Republicans’ Mixed Messages on Federalism

Care to take a guess how many Republican senators are willing to take a stand over federalism? Would you believe just two?

On Monday night, when the Senate considered legislation sponsored by Sen. Susan Collins (R-ME) about “gag clauses” in pharmaceutical contracts, only Utah’s Mike Lee and Kentucky’s Rand Paul voted no. Lee and Paul do not believe the federal government has any business providing for blanket regulation of the health-care sector.

Gag Clauses, Explained

I have experienced the distorted ways the drug pricing system currently operates. When looking to refill a prescription for one of my antihistamines, my insurance benefit quoted me a charge of $170 for a 90- to 100-day supply. But when I went online to GoodRX.com, I found online coupons that could provide me the same product, in the same quantities, for a mere $70-80, depending on the pharmacy I chose.

I found even greater discounts by purchasing in bulk. I ended up buying a nearly one year’s supply of my maintenance medication for $210—little more than the price for a 90-100 day supply originally quoted to me by my insurer. Had I used my insurance card, and refilled the prescription repeatedly, I would have paid approximately $300 more over the course of a year. Because my Obamacare insurance is junk, I have little chance of reaching my deductible this year, short of getting hit by a bus, so it made perfect sense for me to pay with cash instead.

In theory, anyone can go to GoodRX.com (with which I have no relationship except as a satisfied consumer), or other similar websites, to find the cash price of prescription drugs and compare them to the prices quoted by their insurers. But in practice, few try to shop around for prescription drugs.

Why Federalism Matters

In general, conservatives would support efforts to increase transparency within the health-care marketplace, and prohibiting “gag clauses” would do just that. However, some conservatives would also note that the McCarran-Ferguson Act of 1947 devolves the business of regulating insurance, including health insurance, to the states, and that the states could take the lead on whether or not to eliminate “gag clauses” in insurance contracts. Indeed, a majority of states—26 in total—have already done so, including no fewer than 15 state laws passed just this year.

Lee’s office reached out to me several weeks ago for technical assistance in drafting an amendment designed to limit the scope of federal legislation on “gag clauses” to those types of insurance where the federal government already has a regulatory nexus. Lee ultimately offered such an amendment, which prohibited “gag clauses” only for self-insured employer plans—regulated by the federal government under the Employee Retirement Income Security Act of 1974 (ERISA).

Unfortunately, only 11 senators—all Republicans—voted for this amendment, which would have prevented yet another intrusion by the federal government on states’ affairs. Of those 11, only Lee and Paul voted against final passage of the bill, due to the federalism concerns.

More Federalism Violations Ahead?

One of the prime sponsors of the discussion draft? None other than Sen. Bill Cassidy (R-LA), the author of legislation introduced last year that he claimed would “give states significant latitude over how [health care] dollars are used to best take care of the unique…needs of the patients in each state.”

The contradiction between Cassidy’s rhetoric then and his actions now raise obvious questions: How can states get “significant latitude over” their health care systems if Washington-based politicians like Cassidy are constantly butting in with new requirements, like the “surprise medical bill” regulation? Or, to put it another way, why does Cassidy think states are smart enough to manage nearly $1.2 trillion in Obamacare funding, but too stupid to figure out how to solve problems like drug price “gag clauses” and “surprise bills?”

Politics Versus Principle

The widely inconsistent behavior of people like Cassidy raises the possibility that, to some, federalism represents less of a political principle to follow than a political toy to manipulate. When Washington lawmakers want to punt a difficult decision—like how to “repeal” Obamacare while “replacing” it with an alternative that covers just as many people—they can hide behind federalism to defer action to the states.

Reagan had another axiom that applies in this case: That there is no limit to what a person can do if that person does not mind who gets the credit. Lawmakers in literally dozens of states have acted on “gag clauses,” but that matters little to Collins, who wants the federal government to swoop in and take the credit—and erode state autonomy in the process.

It may seem novel to most of official Washington, but if lawmakers claim to believe in federalism, they should stick to that belief, even when it proves inconvenient.

This post was originally published at The Federalist.

Bill Cassidy’s “Monkey Business”

Last we checked in with Louisiana Republican Sen. Bill Cassidy, he was hard at work adding literally dozens of new federal health care requirements to a Republican “repeal-and-replace” bill. This week comes word that Cassidy continues to “monkey around” in health care — this time quite literally.

STAT reports: “Sen. Bill Cassidy is trying to help hundreds of chimpanzees enjoy an easy retirement in his home state of Louisiana. The Republican is pushing for an amendment to a major appropriations bill winding its way through Congress this week that would force the National Institutes of Health to make good on a 2015 promise to move all its chimps out of research facilities.”

Don’t get me wrong: I oppose animal cruelty as much as the next person. If NIH lacks a compelling scientific justification to conduct research on chimpanzees, or any other animal, then it should cease the research and provide alterative accommodations for the creatures affected.

But on at least three levels, Cassidy’s amendment demonstrates exactly what’s wrong with Washington D.C.

Problem 1: Skewed Priorities

The federal debt is at more than $21 trillion and rising — more than double its $10.6 trillion size not ten years ago, on the day Barack Obama took office. American troops remain stationed in Afghanistan, and elsewhere around the world. Russia still looks to undermine American democracy and to meddle in this year’s midterm elections. The situation with North Korea remains tenuous, as the North Koreans continue to develop intercontinental ballistic missile technologies and their nuclear program.

So why is Cassidy trying to consume Senate floor time with a debate and vote on the chimpanzee amendment, after having already sent a letter to NIH on the subject? On a list of America’s top policy issues and concerns, the fate of 272 chimpanzees wouldn’t register in the top 100, or even in the top 1,000. So why should members of Congress (to say nothing of their staffs) spend so much time on such a comparatively inconsequential issue?

Problem 2: Cassidy Doesn’t Want to Repeal Obamacare

Rather than spending time on a chimpanzee amendment, Cassidy — like his Senate Republican colleagues — should focus on keeping the promise they made to their voters for the past four election cycles that they would repeal Obamacare. But unfortunately, many of the people who made that promise never believed it in the first place.

Based on his record, Cassidy stands as one of those individuals opposed to Obamacare repeal. As I noted in June, Cassidy does not want to repeal the federal system of regulations that lies at the heart of the health care law. In fact, a health care plan released earlier this summer seemed designed primarily to give lawmakers like Cassidy political cover not to repeal Obamacare’s most onerous regulations — even though a study by the Heritage Foundation indicates those regulations are the prime driver of premium increases since the law passed.

Problem 3: Cassidy Just Voted to Entrench Obamacare

Earlier this month, I noted some Republicans in the Senate would likely vote to allow the District of Columbia to tax individuals who do not purchase health insurance, after having voted to repeal that mandate in last year’s tax bill. After I wrote that story, Cassidy became one of five Senate Republicans to do just that, by voting to table (or kill) an amendment defunding Washington’s new individual mandate.

Because Cassidy voted to keep the mandate in place in D.C., he voted to allow District authorities to seize and sell individuals’ property if they do not purchase “government-approved” health coverage. Rather than voting to repeal Obamacare, Cassidy and his colleagues voted to entrench Obamacare in the nation’s capital — for which they have sovereign jurisdiction under the Constitution.

Even apart from Cassidy’s flip-flopping on repeal of Obamacare and its individual mandate, the contrast with the letter to NIH raises its own questions. In that letter, Cassidy emphasized that former research chimpanzees should have “the opportunity to live in mixed-sex groups and … daily access to nesting materials.”

This all sounds well and good, but why does Cassidy seemingly care so much about giving freedom to chimpanzees and so little about giving freedom to District of Columbia residents to buy (or not buy) the health coverage they wish to purchase?

Congress, Stop Monkeying Around

Five years ago, Democratic Rep. Frank Pallone famously called a congressional hearing on the healthcare.gov debacle a “monkey court.” Five years later, the Cassidy amendment on chimpanzee research demonstrates how Congress continues to “monkey around.”

Republicans should stop the primate-related sideshows and focus on things that really matter. Like sticking to the promise they made to voters for eight years to repeal Obamacare.

This post was originally published at The Federalist.

Republicans’ Spending Dilemma, In One Tweet

Most of official Washington woke up apoplectic on Sunday, when a tweet from President Trump invoked “the Swamp’s” most dreaded word: “Shutdown.”

Put aside for a moment specific questions about the wall itself—whether it will deter illegal immigration, how much to spend on it, or even whether to build it. The Trump tweet illustrates a much larger problem facing congressional Republicans: They don’t want to fight—about the wall, or about much of anything, particularly spending.

Voting for the Mandate after They Voted Against It?

Take for instance an issue I helped raise awareness of, and have helped spend the past several weeks tracking: The District of Columbia’s move to re-establish a requirement on district residents to purchase health insurance.

As I wrote last week, Sen. Ted Cruz (R-TX) offered an amendment in the Senate that would defund this mandate. The amendment resembles one that Rep. Gary Palmer (R-AL) offered in the House, and which representatives voted to add to the bill. If a successful vote on the Cruz amendment inserted the provision in the Senate version of the bill, the defunding amendment would presumably have a smooth passage to enactment.

So what’s holding it up? In a word, Republicans. According to Senate sources, Republican leaders—and Republican members of the Appropriations Committee—don’t want to vote on Cruz’s amendment. Several outside groups have stated they will key-vote in favor of the amendment, and the leadership types don’t want to vote against something that many conservative groups support.

Are Democrats Running Congress?

In short, because Democrats might object. Appropriations measures need 60 votes to break a Senate filibuster, and Democrats have said they will not vote for any bill that includes so-called “poison pill” appropriations riders. The definition of a “poison pill” of course lies in the eyes of the beholder.

Politico wrote about the spending process six weeks ago, noting that new Senate Appropriations Committee Chairman Richard Shelby (R-AL) and Ranking Member Pat Leahy (D-VT) “have resolved to work out matters privately. Both parties have agreed to hold their noses to vote for a bill that they consider imperfect, but good enough.”

That “kumbaya” dynamic has led Senate Republican leaders and appropriators to try and avoid the Cruz amendment entirely. They don’t want to vote against the amendment, because conservatives like me support it and will (rightly) point out their hypocrisy if they do. But they don’t want the amendment to pass either, because they fear that Democrats won’t vote to pass the underlying bill if it does. So they hope the amendment will die a quiet death.

Conservatives Get the Shaft—Again

At this point some leadership types might point out that it’s easy for people like me to sit on the sidelines and criticize, but that Republicans in Congress must actually govern. That point has more than a grain of truth to it.

On the other hand, “governing” for Republicans usually means “governing like Democrats.” Case in point: The sorry spectacle I described in March, wherein Republican committee chairmen—who, last I checked, won election two years ago on a platform of repealing Obamacare—begged Democrats to include a bailout of Obamacare’s exchanges in that month’s 2,200-page omnibus appropriations bill.

The chairmen in question, and many Republican leaders, feared the party will get blamed in the fall for premium increases. So they decided to “govern” by abandoning all pretense of repealing Obamacare and trying to bolster the law instead, even though their failure to repeal Obamacare is a key driver of the premium increases driving Americans crazy.

With an election on the horizon, bicameral negotiations surrounding the spending bill could get hairy in September, because two of the parties come to the table with fundamentally different perspectives. Republican congressional leaders worry about what might happen in November if they fail to govern because they stood up for conservative policies. Trump worries about what might happen if they don’t.

UPDATE: On Wednesday afternoon, the Senate voted to table the Cruz amendment blocking DC’s individual mandate. Five Republicans who voted to repeal the individual mandate in tax reform legislation last fall — Louisiana’s Bill Cassidy, Maine’s Susan Collins, Alaska’s Lisa Murkowski, Alabama’s Richard Shelby, and Utah’s Orrin Hatch — voted to table, or kill, the amendment.

Because the vote came on a motion to table, senators may attempt to argue that the vote was procedural in nature, and did not represent a change in position on the mandate. Shelby, the chair of the Appropriations Committee, said he supported the underlying policy behind the Cruz amendment, but voted not to advance the amendment because Democrats objected to its inclusion.

This post was originally published at The Federalist.

24 New Federal Requirements Added to the Graham-Cassidy Bill

Last week, I outlined how a white paper Sen. Bill Cassidy (R-LA) released essentially advocated for Obamacare on steroids. That plan would keep the law’s most expensive (and onerous) federal insurance requirements, while calling for more taxpayer dollars to make that expensive coverage more “affordable.”

Unfortunately, Cassidy also would extend this highly regulatory approach beyond mere white papers and into legislation. A recently disclosed copy of a revised Graham-Cassidy bill—originally developed by Cassidy and Sen. Lindsey Graham (R-SC) last fall—imposes two dozen new requirements on states. These requirements would undermine the bill’s supposed goal of “state flexibility,” and could lead to a regime more onerous and expensive than Obamacare itself.

18 New ‘Adequate and Affordable’ Coverage Rules

Specifically, that coverage must:

  • Include four categories of basic services defined in the State Children’s Health Insurance Program (SCHIP) statute:
    • Inpatient and outpatient hospital services;
    • Physicians’ surgical and medical services;
    • Laboratory and X-ray services, and
    • Well-baby and well-child care, including age-appropriate immunizations;
  • Include three categories of additional services also defined in the SCHIP statute:
    • Coverage of prescription drugs;
    • Vision services; and
    • Hearing services;
  • Include two other categories of services as defined by Obamacare:
    • Mental health and substance use disorder services, including behavioral health treatment; and
    • Rehabilitative and habilitative services and devices;
  • Comply with actuarial value standards set by the SCHIP statute:
    • Cover at least 70 percent of estimated health expenses for the average consumer; and
  • Comply with requirements included in eight separate sections of the Public Health Service Act, as amended by Obamacare:
    • Section 2701—Rating premiums only based on age (with older applicants charged no more than three times younger applicants), family size, geography, and tobacco use;
    • Section 2702—Required acceptance for every individual or employer who applies for coverage (i.e., guaranteed issue);
    • Section 2703—Guaranteed renewability of coverage;
    • Section 2704—Prohibition on pre-existing condition exclusions;
    • Section 2705—Prohibition on discriminating against individuals based on health status;
    • Section 2708—Prohibition on excessive waiting periods;
    • Section 2711—Prohibition on annual or lifetime limits; and
    • Section 2713—Requiring first-dollar coverage of preventive services without cost-sharing (i.e., deductibles and co-payments).

As noted above, “adequate and affordable health insurance coverage” would include many of Obamacare’s insurance requirements, and in at least one way would exceed them. Whereas Section 1302(d) of Obamacare requires selling insurance with an actuarial value—that is, the percentage of medical expenses paid for the average individual—of at least 60 percent, the revised Graham-Cassidy would require “adequate and affordable” coverage with an actuarial value of at least 70 percent.

If asked, Graham and Cassidy might state that these requirements would only apply to a certain subset of the population. After all, the revised bill text indicates that each state “shall ensure access to adequate and affordable health insurance coverage (as defined in clause (ii))”—the clause referring to the 18 separate requirements listed above—“for [high-risk individuals].” The bill lists the brackets in the original, which might indicate that Cassidy’s office intends to apply these 18 separate coverage requirements only to plans that high-risk persons purchase.

Thankfully, the new draft removes the “population adjustment factor” allowing CMS to rewrite the block grant formula unilaterally. But even as it took away CMS’ power to alter the funding formula, new language on page 15 of the revised draft allows CMS to cancel states’ block grant funds for “substantial noncompliance.” That provision, coupled with the revised bill’s lack of definition regarding “affordable” coverage and “high-risk individual” provides a future Democratic administration with two clear ways to hijack the block grant program.

For instance, a new administration could define “high-risk individual” so broadly that it would apply to virtually all Americans, subjecting them to the 18 costly coverage requirements. A new administration could also define “affordable” in such a manner—for instance, premiums may not exceed 5 percent of an individual’s income—that states would have to subsidize insurance with sizable amounts of state funds, in addition to the federal dollars included in the block grant. Any state failing to comply with these edicts could see its entire block grant yanked for “substantial noncompliance” with the bureaucratically imposed guidelines.

It seems paradoxical to assert that a bill can be both too prescriptive, imposing far too many requirements on states that undermine the supposed goal of “state flexibility,” and too vague, giving vast amounts of authority to federal bureaucrats. Yet somehow the section on “adequate and affordable health coverage” manages to do both.

Two New Required Uses of Block-Grant Funds

Supporters of the bill would argue that these supposed “guardrails” will prevent states from subsidizing Medicaid coverage, or creating some other government-run health program. But as I noted last week, Obamacare has its own “guardrails” regarding state waivers, which undermine any attempt to deregulate insurance markets.

By adding these new “guardrails,” Graham-Cassidy would essentially replicate Obamacare, albeit with slightly different policy objectives: “The Cassidy plan would give states the ‘flexibility’ to do what Bill Cassidy wants them to do, and only what Bill Cassidy wants them to do. That isn’t flexibility at all.”

Block Grant Reductions with Multiple Risk Pools

On Page 31, the bill includes new language requiring a reduction in block-grant funds, by a percentage not specified, for states electing to create multiple risk pools. Under current law, Section 1312(c) of Obamacare requires insurers to place all individual insurance market enrollees—whether they purchase coverage through the exchange or not—in a single risk pool.

If a state elects to choose multiple risk pools and uses a “substantial portion” of its block grant to subsidize insurance with an actuarial value of under 50 percent, then the state would see an unspecified reduction in its block grant. This language contains many of the flaws of the other provisions described above: It nowhere defines what comprises a “substantial portion” of the block grant, and penalizes states that may choose to create multiple risk pools and subsidize only catastrophic insurance coverage, thus belying Graham-Cassidy’s promise of “state flexibility.”

3 New Requirements for State Waivers

The revised Graham-Cassidy text moves and alters language regarding state waivers of Obamacare’s federal insurance requirements, and in so doing makes three substantive changes. (The original language started in the middle of page 143 of the bill; the new language begins on the top of page 42 of the revised bill.)

First, and perhaps most disturbingly, the revised bill requires the Department of Health and Human Services to waive Obamacare’s insurance requirements for a state only if “such state establishes an equivalent requirement applicable to such coverage in such state.” Taken literally, this provision could mean that states could “opt-out” of Obamacare’s federal requirements if and only if they enshrine those exact same requirements in state law—rendering any supposed “flexibility” under Graham-Cassidy completely nonexistent.

Graham and Cassidy may not have meant to craft language with such a literal interpretation. They may mean to say, for instance, that a state can waive out of Obamacare’s age-rating requirements (which prohibit insurers from charging older people more than three times what they charge younger people) if they establish a more permissive regime—for instance, five-to-one age rating—on the state level.

But taken literally, that’s not what the current bill text says. That vague language raises serious questions about the authors’ intent, and why they chose such unclear, and arguably sloppy, bill language.

Second, the section imposes two new requirements on states selecting multiple risk pools. As noted above, those states would have to comply with the 18 new requirements regarding “adequate and affordable” health coverage, and states creating multiple risk pools could see their block grant reduced as a result.

In addition, however, states must also guarantee that insurers offering coverage in one risk pool offer coverage in all of them. Moreover, premiums charged “by a health insurance issuer for the same health coverage offered in different risk pools in the state [may] not vary by more than 3 to 1.”

The first requirement echoes the Consumer Freedom Amendment offered by Sen. Ted Cruz (R-TX) last year. That amendment allowed insurers to offer plans that did not comply with Obamacare’s requirements, so long as they continued to offer one Obamacare-compliant plan. The second requirement would effectively limit the extent to which insurers could charge individuals more on the basis of pre-existing conditions or health status.

Two Dozen (More) Reasons for State Concern

Both individually and collectively, these two dozen new requirements inserted into the most recent version of Graham-Cassidy present problems for conservatives. The myriad requirements would sharply limit the bill’s ability to deliver lower premiums to consumers—one major goal of “repeal-and-replace” legislation.

More broadly, though, the revised bill drifts further away from any semblance of conservative objectives. While Graham-Cassidy purports to provide more flexibility to states, the revised bill would instead ensnare them in numerous requirements that would impede any attempt at innovation.

Like the proverbial Lilliputians who attempted to tie down Gulliver, the new bill looks to rob states of their ability to manage their own insurance markets and lower premiums for residents, one federal requirement at a time.

This post was originally published at The Federalist.

Bill Cassidy’s New Health Plan Is Obamacare on Steroids

On Tuesday, Sen. Bill Cassidy (R-LA) released a policy white paper with ideas he claimed would “make health care affordable again.” By and large, however, the plan would do no such thing.

Some of the plan’s ideas—promoting consumer transparency in health care, for instance, promoting primary care, and cracking down on monopolistic practices that impede competition—have merit, although people can quibble with the extent to which Washington can, or should, solve those problems.

Fake Flexibility

Cassidy bases his plan on a state-based block-grant funding model, similar to the legislation he and Sen. Lindsey Graham (R-SC) developed last fall. Cassidy cites various state experimental programs to argue that a block-grant approach would allow more room for innovation.

However, the last sentence of the proposal undermines the rest of the discussion: “Flexibility to states would not jeopardize protections for individuals with pre-existing conditions.” That phrase implies that Cassidy believes, as the Graham-Cassidy bill indicated, that Obamacare’s federal insurance requirements regarding pre-existing conditions should remain in place.

That sentence belies the idea that states would get true flexibility to construct their insurance markets however they like. Instead, the Cassidy plan would represent a variation on Obamacare, whose state waiver program essentially lets them add more requirements and more government to their insurance markets, but not take requirements away. Put another way, the Cassidy plan would give states the “flexibility” to do what Bill Cassidy wants them to do, and only what Bill Cassidy wants them to do. That isn’t flexibility at all.

Costly Requirements Remain in Place

For instance, loosening Obamacare’s essential health benefits while keeping the pre-existing condition requirements will encourage insurers to stop covering treatments like chemotherapy. Because they must continue to accept all sick patients, and charge them the same rates as healthy ones, insurers will try to limit their losses by not covering cancer drugs, thereby discouraging cancer patients from applying for coverage.

The combination of these two policy dilemmas could result in the worst of all possible worlds, from both a political and policy standpoint: A plan that does not reduce premiums appreciably—because it keeps the most costly federal insurance requirements intact—yet still encourages insurers to discriminate against the sick.

Throwing Money at the Problem

Rather than trying to solve the problems Obamacare’s federal insurance requirements have caused, as I previously suggested, Cassidy’s plan goes to great lengths to avoid them. He endorses the health insurance “stability” (read: bailout) measure proposed by Sens. Susan Collins (R-ME) and Lamar Alexander (R-TN) earlier this year. Rather than lowering premiums by removing the federal insurance requirements, that plan would lower premiums—albeit only temporarily—by throwing more taxpayer funds at insurers.

Moreover, the need for more federal funding belies Cassidy’s claim that his plan would “make health care affordable again.” States should not need any more funding to encourage insurance enrollment, particularly if they receive sufficient flexibility from federal requirements to bring down premiums. Cassidy knows that any flexibility will prove illusory. As with a “stability” package, he proposes making coverage more “affordable” by throwing other people’s money at the problem.

Neither Repeal Nor Reform

I wrote last April, well before lawmakers ever contemplated the Graham-Cassidy measure, that “Republicans have a choice: They can either retain the ban on pre-existing condition discrimination—and the regulations and subsidies that go with it—or they can fulfill their promise to repeal Obamacare.” Judging from the ideas in his policy paper, Cassidy has made his choice: He supports Obamacare.

But more of the same—more spending to finance the same costly insurance because of the same costly federal insurance requirements—doesn’t constitute a repeal of Obamacare. It doesn’t even come close. Would that Cassidy, and his colleagues in Congress, actually thought about keeping their word and enacting the repeal they promised.

This post was originally published at The Federalist.

Liberals Suddenly Rediscover Federalism — Will Conservatives?

On Thursday, a series of liberal groups sent a letter to the nation’s insurance departments, asking them to effectively undermine President Trump’s October executive order on health care. In so doing, the Left suddenly rediscovered the virtues of federalism in setting an independent policy course from Washington, particularly when governed by an executive of the opposite party.

Unfortunately, however, because Congress has yet to repeal Obamacare’s federally imposed regulations—as I noted just yesterday—legislators in conservative states will have little such recourse to seek freedom from Obamacare unless and until Congress takes action.

Liberals Want to Thwart More Affordable Coverage

For instance, the Trump administration likely will revoke an Obama administration rule prohibiting short-term insurance policies—which need not comply with any of Obamacare’s statutory requirements—from offering plans of longer than 90 days in duration. In such a circumstance, the liberal groups want states to “act swiftly if the federal rulemaking allows these plans to last beyond a reasonable ‘short term’”—in other words, reimpose the 90-day limit on short-term plans, currently codified via federal regulations, on the state level.

The liberal groups also asked states to “consider ways to protect against potential harm from” other elements of the executive order, including association health plans (AHPs) and health reimbursement arrangements (HRAs): “If the proposed federal rules are weakened for short-term plans, AHPs, or HRAs, we urge state insurance regulators to take action to protect consumers in your states.”

In this case, as in most cases with liberal groups, “consumer protection” means protecting individuals from becoming consumers—preventing them from buying insurance plans that liberals do not approve of.

One-Way Federalism, In the Wrong Direction

As a supporter of the Tenth Amendment, while I might not agree with state actions designed to prevent the sale of more affordable insurance options, I respect the rights of states to take such measures. Likewise, if Congress repeals Obamacare’s mandate to purchase insurance, and states wish to reimpose such a requirement at the state level, they absolutely should have the ability to do so.

Unfortunately, however, Congress’ failure to repeal Obamacare’s regulations has created a one-way federalism ratchet. Liberal areas can re-impose Obamacare’s regime at the state level, by blocking the sale of more affordable insurance plans, or re-imposing a mandate to purchase insurance. But because Congress has left all of Obamacare’s federally set regulations in place, conservative states cannot de-impose Obamacare at the state level, to allow more affordable coverage that does not meet all of the law’s requirements.

Admittedly, by not thwarting Trump’s regulatory actions, conservative states can allow the sale of more affordable insurance products—for now. However, those executive actions have real limits when compared to statutory changes.

Moreover, another president could—and in the case of a Democratic president, almost certainly would—undo those actions, collapsing what little freedom the executive order might infuse into the market. Regardless, states will remain hostage to actions in Washington to determine control of their health insurance marketplaces.

This dynamic brings no small amount of irony: Liberal groups have suddenly discovered the benefits of federalism to “resist” a Trump administration initiative, even as Republican senators like Louisiana’s Bill Cassidy, by keeping the federally imposed pre-existing condition mandate in place, want to dictate to other states how their insurance markets should function.

At the risk of sounding like an apostate, liberals are on to something—not with respect to their policy recommendations, but to federalism as a means of achieving them. Perhaps one day, the party that purports to believe in the Tenth Amendment will follow suit, by getting rid of Obamacare’s federal regulations once and for all.

This post was originally published at The Federalist.

What to Do on Obamacare Now

The collapse of legislation proposed by senators Lindsay Graham (R-SC) and Bill Cassidy (R-LA), coupled with the near-simultaneous resignation of Health and Human Services Secretary Tom Price, presents a turning point in this year’s health-care debate. Given the dual disappointments, policymakers and voters looking for long-delayed progress may wonder whether, and what, conservatives can do to restore patient freedom to health-care markets.

Congress still retains procedural options to continue legislatively dismantling Obamacare. In the interim, the executive can seize important regulatory opportunities to lower premiums for millions of Americans—and it appears President Trump is finally doing just that. Press reports over the weekend suggest the administration is preparing to revoke Obama administration regulations sharply limiting the sale of short-term health insurance plans.

What Is Short-Term Health Insurance?

The short-term plan regulations, finalized by the Obama administration one week before last year’s election, demonstrate how liberals hope “consumer protections” protect individuals from becoming consumers. Administration officials expressed “concern” that the policies have “significant limitations”—for instance, Obamacare’s essential health benefits requirements do not apply to short-term coverage—and “may not provide meaningful health coverage.” As a result, bureaucrats prohibited short-term plans from exceeding 90 days in duration, and banned carriers from automatically renewing such coverage.

Jimmy Kimmel forgot to mention it, but prohibiting coverage renewals harms individuals with pre-existing conditions, because it forbids customers who develop a pre-existing condition while on short-term plans from continuing their coverage. In discouraging these short-term plans, the Obama administration preferred individuals going without coverage entirely over seeing anyone purchase a policy lacking the full panoply of “government-approved” benefits. The Trump administration can and should rescind this coercive rule and its perverse consequences immediately.

What Else the Trump Administration Can Do

Upon completing regulatory action to return to the status quo ante on short-term plans, the administration can take action it should have taken months ago: Restoring constitutional order by stopping the unilateral payment of cost-sharing reduction subsidies to insurers. Congress could also repeal the individual mandate penalty, allowing those who wish to purchase non-compliant short-term plans rather than taxing them for not buying costly Obamacare coverage.

Obamacare advocates may complain that this series of actions would bifurcate insurance markets—a reasonable assumption. The exchanges would likely morph into something approaching a high-risk pool, with federal subsidies available to cover the cost of more expensive insurance for individuals with pre-existing conditions. Meanwhile, other individuals would have more, and more affordable, options.

That said, executive action should not prompt Congress to walk away from attempts to reform health care (or vice versa, for that matter). Whether through reconciliation instructions in the fiscal year 2018 budget this fall, the fiscal year 2019 budget next year, or other means, Congress should keep searching for opportunities to return patient-centered forces to health care, and provide needed relief from skyrocketing premiums.

When they next face voters, both President Trump and Republicans in Congress should prepare to tell them they did everything they could to fulfill their eight-year promise to repeal and replace Obamacare. They have much work yet to do to make such a claim credibly. Following the setback on Graham-Cassidy, they should roll up their sleeves and do just that.

This post was originally published at The Federalist.

Five Factors That Could Interfere with Graham-Cassidy’s State Health Care Waivers

Some conservative writers—including others who write for this publication—have opined that the legislation written by Sens. Lindsay Graham (R-SC) and Bill Cassidy (R-LA) offers states the ability to innovate and reform their health care systems. Most conservatives, including this one, consider state flexibility an admirable goal.

Certainly reforming Medicaid—through a block grant or per capita cap, coupled with additional flexibility to allow states to manage their programs more freely—would go a long way towards improving care, and reducing health care costs.

1. Subsidizing Moral Hazard

The language on the top of page 15 explicitly links waivers to funding from the new system of block grants the bill creates. Any waiver will only apply to 1) coverage provided by an insurer receiving block grant funding and 2) coverage “provided to an individual who is receiving a direct benefit (including reduced premium costs or reduced out-of-pocket costs)” under the block grant.

This requirement that each and every person subjected to a non-Obamacare-compliant plan must receive a “direct benefit” subsidized by federal taxpayers has several potential perverse consequences. By definition, it encourages moral hazard. Because individuals will know that if they are subjected to health underwriting, or an otherwise noncompliant plan, they must receive federal subsidies, it will encourage them not to buy health insurance until they need it.

It means that either states will have to extend taxpayer-subsidized benefits to highly affluent individuals (allowing them to buy noncompliant plans), or have to permit only low- and middle-income families to buy noncompliant plans (to restrict the subsidies to low-income families). Both scenarios seem politically problematic to the point of being untenable.

When considering the two considerations above—will the bill lower premiums, and will it work?—this provision alone seems destined to preclude either from occurring. The moral hazard could increase premiums, not lower them, driving more healthy people out of the marketplace by telling them they will receive subsidies if and when they become sick and need coverage. The requirement that every person subjected to a waiver must receive subsidized benefits appears potentially destabilizing to insurance markets, while also creating political problems and administrative complexity.

2. Encouraging Lawsuits

The provision on page 12 requiring states applying for waivers to describe “how the state intends to maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions” presents two concerns. First, a future Democratic administration could use rulemaking to define “adequate and affordable health insurance coverage” so narrowly—prohibiting co-payments or cost-sharing of more than $5, for instance—that no state could maintain access to “adequate and affordable” coverage, thereby eliminating their ability to apply for and receive a waiver.

Second, courts have ruled that Medicaid waiver applications are subject to judicial review, a standard that would presumably apply to the Graham-Cassidy waivers as well. While a Congressional Research Service report notes that courts have traditionally given deference to the Centers for Medicare and Medicaid Services (CMS) on waiver applications, the Ninth Circuit Court of Appeals in 1994 did in fact strike down a California waiver application that CMS had previously approved.

If a state receives a waiver, it seems highly likely that individuals affected, with the strong encouragement of liberal activists, will seek relief in court, and point to the page 12 language to argue that the court should strike down the waiver for not providing “adequate and affordable coverage” to people with pre-existing conditions. At minimum, the ensuing legal uncertainty could place states’ waiver programs in limbo for months or even years. And only one judge, or one circuit court, that views the pre-existing condition language as applying to more than states’ waiver application could undermine the program.

Congress could theoretically include language in Graham-Cassidy precluding judicial review of administrative decisions regarding waivers, as Democrats did 13 separate times in Obamacare. But on this particular bill, such a provision likely would not pass muster with the “Byrd rule” that applies to budget reconciliation measures.

Specifically, language prohibiting judicial review would have no (or a minimal) budgetary impact, and would represent matter outside the committees with jurisdiction over the reconciliation bill (Senate Judiciary versus Senate Finance and HELP Committees), both points of order that would see the provision stricken absent 60 Senate votes (which the bill does not have) to retain it.

Given the ongoing political controversy surrounding pre-existing conditions, some moderates may view the inclusion of this phrase as critical to their support for the bill. But its inclusion could ultimately undermine the entire waiver process and one of conservatives’ prime goals from the “repeal-and-replace” process, namely relief from Washington-imposed regulatory burdens.

3. Encourages Activist Judges and Bureaucrats

4. Allows States to Waive Only Some Regulations

While states may waive some Obamacare regulations, they can’t waive others, an internal inconsistency that belies the promise of “flexibility.” For instance, states cannot waive the under-26 mandate if they so choose. Moreover, language on page 15 prohibiting a waiver of “any requirement under a federal statute enacted before January 1, 2009” precludes states from waiving regulations that preceded Obamacare, such as those related to mental health parity.

If the sponsors believe in state flexibility, they should allow states to waive all federal insurance regulations, even ones, such as the under-26 mandate or mental health parity, they may personally support. Or better yet, they should move to repeal the regulations entirely, and let states decide which ones they want to re-enact on the state level.

5. No Funding Equals No Waivers

Because the bill explicitly ties waivers to federal funding, as noted above, the “cliff” whereby block grant funding ends in 2027 effectively ends waiver programs then as well. Such a scenario would put conservative policy-makers in the perverse position of asking Washington to increase federal spending, because any regulatory relief under Obamacare would otherwise cease.

Meaning of Federalism

The potential concerns above demonstrate how Graham-Cassidy may not provide full flexibility to states. Whether through cumbersome administrative requirements, a future Democratic administration, court rulings, or key omissions, states could find that as written, the bill’s promise of flexibility might turn into a mirage.

Given that, it’s worth remembering the true definition of federalism in the first place. Federalism should not represent states getting permission from Washington to take certain actions (and only certain actions). It should represent the people delegating some authority to the federal government, and some to the states. A bill that looked to do that—to remove the Obamacare regulatory apparatus entirely, and allow states to decide whether and what portions of the law they wish to reimpose—would help to restore the principles of federalism, and a true balance between Washington and the states.

This post was originally published at The Federalist.

How Graham-Cassidy’s Funding Formula Gives Washington Unprecedented Power

The past several days have seen competing analyses over the block-grant funding formula proposed in health-care legislation by Sens. Lindsay Graham (R-SC) and Bill Cassidy (R-LA). The bill’s sponsors have one set of spreadsheets showing the potential allocation of funds to states under their plan, the liberal Center on Budget and Policy Priorities has another, and consultants at Avalere (funded in this case by the liberal Center for American Progress) have a third analysis quantifying which states would gain or lose under the bill’s funding formula.

So who’s right? Which states will end up the proverbial winners and losers under the Graham-Cassidy bill? The answer is simple: Nope.

While the bill’s proponents claim the legislation will increase state authority, in reality the bill gives unelected bureaucrats the power to distribute nearly $1.2 trillion in taxpayer dollars unilaterally. In so doing, the bill concentrates rather than diminishes Washington’s power—and could set the course for the “mother of all backroom deals” to pass the legislation.

A Complicated Spending Formula

To start with, the bill repeals Obamacare’s Medicaid expansion and exchange subsidies, effective in January 2020. It then replaces those two programs with a block grant totaling $1.176 trillion from 2020 through 2026. All else equal, this set of actions would disadvantage states that expanded Medicaid, because the Medicaid expansion money currently being received by 31 states (plus the District of Columbia) would be re-distributed among all 50 states.

From there the formula gets more complicated. (You can read the sponsors’ description of it here.) The bill attempts to equalize per-person funding among all states by 2026, with funds tied to a state’s number of individuals with incomes between 50 percent and 138 percent of the poverty level.

Thus far, the formula carries a logic to it. For years conservatives have complained that Medicaid’s match rate formula gives wealthy states more incentives to draw down federal funds than poor states, and that rich states like New York and New Jersey have received a disproportionate share of Medicaid funds as a result. The bill’s sponsors claim that the bill “treats all Americans the same no matter where they live.”

Would that that claim were true. Page 30 of the bill demonstrates otherwise.

The Trillion-Dollar Loophole

Page 30 of the Graham-Cassidy bill, which creates a “state specific population adjustment factor,” completely undermines the rest of the bill’s funding formula:

IN GENERAL.—For calendar years after 2020, the Secretary may adjust the amount determined for a State for a year under subparagraph (B) or (C) and adjusted under subparagraphs (D) and (E) according to a population adjustment factor developed by the Secretary.

The bill does say that HHS must develop “legitimate factors” that affect state health expenditures—so it can’t allocate funding based on, say, the number of people who own red socks in Alabama. But beyond those two words, pretty much anything goes.

The bill says the “legitimate factors” for population adjustment “may include state demographics, wage rates, [and] income levels,” but it doesn’t limit the factors to those three characteristics—and it doesn’t limit the amount that HHS can adjust the funding formula to reflect those characteristics either. If a hurricane like Harvey struck Texas three years from now, Secretary Tom Price would be within his rights under the bill to cite a public health emergency and dedicate 100 percent of the federal grant funds—which total $146 billion in 2020—solely to Texas.

That scenario seems unlikely, but it shows the massive and virtually unprecedented power HHS would have under the bill to control more than $1 trillion in federal spending by executive fiat. To top it off, pages 6 through 8 of the bill create a separate pot of $25 billion — $10 billion for 2019 and $15 billion for 2020 — and tell the Centers for Medicare and Medicaid Services administrator to “determine an appropriate procedure” for allocating the funds. That’s another blank check of $25,000,000,000 in taxpayer funds, given to federal bureaucrats to spend as they see fit.

Backroom Deals Ahead

With an unprecedented level of authority granted to federal bureaucrats to determine how much funding states receive, you can easily guess what’s coming next. Unnamed Senate staffers already invoked strip-club terminology in July, claiming they would “make it rain” on moderates with hundreds of billions of dollars in “candy.” Under the current version of the bill, HHS staff now have virtual carte blanche to promise all sorts of “state specific population adjustment factors” to influence the votes of wavering senators.

The potential for even more backroom deals than the prior versions of “repeal-and-replace” demonstrates the pernicious power that trillions of dollars in spending delivers to Washington. Draining the swamp shouldn’t involve distributing money from Washington out to states, whether under a simple formula or executive discretion. It should involve eliminating Washington’s role in doling out money entirely.

That’s what Republicans promised when they said they would repeal Obamacare—to end the law’s spending, not work on “spreading the wealth around.” That’s what they should deliver.

This post was originally published at The Federalist.

September 30 Deadline for Obamacare Repeal Is Fake News

Over the past several days, congressional leaders in both the House and Senate have claimed that a bill by Sens. Lindsay Graham (R-SC) and Bill Cassidy (R-LA) is “our best, last chance to get repeal and replace done.” They have made such claims because the press keeps “reporting” that Republicans’ “power to pass health care legislation through a party-line vote in the Senate expires on September 30.”

Don’t you believe it. The Senate’s 52 Republicans have multiple options open to keep the Obamacare repeal process alive after September 30. The only question is whether they have the political will to do so.

Option 1: Set a Senate Precedent

That assertion carries one big flaw: The Senate parliamentarian does not “rule.” The Senate as a body does—and that distinction makes a big difference. The procedural question centers around when, and whether, budget reconciliation instructions expire.

Budget reconciliation provides an expedited process for the Senate to consider matters of a fiscal nature. Reconciliation’s limits on debate and amendments preclude filibusters, allowing the bill to pass with a simple (i.e., 51-vote) majority rather than the usual 60 votes needed to break a filibuster and halt debate. (For additional background, see my May primer on budget reconciliation here.)

In one of its first acts upon convening in January, Congress passed a budget resolution for Fiscal Year 2017, which included instructions for health-related committees in the House and Senate to produce reconciliation legislation—legislation intended to “repeal-and-replace” Obamacare. But Fiscal Year 2017 ends on September 30, and Congress (thus far at least) hasn’t completed work on the reconciliation bill yet. So what happens on September 30? Does a reconciliation measure fail? Or can Congress continue work on the legislation, because the budget resolution set fiscal parameters for ten fiscal years (through 2026), not just the one ending on September 30?

There is literally no precedent on this particular Senate procedural question of whether and when reconciliation instructions expire. If the chair—either Vice President Mike Pence, Senate President Pro Tempore Orrin Hatch (R-UT), or another Senate Republican presiding—wishes to disregard the parliamentarian’s opinion, he or she is free to do so.

Alternatively, if the chair decides to agree with the parliamentarian’s opinion, a 51-vote majority of Republicans could decide to overturn that ruling by appealing the chair’s decision. In either event, the action by the Senate—either the chair or the body itself—would set the precedent, not the opinion of a Senate official who currently has no precedent to guide her.

Option 2: Pass a New Budget

Because there is no precedent to the question of when reconciliation instructions expire, Republican senators can set a precedent on this question themselves—keeping in mind it will apply equally when Republicans are in the minority. But if senators believe that disregarding the parliamentarian’s opinion—even on a question where she has no precedent to guide her—might jeopardize the legislative filibuster, they can simply pass a new budget for Fiscal Year 2018, one that includes reconciliation instructions to allow for Obamacare “repeal-and-replace.”

While that requirement has since been changed, Congress could still pass multiple budget resolutions in a given year, along with a reconciliation measure for each. Congress could pass a Fiscal Year 2018 budget resolution with reconciliation instructions for Obamacare repeal this month, complete work on the Obamacare bill, then pass another budget resolution with reconciliation instructions for tax reform.

Political Will

Congressional leaders apparently want to portray the Graham-Cassidy bill as a binary choice—either support it, or support keeping Obamacare in place. The facts turn that binary choice into a false one. Republicans have every opportunity to work to enact the repeal of Obamacare they promised the American people, regardless of the opinion of an unelected Senate official. No legislator should use an arbitrary—and false—deadline of next week to rationalize voting for a bad bill, or abandoning his or her promises altogether.

This post was originally published at The Federalist.