What Mitch McConnell and Congressional Democrats Get Wrong about Entitlements

Sometimes, as parents often remind children in their youth, two wrongs don’t make a right. This held true on Tuesday, when Democrats erupted over comments by Senate Majority Leader Mitch McConnell (R-KY) on entitlement reform.

In returning to “Mediscare” tactics, Democrats made several false claims about entitlements. But so did McConnell, who blithely omitted what a Republican majority did earlier this year to worsen the country’s entitlement shortfall.

What McConnell Got Wrong

McConnell spoke accurately when he said in an interview that Medicare, Social Security, and Medicaid serve as the primary drivers of our long-term debt. He stood on less firm ground when he told Bloomberg that “the single biggest disappointment of my time in Congress has been our failure to address the entitlement issue.” Contra McConnell’s claim, Congress—a Republican Congress—actually did address the entitlement issue this year: they made the problem worse.

This Republican Congress repealed a cap on Medicare spending—the first such cap in that program’s history. It did so as part of a budget-busting fiscal agreement that increased the debt by hundreds of billions of dollars. It did so even though Republicans could have retained the cap on Medicare spending while repealing the unelected, unaccountable board that Democrats included in Obamacare to enforce that spending cap.

By and large, both parties have tried for years to avoid taking on entitlement reform. But Democrats included an actual cap on Medicare spending as part of Obamacare, and Republicans turned around and repealed it at their first possible opportunity. That makes entitlements not just a bipartisan problem—it makes them a Republican problem too.

What Democrats Got Wrong

But McConnell’s comments suggested just the opposite. He noted that, while entitlements serve as the prime driver of the nation’s long-term debt, any changes to those programs “may well be difficult if not impossible to achieve when you have unified government.” McConnell said the same thing in a separate interview with Reuters on Wednesday: “We all know that there will be no solution to that, short of some kind of bipartisan grand bargain that makes the very, very popular entitlement programs in a position to be sustained. That hasn’t happened since the ’80s.”

Even though Congress needs to start reforming entitlements sooner rather than later—even if that means one political party must take the lead—McConnell indicated he would do nothing of the sort. In fact, his comments implied that Congress would not do so unless and until Democrats agreed to entitlement reform, giving the party an effective veto over any changes. Yet Democrats, who never fail to demagogue an issue, attacked him for those comments anyway.

Actually, they haven’t “earned” those benefits. Seniors may have “paid into” the system during their working lives, but the average senior citizen receives far more in benefits than he or she paid in taxes, and the gap continues to grow.

Making a Tough Job Worse

In this case, two wrongs not only did not make a right, they made our country worse off. Like outgoing Speaker of the House Paul Ryan (R-WI), McConnell wishes to absolve himself of blame for the entitlement crisis, when he made the situation worse.

On the other side, Pelosi and her fellow Democrats continue the partisan demagoguery, perpetuating the myth that seniors have “earned” their benefits because they see political advantage in defending nearly infinite amounts of government subsidies to nearly infinite numbers of people. For all their love of attacking “science deniers,” much of the left’s politics requires denying math—that unsustainable trends can continue in perpetuity.

At some point, this absurd game will have to end. When it finally does, our country might not have any money left.

This post was originally published at The Federalist.

A Reading Guide to the Senate Bill’s Backroom Deals

Buried within the pages of the revised Senate health-care bill are numerous formula tweaks meant to advantage certain states. Call them backroom deals, call them earmarks, call them whatever you like: several provisions were inserted into the bill over the past two weeks with the intent of appealing to certain constituents.

It appears that at least three of these provisions apply to Alaska—home of wavering Sen. Lisa Murkowski (R-AK)—and another applies to Louisiana, home of undecided Sen. Bill Cassidy (R-LA). Below please find a summary (not necessarily exhaustive) of these targeted provisions.

The Buy Off Lisa Murkowski Again Fund

The Alaskan Pipeline

The revised Section 126 of the bill includes modified language—page 44, lines 9 through 17—changing certain Medicaid payments to hospitals based on a state’s overall uninsured population, not its Medicaid enrollment. As Bloomberg noted, this provision would also benefit Alaska, because Alaska recently expanded its Medicaid program, and therefore would qualify for fewer dollars under the formula in the original base bill.

The Moral Hazard Expansion

The underlying bill determined Medicaid per capita caps based on eight consecutive fiscal quarters—i.e., two years—of Medicaid spending. However, the revised bill includes language beginning on line 6 of page 59 that would allow “late expanding Medicaid states”—defined as those who expanded between and July 1, 2015 and September 30, 2016—to base their spending on only four consecutive quarters. Relevant states who qualify under this definition include Alaska (expanded effective September 1, 2015), Montana (expanded effective January 1, 2016), and Louisiana (expanded effective July 1, 2016).

The most recent actuarial report on Medicaid noted that, while the actuary originally predicted that adults in the expansion population would cost less than existing populations, in reality each newly eligible enrollee cost 13.6 percent more than existing populations in 2016. Some states have used the 100 percent federal match for their expansion populations—i.e., “free money from Washington”—to raise provider reimbursement levels. Therefore, allowing these three states to use only the quarters under which they had expanded Medicaid as their “base period” will likely allow them to draw down higher payments from Washington in perpetuity.

The South Dakota Purchase

The Buffalo Bribe

This provision, originally included in the House-passed bill, remains in the Senate version, beginning at line 12 of page 69. Originally dubbed the “Buffalo Bribe,” and inserted at the behest of congressmen from upstate New York, the provision would essentially penalize that state if it continues to require counties to contribute to the Medicaid program’s costs.

More to Come?

While the current bill contains at least half a dozen targeted provisions, many more could be on the way. By removing repeal of the net investment tax and Medicare “high-income” tax, the bill retains over $230 billion in revenue. Yet the revised bill spends far less than that—$70 billion more for the Stability Fund, $43 billion more in opioid funding, and a new $8 billion demonstration project for home and community-based services in Medicaid.

Even after the added revenue loss from additional health savings account incentives, Senate leadership could have roughly $100 billion more to spend in their revised bill draft—which of course they will. Recall too that the original Senate bill allowed for nearly $200 billion in “candy” to distribute to persuade wayward lawmakers. In both number and dollar amount, the number of “deals” to date may dwarf what’s to come.

This post was originally published in The Federalist.

Donald Trump’s 47.5 Million Reasons to Support Obamacare Bailouts

Last Friday afternoon, Donald Trump caused a minor uproar in Washington when he signaled a major softening in his stance towards President Obama’s unpopular health-care law. “Either Obamacare will be amended, or it will be repealed and replaced,” Trump told the Wall Street Journal—a major caveat heretofore unexpressed on the campaign trail.

Why might Trump—who not one month ago, in a nationally televised debate, called Obamacare a “total disaster” that next year will “implode by itself”—embark on such a volte face about the law? Politico notes one possible answer lies in the story of Oscar, a startup insurer created to sell plans under Obamacare:

Oscar is about to have an unusually close tie to the White House: Company co-founder Josh Kushner’s brother Jared is posted to plan an influential role in shaping his father-in-law Donald Trump’s presidency. The two brothers in 2013 were also deemed ‘the ultimate controlling persons in Oscar’s holding company system,’ according to a state report.

Government of the People—Or of the Cronies?

In 2000, while contemplating a run for the White House, Trump told Fortune magazine: “It’s very possible that I could be the first presidential candidate to run and make money on it.” That previously expressed sentiment—of using political office for personal pecuniary gain—would not rule out Trump assuming policy positions designed to enrich himself and his associates.

That need might be particularly acute in the case of Oscar, of which Jared Kushner was a controlling person, and in which Josh Kushner’s venture capital firm Thrive Capital has invested. On Tuesday, the insurer reported $45 million in losses in just three states, bringing Oscar’s losses in those three states to a total of $128 million this calendar year. Bloomberg said the company “sells health insurance to individuals in new markets set up by [Obamacare,]” and described its future after last week’s election thusly:

Trump’s election could be a negative for the insurer. The Republican has promised to repeal and replace [Obamacare,] though he’s softened that stance since his victory. The uncertainty could discourage some people from signing up for health plans, or Republicans could eliminate or reduce the tax subsidies in the law that are used to help pay for coverage.

Replace “the insurer” with “Trump’s in-laws” in the above paragraph, and the president-elect’s evolving stance certainly begins to make more sense.

Pimp My Obamacare Bailout?

It’s an ironic statement, given that government documents reveal how Oscar—and thus Trump’s in-laws—have made claims on Obamacare bailout programs to the tune of $47.5 million. Those claims, including $38.2 million from reinsurance and $9.3 billion from risk corridors, total more than Oscar’s losses in the past quarter. The $47.5 million amount also represents a mere fraction of what Oscar could ultimately request, and receive, from Obamacare’s bailout funds, as it does not include any claims for the current benefit year.

Given that most of the things Trump should do on Day One to dismantle Obamacare involve undoing the law’s illegal bailouts, it’s troubling to learn the extent to which a company run by his in-laws has benefited from them. Following are some examples.

Reinsurance: Administration documents reveal that during Obamacare’s first two years, Oscar received $38.2 million in payments from the law’s reinsurance program, designed to subsidize insurers for the expense associated with high-cost patients. Unfortunately, these bailout payments have come at the expense of taxpayers, who have been shortchanged money promised to the federal Treasury by law so the Obama administration can instead pay more funds to insurers.

In 2014, when Oscar only offered plans in New York, the company received $17.5 million in Obamacare reinsurance payments. In 2015, as Oscar expanded to offer coverage in New Jersey, the insurer received a total of more than $20.7 million in reinsurance funds: $19.8 million for its New York customers, and $945,000 for its New Jersey enrollees.

While reinsurance claims for the 2016 plan year are still being compiled and therefore have not yet been released, it appears likely that Oscar will receive a significant payment in the tens of millions of dollars, for two reasons. First, the carrier expanded its offerings into Texas and California; more enrollees means more claims on the federal fisc. Second, Bloomberg quoted anonymous company sources as saying that part of Oscar’s losses “stem from high medical costs”—which the insurer will likely attempt to offset through the reinsurance program.

While the Obama administration has doled out billions of dollars in reinsurance funds to insurers like Oscar, they have done so illegally. In September, the Government Accountability Office ruled that the administration violated the text of Obamacare itself. Although the law states that $5 billion in payments back to the Treasury must be made from reinsurance funds before insurers receive payment, the Obama administration has turned the law on its head—paying insurers first, and stiffing taxpayers out of billions.

I wrote last week that Trump can and should immediately overturn these illegal actions by the Obama Administration, and sue insurers if needed to collect for the federal government. But if those actions jeopardize tens of millions of dollars in federal payments for the Kushners, or mean the Trump administration will have to take Trump’s in-laws to court, will he?

Risk Corridors: Oscar also has made claims for millions of dollars regarding Obamacare’s risk corridor program, which as designed would see insurers with excess profits subsidize insurers with excess losses. In 2014, Oscar was one of many insurers with excess losses, making a claim for $9.3 million in risk corridor payments.

However, because Congress prohibited taxpayer funds from being used to bail out insurance companies, and because few insurers had excess profits to pay into the risk corridor program, insurers requesting payouts from risk corridors received only 12.6 cents on the dollar for their claims. While Oscar requested more than $9.3 million, it received less than $1.2 million—meaning it is owed more than $8.1 million from the risk corridor program for 2014.

CMS has yet to release data on insurers’ claims for 2015, other than to say that payments to the risk corridor program for 2015 were insufficient to pay out insurers’ outstanding claims for 2014. In other words, Oscar will not be paid its full $9.3 million for 2014, even as it likely makes additional claims for 2015 and 2016.

However, Oscar yet has hope in receiving a bailout from the Obama administration. In September, the administration said it was interested in settling lawsuits brought by insurance companies seeking reimbursement for unpaid risk corridor claims. The administration hopes to use the obscure Judgment Fund to pay through the backdoor the bailout that Congress prohibited through the front door.

As with reinsurance payments, a President Trump should immediately act to block such settlements, which violate Congress’ expressed will against bailing out insurers. However, given his clear conflict-of-interest in protecting his close relatives’ investments, it’s an open question whether he will do so.

Cost-Sharing Reductions: Like other health insurers, Oscar has benefited by receiving cost-sharing subsidies—even though Congress never appropriated funds for them. In May, Judge Rosemary Collyer agreed with the House of Representatives that the Obama administration’s payments to insurers for cost-sharing subsidies without an appropriation violate the Constitution. Although the text of the law requires insurers to reduce deductibles and co-payments for some low-income beneficiaries, it never included an explicit appropriation for subsidy payments to insurers reimbursing them for these discounts. Despite this lack of an appropriation, the Obama administration has paid insurers like Oscar roughly $14 billion in cost-sharing subsidies anyway.

Here again, Trump should immediately concede the illegality of the Obama administration’s actions, settle the lawsuit brought by the House of Representatives, and end the unconstitutional cost-sharing subsidies on Day One. But given his close ties to individuals whose insurance model is largely based on selling Obamacare policies, will he do so? To put it bluntly, will he put the interests of Oscar—and his in-laws—ahead of the U.S. Constitution?

Ask Congress for More and More Money?’

In general, health insurance companies have made record profits during the Obama years—a total of a whopping $15 billion in 2015. But while insurers have made money selling employer plans, or contracting for Obamacare’s massive expansion of Medicaid, few insurers have made money on insurance exchanges. That dynamic explains why Oscar, which has focused on exchange plans, has suffered its massive losses to date.

However, as Trump rightly pointed out just one short month ago, the answer is not to “ask Congress for more money, more and more money.” He should end the bailouts immediately upon taking office. Duty to country—and the constitutional oath—should override any personal familial conflicts.

This post was originally published at The Federalist.

Aetna’s New Obamacare Strategy: Bailouts or Bust

Tuesday’s announcement by health insurer Aetna that it had halted plans to expand its offerings on Obamacare exchanges and may instead reduce or eliminate its participation entirely, caused a shockwave among health-policy experts. The insurer that heretofore had acted as one of Obamacare’s biggest cheerleaders has now admitted that the law will not work without a massive new infusion of taxpayer cash.

In an interview with Bloomberg, Aetna’s CEO, Mark Bertolini, explained the company’s major concern with Obamacare implementation:

Bertolini said big changes are needed to make the exchanges viable. Risk adjustment, a mechanism that transfers funds from insurers with healthier clients to those with sick ones, “doesn’t work,” he said. Rather than transferring money among insurers, the law should be changed to subsidize insurers with government funds, Bertolini said.

“It needs to be a non-zero sum pool in order to fix it,” Bertolini said. Right now, insurers “that are less worse off pay for those that are worse worse off.” 

A brief explanation: Obamacare’s risk adjustment is designed to even out differences in health status among enrollees. Put simply, plans with healthier-than-average patients subsidize plans with sicker-than-average patients. But the statute stipulates that the risk-adjustment payments should be based on “average actuarial risk” in each state marketplace — by definition, plans will transfer funds among themselves, but the payments will net out to zero.

Risk adjustment, a permanent feature of Obamacare, should not be confused with the law’s temporary-risk-corridor program, scheduled to end in December. Whereas risk corridor subsidizes loss-making plans, risk adjustment subsidizes sicker patients. And while plans can lose money for reasons unrelated to patient care — excessive overhead or bad investments, for instance — insurers incurring perpetual losses on patient care have little chance of ever breaking even.

That’s the situation Aetna says it finds itself in now. In calling for the government to subsidize risk adjustment, Bertolini believes that for the foreseeable future insurers will continue to face a risk pool sicker than in the average employer plan. In other words, the exchanges won’t work as currently constituted, because healthy people are staying away from Obamacare plans in droves. Aetna’s proposed “solution,” as expected, is for the taxpayer to pick up the tab.

It’s not that insurers haven’t received enough in bailout funds already. As I have noted in prior work, insurance companies stand to receive over $170 billion in bailout funds over the coming decade. For instance, the Obama administration has flouted the plain text of the law to prioritize payments to insurers over repayments to the United States Treasury. But still insurance companies want more.

Some viewed Aetna’s threat to vacate the exchanges as an implicit threat resulting from the Justice Department’s challenging its planned merger with Humana. But the reality is far worse: Aetna was conditioning its participation not on its merger’s being approved but on receiving more bailout funds from Washington.

Like a patient in intensive care, the Left wants to administer billions of dollars to insurers as a form of fiscal morphine, hoping upon hope that the cash infusions can tide them over until the exchanges reach a condition approaching health. Just last month, the liberal Commonwealth Fund proposed extending Obamacare’s reinsurance program, scheduled to end this December, “until the reformed market has matured.” But as Bertolini admitted in his interview, the exchanges do not work, and will not work — meaning Commonwealth’s suggestion would create yet another perpetual-bailout machine.

Only markets, and not more taxpayer money, will turn this ailing patient around. Congress should act to end the morphine drip and stop the bailouts once and for all. At that point, policymakers of both parties should come together to outline the prescription for freedom they would put in its place.

This post was originally published at National Review.

Medicaid vs. Cash for the Poor

In a Think Tank post last week, I wrote that in trying to sell Obamacare’s Medicaid expansion to states, the administration “has made no attempt to argue that expansion represents the most economically efficient use of those dollars—that the funds could not be better used building bridges, returned to citizens,” or other things. A study released this month raises questions about the very utility and efficiency of Medicaid coverage.

The study, from MIT’s Amy Finkelstein, Nathaniel Hendren, and Erzo F.P. Luttmer, used data from an Oregon health insurance experiment—in which some low-income citizens received access to Medicaid and some did not, based on the results of a random lottery—to estimate the utility of Medicaid coverage. They found that beneficiaries valued Medicaid at 20 cents to 40 cents on the dollar; in other words, for every $1,000 the states and federal government spent on health coverage, the average beneficiaries felt like they were receiving goods or services valued at $200 to $400.

In response, Bloomberg View’s Megan McArdle asked whether the poor would prefer cash benefits to Medicaid. It seems like a fanciful question; for one thing, programs providing cash benefits—such as the Earned Income Tax Credit—historically suffer from a large incidence of fraud. But say a state wanted to offer residents such a choice. Would the Obama administration allow it?

The state waiver program included in Obamacare provides flexibility only to the extent that states provide coverage at least as generous to as many people as the health-care law itself. A state cannot target resources only to certain groups—individuals with disabilities, for example—or provide slimmed-down coverage to some beneficiaries. Under that logic, it seems that if a state wanted to provide residents a choice between a smaller cash benefit and Medicaid insurance coverage, the administration would not permit such a measure—even though, according to the MIT study, the average beneficiary would prefer this outcome, and taxpayers would benefit as well.

While the Obama administration talks about its flexibility, that appears to apply only when such flexibility promotes the administration’s objectives. The president said early in his tenure that for too many years “rigid ideology has overruled sound science.” Now, an MIT study shows “sound science” questioning the efficiency and utility of Medicaid coverage for beneficiaries. Will the administration react to this scientific evidence, or will its own ideology prevent the consideration of more innovative, and potentially more effective, policies?

This post was originally published at the Wall Street Journal Think Tank blog.

Gov. Jindal Op-Ed: Rebuttal to Ramesh Ponnuru

My op-ed this week regarding the need for conservative alternatives to Obamacare has prompted numerous responses, including one on these pages. I’m happy to continue this debate by explaining my plan further, and outlining why I believe it’s the preferable choice for conservatives to embrace.

In his column analyzing my plan, Ramesh Ponnuru criticized it on several counts. He calls its “great flaw” that the plan might disruption when compared to Obamacare. But while some may view that as a bug, others might view it as a feature. For instance, the millions of individuals who received cancellation notices might like the opportunity to purchase more affordable coverage without facing the Obamacare mandates that have jacked up their premiums. Likewise the six million Americans about to face the Obamacare mandate tax for the first time come April 15—or the millions more who will face more red tape as they have to apply to Washington for a mandate exemption.

Two other numbers bear particular emphasis. Last spring, the Congressional Budget Office estimated that delaying the individual mandate until 2019 would raise the number of uninsured Americans by 13 million. In other words, under Obamacare, 13 million Americans will receive health coverage because the federal government is forcing individuals under penalty of taxation to buy it. Making sure none of those individuals—many of whom may never have wanted to buy insurance in the first place—have their coverage disrupted would cost far more in taxes than any alternative to Obamacare would raise.

The second number is $2,500—that’s the reduction in premiums Barack Obama promised from his health plan during the 2008 campaign. But according to an America Next analysis last year, the President’s failure to deliver on that promise has cost the American people more than $1.2 trillion in higher premiums just from 2009 through 2013.

In critiquing my proposal, Ponnuru falls into the typical trap of the Left—to evaluate a health plan primarily, if not exclusively, by how many people it provides with insurance cards. I fundamentally disagree with that premise. The American people are worried first and foremost about the rising cost of health coverage—it’s what makes their health care unaffordable, and Obamacare unsustainable.

That’s why my plan emphasizes attacking rising health costs, and not expanding coverage—because focusing on the former is the best way to achieve the latter. Conversely, fixating on the latter—trying to mandate coverage through new regulations, taxes, and Washington diktats—will only make the former less attainable—raising health costs in a way that no regime of taxpayer-funded subsidies could ever sustain.

That said, my plan absolutely includes a safety net for the most vulnerable. It provides at least $100 billion for states to guarantee access for individuals with pre-existing conditions. Rather than dictating a top-down approach from Washington, our plan lets the states decide how best to increase access for their citizens. And it does so in a way that encourages states to reform their existing regulatory regimes—helping to bring down costs.

I believe this plan—focusing first and foremost on reducing costs, and doing so through the states, not Washington, DC—provides the best path forward, most closely adheres to conservative principles, and provides a telling contrast to Obamacare’s shortcomings and failures. To win elections, conservatives need to have better ideas, not merely mimic the ideas of the Left.

This post was originally published at Bloomberg.

Insurers Now “Scared to Death” of Obamacare

Bloomberg has a must-read story this morning highlighting yet more faults with Obamacare’s exchanges. Specifically, the faults in the exchanges’ computer software aren’t just hitting consumers trying to shop for plans—they’re hitting insurers as well:

Insurers are getting faulty and incomplete data from the new U.S.-run health exchange, which may mean some Americans won’t be covered even after they sign up for an insurance plan.…The companies are receiving electronic files that can’t open or have so much missing information on new enrollees they’re unusable, the consultants said.

Some insurers have been forced to fix entries by hand, said Bob Laszewski, an insurance-industry consultant based in Arlington, Virginia.

“If we don’t see substantial improvement by the end of this week, then I would throw up the yellow flag,” said Dan Schuyler, a consultant advising states and insurers on the exchanges. “If we don’t see it in the next two to three weeks, it’s time for red flags. The concern is some people could get to Jan. 1, and not have coverage.”

Last week, the Administration claimed that heavy volume was the prime cause of the exchanges’ delays. But today’s Bloomberg report, as with other news reports over the weekend, all suggest bigger issues with the federal data hub and other elements of the IT infrastructure needed to support enrollment.

The Congressional Budget Office (CBO) has estimated that 7 million individuals would enroll in exchanges for 2014. If even one in 10 applications has to be adjusted manually because insurance carriers receive inaccurate data from the exchanges, that would mean 700,000 applications would have to be processed by hand between now and the end of open enrollment in March—a staggering possibility, and a feat few insurers will be able to achieve.

Little wonder that the Bloomberg story ends with one consultant saying that “the insurance industry is scared to death” of the problems the exchange glitches may cause them. What started off sounding like a dream—millions of new customers, and more than $1 trillion in insurance subsidies—may turn out to be a horrible nightmare for the insurance industry. It’s a fitting metaphor for the law’s effects on the American people as a whole.

This post was originally published at The Daily Signal.

Yes, There’ll Be Sticker Shock

Which health-insurance plan costs more — one that covers 50 percent of your expected health expenses, or one that covers 60 percent?

It’s not a trick question. And the answer to it goes to the heart of the problem with studies claiming that Obamacare will not raise insurance premiums next year.

Consider, for instance, a recent Rand Corporation study claiming “there could be a decline in total premiums” for Americans who buy health insurance directly from insurance companies. Press headlines trumpeted that talking point. “No Widespread Premium Increases Coming under Obamacare,” said one Capitol Hill publication. “Study: Price Shocks on Health Exchanges Appear Unlikely,” blared NPR. “Many states will see little to no change in premiums,” reported Bloomberg.

It sounded like good news. But there’s a hitch. In arriving at this conclusion, the Rand researchers compared rates for pre- and post-Obamacare plans with the same actuarial values. That’s a fancy term for the percentage of expected health costs paid by the insurance company.

The lead Rand researcher explained to a Bloomberg reporter why their study didn’t consider changes in actuarial value: “Some people buy more generous coverage because of the law and that will lead to increased costs. . . . In my mind, that’s not the same as rate shock because the person will be getting a better plan.”

But there’s one big catch: Obamacare will force people to buy richer plans — whether they want to or not. An article in the journal Health Affairs last year noted most plans now purchased by individuals do not meet the minimum-coverage standards that the law will require starting next year.

To return to where we started: A health plan covering 60 percent of expenses will cost more than a health plan covering 50 percent of expenses. Obamacare forces health plans to cover at least 60 percent of expenses — a requirement most individually purchased health plans don’t meet. Yet the Rand study ignored the impact of this new Obamacare mandate when claiming that premiums will not rise next year.

When Obamacare was being debated in 2009, the nonpartisan Congressional Budget Office did examine the impact of the new benefit mandates on health-insurance premiums. It concluded that “average premiums [under Obamacare] would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained,” in part because of “the minimum level of coverage (and related requirements) specified in the proposal.” In other words, premiums will go up because Obamacare forces people to buy more comprehensive — and therefore more expensive — health plans.

The Rand study was funded by the Department of Health and Human Services, which certainly must be pleased that the analysis conveniently ignored the impact of Obamacare’s forcing people to buy richer coverage. And the claim made by the Rand researcher — that people may pay more for coverage next year but “will be getting a better plan” — echoes those now being made by other defenders of the law.

Regardless, it’s not consistent with what Senator Obama promised when campaigning for president. A 2008 document issued by the Obama campaign highlights the candidate’s pledge: “For those who have insurance now, nothing will change under the Obama plan — except that you will pay less. Obama’s plan will save a typical family up to $2,500 on premiums.” Candidate Obama didn’t say “you will pay more, but you’ll get better coverage” — he said “you will pay less,” period.

Having engaged in a massive bait-and-switch — signing a law that raises premiums after he promised he would lower them — the president and his administration are now trying to justify the law’s impending premium increases. But the false premises under which it was sold in the first place should provide Congress with every reason to use its power of the purse and stop Obamacare before this sticker shock hits the American people on January 1.

This post was originally published at National Review.

The Obamacare Big City Bailout

Bloomberg reports this week on the latest Obamacare trend sweeping across the country: Cities and states may soon attempt to unload unsustainable health costs on the federal government by dumping employees and retirees onto exchanges.

Both Chicago and Detroit have explored using the exchanges to reduce massive budget shortfalls, and it could set an example for others. Bloomberg quotes one expert from the Rockefeller Institute of Government: “We can expect other cities to pick up on this.… I expect [employee dumping] to mushroom.”

The incentives for cities—or even states—to dump their workers onto exchanges are significant. Bloomberg notes that reducing retiree health costs could save Detroit approximately $150 million per year—at a time when the city faces a $386 million budget deficit and $17 billion in long-term debt.

Of course, these budgetary maneuvers aren’t really “savings”—they merely represent a shift of unsustainable costs from cities and states onto the backs of federal taxpayers. If more individuals than expected—particularly retirees, who are likely to be older and sicker than the population as a whole—require federal exchange subsidies, the cost of Obamacare could rise by trillions. And if cities and even states set an example by dumping their health care obligations on the federal government, private-sector employers could well follow suit.

The spokesman for Chicago mayor Rahm Emanuel called the city’s retiree health system “fiscally unsustainable,” but merely shifting that responsibility to Washington may be about as effective as moving deck chairs on a budgetary Titanic.

Meanwhile, like other Americans losing their coverage due to Obamacare, retirees themselves appear none too keen on getting dumped onto the exchanges. Bloomberg quotes one retired Detroit police officer expressing his outrage:

Imagine if they said tomorrow your Social Security, your Medicare is going away and you’re going on Obamacare.… How would you feel?

This post was originally published at The Daily Signal.

It’s Official: Administration Admits Obamacare Is a Job-Killer

Bloomberg News reported this evening that the Obama Administration is set to announce a one-year delay in enforcement of Obamacare’s employer mandate, a move the Treasury Department recently confirmed in a blog post.

However, the problem is not just Obamacare’s employer mandate—the real problem is Obamacare itself. The same individuals who said Obamacare would create jobs, not destroy them, are now the same ones who will say the Administration can “fix” the employer mandate, if only given another year to do so. Conservatives should not be fooled, appeased, or assuaged. Instead, today’s developments should provide every incentive for the American people to redouble their efforts to repeal, defund, and dismantle ALL of this bureaucratic, unworkable law.

The idea that selectively enforcing one provision of the law could “solve” all the problems inherent in Obamacare is absurd on its face. In fact, the Administration’s position raises more questions than it answers:

  • If the employer mandate will prove so devastating to businesses that it can’t be enforced in 2014—following three years of implementation work—why should it be enforced at all?
  • Will delaying implementation of the employer mandate encourage more firms to drop coverage entirely and dump their workers on to Exchanges, raising the cost of taxpayer-funded subsidies by trillions?
  • What about individuals who can’t afford to buy health insurance, yet will be forced to do so under Obamacare? Will they get an exemption from enforcement as well?

It is hard to understate the impact of today’s devastating admission from the Administration that, after three years, it still cannot implement Obamacare without strangling businesses in red tape and destroying American jobs. That said, it is still not too late for Congress to do the right thing, and refuse to fund what the Administration has now—finally—admitted is a job-killing train wreck.

This post was originally published at The Daily Signal.