Third Dem Debate Leaves Major Health Care Questions Unanswered

For more than two hours Thursday night in Houston, 10 presidential candidates responded to questions in the latest Democratic debate. On health care, however, most of those responses didn’t include actual answers.

As in the past several contests, health care led off the debate discussion, and took a familiar theme: former vice president Joe Biden attacked his more liberal opponents for proposing costly policies, and they took turns bashing insurance companies to avoid explaining the details behind their proposals. Among the topics discussed during the health care portion of the debate are the following.

How Much—and Who Pays?

The problems, as Biden and other Democratic critics pointed out: First, it’s virtually impossible to pay for a single-payer health care system costing $30-plus trillion without raising taxes on the middle class. Second, even though Sanders has proposed some tax increases on middle class Americans, he hasn’t proposed nearly enough to pay for the full cost of his plan.

Third, a 2016 analysis by a former Clinton administration official found that, if Sanders did use tax increases to pay for his entire plan, 71 percent of households would become worse off under his plan compared to the status quo. All of this might explain why Sanders has yet to ask the Congressional Budget Office for a score of his single-payer legislation: He knows the truth about the cost of his bill—but doesn’t want the public to find out.

Keep Your Insurance, or Your Doctor?

Believe it or not, Biden once again repeated the mantra that got his former boss Barack Obama in trouble, claiming that if people liked their current insurance, they could keep it under his plan. In reality, however, Biden’s plan would likely lead millions to lose their current coverage; one 2009 estimate concluded that a proposal similar to Biden’s would see a reduction in private coverage of 119.1 million Americans.

For his part, Sanders and Warren claimed that while private insurance would go away under a single-payer plan, people would still have the right to retain their current doctors and medical providers. Unfortunately, however, they can no more promise that than Biden can promise people can keep their insurance. Doctors would have many reasons to drop out of a government-run health plan, or leave medicine altogether, including more work, less pay, and more burdensome government regulations.

Supporting Obamacare (Sometimes)

While attacking Sanders’ plan as costly and unrealistic, Biden also threw shade in Warren’s direction. Alluding to the fact that the Massachusetts senator has yet to come up with a health plan of her own, Biden noted that “I know that the senator says she’s for Bernie. Well, I’m for Barack.”

Biden’s big problem: He wasn’t for Obamacare—at least not for paying for it. As I have previously noted, Biden and his wife Jill specifically structured their business dealings to avoid paying nearly $500,000 in self-employment taxes—taxes that fund both Obamacare and Medicare.

A March to Government-Run Care

I’ll give the last word to my former boss, who summed up the “contrasts” among Democrats on health care.

As I have previously noted, even the “moderate” proposals would ultimately sabotage private coverage, driving everyone into a government-run system. And the many unanswered questions that Democratic candidates refuse to answer about that government-run health system provide reason enough for the American people to reject all the proposals on offer.

This post was originally published at The Federalist.

The Good, The Bad, and The Ugly of Nancy Pelosi’s Drug Pricing Proposal

During the midterm election campaign, Democrats pledged to help lower prescription drug prices. Since regaining the House majority in January, the party has failed to achieve consensus on precise legislation to accomplish that objective.

However, on Monday a summary of proposals by House Speaker Nancy Pelosi (D-CA)—which became public via leaks from lobbyists, of course—provided an initial glimpse of the Democrat leadership’s policy approach. Party leaders claimed the leaked document describes an old legislative draft (they would say that, wouldn’t they?).

The Good: Realigning Incentives in Part D

Among other proposals, the Pelosi proposal would rearrange the current Part D prescription drug benefit, and “realign incentives to encourage more efficient management of drug spending.” Under current law, once beneficiaries pass through the Part D “doughnut hole” and into the Medicare catastrophic benefit, the federal government pays for 80 percent of beneficiaries’ costs, insurers pay for 15 percent, and beneficiaries pay for 5 percent.

This existing structure creates two problems. First, beneficiaries’ 5 percent exposure contains no limit, such that seniors with incredibly high drug spending could face out-of-pocket costs well into the thousands, or even tens of thousands, of dollars.

The Pelosi proposal follows on plans by MedPAC and others to restructure the Part D benefit. Most notably, the bill would institute an out-of-pocket spending limit for beneficiaries (the level of which the draft did not specify), while reducing the federal catastrophic subsidy to insurers from 80 percent to 20 percent. The former would provide more predictability to seniors, while the latter would reduce incentives for insurers to drive up overall drug spending by having seniors hit the catastrophic coverage threshold and thus can shift most of their costs to taxpayers.

The Bad: Price Controls

The Pelosi document talks about drug price “negotiation,” but the policy it proposes represents nothing of the sort. For the 250 largest brand-name drugs lacking two or more generic competitors, the secretary of Health and Human Services would “negotiate” prices. However, Pelosi’s bill “establishes an upper limit for the price reached in any negotiation as no more than” 120 percent of the average price in six countries—Australia, Canada, France, Germany, Japan, and the United Kingdom—making “negotiation” the de facto imposition of price controls.

Drug manufacturers who refuse to “negotiate” would “be assessed an excise tax equal to 75 percent of annual gross sales in the prior year,” what Pelosi’s office called a “steep, retroactive penalty creat[ing] a powerful financial incentive for drug manufacturers to negotiate and abide by the final price.” Additionally, the “negotiated” price would apply not just to Medicare, but would extend to other forms of coverage, including private health insurance.

But the solution to that dilemma lies in trade policy, or other solutions short of exporting other countries’ price controls to the United States, as outlined in both the Pelosi and Trump approaches. Price controls, whether through the “negotiation” provisions in the Pelosi bill, or related provisions that would require rebates for drugs that have increased at above-inflation rates since 2016, have brought unintended consequences whenever policy-makers attempted to implement them. In this case, price controls would likely lead to a significant slowdown in the development and introduction of new medical therapies.

The Ugly: New Government Spending

While the price controls in the drug pricing plan have attracted the most attention, Democrats have mooted some version of them for years. Price controls in a Democratic drug pricing bill seem unsurprising—but consider what else Democrats want to include:

With enough savings, H.R. 3 could also fund transformational improvements to Medicare that will cover more and cost less—potentially including Medicare coverage for vision, hearing, and dental, and many other vital health system needs.

In other words, Pelosi wants to take any potential savings from imposing drug price controls and use those funds to expand taxpayer-funded health care subsidies. In so doing, she would increase the fiscal obligations to a Medicare program that is already functionally insolvent, and relying solely on accounting gimmicks included in Obamacare to prevent shortfalls in current seniors’ benefits.

This post was originally published at The Federalist.

Rant by Congressional Spouse Illustrates the Problem Facing American Health Care

Last week, the wife of Rep. Joe Cunningham (D-S.C.) went on a self-described “rant on social media” about her health coverage.

Amanda Cunningham’s comments echo claims by Democratic lawmakers like Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Rep. Cindy Axne (D-Iowa) about the problems with their health coverage. For many members of Congress that comes via Obamacare-compliant policies sold on health insurance exchanges.

The comments raise one obvious question: If Democrats don’t like Obamacare plans for themselves, then why did they force all Americans to buy this insurance under penalty of taxation? But beyond demonstrating the bipartisan dissatisfaction with Obamacare, Amanda Cunningham’s story illustrates the larger problems plaguing the American health care system.

Mental Health Parity

In her Instagram post, Cunningham complained that under her Blue Cross Blue Shield policy, “all of my mental health therapy sessions are denied, in addition to all of our marriage counseling sessions.” She continued: “It’s just mind-blowing to me that these basic well-known needs, that mental health is health care, are still being denied, that we’re still fighting for these absolutely basic things—it’s unbelievable to me.”

Cunningham didn’t go into many specifics about her case, but on one level, her argument sounds compelling. The opioid crisis has shone a brighter spotlight on the people who need treatment to cover mental illness or substance use disorders. Congress passed mental health parity legislation (as part of the TARP bill, of all things) in 2008, and Section 1311(j) of Obamacare extended these provisions to exchange plans.

Other People’s Money

On the other hand, consider that members of Congress receive a salary of $174,000 annually—more than most Americans (myself included). Consider also that unlike all other Americans purchasing coverage on Obamacare exchanges (myself included), Cunningham, other members of Congress, and their staff receive (likely illegal) subsidies offsetting much of the cost of their health insurance premiums.

More importantly, consider that each coverage requirement on insurers—whether to cover a certain type of treatment (e.g., mental health, in-vitro fertilization, etc.) or treatments provided by a certain type of provider (e.g., marriage counselor, podiatrist, etc.)—raise the price of health insurance each month. Collectively, the thousands of mandates imposed nationwide increase premiums by hundreds of dollars per year.

They also send a paternalistic message to Americans: The policy-makers who impose these coverage requirements would rather individuals go uninsured, because their premiums have become unaffordable, than purchase a plan without the covered benefit or treatment in question.

She didn’t say it outright, but in her “rant,” Cunningham wanted to raise premiums on other Americans—most of whom earn far less than her family—so she would receive “free” therapy. Viewed from this perspective, her objections seem somewhat self-serving from a family in the upper tier of the income spectrum.

Therein lies the problem of American health care: Everyone wants to spend everyone else’s money rather than their own. Everyone wants “their” treatments—in this case, Cunningham’s counseling sessions—covered, even if others pay more. And if their chosen therapies are covered by insurance, with little to no cost-sharing, patients will consume more health care, because they believe they are spending their insurer’s money rather than their own.

Obamacare Made It Worse

The 2010 health care law didn’t cause this problem. However, as the Congressional Budget Office (CBO) noted in its November 2009 analysis of the legislation’s premium impacts, the federal benefit requirements included in the measure raised insurance rates significantly:

Because of the greater actuarial value and broader scope of benefits that would be covered by new nongroup policies sold under the legislation, the average premium per person for those policies would be an estimated 27 percent to 30 percent higher than the average premium for nongroup policies under current law (with other factors held constant). The increase in actuarial value would push the average premium per person about 18 percent to 21 percent above its level under current law, before the increase in enrollees’ use of medical care resulting from lower cost sharing is considered; that induced increase, along with the greater scope of benefits, would account for the remainder of the overall difference.

In CBO’s view, the law required people to buy richer insurance policies, and those richer policies encouraged people to consume more health care, both of which led to a rise in premiums. Unfortunately, that rise in premiums over the past several years has led millions of individuals who do not qualify for insurance subsidies (unlike Amanda Cunningham) to drop their coverage.

Get the Incentives Right

Sooner or later, our country will run out of other people’s money to spend on health care. Despite her impassioned plea, only a movement away from the solutions Cunningham advocated for can prevent that day from coming sooner rather than later.

This post was originally published at The Federalist.

The Fundamental Dishonesty Behind Kamala Harris’ Health Plan

When analyzing Democrats’ promises on health care ahead of the 2020 presidential campaign, a researcher with the liberal Urban Institute earlier this year proffered some sage advice: “We should always be suspect of any public policy—especially when it comes to something as complicated as health care—when anybody tells us everybody is going to get more and pay less for it. It’s really not possible.”

Someone should have given that advice to Sen. Kamala Harris (D-Calif.). Her health plan, a modified version of Sen. Bernie Sanders’ single-payer health care program that she released on Monday in a Medium post and on her website, pledges that it will lead to the following outcomes:

Every American will be a part of this new Medicare system….Seniors will see stronger Medicare benefits than they have now. We will cover millions more people who don’t have health insurance today. And we will reduce costs, save our country money, and ensure that no American has to sacrifice getting the care they need just because the cost is a barrier.

As with Barack Obama’s salesmanship of Obamacare more than a decade ago, Harris’ health plan relies upon the exact strategy the Urban Institute researchers decried of promising everything to everybody. In her socialist utopia, everyone will have coverage—coverage that provides better benefits than the status quo—even as health costs decline dramatically.

Like Obama’s “like your plan” pledge, which PolitiFact dubbed the “Lie of the Year” for 2013, Harris’ plan rests on optimistic scenarios that have little possibility of coming to fruition. But one false premise underpins the entire plan:

We will set up an expanded Medicare system, with a 10-year phase-in period. During this transition, we will automatically enroll newborns and the uninsured into this new and improved Medicare system, give all doctors time to get into the system, and provide a commonsense path for employers, employees, the underinsured, and others on federally-designated programs, such as Medicaid or the Affordable Care Act exchanges, to transition. This will expand the number of insured Americans and create a new viable public system that guarantees universal coverage at a lower cost. Expanding the transition window will also lower the overall cost of the program. [Emphasis mine.]

As any math major can explain, extending the transition window for a move to a single-payer health-care system will not, as Harris tries to claim, lower the overall cost of the program once the entire program takes effect. But it will significantly lower the cost of the program during the transition.

Extending the single-payer transition period to ten years—which conveniently coincides with the ten-year budget window that the Congressional Budget Office uses to analyze major legislation—will keep most of the program’s costs “off the books” and hidden from the public until after her proposal makes it on to the statute books. It also means that her plan wouldn’t take full effect until well after Harris leaves office, meaning she can blame her successor for any problems that occur during the implementation phase.

This fiscal gimmick—delaying most of the spending associated with single payer to outside the ten-year budget window—allows Harris to draw a contrast with Sanders, in which she claims that many middle-class families would not have to pay a single cent in added taxes for all the “free” health care they would receive under a single-payer system:

One of Senator Sanders’ options is to tax households making above $29,000 an additional 4% income-based premium. I believe this hits the middle class too hard. That’s why I propose that we exempt households making below $100,000 [from new taxes to pay for single payer], along with a higher income threshold for middle-class families living in high-cost areas.

Analysts from across the political spectrum agree that the $30 trillion (or more) in new taxes needed to fund a single-payer health care system cannot come from the wealthy alone. Yet Harris proceeds to make that exact argument—that the middle class can have all the “free” health care they want, with someone else footing the bill.

Apart from the fiscal legerdemain, the proposal contains other controversial provisions. While she now claims she would allow private insurance to continue—a reversal of her earlier comments this past January—Harris’ plan states that these insurers would get “reimbursed less than what the [government-run] Medicare plan will cost to operate.” She may tolerate private insurers for the sake of political expediency, but her bias in favor of the government-run plan demonstrates that they would have little more than a token presence in any system of her design.

This post was originally published at The Federalist.

Three Things to Know about “Surprise” Medical Bills

In recent months, lawmakers in Washington have focused on “surprise” medical bills. In large part, this term refers to two types of incidents: 1) individuals who received pre-arranged treatment at an in-network hospital, but saw an out-of-network physician (e.g., anesthesiologist) during their stay, or 2) individuals who had to seek care at an out-of-network hospital during a medical emergency.

In both cases, the out-of-network providers can “balance bill” patients—that is, send them an invoice for the difference between an insurer’s in-network payment and what the physician actually charged. Because these bills can become quite substantial, and because patients do not have a meaningful opportunity to consent to the higher charges—many patients never meet their anesthesiologist until the day of surgery, and few people can investigate hospital networks during an ambulance ride to the ER—policy-makers see reason to intervene.

1. Few Hospitals Comprise Most of the ‘Surprise’ Incidents

As a chart from The New York Times demonstrates, most hospitals had zero, or close to zero, out-of-network emergency room bills in 2015, according to a study by three Yale University professors:

“Surprise” bills applied in 22 percent of ER visits, but as a Times reporter noted, they are “not happening to some random set of patients in every hospital. [They’re] happening to a large percentage of patients in certain hospitals.”

As noted above, most hospitals don’t have this problem, because they keep their ER physicians and other doctors in-network. Unfortunately, however, the one-quarter or so of hospitals that have not forced their physicians in-network have made life difficult for the rest of the hospital sector.

The hospital industry should have done a much better job of policing itself and weeded out these “bad actors” years ago. Had they done so, the number of “surprise” bills likely would not have risen to a level where federal lawmakers demand action. However, the fact that these incidents still only occur in a minority of hospitals suggests reason for continued caution—because why should Congress impose a far-reaching solution to a “problem” that doesn’t affect most hospitals?

2. The Federal Government Has Little Reason to Intervene

Over and above the question of whether “surprise” bills warrant a legislative response, lawmakers should also ponder why that response must come from the federal government. Even knowledgeable reporters have (incorrectly) assumed that a solution to the issue must emanate from Washington because only the federal government can address “surprise” bills for self-funded employer plans. Not so.

ERISA, in this case, refers to the Employee Retirement Income Security Act of 1974, which regulates employer-provided health insurance. ERISA states that its provisions “shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.”

But as that language indicates, ERISA applies only to the regulation of employee benefit plans—i.e., the employer as an insurer. It does not apply to the regulation of providers—i.e., hospitals, doctors, etc. As a Brookings Institution analyst admitted, states can, for instance, require hospitals to issue an in-network guarantee, ensuring that all doctors at an in-network hospital are considered in-network.

For most of the past year, interest groups have lobbied Congress on “surprise” billing. As one might expect, everyone wants a solution that takes patients out of the line of fire in negotiations between doctors, hospitals, and insurers, but no one wants to take a financial haircut in any solution that emerges.

The lack of agreement on a path forward indicates that Congress should take a back seat to the states, and let them innovate solutions to the issue. Indeed, several states have already enacted legislation on out-of-network bills, suggesting that Congress might do more harm than good by weighing in with its own “solution.”

3. Some Republicans Support Socialistic Price Controls

Both the comparatively isolated nature of the problem and the lack of a clear need for federal involvement suggest that some on the left continue to raise the “surprise” billing issue as part of a larger campaign. By establishing that the federal government should regulate the prices of health-care services—even those in private insurance plans—liberals can lay down a predicate for a single-payer health-care system that would do the exact same thing, just on a larger scale.

Sure enough, congressional Republicans, like Oregon Rep. Greg Walden and Tennessee Sen. Lamar Alexander, have endorsed legislation establishing a statutory cap on prices for out-of-network emergency services. (Remember: In policy-making, bipartisanship only occurs when conservatives agree to liberal policies.)

Both the House Energy and Commerce Committee and Senate Health, Education, Labor, and Pensions Committee have introduced proposals that would engage in such federal price-fixing, although lawmakers recently modified the House bill to allow for binding arbitration between doctors and hospitals where the disputed sums exceed certain thresholds. Alexander wants to move his legislation on the Senate floor within weeks.

Last month, Alexander said he “instinctively” liked the in-network guarantee approach—which requires hospitals to have their physicians in-network, while letting insurers, hospitals, and doctors negotiate those in-network prices without setting them through government fiat. However, he told reporters that he ultimately endorsed the price-fixing approach because the Congressional Budget Office (CBO) called it “the most effective at lowering health care costs.”

The retort to Alexander’s comment seems obvious: Of course, price-fixing will lower health care costs. Indeed, CBO said the price-fixing provision would save by far the greatest amount of money of any section of the nearly 250-page bill, because it “lower[s] payment rates” to physicians.

If Alexander suddenly wants to use price controls to lower health care costs, then why not regulate the prices of all health care services ($129.95 for surgery, anyone?)—or move to full-on single-payer? Because the quality of care will suffer too—as will American patients.

A Spoonful of Socialism, Anyone?

I noted above that the hospital industry caused the “surprise” billing problem in the first place. I have little love for hospital executives, many of whom behave like greedy monopolists, and who represent the single biggest argument for single-payer health care I can think of.

Yet however much hospital executives may have earned opprobrium by their conduct, the American people don’t deserve a single-payer system, with its massive economic disruption and its inferior care, foisted on them. They deserve better than federally imposed price controls as a “solution”—whether as the mere “spoonful of socialism” in the “surprise” billing legislation, or an all-out move to single-payer.

This post was originally published at The Federalist.

Why Republicans Should Preserve Obamacare’s Cadillac Tax

Those seeking to understand why the United States faces out-of-control health-care costs need look no further than this week’s congressional agenda. On Wednesday, the House of Representatives will likely vote on legislation to repeal Obamacare’s “Cadillac tax” on high-cost health plans, a provision Congress has already delayed repeatedly.

Most economists agree that reforming the tax treatment of health insurance represents one key way to slow the growth of health-care costs. Yet neither party wants to take the courageous decisions required to do just that — even when, in this case, the “action” involved merely requires allowing a legislative provision already enacted to take effect.

The Conservative Approach to Controlling Costs

But from a conservative perspective, controlling health care costs in a broader sense involves getting incentives right. Reforming incentives can involve injecting more competition into the health care system — for instance, by improving generic drugs faster to help bring down prices. But it also requires reforms that encourage people to serve as smarter consumers of health care.

Health costs continue to skyrocket, in large part because individuals love to spend other people’s money. Few people can afford to pay for all their health care, such as major surgeries, out-of-pocket. Funding more care through third-party payments — a majority of Americans consume most of their health care through an insurer, and many insurers are chosen by an employer — increases spending.

The tax code exacerbates the third-party payment problem by allowing employers to provide health insurance to their workers on a tax-free basis. Economists agree that this tax preference encourages people to use more expensive health insurance than they need, and thus more health care than they need.

Why Do Conservatives Oppose a Conservative Reform?

However, the law used a clumsy approach to imposing this tax, on two levels. First, it applied the same 40 percent rate to all employer-provided policies, regardless of whether the particular affected workers came from a high-tax bracket, such as corporate CEOs, or a low-tax bracket, such as office janitors. Second, it imposed the tax as part of an overall package of revenue increases used to fund Obamacare.

Nonetheless, the “Cadillac tax” represents an important measure to control health care costs. Because Congress included this provision as part of Obamacare, Republicans could easily allow the measure to take effect while disclaiming responsibility for having enacted it. After all, everyone knows Obamacare passed with only Democratic votes.

Yet Republicans have spent the better part of the past decade trying to repeal this measure, without enacting a similar or better replacement that could control health care costs. Moreover, the House will apparently vote on the repeal this week without a full Congressional Budget Office score showing the sizable fiscal impact of that action.

Liberals’ Approach To Controlling Health Costs

Conservatives might not think a battle over the “Cadillac tax” is worth fighting. President Barack Obama’s attack ads from 2008 showed that “taxing health benefits” can prove incredibly politically powerful. (All the more ironic since the Obama White House insisted on including the “Cadillac tax” as part of Obamacare.)

But after watching the Democratic debates last month, conservatives should know that liberals have an “easy solution” to controlling health care costs: price controls, greater regulations, and more government control. After all, Sen. Bernie Sanders’ single-payer legislation exists in no small part to extend Medicare’s price controls over health care goods and services to all Americans, rather than just seniors.

If conservatives cannot support and implement changes that reform the incentives in the health care system, including reasonable limits on the tax treatment of employer-provided health coverage, they may end up bringing about the liberal alternative. And sooner than they think.

This post was originally published at The Federalist.

Three Reasons You Won’t Keep Your Doctor Under Single Payer

Over Fourth of July week, liberal activists took solace in the results of a poll that they said demonstrates the popularity of a single-payer health system. The survey showed diminished support for a “‘Medicare for All’ [system] if it diminished the role of private insurers.” However, support rose by nearly ten points if pollsters described single payer as a system that “diminished the role of private insurers but allowed you to keep your preferred doctor and hospital.”

Staff for Sen. Bernie Sanders (I-VT) claimed the survey showed single payer “is wildly popular when you tell people what it would actually do.” That claim misses the mark on several levels. First, most individuals wouldn’t consider a 55 percent approval rating—the level of support for a single-payer plan that allows patients to keep their doctors—as evidence of a “wildly popular,” as opposed to mildly popular, policy.

More fundamentally, though, single payer has precious little to do with keeping one’s doctor. For at least three reasons, many patients will lose access to their preferred physicians and hospitals under a single-payer system.

‘Free Care’ Means People Will Demand More

Second, the Sanders legislation would virtually eliminate medical cost-sharing—deductibles, co-payments, and the like. As a result, individuals who currently have health insurance would use more care once it becomes “free.”

In their analysis of single-payer legislation, both the Rand Corporation and the liberal Urban Institute have estimated that induced demand would result in capacity constraints for health care supply. In other words, so many more people would clamor for “free” care that the system would not have enough doctors or facilities to treat them.

More Work, Less Pay

As I noted last year, single-payer supporters operate under the fanciful premise that doctors and hospitals will perform more procedures for less money. Nearly three-quarters of hospitals already lose money on their Medicare patients—and single payer would extend those Medicare reimbursement rates to all patients nationwide. A study earlier this year in the Journal of the American Medical Association (JAMA) concluded that a single-payer system linked to Medicare payment levels would reduce hospitals’ revenue by $151 billion annually.

More Soul-Crushing Regulations

The federal government has already caused physicians countless hours of paperwork and grief. Thanks to requirements regarding electronic health records introduced in President Obama’s “stimulus,” an emergency room physician makes an average of 4,000 clicks in one shift. Rather than practicing their craft and healing patients, physicians have become button-clicking automatons, forced to respond to Washington’s every whim and demand.

The combination of more work, less pay, and added government intrusion under single payer could cause many physicians to leave the profession. For instance, the electronic records requirements caused my mother’s longtime physician to retire—he didn’t want to spend all his time staring at a computer screen (and who can blame him).

Some physicians could instead eschew the single-payer route, offering their services on a cash basis to wealthy patients who can afford to opt-out of the government system (provided the government will permit them to do so). Still other individuals may make alternative career plans, abandoning medicine even before they begin their formal training.

Here’s hoping that the American people never get an opportunity to discover the fanciful nature of Sanders’s promise that you can keep your doctor and hospital under single payer.

This post was originally published at The Federalist.

What You Need to Know About Medicaid Crowd Out

A PDF version of this document is available on the Pelican Institute’s website

In recent weeks, lawmakers have focused on the tens of thousands of ineligible individuals who improperly received benefits under Louisiana’s Medicaid expansion. But fighting waste, fraud, and abuse in Medicaid should also include reforms to address another important issue—crowd out. The term refers to Louisiana residents who have dropped their existing coverage to enroll in Medicaid expansion—in other words, government programs “crowding out” private insurance. Here’s what you need to know about crowd out and Medicaid expansion:

Tens of Thousands of People Have Dropped Private Coverage to Enroll in Medicaid

Recently, the Pelican Institute filed a public records request to obtain internal Louisiana Department of Health (LDH) data showing that for much of 2016 and 2017, several thousand individuals dropped their existing health coverage to enroll in Medicaid expansion. With enrollment in Medicaid expansion averaging approximately 15,000 individuals per month in 2017, the data indicates a significant percentage of enrollees dropped their prior coverage to join Medicaid expansion.

Funding Benefits for People Who Previously Had Health Insurance Consumes Scarce Medicaid Resources

Crowd out populations pose big potential costs for Louisiana taxpayers. In 2015, the Legislative Fiscal Office assumed that if Louisiana expanded Medicaid, the state would spend between $900 million and $1.3 billion over five years providing Medicaid coverage to individuals with prior health coverage.

When testifying before the House Appropriations Committee on April 23, LDH staff indicated that, during the fiscal year ending this June 30, the average expansion enrollee cost Medicaid $523.85 per month, or $6,286.20 per year. Multiplying this average cost per enrollee by the number of individuals who dropped private coverage, according to last year’s LSU Health Insurance Survey, yields a potential cost to state and federal taxpayers of $461.6 million this fiscal year:

  • Dropped coverage from a current employer: 40,147; Potential cost to taxpayers: $252.4 million
  • Dropped coverage from a former employer: 23,086; Potential cost to taxpayers: $145.1 million
  • Dropped privately purchased coverage: 10,201; Potential cost to taxpayers: $64.1 million

Because the LSU researchers extrapolated the coverage numbers from survey responses, and because the survey responses varied only slightly from 2015 to 2017, the results for privately purchased coverage, and coverage from a former employer, might have occurred due to random chance, rather than any actual drop in coverage rates. Regardless, the decline in coverage from a former employer DID meet the tests of statistical significance; this crowd out is costing the Medicaid program on the order of $145.1 million per year. Moreover, the potential fiscal impact of the crowd out problem demonstrates the need for more accurate data on the issue.

Crowd Out Metrics

The March 2019 LSU report cites a seminal 1996 work from MIT Professor Jonathan Gruber to define crowd out—the decrease in private insurance divided by the change in public insurance. To put it simply, crowd out should quantify the percentage of Medicaid enrollees who dropped their private coverage to enroll in expansion. Unfortunately, LDH has used different—and inaccurate—metrics to define crowd out on several occasions in attempts to minimize its impact.

For instance, in August 2017, the Department counted 5,659 “Medicaid expansion members who have private insurance whose private insurance policies ended 0-60 days prior to Medicaid expansion enrollment”—4,957 whose coverage ended 0-30 days prior to enrollment in expansion, and another 702 whose coverage ended 31-60 days prior to enrollment. The Department’s internal spreadsheets calculated one crowd out rate of 1.3%, based on a total enrollment in expansion of 442,674.

But this calculation creates an inherently inaccurate result, because it divides the number of new enrollees who dropped coverage by the number of total enrollees in the program. An accurate crowd out rate would compare like with like—dividing the number of new enrollees who dropped private coverage in a given month by the overall number of new enrollees in that month. This metric would accurately determine what percentage of new enrollees are dropping coverage.

Using that rubric, Louisiana’s Medicaid expansion suffers from far higher crowd out rates. According to data provided by LDH in response to the Pelican Institute’s public records request, in August 2017 a total of 13,955 individuals enrolled in expansion—8,783 who had previously enrolled in Medicaid, and 5,172 who had never done so before. Dividing the number of new enrollees who dropped private coverage in the prior 30 days (4,957) by the number of new enrollees overall (13,955) yields a potential crowd out rate of 35.5%—far higher than the 1-2% figure cited in the internal LDH spreadsheets.

At the April 23 House Appropriations Committee hearing, Medicaid director Jen Steele cited data from the LSU Health Insurance Survey to estimate a crowd out rate of 2.4%. But that survey data expressed coverage changes as a percentage of the overall low-income population, not based as a percentage of Medicaid enrollees—making it another inaccurate metric.

Based on LDH’s own internal data, that rate more likely approaches 30-40%.

Need for Better Program Integrity

The debate regarding crowd out comes on the heels of the Medicaid eligibility situation, in which LDH acknowledged that 1,672 individuals with six-figure incomes—including at least one individual reporting a higher income than Gov. John Bel Edwards’ annual salary—enrolled in Medicaid expansion. LDH’s failure to address the crowd out problem, and at the same time, the expansion enrollment of individuals with six-figure incomes suggests the need for fundamental reform to Louisiana’s Medicaid program. Government officials at all levels must serve as smart stewards of scarce taxpayer dollars, and a growing number of signs raise questions about LDH’s fulfillment of this critical role.

Conclusion

Solutions to mitigate crowd out should focus on using scarce government resources wisely, while promoting independence and self-sufficiency amongst beneficiaries. For instance, Indiana recently proposed a waiver that would allow beneficiaries transitioning off of Medicaid to keep a portion of their Medicaid dollars. Those retained dollars could fund co-payments on their new private insurance, whether purchased through an employer or individually. These and similar innovative concepts would encourage beneficiaries to transition off of government assistance and into private coverage.

The CBO Report on Single Payer Isn’t the One We Deserve to See

On Wednesday, the Congressional Budget Office (CBO) released a 30-page report analyzing a single-payer health insurance plan. While the publication explained some policy considerations behind such a massive change to America’s health care market, it included precious few specifics about such a change—like what it would cost.

Sen. Bernie Sanders (I-VT), perhaps single payer’s biggest supporter, serves as the ranking member of the Senate Budget Committee. If he asked the budget scorekeepers to analyze his legislation in full to determine what it would cost, and how to go about paying for the spending, CBO would give it high-priority treatment.

But to the best of this observer’s knowledge, that hasn’t happened. Might that be because the senator does not want to know—or, more specifically, does not want the public to know—the dirty secrets behind his proposed health-care takeover?

Hypothetical Scenarios

The CBO report examined single payer as an academic policy exercise, running through various options for establishing and operating such a mechanism. In the span of roughly thirty pages, the report used the word “would” 245 times and “could” 209 times, outlining various hypothetical scenarios.

That said, CBO did highlight several potential implications of a single-payer system for both the demand and supply of care. For instance, “free” health care could lead to major increases in demand that the government system could not meet:

An expansion of insurance coverage under a single-payer system would increase the demand for care and put pressure on the available supply of care. People who are currently uninsured would receive coverage, and some people who are currently insured could receive additional benefits under the single-payer system, depending on its design. Whether the supply of providers would be adequate to meet the greater demand would depend on various components of the system, such as provider payment rates. If the number of providers was not sufficient to meet demand, patients might face increased wait times and reduced access to care.

The report noted that in the United Kingdom, a system of global budgets—a concept included in the House’s single-payer legislation—has led to massive strains on the health-care system. Because payments to hospitals have not kept up with inflation, hospitals have had to reduce the available supply of care, leading to annual “winter crises” within the National Health Service:

In England, the global budget is allocated to approximately 200 local organizations that are responsible for paying for health care. Since 2010, the global budget in England has grown by about 1 percent annually in real (inflation-adjusted) terms, compared with an average real growth of about 4 percent previously. The relatively slow growth in the global budget since 2010 has created severe financial strains on the health care system. Provider payment rates have been reduced, many providers have incurred financial deficits, and wait times for receiving care have increased.

While cutting payments to hospitals could cause pain in the short term, CBO noted that reducing reimbursement levels could also have consequences in the long term, dissuading people from taking up medicine to permanently reduce the capacity of America’s health-care market:

Changes in provider payment rates under the single-payer system could have longer-term effects on the supply of providers. If the average provider payment rate under a single-payer system was significantly lower than it currently is, fewer people might decide to enter the medical profession in the future. The number of hospitals and other health care facilities might also decline as a result of closures, and there might be less investment in new and existing facilities. That decline could lead to a shortage of providers, longer wait times, and changes in the quality of care, especially if patient demand increased substantially because many previously uninsured people received coverage and if previously insured people received more generous benefits.

That said, because the report did not analyze a specific legislative proposal, its proverbial “On the one hand, on the other hand” approach generates a distinctly muted tone.

Tax Increases Ahead

To give some perspective, the report spent a whopping two pages discussing “How Would a Single Payer System Be Financed?” (Seriously.) This raises the obvious question: If single-payer advocates think their bill would improve the lives of ordinary Americans, because the middle class would save so much money by not having to pay insurance premiums, wouldn’t they want the Congressional Budget Office to fully analyze how much money people would save?

During his Fox News town hall debate last month, Sanders claimed a large show of support from blue-collar residents of Bethlehem, Pennsylvania for single payer. The ostensible support might have something to do with Sanders’ claim during the town hall that “the overwhelming majority of people are going to end up paying less for health care because they’re not paying premiums, co-payments, and deductibles.”

Where have we heard that kind of rhetoric before? Oh yeah—I remember:

At least one analysis has already discounted the accuracy of Sanders’ claims about people paying less. In scrutinizing Sanders’ 2016 presidential campaign plan, Emory University economist Kenneth Thorpe concluded that the plan had a $10 trillion—yes, that’s $10 trillion—hole in its financing mechanism.

Filling that hole with tax increases meant that 71 percent of households would pay more under single payer than under the status quo, because taxes would have to go up by an average of 20 percentage points. Worse yet, 85 percent of Medicaid households—that is, people with the lowest incomes—would pay more, because a single-payer system would have to rely on regressive payroll taxes, which hit the poor hardest, to fund socialized medicine.

Put Up or Shut Up, Bernie

If Sanders really wants to prove the accuracy of his statement at the Fox News town hall, he should 1) ask CBO to score his bill, 2) release specific tax increases to pay for the spending in the bill, and 3) ask CBO to analyze the number of households that would pay more, and pay less, under the bill and all its funding mechanisms.

That said, I’m not holding my breath. A full, public, and honest accounting of single payer, and how to pay for it, would expose the game of three-card monty that underpins Sanders’ rhetoric. But conservatives should keep pushing for Sanders to request that score from CBO—better yet, they should request it themselves.

This post was originally published at The Federalist.

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.