Analyzing the Gimmicks in Warren’s Health Care Plan

Six weeks ago, this publication published “Elizabeth Warren Has a Plan…For Avoiding Your Health Care Questions.” That plan came to fruition last Friday, when Warren released a paper (and two accompanying analyses) claiming that she can fund her single-payer health care program without raising taxes on the middle class.

Both her opponents in the Democratic presidential primary and conservative commentators immediately criticized Warren’s plan for the gimmicks and assumptions used to arrive at her estimate. Her paper claims she can reduce the 10-year cost of single payer—the amount of new federal revenues needed to fund the program, over and above the dollars already spent on health care (e.g., existing federal spending on Medicare, Medicaid, etc.)—from $34 trillion in an October Urban Institute estimate to only $20.5 trillion. On top of this 40 percent reduction in the cost of single payer, Warren claims she can raise the $20.5 trillion without a middle-class tax increase.

Ocasio-Cortez Wants Congress to Stop Pretending to Pay for Its Spending

Get used to reading more storylines like this over the next two years: The left hand doesn’t know what the far-left hand is doing.

On Wednesday, incoming House Speaker Nancy Pelosi (D-CA) faced a potential revolt from within her own party. Rep.-elect Alexandria Ocasio-Cortez (D-NY) and several progressive allies threatened to vote against the rules package governing congressional procedures on the first day of the new Congress Thursday, because of proposed changes they believe would threaten their ability to pass single-payer health care.

What’s Going On?

Ocasio-Cortez and her allies object to Pelosi’s attempt to reinstate Pay-as-You-Go (PAYGO) rules for the new 116th Congress. Put simply, those rules would require that any legislation the House considers not increase the deficit over five- and ten-year periods. In short, this policy would mean that any bill proposing new mandatory spending or revenue reductions must pay for those changes via offsetting tax increases and/or spending cuts—hence the name.

Under Republican control, the House had a policy requiring spending increases—but not tax cuts—to be paid for. Pelosi would overturn that policy and apply PAYGO to both the spending and the revenue side of the ledger.

Progressives object to Pelosi’s attempt to constrain government spending, whether in the form of additional fiscal “stimulus” or a single-payer health system.

However, Pelosi’s spokesman countered with a statement indicating that the progressives’ move “is a vote to let Mick Mulvaney make across-the-board cuts.” Mulvaney heads the Office of Management and Budget, which would implement any sequester under statutory PAYGO.

Regardless of what the new House decides regarding its own procedures for considering bills, Pay-as-You-Go remains on the federal statute books. Democrats re-enacted it in 2010, just prior to Obamacare’s passage. If legislation Congress passed  violates those statutory PAYGO requirements (as opposed to any internal House rules), it will trigger mandatory spending reductions via the sequester—the “across-the-board cuts” to which Pelosi’s spokesman referred.

To Pay for Spending—Or Not?

Progressives think reinstituting PAYGO would impose fiscal constraints hindering their ability to pass massive new spending legislation. However, the reality does not match the rhetoric from Ocasio-Cortez and others. Consider, for instance, just some of the ways a Democratic Congress “paid for” the more than $1.8 trillion in new spending on Obamacare:

  • A CLASS Act that even some Democrats called “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of,” and which never went into effect because the Obama administration could not implement it in a fiscally sustainable manner;
  • Double counting the Medicare savings in the legislation as “both” improving the solvency of Medicare and paying for the new spending in Obamacare;
  • Payment reductions that the non-partisan Medicare actuary considers extremely unlikely to be sustainable, and which could cause more than half of hospitals and nursing homes to become unprofitable within a generation;
  • Tax increases that Congress has repeatedly delayed, and which could end up never going into effect.

A Bipartisan Spending Addiction

An external observer weighing the Part D and Obamacare examples would find it difficult to determine the less dishonest approach to fiscal policy. It reinforces that America’s representatives have a bipartisan addiction to more government spending, and a virtually complete unwillingness to make tough choices now, instead bequeathing massive (and growing) amounts of debt to the next generation.

In that sense, Ocasio-Cortez and her fellow progressives should feel right at home in the new Congress. Republicans may criticize her for proposing new spending, but the difference between her and most GOP members represents one of degree rather than of kind. Therein lies the problem: In continuing to spend with reckless abandon, Congress is merely debating how quickly to sink our country’s fiscal ship.

This post was originally published at The Federalist.

Three Elements of a Conservative Health Care Vision

Recently I wrote about how conservatives failed to articulate a coherent vision of health care, specifically issues related to pre-existing conditions, in the runup to the midterm elections. That article prompted a few Capitol Hill colleagues to ask an obvious question: What should a conservative vision for health care look like? It’s one thing to have answers on specific issues (i.e., alternatives to Obamacare’s pre-existing condition regulations), but what defines the vision of where conservatives should look to move the debate?

Henceforth, my attempt to outline that conservative health-care vision on a macro level with three relatively simple principles. Others may express these concepts slightly differently—and I take no particular pride of authorship in the principles as written—but hopefully they will help to advance thinking about where conservative health policy should lead.

Portable Insurance

Conversely, conservatives believe in insurance purchased by individuals—or, as my former boss Jim DeMint likes to describe it, an insurance policy you can buy, hold, and keep. With most Americans still obtaining health coverage from their employers, a move to individually owned coverage would mean individuals themselves would decide what kind of insurance to purchase, rather than a business’s HR executives.

Conservatives should also promote the concept of portable insurance that can move from job to job, and ideally from state to state as well. If individuals can buy an insurance policy while young, and take it with them for decades, then much of the problem of covering individuals with pre-existing conditions will simply disappear—people will have the same insurance before their diagnosis that they had for years beforehand.

I wrote approvingly about the Trump administration’s proposals regarding Health Reimbursement Arrangements precisely because I believe that, if implemented, they will advance both prongs of this principle. Allowing employees to receive an employer contribution for insurance they own will make coverage both individual and portable, in ways that could revolutionize the way Americans buy insurance.

A Sustainable Safety Net

As it is, the Medicare program became functionally insolvent more than a year ago. The year before Obamacare’s passage, the Medicare trustees asserted the program’s hospital insurance trust fund would become insolvent in 2017. Only the double-counting included in Obamacare—whereby the same Medicare savings were used both to “save Medicare” and fund Obamacare—has allowed the program to remain solvent, on paper if not in fact.

Reasonable people may disagree on precisely where and how to draw the line at the sustainability of our entitlements. For instance, I hold grave doubts that able-bodied adults belong on Medicaid, particularly given the way Obamacare’s expansion of Medicaid has encouraged states to discriminate against individuals with disabilities and the most vulnerable.

But few could argue that the current system qualifies as sustainable. Far from it. With Medicare beneficiaries receiving more from the system in benefits than they paid in taxes—and the gap growing every year—policy-makers must make hard choices to right-size our entitlements. And they should do so sooner rather than later.

Appropriately Aligned Incentives

Four decades ago, Margaret Thatcher hinted at the primary problem in health care when she noted that socialists always run out of other people’s money. Because third-party insurers—in most cases selected by HR executives at individuals’ place of business rather than the individuals themselves—pay for a large share of health expenses, most Americans know little about the price of specific health care goods and services (and care even less).

To state the obvious: No, individuals shouldn’t try to find health care “deals” in the ambulance on the way to the hospital. But given that much health care spending occurs not for acute cases (e.g., a heart attack) but for chronic conditions (i.e., diabetes), policymakers do have levers to try to get the incentives moving in the right direction.

Reforming the tax treatment of health insurance—which both encourages individuals to over-consume care and ties most Americans to employer-based insurance—would help align incentives, while also encouraging more portable insurance. Price transparency might help, provided those prices are meaningful (i.e., they relate to what individuals will actually pay out-of-pocket). Giving individuals financial incentives to shop around for procedures like MRIs, or even surgical procedures, also would place downward pressure on prices.

This post was originally published at The Federalist.

Summary of Health Care “Consensus” Group Plan

Tuesday, a group of analysts including those at the Heritage Foundation released their outline for a way to pass health-care-related legislation in Congress. Readers can find the actual health plan here; a summary and analysis follow below.

What Does the Health Plan Include?

The plan includes parameters for a state-based block grant that would combine funds from Obamacare’s insurance subsidies and its Medicaid expansion into one pot of money. The plan would funnel the block grant funds through the State Children’s Health Insurance Program (SCHIP), using that program’s pro-life protections. In general, states using the block grant would:

  • Spend at least half of the funds subsidizing private health coverage;
  • Spend at least half of the funds subsidizing low-income individuals (which can overlap with the first pot of funds);
  • Spend an unspecified percentage of their funds subsidizing high-risk patients with high health costs;
  • Allow anyone who qualifies for SCHIP or Medicaid to take the value of their benefits and use those funds to subsidize private coverage; and
  • Not face federal requirements regarding 1) essential health benefits; 2) the single risk pool; 3) medical loss ratios; and 4) the 3:1 age ratio (i.e., insurers can charge older customers only three times as much as younger customers).

Is That It?

Pretty much. For instance, the plan remains silent on whether to support an Obamacare “stability” (read: bailout) bill intended to 1) keep insurance markets intact during the transition to the block grant, and 2) attract the votes of moderate Republicans like Alaska Sen. Lisa Murkowski and Maine Sen. Susan Collins.

As recently as three weeks ago, former Sen. Rick Santorum was telling groups that the proposal would include the Collins “stability” language. However, as I previously noted, doing so would likely lead to taxpayer funding of abortion coverage, because there are few if any ways to attach pro-life protections to Obamacare’s cost-sharing reduction payments to insurers under the special budget reconciliation procedures the Senate would use to consider “repeal-and-replace” legislation.

What Parts of Obamacare Would the Plan Retain?

In short, most of them.

Taxes and Medicare Reductions: By retaining all of Obamacare’s spending, the plan would retain all of Obamacare’s tax increases—either that, or it would increase the deficit. Likewise, the plan says nothing about undoing Obamacare’s Medicare reductions. By retaining Obamacare’s spending levels, the plan would maintain the gimmick of double-counting, whereby the law’s payment reductions are used both to “save Medicare” and fund Obamacare.

Insurance Regulations: The Congressional Research Service lists 22 separate new federal requirements imposed on health insurance plans under Obamacare. The plan would retain at least 14 of them:

  1. Guaranteed issue of coverage—Section 2702 of the Public Health Service Act;
  2. Non-discrimination based on health status—Section 2705 of the Public Health Service Act;
  3. Extension of dependent coverage—Section 2714 of the Public Health Service Act;
  4. Prohibition of discrimination based on salary—Section 2716 of the Public Health Service Act (only applies to employer plans);
  5. Waiting period limitation—Section 2708 of the Public Health Service Act (only applies to employer plans);
  6. Guaranteed renewability—Section 2703 of the Public Health Service Act;
  7. Prohibition on rescissions—Section 2712 of the Public Health Service Act;
  8. Rate review—Section 2794 of the Public Health Service Act;
  9. Coverage of preventive health services without cost sharing—Section 2713 of the Public Health Service Act;
  10. Coverage of pre-existing health conditions—Section 2703 of the Public Health Service Act;
  11. Summary of benefits and coverage—Section 2715 of the Public Health Service Act;
  12. Appeals process—Section 2719 of the Public Health Service Act;
  13. Patient protections—Section 2719A of the Public Health Service Act; and
  14. Non-discrimination regarding clinical trial participation—Section 2709 of the Public Health Service Act.

Are Parts of the Health Plan Unclear?

Yes. For instance, the plan says that “Obamacare requirements on essential health benefits” would not apply in states receiving block grant funds. However, Section 1302 of Obamacare—which codified the essential health benefits requirement—also included two other requirements, one capping annual cost-sharing (Section 1302(c)) and another imposing minimum actuarial value requirements (Section 1302(d)).

Additionally, the plan on two occasions says that “insurers could offer discounts to people who are continuously covered.” House Republicans offered a similar proposal in their American Health Care Act last year, one that imposed penalties on individuals failing to maintain continuous coverage.

However, the plan includes no specific proposal on how insurers could go about offering such discounts, as the plan states that the 3:1 age rating requirement—and presumably only that requirement—would not apply for states receiving block grant funds. It is unclear whether or how insurers would have the flexibility under the plan to offer discounts for continuous coverage if all of Obamacare’s restrictions on premium rating, save that for age, remain.

This post was originally published at The Federalist.

Mixed Messages on Paul Ryan’s Entitlement Record

Upon news of House Speaker Paul Ryan’s retirement Wednesday, liberals knew to attack him, but didn’t know exactly why. Liberal Politico columnist Michael Grunwald skewered Ryan’s hypocrisy on fiscal discipline:

Ryan’s support for higher spending has not been limited to defense and homeland security. He supported Bush’s expansion of prescription drug benefits, as well as the auto bailout and Wall Street bailout during the financial crisis…Ryan does talk a lot about reining in Medicaid, Medicare, and Social Security, for which he’s routinely praised as a courageous truth-teller. But he’s never actually made entitlement reform happen. Congress did pass one law during his tenure that reduced Medicare spending by more than $700 billion, but that law was Obamacare, and Ryan bitterly opposed it.

For the record, Ryan opposed Obamacare because, as he repeatedly noted during the 2012 campaign, the law “raided” Medicare to pay for Obamacare. (Kathleen Sebelius, a member of President Obama’s cabinet, admitted the law used Medicare spending reductions to both “save Medicare” and “fund health care reform.”)

Compare that with a Vox article, titled “Paul Ryan’s Most Important Legacy is Trump’s War on Medicaid”: “[Paul] Ryan’s dreams are alive and well. Through work requirements and other restrictions, President Donald Trump could eventually oversee the most significant rollback of Medicaid benefits in the program’s 50-year history.” It goes on to talk about how the administration “is carrying on Ryan’s Medicaid-gutting agenda.”

Which is it? On fiscal discipline, is Ryan an incompetent hypocrite, or a slash-and-burn maniac throwing poor people out on the streets? As in most cases, reality contains nuance. Several caveats are in order.

First, Ryan’s budgets always contained “magic asterisks.” As the Los Angeles Times noted in 2012, “the budget resolutions he wrote would have left that Medicare ‘raid’ in place”—because Republicans could only achieve the political goal of a balanced budget within ten years by retaining Obamacare’s tax increases and Medicare reductions.” The budgets generally repealed the Obamacare entitlements, thus allowing the Medicare reductions to bolster that program rather than financing Obamacare. The budgets served as messaging documents, but generally lacked many of the critical details to transform them from visions into actual policy.

Second, to the best of my recollections, Ryan never took on the leadership of his party on a major policy issue. Former GOP House Speaker John Boehner famously never requested an earmark during a quarter-century in Congress. Sen. John McCain’s “Maverick” image came from his fight against fellow Republicans on campaign finance reform.

But whether as a backbencher or a committee chair, Ryan rarely bucked the party line. That meant voting for the Bush administration’s big-spending bills like the Medicare Modernization Act and TARP—both of which the current vice president, Mike Pence, voted against while a backbench member of Congress.

Third, particularly under this president, Republicans do not want to reform entitlements. As I noted during the 2016 election, neither presidential candidate made an issue of entitlement reform, or Medicare’s impending insolvency. In fact, both went out of their way to avoid the issue. Any House speaker would have difficulty convincing this president to embrace substantive entitlement reforms.

In general, one can argue that, contrary to his image as a leader on fiscal issues, Ryan too readily followed. Other Republicans would support his austere budgets, which never had the force of law, but he would support their big-spending bills, many of which made it to the statute books.

On one issue, however, Ryan did lead—and in the worst possible way. As I wrote last fall, Ryan brought to the House floor legislation repealing Obamacare’s cap on Medicare spending. This past February, that repeal became law.

Ryan could have sought to retain that cap while discarding the unelected, unaccountable board Obamacare created to enforce it. As a result, Ryan’s “legacy” on entitlement reform will consist of his role as the first speaker to repeal a cap on entitlement spending.

Primum non nocere—first, do no harm. Ryan may not have had the power to compel Republicans to reform entitlements, but he did have the power—if he had had the courage—to prevent his own party from making the problem any worse. He did not.

This post was originally published at The Federalist.

No, Nancy Pelosi, Republicans Aren’t “Cutting” Medicare — But They Should

In a many-layered case of irony, House Minority Leader Nancy Pelosi (D-CA) attacked Republicans on Wednesday for doing something they didn’t do—but she did. In a letter to her Democratic colleagues, Pelosi wrote the tax reform bill “will lead to devastating cuts to Medicare and Medicaid.”

First things first: A slowdown in a program’s projected growth rate does not constitute a “cut.” That fact applies just as much to Republican spending proposals as Democratic ones. You don’t have to take my word for it: Multiple fact check articles discussing Obamacare’s reductions in Medicare spending pointed out that under Democrats’ law, “Medicare spending will increase each year but at a lower rate.”

Pelosi’s 2011 phraseology hit the nail on the head, because Democrats did “take” money out of Medicare to fund Obamacare’s new entitlements. While on paper the spending reductions extended the life of the Medicare trust fund, the Congressional Budget Office concluded that Obamacare did not “enhance the ability of the government to pay for future Medicare benefits.”

While the Democrat record on Medicare leaves much to be desired, so too does the Republican one. Whereas Democrats reduced Medicare spending, then diverted those savings to fund another new and costly entitlement, Republicans just last month turned around and increased Medicare spending.

In the February budget “deal,” Republicans repealed the Independent Payment Advisory Board (IPAB). While Obamacare created this unelected, unaccountable board of bureaucrats to make binding rulings regarding Medicare, it did so for a worthwhile purpose: To cap Medicare spending. As I noted last fall, Republicans could have kept the caps in place, while repealing the board. They chose not to do so. As a result, the budget “deal” raised entitlement spending rather than lowering it.

As it stands now, the “devastating cuts to Medicare and Medicaid” that Pelosi claimed to warn her colleagues about on Wednesday seem inevitable—not because Republicans will soon pass legislation slowing the growth of entitlements, but instead because they refuse to do so. Because some Republicans remain under the misapprehension that Medicare “is underfunded,” and because liberals love running “Mediscare” campaigns designed to frighten seniors into voting Democratic, Republicans seem poised to do exactly nothing on entitlement reform for the foreseeable future.

At least, until the debt crisis arrives—which it will, and sooner than many think. With the imminent return of trillion-dollar deficits, and the federal government already $21 trillion in debt, China and other nations may not take kindly to the bipartisan profligacy perpetrated by Democrats and Republicans alike.

As I noted two years ago, if not for the double-counting fiscal gimmicks included in Obamacare, the Medicare Hospital Insurance Trust Fund would already have been exhausted, putting the program’s solvency quite literally on borrowed time.

Last month, in typically understated fashion, Pelosi tweeted about how Republicans were “plotting to destroy your Medicare, Medicaid, and Social Security.” That claim implies a level of intent—that Republicans actually have a plan to reform entitlement spending—that quite clearly does not exist.

Instead, Republicans and Democrats will continue to destroy Medicare, Medicaid, and Social Security in the same way they have over the past several decades. Both parties will ignore the problem and do nothing until it’s too late. It’s the most insidious type of “bipartisanship,” but in Washington, also the most common.

This post was originally published at The Federalist.

Paul Ryan Flip-Flops on Fiscal Responsibility to Prop Up Obamacare

What a difference eight years makes. In February 2010, Rep. Paul Ryan (R-WI), then Ranking Member of the House Budget Committee, spoke at the White House health care summit decrying Obamacare as “a bill that is full of gimmicks and smoke-and-mirrors.” His comments became a viral sensation, so much so that the Wall Street Journal published a condensed version of his remarks as an op-ed. (Here’s the video.)

Reporters confirmed as much on Monday, when an article claimed that the Congressional Budget Office (CBO) believes appropriating funds for cost-sharing reduction payments (CSRs) for three years would save the federal government $32 billion, when compared to a scenario in which Congress does not appropriate CSR payments. Not coincidentally, the article noted that a separate bill by Rep. Ryan Costello (R-PA) — “which House leaders have embraced” — would create a $30 billion “Stability Fund” for insurers, purportedly paid for by the $32 billion in “savings” caused from appropriating CSRs.

The article doesn’t say so outright, but it’s not hard to figure out what happened behind the scenes:

  1. House Republican leadership directed CBO to score the fiscal effects of making CSR payments to insurers compared to not making the payments.
  2. House Republican leaders leaked results of the score to insurer lobbyists.
  3. Those insurer lobbyists then leaked the results to reporters — to claim their bill would generate “savings” for the federal government.

The end result sounds like a Broadway musical: “How to Spend $60 Billion in Taxpayer Funds without Really Trying.” If insurers have their way, Congress would spend roughly $30 billion in CSR payments for the next three years, and that $30 billion in spending would “save” another $32 billion — which Congress would turn right around and send to insurers, via the $30 billion “Stability Fund.”

Compare this maneuver to Obamacare — or, more specifically, Paul Ryan’s 2010 critique of Obamacare. At the White House health care summit, Ryan told President Obama in regard to Obamacare’s proposed reductions to Medicare: “You can’t say that you’re using this money to either extend Medicare solvency and also offset the cost of this new program. That’s double counting.” If claiming that Medicare savings both enhance Medicare’s solvency and pay for Obamacare constitutes double counting — and it does — then what exactly is jiggering the budgetary baseline solely to generate “savings” that Republicans can turn around and spend…?

There’s another problem too: The fraudulent “savings” are also illegal. As I previously noted, the Gramm-Rudman-Hollings statute requires CBO to assume full payment of CSRs — meaning the scenario that House Republicans asked CBO to score violates the statutory requirements.

Some might claim that, since President Trump stopped making CSR payments last October, a scenario in which CBO does not assume the federal government makes those payments represents a more realistic fiscal approach than that currently required by Gramm-Rudman-Hollings. To which I have one simple retort: If you don’t like the law, then Change. The. Law.

Ryan and House Republican leaders don’t want to change the Gramm-Rudman-Hollings law — just like they don’t want to pay for the insurer bailout. Such efforts would take time and effort, necessitate legislative transparency — as opposed to closed-door meetings and selective leaks to K Street lobbyists — and require difficult decisions about how to pay for new spending. Why make those tough choices now, when Republicans can just charge the tab for the insurer bailout on to the national credit card, and let the next generation pay the bill instead?

Congressional Republicans spent eight years decrying Obamacare’s fiscal gimmickry, and President Obama’s executive lawlessness. If they follow the example of the House Republican leadership, and engage in their own illegal budgetary gimmicks, they will have no grounds to complain about Democrats’ spending sprees or overreach. And they shouldn’t be surprised if no one believes their claims of fiscal responsibility come November 6.

This post was originally published at The Federalist.

Why Medicare Reform Can’t Wait

In an interview with “Good Morning America” on Wednesday, House Speaker Paul Ryan (R-WI) cast doubt on the prospect for comprehensive Medicare reform on the congressional agenda in 2018: “There are some provider issues that we may be addressing as you know. Some providers in the Medicare field in some cases are getting overpaid. We want to make sure that’s being dealt with. But as far as you’re talking about beneficiaries, we’re not focused on that.”

Unfortunately, however, if Congress fails to address comprehensive Medicare reform, beneficiaries will miss out on significant savings in their pocketbooks, and taxpayers will miss out on the opportunity to slow the growth of the program’s expenses. This “win-win” proposition—seniors save money, as do taxpayers—could help the federal government solve its growing entitlement shortfalls, but only if Congress has the courage to act.

How Medicare Reform Would Work

To the uninitiated, premium support would transform Medicare into a program roughly akin to the federal employee health benefit plan, or the Obamacare exchanges established in 2014. Insurers, including traditional government-run Medicare, would bid against each other to offer the usual complement of Medicare services.

In each bidding area, whether a county, state, or region, officials would determine a “benchmark” bid—based on, for instance, the average of all plan bids, or the second-lowest plan bid. (Obamacare exchanges use the second-lowest plan bid.) Beneficiaries would receive a sum from the federal government to cover the cost of a benchmark plan in their area. If a senior selected a plan costing less than the benchmark amount, he or she would receive the difference in savings; conversely, if a senior selected a plan costing more than the benchmark, he or she would pay the difference in higher premiums.

New Report Shows Increased Savings

Compared to an earlier CBO report released in September 2013, the updated analysis shows greater savings from implementing premium support. In ten-year budget terms, the second-lowest bid option would save $419 billion, while the average bid option would save $184 billion—up from $275 billion and $69 billion, respectively, four years ago.

The October report cited several factors that put both upward and downward pressure on the amount of federal savings. In general, however, two factors stood out. First, Congress passed a law repealing the Medicare sustainable growth rate mechanism in 2015. That law increased projected spending in traditional fee-for-service Medicare, making it less financially competitive when compared to private Medicare Advantage plans.

Second, the Medicare Advantage plans have become more efficient, reducing their bids when compared to traditional Medicare. With plans already operating in a more competitive environment, the federal government could achieve greater savings by altering the bidding structure to harness that competitive environment.

Let’s Compare the Two Options

In general, while the second-lowest bid option would achieve greater savings for the federal government, the average bid option seems the likeliest to achieve the political consensus necessary to ensure its enactment. Setting a lower benchmark, as the second-lowest bid option would do in most if not all markets, would require more seniors to pay additional premiums, as more plans would exceed the benchmark.

To this conservative, the average bid option seems much more politically palatable. While any plan will result in confusion and controversy, one that will save both taxpayers and seniors money provides a strong incentive to transition to a new system. Congress can adjust the formula over time as needed, to reflect any difficulties in implementation and changes in our fiscal outlook. But the transition should happen—sooner rather than later.

Republicans Need to Combat ‘Mediscare’ Tactics

Of course, enacting Medicare reform involves overcoming partisan attacks and demagoguery—as the ads depicting Republicans throwing granny off a cliff so vividly illustrate. Democrats ran those ads against Ryan in the past, and no doubt will do so again the minute conservatives contemplate a serious effort to reform Medicare.

But conservatives—and Congress as a whole—have no choice but to reform entitlements. As previously noted, Medicare would already be financially insolvent but for Obamacare’s fiscal gimmickry—the accounting scheme that allows Medicare savings simultaneously to make Medicare solvent and fund Obamacare.

This post was originally published at The Federalist.

What’s Wrong with Republicans on Medicare

To demonstrate that most Republicans have no desire to reduce federal spending, one need look no further than a Politico story last Thursday. The article recounted how the pending tax bill could trigger automatic reductions in mandatory spending, including to Medicare, under the pay-as-you-go law. When presented with that scenario, Rep. Phil Roe (R-TN) responded thusly:

Medicare is underfunded as it is. If we have to change the PAYGO [pay-as-you-go] rules [that trigger the spending reductions], we’ll just change ‘em. At the end of the day, we—Republicans and Democrats—have to go home and face our constituents. I wouldn’t want to go home and face my constituents if I’d cut Medicare.

Over and above the obvious fact that Roe expressed less-than-zero interest in actually reducing federal spending, he also showed some tortured and erroneous logic in arriving at his position.

To put Medicare’s spending in another context: According to International Monetary Fund statistics, in 2016, the program spent more than the total economic output of all but 20 nations. That same list demonstrates that Medicare spent more than the entire economic output of New Zealand, Greece, and Portugal combined. Yet Roe considers the program “under-funded.”

But Medicare Is Going Insolvent, and Fast

As I noted last year, the Medicare trustees report issued in 2009, the year before Obamacare’s enactment, predicted the program’s Part A (Hospital Insurance) Trust Fund would become insolvent in 2017—this year. The following year, after Obamacare became law, the trustees postponed the insolvency date from this year to 2029.

But, as the Congressional Budget Office noted, Obamacare did not “enhance the ability of the government to pay for future Medicare benefits.” Put simply, because Obamacare’s re-directed Medicare savings to pay for new entitlements, the provisions improved Medicare’s solvency only on paper. Then-Health and Human Services secretary Kathleen Sebelius admitted as much when, asked in congressional testimony whether the Medicare provisions were being used “to save Medicare or…to fund [Obamacare],” she answered, “Both.”

Substantively, Obamacare’s fiscal schemes did not help Medicare’s solvency one whit. The program was scheduled to become functionally insolvent this year, and because Congress has enacted few meaningful reforms to the program in the time since, can be considered as such. However, because they improved the program’s solvency on paper, Obamacare’s budgetary gimmicks have allowed people like Roe to deny the problem exists, which will only worsen the scale of fiscal adjustment needed when Medicare finally faces its fiscal reckoning.

Reducing Spending Increases Is Not a ‘Cut’

As the New York Times has noted, Republicans argued vociferously—and correctly—earlier this year that slowing the growth of Medicaid spending in their “repeal-and-replace” bills did not represent a “cut” in that program. Yet Roe quickly resurrected the familiar (and incorrect) talking point about budget “cuts” when discussing Medicare.

Over the years, Republicans have spent far too much time demagoguing Obamacare for “cutting” Medicare. (As noted above, the problem with the law wasn’t that it reduced Medicare spending, it’s that it spent those Medicare savings to fund Obamacare, rather than shore up Medicare’s finances.) They now face many of the same opportunistic attacks from the Left regarding the entitlement reform proposals included in the “repeal-and-replace” bills. So why is Roe retreating into that same mindset that a decrease in a spending increase represents a “cut?”

Roe may not want to go back home and explain to his constituents why he reduced Medicare spending. But sooner or later, he and his fellow members of Congress will have to do just that. And the more he and his colleagues continue their pattern of obfuscation and denial through these kinds of ill-informed comments, the worse those spending reductions will end up being.

This post was originally published at The Federalist.

AARP’s Amnesia on “Raiding” Medicare

Based on its statements the past few weeks, if Obamacare extended to non-profit organizations, AARP might need to seek coverage for memory loss. While the seniors’ group opposes House Republicans’ extension of children’s health insurance because it includes provisions means-testing Medicare benefits for wealthy seniors, the Obamacare legislation it endorsed in December 2009 did the very same thing.

Obamacare Included Means-Testing

A letter the AARP sent to the House Energy and Commerce Committee last week objected to the House’s proposals to increase Medicare means-testing, noting that wealthy seniors already pay a greater share of their Part B (outpatient care) and Part D (prescription drug) premiums. That statement is true—in part because of Obamacare, which AARP endorsed.

In addition, Section 3308 of Obamacare applied means-testing for affluent seniors to the Part D prescription drug program for the first time.

Obamacare Used Medicare Savings

Last week’s AARP letter also claimed that “not only is it wrong to continue to ask Medicare beneficiaries to shoulder the burden for non-Medicare expenditures, but it will make it harder to finance actual improvements and address long-term challenges in the Medicare program.” That statement contains no small amount of irony, considering that Obamacare, as House Minority Leader Nancy Pelosi herself admitted, “took half a trillion dollars out of Medicare in [Obamacare], the health care bill”—to spend on new entitlements.

Moreover, by using savings from the Medicare Part A (hospital insurance) trust fund, Obamacare gamed the accounting to make the program’s shortfalls look less severe. When then-Secretary of Health and Human Services Kathleen Sebelius was asked whether the Medicare savings were being used “to save Medicare, or to fund health reform [Obamacare],” Sebelius replied, “Both.”

Some would argue that Obamacare’s financial chicanery has actually undermined Medicare’s solvency by giving lawmakers an excuse to postpone needed reforms. While this year’s Medicare trustees report claimed the Part A trust fund would become insolvent in 2029, the last trustees report released prior to Obamacare measured the program’s insolvency date at 2017—this year.

If it weren’t for the double-counting in Obamacare—a bill that AARP proudly endorsed—lawmakers would likely be confronting Medicare’s structural deficits this year. Instead, comforted by the false hope of Obamacare’s accounting gimmicks, Congress seems unlikely to embark on comprehensive Medicare reform to solve those deficits in the near future, which will only exacerbate the impact of legislative changes when they do take place.

The history of Obamacare lends support to AARP’s current argument that Medicare savings not finance other government spending. But given its own history in supporting Obamacare, AARP seems singularly unqualified to make it.

This post was originally published at The Federalist.