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

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

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

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

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

The Problem: Employer-Provided Health Insurance

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

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

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

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

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

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

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

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

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

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

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

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

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

Cure the Disease, Not the Symptoms

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

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

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

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

Trump Administration’s Solution

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

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

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

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

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

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

Empower Patients, Not Government

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

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

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

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

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

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

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

Most Eligible People Already Have Coverage

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

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

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

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

Near-Retirees Are Comparatively Wealthy

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

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

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

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

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

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

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

This post was originally published at The Federalist.

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.

Warren’s Prescription the Wrong One

In an October analysis the Urban Institute concluded that a single-payer plan, similar to Sen. Warren’s, which eliminates virtually all patient cost-sharing, would raise national health spending by more than 20%, or $719.7 billion a year. In the researchers’ view, the additional demand stimulated by making health care “free” to consumers would overwhelm any potential savings from paying doctors and hospitals government-dictated rates. This higher demand would also raise the cost of single-payer well beyond Sen. Warren’s estimates, meaning middle-class families would face massive tax increases to pay for this spending.

That Prof. Johnson would cite the Urban Institute to argue that Sen. Warren’s plan would lower health-care costs, while ignoring the fact that the institute itself reached the opposite conclusion, speaks to the cherry-picked nature of the proposal, which has drawn derision from liberals and conservatives alike.

This post was originally published at the Wall Street Journal.

Skyrocketing Premiums Show Obamacare’s Failure to Deliver

According to a recently released report, extending employer-provided health coverage to the average American family equates to buying that family a moderately-priced car every single year. This provides further proof that Barack Obama “sold” a lemon to the American people in the form of Obamacare.

The inexorable rise in health care costs—a rise that candidate Obama pledged to reverse—shows how Obamacare has failed to deliver on its promise. Yet Democrats want to “solve” the problems Obamacare is making worse through even more government regulations, taxes, and spending. Struggling American families deserve relief from both the failed status quo, and Democrats’ desire to put that failed status quo on steroids.

Study of Employer Plans

Obamacare has failed to deliver on that pledge, as premiums continue to rise higher and higher:

Why has Obamacare failed to deliver? Several reasons stand out. First, its numerous regulatory requirements on insurance companies raised rates, in part by encouraging individuals to consume additional care.

The pre-existing condition provisions represent the prime driver of premium increases in the exchange market, according to a Heritage Foundation paper from last year. However, because employer-sponsored plans largely had to meet these requirements prior to Obamacare, they have less bearing on the increase in employer-sponsored premiums.

Second, Obamacare encouraged consolidation within the health care sector—hospitals buying hospitals, hospitals buying physician practices, physician practices merging, health insurers merging, and so on. While providers claim their mergers will provide better care to patients, they also represent a way for doctors and hospitals to demand higher payments from insurers. Reporting has shown how hospitals’ monopolistic practices drive up prices, raising rates for patients and employers alike.

Same Song, Different Verse

More Regulations: On issues like “surprise” billing or drug pricing, Democrats’ favored proposals would impose price controls on some or all segments of the health care industry. These price controls would likely limit the supply of care provided, while also reducing its quality.

More Spending: Most Democratic proposals, whether by presidential candidates, liberal think-tanks, or members of Congress, include major amounts of new spending to make health care “affordable” for the American people—an implicit omission that Obamacare (a.k.a. the “Affordable Care Act”) has not delivered for struggling families.

More Taxes: Even though some don’t wish to admit it, the Democratic candidates for president have all proposed plans that would necessitate major tax increases, from the hundreds of billions to the tens of trillions of dollars—even though at least two of those candidates have failed to pay new taxes imposed by Obamacare itself.

The latest increase in employer-sponsored health premiums demonstrates that hard-working families deserve better than Obamacare. It also illustrates why the American people deserve better than the new Democratic plans to impose more big government “solutions” in the wake of Obamacare’s failure.

This post was originally published at The Federalist.

How the Impeachment Frenzy Could Block Bad Health Care Policies

House Democrats’ headlong rush to impeach President Trump will have many implications for American politics and the presidential election. On policy, it could have a salutary effect for conservatives, by precluding the enactment of harmful policies that would push our health care system in the wrong direction.

Congress should of course do something about our health care system, particularly the millions of individuals priced out of insurance by Obamacare, also known as the Unaffordable Care Act. But in recent weeks, it appears that Republicans have fallen into the typical definition of bipartisanship—when conservatives agree to do liberal things. As a result, if the controversy over impeachment leads to a legislative stalemate over health care, it will at least prevent Congress from making our current flawed system any worse.

Renewed Impeachment Push

The emerging controversy over Trump’s interactions with Ukraine, and whether those actions constituted an impeachable offense, resulted in analyses of whether and how the impeachment push will affect the legislative agenda on multiple issues, including health care.

Multiple Republicans suggested impeachment could bring Congress’ other work to a halt, whether by consuming the time and energy of members of Congress and staff, poisoning the proverbial well for negotiations and compromise, or a combination of the two. Consider the following quotes from Republicans in a Wednesday story:

  • House Ways and Means Committee Ranking Member Kevin Brady (R-Texas): “Impeachment makes a toxic environment more toxic.”
  • Former House Freedom Caucus Chairman Mark Meadows (R-N.C.): “There is more oxygen on impeachment than there is on legislation….My Democratic colleagues have put everything on hold to try to make sure that this President is not the one that signs any proposed bills.”
  • President Trump: Nancy Pelosi has “been taken over by the radical left. Unfortunately, she’s no longer the Speaker of the House.”
  • The White House: Democrats have “destroyed any chances of legislative progress” with their focus on impeachment.

Ultimately, whether any major legislation passes in this environment, whether on health care or other issues, will depend on two factors. First, will President Trump want to strike legislative bargains with House Democrats at the same time the latter are working to impeach and remove him from office? On that front, color me skeptical, at best.

Second, at a time when Trump will need Republicans to support him in an impeachment fight, will he aggressively push policies that many of them oppose?

Controversial Agenda in Congress

In July, the Senate Finance Committee approved drug pricing legislation over the concerns of many Republicans. A majority of Republicans voted against the Finance Committee bill, believing (correctly) that its provisions limiting price increases for pharmaceuticals amounted to price controls, which would have a harmful impact on innovation.

Since that time, House Speaker Nancy Pelosi (D-Calif.) has taken ideas from Senate Finance Committee Chairman Chuck Grassley (R-Iowa), and the Trump administration, and put them on steroids. The drug pricing legislation she recently introduced as H.R. 3 would force drug companies into a “negotiation” with defined price limits, confiscating virtually all their revenues if they do not submit to these government-imposed price controls.

Likewise, Congress’ action on “surprise” billing appears ominous. While Washington should allow states to come up with their own solutions to this issue, some Republicans want Congress to intervene.

Save Us from ‘Socialism-Lite’

If Congress’ legislative agenda grinds to a halt over a combination of the impeachment food fight and the impending 2020 presidential campaign, it would mean that lawmakers at least did not make the health care system worse via a series of socialist-style price controls.

The American people do deserve better than the failed status quo. They need the enactment of a conservative health care agenda that will help lower the skyrocketing cost of health care.

But if Republicans have failed to embrace such an agenda, as by and large they have, at least they can stop doing any more damage through new policies that will push us further in the direction of government-run health care. Thankfully, Pelosi’s newfound embrace of a march towards impeachment may slow the march towards socialized medicine—at least for the time being.

This post was originally published at The Federalist.

Rant by Congressional Spouse Illustrates the Problem Facing American Health Care

Last week, the wife of Rep. Joe Cunningham (D-S.C.) went on a self-described “rant on social media” about her health coverage.

Amanda Cunningham’s comments echo claims by Democratic lawmakers like Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Rep. Cindy Axne (D-Iowa) about the problems with their health coverage. For many members of Congress that comes via Obamacare-compliant policies sold on health insurance exchanges.

The comments raise one obvious question: If Democrats don’t like Obamacare plans for themselves, then why did they force all Americans to buy this insurance under penalty of taxation? But beyond demonstrating the bipartisan dissatisfaction with Obamacare, Amanda Cunningham’s story illustrates the larger problems plaguing the American health care system.

Mental Health Parity

In her Instagram post, Cunningham complained that under her Blue Cross Blue Shield policy, “all of my mental health therapy sessions are denied, in addition to all of our marriage counseling sessions.” She continued: “It’s just mind-blowing to me that these basic well-known needs, that mental health is health care, are still being denied, that we’re still fighting for these absolutely basic things—it’s unbelievable to me.”

Cunningham didn’t go into many specifics about her case, but on one level, her argument sounds compelling. The opioid crisis has shone a brighter spotlight on the people who need treatment to cover mental illness or substance use disorders. Congress passed mental health parity legislation (as part of the TARP bill, of all things) in 2008, and Section 1311(j) of Obamacare extended these provisions to exchange plans.

Other People’s Money

On the other hand, consider that members of Congress receive a salary of $174,000 annually—more than most Americans (myself included). Consider also that unlike all other Americans purchasing coverage on Obamacare exchanges (myself included), Cunningham, other members of Congress, and their staff receive (likely illegal) subsidies offsetting much of the cost of their health insurance premiums.

More importantly, consider that each coverage requirement on insurers—whether to cover a certain type of treatment (e.g., mental health, in-vitro fertilization, etc.) or treatments provided by a certain type of provider (e.g., marriage counselor, podiatrist, etc.)—raise the price of health insurance each month. Collectively, the thousands of mandates imposed nationwide increase premiums by hundreds of dollars per year.

They also send a paternalistic message to Americans: The policy-makers who impose these coverage requirements would rather individuals go uninsured, because their premiums have become unaffordable, than purchase a plan without the covered benefit or treatment in question.

She didn’t say it outright, but in her “rant,” Cunningham wanted to raise premiums on other Americans—most of whom earn far less than her family—so she would receive “free” therapy. Viewed from this perspective, her objections seem somewhat self-serving from a family in the upper tier of the income spectrum.

Therein lies the problem of American health care: Everyone wants to spend everyone else’s money rather than their own. Everyone wants “their” treatments—in this case, Cunningham’s counseling sessions—covered, even if others pay more. And if their chosen therapies are covered by insurance, with little to no cost-sharing, patients will consume more health care, because they believe they are spending their insurer’s money rather than their own.

Obamacare Made It Worse

The 2010 health care law didn’t cause this problem. However, as the Congressional Budget Office (CBO) noted in its November 2009 analysis of the legislation’s premium impacts, the federal benefit requirements included in the measure raised insurance rates significantly:

Because of the greater actuarial value and broader scope of benefits that would be covered by new nongroup policies sold under the legislation, the average premium per person for those policies would be an estimated 27 percent to 30 percent higher than the average premium for nongroup policies under current law (with other factors held constant). The increase in actuarial value would push the average premium per person about 18 percent to 21 percent above its level under current law, before the increase in enrollees’ use of medical care resulting from lower cost sharing is considered; that induced increase, along with the greater scope of benefits, would account for the remainder of the overall difference.

In CBO’s view, the law required people to buy richer insurance policies, and those richer policies encouraged people to consume more health care, both of which led to a rise in premiums. Unfortunately, that rise in premiums over the past several years has led millions of individuals who do not qualify for insurance subsidies (unlike Amanda Cunningham) to drop their coverage.

Get the Incentives Right

Sooner or later, our country will run out of other people’s money to spend on health care. Despite her impassioned plea, only a movement away from the solutions Cunningham advocated for can prevent that day from coming sooner rather than later.

This post was originally published at The Federalist.

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.