Meet the Radical Technocrat Helping Democrats Sell Single-Payer

If anyone had doubts about the radical nature of Democrats’ health care agenda, they needn’t look further than the second name on the witness list for this Wednesday’s House Ways and Means Committee hearing on single-payer health care: Donald Berwick of the Institute for Healthcare Improvement.

If that name sounds familiar, it should. In summer 2010, right after Obamacare’s passage, President Obama gave Berwick a controversial recess appointment to head the Centers for Medicare and Medicaid Services (CMS). Democrats refused to consider Berwick’s nomination despite controlling 59 votes in the Senate at the time, and he had to resign as CMS administrator at the end of his recess appointment in late 2011.

Berwick’s History of Radical Writings

Even a cursory review of Berwick’s writings explains why Obama’s only option was to push him through with a recess appointment, and why Democrats refused to give Berwick so much as a nomination hearing. As someone who read just about everything he wrote until his nomination—thousands of pages of journal articles, books, and speeches—I know the radical nature of Berwick’s thinking all too well. He believes passionately in a society ruled by a technocratic elite, thinking that a core group of government planners can run the country’s health care system better than individual doctors and patients.

Here is what this doctor believes in, in his own words:

  • Socialized Medicine: “Cynics beware: I am romantic about the National Health Service; I love it. All I need to do to rediscover the romance is to look at health care in my own country.”
  • Control by Elites: “I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.”
  • Wealth Redistribution: “Any health care funding plan that is just, equitable, civilized, and humane must—must—redistribute wealth from the richer among us to the poorer and less fortunate.”
  • Shutting Medical Facilities: “Reduce the total supply of high-technology medical and surgical care and consolidate high-technology services into regional and community-wide centers … Most metropolitan areas in the United States should reduce the number of centers engaging in cardiac surgery, high-risk obstetrics, neonatal intensive care, organ transplantation, tertiary cancer care, high-level trauma care, and high-technology imaging.”
  • End of Life Care: “Most people who have serious pain do not need advanced methods; they just need the morphine and counseling that have been available for centuries.”
  • Cost-Effectiveness Rationing of Care: “The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”
  • Doctors Putting “The System” over their Patients: “Doctors and other clinicians should be advocates for patients or the populations they service but should refrain from manipulating the system to obtain benefits for them to the substantial disadvantage of others.”
  • Standardized “Cookbook Medicine”: “I would place a commitment to excellence—standardization to the best-known method—above clinician autonomy as a rule for care.”

For those who want a fuller picture of Berwick’s views, in 2010-11 I compiled a nearly 30-page dossier featuring excerpts of his beliefs, based on my comprehensive review of his prior writings and speeches. That document is now available online here, and below.

Where’s the Political Accountability?

Some of Berwick’s greatest admiration is saved for Britain’s National Health Service on the grounds that it was ultimately politically accountable to patients. For instance, Berwick said his “rationing with our eyes open” quote was “distorted,” claiming that

Someone, like your health insurance company, is going to limit what you can get. That’s the way it’s set up. The government, unlike many private health insurance plans, is working in the daylight. That’s a strength.

When running for governor of Massachusetts in 2013, Berwick claimed he “regrets listening to White House orders to avoid reaching out to congressional Republicans.” But that doesn’t absolve the fact that Berwick went to great lengths to avoid the political accountability he previously claimed to embrace.

It also doesn’t answer the significant questions about why Obama waited until after Obamacare’s enactment to nominate Berwick—deliberately keeping the public in the dark about the radical nature of the person he wanted to administer vast swathes of the law.

Thankfully, however, Wednesday’s hearing provides a case of “better late than never.” Republicans will finally get a chance to ask Berwick about the extreme views expressed in his writings. They will also be able to raise questions about why Democrats decided to give him an official platform to talk about single payer (and who knows what else).

This post was originally published at The Federalist.

Exclusive: Inside the Trump Administration’s Debate over Expanding Obamacare

Last August, I responded to a New York Times article indicating that some within the Trump administration wanted to give states additional flexibility to expand Medicaid under Obamacare. Since then, those proposals have advanced, such that staff at the Centers for Medicare and Medicaid Services (CMS) believe that they have official sign-off from the president to put those proposals into place.

My conversations with half a dozen sources on Capitol Hill and across the administration in recent weeks suggest that the proposal continues to move through the regulatory process. However, my sources also described significant policy pitfalls that could spark a buzz-saw of opposition from both the left and the right.

The Times reported that some within the administration—including CMS Administrator Seema Verma and White House Domestic Policy Council Chairman Andrew Bremberg—have embraced the proposal. But if the plan overcomes what the Times characterized as a “furious” internal debate, it may face an even tougher reception outside the White House.

How It Would Work

After the Supreme Court made Medicaid expansion optional for states as part of its 2012 ruling upholding Obamacare’s individual mandate, the Obama administration issued guidance interpreting that ruling. While the court made expansion optional for states, the Obama administration made it an “all-or-nothing” proposition for them.

Under the 2012 guidance—which remains in effect—if states want to receive the enhanced 90 percent federal match associated with expansion, they must cover the entire expansion population—all able-bodied adults with incomes under 138 percent of the federal poverty level (just under $35,000 for a family of four). If states expand only to some portion of the eligible population, they would only receive their regular Medicaid match of 50-76 percent, not the enhanced 90 percent match.

The Internal Debate

The August Times article indicated that, after considering partial expansion, the administration postponed any decision until after November’s midterm elections. Since that time, multiple sources disclosed to me a further meeting that took place on the topic in the Oval Office late last year. While the meeting was originally intended to provide an update for the president, CMS staff left that meeting thinking they had received the president’s sign-off to implement partial expansion.

Just before Christmas, during a meeting on an unrelated matter, a CMS staffer sounded me out on the proposal. The individual said CMS was looking for ways to help give states additional flexibility, particularly states hamstrung by initiatives forcing them to expand Medicaid. However, based on my other reporting, I believe that the conversation also represented an attempt to determine the level of conservative opposition to the public announcement of a decision CMS believes the president has already made.

Why Liberals Will Object

During my meeting, I asked the CMS staffer about the fiscal impacts of partial expansion. The staffer admitted that, as I had noted in my August article, exchange plans generally have higher costs than Medicaid coverage. Therefore, moving individuals from Medicaid to exchange coverage—and the federal government paying 100 percent of subsidy costs for exchange coverage, as opposed to 90 percent of Medicaid costs—will raise federal costs for every beneficiary who shifts coverage under partial expansion.

The Medicare actuary believes that the higher cost-sharing associated with exchange coverage will lead 30 percent of the target population—that is, individuals with incomes from 100-138 percent of poverty—to drop their exchange plan. Either beneficiaries will not be able to afford the premiums and cost-sharing, or they will not consider the coverage worth the money. And because 30 percent of the target population will drop coverage, the partial expansion change will save money in a given state—despite the fact that exchange coverage costs more than Medicaid on a per-beneficiary basis.

Why Conservatives Will Object

I immediately asked the CMS staffer an obvious follow-up question: Did the actuary consider whether partial expansion, by shifting the costs of expansion from the states to the federal government, would encourage more states to expand Medicaid? The staffer demurred, saying the actuary’s analysis focused on only one hypothetical state.

However, the CMS staffer did not tell me the entire story. Subsequent to my “official” meeting with that staffer, other sources privately confirmed that the actuary does believe that roughly 30 percent of the target population will drop coverage.

But these sources and others added that both the Medicare actuary and the Congressional Budget Office (CBO) agree that, notwithstanding the savings from current expansion states—savings associated with individuals dropping exchange coverage, as explained above—the partial expansion proposal will cost the federal government overall, because it will encourage more states to expand Medicaid.

For instance, the Council of Economic Advisers believes that spending on non-expansion states who use partial expansion as a reason to extend Medicaid to the able-bodied will have three times the deficit impact as the savings associated with states shifting from full to partial expansion.

Because the spending on new partial expansion states will overcome any potential savings from states shifting from full to partial expansion, the proposal, if adopted, would appreciably increase the deficit. While neither CBO nor the Medicare actuary have conducted an updated analysis since the election, multiple sources cited an approximate cost to the federal government on the order of $100-120 billion over the next decade.

One source indicated that the Medicare actuary’s analysis early last summer arrived at an overall deficit increase of $111 billion. The results of November’s elections—in which three non-expansion states voted to accept expansion due to ballot initiatives—might have reduced the cost of the administration’s proposal slightly, but likely did not change the estimate of a sizable deficit increase.

A net cost of upwards of $100 billion, notwithstanding potential coverage losses from individuals dropping exchange coverage in current expansion states, can only mean one thing. CBO and the Medicare actuary both believe that, by lowering the cost for states to expand, partial expansion will prompt major non-expansion states—such as Texas, Florida, Georgia, and North Carolina—to accept Obamacare’s Medicaid expansion.

Who Will Support This Proposal?

Based on the description of the scoring dynamic my sources described, partial expansion, if it goes forward, seems to have no natural political constituency. Red-state governors will support it, no doubt, for it allows them to offload much of their state costs associated with Medicaid expansion onto the federal government’s debt-laden dime. Once CMS approves one state’s partial expansion, the agency will likely have a line of Republican governors out its door looking to implement waivers of their own.

But it seems unlikely that Democratic-led states will follow suit. Indeed, the news that partial expansion would cause about 30 percent of the target population to drop their new exchange coverage could well prompt recriminations, investigations, and denunciations from Democrats in Congress and elsewhere. Because at least 3.1 million expansion beneficiaries live in states with Republican governors, liberals likely would object to the sizable number of these enrollees who could decide to drop coverage under partial expansion.

Conversely, conservatives will likely object to the high net cost associated with the proposal, notwithstanding the potential coverage losses in states that have already expanded. Some within the administration view Medicaid expansion, when coupled with proposals like work requirements, as a “conservative” policy. Other administration officials view expansion in all states as something approaching a fait accompli, and view partial expansion and similar proposals as a way to make the best of a bad policy outcome.

But Medicaid expansion by its very nature encourages states to discriminate against the most vulnerable in society, because it gives states a higher match for covering able-bodied adults than individuals with disabilities. In addition to objecting to a way partial expansion would increase government spending by approximately $100 billion, some conservatives would also raise fundamental objections to any policy changes that would encourage states to embrace Obamacare—and add even more able-bodied adults to the welfare rolls in the process.

Particularly given the Democratic takeover of the House last week, the multi-pronged opposition to this plan could prove its undoing. Democrats will have multiple venues available—from oversight through letters and subpoenae, to congressional hearings, to use of the Congressional Review Act to overturn any administration decisions outright—to express their opposition to this proposal.

A “strange bedfellows” coalition of liberals and conservatives outraged over the policy, but for entirely different reasons, could nix it outright. While some officials may not realize it at present, the administration may not only make a decision that conservatives will object to on policy grounds, they may end up in a political quagmire in the process.

This post was originally published at The Federalist.

Let the Individual Mandate Die

In May New Jersey imposed a health-insurance mandate requiring all residents to buy insurance or pay a penalty. More states will feel pressure to follow suit in the coming year as the federal mandate’s penalty disappears Jan. 1 and state legislatures reconvene, some with new Democratic majorities intent on “protecting” Obamacare. But conflicts with federal law will make state-level health-insurance mandates ineffective or unduly onerous, and governors and legislatures would do well to steer clear.

While states can require citizens to purchase health coverage, they will have trouble ensuring compliance. Federal law prohibits the Internal Revenue Service from disclosing tax-return data, except under limited circumstances. And there is no clear precedent allowing the IRS to disclose coverage data to verify compliance with state insurance requirements.

Accordingly, mandates enacted in New Jersey and the District of Columbia earlier this year created their own coverage-reporting regimes. But those likely conflict with the Employee Retirement Income Security Act, or ERISA, which explicitly pre-empts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” The point is to protect large employers who self-insure workers from 50 sets of conflicting state laws.

No employer has used ERISA to challenge Massachusetts’ 2006 individual mandate, which includes reporting requirements, but that doesn’t mean it’s legal. Last month a Brookings Institution paper conceded that “state requirements related to employer benefits like health coverage may be subject to legal challenge based on ERISA preemption.”

A 2016 Supreme Court ruling would bolster such a challenge. In Gobeille v. Liberty Mutual, the court struck down a Vermont law that required employers to submit health-care payment claims to a state database. The court said the law was pre-empted by ERISA.

Writing for a six-justice majority, Justice Anthony Kennedy noted the myriad reporting requirements under federal law. Vermont’s law required additional record-keeping. Justice Kennedy concluded that “differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability.”

Justice Kennedy’s opinion provides a how-to manual for employers to challenge state-level insurance mandates. A morass of state-imposed insurance mandates and reporting requirements would unnecessarily burden employers with costs and complexity. It cries out for pre-emptive relief.

Unfortunately, policy makers have ignored these concerns. Notes from the working group that recommended the District of Columbia’s individual mandate never mention the reporting burden or ERISA pre-emption. And in August the federal Centers for Medicare and Medicaid Services approved New Jersey’s waiver application that relied in part upon funding from that state’s new individual mandate, even though money from the difficult-to-enforce requirement may never materialize.

States already cannot require federal agencies to report coverage. This means their mandates won’t track the 2.3 million covered by the Indian Health Service, 9.3 million receiving health care from the Veterans Administration, 8.8 million disabled under age 65 who are enrolled in Medicare, 9.4 million military Tricare enrollees and 8.2 million federal employees and retirees.

If a successful ERISA challenge also exempts some of the 181 million with employer-based insurance from coverage-reporting requirements, state insurance mandates become farcical. States would have to choose between mandates that run on the “honor system”—thus likely rife with cheating—or taking so much time and energy to verify coverage that administration becomes prohibitively expensive.

States should take the hint and refrain from even considering their own coverage mandates. But if they don’t, smart employers should challenge the mandate’s reporting requirements. They’d likely win.

This post was originally published at The Wall Street Journal.

Is Donald Trump “Sabotaging” Obamacare?

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

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

1. The GAO Report

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

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

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

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

2. The New York Times Article

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

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

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

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

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

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

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

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

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

A third allegation:

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

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

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

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

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

3. The Lawsuit

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

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

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

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

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

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

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

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

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

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

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

Words Versus Actions

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

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

This post was originally published at The Federalist.

Will the Trump Administration Help Republicans Expand Obamacare?

For all the allegations by the Left about how the Trump administration is “sabotaging” Obamacare, a recent New York Times article revealed nothing of the sort. Instead it indicated how many senior officials within the administration want to entrench Obamacare, helping states to expand the reach of one of its costly entitlements.

Thankfully, a furious internal battle took the idea off the table—for now. But instead of trying to find ways to increase the reach of Obamacare’s Medicaid expansion, which prioritizes able-bodied adults over individuals with disabilities, the Trump administration should instead pursue policies that slow the push towards expansion, by making the tough fiscal choices surrounding expansion plain for states to see.

What ‘Partial Expansion’ Means

Following the court’s decision, the Obama administration determined expansion an “all-or-nothing” proposition. If states wanted to receive the enhanced match rate for the expansion—which started at 100 percent in 2014, and is slowly falling to 90 percent for 2020 and future years—they must expand to all individuals below the 138 percent of poverty threshold.

However, some states wish to expand Medicaid only for adults with incomes below the poverty level. Whereas individuals with incomes above 100 percent of poverty qualify for premium and cost-sharing subsidies for plans on Obamacare’s exchanges, individuals with incomes below the poverty level do not. (In states that have not expanded Medicaid, individuals with incomes below poverty may fall into the so-called “coverage gap,” because they do not have enough income to qualify for subsidized exchange coverage.)

States that wish to cover only individuals with incomes below the poverty line may do so—however, under the Obama administration guidance, those states would receive only their regular federal match rate of between 50 and 74 percent, depending on a state’s income. (Wisconsin chose this option for its Medicaid program.)

How ‘Partial Expansion’ Actually Costs More Money

The Times article says several administration supporters of “partial expansion”—including Health and Human Services (HHS) Secretary Alex Azar, Centers for Medicare and Medicaid Administrator (CMS) Seema Verma, and Domestic Policy Council Director Andrew Bremberg—believe that embracing the change would help to head off full-blown expansion efforts in states like Utah. An internal HHS memo obtained by the Times claims that “HHS believes allowing partial expansion would result in significant savings over the 10-year budget window compared to full Medicaid expansion by all.”

In reality, however, “partial expansion” would explode the budget, for at least three reasons. First, it will encourage states that have not embraced expansion to do so, by lowering the fiscal barrier to expansion. While states “only” have to fund up to 10 percent of the costs of Medicaid expansion, they pay not a dime for any individuals enrolled in exchange coverage. By shifting individuals with incomes of between 100-138 percent of poverty from Medicaid to the exchanges, “partial expansion” significantly reduces the population of individuals for whom states would have to share costs. This change could encourage even ruby red states like Texas to consider Medicaid expansion.

Second, for the same reason, such a move will encourage states that have already expanded Medicaid to switch to “partial expansion”—so they can fob some of their state costs onto federal taxpayers. The Times notes that Arkansas and Massachusetts already have such waiver applications pending with CMS. Once the administration approves a single one of these waivers, virtually every state (or at minimum, every red state with a Medicaid expansion) will run to CMS’s doorstep asking for the federal government to take these costs off their hands.

Medicaid expansion has already proved unsustainable, with exploding enrollment and costs. “Partial expansion” would make that fiscal burden even worse, through a triple whammy of more states expanding, existing states offloading costs to the federal government through “partial expansion,” and the conversion of millions of enrollees from less expensive Medicaid coverage to more costly exchange plans.

What Washington Should Do Instead

Rather than embracing the fiscally irresponsible “partial expansion,” the Trump administration and Congress should instead halt another budget gimmick that states have used to fund Medicaid expansion: The provider tax scam. As of last fall, eight states had used this gimmick to fund some or all of the state portion of expansion costs. Other states have taken heed: Virginia used a provider tax to fund its Medicaid expansion earlier this year, and Gov. Paul LePage (R-ME)—who heretofore has steadfastly opposed expansion—recently floated the idea of a provider tax to fund expansion in Maine.

The provider tax functions as a scam by laundering money to generate more federal revenue. Providers—whether hospitals, nursing homes, Medicaid managed-care plans, or others—agree to an “assessment” that goes into the state’s general fund. The state uses those dollars to draw down new Medicaid matching funds from the federal government, which the state promptly sends right back to the providers.

For this reason, politicians of all parties have called on Congress to halt the provider tax gimmick. Even former vice president Joe Biden called provider taxes a “scam,” and pressed for their abolition. The final report of the bipartisan Simpson-Bowles commission called for “restricting and eventually eliminating” the “Medicaid tax gimmick.”

If Republicans in Congress really want to oppose Obamacare—the law they ran on repealing for four straight election cycles—they should start by imposing a moratorium on any new Medicaid provider taxes, whether to fund expansion or anything else. Such a move would force states to consider whether they can afford to fund their share of expansion costs—by diverting dollars from schools or transportation, for instance—rather than using a budget gimmick to avoid those tough choices. It would also save money, by stopping states from bilking the federal government out of billions in extra Medicaid funds through what amounts to a money-laundering scam.

Rhetoric vs. Reality, Take 5,000

But of course, whether Republicans actually want to dismantle Obamacare remains a very open question. Rather than opposing “partial expansion” on fiscal grounds, the Times quotes unnamed elected officials’ response:

Republican governors were generally supportive [of “partial expansion”], but they said the change must not be seen as an expansion of the Affordable Care Act and should not be announced before the midterm elections. Congressional Republican leaders, while supportive of the option, also cautioned against any high-profile public announcement before the midterm elections.

In other words, these officials want to expand and entrench Obamacare, but don’t want to be seen as expanding and entrenching Obamacare. What courage!

Just as with congressional Republicans’ desperate moves to bail out Obamacare’s exchanges earlier this year, the Times article demonstrates how a party that repeatedly ran on repealing Obamacare, once granted with the full levers of power in Washington, instead looks to reinforce it. Small wonder that the unnamed politicians in the Times article worry about conservative voters exacting a justifiable vengeance in November.

This post was originally published at The Federalist.

Will the Senate Make Exchange Heads Purchase Exchange Coverage?

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

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

A Firsthand Display of Hypocrisy

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

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

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

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

‘1 Percenters’ Won’t Buy Exchange Coverage

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

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

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

The Amendment Concept

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

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

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

This post was originally published at The Federalist.

How Andy Slavitt Sabotaged Obamacare

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

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

What’s the Issue?

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

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

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

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

What Happened in the Lawsuits?

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

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

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

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

Who Issued ‘Arbitrary and Capricious’ Rules?

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

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

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

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

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

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

What Would Andy Slavitt Do Instead?

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

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

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

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

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

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

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

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

This post was originally published at The Federalist.

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.

How a CBO Error Could Cost the Pharmaceutical Industry Billions

Government officials often attempt to bury bad news. Aaron Sorkin’s “The West Wing” even coined a term for it: “Take Out the Trash Day.” So it proved last week. A Congressional Budget Office (CBO) document released quietly on Thursday hinted at a major gaffe by the budget agency and its efforts to conceal that gaffe.

In a series of questions for the record submitted following Director Keith Hall’s April 11 hearing before the Senate Budget Committee, CBO admitted the following regarding a change to the Medicare Part D prescription drug program included in this past February’s budget agreement:

When the legislation was being considered, CBO estimated that provision would reduce net Medicare spending for Part D by $7.7 billion over the 2018-2027 period. CBO subsequently learned of a relevant analysis by the Centers for Medicare and Medicaid Services and incorporated that analysis in its projections for the April 2018 Medicare baseline. The current baseline incorporates an estimate that, compared with prior law, [the relevant provision] will reduce net Medicare spending for Part D by $11.8 billion over the 2018-2027 period.

As I wrote at the time, the provision attracted no small amount of controversy at its passage—or, for that matter, since. The provision accelerated the closing of the Part D “donut hole” faced by seniors with high prescription drug costs, but it did so by shifting costs away from the Part D program run by health insurers and on to drug companies.

The pharmaceutical industry was, and remains, livid at the change, which it did not expect, and tried to undo in the March omnibus spending bill. CBO didn’t just get its score wrong on a minor, non-controversial provision—it messed up on a major provision that will over the next decade affect both drug companies and health insurers.

Because the provision substitutes mandatory “discounts” by drug companies for government spending through the Part D program, it saves the government money through smaller Part D subsidies—at least on paper. (That said, the score doesn’t take into account whether drug manufacturers will raise prices in response to the change, which they could well do.) Because seniors actually spend more in the “donut hole” than CBO’s initial projections said, the provision will have a greater impact—i.e., cost the pharmaceutical industry billions more—than the February budget estimate says.

In its response last week, CBO tried to cover its tracks by claiming that “the $4 billion change…accounts for about 2 percent” of the total of $186 billion reduction in estimated Medicare spending over the coming decade due to technical changes incorporated into the revised baseline. But a $4.1 billion scoring error on a provision first projected to save $7.7 billion means CBO messed up its score by more than 53 percent of its original budgetary impact. That’s not exactly a small error.

Moreover, CBO didn’t come clean and publicly admit this error of its own volition. It did so only because Senate Budget Committee Chairman Mike Enzi (R-WY) forced the budget office to do so.

Enzi submitted a question noting that “CBO realized its estimate of a provision [in the budget agreement] was incorrect. Where is the correction featured in the new report?” CBO didn’t “feature” the correction in its April Budget and Economic Outlook report at all—it incorporated the change into the revised baseline without disclosing it, hoping to sneak it by without anyone calling the budget office out on its error.

Since that time, the purportedly “nonpartisan” organization realized it published an incorrect score—off by more than 50 percent—on a high-profile and controversial issue, changed its baseline to account for the scoring error, and said exactly nothing in a 166-page report on the federal budget about the change. If CBO won’t disclose this kind of major mistake on its own, then its “transparency efforts” seem like so much noise—a distraction designed to keep people preoccupied from focusing on errors like the Part D debacle.

To view it from another perspective: Any head of a private company whose analysis of a multi-billion-dollar transaction proved off by more than 50 percent, because his staff did not access relevant information available to them at the time of the analysis, would face major questions about his leadership, and could well lose his job. But judging from his desire to conceal this scoring mistake, the CBO director apparently feels no such sense of accountability.

Thankfully, however, members of Congress have tools available to fix the rot at CBO, up to and including replacing the director. Given the way CBO attempted to conceal the Part D scoring fiasco, they should start using them.

This post was originally published at The Federalist.

Politico’s Dumbest Headline Ever Trivializes Rand Paul’s Budget Protest

So much for the romance surrounding the famous scene in “Mr. Smith Goes to Washington” where the title character successfully filibusters a bill, rousing the public to his side. Politico claimed that similar tactics surrounding a budget agreement last week led to the “dumbest shutdown ever.” In reality, however, the brief lapse in appropriations had serious underlying causes, and the flip way its correspondents covered the incident led to arguably the dumbest headline in Politico’s history.

To explain the shutdown in brief: Congressional leaders arrived at a budget agreement last week, just before the existing spending bill expired on Thursday at midnight. Having only introduced the bill hours previously, Senate leaders pushed to pass it Thursday afternoon, before the prior spending bill expired.

Paul’s actions protested two important issues: Skyrocketing spending and deficits, and Congress passing massive spending bills without reading them or allowing anyone to offer amendments. But the Politico report by Rachael Bade and Seung Min Kim trivialized the incident, calling it a “spectacle,” “extraneous drama,” and a “sideshow” full of “absurdity.” Their own phraseology amplified quotes such as those from an unnamed Republican aide, who called the floor drama “even more stupid than the name of the new Kardashian baby.”

So Paying for Stuff Congress Buys Is ‘Stupid’?

Why would reporters take such a cavalier attitude toward otherwise weighty matters? Four possible reasons come to mind.

First, the natural inclination to blame the individual or individuals perceived as responsible for causing havoc with the schedule. Few politicians or reporters on Capitol Hill expected to spend Thursday evening and much of Friday morning covering all-night drama surrounding the appropriations bill. The missed flights, cancelled dinner plans, and other last-minute chaos largely redounded on Paul’s head, even though Senate leaders could, and should, have avoided that drama by planning more than a few hours ahead.

If, instead of the headline at issue, Politico had led its story by pointing out that tactical stupidity by Senate Majority Leader Mitch McConnell (R-Kentucky) led to the shutdown—belying his November 2014 and December 2017 statements that “We will not be shutting down the government”—how quickly do you think the majority leader’s press staff would have responded to Politico reporters’ questions this week?

Always Selective ‘Concern’ for Process

Third, reporters’ natural bias towards bipartisan agreements, underpinned by an implicit assumption that bipartisan agreements are inherently good. Whereas last year’s partisan attempts to “repeal-and-replace” Obamacare led to myriad stories about Republicans violating their pledges for transparency (an exception to rule two above), the bipartisan budget deal aroused much less indignation from the press about the secretive process used to craft it.

A contrarian might ask the obvious question: If the bill is so good, why not give lawmakers time to read and understand its contents, rather than ramming through a 652-page bill spending hundreds of billions of dollars in a 24-hour period?

Of course not. But when officials at the Centers for Medicare and Medicaid Services (CMS) earlier this month tried to shut out a reporter for what CMS officials viewed as an inaccurate article—or, to coin a phrase, “bad behavior” by a journalist—the Association of Health Care Journalists filed protests with CMS, and published multiple stories on the kerfuffle (which Politico dutifully covered).

If they care about democracy as much as they claim, the reporters who consistently hyperventilate every time President Trump makes (idle) threats towards the press might spend more time promoting sunshine and accountability throughout government. But instead of highlighting Paul’s efforts to enhance transparency in government—is a single amendment vote on a 652-page bill really too much to ask?—the “dumbest shutdown ever” story ridiculed these efforts. It’s why the story represents Politico’s dumbest headline ever.

This post was originally published at The Federalist.