Why Single-Payer Advocates Demonize Opponents of Government-Run Health Care

Earlier this summer, I wrote an article, based upon research for my forthcoming book, outlining the ways a single-payer health care system will lead to greater fraud and corruption. That afternoon, I received the following message—sent not just once, but four separate times—in my firm’s e-mail inbox:

Just finished reading the fear mongering article that Chris wrote for RCP. I am looking forward to reading and refuting his book on ‘single payer’. Id love to know which insurance companies own his arse via monetary payments. It’s obvious by Chris’ lack of salient facts regarding single payer that he is owned by some corporation. Since RCP only makes it look like others can comment you were spared from me systematically destroying your BS with the real facts of health care. In closing, go [f-ck] yourself you corporate [b-tch].

Whether in vulgar e-mails, Twitter rants, or blog posts, single payer supporters often start out by assuming that anyone opposed to socialized medicine must by definition have received some sort of payoff from drug companies or insurance companies. Even in my case, however, that claim has very little validity. More importantly, calling anyone opposed to single payer a corporate shill patronizes and insults the American people—the same people whose support they need to enact the proposal in the first place.

Take Me as an Example

If folks want to play “Gotcha” games with this nugget, they can—and some will—but there’s much less to this history than meets the eye. For starters, I took the lobbying job when I was aged 24, a little over a year out of grad school, and for the princely salary of…$39,000 per year. I never made six figures as a registered lobbyist—not even close, actually—and earned less in three and a half years as a registered lobbyist than most actual lobbyists make in one.

To be honest, I did little actual lobbying. My inclusion on the list of registered lobbyists represented more of an abundance of caution by my firm than anything else. (Under the federal Lobbying Disclosure Act, individuals do not have to register as a lobbyist if fewer than 20 percent of their hours are spent in paid lobbying activities.)

I prepared memos ahead of lobbying meetings, and drafted letters following those meetings, but precious little beyond that. After three years, I left to go back to Capitol Hill in a more senior role, where I had wanted to work all along.

More to the point: I haven’t taken a dime of support from corporate interests to shill for their positions—and I won’t, period. My views and reputation are not for sale. They’re not even for rent.

Don’t Insult the American People

Even Ezra Klein, of all people, acknowledged Americans’ deep resistance to change regarding health care. In a July article analyzing whether individuals can keep their health insurance—an issue that has tripped up Kamala Harris, among others, during the Democratic presidential campaign—Klein asked some pertinent questions:

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

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

Yet, judging from the amount of times Bernie Sanders attacks “millionaires and billionaires” in his campaign speeches, he and others find it much easier to ignore the substance of Americans’ concerns, and instead blame corporations and “the rich” for deluding the public.

Even Slate admitted that “to the President’s critics, it sounds patronizing. I was doing the right thing, but the slow American people didn’t get it” (emphasis original). Single-payer supporters fall into this trap on health care: “We could enact our socialist paradise easily, if only the health insurers and drug companies hadn’t bought off so many people.”

Starting off by questioning motives—by assuming everyone with any objections to single payer automatically must be a shill of corporate interests, just trying to bilk the sick and dying out of more money to pad their wallets—doesn’t seem like the best way to win friends and influence people, let alone pass a massive bill like single payer. And it speaks volumes about the radical left that they seem more intent on the former than the latter.

This post was originally published at The Federalist.

Four Ways Donald Trump Can Start Dismantling Obamacare on Day One

Having led a populist uprising that propelled him to the presidency, Donald Trump will now face pressure to make good on his campaign promise to repeal Obamacare. However, because President Obama used executive overreach to implement so much of the law, Trump can begin dismantling it immediately upon taking office.

The short version comes down to this: End cronyist bailouts, and confront the health insurers behind them. Want more details? Read on.

1. End Unconstitutional Cost-Sharing Subsidies

In May, Judge Rosemary Collyer ruled in a lawsuit brought by the House of Representatives that the Obama administration had illegally disbursed cost-sharing subsidies to insurers without an appropriation. These subsidies—separate and distinct from the law’s premium subsidies—reimburse insurers for discounted deductibles and co-payments they provide to some low-income beneficiaries.

Trump should immediately 1) revoke the Obama administration’s appeal of Collyer’s ruling in the House’s lawsuit, House v. Burwell, and 2) stop providing cost-sharing subsidies to insurers unless and until Congress grants an explicit appropriation for same.

2. Follow the Law on Reinsurance

House v. Burwell represents but one case in which legal experts have ruled the Obama administration violated the law by bailing out insurers. In September, the Government Accountability Office (GAO) handed down a ruling in the separate case of Obamacare’s reinsurance program.

The law states that, once reinsurance funds come in, Treasury should get repaid for the $5 billion cost of a transitional Obamacare program before insurers receive reimbursement for their high-cost patients. GAO, like the non-partisan Congressional Research Service before it, concluded that the Obama administration violated the text of Obamacare by prioritizing payments to insurers over and above payments to the Treasury.

Trump should immediately ensure that Treasury is repaid all the $5 billion it is owed before insurance companies get repaid, as the law currently requires. He can also look to sue insurance companies to make the Treasury whole.

3. Prevent a Risk Corridor Bailout

In recent weeks, the Obama administration has sought to settle lawsuits raised by insurance companies looking to resolve unpaid claims on Obamacare’s risk corridor program. While Congress prohibited taxpayer funds from being used to bail out insurance companies—twice—the administration apparently wishes to enact a backdoor bailout prior to leaving office.

Under this mechanism, Justice Department attorneys would sign off on using the obscure Judgment Fund to settle the risk corridor lawsuits, in an attempt to circumvent the congressional appropriations restriction.

Trump should immediately 1) direct the Justice Department and the Centers for Medicare and Medicaid Services (CMS) not to settle any risk corridor lawsuits, 2) direct the Treasury not to make payments from the Judgment Fund for any settlements related to such lawsuits, and 3) ask Congress for clarifying language to prohibit the Judgment Fund from being used to pay out any settlements related to such lawsuits.

4. Rage Against the (Insurance) Machine

Trump ran as a populist against the corrupting influence of special interests. To that end, he would do well to point out that health insurance companies have made record profits, nearly doubling during the Obama years to a whopping $15 billion in 2015. It’s also worth noting that special interests enthusiastically embraced Obamacare as a way to fatten their bottom lines—witness the pharmaceutical industry’s “rock solid deal” supporting the law, and the ads they ran seeking its passage.

As folks have noted elsewhere, if Trump ends the flow of cost-sharing subsidies upon taking office, insurers may attempt to argue that legal clauses permit them to exit the Obamacare exchanges immediately. Over and above the legal question of whether CMS had the authority to make such an agreement—binding the federal government to a continuous flow of unconstitutional spending—lies a broader political question: Would insurers, while making record profits, deliberately throw the country’s insurance markets into chaos because a newly elected administration would not continue paying them tribute in the form of unconstitutional bailouts?

For years, Democrats sought political profit by portraying Republicans as “the handmaidens of the insurance companies.” Anger against premium increases by Anthem in 2010 helped compel Democrats to enact Obamacare, even after Scott Brown’s stunning Senate upset in Massachusetts. It would be a delicious irony indeed for a Trump administration to continue the political realignment begun last evening by demonstrating to the American public just how much Democrats have relied upon crony capitalism and corrupting special interests to enact their agenda. Nancy Pelosi and K Street lobbyists were made for each other—perhaps it only took Donald Trump to bring them together.
This post was originally published at The Federalist.

Barack Obama’s Tax Cuts — For Insurance Companies

The President’s campaign flyer includes some interesting claims on health care.  It also includes some curious language on taxes: “The President has provided new tax cuts to help the middle class afford higher education and health care.”  We’ve debunked this myth in its entirety here.  But it’s worth reiterating the key point: The President’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets of the insurance industry:

  • Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
  • Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges.  The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultantadmitted in an interview that “Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change.  In most cases, credits will go straight to insurance companies, to pay for health benefits.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President, only to flip-flop on this issue when he signed Obamacare.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

Presidential flip-flops and insurance company giveaways are real signs of change – but they’re certainly not hope and change, and they’re not the true reform our health sector needs.

Fact Check: “At the Mercy of Insurance Companies”

The Hill reports that, during his remarks to AARP this morning, the President attacked Republicans for leaving seniors “at the mercy of insurance companies.”  Well, in case you missed it, here are five ways the President and his Administration have left seniors at the mercy of one organization with insurance interests – AARP – by granting them special exemptions and ignoring their questionable insurance practices:

  1. AARP’s lucrative Medigap insurance was exempted in Obamacare from the ban on pre-existing conditions; medical loss ratio requirements; caps on insurance industry executive compensation; and the tax on all other health insurance plans.
  2. The Department of Health and Human Services didn’t think all these Obamacare exemptions were enough; last year they also exempted Medigap insurance from premium rate review – even though AARP, which carries the plan with the largest market share, earns greater profits the more seniors pay in premiums.
  3. At a conference hosted by America’s Health Insurance Plans in March 2010, HHS Secretary Sebelius encouraged the insurance industry to give up some of its profits, at a time when health insurance profit margins were about 2 percentYet neither Secretary Sebelius nor anyone else in the Administration ever criticized AARP for making a profit margin of nearly 5 percent on its Medigap insurance.
  4. In April 2010, the Administration engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than is required by the law.  But no one from the Administration has taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage.
  5. In a speech at an AARP conference in October 2010, Secretary Sebelius praised AARP as the “gold standard in cutting through spin and complexity to give people the accurate information they need.”  Yet the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements.  So Secretary Sebelius praised as the “gold standard” for “accurate information” an organization that has the types of financial conflicts her insurance commissioner colleagues have criticized as ripe for abuse.

If the President is so worried about leaving seniors at the mercy of insurance companies, perhaps he should tell the people within his own Administration to stop granting political favors to Democrats’ cronies at the AARP.

The Obama Administration’s Protection Racket

Shortly, President Obama will be addressing the AARP convention via satellite.  He will undoubtedly say nice things about AARP’s role as a “senior advocate.”  But what he won’t discuss are the ways in which his own Administration has allowed AARP to continue making billions in profits on its insurance business:

  1. AARP’s lucrative Medigap insurance was exempted in Obamacare from the ban on pre-existing conditions; medical loss ratio requirements; caps on insurance industry executive compensation; and the tax on all other health insurance plans.
  2. The Department of Health and Human Services didn’t think all these Obamacare exemptions were enough; last year they also exempted Medigap insurance from premium rate review – even though AARP, which carries the plan with the largest market share, earns greater profits the more seniors pay in premiums.
  3. At a conference hosted by America’s Health Insurance Plans in March 2010, HHS Secretary Sebelius encouraged the insurance industry to give up some of its profits, at a time when health insurance profit margins were about 2 percentYet neither Secretary Sebelius nor anyone else in the Administration ever criticized AARP for making a profit margin of nearly 5 percent on its Medigap insurance.
  4. In April 2010, the Administration engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than is required by the law.  But no one from the Administration has taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage.
  5. In a speech at an AARP conference in October 2010, Secretary Sebelius praised AARP as the “gold standard in cutting through spin and complexity to give people the accurate information they need.”  Yet the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements.  So Secretary Sebelius praised as the “gold standard” for “accurate information” an organization that has the types of financial conflicts her insurance commissioner colleagues have criticized as ripe for abuse.

Why might the Administration look the other way despite these abuses?  Documents released by the Energy and Commerce Committee yesterday provide myriad reasons, showing all the political favors senior Administration officials asked of AARP as they rammed Obamacare through Congress:

  • Jim Messina, White House Deputy Chief of Staff: “We need [AARP CEO] Barry Rand to go meet with Ben Nelson personally and just lay it on the line.  ‘We will be with you, we will protect you.  But if you kill this bill, seniors will not forget.’  We are at 59 [votes in the Senate], we have to have him.” (page 7)
  • Jim Messina: “Can we get immediate robo calls into Nebraska urging [Ben] Nelson to vote for cloture?” (page 9)
  • Nancy-Ann DeParle, Director, White House Office of Health Reform: “Can AARP support accountable care orgs [sic] and some other delivery system reforms?” (page 26)
  • Jim Messina: “Latest top 25 targets list from House leadership” (page 35)
  • Ann Widger, Office of Public Engagement: “We would really like AARP to participate in this roundtable.” (page 37)
  • Ann Widger: “Did you guys put out any paper today on the McCain [Medicare] amendment?” (page 39)
  • Jim Messina: “[Rep. Larry] Kissel a problem…Help.” (pages 42-43)
  • Nancy-Ann DeParle: “Can you get me a copy of the [AARP] bulletin we discussed yesterday?” (page 64)

Secretary Sebelius has already admitted she has acted improperly in using her office to conduct political activities; the Office of Special Counsel last week concluded she violated the law to do so.  Given all of the above, it is not unreasonable to question whether the Secretary, and others within the Administration, made a calculated political decision to grant special favors to AARP – and ignore its questionable business practices – because AARP endorsed Obamacare.

Yesterday President Obama claimed that he changed Washington “from the outside” by enacting Obamacare.  The pattern of conduct described above suggests just the opposite: That the President rammed Obamacare through only by establishing what amounts to an inside-the-Beltway protection racket between the Administration and AARP – the former will allow the latter to continue overcharging seniors for insurance, so long as AARP uses its advocacy megaphone to endorse the President’s liberal causes.

 

The Honorable Kathleen Sebelius

Secretary

Department of Health and Human Services

200 Independence Avenue, S.W.

Washington, DC 20201

Dear Secretary Sebelius:

Today my office is releasing a report, “Profits Before Principles,” regarding the insurance practices of AARP. The report finds that AARP has a strong financial interest in keeping Medigap supplemental insurance premiums high – because the organization receives greater profits the more seniors pay in premiums. In addition, AARP’s financial interests have been aided by the Patient Protection and Affordable Care Act (PPACA), which AARP not coincidentally endorsed. Experts agree that PPACA’s provisions will have the effect of driving seniors out of Medicare Advantage health plans and into Medigap supplemental insurance – a market where AARP enjoys the largest market share.

I am greatly concerned by AARP’s questionable business practices, and by the numerous exemptions granted to Medigap insurance – both legislatively and through your Department’s regulatory process – as a result of PPACA. Therefore, I ask you to respond to the following questions:

  1. The text of PPACA exempts Medigap supplemental insurance plans from several new requirements: Section 1103 exempts plans from medical-loss ratio requirements; Section 1202(2)(A) exempts plans from the prohibition on pre-existing condition exclusions; Section 9014 exempts plans from caps on industry executive compensation; and Section 10905(d) exempts plans from the tax applied to all other health insurers. Does the Administration support all these special exemptions for Medigap plans? Why or why not?
  2. My staff attended a PPACA implementation briefing for Senate Republican staff in April 2010. At that time, Jeanne Lambrew of your Department’s Office of Health Reform admitted that PPACA exempted Medigap insurance from the law’s new regulatory regime. If in fact the Administration does NOT support PPACA’s numerous exemptions for Medigap plans, why has your Department done nothing to publicize that fact in the intervening two-plus years since that briefing?
  3. Your Department continues to claim that PPACA “ended many of the insurance industry’s worst abuses” – even though you are fully aware that these changes do not apply to Medigap plans. For instance, HHS previously released a publicity brochure that says “starting in 2014, discrimination based on a pre-existing condition by an insurer will be prohibited in every state.” Why has your Department continued to repeat these misleading slogans, even though your staff admitted that seniors applying for Medigap insurance remain subject to pre-existing condition discrimination due to the special carve-outs included in PPACA?
  4. In your speech to the Democratic National Convention on September 4, 2012, you criticized Republicans for “let[ting] insurance companies continue to cherry-pick who gets coverage and who gets left out, priced out, or locked out of the market.” Likewise, during his speech at the Democratic National Convention, President Obama said that “no American should have to spend their golden years at the mercy of insurance companies.” Please detail the specific provisions included in PPACA that place new limits on Medigap insurers’ ability to “cherry-pick who gets coverage and who gets left out, priced out, or locked out of the market,” and ensure that no applicant for Medigap coverage with a pre-existing condition will be left “at the mercy of insurance companies.”
  5. In a speech on September 8, 2012, President Obama claimed that Medicare premium support proposals would lead to billions of dollars in greater profits for insurance companies. But a 2011 House Ways and Means Committee member report found that PPACA itself could lead to billions in profits for AARP, because the law’s cuts to Medicare Advantage will reduce enrollment in that program, and encourage seniors to purchase supplemental Medigap insurance instead. Do you agree with the Ways and Means Committee report’s premise that PPACA will lead seniors to migrate from Medicare Advantage coverage to Medigap plans – thereby increasing profits to AARP? If not, on what basis do you disagree with the non-partisan experts at the Congressional Budget Office and the Medicare Office of the Actuary, who have concluded the law will reduce Medicare Advantage enrollment by millions?
  6. In addition to the above exemptions, your Department added yet another Medigap carve-out to the ones included in the statute, by exempting Medigap insurance from PPACA’s rate review process. Why do seniors not deserve this supposed protection? If PPACA’s benefits are so good, why didn’t your Department extend them to seniors as well?
  7. Did AARP, or anyone associated with or paid by it, influence or attempt to influence the Administration regarding the numerous exemptions given to Medigap insurance in PPACA, or the regulatory interpretations of PPACA? If so, please provide details as to the dates, persons, positions, and circumstances of said efforts.
  8. The 2011 House Ways and Means Committee member report noted that for its Medigap plans, AARP receives 4.95% of every premium dollar paid by seniors. As a former insurance commissioner, do you think it’s appropriate that AARP has a perverse financial incentive to keep Medigap insurance premiums high?
  9. In a speech at an AARP conference in October 2010, you praised that organization as the “gold standard in cutting through spin and complexity to give people the accurate information they need.” As a former insurance commissioner, how exactly do you believe AARP can serve as a “gold standard” giving seniors “accurate information” about Medigap insurance plans, when the organization has a financial incentive to sell seniors more insurance than they may need or want?
  10. As a former insurance commissioner, you are no doubt aware that the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements. In fact, Section 18 of NAIC’s Producer Model Licensing Act recommends that states require explicit disclosure by insurer affiliates, and clear written acknowledgement by consumers, of any percentage-based compensation arrangement, due to the potential for financial abuses. Did you undertake any due diligence to ensure that AARP’s Medigap percentage-based compensation model was in full compliance with both the letter and spirit of Section 18 of the Producer Model Licensing Act prior to making your assertion that AARP constitutes the “gold standard” for giving seniors “accurate information?” If not, why not?
  11. Given that AARP holds the largest share of the Medigap market, why did your Department grant a special exemption for Medigap insurance from PPACA rate review? Why do you believe that AARP can act in a proper manner to control premium increases – even though the organization gains profits for every additional dollar Medigap premiums rise?
  12. At a conference hosted by America’s Health Insurance Plans in March 2010, you encouraged the insurance industry to give up some of its profits, at a time when health insurers were earning between 2 and 3 cents of profit for every dollar of revenue, according to Fortune 500 estimates. If you criticized other insurers for earning between 2 and 3 cents of every premium dollar in profits, why haven’t you criticized AARP for taking 4.95 cents of every Medigap premium dollar as pure profit?
  13. In April 2010, the Administration and you personally engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than was required by PPACA. Why haven’t you taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage?
  14. At the April 2010 Senate Republican briefing, staff asked whether your Department would write a letter to AARP asking them to stop denying Medigap applications for individuals with pre-existing conditions. Jeanne Lambrew of the Office of Health Reform promised to look into the matter, but the letter was never sent. Why has your Department waited more than two and a half years to ask AARP to stop discriminating against sick and disabled individuals applying for Medigap insurance?
  15. Finally, please forward copies of any and all Administration documents – including those originating from outside your Department – from January 20, 2009 through today inclusive regarding: 1) the Medigap exemptions included in PPACA, and the Administration’s viewpoints and/or technical assistance provided regarding same during the drafting process; 2) the Administration’s administrative interpretations of the Medigap exemptions during the rulemaking process; 3) AARP’s positions on Medigap insurance plans, including but not limited to the exemptions included in PPACA; and 4) AARP’s position on PPACA, including but not limited to any policy changes AARP said it required to be included in the legislation for the bill to receive the organization’s endorsement.

I look forward to receiving your response on these issues within two weeks. If you have any questions, feel free to contact Alec Aramanda or Chris Jacobs of my staff. Thank you for your time, and I look forward to your reply.

Sen. DeMint Op-Ed: AARP Sells Out Seniors for Obamacare

President Barack Obama is scheduled to speak Friday via satellite to a convention sponsored by AARP. His speech will likely extol the virtues of “Obamacare,” and engage in scare tactics about conservative proposals to make Medicare sustainable. But here are five facts you’re unlikely to hear from the president, or AARP, about how each treats seniors:

First, while AARP poses as a disinterested senior advocate, it functions as an insurance conglomerate, with a liberal lobbying arm on the side. AARP depends on profits, royalties and commissions to make up more than 50 percent of its annual revenues. Membership dues from seniors account for only about 20 percent. The sums involved aren’t chump change: AARP’s $458 million in health insurance revenue in 2011 would rank it as the nation’s sixth most profitable health insurer.

Second, AARP wins when seniors lose. Because AARP receives a “royalty fee” of 4.95 percent of every premium dollar paid by seniors buying Medigap insurance from the organization, AARP earns more profit when seniors pay more in premiums. Even former AARP executives admit that the billions of dollars raised from these business enterprises have compromised the organization’s mission and independence.

Third, AARP’s policy positions just happen to coincide with its financial interests. “Obamacare,” which AARP lobbied heavily for, could yield the group windfall profits of more than $1 billion over the next decade by forcing seniors off Medicare Advantage plans and into Medigap supplemental coverage. Conversely, AARP engaged in a secret lobbying campaign to block Medigap reforms last year that by one estimate would have saved nearly 80 percent of seniors an average of $415 per year – but cost AARP billions in profits.

Fourth, AARP knows it can protect its financial interests by aligning with Democrats, no matter what its members think. That’s one reason why AARP endorsed “Obamacare,” though the organization’s call response logs indicate opponents outnumbered supporters by more than 50 to 1.

Consider: One senior AARP executive wrote the White House in November 2009, saying “we will try to keep a little space between us” on health care – because AARP’s “polling shows we are more influential when we are seen as independent, so we want to reinforce that positioning….The larger issue is how best to serve the cause.”

“The cause” in this case is liberalism, the Obama agenda and “Obamacare” in particular.

Fifth, the Obama administration has reciprocated AARP’s support by giving the group preferential treatment. “Obamacare” exempted Medigap insurance – a market AARP dominates – from virtually all its new mandates, including the ban on preexisting condition discrimination. The Department of Health and Human Services exempted Medigap plans from insurance rate review, though AARP, whose plan is the most popular form of Medigap coverage, makes more in profit the higher premiums rise. Though the administration has publicly attacked other insurance companies with much smaller profit margins, it has not openly criticized AARP’s business practices.

It’s not that AARP and the administration don’t know better – they do. The AARP executive who wrote White House officials knew that AARP had to be “seen as independent.” He wasn’t independent, of course – comments about “serv[ing] the cause” make that clear. But he knew he had to appear impartial to AARP’s members.

And as a former state insurance commissioner, Health and Human Services Secretary Kathleen Sebelius must know that percentage-based “royalty” payments create a strong incentive for abuse. Nonetheless, Sebelius called AARP the “gold standard” for “accurate information” – though AARP makes more profits the higher the Medigap premiums rise for seniors.

As much as Obama claims to eschew Chicago-style politics, this administration’s crony relationship with AARP gives every appearance of being an old-fashioned protection racket. The administration lets AARP make billions of dollars in profits off seniors, as long as they continue to support “the cause” and funnel those profits toward supporting Obama’s liberal agenda.

That’s why the administration won’t speak out against AARP’s abuses; why Democrats who said they ended “the worst insurance industry abuses” in “Obamacare” exempted Medigap insurance from virtually the entire law, and why the Obama campaign is so willing to use AARP as a political shield in running negative attack ads against his opponent.

The president recently said, “no American should have to spend their golden years at the mercy of insurance companies.” What he won’t tell seniors today is that, thanks to his administration’s protection racket, that isn’t true.

Millions of seniors have been — and will continue to be — taken advantage of, because this administration’s protection racket turns a blind eye toward the insurance industry abuses of the AARP.

This post was originally published at Politico.

Neera Tanden and Obamacare’s $1 Trillion Tax Cut for Insurers

Speaking on Face the Nation yesterday, Center for American Progress CEO Neera Tanden claimed that Obamacare “is a massive tax cut for – in health care.  It’s a six-hundred-billion-dollar tax cut for health care.  It’s a tax cut to middle-class families.”  Tanden’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets of the insurance industry:

  • Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
  • Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges.  The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultantadmitted in an interview that “Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change.  In most cases, credits will go straight to insurance companies, to pay for health benefits.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

In making her false claims that middle class families – as opposed to insurance companies – would actually receive these tax cuts, Tanden contradicted both the words of candidate Obama – on whose 2008 campaign she worked – and someone who has written multiple papers for the organization she leads.  It’s unfortunate that Obamacare supporters feel the need to twist the facts in such a blatantly obvious manner to try to gin up support for their unpopular health care law.

Obamacare’s Trillion-Dollar Gift to Big Insurance

The House Oversight Committee is holding a hearing this morning on the IRS’ massive role in implementing Obamacare – and the hearing already includes a devastating admission from the Administration.  In his prepared testimony to the Committee discussing the law’s subsidies for health insurance, IRS Commissioner Doug Shulman admits that “the advance payments of the credit [i.e., subsidy] will be paid directly to the insurer, and cannot be accessed directly by the taxpayer.”  In its updated analysis of Obamacare last week, the Congressional Budget Office indicated that these subsidies will exceed $1 trillion – meaning Obamacare provides a whopping thirteen-figure gift directly to insurers.

Not only do these developments provide a big wet kiss to Big Insurance, but they also violate candidate Obama’s campaign promises made four years ago.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

During his campaign, then-Senator Obama sold himself as a candidate full of hope and change.  Now, when it comes to Obamacare’s giveaways to Big Insurance, he has changed his position – and hopes you won’t notice.  It’s exactly the kind of “reform” Americans don’t need.

Why Obamacare Is NOT a Tax Cut

By now you’ve heard claims from President Obama and others that Obamacare provides a massive middle-class tax cut – largely by funding coverage for health insurance through Exchanges.  We figured we would take this opportunity to summarize why that claim doesn’t hold water:

CBO Scores Most of the “Tax Cuts” as Government Spending

We previously noted that, according to CBO’s March 2012 baseline, projected spending on insurance subsidies totaled $806 billion during FY2013-22.  As of March, $628 billion of that $806 billion was classified by CBO as government spending, NOT reduced tax revenues.  But since the Supreme Court’s ruling on Obamacare, those numbers have actually increased.  CBO now assumes more low-income people who previously would have enrolled in Medicaid will receive Exchange subsidies instead in light of the Court decision.  In its updated score of the repeal bill, CBO last week projected that $793 billion of the $1.017 trillion in subsidies represent government outlays, NOT revenue reductions.  That means that over 78% of Obamacare insurance subsidies are pure government spending to individuals who have no income tax liability.

Democrats are quick to cite CBO to claim that Obamacare will reduce the deficit – why aren’t they also quick to cite CBO when it states that the subsidies are NOT a tax cut, but instead largely comprise new government spending?

Democrat Claims on “Tax Cuts” Undermine the Social Security Trust Fund

When confronted with the fact that most of the Exchange subsidies constitute outlay spending by the federal government, President Obama and Democrats argue that these refundable tax credits – i.e., people receiving refunds even though they have zero income tax liability – offset payroll taxes paid by the low-income.  But Democrats have told Republicans for years that those payroll taxes are used solely to fund Social Security benefits, meaning those workers will get their payroll taxes back in future benefits (and especially in the case of low-income workers, will get their payroll taxes back and then some, due to the way Social Security benefits are calculated).  Do Democrats now want to admit that the Social Security Trust Fund is effectively meaningless, and that those who pay only payroll taxes are funding general government obligations rather than their own retirement benefits…?

Low-Income Individuals Don’t Pay Enough Other Taxes to Offset this “Tax Cut”

Even if you disregard points #1 and #2 above, and believe that the subsidies will offset payroll and other taxes paid by individuals, the massive subsidies will still overwhelm many individuals’ total tax liability – federal, state, AND local.  In its analysis of the fiscal impacts of the Supreme Court ruling, CBO noted that in 2022, Exchange subsidies for low-income individuals – i.e., those persons who were originally projected to enroll in Medicaid, but who will now enroll in Exchanges instead due to the Court ruling – will average about $9,000 per year.  These low-income individuals have incomes under 138% of the federal poverty level ($15,414.60 for a single person, $31,809 for a family of four in 2012).

To put it into perspective: A single person with income of 138% FPL, or $15,414.60, would pay total federal payroll taxes of $2,358.44 (that includes employee AND employer shares).  Assume also for illustrative purposes that this person would pay $1,541.46 in state and local income taxes, given a combined 10% state and local tax rate.  As noted above, this person’s average insurance subsidy will total $9,000.  Given payroll and state/local income tax liability totaling $3899.90, that means the individual in question would have to pay an additional $5100.10 in sales taxes for the federal subsidy to offset existing tax liability.  And at a 6% local sales tax rate, an individual with income of $15,414.6 would have to spend just over $85,000 – enough to buy a Platinum Edition Cadillac Escalade – to pay enough sales tax to have a net tax liability.

All this is to say that there is virtually NO WAY some of the individuals receiving subsidies will pay enough in payroll taxes, state and local taxes, sales taxes, or any other kind of taxes for the subsidies to offset taxes they actually paid – as opposed to the government spending money to buy them health insurance.

Obamacare Subsidies are Paid Directly to Insurance Companies

Democrats’ claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets of the insurance industry:

  • Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
  • Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges.  The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultantadmitted in an interview that “Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change.  In most cases, credits will go straight to insurance companies, to pay for health benefits.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President, only to flip-flop on this issue when he signed Obamacare.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

If this isn’t enough to convince you, consider a hypothetical example whereby Congress orders the IRS to send checks to Ferrari dealerships to pay for new sports cars for all Americans with incomes under $50,000 per year.  This is clearly NOT a tax cut – because the cost of the Ferrari obviously exceeds any and all taxes low- and middle-income families pay, and because the individuals in question don’t receive cash through the transaction.  It’s the same situation with health insurance.  And unfortunately for the shrinking number of Americans who DO pay taxes, giving $1 trillion in Exchange subsidies straight to insurance companies will prove to be a fiscal wreck that even loads of Ferraris couldn’t begin to match.

Obamacare: $2.6 Trillion in Change Special Interests Can Believe In

A new paper, co-written by former HHS official Joel Ario and released online by Health Affairs yesterday, talks about special interest lobbying both prior to and after the enactment of Obamacare.  The article profiles various industries, and explains why they have offered support for the law:

Ario and his co-author note that all these Obamacare giveaways have been financially beneficial to the health care sector: “The large influx of new paying customers helped the bottom line for some health care businesses.  On Wall Street, the valuation of the health sector has risen 36 percent since the passage of health reform in 2010, four times faster than the rate of increase of the Standard and Poor’s 500 average.”  They add that special interests have spent much of the past several years lobbying for more waivers and favors from the Obama Administration:

The leading representatives of business, insurers, providers, and patients have privately negotiated aggressively with government officials to wrest further concessions in exchange for their support or their retreat from earlier opposition.  From the perspective of stakeholders, influence on critical implementation decisions is more efficacious than joining the rabble at a town-hall meeting or squandering resources on a national advertising campaign when the key decision makers are few in number and squirreled away in government agencies.

Some may find it surprising that a former Administration official like Ario – who left HHS to “cash in” with a lucrative law-and-consulting gig – would co-author an article discussing “rabble” at town hall meetings.  Some would also find it surprising his public admission that backroom lobbying – aka cutting a “rock-solid dealaway from the C-SPAN cameras – is far preferable to engaging with actual constituents.  Then again, even Jack Abramoff admitted last week that Obamacare is a massive giveaway to special interest lobbyists and their clients, “who want to use the government as a bludgeon against competition.”  So when it comes to Obamacare’s $2.6 trillion in new spending, granting backroom deals for special interest lobbyists is just another day at the office.