How Andy Slavitt Sabotaged Obamacare

Over the weekend, former Centers for Medicare and Medicaid Services (CMS) acting administrator and Obamacare defender Andy Slavitt took to Twitter to denounce what he viewed as the Trump administration’s “aggressive and needless sabotage” of the health care law:

Unfortunately for Slavitt, the facts suggest otherwise. The Trump administration took actions to comply with a federal court order that vacated rules promulgated by the Obama administration—including rules CMS issued when Slavitt ran the agency. If Slavitt wants to denounce the supposed “sabotage” of Obamacare, he need look no further than the nearest mirror.

What’s the Issue?

This legal dispute involves risk adjustment payments, one of the three “Rs” Obamacare created. Unlike the risk corridor and reinsurance programs, which lasted only from 2014 through 2016, Obamacare made the risk adjustment program permanent.

In general, risk adjustment transfers funds from insurers with healthier-than-average enrollment to insurers with sicker-than-average enrollment. Without risk adjustment, plans would have perverse incentives to avoid enrolling sick people, due to the Obamacare regulations that require insurers to accept all applicants, and prohibit them from charging higher premiums due to health status.

Since the Obamacare exchanges began operations in 2014, many newer and smaller insurers say that the federal risk adjustment formula unfairly advantages incumbent carriers—in many cases, local Blue Cross Blue Shield plans. The small carriers complain that larger insurers do a better job of documenting their enrollees’ health conditions (e.g., diabetes, etc.), entitling them to larger risk adjustment payments.

A July 2016 analysis concluded that “for most co-ops, these recently announced risk adjustment payments have made a bad situation worse, and for a subset, they may prove to be the proverbial last straw.” Indeed, most Obamacare co-ops failed, and the risk adjustment methodology proved one reason. Two co-ops—Minuteman Health in Massachusetts (now in receivership) and New Mexico Health Connections—sued to challenge the risk adjustment formula.

What Happened in the Lawsuits?

On January 30, a federal district court in Massachusetts ruled in favor of the federal government with respect to Minuteman Health’s case. Judge Dennis Saylor ruled that the Department of Health and Human Services (HHS) did not act in an arbitrary and capricious manner when setting the risk adjustment formula.

However, a few weeks later, on February 28, another federal district court in New Mexico granted partial summary judgement in favor of New Mexico Health Connections, ruling that one element of the risk adjustment formula—the use of statewide average premium (discussed further below)—violated the Administrative Procedure Act as arbitrary and capricious. Judge James Browning vacated that portion of the risk adjustment formula for the years 2014 through 2018, and remanded the matter back to HHS and CMS for further proceedings.

If the Trump administration wanted to use the risk adjustment ruling to “sabotage” Obamacare, as people like Slavitt claim, it would have halted the program immediately after Browning issued his order in February. Instead, the administration on March 28 filed a motion to have Browning reconsider his decision in light of the contrary ruling in the Minuteman Health case.

The administration also asked Browning to lift his order vacating the risk adjustment formula, and just remand the matter to CMS/HHS instead. In that case, the rule would remain in effect, but the administration would have to alter it to comply with Browning’s ruling. However, at a June 21 hearing, Browning seemed disinclined to accept the government’s request—which likely led to the CMS announcement this weekend.

Who Issued ‘Arbitrary and Capricious’ Rules?

The Obama administration did, in all cases. Browning’s ruling vacated a portion of the risk adjustment formula for plan years 2014 through 2018 (i.e., the current one). Even though President Trump took office on January 20, 2017, the outgoing Obama administration rushed out rules for the 2018 plan year on December 22, 2016, with the rules taking effect just prior to Obama leaving office.

However, Browning believed the statute does not require budget neutrality—it does not prohibit it, nor does it require it. Therefore, the administration needed to provide a “policy rationale” for its budget neutrality assumption. For instance, HHS could have argued that, because Obamacare did not include a separate appropriation for the risk adjustment program, implementing risk adjustment in a budget neutral manner would prevent the diversion of taxpayer resources from other programs.

But as Browning noted, “the Court must rely upon the rationale the agency articulated in its internal proceedings and not upon post hoc reasoning.” HHS did not explain the reasoning behind budget neutrality in its final rules for the 2014 plan year, nor for several years thereafter.

While both the 2011 white paper and 2014 rules (the final version of which HHS released in March 2013) preceded the July 2014 start of Slavitt’s tenure in senior management at CMS, the agency released rules for the 2016, 2017, and 2018 plan years on his watch. If Slavitt believes “sabotage” occurred as a result of Browning’s court ruling, he should accept his share of the responsibility for it, by issuing rules that a federal judge struck down as “arbitrary and capricious.”

Ironically, as one observer noted, the federal government “argued that the court’s ruling as it applies to the 2018 benefit year should be set aside because the agency responded directly to comments regarding its rationale for budget neutrality in the final 2018 payment rule.” However, Browning held that “subsequent final rules” did “not elaborate further on [HHS’] budget neutrality rationale,” and struck down the 2018 rule along with the rules for 2014 through 2017.

Browning’s decision to strike down the 2018 rule demonstrates Slavitt’s “sabotage.” HHS released that rule months after Minuteman Health and New Mexico Health Connections filed their lawsuits, and thus had adequate time to adjust the rule in response to their claims. Regardless, Browning thought the agency did not elaborate upon or justify its policy reasoning regarding budget neutrality in the risk adjustment program—a direct swipe at Slavitt’s inability to manage the regulatory process inside his agency.

What Would Andy Slavitt Do Instead?

On Friday night, Slavitt claimed that an interim final rule could “clarify and resolve everything:”

However, on Sunday, Slavitt tweeted a link to a New York Times article entitled “A Fatal Flaw as Trump Tries to Remake Health Care: Shortcuts.” That article cited several court cases “that the Administration has lost [that] have a common theme: Federal judges have found that the Administration cut corners in trying to advance its political priorities.” It continues:

Two federal courts blocked Trump Administration rules that would have allowed employers who provide health insurance to employees to omit contraceptive coverage if the employers had moral or religious objections. Two federal judges, in separate cases, said the Administration had violated the law by adopting the rules without a public comment period, which the Trump Administration had declared ‘impracticable and contrary to the public interest.’

Those rules regarding the contraception mandate that the Trump administration adopted “without a public comment,” and which were struck down as unlawful, were both interim final rules—the same type of rule Slavitt now wants to use to change the risk adjustment formula. (Interim final rules do require the agency to take comments, but go into effect on the date of their release—thus notice-and-comment occurs retroactively.)

Nicholas Bagley, an Obamacare supporter, explained at the time of their release why he thought the contraception rules would get stricken (as they were) for violating the notice-and-comment requirement. It’s certainly possible that the administration could use Browning’s ruling as a reason to justify forgoing notice-and-comment, and releasing an interim final rule

But it also makes sense that, given the series of legal setbacks the administration has suffered in recent weeks—and the Times article highlighted—officials at CMS and HHS would take a more cautious approach to issuing regulations, to ensure their actions withstand legal scrutiny.

More to the point, it’s disingenuous of Slavitt to tweet an article criticizing the Trump administration for using interim final rules to enact policies he dislikes, then accuse the administration of “sabotage” for not using that same expedited process for policies he likes. It’s even more disingenuous for Slavitt given that the legal dilemma the Trump administration faces regarding risk adjustment comes entirely from a mess they inherited from the Obama administration—and Slavitt himself.

On Sunday, Slavitt cited a conservative article that in his view “called out Trump’s motivation for ending risk adjustment and raise [sic] premiums on millions: Punishing a former President.” Maybe the next time Slavitt makes allegations about supposed “sabotage” by the Trump administration, he should get his facts straight—CMS’s announcement didn’t “end” the risk adjustment program; only Congress can do that—rather than making unfounded against the current president.

This post was originally published at The Federalist.

We Passed the Bill, But We STILL Don’t Know What’s In It…

The Mercatus Center is out today with several papers examining the quality of Obamacare regulations.  The papers take a specific look at eight Obamacare-related interim final rules – those rules that took effect WITHOUT prior public comment – published last year, and effectively undermine Speaker Pelosi’s famous quote that we had to pass the bill to find out what’s in it.  According to the studies, the regulatory analysis performed by the HHS bureaucrats to justify these Obamacare regulations is so poor, we passed the bill and we STILL don’t know what’s in it:

  • The health care [regulatory impact analyses] presented no monetary estimates of benefits, often overestimated the number of people who would benefit, and usually underestimated costs – often by hundreds of millions or billions of dollars.”
  • “The regulation establishing subsidies for early retiree health insurance failed to consider the possibility of “crowd out,” meaning a substantial portion of the subsidies would be given to employers who were going to continue health insurance for early retirees anyway.  This omission means the analysis substantially overstates the number of people who would retain coverage as a result of the regulation.”
  • “None of the regulations consider “moral hazard” – the risk that individuals will engage in wasteful health care spending or unhealthy activities because the insurance company is paying most of the cost.”
  • For at least three and possibly five of the eight rules, more accurate estimates of benefits and costs would likely have reversed the conclusion that benefits outweighed costs.”
  • In numerous cases, the agencies neglected to analyze alternatives that would have been obvious to researchers familiar with the health policy literature.  For the regulation extending health insurance coverage to adult dependent children up to age 26, the analysis did not even consider using the established Internal Revenue Service (IRS) definition of “dependent,” even though that arguably would have made compliance much simpler. Instead, the regulation involved a whole new definition.”
  • “The analysis of the regulation mandating coverage of preventive services did not consider alternative criteria for covered services, such as services that produce net cost savings or that produce results at some specified cost per outcome.  In addition, this analysis selectively cited literature that conveyed the impression that most preventive services pay for themselves by reducing the need for future health care expenditures, when in reality only a minority of such services do.”

Another Mercatus analysis found that Obamacare regulations scored significantly lower than other federal regulations with respect to their quality.  When judged on 12 criteria such as data documentation (How verifiable are the data used in the analysis?) and goal metrics (Does the rule establish measures to track its future performance?), the eight Obamacare regulations scored lower than other federal regulations issued in 2008 and 2009, including those issued by HHS.

As a reminder, through the end of 2011 the Administration had ALREADY issued more than 10,000 pages of Obamacare-related regulations and notices in the Federal Register.  By noting the weak analyses that regulators have used to justify these Obamacare regulations, the Mercatus studies have made the case not only that Obamacare’s impact on business could be more costly than advertised, but also that the supposed benefits of these regulations may end up being illusory – meaning at a time of economic weakness, businesses have been saddled with additional costs for no great purpose.

Ten Questions for Marilyn Tavenner

Now that the Obama Administration has finally decided to jettison the ill-fated nomination of Donald Berwick, attention has turned toward Marilyn Tavenner, the current Deputy Administrator of CMS, whom the President nominated for the agency’s top job.  Remember that, if confirmed, Tavenner will be charged with overseeing not just the Medicare and Medicaid programs, but the new insurance “super-regulator” being built within CMS – a center that will implement creation of state Exchanges and the insurance “reforms” included in Obamacare.  In other words, the CMS Administrator affects not just the health care of Medicare and Medicaid beneficiaries, but the insurance and care provided to all Americans.

The confirmation process will doubtless cover many of the provisions of Obamacare, how Tavenner intends to implement them, and what CMS under her leadership will do to contain skyrocketing entitlement spending.  To give but ten (plus a bonus 11th!) examples, some of the issues that may arise include:

Medicaid Mandates:  At a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing new unfunded mandates of at least $118 billion.  Governors have made multiple requests for flexibility from such mandates – the earliest of which came on January 7 this year.  On February 3, Secretary Sebelius wrote to them saying she was “continu[ing] to review what authority, if any, I have to waive the maintenance of effort” requirements under the law.  It’s been more than ten months since the governors sent their original letter – aren’t they entitled to a straight answer as to whether or not the Administration has the authority to waive the Obamacare mandates, as opposed to whether the Administration is ignoring the requests for ostensibly political reasons?

Medicaid Lawsuits:  On the first day of the Supreme Court’s term in October, the nine justices heard a consolidated set of cases from California regarding Medicaid state payment levels, centering around whether Medicaid providers and beneficiaries have a private right of action (i.e., the right to sue) against state officials regarding reimbursement rates and beneficiary access.  The Administration filed a brief supporting the states’ position, but Congressional liberals have sided with the trial bar in favoring the right to sue.  As the former head of Virginia’s Department of Health and Human Services, what does Tavenner think would happen if state Medicaid programs suddenly faced myriad lawsuits from members of the trial bar over reimbursement levels?

Medicare Reform:  In July, the President’s Chief of Staff said that Medicare “will run out of money in five years if we don’t do something.”  Yet the President’s most recent deficit proposal would delay any changes to the Medicare benefit, including additional means-testing, until 2017 – more than five years from now, and well after President Obama leaves office.  What’s the point of delaying changes to the Medicare benefit until after the program could be broke – how does this dithering help seniors, as opposed to the President’s political prospects?  Given his eagerness to impose a trillion-dollar tax hike within mere months, why is the President so afraid of raising Medicare premiums on millionaires and billionaires until after he leaves office?

Premium Increases:  Candidate Obama repeatedly promised that he would cut premium costs by an average of $2,500 per family, and do so in his first term.  Yet the Kaiser Family Foundation has reported that premiums for employer-sponsored insurance have gone up by more than $2,200 since Obama was elected in 2008.  Why has Obamacare failed to live up to candidate Obama’s promises – and will the next CMS Administrator promulgate additional regulations that violate candidate Obama’s clear pledge to lower premiums by $2,500 per family?

Federal Exchanges:  How can the Administration lawfully implement a federal Exchange, seeing as how Obamacare provides no funding for a Washington-run Exchange, and the statute includes no provision under which individuals in federally-run Exchanges can receive insurance subsidies?

Employers Dumping Coverage:  Speaker Pelosi recently spoke favorably about Obamacare as a way “for businesses to be emancipated from health care costs because they have a way out or whatever works for them.”  Her comments echo those of a senior HHS official, who earlier this year said if “the Exchanges work pretty well, then the employer can say ‘This is a great thing.  I can now dump my people into the Exchange and it would be good for them, good for me.’”  Is this the Administration’s official position – that employers being “emancipated” and “dumping” their workers into government-run Exchanges is a good thing?

IPAB and Rationing:  Secretary Sebelius has claimed that the IPAB board of bureaucrats created by Obamacare “is expressly prohibited from making recommendations that ration care” in its rulings.  Where exactly in Obamacare – or any other federal law – is the term “rationing” defined?  For instance, where in the statute is there a prohibition on IPAB making recommendations that could reduce access to breast cancer treatments – say, mammograms?  What about diabetes treatment and prostate cancer screenings – are there any provisions in the law that explicitly state IPAB cannot reduce access to those treatments?

Bureaucrats Interfering with Doctor-Patient Relationship:  In October, the US Preventive Services Task Force released its draft recommendations regarding prostate cancer screening, and the report prompted reactions from across the health policy community.  The New York Times reported that insurers have already begun re-evaluating whether or not to cover screening tests in light of the draft recommendations.  As a trained medical professional, does Tavenner agree with the Task Force’s recommendations?  And is CMS concerned that the rulings of a government-backed panel will lead insurance companies to stop covering certain treatments, preventing patients from determining the best options for them in consultation with their physician?

Politicized and Pre-judged Regulations:  The Administration this summer released a regulation regarding mandatory coverage of contraceptive services.  But back in February,  the New York Times reported that the regulation’s contents had already been determined:  “Administration officials said they expected the list [of required benefits] to include contraception and family planning….But the officials said they preferred to have the panel of independent experts make the initial recommendations so the public would see them as based on science, not politics.”  Is it appropriate for Administration officials to be publicly pre-judging the outcome of “independent” reviews and rulemaking proceedings?  What will CMS do to investigate whether the Administrative Procedures Act or other similar procedural guidelines were violated during this rulemaking?

Waivers and Favors:  In just over one year, the Administration has granted myriad waivers and exemptions to Obamacare:  The Administration has issued more than 1,500 waivers – most of which cover members of union plans – five Democrat Senators recently requested their own waiver for certain agricultural populations and products, and AARP’s lucrative Medigap insurance has also been exempted from the law’s new mandates.  If Obamacare is so good, why does the Administration keep having to exempt people from it?

Medicare Advantage:  In July the Associated Press reported on what amounts to a round of temporary Obamacare waivers granted by the Administration – this one to seniors in Medicare Advantage.  The “reprieve” granted by the Administration came in the form of a multi-billion dollar demonstration project – FAR larger and broader than any prior demonstration program – to pay “bonuses” that “could head off service cuts that would have been a [political] headache for Obama and Democrats in next year’s elections.”  Even a former Democrat staffer who worked in the Clinton Administration admitted the political tenor of the program: “It’s fair to say that [Medicare] could not tolerate dislocation, given the political climate.”  Do you agree with this Democrat’s view that this demonstration program amounted to a political stunt?  Is it appropriate that at a time of trillion dollar deficits, a new multi-billion dollar spending program – one that even Democrats admit has clear political overtones – should be implemented without so much as a vote in Congress?

Liberal Double Standards on Contraception

Several media outlets reported over the weekend that White House officials participated in a conference call with pro-choice groups late last week regarding the status of contraceptive coverage mandates related to Obamacare.  The call came amidst rumors that the Administration may expand conscience exemptions to the contraception mandate, so that Catholic hospitals and other faith-based institutions may continue to offer health insurance coverage not in conflict with their religious beliefs.

Two claims in these articles merit rebuttal.  The first, in the New York Times, is the White House’s claim that including contraceptive coverage in a package of mandatory women’s services was “based on science.”  Unfortunately for the White House, Administration officials themselves undermined this assertion back in February, as quoted in another Times piece:

Administration officials said they expected the list [of required benefits] to include contraception and family planning because a large body of scientific evidence showed the effectiveness of those services.  But the officials said they preferred to have the panel of independent experts make the initial recommendations so the public would see them as based on science, not politics.

In other words, the Administration decided back in February to require coverage of contraceptive services, and merely used the public process to provide political cover to a decision that had already been made by Administration officials.

The second was an allegation by Rep. Nita Lowey in a Huffington Post article stating that the Administration was playing politics by considering an expansion of the conscience exemption.  Unfortunately, this Administration has been playing politics all along – as noted above, the process leading to the conscience regulations appears to have been rigged well in advance to achieve an outcome favorable to the President’s liberal supporters.  Additionally, the Administration recently rejected renewing a human trafficking grant previously awarded to the United States Conference of Catholic Bishops, and the Washington Post explained why:  “Senior political appointees at HHS awarded the new grants to the bishops’ competitors despite a recommendation from career staffers that the bishops be funded based on scores by an independent review board.”

Given these developments, some have written that “a part of [the Obama] Administration is at war with Catholic leaders and Catholic belief.”  Just as relevant is whether or not the Administration that claimed to end the “war on science” has on two separate occasions related to contraceptive issues manipulated the process, and/or overridden the recommendations of non-partisan experts, to achieve political victories for its liberal allies.