Alexandria Ocasio-Cortez Doesn’t Understand How Obamacare’s Exchanges Work

On Twitter Sunday evening, Rep. Alexandria Ocasio-Cortez (D-N.Y.) complained about what she viewed as the daunting prospect of having to choose her health insurance plan for 2020.

It’s not the first time Ocasio-Cortez has taken issue with the health coverage for members of Congress. She griped about the process last year, as a newly elected official just taking her seat.

But, as someone who has gone through the process of buying health insurance as a DC resident for years, I can characterize most of the points she makes in the tweet as inaccurate, or rooted in the special privilege she receives as a member of Congress.

She’s Not Buying ‘Off the Exchange’

To start with, Ocasio-Cortez claimed that “Members of Congress also have to buy their plans off the Exchange.” That statement contains numerous false elements. Most obviously, she cannot buy her insurance off the exchange because the District of Columbia abolished its private insurance market “off the Exchange.”

Upon seeing her tweet, I went to eHealthInsurance, a private market away from the government-run exchange, and tried to search for a plan. (Disclosure: I used to represent eHealth more than a decade ago as a paid lobbyist.) When I typed in a DC-based ZIP code, I found the following:

eHealth doesn’t offer insurance plans in the District of Columbia, because it can’t offer them. DC law prohibits anyone but the exchange from selling insurance to individuals.

Rather than purchasing coverage “off the Exchange,” Ocasio-Cortez buys her health insurance through DC’s small business exchange, as opposed to its marketplace for individuals. As a Congressional Research Service paper on health coverage for members of Congress and their staff explains, both groups buy insurance through the DC small business exchange to obtain their (illegal) employer subsidy.

Admittedly, Ocasio-Cortez may have meant “from the Exchange” when she said “off the Exchange.” But her imprecise language implies that she does not understand the important distinction between buying plans from the Exchange directly and not doing so. (Only Exchange-purchased plans qualify for subsidies under the Obamacare statute.)

She Gets Access to More Plans as a Member of Congress

Ocasio-Cortez complained about having to choose from 66 different insurance plans. She wouldn’t have that problem if she weren’t a member of Congress. People who buy insurance on DC’s individual exchange have far fewer options. I know, because I have to buy coverage there. Take a look at the “choices” my personalized webpage presented to me: Only 23 plans—about one-third the number available to Ocasio-Cortez:

Some may think that 23 plans still represent a large number to choose from, but my reality proved far different. To begin with, those plans come from only two carriers: CareFirst Blue Cross Blue Shield and Kaiser Permanente, which only offers HMO options. If you don’t want to get locked into an HMO’s provider network—and I don’t—you have exactly one choice of carrier: CareFirst.

Couple my preference for non-HMO coverage with my desire for insurance that includes a health savings account option, and I ended up with only two plans to choose from: CareFirst’s Bronze HSA plan, and its Gold HSA plan.

I would prefer more choices for health insurance. I would particularly appreciate the opportunity to buy coverage that doesn’t need to comply with the Obamacare insurance regulations that have driven up premiums and priced millions of people out of coverage. But DC’s insurance regulators have prohibited carriers from offering non-complaint plans, because they’re from the government and they’re here to help.

She Gets Special Privileges as a Member of Congress

To say that members of Congress and congressional staff receive kid-glove treatment from the DC small business exchange would put it mildly. This flyer (from 2013) shows that the DC exchange conducted no fewer than 12 separate in-person enrollment events for members and staff during Obamacare’s first open enrollment period.

Congressional staff confirmed to me that the in-person enrollment sessions continued on Capitol Hill this year. Congressional staff also confirmed that House and Senate benefits counselors can walk them through the entire enrollment process.

Even as an individual DC exchange participant, I received no fewer than five separate e-mails, starting on Friday afternoon, reminding me that Sunday represented the last day to sign up for coverage taking effect on January 1. The timing of Ocasio-Cortez’ tweet suggests that she waited until the last minute to examine her coverage options, but she can’t say she wasn’t warned. Maybe if she and her colleagues spent less time focused on impeachment, Ocasio-Cortez could have found more time to select her plan sooner?

Ocasio-Cortez Gets an Illegal Subsidy

I and others have made this point before: members of Congress and their staff represent the only group that can receive a subsidy from their employer on the exchange. That subsidy came through a rule promulgated by the Office of Personnel Management in 2013, but several analyses have called that rule illegal.

Ocasio-Cortez claimed that “Members of Congress have to buy their plans off the Exchange.” Just as the off-exchange claim holds no basis in fact, she and other members of Congress do not have to buy plans via the DC small business exchange. Nothing in law forces them to do so—unless they want to receive the (illegal) subsidy.

In fact, at least one member of Congress has turned down the (illegal) congressional subsidy. Dr. Michael Burgess frequently mentions at hearings, including the House Energy and Commerce Committee hearing on single payer last week, that he buys his own coverage with his own money, not taxpayer funds. As someone who earns less than members of Congress do, and has no access to (illegal) insurance subsidies, I appreciate Burgess’ integrity in this regard.

If Ocasio-Cortez wanted to do something other than complain—and if she didn’t want so many choices—she could ditch the special, and illegal, subsidies she receives as a member of Congress, and buy coverage with the hoi polloi like me. She’s welcome to do so any time she likes, but I’m not holding my breath.

UPDATE: This post was updated after publication to clarify potential interpretations of Ocasio-Cortez’ comments about “off the Exchange” coverage.

This post was originally published at The Federalist.

Three Obstacles to Senate Democrats’ Health Care Vision

If Democrats win a “clean sweep” in the 2020 elections—win back the White House and the Senate, while retaining control of the House—what will their health care vision look like? Surprisingly for those watching Democratic presidential debates, single payer does not feature prominently for some members of Congress—at least not explicitly, or immediately. But that doesn’t make the proposals any more plausible.

Ezra Klein at Vox spent some time talking with prominent Senate Democrats, to take their temperature on what they would do should the political trifecta provide them an opportunity to legislate in 2021. Apart from the typical “Voxplanations” in the article—really, did Klein have to make not one but two factual errors in his article’s first sentence?—the philosophy and policies the Senate Democrats laid out don’t stand up to serious scrutiny, on multiple levels.

Problem 1: Politics

The first problem comes in the form of a dilemma articulated by none other than Ezra Klein, just a few weeks ago. Just before the last Democratic debate in July, Klein wrote that liberals should not dismiss with a patronizing shrug Americans’ reluctance to give up their current health coverage:

If the private insurance market is such a nightmare, why is the public so loath to abandon it? Why have past reformers so often been punished for trying to take away what people have and replace it with something better?…

Risk aversion [in health policy] is real, and it’s dangerous. Health reformers don’t tiptoe around it because they wouldn’t prefer to imagine bigger, more ambitious plans. They tiptoe around it because they have seen its power to destroy even modest plans. There may be a better strategy than that. I hope there is. But it starts with taking the public’s fear of dramatic change seriously, not trying to deny its power.

Democrats’ “go big or go home” theory lies in direct contrast to the inherent unease Klein identified in the zeitgeist not four weeks ago.

Problem 2: Policy

Klein and the Senate Democrats attempt to square the circle by talking about choice and keeping a role for private insurance. The problem comes because at bottom, many if not most Democrats don’t truly believe in that principle. Their own statements belie their claims, and the policy Democrats end up crafting would doubtless follow suit.

Does this sound like someone who 1) would maintain private insurance, if she could get away with abolishing it, and 2) will write legislation that puts the private system on a truly level playing field with the government-run plan? If you believe either of those premises, I’ve got some land to sell you.

In my forthcoming book and elsewhere, I have outlined some of the inherent biases that Democratic proposals would give to government-run coverage over private insurance: Billions in taxpayer funding; a network of physicians and hospitals coerced into participating in government insurance, and paid far less than private insurance can pay medical providers; automatic enrollment into the government-run plan; and many more. Why else would the founder of the “public option” say that “it’s not a Trojan horse” for single payer—“it’s just right there!”

Problem 3: Process

Because Democrats will not have a 60-vote margin to overcome a Republican filibuster even if they retake the majority in 2020, Klein argues they can enact the bulk of their agenda through the budget reconciliation process. He claims that “if Democrats confine themselves to lowering the Medicare age, adding a [government-run plan], and negotiating drug prices, there’s reason to believe it might pass parliamentary muster.”

Of course Klein would say that—because he never worked in the Senate. It also appears he never read my primer on the Senate’s “Byrd rule,” which governs reconciliation procedures in the Senate. Had he done either, he probably wouldn’t have made that overly simplistic, and likely incorrect, statement.

Take negotiating drug prices. The Congressional Budget Office first stated in 2007—and reaffirmed this May—its opinion that on its own, allowing Medicare to negotiate drug prices would not lead to any additional savings.

That said, Democrats this year have introduced legislation with a “stick” designed to force drug companies to the “negotiating” table. Rep. Lloyd Doggett (D-Texas) introduced a bill (H.R. 1046) requiring federal officials to license the patents of companies that refuse to “negotiate” with Medicare.

While threatening to confiscate their patents might allow federal bureaucrats to coerce additional price concessions from drug companies, and thus scorable budgetary savings, the provisions of the Doggett bill bring their own procedural problems. Patents lie within the scope of the House and Senate Judiciary Committees, not the committees with jurisdiction over health care issues (Senate Finance, House Ways and Means, and House Energy and Commerce).

While Doggett tried to draft his bill to avoid touching those committees’ jurisdiction, he did not, and likely could not, avoid it entirely. For instance, language on lines 4-7 of page six of the Doggett bill allows drug companies whose patents get licensed to “seek recovery against the United States in the…Court of Federal Claims”—a clear reference to matter within the jurisdiction of the Judiciary Committees. If Democrats include this provision in a reconciliation bill, the parliamentarian almost certainly advise that this provision exceeds the scope of the health care committees, which could kill the reconciliation bill entirely.

But if Democrats don’t include a provision allowing drug manufacturers whose patents get licensed the opportunity to receive fair compensation, the drug companies would likely challenge the bill’s constitutionality. They would claim the drug “negotiation” language violates the Fifth Amendment’s prohibition on “takings,” and omitting the language to let them apply for just compensation in court would give them a much more compelling case. Therein lies the “darned if you do, darned if you don’t” dilemma reconciliation often presents: including provisions could kill the entire legislation, but excluding them could make portions of the legislation unworkable.

Remember: Republicans had to take stricter verification provisions out of their “repeal-and-replace” legislation in March 2017—as I had predicted—due to the “Byrd rule.” (The provisions went outside the scope of the committees of jurisdiction, and touched on Title II of the Social Security Act—both verboten under budget reconciliation.)

If Republicans had to give up on provisions designed to ensure illegal immigrants couldn’t receive taxpayer-funded insurance subsidies due to Senate procedure, Democrats similarly will have to give up provisions they care about should they use budget reconciliation for health care. While it’s premature to speculate, I wouldn’t count myself surprised if they have to give up on drug “negotiation” entirely.

1994 Redux?

Klein’s claims of a “consensus” aside, Democrats could face a reprise of their debacle in 1993-94—or, frankly, of Republicans’ efforts in 2017. During both health care debates, a lack of agreement among the majority party in Congress—single payer versus “managed competition” in 1993-94, and “repeal versus replace” in 2017—meant that each majority party ended up spinning its wheels.

To achieve “consensus” on health care, the left hand of the Democratic Party must banish the far-left hand. But even Democrats have admitted that the rhetoric in the presidential debates is having the opposite effect—which makes Klein’s talk of success in 2021 wishful thinking more than a realistic prediction.

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.

How Andy Slavitt Sabotaged Obamacare

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

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

What’s the Issue?

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

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

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

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

What Happened in the Lawsuits?

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

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

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

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

Who Issued ‘Arbitrary and Capricious’ Rules?

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

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

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

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

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

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

What Would Andy Slavitt Do Instead?

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

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

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

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

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

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

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

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

This post was originally published at The Federalist.

Ten Conservative Concerns with an Obamacare “Stability” Bill

A PDF version of this document is available online here.

1.     Taxpayer Funding of Abortion Coverage.             As Republicans themselves correctly argued back in 2010, any provision preventing taxpayer dollars from funding abortion coverage must occur in legislation itself—executive orders are by their nature insufficient. Therefore, any “stability” bill must have protections above and beyond current law to ensure that taxpayer dollars do not fund abortion coverage.

2.     Potential Budget Gimmick.       Press reports indicate that House Republican leaders have considered adjusting the budgetary baseline to fund a “stability” package. Congress should not attempt to violate existing law and create artificial “savings” to fund a reinsurance program.

3.     Insurers Still Owe the Treasury Billions.    The Government Accountability Office concluded in 2016 that the Obama Administration violated the law by prioritizing payments to insurers over payments to the U.S. Treasury. The Trump Administration and House Republicans should focus first on reclaiming the billions insurers haven’t repaid, rather than giving them more taxpayer cash in a “stability” package.

4.     Doesn’t Repeal Obamacare Now.        Instead of repealing the onerous regulations that caused health insurance rates to more than double from 2013-17, a “stability” bill would lower premiums by giving insurers additional subsidies—throwing money at a problem rather than fixing it.

5.     Undermines Obamacare Repeal Later.   House Republican leaders reportedly support a bill (H.R. 4666) by Rep. Ryan Costello (R-PA). That bill appropriates “stability” funds to insurers for three years (2019 through 2021), eliminating any incentive for the next Congress to consider “repeal-and-replace” legislation.

6.     Budgetary Cliff Opens Door to Perpetual Bailouts.    Whereas Obamacare’s reinsurance program phased out over three years—with funding of $10 billion in 2014, $6 billion in 2015, and $4 billion in 2016—H.R. 4666 contains $10 billion in funding for each of three years. This funding cliff would create a push for additional “stability” funding thereafter—turning the Costello bill into a perpetual bailout machine.

7.     Bails Out Insurers’ Bad Decisions.    During the period 2015-17, most insurers assumed they would continue to receive cost-sharing reduction (CSR) payments, despite growing legal challenges over their constitutionality. Before even considering appropriating CSR funds, Congress should first investigate insurers’ bad business decisions to assume unconstitutional payments would continue in perpetuity.

8.     Bails Out Insurance Commissioners’ Bad Decisions.    Likewise, in the summer and fall of 2016, virtually all state insurance commissioners failed to consider whether the incoming Administration would unilaterally withdraw CSR payments—which the Trump Administration did last year. Before making CSR payments, Congress first should investigate insurance commissioners’ gross negligence.

9.     Doesn’t Hold Obama Officials Accountable.        In 2016, the House Energy and Commerce and Ways and Means Committees released a 158-page report highlighting abuses over the unconstitutional appropriation of CSRs by the Obama Administration. Since then, neither committee has acted—contempt citations, criminal referrals, or other similar actions—to uphold Congress’ constitutional prerogatives.

10.  Could Undermine Second Amendment Rights.  Last week, health insurer Aetna made a sizable contribution to fund this month’s gun control march in Washington. Some may question why insurers need billions of dollars in taxpayer cash if they can contribute to liberal organizations, and whether some of this “stability” package will end up in the hands of groups opposed to Americans’ fundamental liberties.

Republicans Were Against Reinsurance Before They Were For It

House Speaker Paul Ryan (R-WI) made comments in a January radio interview supporting a “bipartisan opportunity” to fund Obamacare’s Exchanges, specifically through mechanisms like reinsurance.

How quickly the speaker forgets — or wants others to forget. Obamacare already had a reinsurance program, one that ran from 2014 through 2016. During that time, non-partisan government auditors concluded that, while implementing that reinsurance program, the Obama administration violated the law, diverting billions of dollars to insurers that should have gone to the United States Treasury. After blasting the Obama administration’s actions as the “Great Obamacare Heist,” and saying taxpayers deserved their money back, Republican leaders have for the past eighteen months done … exactly nothing to make good on their promise.

Section 1341 of Obamacare imposed a series of “assessments” (some have called them taxes) to accomplish two objectives. Section 1341 required the Department of Health and Human Services (HHS) to collect $5 billion, to reimburse the Treasury for the cost of another Obamacare program that operated from 2010 through 2013. The assessments also intended to provide a total of $20 billion — $10 billion in 2014, $6 billion in 2015, and $4 billion in 2016 — in reinsurance funds to health insurers subsidizing their high-cost patients.

Unfortunately, however, the “assessments” on employers offering group health coverage did not achieve the desired revenue targets. The plain text of the law indicates that, under such circumstances, HHS must repay the Treasury before it paid health insurers. But the Obama Administration did no such thing — it paid all of the available funds to insurers, while giving taxpayers (i.e., the Treasury) nothing.

The non-partisan Congressional Research Service and other outside experts agreed that the Obama administration flouted the law to give taxpayers the shaft. In September 2016, the Government Accountability Office (GAO) agreed: “We conclude that HHS lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program in the Treasury and instead make deposits to the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341. This prioritization of collections for payment to issuers over payments to the Treasury is not authorized.”

At the time GAO issued its ruling, Republicans denounced the Obama Administration’s actions, and pledged to fight for taxpayers’ interests: Multiple Chairmen — including the current Chairs of the House Ways and Means Committee and Senate Budget, HELP, and Finance Committees — said in a statement that, as a matter of “fairness and respect for the rule of law clearly anchored in the Constitution,” the Obama “Administration need to put an end to the Great Obamacare Heist immediately.”

Sen. John Barrasso (R-WY), Chairman of the Senate Republican Policy Committee, said that “the Administration should end this illegal scheme immediately.”

A spokesman for the House Energy and Commerce Committee said that, “We expect the Administration to comply with the independent watchdog’s opinion, halt the billions of dollars in illegal Obamacare payments to insurers, and pay back the American taxpayers what they are owed.”

Since all this (self-)righteous indignation back in the fall of 2016 — six weeks before the presidential election — what exactly have Republicans done to follow through on all their rhetoric?

In a word, nothing. No legislative actions, no hearings, no letters to the Trump Administration — nothing. Some experts have suggested that the Trump administration could file suit against insurers, seeking to reclaim taxpayers’ cash, but the administration has yet to do so.

In September 2016, outside analysts explained why the Obama administration prioritized insurers’ needs over taxpayers’ — and the rule of law: “I don’t think the Administration wants to do anything to upset insurers right now.” That same description just as easily applies to Republican congressional leaders today, making their promise to end the “Great Obamacare Heist” yet another one that has thus far gone unfulfilled — that is, if they ever intended to make good on their rhetoric in the first place.

This post was originally published at The Federalist.

Republicans’ SCHIP Surrender

In spring 2015, Senate Republican leaders pressured their members to accept a clean, two-year reauthorization of the State Children’s Health Insurance Program (SCHIP) added as part of a larger health spending measure.

The SCHIP reauthorization added to a larger Medicare bill included none of the reforms Republicans had proposed that year, many of which attempted to turn the program’s focus back toward covering low-income families first, as the George W. Bush administration had done. But Republican leaders said that the two-year extension, rather than the four-year extension Democrats supported, would allow conservatives to fight harder for reforms in 2017.

The press has focused on the disputes over paying for the SCHIP program, which have held up final enactment of a long-term reauthorization. (The House passed its version of the bill in November; the Senate, failing to find agreement on pay-fors, has not considered the bill on the floor.) But the focus on pay-fors has ignored Republicans’ abject surrender on the policy behind the program, because the media defines “bipartisanship” as conservatives agreeing to do liberal things. That occurred in abundance on this particular bill.

So Much for Our Promises, Voters

On the underlying policy, all the groups who pledged to fight for conservative reforms vacated the field. Senate Finance Committee Chairman Orrin Hatch (R-UT), who brags about how he created the program as part of the Balanced Budget Act in 1997, cut a deal with Ranking Member Ron Wyden (D-OR) that, as detailed below, includes virtually no conservative reforms to the program—raising questions about whether Hatch was so desperate for a deal to preserve his legacy that he failed to fight for conservative reforms.

House Speaker Paul Ryan (R-WI) did not repudiate the agreement Hatch and Wyden struck, even though that agreement maintained virtually the provisions of the 2009 SCHIP reauthorization that Ryan himself, then the ranking member of the House Budget Committee, called “an entitlement train wreck.”

Republicans have thus suffered the worst of both worlds: getting blamed for inaction on a program’s reauthorization, while already having conceded virtually every element of that program, save for its funding.

Details About the SCHIP Proposals

A detailed examination of the Hatch-Wyden agreement (original version here, and slightly revised version in Sections 301-304 of the House-passed bill here) demonstrates how it extends provisions of the 2009 reauthorization passed by a Democratic Congress and signed by President Obama—which Republicans in large part opposed. Moreover, the Hatch-Wyden agreement and House-passed bill includes none of the reforms the House Energy and Commerce Committee proposed, but were not enacted into law, in 2015.

The only “reform” in the pending reauthorization consists of phasing out an enhanced match for states included in Section 2101(a) of Obamacare—one already scheduled to expire. Even though the enhanced match will end on its own in October 2019, the Hatch-Wyden agreement and the House-passed bill would extend that enhanced match by one year further, albeit at a reduced level, before phasing it out entirely.

Child Enrollment Contingency Fund: Created in Section 103 of the 2009 reauthorization. As I noted then, “Some Members may be concerned that the fund—which does not include provisions making additional payments contingent on enrolling the low-income children­ for which the program was designed—will therefore help to subsidize wealthier children in states which have expanded their programs to higher-income populations, diverting SCHIP funds from the program’s original purpose” (emphasis original). Section 301(c) of the House-passed bill would extend this fund, without any reforms.

Express Lane Eligibility: Created in Section 203 of the 2009 reauthorization, as a way of using eligibility determinations from other agencies and programs to facilitate enrollment in SCHIP. As I noted then, “Some Members may be concerned first that the streamlined verification processes outlined above will facilitate individuals who would not otherwise qualify for Medicaid or SCHIP, due either to their income or citizenship, to obtain federally-paid health benefits.” Section 301(e) of the House-passed bill would extend this option, without any reforms.

Citizenship Verification: Section 211 of the 2009 reauthorization created a new process for verifying citizenship, but not identity, to circumvent strict verification requirements included in the 2005 Deficit Reduction Act. As I wrote in 2009:

Some Members may echo the concerns of Social Security Commissioner Michael Astrue, who in a September 2007 letter stated that the verification process proposed in the bill would not keep ineligible individuals from receiving federal benefits—since many applicants would instead submit another person’s name and Social Security number to qualify. Some Members may believe the bill, by laying out a policy of ‘enroll and chase,’ will permit ineligible individuals, including illegal aliens, to obtain federally-paid health coverage for at least four months during the course of the verification process. Finally, some Members may be concerned that the bill, by not taking remedial action against states for enrolling illegal aliens—which can be waived entirely at the Secretary’s discretion—until states’ error rate exceeds 3%, effectively allows states to provide benefits to illegal aliens.

Legal Aliens: Section 214 of the 2009 reauthorization allowed states to cover legal aliens in their SCHIP programs without subjecting them to the five-year waiting period required for means-tested benefits under the 1996 welfare reform law.

As I wrote in 2009, “Some Members may be concerned that permitting states to cover legal aliens without imposing waiting periods will override the language of bipartisan welfare reform legislation passed by a Republican Congress and signed by a Democrat President, conflict with decades-long practices in other federally-sponsored entitlement health programs (i.e., Medicare), and encourage migrants to travel to the United States for the sole or primary purpose of receiving health benefits paid for by federal taxpayers.” The House-passed bill includes no provisions modifying or repealing this option.

Premium Assistance: Section 301 of the 2009 reauthorization created new options regarding premium assistance—allowing states to subsidize employer-sponsored coverage, rather than enrolling individuals in government-run plans. While that reauthorization contained some language designed to make premium assistance programs more flexible for states, it also expressly prohibited states from subsidizing health savings account (HSA) coverage through premium assistance. The House-passed bill includes no provisions modifying or repealing this prohibition on states subsidizing HSA coverage.

Health Opportunity Accounts: Section 613 of the 2009 reauthorization prohibited the Department of Health and Human Services from approving any new demonstration programs regarding Health Opportunity Accounts, a new consumer-oriented option for low-income beneficiaries created in the 2005 Deficit Reduction Act. The House-passed bill includes no provisions modifying or repealing this prohibition on states offering more consumer-oriented options.

Covering Poor Kids First: The 2015 proposed reauthorization looked to restore SCHIP’s focus on covering low-income children first, by 1) eliminating the enhanced federal match rate for states choosing to cover children in families between 250-300 percent of the federal poverty level ($61,500-$73,800 for a family of four in 2017) and 2) eliminating the federal match entirely for states choosing to cover children in families above 300 percent of poverty. These provisions were consistent with the policy of the George W. Bush administration, which in 2007 issued guidance seeking to ensure that states covered low-income families first before expanding their SCHIP programs further up the income ladder. The House-passed bill includes no such provision.

Maintenance of Effort: Section 2001(b) of Obamacare included a requirement that states could not alter eligibility standards for children enrolled in SCHIP through October 1, 2019, limiting their ability to manage their state programs. Whereas the 2015 proposed reauthorization would have repealed this requirement, effective October 1, 2015, Section 301(f) of the House-passed bill would extend this requirement, through October 1, 2022. (However, under the House-passed bill, states could alter eligibility for children in families with incomes over 300 percent of poverty, beginning in October 2019.)

Crowd-Out: The 2015 proposed reauthorization allowed states to impose a waiting period of up to 12 months for individuals who declined an offer of, or disenrolled from, employer-based coverage—a provision designed to keep families from dropping private insurance to enroll in a government program. The House-passed bill contains no such provision.

Program Name: The 2009 reauthorization sought to remove the “state” element of the “State Children’s Health Insurance Program,” renaming the program as the “Children’s Health Insurance Program.” While the 2015 proposed reauthorization looked to restore the “state” element to “SCHIP,” the House-passed bill includes no such provision.

Cave, Not a Compromise

For all the focus on paying for SCHIP, the underlying policy represents a near-total cave by Republicans, who failed to obtain any meaningful reforms to the program. Granted, Democrats likely would not agree to all the changes detailed above. But the idea that a “bipartisan” bill should include exactly none of them also seems absurd—unless Republicans threw in the towel and failed to fight for any changes.

The press spent much of 2017 focused on Republican efforts to unwind Obamacare. But the SCHIP bill represents just as consequential a story. The cave on SCHIP demonstrates how many Republicans, after spending the last eight years objecting to the Obama agenda, suddenly have little interest in rolling it back.

This post was originally published at The Federalist.

Are Cost-Sharing Reductions Subject to the Sequester?

Sen. Susan Collins (R-ME) thinks she has a deal with Senate Majority Leader Mitch McConnell (R-KY) to attach two provisions to a short-term spending bill later this month: The Alexander-Murray legislation to appropriate funds for cost-sharing reduction (CSR) payments to insurers, and a separate bill she and Sen. Bill Nelson (D-FL) have developed regarding reinsurance proposals.

Collins also thinks these two provisions will have a “net downward effect on premiums,” even after repealing Obamacare’s individual mandate as part of the tax bill the Senate is currently considering. However, it appears that Alexander-Murray and Collins-Nelson’s net effect on premiums could end up being a nice round number: Zero.

Cost-Sharing Reductions and the Sequester

The statute that created the budget sequester applies a list of programs and accounts not subject to sequestration spending reductions. For instance, the law exempts refundable tax credits, like those provided to low-income individuals who buy coverage on Obamacare’s exchanges, from sequestration reductions.

However, neither cost-sharing reduction payments nor reinsurance would qualify as refundable tax credits. They are paid directly to insurers, not individuals, and are not part of the Internal Revenue Code. Also, neither cost-sharing reductions nor reinsurance are on a list of other accounts and programs exempted from the sequester.

The Obama administration previously admitted that cost-sharing reduction payments were subject to the sequester, in a sequestration report to Congress in April 2013, and in testimony before the House Energy and Commerce Committee in August of that year. In a separate 2014 report, the Obama administration also admitted that Obamacare’s transitional reinsurance program (which expired in 2016, and which senators Collins and Nelson effectively want to re-create) was subject to the sequester.

However, last year Judge Rosemary Collyer ruled these actions unconstitutional, because the treasury lacks a valid appropriation to pay out CSR funds. The Trump administration last month stopped the CSR payments to insurers, citing the lack of an appropriation. While the Alexander-Murray bill would appropriate funds for the CSR payments, it would do so through the Centers for Medicare and Medicaid Services, not the treasury—meaning that the sequester would apply.

Statutory PAYGO and the Sequester

Earlier this month, the Congressional Budget Office (CBO) released a letter to Rep. Steny Hoyer (D-MD) indicating that legislation increasing the budget deficit (on a static basis, i.e., not accounting for economic growth) by $1.5 trillion would result in a sequester order of approximately $136 billion for 2018. The existing statutory formula would deliver a 4 percent, or approximately $25 billion, reduction in Medicare spending, followed by about $111 billion in reductions elsewhere.

However, because the sequestration statute exempts many major spending programs like Social Security and Medicaid, CBO believes that only about $85-90 billion in existing federal resources would be subject to the sequester. This means an additional $20-25 billion in mandatory spending, if appropriated, would immediately get sequestered to make up the difference.

On the one hand, conservatives who oppose paying CSRs to insurers may support an outcome where insurers do not actually receive these payments. On the other hand, however, some may view this outcome as the worst of all possible worlds: Having surrendered the principle that the federal government must prop up insurers—and Obamacare—without receiving any actual premium reductions, because the payments to insurers never get made.

This scenario, when coupled with repeal of the individual mandate, could result in a legislative outcome that raises premiums next year—a contradiction of the promises Republicans made to voters.

This post was originally published at The Federalist.

Six Reasons the Mandate “Deal” Is Bad Health Policy

After their member lunch Tuesday, Senate Republican leadership announced they would work to include a repeal of Obamacare’s individual mandate as part of tax reform. The Senate leaders also announced they would bring the Obamacare “stability” legislation written by Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) to the floor for a vote.

Repealing Obamacare’s tax on individuals who do not buy health coverage, and using the proceeds to reduce taxes overall, may represent sound tax policy. However, for several reasons, both the mandate repeal, and the “stability” legislation linked to it, represent unsound health policy.

1. This Will Raise Premiums

For these reasons, a tax reform bill repealing the individual mandate cannot repeal the regulations that caused premiums to more than double over the past four years, and necessitated the mandate in the first place. As I previously noted, repealing a penalty that encourages healthy people to purchase insurance, while retaining the regulations that have attracted a sicker-than-average population to Obamacare’s insurance exchanges, will raise premiums—the only question is by how much.

2. It Bails Out Insurers—And Obamacare

The “stability” legislation would provide two years of cost-sharing reduction (CSR) subsidies to health insurers, which reimburse them for the cost of discounting deductibles and co-payments to certain insurers. Three years ago, the House of Representatives sued the Obama administration challenging the constitutionality of these payments, which the House contended were being made without an explicit appropriation from Congress.

In May 2016, Judge Rosemary Collyer agreed. While she stayed her ruling stopping the payments while the Obama administration appealed, the Trump administration used her logic—that the payments lacked a constitutional appropriation—to halt the payments unilaterally last month.

3. This Establishes De Facto Single Payer

In choosing to appropriate CSR funds mere weeks after the Trump administration cancelled the payments, a Republican Congress would send a very clear message: Health insurers—and Obamacare itself—are too big to fail.

This message to health insurers, who last year ignored the risk that CSR payments would disappear, will only encourage them to take further reckless risks, knowing the federal government will provide a backstop if they fail. In other words, a Republican Congress would create a de facto single-payer health system, by establishing the principle that insurers are too big to fail.

Some might argue, as Alexander did Tuesday, that the “stability” fund will lower premiums and mitigate the effects from repealing the mandate outlined above. In one sense, throwing taxpayer funds at a problem will always “fix” it—at least in the short term. But with our nation $20 trillion in debt and repeated years of federal deficits, the federal government has a diminishing ability to spend other people’s money to “solve” problems. Moreover, in the longer term, a Republican Congress will have set an incredibly dangerous—and costly—precedent by telling insurers the federal government will cover their losses.

4. Insurers Could Reap Billions in Windfall Profits

The CBO score also provided some sense of the money insurers might keep. The Alexander-Murray bill would appropriate roughly $7-9 billion in CSR funds for the coming plan year. Yet CBO believes insurers would return only about $3.1 billion in rebates back to the federal government, meaning the insurers themselves could keep some, or all, of the remaining $4-6 billion. All this after insurer profits nearly doubled during the Obama era, to $15 billion per year.

5. There’s Not Enough Flexibility for States

Over and above the question of bailing insurers out of their strategic mistakes by making CSR payments, the Alexander-Murray bill provides nowhere near enough flexibility for states in return. The bill provides for several process improvements regarding applications for state innovation waivers under Obamacare, but it does not fundamentally change the substance of those waivers.

States must still provide as many individuals with health insurance as Obamacare, and much provide a benefit package “of comparable affordability” as Obamacare coverage. Because the Alexander-Murray bill does not substantively change Obamacare’s regulatory straight-jacket, it still will not allow states to provide consumer-driven health care options, or plans that might have lower premiums for consumers.

6. This Means Federal Funding of Plans that Pay for Abortion

If the above six reasons weren’t enough evidence of the questionable policy merits of the mandate “deal,” the video should serve as the coup de grace. That the bill’s sponsor seemed blissfully unaware of all the policy implications of a bill he sponsored—and worked feverishly to sell to his colleagues—should function as a warning to lawmakers. In their haste to pass a tax bill, they are blundering into some serious strategic and policy errors in health policy, which could come back to bite them for many years to come.

This post was originally published at The Federalist.

CBO, the Individual Mandate, and Tax Reform

This week, word that the Congressional Budget Office (CBO) was preparing to re-estimate the fiscal impact of repealing the individual mandate prompted consternation among Republican ranks. Sen. Mike Lee (R-UT) claimed the budget office was playing a game of “Calvinball,” constantly revising its estimates and making up rules a la the comic strip Calvin and Hobbes.

CBO is reassessing the effectiveness of the mandate in light of research published earlier this year by a team of researchers including Jonathan Gruber—yes, that Jonathan Gruber—that examined the effectiveness of the Obamacare mandate in the law’s first few years.

Consternation about CBO aside, the debate speaks to larger concerns about the effects on both health policy and tax policy of repealing the mandate.

Inconvenient Truths are Truths Nonetheless

Lee will find no argument from this observer about the need for CBO to increase its transparency. As previously noted, I’ve seen it up close and personal. Former CBO Director Doug Elmendorf repeatedly failed to disclose to Congress material omissions in CBO’s analysis of Obamacare’s CLASS Act—omissions that could have led the budget office to conclude that the program was financially unstable before Congress enacted Obamacare (with the CLASS Act included) into law.

That said, some people on the Right apparently think that difficulties with CBO allow them simply to ignore or dismiss its opinions. Witness this response back in July, when I noted that CBO believed one version of the Senate “repeal-and-replace” bill would raise premiums by 20 percent in its first few years:

The reconciliation bill being used as the vehicle for tax reform does not include reconciliation instructions to the House Energy and Commerce and Senate HELP Committees, the primary committees of jurisdiction over Obamacare’s regulatory regime. Because the tax reform bill cannot repeal, waive, or otherwise alter any of the Obamacare regulations, repealing the mandate as part of tax reform will definitely raise premiums.

Do Republicans Want to Repeal Obamacare’s Regulations?

This criticism shouldn’t apply to Lee, who fought hard to repeal as much of the Obamacare regulations as possible during the budget reconciliation debate in July. However, many other Republicans have demonstrated a significant lack of policy forthrightness on the issue of Obamacare’s regulatory regime. For many reasons, the claim that Republicans can “repeal” Obamacare while retaining the status quo on pre-existing conditions presents an inherent policy contradiction.

Health Policy Is Taking a Back Seat to Tax Policy

Whatever the merits of using the revenue from the mandate’s repeal to help the tax reform effort, Republicans did not campaign for four straight election cycles on enacting tax reform. They campaigned on repealing Obamacare.

From a health policy perspective, enacting a “solution” that involves repealing the mandate and walking away from the issue would represent a bad outcome—one measurably worse than the status quo. Insurance costs—the health care priority that Americans care most about—would rise, only alienating voters who objected to Democrats not delivering on the $2,500 per-family reduction in premiums Barack Obama promised in 2008.

Done right, tax reform can rise and pass on its own merits. But using repeal of the mandate to pass tax reform—which would lead to another round of high premium increases in (you guessed it!) the fall of 2018—represents a game of policy and political Russian roulette that Congress should not even contemplate.

This post was originally published at The Federalist.