Friday afternoon’s memo.

It can also use its appropriations power to defund the “demonstration project,” preventing the waste of taxpayer funds on slush funds and giveaways to insurers. Best of all, they can do all three.

Republicans objected to crony capitalism under Democrats—Rubio famously helped block a taxpayer bailout of Obamacare’s risk corridor program back in 2014. Here’s hoping they will do the same thing when it comes to the latest illegal insurer bailout proposed by CMS.

This post was originally published at The Federalist.

Six Things about Pre-Existing Conditions Republican “Leaders” Still Don’t Get

“If at first you don’t succeed, go ahead and quit.” That might be the takeaway from excerpts of a conference call held earlier this month by House Minority Leader Kevin McCarthy (R-CA), and published in the Washington Post.

McCarthy claimed that Republicans’ “repeal and replace” legislation last Congress “put [the] pre-existing condition campaign against us, and so even people who are [sic] running for the very first time got attacked on that. And that was the defining issue and the most important issue in the [midterm election] race.” He added: “If you’ll notice, we haven’t done anything when it comes to repealing Obamacare this time.”

Problem 1: Pre-Existing Condition Provisions In Context

I first noted this dilemma last summer: Liberals call the pre-existing condition provisions “popular” because their polls only ask about the policy, and not its costs. If you ask Americans whether they would like a “free” car, how many people do you think would turn it down? The same principle applies here.

When polls ask about the trade-offs associated with the pre-existing condition provisions—which a Heritage Foundation study called the largest driver of premium increases under Obamacare—support plummets. Cato surveys in both 2017 and 2018 confirmed this fact. Moreover, a Gallup poll released after the election shows that, by double-digit margins, Americans care more about rising health premiums and costs than about losing coverage due to a pre-existing condition.

The overall polling picture provided an opportunity for Republicans to push back and point out that the pre-existing condition provisions have led to skyrocketing premiums, which priced 2.5 million people out of the insurance marketplace from 2017 to 2018. Instead, most Republicans did nothing.

Problem 2: Republicans’ Awful Legislating

The bills’ flaws came from a failure to understand how Obamacare works. The law’s provisions requiring insurers to offer coverage to everyone (guaranteed issue) and price that coverage the same regardless of health status (community rating) make insurers want to avoid covering sick people. Those two provisions necessitate another two requirements, which force insurers to cover certain conditions (essential health benefits) and a certain percentage of expected health costs (actuarial value).

In general, the House and Senate bills either repealed, or allowed states to waive, the latter two regulations, while keeping the former two in place. If Republicans had repealed all of Obamacare’s insurance regulations, they could have generated sizable premium savings—an important metric, and one they could tout to constituents. Instead, they ended up in a political no man’s land, with people upset about losing their pre-existing condition “protections,” and no large premium reductions to offset that outrage.

Looking at this dynamic objectively, it isn’t surprising that McCarthy and his colleagues ended up with a political loser on their hands. The true surprise is why anyone ever thought the legislative strategy made for good politics—or, for that matter, good (or even coherent) policy.

Problem 3: Pre-Existing Conditions Aren’t Going Away

Within hours after Sen. Thom Tillis (R-NC) introduced a bill last year maintaining Obamacare’s pre-existing condition provisions—the requirement that all insurers offer coverage at the same rates to all individuals, regardless of health status—liberals weighed in to call it insufficient.

As noted above, Obamacare encourages insurers to discriminate against people with pre-existing conditions. Repealing only some of the law’s regulations would exacerbate that dynamic, by giving insurers more tools with which to avoid enrolling sick people. Liberals recognize this fact, and will say as much any time Republicans try to modify any of Obamacare’s major insurance regulations.

Problem 4: Better Policies Exist

According to the Post, McCarthy said he wants to recruit candidates who would “find a solution at the end of the day.” A good thing that, because better solutions for the problems of pre-existing conditions do exist (I’ve written about several) if McCarthy had ever bothered to look for them.

Their political attacks demonstrate that liberals focus on supporting “insurance” for people once they develop a pre-existing condition. (Those individuals’ coverage by definition really isn’t “insurance.”) By contrast, conservatives should support making coverage more affordable, such that people can buy it before they develop a pre-existing condition—and keep it once they’re diagnosed with one.

Regulations proposed by the Trump administration late last year could help immensely on this front, by allowing employers to subsidize insurance that individuals hold and keep—that is, coverage that remains portable from job to job. Similar solutions, like health status insurance, would also encourage portability of insurance throughout one’s lifetime. Other options, such as direct primary care and high-risk pools, could provide care for people who have already developed pre-existing conditions.

Using a series of targeted alternatives to reduce and then to solve the pre-existing condition problem would prove far preferable than the blunt alternative of one-size-fits-all government regulations that have made coverage unaffordable for millions. However, such a solution would require political will from Republicans—which to date they have unequivocally lacked.

Problem 5: Republicans’ Alternative Is Socialized Medicine

Instead of promoting those better policies, House Republican leaders would like to cave in the most efficient manner possible. During the first day of Congress, they offered a procedural motion that, had it been adopted, would have instructed the relevant committees of jurisdiction to report legislation that:

(1) Guarantees no American citizen can be denied health insurance coverage as the result of a previous illness or health status; and (2) Guarantees no American citizen can be charged higher premiums or cost sharing as the result of a previous illness or health status, thus ensuring affordable health coverage for those with pre-existing conditions.

Guaranteeing that everyone gets charged the same price for health care? I believe that’s called socialism—and socialized medicine.

Their position makes it very ironic that the same Republican committee leaders are pushing for hearings on Democrats’ single-payer legislation. It’s a bit rich to endorse one form of socialism, only to denounce another form as something that will destroy the country. (Of course, Republican leaders will only take that position unless and until a single-payer bill passes, at which point they will likely try to embrace it themselves.)

Problem 6: Health Care Isn’t Going Away As An Issue

The federal debt this month passed $22 trillion, and continues to rise. Most of our long-term government deficits arise from health care—the ongoing retirement of the baby boomers, and our corresponding obligations to Medicare, Medicaid, and now Obamacare.

Any Republican who cares about a strong national defense, or keeping tax rates low—concerns most Republicans embrace—should care about, and take an active interest in, health care and health policy. Given his comments about not repealing, or even talking about, Obamacare, McCarthy apparently does not.

But unsustainable trends are, in the long run, unsustainable. At some point in the not-too-distant future, skyrocketing spending on health care will mean that McCarthy will have to care—as will President Trump, and the Democrats who have gone out of their way to avoid talking about Medicare’s sizable financial woes. Here’s hoping that by that point, McCarthy and Republican leaders will have a more coherent—and conservative—policy than total surrender to the left.

This post was originally published at The Federalist.

Do House Republicans Support Socialized Medicine?

Health care, and specifically pre-existing conditions, remain in the news. The new Democratic majority in the House of Representatives has lined up two votes — one last week and one this week — authorizing the House to intervene in Texas’ lawsuit against the Affordable Care Act, also known as Obamacare. Speaker Nancy Pelosi, D-Calif., claims that the intervention will “protect” Americans with pre-existing conditions.

In reality, the pre-existing condition provisions represent Obamacare’s major flaw. According to the Heritage Foundation, those provisions have served as the prime driver of premium increases associated with the law. Since the law went into effect, premiums have indeed skyrocketed. Rates for individual health insurance more than doubled from 2013 through 2017, and rose another 30-plus percent last year to boot.

As a result of those skyrocketing premiums, more than 2.5 million people dropped their Obamacare coverage from March 2017 through March 2018. These people now have no coverage if and when they develop a pre-existing condition themselves.

A recent Gallup poll shows that Americans care far more about rising premiums than about being denied coverage for a pre-existing condition. Given the public’s focus on rising health care costs, Republicans should easily rebut Pelosi’s attacks with alternative policies that address the pre-existing condition problem while allowing people relief from skyrocketing insurance rates.

Unfortunately, that’s not what the Republican leadership in the House did. Last Thursday, Rep. Kevin Brady, R-The Woodlands, offered a procedural motion that amounted to a Republican endorsement of Obamacare. Brady’s motion instructed House committees to draft legislation that “guarantees no American citizen can be charged higher premiums or cost sharing as the result of a previous illness or health status, thus ensuring affordable health coverage for those with pre-existing conditions.”

If adopted — which thankfully it was not — this motion would only have entrenched Obamacare further. The pre-existing condition provisions represent the heart of the law, precisely because they have raised premiums so greatly. Those premium increases necessitated the mandates on individuals to buy, and employers to offer, health insurance. They also required the subsidies to make that more-expensive coverage “affordable” — and the tax increases and Medicare reductions needed to fund those subsidies.

More to the point, what would one call a health care proposal that treats everyone equally, and ensures that no one pays more or less than the next person? If this concept sounds like “socialized medicine” to you, you’d have company in thinking so. None other than Kevin Brady denounced Obamacare as “socialized medicine” at an August 2009 town hall at Memorial Hermann Hospital.

All of this raises obvious questions: Why did someone who for years opposed Obamacare as “socialized medicine” offer a proposal that would ratify and entrench that system further?

Republicans like Brady can claim they want to “repeal-and-replace” Obamacare from now until the cows come home, but if they want to retain the status quo on pre-existing conditions then as a practical matter they really want to uphold the law. Conservatives might wonder whether it’s time to “repeal-and-replace” Republicans with actual conservatives.

This post was originally published in the Houston Chronicle.