Tag: Cost estimates

Do House Republicans Support Socialized Medicine?

Health care, and specifically pre-existing conditions, remain in the news. The new Democratic majority in the House of Representatives has lined up two votes — one last week and one this week — authorizing the House to intervene in Texas’ lawsuit against the Affordable Care Act, also known as Obamacare. Speaker Nancy Pelosi, D-Calif., claims that the intervention will “protect” Americans with pre-existing conditions.

In reality, the pre-existing condition provisions represent Obamacare’s major flaw. According to the Heritage Foundation, those provisions have served as the prime driver of premium increases associated with the law. Since the law went into effect, premiums have indeed skyrocketed. Rates for individual health insurance more than doubled from 2013 through 2017, and rose another 30-plus percent last year to boot.

As a result of those skyrocketing premiums, more than 2.5 million people dropped their Obamacare coverage from March 2017 through March 2018. These people now have no coverage if and when they develop a pre-existing condition themselves.

A recent Gallup poll shows that Americans care far more about rising premiums than about being denied coverage for a pre-existing condition. Given the public’s focus on rising health care costs, Republicans should easily rebut Pelosi’s attacks with alternative policies that address the pre-existing condition problem while allowing people relief from skyrocketing insurance rates.

Unfortunately, that’s not what the Republican leadership in the House did. Last Thursday, Rep. Kevin Brady, R-The Woodlands, offered a procedural motion that amounted to a Republican endorsement of Obamacare. Brady’s motion instructed House committees to draft legislation that “guarantees no American citizen can be charged higher premiums or cost sharing as the result of a previous illness or health status, thus ensuring affordable health coverage for those with pre-existing conditions.”

If adopted — which thankfully it was not — this motion would only have entrenched Obamacare further. The pre-existing condition provisions represent the heart of the law, precisely because they have raised premiums so greatly. Those premium increases necessitated the mandates on individuals to buy, and employers to offer, health insurance. They also required the subsidies to make that more-expensive coverage “affordable” — and the tax increases and Medicare reductions needed to fund those subsidies.

More to the point, what would one call a health care proposal that treats everyone equally, and ensures that no one pays more or less than the next person? If this concept sounds like “socialized medicine” to you, you’d have company in thinking so. None other than Kevin Brady denounced Obamacare as “socialized medicine” at an August 2009 town hall at Memorial Hermann Hospital.

All of this raises obvious questions: Why did someone who for years opposed Obamacare as “socialized medicine” offer a proposal that would ratify and entrench that system further?

Republicans like Brady can claim they want to “repeal-and-replace” Obamacare from now until the cows come home, but if they want to retain the status quo on pre-existing conditions then as a practical matter they really want to uphold the law. Conservatives might wonder whether it’s time to “repeal-and-replace” Republicans with actual conservatives.

This post was originally published in the Houston Chronicle.

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.

How AARP Made BILLIONS Denying Care to People with Pre-Existing Conditions

On Wednesday, the U.S. Senate voted to maintain access to short-term health coverage. Senate Democrats offered a resolution disapproving of the Trump administration’s new rules regarding the more affordable plans, but the resolution did not advance on a 50-50 tie vote.

Because short-term plans need not comply with Obamacare’s restrictions on covering prior health ailments, Senate Democrats used the resolution to claim they will protect individuals with pre-existing conditions. But what if I told you that, in the years since Obamacare passed, one organization has made more than $4.5 billion in profits, largely from denying care to vulnerable individuals with pre-existing conditions?

You might feel surprised. After all, didn’t Obamacare supposedly prohibit “discrimination” against individuals with pre-existing conditions? But what if I told you that the organization raking in all those profits was none other than AARP, the organization that claims to represent seniors? Then the profits might make more sense.

Obamacare and Pre-Existing Conditions

Even though an article on AARP’s own website states that, as of 2014, “insurance companies [are] required to sell policies to anyone, regardless of their pre-existing medical conditions,” that claim isn’t quite accurate. Obamacare exempted Medigap supplemental insurance plans from all of its “reforms,” including the prohibition on “discriminating” against individuals with pre-existing conditions.

As a 2011 Washington Post article noted, individuals can apply for Medigap plans when they first turn 65 and become eligible for Medicare. “However, when Congress created this protection in 1992…it exempted disabled Medicare beneficiaries under age 65, a group that now totals 8 million people.”

In other words, the most vulnerable Medicare beneficiaries—those enrolled because they receive Social Security disability benefits—often cannot obtain Medigap coverage due to pre-existing conditions. And because traditional Medicare does not provide a catastrophic cap on patient cost-sharing (Medigap plans often provide that coverage instead), disabled beneficiaries who want to remain in traditional Medicare (as opposed to Medicare Advantage plans offered by private insurers) may face unlimited out-of-pocket spending.

The Post article conceded that Obamacare “does not address this issue. A provision to provide disabled Medicare beneficiaries better coverage was dropped from the legislation during congressional negotiations because it would have increased Medicare costs, according to a House Democratic congressional aide.” That’s where AARP comes in.

Why Didn’t AARP ‘Show Congress the Money’?

In July 2009, the Congressional Budget Office (CBO) analyzed a House Democrat bill that, among other things, would have made Medigap coverage available to all individuals, regardless of pre-existing conditions. CBO stated that the Medigap provisions in Section 1234 of the bill would have raised federal spending by $4.1 billion over ten years—a sizable sum, but comparatively small in the context of Obamacare itself.

Contrary to the anonymous staffer’s claims to the Washington Post, if House Democrats truly wanted to end pre-existing condition “discrimination” against individuals with disabilities enrolling in Medicare, they had an easy source of revenue: AARP. As Democrats were drafting Obamacare, in November 2009, the organization wrote in a letter to Rep. Dave Reichert (R-WA) that AARP “would gladly forego every dime of revenue to fix the health care system.”

Since that time, AARP has made quite a few dimes—about 45,090,743,700, in fact—from keeping the health care system just the way it was.

Billions in Profits, But Few Principles

A review of AARP’s financial statements shows that since 2010, AARP has made more than $4.5 billion in income from selling health insurance plans, and generating investment income from plan premiums:

AARP makes its money several ways. As the chart demonstrates, a large and growing percentage of its “royalty” money comes from United Healthcare. United Healthcare sells AARP-branded Medigap plans, Part D prescription drug coverage, and Medicare Advantage insurance.

However, as a 2011 House Ways and Means Committee report made clear, in AARP receiving royalty revenues, not all forms of coverage are created equal. While the organization receives a flat fee for the branding of its Part D and Medicare Advantage plans, it receives a percentage (4.95 percent) of revenue with respect to its Medigap coverage. This dynamic means Medigap royalties make up the majority of AARP’s revenue from United Healthcare, giving AARP a decided bias in favor of the status quo, even if it means continuing to discriminate against individuals with disabilities.

AARP’s Deafening Silence

So if in the seven years since Obamacare’s enactment, AARP has earned more than enough in profits and investment income to offset the cost of changes to Medigap, and AARP publicly told Congress that it would gladly forego all its profits to achieve health care reform, why didn’t AARP make this change happen back in 2010?

AARP occasionally claims it supports reforming Medigap, normally in response to negative publicity about its shady business practices. But by and large, it avoids the subject entirely, preferring to cash in on its Medigap business by flying under the radar.

As I previously noted, in the fourth quarter of 2016 AARP lobbied on 77 separate bills, including such obscure topics as lifetime National Park Service passes, but took absolutely no action to support Medigap reform.

So the next time a liberal Democrat wants to get on his or her high horse and attack conservative policy on pre-existing conditions, ask why they support AARP making $4.5 billion in profits by denying care for individuals with disabilities. Then maybe—just maybe—one day someone could get AARP to put its money where its mouth is.

This post was originally published at The Federalist.

The High Costs of Medicaid Expansion in Louisiana

The data indicates that as a result of Medicaid expansion, taxpayers face an ever-growing tab for benefits provided to able-bodied adults — many of whom already had health insurance prior to Obamacare — even as the most vulnerable wait and wait for care. Louisiana can — and should — do better.

This post was originally published in the New Orleans Times-Picayune.

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.

What’s Going on with Premium Increases under Obamacare?

Multiple articles in recent weeks have outlined the ways Democrats intend to use Obamacare as a wedge issue in November’s midterm elections. While only a few states have released insurer filings—and regulators could make alterations to insurers’ proposals—the preliminary filings to date suggest above-average premium increases have been higher than the underlying trend in medical costs.

Democrats claim that such premium increases come from the Trump administration and Republican Congress’s “sabotage.” But do those charges have merit? On the three primary counts discussed in detail below, the effects of the policy changes varies significantly.

End of Cost-Sharing Reduction Payments

The administration’s decision meant most insurers increased premiums for 2018, to recoup their costs for discounting cost-sharing indirectly (i.e., via premiums) rather than through direct CSR payments. However, as I previously noted, most states devised strategies whereby few if any individuals would suffer harm from those premium increases. Low-income individuals who qualify for premium subsidies would receive larger subsidies to offset their higher costs, and more affluent individuals who do not qualify for subsidies could purchase coverage away from state exchanges, where insurers offer policies unaffected by the loss of CSR payments.

These state-based strategies mean that the “sabotage” charges have little to no merit, for several reasons. First, the premium increases relating to the lack of direct CSR payments already took effect in most states for 2018; this increase represents a one-time change that will not recur in 2019.

Second, more states have announced that, for 2019, they will switch to the “hold harmless” strategy described above, ensuring that few if any individuals will incur higher premiums from these changes. Admittedly, taxpayers will pay more in subsidies, but most consumers should see no direct effects. This “sabotage” argument was disingenuous when Democrats first raised it last year, and it’s even more disingenuous now.

Eliminating the Individual Mandate Penalty

Repealing the mandate will raise premiums for 2019, although questions remain over the magnitude. The Congressional Budget Office (CBO) last month officially reduced its estimate of the mandate’s “strength” in compelling people to purchase coverage by about one-third. However, another recent study suggests that, CBO’s changes notwithstanding, the mandate had a significant impact on getting people to buy insurance—suggesting that many healthy people could drop coverage once the mandate penalty disappears.

To insurers, the mandate repeal represents an unknown factor shaping the market in 2019. In the short term at least, whether or not people will drop coverage in 2019 due to the mandate’s repeal matters less than what insurers—and, just as important, insurance regulators—think people will do in response. If insurers think many people will drop, then premiums could rise significantly; however, if insurers already thought the mandate weak or ineffective, then its repeal by definition would have a more limited impact.

New Coverage Options

The Trump administration’s moves to expand access to association health plans and short-term insurance coverage, while still pending, also represent a factor for insurers to consider. In this case, insurers fear that more affordable coverage that does not meet all of Obamacare’s requirements will prove attractive to young and healthy individuals, raising the average costs of the older and sicker individuals who remain in Obamacare-compliant plans.

If association plans and short-term coverage do not entice many enrollees—or if most of those enrollees had not purchased coverage to begin with—then the market changes will not affect exchange premiums that much. By contrast, if the changes entice millions of individuals to give up exchange coverage for a non-compliant but more affordable plan, then premiums for those remaining on the exchanges could rise significantly.

Estimates of the effects of these regulatory changes vary. For instance, the administration’s proposed rule on short-term plans said it would divert enrollment from exchanges into short-term plans by only about 100,000-200,000 individuals. However, CBO and some other estimates suggest higher impacts from the administration’s changes, and a potentially greater impact on premiums (because short-term and association plans would siphon more healthy individuals away from the exchanges).

But the final effect may depend on the specifics of the changes themselves. If the final rule on short-term plans does not allow for automatic renewability of the plans, they may have limited appeal to individuals, thus minimizing the effects on the exchange market.

However, those same proponents seem less interested in advertising the same study’s premium impact. The Urban researchers believe short-term plans will draw roughly 2.6 million individuals away from exchange coverage, raising premiums for those who remain by as much as 18.3 percent.

Why Prop Up Obamacare?

The selective use of data regarding short-term plans illustrates Republicans’ problem: On one hand, they want to create other, non-Obamacare-compliant, options for individuals to purchase more affordable coverage. On the other hand, if those options succeed, they will raise premiums for individuals who remain on the exchanges.

But some might argue that fixating on exchange premiums for 2019 misses the point, because Republicans should focus on developing alternatives to Obamacare. The exchanges will remain, and still offer comprehensive coverage—along with income-based premium subsidies for that—to individuals with costly medical conditions. But rather than trying to bolster the exchanges by using bailouts and “stability” packages to throw more taxpayer money at them, Republicans could emphasize the new alternatives to Obamacare-compliant plans.

Of course, if that stance presents too much difficulty for Republicans, they have another option: They could repeal the root cause of the premium increases—Obamacare’s myriad new federal insurance requirements. Of course, in Washington, following through on pledges made for the last four election cycles seems like a radical concept, but to most Americans, delivering on such a long-standing promise represents simple common sense.

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.

Is CBO Working with Budget Committee Staff to Hide an Illegal Obamacare Bailout?

It appears my recent article, which raised questions about whether the Congressional Budget Office (CBO) illegally manipulated the budget baseline to ease the passage of an Obamacare “stability” bill, hit a nerve. To borrow a current metaphor, if there were any more collusion between the House Budget Committee and CBO on this issue, Rod Rosenstein would need to appoint a special counsel to investigate.

Consider a series of questions asked by Rep. Diane Black (R-TN) at House Budget’s April 12 hearing on the new Budget and Economic Outlook. Black asked CBO Director Keith Hall about the agency’s treatment of the law’s cost-sharing reduction payments (CSRs), which President Trump cancelled in October.

  1. Black asked about this issue, and only this issue. After completing her exchange with Hall on CSRs, she yielded back more than half of the five minutes allotted to her for questions—an unusual occurrence. Think about it: How often have you seen members of Congress take two minutes to give a five-minute speech?
  2. Black began the exchange by asking Hall a very friendly, and some would argue leading, question: “Is CBO doing this [i.e., changing the budgetary baseline] in full compliance with” the law?
  3. In response, Hall looked down at his notes no fewer than seven times in a roughly 45-second response. Particularly during the seventh and final instance, Hall quite clearly appears to be reading from his briefing materials. Members of Congress often read questions at hearings, but in nearly 15 years of working on and around Capitol Hill, I can recall precious few times where witnesses read answers.

Based on these circumstances, it seems reasonable to conclude that the exchange was scripted well in advance. If that’s the case, it appears Black, and whomever wrote her questions, worked with CBO to choreograph an exchange designed to rebut one of my allegations, namely, that CBO violated the Gramm-Rudman-Hollings Act in making this budgetary change.

Mind you, the change does violate the law, Hall’s claims notwithstanding. CBO can claim that the budget baseline funds CSRs indirectly—via “higher premiums and larger premium tax credit subsidies”—only by assuming that Congress does not fund CSRs directly.

Later in the April 12 hearing, Rep. Gary Palmer (R-AL) also queried Hall on the circumstances behind this questionable change.

Palmer asked Hall: “Why did you change that [i.e., raise the baseline]?…You would have had to have gotten instruction to” make the alteration. Hall didn’t directly answer the question: He claimed CBO had the authority to make the change, but never said where his instruction came from.

But the budget committees already gave CBO instructions—which CBO suddenly chose to ignore. In an October estimate of Obamacare “stability” legislation, the budget office specifically said that “after consultation with the Budget Committees, CBO has not changed its baseline” to reflect the Trump administration’s cancellation of the CSR payments. Last week’s updated CBO document, which altered the budgetary baseline, said nothing about consultation with the budget committees—a break from the October precedent, and a direct violation of Hall’s promise in his January 30 testimony.

What changed? Did the CBO director just wake up one morning and decide to make a scoring change affecting $200 billion in taxpayer dollars? Or did someone pressure the CBO director to make that change—and if so, who?

If the House Budget Committee staff knows—and I’d bet they do—they certainly don’t want to say. At first my repeated e-mails to committee staff disappeared into dead air. Once I noted this radio silence on Twitter, I got a response, but not a substantive reply. The House Budget Committee’s communications director said my queries were within CBO’s purview, and sent me to them.

However, given the opaque and questionable way this budgetary change transpired, both CBO and House Budget have very clear reasons not to answer the question:

  • If House Budget admits that CBO did reach out to them about this scoring change, that places the fingerprints of House leadership on a heavy-handed attempt to strong-arm CBO and alter scoring rules in a way that favors an Obamacare bailout—the issue I first wrote about back in January.
  • If House Budget admits that CBO did not reach out to them about this scoring change, that means CBO “went rogue,” and increased spending on Obamacare subsidies by $194 billion without guidance or direction from the elected members of Congress who govern it. It also raises questions of whether Hall materially misled the Budget Committee (a felony offense) during his January 30 testimony.

Answering my question involves someone assuming responsibility for this mysterious occurrence. Because no one wants to assume responsibility for the chicanery behind this budget gimmick, apparently people think, or hope, that ignoring questions will make them go away. (I haven’t yet reached out to CBO for a comment, but anyone want to lay odds that their spokesman says, “I’m sorry, but we can’t disclose our communications with members of Congress”?) News flash: They’re not.

If CBO and House Budget are completely blameless, and everything about this budget change occurred in an above-board manner, they seem to have a funny way of going about proving their innocence—sidestepping questions. Not two months ago, Hall testified before the House Budget Committee about the ways CBO will improve transparency surrounding the budget process. If he wants to follow through on his promise, then Hall (to say nothing of House Budget) should start by disclosing exactly who ordered CBO to make this change—the sooner, the better.

This post was originally published at The Federalist.

Paul Ryan Shares Responsibility for Republicans’ Obamacare Failure

On the last day of 2016, I sent the editing team at The Federalist a draft article that predicted events in the coming Congress. If those events came to pass, then it could publish, along with a notation indicating that I had written it months (or years) previously.

The piece described a scenario in which cross-pressures over repealing-and-replacing Obamacare led Paul Ryan to resign his speakership. Even then, before the 115th Congress officially convened, I envisioned conflicts between the “repeal” wing of the Republican Party and the “replace” wing, making success on health care unlikely and Ryan the likeliest “fall guy” in any such scenario. Even though Wednesday’s retirement announcement by the speaker officially rendered this outcome moot, I can’t help but reflecting on the prediction.

A Party Proves It Has No Idea How to Lead

A few months after I drafted that prediction, the worst-kept secret among Republican circles became the fact that House leaders didn’t start drafting health-care legislation until late January 2017, around the time of President Trump’s inauguration. On one level, the delay made some sense. After all, no one expected Donald Trump to win the presidency—not even Donald Trump.

But on the other hand, members and staff should have immediately sprung to work the morning after the election, to begin assembling options and drafting legislation. Congressional leaders had 72 days between November 9, 2016 and January 20, 2017 to develop both a coherent strategy and a bill. They certainly didn’t do the latter, and they probably didn’t do enough of the former. Those failures ultimately lie at Ryan’s feet.

Some may argue that congressional leaders’ initial support for a repeal-first approach—also called “repeal-and-delay,” for it would have postponed the repeal’s effective date to allow for enacting a replacement—justified the lack of action on a “repeal-and-replace” measure. After all, “repeal-and-replace” didn’t become the preferred option until the month of Trump’s inauguration. But Republicans were always going to need some type of “replace” legislation eventually, and delaying work on drafting that bill qualifies as legislative malpractice.

Hiding Your Heads In the Sand Isn’t a Plan, Guys

Once they did release their bill publicly, House Republicans didn’t hold hearings on the legislation before marking it up, leaving many members to defend their votes for legislation whose full implications they didn’t necessarily comprehend.

The fast timetable meant House leaders passed the bill in committee, and on the House floor, without final Congressional Budget Office scores. One staffer called this tactic a game of Russian roulette—a hope that final CBO scores would not blow up in members’ faces after they voted for the bill. These procedural shortcuts led to understandable concerns among the public about the rush to pass a bill, not to mention justifiable arguments of hypocrisy over how Republican critics of Obamacare’s lack of transparency used an even more secretive process.

Second, once they did draft a bill, time pressures contributed to Ryan’s initial take-it-or-leave-it strategy with his own conference. In part, House leaders’ talk of “binary choices”—“Either support the Republican plan as-is, or support Obamacare”—stemmed from their desire to pre-empt a rightward drift that might hinder the bill’s chances in the Senate. But it also came from their absurd prediction—which I called absurd at the time—that Congress could introduce, and pass, legislation remaking much of the nation’s health sector within six weeks.

The Party’s Mess Isn’t Ryan’s Fault, But Leadership Lack Is

To be clear, the Republican Party faced internal fissures on health care that Ryan could not have resolved by himself. Immediately after the election, I considered stalemate the likeliest option, and so it proved.

But had House leaders crafted a bill sooner, they could have 1) guaranteed a more open process, alleviating some member concerns and preventing bad headlines about the lack of transparency, or 2) discovered the intractable nature of the debate at an earlier stage in 2017, and pivoted away from health care sooner (perhaps to come back to it at some later date). Either option would have proved far preferable than the events of last spring and summer.

To sum up: House leaders’ failure to plan, and draft Obamacare legislation well in advance, led to members taking tough votes—votes that could cost members their seats in November—without either all the information they needed to make an informed choice or a process they could publicly defend. And it squandered the entirety of what little honeymoon President Trump had with voters last year.

In his first letter to the Corinthians, Saint Paul asked, “For if the trumpet give an uncertain sound, who shall prepare himself to the battle?” At the time when Republican Washington needed a path toward action on health care, another Paul proved to be a far from certain trumpet, with disastrous consequences for his party. It will stand as part of his legacy.

This post was originally published at The Federalist.

More Liberal Scaremongering on Premiums

It didn’t get much notice at the time, given its release just prior to the massive, 2,232-page omnibus appropriations measure, but the Urban Institute issued a study designed largely, if not solely, for Democrats to engage in political scaremongering prior to the midterm elections this fall. Like other studies before it, the Urban paper omitted inconvenient truths that have made this year’s premium increases less drastic for consumers than they appear at first blush.

In fact, the Urban Institute authors ignored their own prior research while doing so, an explanation one can only chalk up to raw politics—i.e., the desire to show the greatest possible premium increases in political ads this fall, even though few (if any) individuals will pay them.

But nowhere in the recent Urban study did the researchers explicitly state the major implication of this selective loading of premiums. In most states, individuals who do not qualify for subsidies can avoid the “CSR surcharge” (i.e., the premium costs associated with the withdrawal of CSR funding) by either buying a non-silver plan, or buying a silver plan off the exchange.

As I previously noted, only in six states must unsubsidized individuals pay the costs associated with the withdrawal of CSRs. In the remaining 44 states and the District of Columbia, unsubsidized individuals can choose other plans to avoid the surcharge—and all fully informed, rational consumers would do so.

Given this unusual dynamic, the increase in silver, on-exchange premiums between 2017 and 2018 does reflect an increase in federal spending. Obamacare links premium subsidies to the cost of the second-lowest silver plan on the exchanges, meaning that federal spending on subsidies rose from the “CSR surcharge.” But it does not reflect what people paid out-of-pocket. In most cases, unsubsidized individuals could avoid the surcharge, and most presumably did just that.

The Urban Institute researchers know that most unsubsidized individuals can (and did) avoid the “CSR surcharge”—because they encouraged states to come up with this strategy in the first place. Their January 2016 paper about the withdrawal of CSR payments noted that, if those payments disappeared, unsubsidized individuals would be “strongly disincentivized” to purchase coverage from the exchanges, and would instead “enroll in silver plan coverage” outside the exchanges, where “plan premiums…would be significantly lower.”

Linda Blumberg, one of the authors of the prior study, also co-authored the paper released last month. She did not forget her prior work. In fact, she cited the January 2016 study in footnote six of the March 2018 paper. So why did the March 2018 work nowhere mention that most unsubsidized individuals could, and likely did, obtain cheaper coverage by buying other types of plans?

The obvious answer comes in the lead paragraph of a Politico story about the study: “Premiums for the most popular Obamacare plans skyrocketed by nearly a third this year…” Neither the study nor the Politico story mentioned that in most states, only subsidized individuals—for whom the federal government pays most of their premiums—purchased these plans, and that unsubsidized individuals could avoid these “skyrocketing” premiums by purchasing other coverage.

In other words, the Urban Institute “study” amounted to a political hit piece on Republicans. By coming up with the largest possible premium increases, even though few (if any) individuals actually paid these increases out-of-pocket, the Urban Institute gave Democrats fodder to use in campaign attack ads this fall. Given the lack of attention and consideration the Urban researchers paid to their own prior work, that seems the prime objective for the paper.

This post was originally published at The Federalist.