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.

How Government-Run Health Care Worsened the Coronavirus Crisis

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

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

Low Reimbursements Equals Fewer Tests

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

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

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

Bureaucrats Can’t Micromanage Health Care

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

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

Low Payments Lead to Job Losses, Too

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

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

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

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

This post was originally published at The Federalist.

The Bigger Problem with SCOTUS’ Obamacare Bailout Ruling

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

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

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

The Bailout’s Origins

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

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

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

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

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

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

Unconstitutional Actions

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

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

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

Sticking Taxpayers with the Tab

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

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

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

A Costly ‘Bait-and-Switch’

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

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

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

This post was originally published at The Federalist.

How Congress’ Coronavirus Legislation Could See Millionaires on Medicaid

Congress’ urge to legislate quickly on the coronavirus outbreak has resulted in all manner of unintended policy consequences. Numerous reports indicate that the Internal Revenue Service has sent coronavirus relief payments to deceased individualsLarge restaurant chains have received loans from the Paycheck Protection Program intended for businesses that have less access to capital, even as small businesses struggling to survive report being shut out of the PPP.

Even more worrisome than these reports: A series of Medicaid-related provisions that provide a potential steppingstone toward a single-payer health-care system. These provisions not only encourage waste, fraud, and abuse, but will also further entrench government-run health care—the left’s ultimate objective.

Maintenance of Effort Provisions

Section 6008 of pandemic relief legislation the president signed on March 18 provides states a 6.2 percent increase in the federal Medicaid match. But the funds, designed in part to offset states’ revenue loss during the economic downturn, come with a huge catch.

To receive the additional federal funding, states may not adopt more restrictive Medicaid eligibility standards, impose new premiums, or otherwise restrict benefits. These “maintenance of effort” requirements echo provisions included in the 2009 “stimulus” legislation, which also raised states’ Medicaid match. But this year’s bill went even further, prohibiting states from terminating benefits for any enrollee during the coronavirus public health emergency “unless the individual requests a voluntary termination of eligibility or the individual ceases to be a resident of the State.”

In layman’s terms, this provision prohibits state Medicaid programs from terminating the enrollment of individuals with income that exceeds state eligibility limits. For instance, following a scathing report by the state’s legislative auditor, Louisiana last year disenrolled 1,672 individuals with incomes of more than $100,000 from the state’s Medicaid program—including some with income higher than Gov. John Bel Edwards’ salary.

But the provisions Congress enacted in March now prohibit Louisiana, or any other state, from disenrolling these ineligible individuals during the coronavirus outbreak. To put it another way, an individual who enrolled in Medicaid while unemployed could take a new job making $1 million per year, and the state would have absolutely no recourse to kick that individual off of the government rolls, so long as he wants to remain enrolled in “free,” taxpayer-funded health coverage.

Pave the Way for Single Payer?

It doesn’t take a rocket scientist to see how the next president could use these provisions to empower a vast expansion of government-run care. A Biden administration could leave the public health emergency declaration in place for its entire presidency—and would have strong policy incentives to do so. By preventing states from removing ineligible beneficiaries for its entire presidency, a Biden administration could massively expand Medicaid, turning the program into something approaching liberals’ dream of a single-payer system.

The Louisiana experience also shows the direct correlation between eligibility checks, enrollment, and spending on Medicaid. State officials removed at least 30,000 individuals from the program last spring, reducing enrollment in expansion by more than 10 percent, and lowering program spending by approximately $400 million. A Biden administration that prohibits states from removing ineligible beneficiaries for four or eight years would see taxpayers spending billions of dollars funding millions of ineligible enrollees—an enrollment explosion that could prove difficult to unwind.

Don’t Bail Out the States

House Speaker Nancy Pelosi (D-Calif.) has already begun work on the next coronavirus package, with she and her fellow Democrats adamantly insisting that a bailout of states stands next on Congress’ “to-do” list.

But it seems highly disingenuous for Pelosi and Democrats to call for bailing out state budgets, even as they prohibit those same states from removing ineligible individuals from the Medicaid program. Even Gov. Andrew Cuomo (D-NY) has called the new requirements on state Medicaid programs absurd: “Why would the federal government say, ‘I’m going to trample the state’s right to redesign its Medicaid program, that it runs—that saves money?’”

Conservatives in Congress should demand that lawmakers fix the Medicaid provisions, either by allowing states to remove ineligible beneficiaries, setting a specific end-date for the increased federal matching funds, or (more preferably) both. Otherwise, by prohibiting states from purging their rolls of Medicaid enrollees who don’t belong in the program, the United States could find itself with a single-payer system by the back door.

This post was originally published at The Federalist.

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

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

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

Massive Disruptions

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

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

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

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

A Preview of Democrats’ Health Care Future

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

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

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

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

Economic Cutbacks and Job Losses

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

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

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

This post was originally published at The Federalist.

The Coronavirus and Advance Directives

Sometimes, the right policy can come at the wrong time. Consider an article on how the coronavirus has upended nursing homes, hundreds of which have at least one—and in many cases far more than one—case among residents.

A Politico newsletter discussing the article last Monday included an ominous blurb: “The National Hospice and Palliative Care Association has been pushing Congress to give more support to advance care planning, perhaps in the next stimulus bill.” While the advocates may have the best of intentions, discussing advance care directives in the context of a global pandemic raises serious ethical questions.

Planning for Worst-Case Scenarios

End-of-life care remains a touchy political subject. In 2009, following comments by Gov. Sarah Palin (R-Alaska) about “death panels,” she defended her characterization of Democrats’ health care effort by pointing to a provision in a House draft allowing Medicare to cover end-of-life counseling. While the controversy prompted congressional Democrats to drop the provision from the bill that became Obamacare, the Centers for Medicare and Medicaid Services (CMS) in 2015 approved regulatory changes allowing Medicare to pay physicians for end-of-life consultations with their patients.

In most cases, talking through options and allowing patients to determine their intended course of treatment gives patients a voice in their own care. Advance care planning—whether through a formal directive, or even informal conversations amongst family members—also takes a weighty burden off of loved ones at a time of immense stress and emotional anguish.

My mother has told me throughout my adult life that, in extreme circumstances, she does not want medical personnel using extraordinary means to extend her life. Heart-breaking as it would be for me to relay that decision to her doctors, I could at least know I did not make that decision, but instead merely relayed a wish that my mother has expressed, consistently and repeatedly, over many years.

The Power of Persuasion

Under most circumstances, encouraging individuals to have these types of end-of-life conversations with their family members and physicians represents sound medical practice and wise public policy. But the middle of a global pandemic by definition does not constitute ordinary circumstances.

Here’s one telling example from Britain’s National Health Service. The BBC obtained a document from a regional medical group based in Sussex. The document, which sets out guidance for treating coronavirus patients in nursing homes, prompted one care manager to become “deeply concerned that residents and families are being pushed to sign” do-not-resuscitate forms:

The…guidance even provides a suggested script for GPs [general practitioners] to use in conversations with residents and families, part of which says ‘frail elderly people do not respond to the sort of intensive treatment required for the lung complications of coronavirus and indeed the risk of hospital admission may be to exacerbate pain and suffering.’

It goes on: ‘We may therefore recommend that in the event of coronavirus infection, hospital admission is undesirable.’

One care manager…[said] their GP had even told them ‘none of your residents aged over 75 will be admitted to hospital.’ They said they felt ‘shocked and numb’ to hear that. Another said: ‘We have been told flatly that it would be highly unlikely that they would be accepted into hospital.’

Put aside for a moment the fact that Britain’s system of socialized medicine has prompted at least some physicians to believe they should flatly refuse medical care to senior citizens (even though Health Secretary Matt Hancock denied such a policy exists). That such a system has also pressured family members to sign do-not-resuscitate orders for their loved ones speaks to the potential dangers of combining end-of-life counseling with the pressures faced by health care providers during a pandemic.

Preserve a Culture of Life

A content-neutral conversation among a doctor and a patient about constructing an advance directive, and what instructions to put in that advance directive, is one thing, but pressuring vulnerable patients to sign do-not-resuscitate orders during a global pandemic is quite another. Common sense, confirmed by the example from Britain, suggests that given the current medical crisis, the conversations could easily veer off-track from the former to the latter.

Advance care planning has its place in health care, but now seems an inauspicious time to push for its more widespread adoption. At present, our efforts should focus not just on preserving life, but on preserving a culture of life—and hurried conversations about end-of-life care in the current pandemic could undermine that culture significantly.

This post was originally published at The Federalist.

The Economy Won’t Recover Until Americans’ Coronavirus Fears Fade

If we reopen it, will they come? That paraphrase of the signature line from “Field of Dreams” illustrates a dilemma facing the Trump administration, along with state and local leaders, as they contemplate when and how to reopen elements of the economy shut down by the coronavirus pandemic.

Just because the Trump administration gives word that individuals and businesses can reopen doesn’t mean that most, or even any, of them will do so.

A dozen years ago, former Sen. Phil Gramm (R-Texas) caused a minor uproar during the middle of the 2008 presidential campaign when he characterized the nation as in a “mental recession.” His remarks drew outrage, but they accurately describe one of the two predicaments the American economy faces: Both the coronavirus and the fear caused by the virus.

Even as the nation’s leaders work to resolve the first problem, they also must work diligently to resolve the second. When restarting economic activity, all Americans have a voice: They can spend, or not spend, money as they please. If the American public stays home en masse even after public officials lift stay-at-home orders, the “re-opened” economy will look nearly as morose as the current one.

Big Support for Forcing People to Stay Home

Polling shows a surprising level of support for most of the actions taken to curb the virus, even at the expense of the nation’s economy. A Fox News poll taken last week showed that 80 percent of Americans support “a national stay-at-home order for everyone except essential workers.” That comes despite the fact that 50 percent of Americans said they, or someone in their household, had lost a job or had hours reduced because of the virus and related shutdowns.

Why do an overwhelming majority of Americans support such a drastic shutdown of the nation’s economy? The polling shows that, as of April 4-7, most Americans fear the virus:

  • A total of 94 percent are very or somewhat concerned about the spread of the virus in the United States;
  • More than three in four (76 percent) are very or somewhat concerned about catching the coronavirus;
  • Nearly four in five (79 percent) are very or somewhat concerned that they or someone in their family could die from the virus; and
  • Three-quarters (75 percent) believe the worst is yet to come regarding the pandemic.

The American people do worry about the virus’ potential to cause a recession (91 percent are very or somewhat concerned), and inflict economic hardship on their families (79 percent very or somewhat concerned). But the survey shows that, at least as of last week, they fear the virus more than they fear the economic consequences of the virus. Perhaps for this reason, a 47 percent plurality believe President Trump has not taken the virus seriously enough, whereas only 4 percent believe he has overreacted to the pandemic.

Don’t Just Tell Me, Show Me

Some might believe the American people have in fact overreacted to the coronavirus. They of course have their right to hold those beliefs. But trivializing people’s fears—as opposed to reasoning with them in a way that puts them at ease—won’t encourage people to begin resuming their normal lives, and will likely keep the economy stuck in neutral (or sliding further backwards).

Despite the lack of focus on the topic to date, the messaging component of reopening the economy seems critically important to its success—as important as getting the timing right of the reopening. The administration needs to approach the American people where they are—anxious about the virus’ spread—and offer clear explanations not just for what they are doing, but why:

  • Why reopen a given area, sector, or activity now? Why not two weeks ago, or two weeks (or two months) from now?
  • What will the federal government do (and what can it do) regarding interstate travel? What happens to the businessman who needs to fly for work—will a governor in another state attempt to stop him or her from traveling?
  • The administration’s initial proposal to classify areas as high, medium, or low risk makes a great deal of sense. But what metrics will go into those classifications—number of cases, growth in cases, number of deaths, health-care capacity, or something else? Will the criteria remain transparent and objective, and not subject to political manipulation or pressure?
  • What metrics will determine any potential need to reactivate shutdown orders?

This advice applies not just to President Trump, but to governors and other policy makers as well. For instance, Dr. Anthony Fauci of the National Institute for Allergy and Infectious Diseases said Friday that he envisioned a “real degree of normality” by around the time of this fall’s elections. His statement seemed somewhat surprising, given prior comments by Fauci and others about a possible “second wave” of coronavirus infections hitting this fall.

In an evolving response to a pandemic, facts and circumstances can change rapidly, as scientists learn more about the virus, and humans’ responses to it. But whenever scientists change their models, or political leaders alter their guidance and recommendations, both must explain to the public why they have done so. Only transparent data, communications, and explanations can ensure the public buy-in necessary to bring the economy back to life at the appropriate time.

Fix Both the Problems

Half a century ago this week, the Apollo 13 mission—where an on-board explosion turned a potential moon landing into a struggle for three astronauts to survive—captivated the nation. As staffers at NASA’s Mission Control worked feverishly to bring the space travelers safely home, Flight Director Gene Kranz instructed his employees to “Work the problem” (or words to that effect).

With the current pandemic, policymakers need to work the problem—both of them. They must break down the component parts associated with reopening our economic and civic institutions: the conditions that must be met prior to a reopening, the sequencing behind such an effort, and so forth.

But they also must explain openly, clearly, and repeatedly to the American people how and why they are doing so. Doing the former without the latter could result in more confusion, uncertainty, and continued economic stagnation.

The fact that Jim Lovell, the commander of the fateful Apollo 13 mission, survived to write about that experience 50 years on this past weekend speaks to the power of American ingenuity in solving problems, overcoming obstacles, and saving lives. Here’s hoping we see a reprise of that ingenuity for the coronavirus.

This post was originally published at The Federalist.

Colorado Plan Shows the Coercion Behind the Public “Option”

Former Vice President Joe Biden’s political comeback prompted health care stocks to surge last month following the Super Tuesday primaries. The rally, which occurred before the coronavirus pandemic took hold in the United States, stemmed in large part from Wall Street’s belief that Biden represents less of a threat to the sector as a potential president than Vermont Sen. Bernie Sanders’ single-payer health-care system.

But anyone who considers Biden’s alternative to single payer, the so-called “public option,” innocuous should look to Colorado. Lawmakers in the Centennial State recently revealed their version of the concept, and it represents an “option” in name only. Indeed, the state’s plan contemplates a level of coercion that in some respects exceeds that of Sanders’ system of socialized medicine.

Big Government Forces Hospitals’ Participation

For starters, the legislative proposal dictates prices for hospitals, based on a percentage of Medicare rates. As one might expect, the bill’s supporters believe the rates proposed in the legislation represent fair reimbursement levels, while some hospital executives disagree.

But the bill would also take away hospitals’ negotiating leverage, by requiring all Colorado facilities to participate in the new insurance offering. Hospitals refusing to participate would face fines of up to $40,000 per day. And if the prospect of nearly $1.5 million in government-imposed sanctions does not force a recalcitrant facility into submission, the bill also permits Colorado’s insurance commissioner to “suspend, revoke, or impose conditions on the hospital’s license.”

Think about that for a moment: The government forces hospitals to offer patients a service—even if the government’s price for that service could lead them to incur financial losses—and threatens to take away their license to do business if they refuse. That level of heavy-handed government involvement far exceeds the individual mandate in Obamacare.

Insurers Required to Participate, Too

The bill similarly requires all Colorado insurers to offer the new government-dictated “option” in each county in which they offer Obamacare exchange products. In counties where only one insurer currently offers coverage, the bill directs the insurance commissioner to “require carriers to offer the Colorado option in specific counties,” such that at least two carriers offer the plan in every county.

According to one report, the bill’s sponsors called their new offering the “Colorado option” rather than the “public option” because lawmakers did “not want to put the state budget at risk by creating a government-run insurance company.” Instead, lawmakers want to dragoon insurers into assuming that risk, even as the bill prohibits efforts by insurers to absorb potential losses from the “Colorado option” by raising rates elsewhere.

Worse Than Berniecare?

Sanders’ legislation would effectively put private insurers out of business, by making coverage for services covered by the single-payer system “unlawful.” The issue of whether to ban private insurance, and take away individuals’ ability to keep their current coverage, became a defining characteristic of Democrats’ nominating contest.

But the Colorado legislation could put private insurers and hospitals out of business, if they refuse the state’s commands. At least Sanders’ proposal allows hospitals to opt out of the government system if they decide—few would, but they do have that choice.

The Colorado legislation shows how Obamacare set a dangerous precedent, which Democrats want to extend throughout the health-care system. Just as Obamacare forced all Americans to buy a product for the first time ever, now lawmakers want to force hospitals and insurers to treat patients, even at their financial peril. Each could face a Hobson’s choice: Putting themselves out of business by incurring losses on “Colorado option” patients, or taking the “option” to decline to participate, at which point the state will regulate them out of business.

Colorado’s proposal of dubious merit and equally dubious constitutionality demonstrates the way in which even purported moderates like Biden have embraced a health-care agenda defined by ever-increasing levels of government intrusion and coercion. At present, Sanders’ single-payer legislation represents the far end of that continuum, but liberals will use proposals like Colorado’s “public option” to get there.

This post was originally published at The Federalist.

Democrats in Congress Won’t Let Andrew Cuomo Fight Medicaid Fraud

Over the past several weeks, Gov. Andrew Cuomo has taken several shots at Sen. Chuck Schumer, his fellow New York Democrat, about the coronavirus “stimulus” bills passed by Congress. Cuomo has repeatedly attacked Schumer for not looking out for their home state’s interests, calling the most recent measure, which cost more than $2 trillion, “terrible” for the Empire State.

The intraparty feuding seems all the more noteworthy for one reason Cuomo found the “stimulus” terrible: It precludes New York from taking steps to right-size its Medicaid program. That senior Democrats in Congress tied the hands of a governor from their own party as he works to enact reforms, and combat fraud, in the costly program speaks to how leftists will fight tooth-and-nail to maintain every facet of the welfare state.

New York’s Medicaid Mess

Even prior to the coronavirus pandemic, New York’s state Medicaid program faced major difficulties. In fiscal year 2018, New York’s Medicaid program spent nearly as much ($74.8 billion) as California’s ($83.9 billion), even though California has more than twice the population (39.5 million vs. 19.5 million for New York).

Some of New York’s high Medicaid spending stems from rampant waste and fraud. A 2005 in-depth investigation by The New York Times quoted a former investigator as saying that 10 percent of all Medicaid spending constituted outright fraud, with another 20-30 percent representing “unnecessary spending that might not be criminal.”

New York’s Medicaid program also spends disproportionate sums on institutional care for individuals with disabilities. The state spends more than twice as much on nursing home care ($5.5 billion) as California ($2.5 billion), despite having less than half the population. New York also exceeds California’s spending on intermediate care facilities for the intellectually disabled.

Smart reforms to Medicaid would attempt to keep individuals in their own homes wherever possible. Paying for home and community-based services would save taxpayers money. More importantly, it would also treat patients in the location the vast majority of patients prefer: Their own homes. Changes to move in this direction, coupled with efforts to fight waste and fraud, would bring long-overdue reform to Medicaid in New York.

Cuomo Tried to Fix the Problem

Prior to the pandemic, New York faced a $6 billion budget shortfall that Cuomo blamed (correctly) on the Medicaid mess. He asked a commission to recommend reforms, and the commission came back with a series of proposals that would save more than $1.6 billion in state dollars during the coming fiscal year, and additional sums thereafter. (Because the federal government provides at least a 50 percent Medicaid match to New York, the changes would save federal taxpayers at least as much as they would save state taxpayers.)

While the recommendations do include across-the-board reductions in provider payment levels, changes to long-term care represent the largest amount of savings ($715 million of the $1.65 billion total). The package includes a focus on home- and community-based services, tightens restrictions on households who attempt to hide assets to have Medicaid cover their long-term care costs, and includes reforms to program integrity as well.

Did Schumer Stop Reform?

As New York’s Democrat governor proposed a Medicaid reform package, what did New York’s senior senator do? By one account he worked to ensure that his fellow Democrat could not enact the needed changes.

As I previously noted, the second “stimulus” bill included a Medicaid bailout for states, coupled with maintenance of effort provisions. These provisions prohibit states from making any changes to eligibility or benefits in exchange for the 6.2 percent increase in the federal Medicaid match (which will last for the duration of the coronavirus public health emergency). States that increase cost-sharing, change benefits, impose premiums—pretty much any change to the Medicaid benefit package, other than arbitrary reductions in provider payments—lose eligibility for the increased federal match.

Cuomo railed against these restrictions: “Why would the federal government say, ‘I’m going to trample the state’s right to redesign its Medicaid program, that it runs—that saves money?’…I don’t even know what the political interest is they’re trying to protect.”

The governor appeared to win the argument—at first. Section 3720 of a draft version of the third “stimulus” bill (beginning at page 394 here) would have amended the second “stimulus” bill to allow New York to go ahead with its reforms, while still receiving the 6.2 percent increase in the federal Medicaid match.

But Section 3720 of the version that made it into law (page 147 here) stripped out the original language that allowed New York to proceed with its Medicaid changes. Rep. Lee Zeldin (R-N.Y.) claims Schumer got the language removed, presumably because he opposes Cuomo’s reform package:

Lee Zeldin

@RepLeeZeldin

Re-upping here for additional background on what Gov Cuomo is talking about right now re FMAP and the stimulus bill.

McConnell offered Schumer exactly what Cuomo asked for on this fix and Schumer rejected it. https://twitter.com/RepLeeZeldin/status/1243210360334815232 

Lee Zeldin

@RepLeeZeldin

Gov. Cuomo just said the stimulus package could’ve & should’ve provided additional support for the NYS budget.

He is right.

Here’s the context not mentioned:

McConnell offered the FMAP language Cuomo asked for & Schumer blocked it, resulting in the loss of SIX BILLION for NY.

Stop Defending Fraudsters

Who exactly nixed the language helping New York, and why, may remain a mystery. But it seems highly unlikely that Senate Republicans would have insisted on its removal. Most conservatives support states’ Medicaid reform proposals, and fought maintenance of effort requirements included in the 2009 “stimulus” and Obamacare that thwarted state flexibility. The objection that led to the New York provision’s removal almost certainly came from the Democrat side of the aisle.

As to why, consider this quote from Politico: “Critics argue…that even if there is some sense in targeting waste and fraud, it also makes sense to raise taxes on the wealthy to support a program that poor New Yorkers rely on.”

Yes, by all means let’s raise taxes during the midst of an economic cataclysm. If we crack down on fraud too much, the fraudsters might go out of business—and they need to eat just like the rest of us!

It’s exactly this kind of mentality that left the United States with $23 trillion in debt (and rising). Cuomo rightly called out the members of his own party for their socialistic games, because the American people deserve better than the left’s welfare-industrial complex.

This post was originally published at The Federalist.

A Coronavirus Medal of Freedom

President Trump has drawn fire for referring to the novel coronavirus as the “Chinese virus.” Critics accuse him of racism, and they are right that Americans should bear no ill will toward people of Chinese ethnicity. But the Chinese Communist regime is culpable in the pandemic. It worked to suppress news about the virus, persecuted medical workers who told the truth, expelled reporters from American outlets (including the Journal), and has attempted to deflect blame by falsely asserting that the U.S. created the virus.

There’s a better way for Mr. Trump to make his point: He could posthumously award the Presidential Medal of Freedom to Li Wenliang.

Li, a physician at Wuhan Central hospital, raised the alarm early. After seeing patient reports discussing a new “SARS coronavirus,” he warned colleagues via an Internet chat room on Dec. 30 and urged them to “take caution.”

When Li’s warnings circulated widely, Wuhan police summoned him and other “rumormongers,” giving them an official admonishment on Jan. 3. A week later, Li developed a fever and cough; subsequent tests confirmed he had contracted the coronavirus. After several weeks in intensive care, he died Feb. 7 at 33.

Three days earlier, after internal and international outrage, China’s Supreme Court had negated his punishment. Yet the fact remains that Chinese leaders inflicted incalculable damage on their own nation and the rest of the world by trying to suppress news of the coronavirus rather than marshal global efforts to fight it.

By raising concerns about the novel coronavirus before Chinese authorities did, Li meets the medal’s criteria of making “an especially meritorious contribution to the security or national interests of the United States, world peace . . . or other significant public or private endeavors.” Since President John F. Kennedy instituted the Presidential Medal of Freedom in 1963, presidents have awarded it to a broad swathe of international leaders, including Vaclav Havel, Lech Walesa and Margaret Thatcher. It has also been awarded posthumously, including to JFK himself two weeks after his assassination.

Awarding the Medal of Freedom to Li Wenliang would recognize the role of free speech in maintaining a healthy society and serve as a a fitting tribute to the role that millions of other first responders are playing in this pandemic.

This post was originally published at The Wall Street Journal.