Is Donald Trump “Sabotaging” Obamacare?

Is Donald Trump “sabotaging” Obamacare? And are he and his administration violating the law to do so?

Democrats intend to make this issue a prime focus of their political messaging ahead of the November elections. And several developments over the month of August — a Government Accountability Office (GAO) report, a New York Times op-ed by two legal scholars, and a lawsuit filed by several cities — all include specific points and charges related to that theme.

1. The GAO Report

The most recent data point comes from the GAO, which at the behest of several congressional Democrats analyzed the administration’s outreach efforts during the most recent open enrollment period last fall. Those efforts culminated in a report GAO released Thursday.

The report made a persuasive case that the administration’s decision to reduce and re-prioritize funding for enrollment navigators utilized flawed data and methods. While the Department of Health and Human Services (HHS) based navigators’ 2018 funding on their effectiveness in enrolling individuals in coverage in prior years, GAO noted that HHS lacked solid data on navigators’ enrollment on which to base 2018 funding, and that enrollment was but one of navigators’ stated goals in prior years. HHS agreed with GAO’s recommendation that it should provide clearer goals and performance metrics for navigators to meet.

GAO also recommended that the administration reinstitute an overall enrollment target, as one way to determine the adequate distribution of resources during open enrollment. However, a cynic might note that Obamacare advocates, including the Democratic lawmakers who requested the report, may want the Trump administration to publicize an enrollment target primarily so they can attack HHS if the department does not achieve its goals.

Even though reporters and liberals like Andy Slavitt cried foul last year when HHS announced planned maintenance time for healthcare.gov in advance, actual downtime for the site dropped precipitously in 2018 compared to 2017. Which could lead one to ask who is sabotaging whom.

2. The New York Times Article

In The New York Times piece, law professors Nicholas Bagley and Abbe Gluck provide an overview of the lawsuit filed against the Trump Administration (about which more below). As someone who has cited Bagley’s work in the past, I find the article unpersuasive, even disappointing.

Take for instance some of the article’s specific allegations:

Here’s one: “To make it harder for people to enroll in Obamacare plans, for example, the administration shortened the open enrollment period on the health care exchanges from three months to six weeks.”

This charge would have evaporated entirely had Bagley specified which Administration first proposed shortening the open enrollment period to six weeks. The Obama Administration did just that.

This rule also establishes dates for the individual market annual open enrollment period for future benefit years. For 2017 and 2018, we will maintain the same open enrollment period we adopted for 2016—that is, November 1 of the year preceding the benefit year through January 31 of the benefit year, and for 2019 and later benefit years, we are establishing an open enrollment period of November 1 through December 15 of the year preceding the benefit year.

The Trump administration merely took the shorter open enrollment period that the Obama team proposed for 2019 and accelerated it by one year. If shortening the enrollment period would make it so much “harder for people to enroll in Obamacare plans,” as Bagley and Gluck claim, then why did the Obama Administration propose this change?

Another allegation: “To sow chaos in the insurance markets, Mr. Trump toyed for nine months with the idea of eliminating a crucial funding stream for Obamacare known as cost-sharing payments. After he cut off those funds, he boasted that Obamacare was ‘being dismantled.’”

This charge seems particularly specious — because Bagley himself has admitted that Obamacare lacks a constitutional appropriation for the cost-sharing reduction payments to insurers. Bagley previously mentioned that he took no small amount of grief from the left for conceding that President Obama had exceeded his constitutional authority. For him to turn around and now claim that Trump violated his constitutional authority by ending unconstitutional payments represents a disingenuous argument.

Here and elsewhere, Bagley might argue that Trump’s rhetoric — talk of Obamacare “being dismantled,” for instance — suggests corrupt intent. I will gladly stipulate that presidential claims Obamacare is “dead” are both inaccurate and unhelpful. But regardless of what the President says, if the President does what Bagley himself thinks necessary to comport with the Constitution, how on earth can Bagley criticize him for violating his oath of office?

A third allegation:

This month, the Trump administration dealt what may be its biggest blow yet to the insurance markets. In a new rule, it announced that insurers will have more latitude to sell ‘short-term’ health plans that are exempt from the Affordable Care Act’s rules. These plans … had previously been limited to three months.

Under Mr. Trump’s new rule, however, such plans can last for 364 days and can be renewed for up to three years. … In effect, these rules are creating a cheap form of ‘junk’ coverage that does not have to meet the higher standards of Obamacare. This sort of splintering of the insurance markets is not allowed under the Affordable Care Act as Congress drafted it.

This claim also fails on multiple levels. First, if Congress wanted to prohibit “short-term” health plans as part of Obamacare, it could have done so. Congress chose first to allow these plans to continue to exist, and second to exempt these plans from all of Obamacare’s regulatory regime. If Bagley and Gluck have an objection to the splintering of insurance markets, then they should take it up with Congress.

Second, the so-called “new rule” Bagley and Gluck refer to only reverts back to a definition of short-term coverage that existed under the Obama Administration. This definition existed for nearly two decades, from when Congress passed the Health Insurance Portability and Accountability Act (HIPAA) through 2016. The Obama administration published a rule intended to eliminate much of the market for this type of coverage — but it did so only in the fall of that year, more than two years after Obamacare’s major coverage provisions took effect.

As with the shortening of the open enrollment period discussed above, if Bagley and Gluck want to scream “Sabotage!” regarding the Trump administration’s actions, they also must point the finger at Barack Obama for similar actions. That they did not suggests the partisan, and ultimately flawed, nature of their analysis.

3. The Lawsuit

The 128-page complaint filed by the city plaintiffs earlier this month makes some of the same points as the New York Times op-ed. It also continues the same pattern of blaming the Trump administration for actions previously taken by the Obama administration.

The lawsuit criticizes numerous elements of the administration’s April rule setting out the payment parameters for the 2019 Exchange year. For instance, it criticizes the removal of language requiring Exchanges to provide a direct notification to individuals before discontinuing their eligibility for subsidies, if individuals fail to reconcile the subsidies they received in prior years with the amount they qualified for based on their income. (Estimated subsidies, which are based on projected income for a year, can vary significantly from the actual subsidy levels one qualifies for, based on changes in income due to a promotion, change in life status, etc.)

As part of this charge, the lawsuit includes an important nugget: The relevant regulation “was amended in 2016 to specify that an Exchange may not deny [subsidies] under this provision ‘unless direct notification is first sent to the tax filer.’” As with the New York Times op-ed outlined above, those claiming “sabotage” are doing so because the Trump administration decided to revert to a prior regulatory definition used by the Obama administration for the first several years of Obamacare implementation.

The lawsuit similarly complains that the Trump administration is “making it harder to compare insurance plans” by eliminating support for “standardized options” from the Exchange. Here again, the complaint notes that “prior rules supported ‘standardized options,’” while mentioning only in a footnote that the rules implementing the “standardized options” took effect for the 2017 plan year. In other words, the Obama administration did not establish “standardized options” for the 2014, 2015, or 2016 plan years. Were they “sabotaging” Obamacare by failing to do so?

The suit continues with these types of claims, which collectively amount to legalistic whining that the Trump administration has not implemented Obamacare in a manner the (liberal) plaintiffs would support. It even includes this noteworthy assertion:

Maryland has been cleared by state legislators to petition CMS to ‘establish a reinsurance program that would create a pot of money for insurers to cover the most expensive claims,’ but a health economist ‘said he would be shocked if the Trump administration approved such a request, given its efforts to weaken Obamacare’: ‘It just seems very unlikely to me that Trump would approve this. … Maryland is easily saying we want to help prop up Obamacare, which the Trump administration doesn’t want to have anything to do with.’

Fact: The Trump administration just approved Maryland’s insurance waiver this week. So much for that “sabotage.”

A review of its “prayer for relief” — the plaintiffs’ request for actions the court should take — shows the ridiculously sweeping nature of the lawsuit’s claims. Among other things, the plaintiffs want the court to order the defendants to “comply with their constitutional obligation to take care to faithfully execute the ACA,” including by doing the following:

  • “Expand, rather than suppress, the number of individuals and families obtaining health insurance through ACA exchanges;
  • “Reduce, rather than increase, premiums for health insurance in the ACA exchanges;
  • “Promote, rather than diminish, the availability of comprehensive, reasonably-priced health insurance for individuals and families with preexisting conditions;
  • “Encourage, rather than discourage, individuals and families to obtain health insurance that provides the coverage that Congress, in the ACA, determined is necessary to protect American families against the physical and economic devastation that results from lesser insurance, with limits on coverage that leaves them unable to cover the costs of an accident or unexpected illness…
  • “Order Defendants to fully fund advertising under the ACA;
  • “Enjoin Defendants from producing and disseminating advertisements that aim to undermine the ACA;
  • “Order Defendants to fully fund Navigators under the ACA;
  • “Enjoin Defendants from incentivizing Navigators to advertise non-ACA compliant plans;
  • “Order Defendants to lengthen the open enrollment period;
  • “Order Defendants to resume participation in enrollment events and other outreach activities under the ACA…
  • “Order Defendants to process states’ waiver applications under the ACA so as to faithfully implement the Act.”

In other words, the lawsuit asks a court to micro-manage every possible element of implementation of a 2,700-page law — tell HHS what it must say, what it must do, how much it must spend, and on and on. It would create de facto entitlements, by stating that HHS could never reduce funding for advertising and outreach, or lower spending on navigators, or reject states’ waiver applications — potentially even if those applications violate the law itself. And it asks for impossible actions — because HHS cannot unilaterally “expand, rather than suppress” the number of people with coverage, just as it cannot unilaterally “reduce, rather than increase, premiums.”

Despite its questionable claims, and the highly questionable remedies it seeks, the lawsuit may yet accomplish some of its goals. The complaint spends much of its time alleging violations of the Administrative Procedure Act, claiming that HHS did not “meaningfully” or “adequately” consider comments from individuals who objected to the regulatory changes in question. While I have not examined the relevant regulatory dockets in any level of detail, the (pardon the pun) trumped-up nature of elements of the complaint makes me skeptical of such assertions. That said, the administration has suffered several setbacks in court over complaints regarding the regulatory process, so the lawsuit may force HHS to ensure it has its proverbial “i”s dotted and “t”s crossed before proceeding with further changes.

Words Versus Actions

On many levels, the “sabotage” allegations try to use the president’s own words (and tweets) against him. Other lawsuits have done likewise, with varying degrees of success. As I noted above, the president’s rhetoric often does not reflect the actual reality that Obamacare remains much more entrenched than conservatives like myself would like.

But for all their complaints about the administration’s “sabotage,” liberals have no one to blame but themselves for the current situation. Obamacare gave a tremendous amount of authority to the federal bureaucracy to implement its myriad edicts. They should not be surprised when someone who disagrees with them uses that vast power to accomplish what they view as malign ends. Perhaps next time they should think again before proceeding down a road that gives government such significant authority. They won’t, but they should.

This post was originally published at The Federalist.

Will the Senate Make Exchange Heads Purchase Exchange Coverage?

This week, the Senate will likely consider a package of several appropriations measures. The legislation provides an opportunity for senators to offer, and possibly vote on, an amendment defunding the District of Columbia’s new health insurance mandate.

Because such an amendment, proposed by Rep. Gary Palmer (R-AL), passed in the House last week, if a similar amendment passes the Senate, it would almost certainly remain in the final version enacted into law. As a result, residents of the nation’s capital would not face the threat of having their property seized if they cannot afford to purchase “government-approved” health insurance.

A Firsthand Display of Hypocrisy

I have seen up close how the heads of exchanges do not purchase exchange coverage. In the fall of 2016, CareFirst Blue Cross cancelled my exchange insurance policy, in part due to regulations promulgated by the District’s exchange authority.

To find out the reasons for the cancellation, I attended a meeting of the authority board. When I asked whether employees of the exchange purchase exchange coverage themselves, Mila Kofman, the exchange’s director, responded that doing so would cause employees to forfeit their employer insurance subsidy, making coverage unaffordable.

That explanation makes sense for junior employees making $40,000, $60,000, or even $80,000 annually. But it seems much less justifiable for Kofman. Kofman did not disclose it at the meeting I attended, but I later learned through DC public records that in 2016, she received a salary of more than $217,000—more than Mayor Muriel Bowser herself.

If Kofman cannot, or will not, purchase the exchange plans she sells without a subsidy, why would she, and the exchange board, support requiring residents making a fraction of her income to do so, and punishing them with taxes—and the threat of property seizure—if they do not?

‘1 Percenters’ Won’t Buy Exchange Coverage

Nor do the double-standards remain confined to the District of Columbia. The head of California’s exchange receives a salary putting him in “the 1 percent,” yet refuses to purchase the plans he sells.

I had previously recounted how Peter Lee, Covered California’s executive director, admitted to me at a briefing that his health insurance coverage comes through California’s state employee plan—at taxpayer expense, of course. Yet Covered California’s website lists his current monthly salary at a rate of $36,400, or a whopping $436,800 per year.

With all that money, does Lee really need to have taxpayers fund his health benefits as well? Does he think the policies Covered California sells so unaffordable, or so poor in quality, that he refuses to buy them? Or does he just feel entitled to have taxpayers fund his benefits on top of his fat paycheck because he thinks he’s better than we are?

The Amendment Concept

In theory, the Trump administration could have solved this problem months ago, by issuing regulations requiring all CEOs of state-run exchanges—and, for that matter, their board members too—to purchase plans from the exchanges. If those individuals consider exchange plans so inferior or unaffordable that they will not purchase them for themselves, then they have no business selling them in the first place.

(In case you were wondering, yes, I do believe that at the federal level, the U.S. secretary of Health and Human Services and Centers for Medicare and Medicaid Services administrator should buy exchange plans. I previously criticized former CMS Acting Administrator Andy Slavitt for failing publicly to disclose that he held exchange coverage during a Democratic administration, and I would be remiss not to point that out under a Republican one.)

At that point, people like Mila Kofman and Peter Lee will have a choice to make. They can determine whether they care more about keeping their taxpayer-funded health insurance benefits, or ensuring their constituents continue to have access to insurance subsidies. In short, they can choose whether they will finally put their principles ahead of their own pocketbooks—which they should have been doing all along.

This post was originally published at The Federalist.

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.

Democrats Talking Down Obamacare

It appears that analysts at the Center for American Progress (CAP) have taken up weightlifting in recent weeks, as their health-care team on Monday released a report that represented little more than an attempt to move the Obamacare goalposts. Released ahead of this morning’s start of the 2018 open enrollment period, the “analysis” claimed that, but for the Trump administration’s “sabotage” of Obamacare, enrollment in insurance exchanges would—wait for it—remain unchanged from current year levels.

So in CAP’s view, any decline in exchange enrollment lies entirely at Trump’s feet, but any increase in enrollment comes despite Trump, not because of him. (Funny that.) CAP demonstrated its complete confidence in the effect of Trump’s “sabotage” by failing to make any specific estimate or prediction about how much enrollment would decline due to the president’s actions. The paper discussed Obamacare, but its soft bigotry of low expectations—both for the exchanges and the accuracy of CAP’s own predictions—sounded straight out of the debate on No Child Left Behind.

Their Logic Says Obama Sabotaged His Own Program

But the decision to shorten the open enrollment period was first made by none other than those infamous “saboteurs” Barack Obama and Obama official Andy Slavitt. In February 2016, they announced that open enrollment in 2019 would range from November 1 to December 15. Upon taking office earlier this year, the Trump administration decided to implement this change a year ahead of time, due in part to the ways in which individuals were “gaming the system”—using the long open enrollment period and readily available special enrollment periods to sign up for coverage only after developing costly medical conditions.

A change? Sure. Sabotage? Only if you think Obama and Slavitt want to dismantle Obamacare.

Then there’s the question of funding for enrollment and outreach, which the Trump administration reduced from $100 million to $10 million. As with all organizations that believe beneficence lies solely through government, CAP claims private efforts “cannot fully make up for the wealth of information that only the government has for outreach, as well as the planning and funding that HHS dedicated to the program in past years.”

So maybe, just maybe, Hillary Clinton could cut short her walks in the woods, and raise money for Obamacare instead of hawking her own books. Who knows—maybe noted clean-energy advocate Tom Steyer will stop tilting at windmills, and run ads supporting Obamacare instead of Trump’s impeachment. Or Clinton could simply open up her checkbook and single-handedly replenish the outreach budget herself, given that she and her husband made $153 million giving speeches over their careers—a figure which puts both the Clintons’ largesse, and the outreach “cuts,” in perspective.

Regardless, having seen their profits double under the last administration, health insurers don’t need taxpayers funding ads encouraging people to buy their products. They have $15 billion in profits from 2015 to do that themselves. (With that much money, they could even reprise Andy Griffith’s ads promoting Obamacare.)

Is It Sabotage to Increase Health Coverage?

In the final category of “sabotage” comes the Trump administration’s decision to cancel cost-sharing reduction payments to insurers—payments that Judge Rosemary Collyer ruled unconstitutional nearly 18 months ago. CAP claims this decision will raise premiums for the 2018 plan year. But the decision will also lead to greater spending on insurance subsidies, and more individuals with health coverage, according to the Congressional Budget Office—outcomes CAP would ordinarily support, but somehow “forgot” to mention in its report.

If the states are so concerned that people will be scared away from the exchanges by the thought of higher premiums, perhaps they should stop yelling about higher premiums. With open enrollment just days away, perhaps the states should focus instead on communicating the message that they have devised a response to the CSR payment termination that will prevent harm to the large majority of people while in fact allowing millions of lower-income people to get a better deal on health insurance in 2018. [Emphasis mine.]

While out on the campaign trail, Obama famously told crowds: “Don’t boo—vote.” Perhaps Obamacare supporters should take the eponym’s advice, and spend less time over the next few weeks whining about “sabotage” over open enrollment and more time actually working to enroll people. And maybe, just maybe, all the Washington elites up in arms about President Trump’s “sabotage” of the law could take a truly radical step, and sign up for Obamacare coverage themselves.

This post was originally published at The Federalist.

Does Andy Slavitt Know Anything about Medicaid?

The debate on health care has seen numerous examples of hyperbolic rhetoric in recent months. But one series of allegations made earlier this month takes the cake, both for its factual ignorance and logical incoherence. That these demonstrably false allegations were made by a former senior official in the Obama administration makes them that much more disconcerting.

While many Americans were enjoying a long Independence Day weekend, former acting administrator of the Centers for Medicare and Medicaid Services (CMS) Andy Slavitt took to Twitter to make the bold claim that Republicans were changing their health-care bill “not just to gut Medicaid, but to allow states to eliminate it.”

Moreover, Slavitt’s allegation reflects not just ignorance of fundamental constitutional principles, but the history of Medicaid itself. Arizona did not join the Medicaid program until 1982, 17 years after Medicaid’s creation, and nearly a decade after every other state joined the program. If, as Slavitt claims, Republicans are concocting some nefarious plot to “allow” states to “eliminate” Medicaid, then why did a Democratic Congress “allow” Arizona not to join Medicaid for nearly two decades after the program’s creation? Again, his allegations are, in a word, nonsense—because he either does not know, or does not wish to know, how Medicaid works.

These Waivers Ain’t New, Buddy

As Slavitt’s general claim is outlandishly ignorant, so too the details supposedly bolstering his assertions. Specifically, he claims that “the new state waiver process in the Senate bill already allows Medicaid to be replaced by giving [people] a subsidy.” Setting aside the question of whether giving some Medicaid beneficiaries access to private insurance coverage represents good policy, this claim likewise lacks any factual basis—because the waiver program he mentions has nothing to do with Medicaid.

Slavitt’s claim about a “new state waiver process” references Section 207 of the Senate bill (pages 138-145 here). That language doesn’t create a “new” state waiver process; rather, it amends an existing waiver program created by Section 1332 of Obamacare. Under Section 1332(a)(2) of the law, states can only use the innovation program to waive specific requirements: 1) the individual mandate to purchase coverage; 2) the employer mandate to offer coverage; 3) subsidies for exchange coverage, which states can take as a block grant and distribute to their citizens through other means; and 4) some insurance regulations, such as the definition of a qualified health plan, essential benefits, and actuarial value requirements (see page 98 here). While the Senate bill would change the way states could apply for waivers, it would not change what provisions states could waive.

Credibility: Shot

While at CMS, Slavitt ran an organization which, as the New York Times noted, “finances health care for one in three Americans and has a budget bigger than the Pentagon’s.” For that reason, there’s no other way to say it: Given the number of false statements in Slavitt’s Medicaid Twitter rant, he is either grossly misinformed about how Medicaid operates—in other words, he was never competent to run such a large organization in the first place—or he’s flat-out lying to the American public now.

Either way, his statements deserve much more scrutiny than they’ve received from an otherwise fawning press. Instead of writing pieces lionizing Slavitt as an Obamacare “rabble-rouser,” analysts should focus more on his misstatements and hypocrisy—his apparent failure to go on Obamacare himself while running the law’s exchanges, and his attacks on Republican plans to cap Medicaid spending, even though Obamacare did the exact same thing to Medicare. The American people deserve an honest, serious debate about the future of health care in our country. Unfortunately, they’re not getting it from Andy Slavitt.

This post was originally published at The Federalist.

Liberals’ Medicaid Alarmism

The Senate health care bill is dead, and that’s at least in part due to overheated rhetoric from the left about Medicaid. Many of the over-the-top claims lacked important facts or context, and seemed primarily designed to scare people rather than prompt civil debate.

For instance, liberals claimed that Republican plans to reduce the growth of Medicaid spending by nearly $800 billion in the next decade would “unravel” the program, as Clinton administration labor secretary Robert Reich put it. Yet Obamacare did nearly the exact same thing to Medicare. Obamacare reduced Medicare spending by $716 billion, according to a 2012 Congressional Budget Office estimate. And it did so not to improve Medicare’s ability to pay for care for the next generation of seniors, but instead to fund new Obamacare entitlements.

The liberals who claimed this year’s Republican health bills would “cut” Medicaid are the same ones who endorsed Obamacare’s reductions in Medicare spending. Just look at AARP’s framing of the issue: When Democrats reduce Medicare spending by hundreds of billions of dollars, the organization calls it “taking steps to reduce waste, fraud, abuse, and inefficiency.” But when Republicans reduce Medicaid spending by roughly equivalent amounts, AARP decries “unsustainable cuts” to the program.

Likewise the issue of caps on spending. A group of health care advocacy organizations sent a letter to Capitol Hill last month expressing “grave concern about potential changes to the fundamental structure and purpose of Medicaid,” saying they “vehemently oppose converting Medicaid’s funding into a capped financing structure.”

But this objection to capped payments also seems ironic at best, and disingenuous at worst. Section 3403 of Obamacare imposed per capita caps on Medicare spending, to be enforced by the Independent Payment Advisory Board — a group of unelected bureaucrats. So why did many of the same organizations who claim they “vehemently oppose” capped funding for Medicaid, endorse a health care bill that created the same funding structure for Medicare? Is it because a Democratic president proposed the former change, and a Republican Congress is debating the latter?

Then there’s the alarm raised by Andy Slavitt, a former head of Medicare, Medicaid and the Affordable Care Act during the Obama administration. He recently claimed that Republicans had a secret plan “not just to cut Medicaid, but to allow states to eliminate it.” He said a “new waiver process” in the Senate bill — really a modification of an existing Obamacare waiver — would allow states to transfer Medicaid beneficiaries to private coverage, thereby allowing them to “eliminate” Medicaid.

Yet the Obamacare waiver process explicitly prohibits changes to Medicaid — and the Senate bill would not have changed that. In addition, states have always had the ability to “eliminate” Medicaid; the federal government can’t force states to participate in the program. That’s why Arizona didn’t join until 1982, nearly two decades after Medicaid’s creation. States have remained in Medicaid because the federal government provides significant funding to them for their programs — and that funding would continue to rise, albeit more slowly, under both the House and Senate bills.

To be sure, both sides have exhibited their share of political opportunism. Republicans shouldn’t have attacked Obamacare’s Medicare savings as “cuts” — a reduction in projected growth rates should never be considered a “cut” in government spending. And conservatives were guaranteed to reap the political whirlwind sooner or later.

But the left’s hyperbolic rhetoric, coupled with some pretty apparent hypocrisy, not only helped kill the Senate health bill. It did the American people a disservice by detracting from the debate on health care that our country deserves.

This post was originally published at USA Today.

Testimony on Risk Corridors and the Judgment Fund

A PDF of this testimony is available at the House Judiciary Committee website.

Testimony before the House Judiciary

Subcommittee on the Constitution and Civil Justice

 

Hearing on “Oversight of the Judgment Fund”

March 2, 2017

 

Chairman King, Ranking Member Cohen, and Members of the Subcommittee:

Good morning, and thank you for inviting me to testify. My name is Chris Jacobs, and I am the Founder of Juniper Research Group, a policy and research consulting firm based in Washington. Much of my firm’s work focuses on health care policy, a field in which I have worked for over a decade—including more than six years on Capitol Hill. Given my background and work in health care, I have been asked to testify on the use of the Judgment Fund as it pertains to one particular area: Namely, the ongoing litigation regarding risk corridor payments to insurers under Section 1342 of the Patient Protection and Affordable Care Act (PPACA).

The risk corridor lawsuits provide a good example of a problematic use of the Judgment Fund, and not just due to the sums involved—literally billions of dollars in taxpayer funds are at issue. Any judgments paid out to insurers via the Judgment Fund would undermine the appropriations authority of Congress, in two respects. First, Congress never explicitly appropriated funds to the risk corridor program—either in PPACA or any other statute. Second, once the Obama Administration sent signals indicating a potential desire to use taxpayer dollars to fund risk corridors, notwithstanding the lack of an explicit appropriation, Congress went further, and enacted an express prohibition on such taxpayer funding. Utilizing the Judgment Fund to appropriate through the back door what Congress prohibited through the front door would represent an encroachment by the judiciary and executive on Congress’ foremost legislative power—the “power of the purse.”

Though past precedents and opinions by the Congressional Research Service, Government Accountability Office, and Justice Department Office of Legal Counsel should provide ample justification for the Court of Appeals for the Federal Circuit to deny the risk corridor claims made by insurers when it considers pending appeals of their cases, Congress can take additional action to clarify its prerogatives in this sphere. Specifically, Congress could act to clarify in the risk corridor case, and in any other similar case, that it has “otherwise provided for” funding within the meaning of the Judgment Fund when it has limited or restricted expenditures of funds.

 

Background on Risk Corridors

PPACA created risk corridors as one of three programs (the others being reinsurance and risk adjustment) designed to stabilize insurance markets in conjunction with the law’s major changes to the individual marketplace.  Section 1342 of the law established risk corridors for three years—calendar years 2014, 2015, and 2016. It further prescribed that insurers suffering losses during those years would have a portion of those losses reimbursed, while insurers achieving financial gains during those years would cede a portion of those profits.[1]

Notably, however, the statute did not provide an explicit appropriation for the risk corridor program—either in Section 1342 or elsewhere. While the law directs the Secretary of Health and Human Services (HHS) to establish a risk corridor program,[2] and make payments to insurers,[3] it does not provide a source for those payments.

 

History of Risk Corridor Appropriations

The lack of an explicit appropriation for risk corridors was not an unintentional oversight by Congress. The Senate Health, Education, Labor, and Pensions (HELP) Committee included an explicit appropriation for risk corridors in its health care legislation marked up in 2009.[4] Conversely, the Senate Finance Committee’s version of the legislation—the precursor to PPACA—included no appropriation for risk corridors.[5] When merging the HELP and Finance Committee bills, Senators relied upon the Finance Committee’s version of the risk corridor language—the version with no explicit appropriation.

Likewise, the Medicare Modernization Act’s risk corridor program for the Part D prescription drug benefit included an explicit appropriation from the Medicare Prescription Drug Account, an account created by the law as an offshoot of the Medicare Supplementary Medical Insurance Trust Fund.[6] While PPACA specifically states that its risk corridor program “shall be based on the program for regional participating provider organizations under” Medicare Part D, unlike that program, it does not include an appropriation for its operations.[7]

As the Exchanges began operations in 2014, Congress, noting the lack of an express appropriation for risk corridors in PPACA, questioned the source of the statutory authority for HHS to spend money on the program. On February 7, 2014, then-House Energy and Commerce Committee Chairman Fred Upton (R-MI) and then-Senate Budget Committee Ranking Member Jeff Sessions (R-AL) wrote to Comptroller General Gene Dodaro requesting a legal opinion from the Government Accountability Office (GAO) about the availability of an appropriation for the risk corridors program.[8]

In response to inquiries from GAO, HHS replied with a letter stating the Department’s opinion that, while risk corridors did not receive an explicit appropriation in PPACA, the statute requires the Department to establish, manage, and make payments to insurers as part of the risk corridor program. Because risk corridors provide special benefits to insurers by stabilizing the marketplace, HHS argued, risk corridor payments amount to user fees, and the Department could utilize an existing appropriation—the Centers for Medicare and Medicaid Services’ (CMS) Program Management account—to make payments.[9] GAO ultimately accepted the Department’s reasoning, stating the Department had appropriation authority under the existing appropriation for the CMS Program Management account to spend user fees.[10]

The GAO ruling came after Health and Human Services had sent a series of mixed messages regarding the implementation of the risk corridor program. In March 2013, the Department released a final rule noting that “the risk corridors program is not statutorily required to be budget neutral. Regardless of the balance of payments and receipts, HHS will remit payments as required under Section 1342 of” PPACA.[11] However, one year later, on March 11, 2014, HHS reversed its position, announcing the Department’s intent to implement the risk corridor program in a three-year, budget-neutral manner.[12]

Subsequent to the GAO ruling, and possibly in response to the varying statements from HHS, Congress enacted in December 2014 appropriations language prohibiting any transfers to the CMS Program Management account to fund shortfalls in the risk corridor program.[13] The explanatory statement of managers accompanying the legislation, noting the March 2014 statement by HHS pledging to implement risk corridors in a budget neutral manner, stated that Congress added the new statutory language “to prevent the CMS Program Management account from being used to support risk corridor payments.”[14] This language was again included in appropriations legislation in December 2015, and remains in effect today.[15]

 

Losses Lead to Lawsuits

The risk corridor program has incurred significant losses for 2014 and 2015. On October 1, 2015, CMS revealed that insurers paid $387 million into the program, but requested $2.87 billion. As a result of both these losses and the statutory prohibition on the use of additional taxpayer funds, insurers making claims for 2014 received only 12.6 cents on the dollar for their claims that year.[16]

Risk corridor losses continued into 2015. Last September, without disclosing specific dollar amounts, CMS revealed that “all 2015 benefit year collections [i.e., payments into the risk corridor program] will be used towards remaining 2014 benefit year risk corridors payments, and no funds will be available at this time for 2015 benefit year risk corridors payments.”[17]

In November, CMS revealed that risk corridor losses for 2015 increased when compared to 2014. Insurers requested a total of $5.9 billion from the program, while paying only $95 million into risk corridors—all of which went to pay some of the remaining 2014 claims.[18] To date risk corridors face a combined $8.3 billion shortfall for 2014 and 2015—approximately $2.4 billion in unpaid 2014 claims, plus the full $5.9 billion in unpaid 2015 claims. Once losses for 2016 are added in, total losses for the program’s three-year duration will very likely exceed $10 billion, and could exceed $15 billion.

Due to the risk corridor program losses, several insurers have filed suit in the Court of Federal Claims, seeking payment via the Judgment Fund of outstanding risk corridor claims they allege are owed. Thus far, two cases have proceeded to judgment. On November 10, 2016, Judge Charles Lettow dismissed all claims filed by Land of Lincoln Mutual Health Insurance Company, an insurance co-operative created by PPACA that shut down operations in July 2016.[19] Notably, Judge Lettow did not dismiss the case for lack of ripeness, but on the merits of the case themselves. He considered HHS’ decision to implement the program in a budget-neutral manner reasonable, using the tests in Chevron v. Natural Resources Defense Council, and concluded that neither an explicit nor implicit contract existed between HHS and Land of Lincoln.[20]

Conversely, on February 9, 2017, Judge Thomas Wheeler granted summary judgment in favor of Moda Health Plan, an Oregon health insurer, on its risk corridor claims.[21] Judge Wheeler held that PPACA “requires annual payments to insurers, and that Congress did not design the risk corridors program to be budget-neutral. The Government is therefore liable for Moda’s full risk corridors payments” under the law.[22] And, contra Judge Lettow, Judge Wheeler concluded that an implied contract existed between HHS and Moda, which also granted the insurer right to payment.[23]

 

Congress “Otherwise Provided For” Risk Corridor Claims

The question of whether or not insurers have a lawful claim on the United States government is separate and distinct from the question of whether or not the Judgment Fund can be utilized to pay those claims. CMS, on behalf of the Department of Health and Human Services, has made clear its views regarding the former question. In announcing its results for risk corridors for 2015, the agency stated that the unpaid balances for each year represented “an obligation of the United States Government for which full payment is required,” and that “HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments.”[24]

But because insurers seek risk corridor payments from the Judgment Fund, that fund’s permanent appropriation is available only in cases where payment is “not otherwise provided for” by Congress.[25] GAO, in its Principles of Federal Appropriations Law, describes such circumstances in detail:

Payment is otherwise provided for when another appropriation or fund is legally available to satisfy the judgment….Whether payment is otherwise provided for is a question of legal availability rather than actual funding status. In other words, if payment of a particular judgment is otherwise provided for as a matter of law, the fact that the defendant agency has insufficient funds at that particular time does not operate to make the Judgment Fund available. The agency’s only recourse in this situation is to seek additional appropriations from Congress, as it would have to do in any other deficiency situation.[26]

In this circumstance, GAO ruled in September 2014 that payments from insurers for risk corridors represented “user fees” that could be retained in the CMS Program Management account, and spent from same using existing appropriation authority. However, the prohibition on transferring taxpayer dollars to supplement those user fees prevents CMS from spending any additional funds on risk corridor claims other than those paid into the program by insurers themselves.

Given the fact pattern in this case, the non-partisan Congressional Research Service concluded that the Judgment Fund may not be available to insurers:

Based on the existence of an appropriation for the risk corridor payments, it appears that Congress would have “otherwise provided for” any judgments awarding payments under that program to a plaintiff. As a result, the Judgment Fund would not appear to be available to pay for such judgments under current law. This would appear to be the case even if the amounts available in the “Program Management” account had been exhausted. In such a circumstance, it appears that any payment to satisfy a judgment secured by plaintiffs seeking recovery of damages owed under the risk corridors program would need to wait until such funds were made available by Congress.[27]

Because the appropriations power rightly lies with Congress, the Judgment Fund cannot supersede the legislature’s decision regarding a program’s funding, or lack of funding. Congress chose not to provide the risk corridor program with an explicit appropriation; it further chose explicitly to prohibit transfers of taxpayer funds into the program. To allow the Judgment Fund to pay insurers’ risk corridor claims would be to utilize an appropriation after Congress has explicitly declined to do so.

The Justice Department’s Office of Legal Counsel (OLC) has previously upheld the same principle that an agency’s inability to fund judgments does not automatically open the Judgment Fund up to claims:

The Judgment Fund does not become available simply because an agency may have insufficient funds at a particular time to pay a judgment. If the agency lacks sufficient funds to pay a judgment, but possesses statutory authority to make the payment, its recourse is to seek funds from Congress. Thus, if another appropriation or fund is legally available to pay a judgment or settlement, payment is “otherwise provided for” and the Judgment Fund is not available.[28]

The OLC memo reinforces the opinions of both CRS and the GAO: The Judgment Fund is a payer of last resort, rather than a payer of first instance. Where Congress has provided another source of funding, the Judgment Fund should not be utilized to pay judgments or settlements. Congress’ directives in setting limits on appropriations to the risk corridor program make clear that it has “otherwise provided for” risk corridor claims—therefore, the Judgment Fund should not apply.

 

Judgment Fund Settlements

Even though past precedent suggests the Judgment Fund should not apply to the risk corridor cases, a position echoed by at least one judge’s ruling on the matter, the Obama Administration prior to leaving office showed a strong desire to settle insurer lawsuits seeking payment for risk corridor claims using Judgment Fund dollars. In its September 9, 2016 memo declaring risk corridor claims an obligation of the United States government, CMS also acknowledged the pending cases regarding risk corridors, and stated that “we are open to discussing resolution of those claims. We are willing to begin such discussions at any time.”[29] That language not only solicited insurers suing over risk corridors to seek settlements from the Administration, it also served as an open invitation for other insurers not currently suing the United States to do so—in the hope of achieving a settlement from the executive.

Contemporaneous press reports last fall indicated that the Obama Administration sought to use the Judgment Fund as the source of funding to pay out risk corridor claims. Specifically, the Washington Post reported advanced stages of negotiations regarding a settlement of over $2.5 billion—many times more than the $18 million in successful Judgment Fund claims made against HHS in the past decade—with over 175 insurers, paid using the Judgment Fund “to get around a recent congressional ban on the use of Health and Human Services money to pay the insurers.”[30]

When testifying before a House Energy and Commerce subcommittee hearing on September 14, 2016, then-CMS Acting Administrator Andy Slavitt declined to state the potential source of funds for the settlements his agency had referenced in the memo released the preceding week.[31] Subsequent to that hearing, Energy and Commerce requested additional documents and details from CMS regarding the matter; that request is still pending.[32]

Even prior to this past fall, the Obama Administration showed a strong inclination to accommodate insurer requests for additional taxpayer funds. A 2014 House Oversight and Government Reform Committee investigative report revealed significant lobbying by insurers regarding both PPACA’s risk corridors and reinsurance programs.[33] Specifically, contacts by insurance industry executives to White House Senior Advisor Valerie Jarrett during the spring of 2014 asking for more generous terms for the risk corridor program yielded changes to the program formula—raising the profit floor from three percent to five percent—in ways that increased payments to insurers, and obligations to the federal government.[34]

Regardless of the Administration’s desire to accommodate insurers, as evidenced by its prior behavior regarding risk corridors, past precedent indicates that the Judgment Fund should not be accessible to pay either claims or settlements regarding risk corridors. A prior OLC memo indicates that “the appropriate source of funds for a settled case is identical to the appropriate source of funds should a judgment in that case be entered against the government.”[35] If a judgment cannot come from the Judgment Fund—and CRS, in noting that Congress has “otherwise provided for” risk corridor claims, believes it cannot—then neither can a settlement come from the Fund.

Given these developments, in October 2016 the Office of the House Counsel, using authority previously granted by the House, moved to file an amicus curiae brief in one of the risk corridor cases, that filed by Health Republic.[36] The House filing, which made arguments on the merits of the case that the Justice Department had not raised, did so precisely to protect Congress’ institutional prerogative and appropriations power—a power Congress expressed first when failing to fund risk corridors in the first place, and a second, more emphatic time when imposing additional restrictions on taxpayer funding to risk corridors.[37] The House filing made clear its stake in the risk corridor dispute:

Allegedly in light of a non-existent ‘litigation risk,’ HHS recently took the extraordinary step of urging insurers to enter into settlement agreements with the United States in order to receive payment on their meritless claims. In other words, HHS is trying to force the U.S. Treasury to disburse billions of dollars of taxpayer funds to insurance companies, even though DOJ [Department of Justice] has convincingly demonstrated that HHS has no legal obligation (and no legal right) to pay these sums. The House strongly disagrees with this scheme to subvert Congressional intent by engineering a massive giveaway of taxpayer money.[38]

The amicus filing illustrates the way in which the executive can through settlements—or, for that matter, failing vigorously to defend a suit against the United States—undermine the intent of Congress by utilizing the Judgment Fund appropriation to finance payments the legislature has otherwise denied.

 

Conclusion

Both the statute and existing past precedent warrant the dismissal of the risk corridor claims by the Court of Appeals for the Federal Circuit. Congress spoke clearly on the issue of risk corridor funding twice: First when failing to provide an explicit appropriation in PPACA itself; and second when enacting an explicit prohibition on taxpayer funding. Opinions from Congressional Research Service, Government Accountability Office, and Office of Legal Counsel all support the belief that, in taking these actions, Congress has “otherwise provided for” risk corridor funding, therefore prohibiting the use of the Judgment Fund. It defies belief that, having explicitly prohibited the use of taxpayer dollars through one avenue (the CMS Program Management account), the federal government should pay billions of dollars in claims to insurers via the back door route of the Judgment Fund.

However, in the interests of good government, Congress may wish to clarify that, in both the risk corridor cases and any similar case, lawmakers enacting a limitation or restriction on the use of funds should constitute “otherwise provid[ing] for” that program as it relates to the Judgment Fund. Such legislation would codify current practice and precedent, and preserve Congress’ appropriations power by preventing the executive and/or the courts from awarding judgments or settlements using the Judgment Fund where Congress has clearly spoken.

Thank you for the opportunity to testify this morning. I look forward to your questions.

 

 

[1] Under the formulae established in Section 1342(b) of the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), plans with profit margins between 3 percent and 8 percent pay half their profit margins between those two points into the risk corridor program, while plans with profit margins exceeding 8 percent pay in 2.5 percent of profits (half of their profits between 3 percent and 8 percent), plus 80 percent of any profit above 8 percent. Payments out to insurers work in the inverse manner—insurers with losses below 3 percent absorb the entire loss; those with losses of between 3 and 8 percent will have half their losses over 3 percent repaid; and those with losses exceeding 8 percent will receive 2.5 percent (half of their losses between 3 and 8 percent), plus 80 percent of all losses exceeding 8 percent. 42 U.S.C. 18062(b).

[2] Section 1342(a) of PPACA, 42 U.S.C. 18062(a).

[3] Section 1342(b) of PPACA, 42 U.S.C. 18062(b).

[4] Section 3106 of the Affordable Health Choices Act (S. 1679, 111th Congress), as reported by the Senate HELP Committee, established the Community Health Insurance Option. Section 3106(c)(1)(A) created a Health Benefit Plan Start-Up Fund “to provide loans for the initial operations of a Community Health Insurance Option.” Section 3106(c)(1)(B) appropriated “out of any moneys in the Treasury not otherwise appropriated an amount necessary as requested by the Secretary of Health and Human Services to,” among other things, “make payments under” the risk corridor program created in Section 3106(c)(3).

[5] Section 2214 of America’s Healthy Future Act (S. 1796, 111th Congress), as reported by the Senate Finance Committee, created a risk corridor program substantially similar to (except for date changes) that created in PPACA. Section 2214 did not include an appropriation for risk corridors.

[6] Section 101(a) of the Medicare Modernization Act (P.L. 108-173) created a program of risk corridors at Section 1860D—15(e) of the Social Security Act, 42 U.S.C. 1395w—115(e). Section 101(a) of the MMA also created a Medicare Prescription Drug Account within the Medicare Supplementary Medical Insurance Trust Fund at Section 1860D—16 of the Social Security Act, 42 U.S.C. 1395w—116. Section 1860D—16(c)(3) of the Social Security Act, 42 U.S.C. 1395w—116(c)(3), “authorized to be appropriated, out of any moneys of the Treasury not otherwise appropriated,” amounts necessary to fund the Account. Section 1860D—16(b)(1)(B), 42 U.S.C. 1395w—116(b)(1)(B), authorized the use of Account funds to make payments under Section 1860D—15, the section which established the Part D risk corridor program.

[7] Section 1342(a) of PPACA, 42 U.S.C. 18062(a).

[8] Letter from House Energy and Commerce Committee Chairman Fred Upton and Senate Budget Committee Ranking Member Jeff Sessions to Comptroller General Gene Dodaro, February 7, 2014.

[9] Letter from Department of Health and Human Services General Counsel William Schultz to Government Accountability Office Assistant General Counsel Julie Matta, May 20, 2014.

[10] Government Accountability Office legal decision B-325630, Department of Health and Human Services—Risk Corridor Program, September 30, 2014, http://www.gao.gov/assets/670/666299.pdf.

[11] Department of Health and Human Services, final rule on “Notice of Benefit and Payment Parameters for 2014,” Federal Register March 11, 2013, https://www.gpo.gov/fdsys/pkg/FR-2013-03-11/pdf/2013-04902.pdf, p. 15473.

[12] Department of Health and Human Services, final rule on “Notice of Benefit and Payment Parameters for 2015,” Federal Register March 11, 2014, https://www.gpo.gov/fdsys/pkg/FR-2014-03-11/pdf/2014-05052.pdf, p. 13829.

[13] Consolidated and Further Continuing Appropriations Act, 2015, P.L. 113-235, Division G, Title II, Section 227.

[14] Explanatory Statement of Managers regarding Consolidated and Further Continuing Appropriations Act, 2015, Congressional Record December 11, 2014, p. H9838.

[15] Consolidated Appropriations Act, 2016, P.L. 114-113, Division H, Title II, Section 225.

[16] Centers for Medicare and Medicaid Services, memorandum regarding “Risk Corridors Proration Rate for 2014,” October 1, 2015, https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RiskCorridorsPaymentProrationRatefor2014.pdf.

[17] Centers for Medicare and Medicaid Services, memorandum regarding “Risk Corridors Payments for 2015,” September 9, 2016, https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Risk-Corridors-for-2015-FINAL.PDF.

[18] Centers for Medicare and Medicaid Services, memorandum regarding “Risk Corridors Payment and Charge Amounts for the 2015 Benefit Year,” https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-RC-Issuer-level-Report-11-18-16-FINAL-v2.pdf.

[19] Land of Lincoln Mutual Health Insurance Company v. United States, Court of Federal Claims No. 16-744C, ruling of Judge Charles Lettow, November 10, 2016, https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2016cv0744-47-0.

[20] Ibid.

[21] Moda Health Plan v. United States, Court of Federal Claims No. 16-649C, ruling of Judge Thomas Wheeler, February 9, 2017, https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2016cv0649-23-0.

[22] Ibid., p. 2.

[23] Ibid., pp. 34-39.

[24] CMS, “Risk Corridors Payments for 2015.”

[25] 31 U.S.C. 1304(a)(1).

[26] Government Accountability Office, 3 Principles of Federal Appropriations Law 14-39, http://www.gao.gov/assets/210/203470.pdf.

[27] Congressional Research Service, memo to Sen. Marco Rubio on the risk corridor program, January 5, 2016, http://www.rubio.senate.gov/public/_cache/files/1dc92ef8-c340-4cfd-95c0-67369a557f1e/2AA5EF8F125279800BFABC8B8BA37072.05.24.2016-crs-rubio-memo-risk-corridors-1-5-16-1-redacted.pdf.

[28] Justice Department Office of Legal Counsel, “Appropriate Source for Payment of Judgment and Settlements in United States v. Winstar Corp.,” July 22, 1998, Opinions of the Office of Legal Counsel in Volume 22, https://www.justice.gov/sites/default/files/olc/opinions/1998/07/31/op-olc-v022-p0141.pdf, p. 153.

[29] CMS, “Risk Corridors Payments for 2015.”

[30] Amy Goldstein, “Obama Administration May Use Obscure Fund to Pay Billions to ACA Insurers,” Washington Post September 29, 2016, https://www.washingtonpost.com/national/health-science/obama-administration-may-use-obscure-fund-to-pay-billions-to-aca-insurers/2016/09/29/64a22ea4-81bc-11e6-b002-307601806392_story.html?utm_term=.361888177f81.

[31] Testimony of CMS Acting Administrator Andy Slavitt before House Energy and Commerce Health Subcommittee Hearing on “The Affordable Care Act on Shaky Ground: Outlook and Oversight,” September 14, 2016, http://docs.house.gov/meetings/IF/IF02/20160914/105306/HHRG-114-IF02-Transcript-20160914.pdf, pp. 84-89.

[32] Letter from House Energy and Commerce Committee Chairman Fred Upton et al. to Health and Human Services Secretary Sylvia Burwell regarding risk corridor settlements, September 20, 2016, https://energycommerce.house.gov/news-center/letters/letter-hhs-regarding-risk-corridors-program.

[33] House Oversight and Government Reform Committee, staff report on “Obamacare’s Taxpayer Bailout of Health Insurers and the White House’s Involvement to Increase Bailout Size,” July 28, 2014, http://oversight.house.gov/wp-content/uploads/2014/07/WH-Involvement-in-ObamaCare-Taxpayer-Bailout-with-Appendix.pdf.

[34] Ibid., pp. 22-29.

[35] OLC, “Appropriate Source of Payment,” p. 141.

[36] H.Res. 676 of the 113th Congress gave the Speaker the authority “to initiate or intervene in one or more civil actions on behalf of the House…regarding the failure of the President, the head of any department or agency, or any other officer or employee of the executive branch, to act in a manner consistent with that official’s duties under the Constitution and the laws of the United States with respect to implementation of any provision of” PPACA. Section 2(f)(2)(C) of H.Res. 5, the opening day rules package for the 114th Congress, extended this authority for the duration of the 114th Congress.

[37] Motion for Leave to File Amicus Curiae on behalf of the United States House of Representatives, Health Republic Insurance Company v. United States, October 14, 2016, http://www.speaker.gov/sites/speaker.house.gov/files/documents/2016.10.13%20-%20Motion%20-%20Amicus%20Brief.pdf?Source=GovD.

[38] Ibid., p. 2.

The Limousine Liberals Who Won’t Join Obamacare

Even by government standards, it’s an outlandish story of wealth and hypocrisy: A bureaucrat who made more than one million dollars selling Obamacare insurance plans, but won’t buy one for himself? The sad thing is, it also happens to be true.

Meet Peter Lee, Executive Director of Covered California. In the past three years alone, Mr. Lee has made well over one million dollars running California’s Obamacare Exchange. He received massive raises the past two years, going from a salary of $262,644 in 2014 to $420,000 beginning this July. On top of that nearly $160,000 raise, Peter Lee received two other whopping bonuses of $52,258 in 2014 and $65,000 in 2015—winning more in one lump sum than many families make in an entire year. But at a September briefing, I asked Mr. Lee point blank what type of health coverage he holds, and he said he was enrolled in California’s state employee plan.

Think about that: a bureaucrat whose salary comes from selling Exchange plans—Covered California’s operating budget derives from surcharges on plans sold through the Exchange—but yet won’t buy one of the plans he sells for himself. It’s enough to make a person ask how much Mr. Lee would have to make before he would actually break down and buy one of the plans he sells—a million dollars? Two million? Five million?

Liberal One-Percenters: Good for You, Not for Me

I’ll concede right now that Obamacare’s Exchanges were designed primarily for those without employer coverage. Individuals whose employers do offer “affordable” coverage cannot receive subsidies on Exchanges, although they can enroll without a subsidy, if they so choose. Most Americans choose employer coverage, because firms heavily subsidize them—to the tune of an average of $12,865 for family coverage. For the average worker making $60,000, or even $80,000, per year, turning down the employer subsidy to purchase an unsubsidized Exchange plan represents a substantial pay cut, one many families could not afford.

But well-paid liberals like Peter Lee—who over the last two years received raises more than twelve times the average employer’s subsidy for health coverage—have no real financial excuse not to join the Exchanges—other than liberal elitism. As the owner of a new small business who likely won’t make six figures this year, I have little patience to hear supposed believers in Obamacare with far more means than I who won’t give up a few thousand dollars in employer subsidies to enroll on the Exchanges themselves. After all, aren’t liberals the ones who believe in social solidarity and “paying your fair share” anyway…?

Well-Heeled Bureaucrats and Think Tankers’ Hypocrisy

For instance, Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt literally cashed in to the tune of over $4.8 million in stock options on joining the Administration—more than enough to forego any employer subsidy for his health coverage. He recently responded to a questioner on Twitter asking him why he wasn’t on Medicare by stating that he was only 49 years of age—too young to qualify. Within minutes, I sent Slavitt a follow-up tweet: “If Obamacare is so great, are you on the Exchange—and if not, why not?” Slavitt has yet to reply.

Both Slavitt, and Health and Human Services Secretary Sylvia Burwell (net worth: $4.6 million), have plenty of financial resources to forego an employer subsidy and purchase Exchange coverage. Even at a total premium of $15,000 for his family, one year’s insurance costs would total less than 0.3% of the stock gains Slavitt cashed in on when joining the Administration—to say nothing of the millions he likely will make when he “cashes in” on his government experience in just a few months.

Did Slavitt just not see my tweet asking him about his health coverage? Did he not reply because the person in charge of selling Exchange policies doesn’t think they’re good enough to buy one himself? Or does he believe that someone who made millions a few short years ago is too “poor” to give up a few thousand dollars in employer subsidies for his health care?

The ranks of well-paid liberals clamming up when asked about their health benefits extends beyond government, into the think-tank ranks as well. In September, the Urban Institute published a paper claiming that Exchange coverage was actually cheaper than the average employer plan. I e-mailed the papers’ authors, asking them a simple question: Had they taken steps to enroll in Exchange coverage themselves—and encouraged the Urban Institute to send all its employees to the Exchanges?

I have yet to receive a reply from the three researchers. But after doing some digging, I found the Urban Institute’s Form 990 filing with the IRS. The form reveals that one of the study’s authors, John Holahan, received a total of $313,932 in compensation in 2014—$267,051 in salary, and $46,881 in other compensation and benefits. Does Mr. Holahan therefore believe that giving up his subsidized benefits, and relying “only” upon his $267,051 salary, presents too great a sacrifice for him to bear financially? If he and his colleagues truly believe Exchange plans are more efficient than employer coverage—as opposed to just coming up with a talking point to rebut Obamacare’s massive premium increases—then shouldn’t they enroll themselves?

I Make $400,000—So Quit Whining about Your Cost Hike

Then there’s Larry Levitt, a Senior Vice President at the Kaiser Family Foundation. Last week Levitt tweeted that Exchange premium increases don’t apply to many people—a talking point that Drew Altman, Kaiser’s CEO, has also made in blog posts. I replied asking whether Levitt himself, or other people using this talking point, actually have Exchange coverage—to which Levitt gave no response.

Care to guess how much these scholars claiming Exchange premium increases are overrated make themselves? According to Kaiser’s IRS filing, Levitt received $333,048 in salary, and $48,563 in benefits, in 2014. His boss, Drew Altman, pulled down a whopping $642,927 in salary, $149,509 in retirement plan contributions, and a $13,545 expense account—nearly $806,000 in total compensation.

The contradictions from the Kaiser researchers are ironic on two levels. One could certainly argue that an executive making nearly $400,000, let alone over $800,000, doesn’t need comprehensive health insurance—except to protect from severe emergencies, like getting hit by the proverbial bus. However, both appear loathe to give up their employer-provided health coverage—and equally quick to minimize the impact of Obamacare’s premium increases nationwide. As I noted on Twitter, that’s easy for people who refuse to join the Exchanges to say.

Stupid Is What Stupid Does?

Last, but certainly not least, on the hit parade is MIT professor Jonathan “Stupidity of the American Voter” Gruber. Last week Gruber said both that the law “was working as designed” and that people who lost their coverage thanks to the law “never had real insurance to begin with.” Unfortunately, MIT’s tax filings don’t include his salary. However, given that Gruber’s infamous undisclosed contract with the Obama Administration totaled nearly $400,000, and that he literally made millions from other contracts, it’s fair to say Gruber could afford to purchase his own health insurance outside his employer—if he wanted to. So I e-mailed him, and asked him whether he gave up his employer coverage to purchase that “real insurance” that Obamacare provides. Wouldn’t you know, I have yet to receive a reply.

It’s bad enough that the individuals above apparently refuse to give up their platinum-plated health plans to join the Exchanges—even though it would cost them at most a few percentage points of their total compensation to do so. They also wish to cast stones from their ivory towers at those of us who are facing higher premiums, rising deductibles, fewer (if any) choices of insurers, and smaller doctor networks thanks to the law they claim to support.

So to all those well-heeled Obamacare supporters who can afford to enroll in Obamacare themselves, but simply won’t, I’ll make one final point: Disagree with me if you like, but I’m working my damnedest to stop Obamacare’s bailouts—even though I know that if I “win” on the policy, I could lose my health coverage. It’s called standing on principle. It’s a novel concept—you might want to try it sometime.

This post was originally published at The Federalist.

Risk Corridors: The Obama Administration at War with Itself?

Ferrets in a sack might prove an apt description of the internal infighting plaguing the Obama Administration regarding risk corridors. Last week, sources — whether within the Administration, amongst the insurer community, or both — wanted to portray a multi-billion dollar Judgment Fund settlement with insurers as a fait accompli, telling the Washington Post an agreement could be reached within two weeks.

But in two separate motions filed late last Friday regarding pending lawsuits, lawyers for the Department of Justice pulled a Lee Corso: “Not so fast, my friend!” The filings stated repeated claims made in a related lawsuit this summer that the case made by insurers is not yet ripe for adjudication in court. However, in a new development, Justice also alleged that insurers had no claim to make in court at all:

Third, Count I fails on the merits. Section 1342 [of Obamacare] does not require HHS to make risk corridors payments beyond those funded from collections. And even if that intent were unclear when the Affordable Care Act was enacted in 2010, Congress removed any ambiguity when it enacted annual appropriations laws for fiscal years 2015 and 2016 that prohibited HHS from paying risk corridors amounts from appropriated funds other than collections.

Here are four things you need to know about the latest risk corridor developments:

  • DOJ vs. CMS? Whereas the Centers for Medicare and Medicaid Services stated in a September 9 document that it considered unpaid risk corridor claims “an obligation of the United States government for which full payment is required,” the Justice Department has now argued before two separate district court judges that no additional payment is required — not now, and not ever. In testifying before Congress last month, both Acting Administrator Slavitt and his Chief of Staff separately claimed that the Justice Department were consulted before CMS issued its September 9 memo. While last week’s Post article claimed that “Justice officials have privately told several health plans” they want to settle claims on insurers’ terms as quickly (and as quietly) as possible, the filings show that at least some Justice officials have no intention of “tanking” the government’s case for political reasons.
  • Political Appointees vs. Career Civil Servants: Two congressional reports provide some clues to the possible divides within the Administration. A 2014 House Oversight Committee investigative report showed how insurers immediately contacted Valerie Jarrett and other political appointees seeking increased risk corridor payments when insurers’ enrollees started skewing older and sicker than expected. And a report by two House committees earlier this year showed how political appointees have put the proverbial screws to uncooperative civil servants, threatening those civil servants if they exercised their statutory rights to provide information to Congress regarding a related program of Obamacare cost-sharing subsidies. The mixed messages regarding the risk corridor suits could represent a similar divide — political appointees want to pay the claims before President Obama leaves office, whereas career civil servants are focused on the heretofore novel notion of actually enforcing the law as written.
  • Andy Slavitt, Bailout King? During his own testimony before the House Energy and Commerce Committee last month, CMS head Andy Slavitt made absolutely no attempt to argue the points Justice made in its filings — namely, that Congress has made its intent regarding risk corridors crystal clear, and that insurers are not owed any money. In this context, it is worth noting: 1) Administrator Slavitt’s at least $4.8 million in stock compensation from a unit of UnitedHealthGroup — the nation’s largest insurer; 2) the special ethics waiver he had to receive from the Obama Administration to make policy decisions impacting his former employer; and 3) the fact that Mr. Slavitt will likely require new employment in three months. Could Administrator Slavitt be attempting to help his once — and perhaps future — employers in the insurance industry…?
  • Constitutional “Takings,” Redefined: In one of the court cases, filed by Blue Cross Blue Shield of North Carolina, the Justice Department responded to claims that the risk corridor non-payment represent a Fifth Amendment violation on the part of the federal government. This Blue Cross insurer has argued — apparently with a straight face — that the federal government NOT giving it a multi-billion dollar, taxpayer-funded risk corridor payment represents a “taking” that violates its constitutional rights. To repeat: Blue Cross alleges it has a constitutional right to a multi-billion dollar bailout — even though the Justice Department notes that there is no contractual right to payment under the risk corridor program at all.