About That “Junk” Insurance

On Wednesday, the Trump administration released its final rule regarding short-term, limited-duration insurance coverage. For all critics’ carping about how short-term coverage epitomizes “junk insurance,” these plans will provide another option for individuals who find Obamacare-compliant policies unattractive and unaffordable.

Pros and Cons of the Rule

The Cato Institute’s Michael Cannon lists a good summary of the rule’s benefits. At a time when the market for unsubsidized coverage away from the exchanges has dropped by nearly 40 percent, short-term plans will allow individuals who find Obamacare-compliant coverage unaffordable to purchase coverage.

Whereas the Obama administration defined “consumer protections” as “protecting people from being a consumer” of anything other than exchange plans, the Trump administration’s rule allows consumers to buy coverage that actually protects them from future harmful health events.

That said, the rule brings with it two notable drawbacks. First, the administration believes it could raise federal spending by $28.2 billion over a decade. The estimate comes because some healthy people likely will leave the exchanges to buy more affordable short-term coverage, raising premiums—and thus premium subsidies—for those who remain in Obamacare-compliant plans. While the Congressional Budget Office estimated a much smaller (and slightly positive) fiscal impact, the rule could end up increasing spending at a time when the federal government has racked up $21 trillion in debt (and counting).

Second, the rule doesn’t repeal Obamacare—an obvious statement, but one with important implications. Another president can easily revoke the Trump administration’s actions, and the next Democrat will almost certainly do just that. While helpful, the rule itself should not serve as an excuse for Congress not to take action to repeal Obamacare’s harmful regulations—because if you like your short-term plan, and Congress does nothing, you probably won’t be able to keep it.

What’s the Real ‘Junk Insurance’?

But as I wrote last week, Kofman has refused to buy an Obamacare plan, because she claims she requires an employer subsidy—this despite making more than $217,000 per year. Given her sizable income, Kofman must not think exchange policies unaffordable, even without an employer subsidy.

After all, the Exchange Authority recently endorsed, and the District enacted, a mandate requiring people with far less income than her—that is, people like me—to buy unsubsidized coverage or pay a tax. Why does she not buy the insurance policies she sells—because she considers them “junk insurance?”

She’s not alone. At a briefing last month, Sara Collins, a vice president at the Commonwealth Fund, asked whether short-term plans and other non-Obamacare policies would have “warning labels on them.” Collins neglected to provide a warning of her own: She has not purchased an exchange plan. Lest one think she cannot afford to do so, Commonwealth’s tax filings reveal that for the 12 months ending in June 2017, Collins received $334,353 in total compensation (including benefits).

I consider the very definition of “junk insurance” a policy that one encourages others to buy but refuses to purchase. On that, Corlette has a sterling track record. At a 2016 briefing, her presentation included a bullet point about the need to increase exchange sign-ups. She went further in her oral remarks: “I think it’s critical to do everything we can do boost enrollment.”

But when I asked Corlette at that same 2016 briefing if she had taken her own advice and bought an exchange plan, I received a song-and-dance about her life as a “spoiled academic.” Lest anyone think her unfeeling, however, she allowed that “I do try to think about” individuals without employer-sponsored coverage when designing insurance coverage standards.

Principles Versus Power

That’s the point. If Obamacare advocates thought achieving the law’s goals was so critical, they would have put their money where their mouths are and enrolled in exchange plans long ago. For all liberals’ talk of solidarity and “We’re all in this together,” the unwillingness for individuals making hundreds of thousands per year to enroll in exchange coverage, even though they could easily afford to do so, astounds. Given their own failures to enroll, who are they to criticize President Trump for “sabotaging” the law?

In their quiet moments, people like Kofman, Collins, and Corlette may wonder what strange confluence of events led the American people to elect Donald Trump, and empower him with the authority to dismantle their liberal paradise. But their failure to practice what they preach yields a ready answer: They need only look in the mirror.

This post was originally published at The Federalist.

Liberal Think-Tank Admits Obamacare’s Failures

Once again, the movement to expand government-run health care continues apace. No sooner had one think tank published a paper calling for the return of an individual mandate at the federal level than the liberal Commonwealth Fund published a paper, released on Friday, calling for states to impose their own Obamacare-style mandates at the state level.

However, the paper proves most interesting for what it tacitly admits. Over time, Commonwealth believes that more and more people will purchase coverage solely due to a government order—because health costs and premiums will continue to rise. Because Obamacare failed to control health costs, more and more individuals will purchase health coverage only under the threat of government-imposed taxation. That’s Commonwealth’s version of health “reform.”

Late Wednesday evening, the House of Representatives adopted the amendment by a 226-189 vote. Next week, the Senate could take up its version of the District of Columbia appropriations bill. If a similar amendment passes on the Senate floor, then the final version of the appropriations measure likely will contain the defunding language—thus preventing individuals who do not buy “government-approved” health coverage from having their property seized by DC authorities.

Longer-Term Effects of the Mandate

As to the Commonwealth report itself: It concludes that enacting an individual mandate in all 50 states would increase insurance coverage by roughly 3.9 million in 2019. Nearly half of those individuals (1.7 million) would comprise individuals purchasing unsubsidized exchange coverage—the people for whom Bill Clinton said Obamacare was the “craziest thing in the world,” because they don’t receive subsidies (which might explain why they won’t purchase insurance unless the government taxes them for not doing so). Individuals enrolling in Medicaid (600,000), subsidized exchange policies (1.1 million), and employer plans (450,000) comprise the rest of the coverage gains.

Particularly noteworthy however: In 2022—just four years from now—the mandate will lead 7.5 million people to obtain health coverage, or nearly twice the 2019 total. Commonwealth explains the reasoning:

As health care costs get more expensive relative to incomes over time, fewer people tend to purchase insurance and the number of uninsured rises. However, with an individual mandate in place, the effect of health care cost growth is lessened because more people hold on to their insurance to comply with the mandate. As a result, the effect of the individual mandate on reducing the number of people without insurance increases over time in percentage terms.

Wasn’t Obamacare Supposed to Reduce Health Costs?

The obvious question: Why would health care costs continue to “get more expensive relative to income over time”? Wasn’t Obamacare supposed to fix all that?

Recall that during his 2008 campaign, Barack Obama repeatedly promised that his health plan would cut families’ premiums by $2,500 per year. Commonwealth provided some of the intellectual firepower behind the pledge, releasing in 2007 a report that it claimed could save $1.5 trillion in health expenditures over 10 years. Many of that report’s proposals, although not all (limiting Medicare’s coverage of expensive drugs and treatments being an obvious exception), made their way into the measure that became Obamacare.

In 2013, Commonwealth upped the ante, releasing another report whose recommendations promised $2 trillion in lower health spending over a decade. Yet Commonwealth’s report released Friday admits that health costs in 2022 will continue to rise faster than income, resulting in more and more people feeling squeezed to afford coverage. At this rate, Commonwealth should stop putting out reports talking about all the health costs we could save. Our country can’t afford them.

The Left’s Arrogant Conceit

I’ll give the last word to—of all people—Barack Obama. In 2010, he talked about how he didn’t want to “give the keys back” to people who “didn’t know how to drive.” The Commonwealth report makes plain that despite all the intrusions on freedom Obamacare included, it didn’t accomplish its supposed goal of making health care more affordable. (And no, using government to re-distribute money doesn’t qualify as making the underlying cost of care more “affordable.”)

Given that dynamic, who would want to give people like the researchers at Commonwealth even more control over the health care system? The question should answer itself.

This post was originally published at The Federalist.

Is Buying Health Insurance a Political Statement?

A recent Commonwealth Fund analysis of survey data concluded that the number of uninsured Americans rose over the past two years, by the equivalent of approximately 4 million individuals. The Commonwealth researchers claim Trump administration policy decisions explain the decline in the number of Americans with health insurance.

But the data themselves suggest another theory: Some Americans may have made a political decision to drop health coverage.

But consider that Obamacare subsidizes insurance rates for low-income households, capping their premium costs as a percentage of income, and insulating them from most of the effects of premium increases. Consider too that over the past several years, only low-income individuals have purchased coverage on insurance exchanges in significant numbers, precisely because of the rich premium subsidies and lower co-payments and deductibles taxpayers provide to households with income below 250 percent of the federal poverty level.

The high subsidies for low-income individuals would not appear to explain the increase in the uninsured among this group. And a marginal decrease in the uninsured rate this year among those with incomes over 250 percent of poverty—including those who do not qualify for insurance subsidies at all—suggests premium increases may not have led affluent Americans to drop coverage (at least not yet).

What might more logically explain the increase in the number of uninsured? In a word, politics. The Commonwealth researchers note that between 2016 and 2018, the uninsured rate among Republicans aged 19-64 nearly doubled, from 7.9 percent to 13.9 percent. By contrast, the uninsured rate among self-identified Democrats actually declined, albeit not in a statistically significant fashion.

The increase in the uninsured also occurred almost exclusively in states that did not expand Medicaid. From 2016 through 2018, the uninsured rate in those states rose by more than one-third, from 16.1 percent to 21.9 percent, while the rate in states that did expand Medicaid remained relatively constant. Given that the 18 states that have not expanded Medicaid under Obamacare are overwhelmingly southern and red ideologically, this data point confirms a political tinge regarding health coverage decisions.

In all, the uninsured data suggest that a small but measurable percentage of red-state Americans have decided to drop health coverage over the past two years. Because many of those individuals come from working-class backgrounds and could qualify for sizable subsidies, affordability may not have driven their decision to forego insurance. Moreover, three times as many Republicans (6 percent) as Democrats (2 percent) plan to drop health coverage when Obamacare’s individual mandate tax disappears next year, further indicating that politics plays into Americans’ coverage decisions.

The Commonwealth researchers ignore the policy implications of a political divide over purchasing health coverage. They propose reducing the uninsured rate through the usual toolkit Obamacare supporters rely upon to bolster the law: More funding for outreach; more affordability subsidies; more “stability” funding for insurers; more government-run insurance options, including the “public option.”

But if some Americans have purposefully dropped health coverage as a political statement—in opposition to Obamacare in general, the individual mandate in particular, or in solidarity with President Trump—no increase in subsidies, or cajoling via outreach programs, will persuade them to change their decisions. In fact, further policy debates about reinforcing Obamacare may only inflame partisan passions, recalling Ronald Reagan’s famous axiom about the nine most terrifying words in the English language: “I’m from the government and I’m here to help.”

In the run-up to this November’s elections, Democrats plan to attack Republicans’ so-called “sabotage” of Obamacare. Senate Democrats’ campaign arm did just that within hours of the Commonwealth study’s release. But the evidence suggests that the partisanship of the past two years has contributed to the increase in the uninsured rate—meaning Democrats may be the ones sabotaging themselves.

This post was originally published at The Federalist.

Repealing “Son of Obamacare”

The election of Donald Trump brings conservatives an opportunity to repeal a misguided piece of health care legislation that cost hundreds of billions of dollars, will blow a major whole in our deficit, has led to thousands of pages of regulations, and will further undermine the integrity of the doctor-patient relationship.

Think I’m talking about Obamacare?

I am — but I’m not just talking about Obamacare.

I’m also talking about the Medicare and CHIP Reauthorization Act (MACRA), which passed last year (with a surprising level of Republican support) and contains many of the same flaws as Obamacare itself.

Just as Republicans are preparing legislation to repeal and replace Obamacare, they also need to figure out how to undo MACRA.

Last month, the Obama administration released a 2,398-page final regulation — let me say that again: a 2,398-page regulation — implementing MACRA’s physician reimbursement regime.

In the new Congress, Republicans can and should use the Congressional Review Act to pass a resolution of disapproval revoking this massive new regulation. They can then set about making the changes to Medicare that both Paul Ryan and Donald Trump have discussed: getting government out of the business of 1) fixing prices and 2) micro-managing the practice of medicine.

MACRA’S FUNDAMENTALLY FLAWED, STATIST APPROACH

Since the administration released its physician-payment regulations — nearly as long as Obamacare itself – some commentary has emphasized (rightly) the burdensome nature of the new federal regulations and mandates.

But the more fundamental point, rarely made, is that we need more than mere tweaks to free doctors from an ever-tightening grip exercised by federal overseers. After more than a half century of failed attempts at government price-setting and micro-management of medical practice, it’s time to get Washington out of the business of playing “Dr. Sam” once and for all.

In fact, even liberals tend to acknowledge this occasionally. In a May 2011 C-SPAN interview, Noam Levey of the Los Angeles Times asked then-administrator of the Centers for Medicare and Medicaid Services Donald Berwick why he thought the federal government could use Medicare as it exists to reform the health-care system:

In nearly half a century of federal-government oversight, the federal government hasn’t succeeded in two really important things: Number one, Medicare costs are still growing substantially more quickly than the economy; and number two, that fragmented [health care] system . . . has persisted in Medicare for 46 years now. . . . Why should the public, when it hears you, when it hears the President say, “Don’t worry, this time we’re going to make it better, we’re going to give you a more efficient, higher-quality health care system,” why should they believe that the federal government can do now what it essentially hasn’t really been able to do for close to half a century? [Emphasis added] 

Dr. Berwick didn’t really answer the question: He claimed that fragmented care issues “are not Medicare problems — they’re health system problems.” But in reality, liberal organizations like the Commonwealth Fund often argue Medicare can be leveraged as a model to reform the entire health care system — and that is exactly what MACRA, in defiance of historical precedent, tries to do.

When a 2012 Congressional Budget Office report examined the history of various Medicare payment demonstrations, it concluded that most had not saved money. A seminal study undertaken by MIT’s Amy Finkelstein concluded that the introduction of Medicare, and specifically its method of third-party payment, was one of the primary drivers of the growth in health-care spending during the second half of the 20th century.

After five decades of failed government control and rising costs driven by the existing Medicare program, the solution lies not in more tweaks and changes to the same program.

The answer lies in replacing that program with a system of premium support that gets the federal government out of the price-fixing business entirely.

The notion that the federal government can know the right price for inhalation therapy in Birmingham or the appropriate reimbursement for a wart removal in Boise is a fundamentally flawed and arrogant premise — one that conservatives should whole-heartedly reject.

Unfortunately, most critics of MACRA have not fully grasped this. A law that prompts the federal bureaucracy to issue a sprawling regulation of nearly 2,400 pages cannot on any level be considered conceptually sound.

Believing otherwise echoes Margaret Thatcher’s famous maxim about consensus politicians and conviction politicians: Some analysts, seeking a consensus among their fellow technocrats, push for changes to make the 2,400-page rule more palatable. But our convictions should have us automatically reject any regulation with this level of micro-management and government-enforced minutiae.

THE NEED FOR COMPREHENSIVE REFORM

It bears worth repeating that, in addition to perpetuating the statist nature of Medicare, MACRA raised the deficit by over $100 billion in its first ten years — and more thereafter — while not fundamentally solving the long-term problem of Medicare physician-payment levels.

More than a decade ago, after President Bush and a Republican Congress passed the costly Medicare Modernization Act (MMA), creating the Part D prescription-drug entitlement, conservatives argued even after the law’s passage that the new entitlement should not take effect. If the MMA was “no Medicare reform” for including only a premium-support demonstration project, conservatives should likewise reject MACRA, which includes nothing – not even a demonstration project — to advance the premium-support reform Medicare truly needs.

Any efforts focused on building a slightly better government health-care mousetrap distract from the ultimate goal: removing the mousetrap entirely. In his 1964 speech A Time for Choosing, Reagan rejected the idea “that a little intellectual elite in a far distant capital can plan our lives for us better than we can plan them ourselves” — and Republicans should do the same today.

In the context of health care, this means not debating the details of MACRA but replacing it, sending power back to where it belongs — with the people themselves.

Last week’s election results give the new Congress an opportunity to do just that, by disapproving the MACRA rule and moving to enact comprehensive Medicare reform in its place. After more than five decades of the same statist health care policies, it’s finally time for a new approach. Here’s hoping Congress agrees.

This post was originally published at National Review.

The Dirty Little Secret of Hillary Clinton’s Health Plan

On Monday, President Bill Clinton committed a Kinsley gaffe, criticizing Obamacare as “the craziest thing in the world,” whereby small business owners “wind up with their premiums doubled and their coverage cut in half.” In response to her husband’s accurate depiction of Obamacare’s problems, Hillary said on Tuesday: “We got to fix what’s broken and keep what works, . . . We’re going to tackle it and we’re going to fix it.” Secretary Clinton is exactly correct — if by “fix” she means enacting a proposal that could line the pockets of businesses to the tune of nearly a trillion dollars while simultaneously jacking up premiums and deductibles for millions of Americans.

Hillary Clinton’s plan for a new federal tax credit to subsidize out-of-pocket costs for all Americans will encourage businesses to make their health benefits skimpier — raising premiums, co-payments, and deductibles — because they know that the new tax credit will pick up the difference for the hardest-hit families. While Secretary Clinton’s other major health-care proposals (to increase federal subsidies on insurance exchanges and to create a government-run “public option” on them) would apply only to those without employer-based coverage, the out-of-pocket tax credit would apply to both insurance that is employer-based and insurance that is individually purchased.

In analyzing her proposals, the liberal Commonwealth Fund noted that Secretary Clinton’s out-of-pocket tax credit would affect a pool of 177.5 million potentially eligible Americans, which is more than four times as many as those who would be eligible to avail themselves of the government-run “public option.” The broader reach for the tax credit, plus its generous amount (up to $2,500 per individual or $5,000 per family for out-of-pocket spending that exceeds 5 percent of income) creates a sizable cost for the federal government: net spending of $90.3 billion in 2018 alone, according to the Commonwealth analysis. In 2009, President Obama made this pledge to Congress: “The plan I’m proposing will cost around $900 billion over ten years.” But one element alone of Secretary Clinton’s plan will cost at least that much — and probably more than $1 trillion.

The Commonwealth analysis of Clinton’s plan attempts to estimate how much the out-of-pocket tax credit will reduce health-care expenses for middle-class and working-class families. What the Commonwealth researchers did not mention in the report, and instead buried in a technical appendix, is this doozy of an asterisk: “Potentially, this [tax credit] approach gives firms an incentive to increase workers’ premium contributions, so that more workers are eligible to claim the credit.”

The Commonwealth researchers did not even attempt to model the impact of the tax credit on the actual behavior of businesses, claiming that employers might not know their workers’ income or out-of-pocket expenses, and saying they could not make decisions based on incomplete information. Nonsense. Even if businesses decide not to increase employees’ premium contributions, they could jack up deductibles instead. A firm could raise its deductible by $2,500, offer all workers a $1,000 bonus — to help employees whose out-of-pocket costs don’t meet the 5 percent of income threshold to obtain the tax credit, or assist workers’ cash flow until they receive it — and still come out ahead.

Whether by accident or design, the Commonwealth researchers assumed that employers will not respond to incentives — an assumption that belies three years of experience with Obamacare’s exchanges. Thousands of Americans have gamed the law’s special enrollment periods to sign up for coverage outside the annual enrollment window, incurred above-average costs – and then dropped their coverage at above-average rates, un-enrolling after returning to health. And because Section 1412 of the law allows enrollees a three-month grace period before insurers can drop their coverage for non-payment, one insurer found that 21 percent of its customers didn’t bother to pay their premiums last December, because the law effectively said they didn’t have to.

Given the ways in which Americans have gamed Obamacare’s morass of new regulations to create a system of barely functioning insurance exchanges, it beggars belief to think that businesses would not similarly work to maximize profit. According to the Kaiser Family Foundation’s survey of employer-sponsored health plans, only 23 percent of workers face a deductible above $2,000. With the average deductible rising 12 percent last year, firms would now have an even greater incentive to privatize their gains – because the new tax credit would allow them to socialize their workers’ losses by moving them to the federal fisc.

Why would Secretary Clinton propose a costly plan that encourages large businesses to pocket profits while jacking up costs on struggling families? Simple: The plan will make employer coverage less desirable, and it might even make the Obamacare exchanges look attractive by comparison. If liberals’ end goal is to erode employer-provided health coverage and migrate all Americans to government-run exchanges, offering a tax credit that will effectively erode that coverage faster isn’t a bad way to start.

This post was originally published at National Review.

Are Millions of Americans Leaving Employer Coverage to Join Obamacare?

In defending the relatively small enrollment of health insurance Exchanges to date, the Obama Administration has claimed that fewer employers have dropped health insurance coverage than expected. However, results from a recent survey indicate that approximately 6.8 million enrollees in Obamacare coverage have come directly from the employer market—suggesting the phenomenon may be more widespread than originally thought.

The survey, from the Commonwealth Fund, found that a majority of individuals with Medicaid coverage (62%), and a plurality of individuals with Exchange coverage (45%), lacked health insurance prior to obtaining their new coverage. But sizable percentages of individuals with Exchange coverage (34%) and Medicaid insurance (20%) said they had been enrolled in employer-provided health insurance immediately prior to obtaining their current Obamacare-related plan.

The responses suggest the presence of crowd-out, in which government-subsidized insurance takes the place of privately-sponsored coverage. Prior studies suggest that, in some cases, crowd-out can reach as high 60%. While not approaching those levels, the survey data do demonstrate that public programs have attracted many individuals with employer coverage.

Extrapolating the Commonwealth data to existing enrollment figures suggests that Obamacare programs may have prompted 6.8 million enrollees to drop their employer coverage. That number includes 34% of the 11.1 million Exchange enrollees as of March 31 (3.8 million), plus 20% of the approximately 15 million increase in Medicaid enrollment since Obamacare’s first open enrollment period in 2014 (3.0 million).

The publicly released data associated with the Commonwealth do not provide income information for the individuals who dropped employer coverage to join an Obamacare plan, or the reasons for their change in coverage. However, other studies suggest that Exchanges have appealed primarily, if not exclusively, to those individuals with low incomes eligible for the greatest subsidies.

News articles have generally focused on the lack of disruption to employer coverage caused by the Obamacare rollout. It remains unclear whether those surveyed by Commonwealth voluntarily relinquished employer coverage (in which case they should not have received Exchange insurance subsidies), saw themselves “dumped” into the Exchange by an employer dropping their plan, or a mix of the two. But the survey data suggest policy-makers need examine the crowd-out phenomenon more closely—not just for those facing potential dislocations in coverage, but for taxpayers footing the bill for insurance subsidies.

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.

Obamacare Enrollment Split: Subsidies vs. No Subsidies

Two reports released in the past week demonstrate a potential bifurcation in state insurance exchanges: The insurance marketplaces appear to be attracting a disproportionate share of low-income individuals who qualify for generous federal subsidies, while middle- and higher-income filers have generally eschewed the exchanges.

On Wednesday, the consulting firm Avalere Health released an analysis of exchange enrollment. As of the end of the 2015 open-enrollment season, Avalere found the exchanges had enrolled 76% of eligible individuals with incomes between 100% and 150% of the federal poverty level—between $24,250 and $36,375 for a family of four. But for all income categories above 150% of poverty, exchanges have enrolled fewer than half of eligible individuals—and those percentages decline further as income rises. For instance, only 16% of individuals with incomes between three and four times poverty have enrolled in exchanges, and among those with incomes above four times poverty—who aren’t eligible for insurance subsidies—only 2% signed up.

The Avalere results closely mirror other data analyzed by the Government Accountability Office in a study released last Monday. GAO noted that three prior surveys covering 2014 enrollment—from Gallup, the Commonwealth Fund, and the Urban Institute—found statistically insignificant differences in the uninsured rate among those with incomes above four times poverty, a group that doesn’t qualify for the new insurance subsidies.

The GAO report provided one possible reason for the lack of enrollment among individuals not eligible for federal insurance subsidies. In 2014, premiums remained unaffordable—costing more than 8% of income—across much of the country for a 60-year-old making five times poverty. These individuals earned too much to qualify for subsidies, but too little to afford the insurance premiums for exchange policies. The GAO data confirm my July analysis, in which I wrote: “Those who do not qualify for federal subsidies appear to find exchange coverage anything but affordable.”

Other findings echo the strong link between subsidies and coverage. The Commonwealth Fund’s study last summer noted that among those with incomes between 250% and 399% of poverty, the uninsured rate had not changed appreciably. These individuals don’t qualify for the additional federal assistance with cost-sharing—deductibles, co-payments, and co-insurance—provided to those with incomes below 250% of the federal poverty level. Prior studies have demonstrated that some of these individuals won’t qualify for premium subsidies at all, based on their age, income, and premium levels in their state.

The overall picture presented is one of a bifurcated, or even trifurcated, system of health insurance. Individuals who qualify for very rich insurance subsidies or Medicaid have signed up for coverage, while those who qualify for small or no subsidies have not. It raises two obvious questions: Whether and how the exchanges can succeed long-term with an enrollment profile heavily weighted towards subsidy-eligible individuals—and whether an insurance market segregated by income was what Obamacare’s creators originally had in mind.

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

What’s “Success” in Lowering Health Care Premiums?

Supporters and opponents of the health-care law disagree about a lot. When it comes to whether the Affordable Care Act is reducing health insurance premiums, they even disagree on the definition of success.

Recently the Commonwealth Fund, a think tank that supports the law, released a paper on overall premium levels. The analysis by Jonathan Gruber, a paid consultant to the Obama administration on the Affordable Care Act, argues that premium increases routinely exceeded 10% before the law was enacted in 2010 and that Obamacare will help lower the scope of increases in future years.

But during the 2008 presidential campaign, Barack Obama promised on numerous occasions that his plan would “cut costs” and “lower your premiums” by $2,500 per year for the average family. Ironically, the foundation for Mr. Obama’s promises rests in a memo released by three consultants to the 2008 campaign—one of whom, David Blumenthal, now heads the Commonwealth Fund.

Since the law was enacted, Commonwealth and other supporters, while saying that Obamacare would mitigate premium increases, have largely failed to address the earlier promise that the law would reduce them outright. Another author of the 2008 memo, David Cutler, said in 2012 that, in retrospect, Mr. Obama made “occasional misstatements” when pledging that premiums would fall by $2,500 annually. In August 2012, Politifact rated that premiums pledge a “promise broken.”

Supporters of the law started out saying that Obamacare would reduce premiums in absolute terms. Now, backers say that the law will lower premium increases relative to what they would have been without the law—a tougher metric to quantify and a more difficult measure of success to sell politically. This is another example of how in Washington, where one stands on an issue frequently depends upon where one sits.

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

Liberal Group Makes the Case Against Obamacare

Yesterday, the Commonwealth Fund released a report attempting to argue that low-income individuals will benefit if states expand their Medicaid programs under Obamacare. But in reality, the study made a more effective case against Obamacare than it did in favor of the law.

The Commonwealth report’s most revealing evidence comes in Exhibit 2, reproduced below. According to Commonwealth’s own survey data, fewer than one in 10 (9 percent) of Americans were always uninsured during the period 2011-2012. Among adults with incomes above 133 percent of the poverty level (just under $15,000 for a single person), only one in 20 (5 percent) Americans lacked health insurance for all of 2011 and 2012.

Commonwealth

It’s a point worth emphasizing again: During a two-year period following the most severe economic downturn in generations, fewer than one in 10 Americans consistently lacked health insurance coverage. And some portion of that 9 percent consists of non-citizens, who are ineligible for most taxpayer-funded assistance programs anyway.

All of which raises the obvious question: Did it really require a 2,700-page bill, more than 20,000 pages of regulations, $1 trillion in tax increases, and massive dislocation in insurance markets to “solve” a problem affecting a relatively small percentage of Americans…? The answer is obvious: It did not—at least not if the focus was on reforming the health system, as opposed to expanding government power.

The Commonwealth survey does indicate that a larger percentage of individuals—nearly one in four (23 percent) Americans—experienced some period without health insurance during a two-year period. That suggests that policymakers can and should do more to make insurance portable, particularly as individuals move from job to job.

But the Commonwealth study actually undermines the case for Obamacare, including the law’s costly expansion of the ineffective Medicaid program. The survey data demonstrate how the law is a massive, government-centric overkill of the problems in our health care system—the equivalent of killing an ant with a cruise missile—which is why Congress should stop the law now before it takes root.

This post was originally published at The Daily Signal.