Lowlights of Democrats’ New Single-Payer Bill

Some might think that, having embraced socialism and taking away the health coverage of millions of Americans, the Democratic Party couldn’t move further to the left. Think again.

House Democrats introduced their single-payer bill on Wednesday, and claimed that it’s a “significantly different” bill compared to versions introduced in prior Congresses. It definitely meets that definition—because, believe it or not, it’s gotten significantly worse.

What Remains

Abolition of Medicare—and Most Other Insurance Coverage: As I noted last year, the bill would still eliminate the current Medicare program, by prohibiting Title XVIII of the Social Security Act from paying for any service (Section 901(a)(1)(A)) and liquidating the current Medicare trust funds (Section 701(d)). Likewise, the bill would eliminate the existing insurance coverage of all but the 2.2 million who receive care from the Indian Health Service and the 9.3 million enrolled veterans receiving care from the Veterans Administration.

Taxpayer Funding of Abortion: As before, Section 701(b)(3) of the bill contains provisions prohibiting “any other provision of law…restricting the use of federal funds for any reproductive health service” from applying to the single-payer system. This language would put the single-payer system outside the scope of the Hyde Amendment, thereby permitting taxpayer funding for all abortions.

Lack of Accountability: As with the prior bill, the legislation would give massive amounts of power to bureaucrats within the Department of Health and Human Services (HHS). For instance, the legislation would establish new regional directors of the single-payer system—none of whom would be subject to Senate confirmation.

What Lawmakers Added

More Spending: Section 204 of the new bill federalizes the provision of long-term supports and services as part of the single-payer benefit package. Prior versions of the bill had retained those services as part of the Medicaid program, implemented by states with matching funds from the federal government.

In addition, the revised bill eliminated language in Section 202(b) of the Sanders legislation, which permitted co-payments for prescription drugs to encourage the use of generics. With the co-payments (capped at an annual maximum of $200 in the Sanders bill from last Congress) eliminated, the bill envisions the federal government providing all health services without cost-sharing. This change, coupled with the federalization of long-term supports and services, will result in increased spending—as more people demand “free” health care.

Faster Elimination of Private Coverage: Rather than envisioning a four-year transition to the single-payer system, the revised bill would eliminate all private health insurance within a two-year period. Over and above the myriad philosophical concerns associated with single-payer health care, this accelerated transition period raises obvious questions about whether the new system could get up and running so quickly. After all, Obamacare had an implementation period of nearly four years—yet healthcare.gov failed miserably during its initial launch phase.

In theory, moving away from a fee-for-service method of paying medical providers would eliminate their incentive to perform more procedures—a worthy goal. But in practice, global budgets could also lead to de facto rationing, as hospitals that exceed their budgets might have to stop providing care to patients—just as under-funding within Britain’s National Health Service (NHS) has led to chronic hospital overcrowding.

Compensation Caps: Section 611(b)(5) of the new bill would limit “compensation costs for any employee or any contractor or any subcontractor employee of an institutional provider receiving global budgets,” by applying existing pay restrictions on government contractors to hospitals and facilities in the single-payer program. These restrictions might lead some to wonder whether hospitals could truly be considered independent entities, or merely an arm of the state.

Effective Abolition of For-Profit Medicine: Section 614(a) of the revised bill states that “payments to providers…may not take into account…or be used by a provider for” marketing; “the profit or net revenue of the provider, or increasing the profit or net revenue of the provider;” any type of incentive payment—“including any value-based payment;” and political contributions prohibited by government contractors.

Liberals would argue that eliminating the profit motive will encourage doctors to provide better care, by focusing on patients rather than ways to enrich themselves. But the profit motive also encourages individuals to invest in health care—as opposed to other sectors of the economy—by allowing them to recover a return on their investment.

Effective Elimination of Patents: Section 616(c)(1) of the bill states that “if the manufacturer of a covered pharmaceutical, medical supply, medical technology, or medically necessary assistive equipment refuses to negotiation a reasonable price, the Secretary shall waive or void any government-granted exclusivities with respect to such drug or product,” and shall allow other companies to manufacture the product. By allowing the federal government to march in on a whim and seize a company’s intellectual property, the bill would discourage individuals from investing in such intellectual property in the first place.

“Reasonable” Prices and Rationing: As noted above, Section 616 of the bill requires HHS to determine when the prices of drugs and medical devices are “not reasonable,” by taking into account among other things “the therapeutic value of the drug or product, including cost-effectiveness and comparative effectiveness.” This provision could lead to the federal government denying patients access to drugs deemed too expensive, as occurs currently within Britain’s National Health Service.

This post was originally published at The Federalist.

Republicans Hide Obamacare Bailout Inside Health Savings Account Bill

Cue the scene from “Poltergeist”: “They’re baa-ack.” The Obamacare bailout seekers, that is.

Multiple Capitol Hill sources confirmed to me on Wednesday morning that the House Ways and Means Committee’s markup of health savings account (HSA)-related legislation later in the day comes with a potential ulterior motive: Committee and leadership staff want to resurrect this spring’s failed Obamacare “stability” legislation—and see the HSA provisions as a way to do so.

This Is a Bad Deal for Conservatives

The leadership gambit seems simple: with the HSA provisions, placate conservatives who (rightly) don’t want to bail out Obamacare, and allow the package to pass the House solely with Republican votes—because Democrats likely won’t vote to support any “stability” legislation imposing robust pro-life protections. With Democrats intending to make Obamacare premium increases an issue in the November elections, House leaders think the vote would inoculate vulnerable Republicans from political attacks by the Left.

But a “stability” vote would demoralize the Right, by showing how completely Republicans have caved on their repeal promises. It would also set a horrible precedent, officially declaring Obamacare “too big to fail,” which would put taxpayers on the hook for an ever-increasing flow of bailout funds.

That flow would soon vastly overwhelm any small amount of HSA incentives that conservatives received in exchange for their vote. Eventually, lawmakers would run out of other people’s money to spend propping up Obamacare.

Questionable Policies

The best bills on the Ways and Means agenda contain broad policies that will expand HSAs’ reach. In this group: A bill increasing HSA contribution limits; another bill allowing seniors eligible for (but not enrolled in) Medicare Part A to continue making HSA contributions; and legislation ensuring that all Obamacare bronze and catastrophic plans qualify for HSA contributions.

Other, more targeted measures that would expand the types of services HSA plans can cover could have a mixed effect. By allowing coverage for more services below a plan’s high deductible, they could draw more people to choose HSA coverage, but could also raise premiums for HSA plans.

Non-HSA Legislation Bears Attention, Too

Most troubling: The two pieces of legislation on the committee’s agenda not directly related to HSAs. The description of one bill hints at its inherent flaw:

The bill provides an off-ramp from Obamacare’s rising premiums and limited choices by allowing the premium tax credit to be used for qualified plans offered outside of the law’s exchanges and Healthcare.gov. In addition, it expands access to the lowest-premium plans available (‘catastrophic’ plans) for all individuals purchasing coverage in the individual market and allows the premium tax credit to be used to offset the cost of such plans.

Another bill suspending two Obamacare taxes sounds appealing on its face, but would have negative consequences. Suspending Obamacare’s “Cadillac tax” for two more years (until 2022) would further weaken an effort in that law (albeit a poorly designed one) to change current incentives that encourage people to over-consume employer-provided health insurance and thus health care. In short, it would encourage the growth of health care costs, rather than working to lower them.

The bill’s effort to repeal the employer mandate for years 2014 through 2018 likewise could have unintended consequences. The bill only repeals the employer mandate retrospectively likely because doing so prospectively (i.e., for 2019 and future years) could encourage employer “dumping”—businesses dropping coverage and sending their workers to the exchanges, which could raise spending on Obamacare insurance subsidies. While the retrospective nature of that legislation could mitigate any “dumping” in the short term, if employers think Congress will continue to weaken the mandate in future years, they could view that as an incentive to drop coverage.

This Is Not a Good Deal

The Ways and Means Committee package includes some very good HSA-related bills, some potentially harmful bills that could further entrench Obamacare, and some bills that may not have much effect. Regardless of the individual bills’ specific merits, they certainly do not warrant conservatives’ approval for a massive “stability” package in the tens of billions of taxpayer dollars.

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.

Does the Heritage Health Plan Include Taxpayer Funding of Abortion?

When lawmakers write legislation, little details matter—a lot. In the case of a health plan that the Heritage Foundation and former Sen. Rick Santorum (R-PA) are reportedly preparing to release in the coming days, a few words indicate the plan has not considered critically important details—like how Senate procedure intertwines with abortion policy—necessary to any substantive policy endeavor.

A few short words in a summary of the Heritage plan leave the real possibility that the plan, if enacted as described, could lead to taxpayer funding of abortion coverage. Either Heritage and Santorum—both known opponents of abortion—have undertaken dramatic changes in their pro-life positions over the past few months, or they have failed to think through the full import of the policies they will release very shortly.

However, multiple individuals participating in the Heritage meetings told me that the concepts and policies Spiro’s document discusses align with Heritage discussions. Spiro may have created that document based on verbal descriptions given to him of the Heritage plan (just as the New York Times’ list of questions Robert Mueller wants to ask President Trump likely came via Trump’s attorneys and not Mueller). But regardless of who created it, people in the Heritage group told me it accurately outlined the policy proposals under discussion.

What Cost-Sharing Reductions Do

The summary describes many policies, but one in particular stands out: Under “Short-term stabilization/premium relief,” the plan “Adopts the [Lamar] Alexander and [Susan] Collins appropriation for CSRs [cost-sharing reductions] and state reinsurance/high risk pool programs for 2019 and 2020.”

On one level, this development should not come as a surprise. Party leaders often incorporate recalcitrant members’ pet projects (or, in the old days, earmarks) into a bill to obtain their votes: “See, we included the language that you wanted—you have to vote for our bill now!” Given that Collins as of last week had not even heard about the Heritage-led effort, one might think she would need some incentive to support the measure, which attaching her “stability” language might provide.

About the Hyde Amendment and Byrd Rule

The reference to CSRs takes on more importance because of the way Congress would consider Heritage’s plan. As with the Graham-Cassidy bill and other “repeal-and-replace” bills considered last year, the Senate would enact them using expedited budget reconciliation procedures.

Those procedures theoretically allow all 51 Senate Republicans to circumvent a Democratic filibuster and pass a reconciliation bill on a party-line vote. However, as I outlined last year, the reconciliation process comes with procedural restrictions (i.e., the “Byrd rule”) to prevent senators from attaching “extraneous” and non-budgetary matter to a bill that cannot be filibustered.

“Hyde amendment” restrictions—which prevent federal funding of abortion coverage, except in the cases of rape, incest, or to save the life of the mother—represent a textbook example of the “Byrd rule,” because they have a fiscal impact “merely incidental” to the policy changes proposed. Former Senate Parliamentarian Bob Dove said as much about abortion restrictions Congress considered in 1995:

The Congressional Budget Office determined that it was going to save money. But it was my view that the provision was not there in order to save money. It was there to implement social policy. Therefore I ruled that it was not in order and it was stricken.

After pushing for a vote for months, Collins suddenly backed off and didn’t force the issue on the Senate floor. She knew she didn’t have the votes—everyone knew she didn’t have the votes—because Democrats wouldn’t support a measure that restricted taxpayer funding of abortion coverage. Exactly nothing has changed that dynamic since Congress considered the issue in March.

Why We Can’t Fund CSRs

Republicans recognize the problems the abortion funding issue creates, and the Graham-Cassidy bill attempted to solve them by providing subsidies via a block grant to states. Graham-Cassidy funneled the block grant through the State Children’s Health Insurance Program (SCHIP), largely because the SCHIP statute includes the following language: “Funds provided to a state under this title shall only be used to carry out the purposes of this title, and any health insurance coverage provided with such funds may include coverage of abortion only if necessary to save the life of the mother or if the pregnancy is the result of an act of rape or incest.”

Because SCHIP already contains full Hyde protections on taxpayer funding of abortion, Graham-Cassidy ran the block grant program through SCHIP. Put another way, Graham-Cassidy borrowed existing Hyde amendment protections because any new protections would get in a budget reconciliation bill. It did the same thing for a “stability” fund for reinsurance or other mechanisms intended to lower premiums by subsidizing insurers, also referred to in Spiro’s document.

Creating a pot of money elsewhere in law—for instance, through the SCHIP statute, which does contain Hyde protections—and using that money to compensate insurers for reducing cost-sharing would prove just as unrealistic. The CSR payments reimburse insurers for discrete, specific discounts provided to discrete, specific low-income individuals.

If the subsidy pool gave money to all insurers equally, regardless of the number of low-income enrollees they reduced cost-sharing for, then insurers would have a ready-built incentive to avoid attracting poor people, because enrolling low-income individuals would saddle them with an unfunded (or only partially funded) mandate. If the subsidy pool gave money to insurers based on their specific obligations under the Obamacare cost-sharing reduction requirements, then the parliamentarian would likely view this language as an attempt to circumvent the Byrd rule restrictions and strike it down.

Not Ready for Prime Time

Four participants in the Heritage meetings told me the group has discussed appropriating funds for CSR payments to insurers as part of the plan. Not a single individual said the Senate’s “Byrd rule” restrictions—which make enacting pro-life protections for such CSR payments all-but-impossible—came up when discussing an appropriation for cost-sharing payments to insurers.

That silence signals one or more potential problems: A lack of regard for pro-life policy; an ignorance of Senate procedure, and its potential ramifications on the policies being considered; or a willingness to fudge details—allowing people to believe what they want to believe. Regardless, it speaks to the unformed nature of the proposal, despite meetings that have continued since the last time “repeal-and-replace” collapsed” nearly eight months ago.

Earlier this month, Santorum claimed in an interview that while the original “Graham-Cassidy was a rush…this time we have the opportunity to get the policy better.” But any serious attempt to “get the policy better” wouldn’t have major lingering questions about tens of billions of dollars in “stability” funding, and whether such funds would subsidize abortion coverage, mere days before its public release. In this case, eight months of deliberations may not lead to a deliberative and coherent policy product.

This post was originally published at The Federalist.

Republicans Omit Obamacare Bailout from Omnibus — DO NOT CONGRATULATE

Congressional leaders finally released the massive, 2,232-page omnibus spending bill late Wednesday, a measure they want Congress to pass within 24 hours. The version released Wednesday night omits language of an Obamacare “stability” package that Republican lawmakers released separately on Monday.

But, to borrow a phrase echoing throughout the Capitol since a Washington Post story appeared Tuesday night, “DO NOT CONGRATULATE” Republicans for leaving the bailout provisions out of the draft. On both process and on substance, congressional leaders did not cover themselves in glory. Far from it.

Republicans Bad on Substance…

A cynic would question why Republican leaders found this particular issue non-negotiable. After all, Republicans ran for four straight election cycles—in 2010, 2012, 2014, and 2016—on repealing Obamacare, only to turn around and propose more than $60 billion in spending to prop it up. From Democrats’ perspective, since Republicans did a complete 180 on repealing Obamacare, why not expect the GOP to perform a similar U-turn on taxpayer funding of abortion?

…And Just as Bad on Process

In general, the process surrounding the omnibus—as with most appropriations legislation, and most major legislation in general—stinks. After completing a secretive drafting process among a small group of staff behind closed doors—the swamp personified—leaders now will turn to ramming the legislation through Congress.

Facing a potential government shutdown at midnight on Friday, they will rush through the massive bill spending trillions of dollars in a matter of hours, well before members of Congress or their staff will have time to read, let alone digest and understand, its contents.

One specific issue stands out: As I previously wrote, Senate Majority Leader Mitch McConnell (R-KY) wants to grant Sens. Susan Collins (R-ME) and Lamar Alexander (R-TN) a separate vote on bailing out Obamacare. He apparently will attempt to do so despite the fact that:

  1. Other Republican senators never agreed to give Collins a vote. McConnell spoke only for himself in his colloquy with Collins last December.
  2. Collins demonstrably moved the goalposts on the size of her bailout. McConnell agreed to support $5 billion in reinsurance funds in December, while now she has demanded more than six times as much, or more than $30 billion.
  3. McConnell literally shut down the federal government rather than grant Sen. Rand Paul (R-KY) a vote on his amendment to an appropriations bill just last month—and Paul’s colleagues publicly trashed his attempts to obtain a vote as a “stunt” and “utterly pointless.”

To most individuals outside Washington, Republicans moving to bail out Obamacare, and attempting to pass 2,200-plus page bills in mere hours, signifies a degree of insanity. Unfortunately, however, Congress seems to engage in these types of activities (at least) every year, raising the specter of the trite saying that defines insanity as doing the same thing over and over while expecting different results.

This week’s spectacle should raise one obvious question: How many more of these sorry affairs will it take before conservatives summon the will to end it, once and for all?

This post was originally published at The Federalist.

Legislative Bulletin: Updated Summary of Obamacare “Stability” Legislation

On Monday, Sen. Lamar Alexander (R-TN) and others introduced their latest version of an Obamacare “stability” bill. In general, the bill would appropriate more than $60 billion in funds to insurance companies, propping up and entrenching Obamacare rather than repealing it.

Also on Monday, the Congressional Budget Office released its analysis of the updated legislation. In CBO’s estimate, the bill would increase the deficit by $19.1 billion, while marginally increasing the number of insured Americans (by fewer than 500,000 per year).


Stability Fund
: Provides $500 million in funding for fiscal year 2018, and $10 billion in funding for each of fiscal years 2019, 2020, and 2021, for invisible high-risk pools and reinsurance payments. The $500 million this year would provide administrative assistance to states to establish such programs, with the $10 billion in each of the following three years maintaining them.

Grants the secretary of Health and Human Services (HHS), in consultation with the National Association of Insurance Commissioners, the authority to allocate the funds to states—which some conservatives may be concerned gives federal bureaucrats authority to spend $30.5 billion wherever they choose.

Includes a provision requiring a federal fallback for 2019 (and only 2019) in states that choose not to establish their own reinsurance or invisible high-risk program. Moreover, these federal fallback dollars must be used “for market stabilization payments to issuers.” Some conservatives may be concerned that this provision—which, like the rest of the $30 billion in “stability funds,” did not appear in the original Alexander-Murray legislation—undermines state flexibility, by effectively forcing states to bail out insurers, whether they want to or not.

Cost-Sharing Reduction Payments: The bill appropriates roughly $30-35 billion in cost-sharing reduction (CSR) payments to insurers, which subsidizes their provision of discounts on deductibles and co-payments to certain low-income individuals enrolled on insurance exchanges.

Last October, President Trump announced he would halt the payments to insurers, concluding the administration did not have authority to do so under the Constitution. As a result, the bill includes an explicit appropriation, totaling roughly $3-4 billion for the final quarter of 2017, and $9-10 billion for each of years 2019, 2020, and 2021, based on CBO spending estimates. This language represents a change from the original Alexander-Murray bill, which appropriated payments for 2018 and 2019 only.

For 2018, the bill appropriates CSRs only for 1) states choosing the Basic Health plan option (which gives states a percentage of Obamacare subsidies as a block grant to cover low-income individuals) and 2) insurers for which HHS determines, in conjunction with state insurance commissioners, that the insurer assumed the payment of CSRs when setting rates for the 2018 plan year. This language represents a change from the original Alexander-Murray bill, which set up a complicated system of rebates that would have allowed insurers potentially to pocket billions of dollars by retaining “extra” CSR payments for 2018.

Some conservatives may be concerned that, because insurers understood for well over a year that a new administration could terminate these payments in 2017, the agreement would effectively subsidize their flawed assumptions. Some conservatives may be concerned that action to continue the flow of payments would solidify the principle that Obamacare, and therefore insurers, are “too big to fail,” which could only encourage further risky behavior by insurers in the future.

Hyde Amendment: With respect to the issue of taxpayer dollars subsidizing federal insurance plans covering abortion, the bill does not apply the Hyde Amendment protections retrospectively to the 2017 CSR payments, or to the (current) 2018 plan year. With respect to 2019 through 2021, the bill prohibits federal funding of abortions, except in the case of rape, incest, or to save the life of the mother. However, the bill does allow states to use state-only dollars to fund other abortions, as many state Medicaid managed care plans do currently.

According to the pro-abortion Guttmacher Institute, with respect to coverage of abortions in state Medicaid plans:

  • 32 states and the District of Columbia follow the federal Hyde Amendment standard, funding abortion only in the cases of rape, incest, or to save the life of the mother;
  • One state provides abortion only in the case of life endangerment; and
  • 17 states provide coverage for most abortions—five voluntarily, and 12 by court order.

State Waiver Processes: The bill would streamline the process for approving state innovation waivers, authorized by Section 1332 of Obamacare. Those waivers allow states to receive their state’s exchange funding as a block grant, and exempt themselves from the individual mandate, employer mandate, and some (but not all) of Obamacare’s insurance regulations.

Specifically, the bill would:

  • Extend the waivers’ duration, from five years to six, with unlimited renewals possible;
  • Prohibit HHS from terminating waivers during their duration (including any renewal periods), unless “the state materially failed to comply with the terms and conditions of the waiver”;
  • Require HHS to release guidance to states within 60 days of enactment regarding waivers, including model language for waivers—a change from the 30 days included in the original Alexander-Murray bill;
  • Shorten the time for HHS to consider waivers from 180 days to 120—a change from 90 days in the original Alexander-Murray bill;
  • Allow a 45-day review for 1) waivers currently pending; 2) waivers for areas “the Secretary determines are at risk for excessive premium increases or having no health plans offered in the applicable health insurance market for the current or following plan year”; 3) waivers that are “the same or substantially similar” to waivers previously approved for another state; and 4) waivers related to invisible high-risk pools or reinsurance, as discussed above. These waivers would initially apply for no more than three years, with an extension possible for a full six-year term;
  • Allow governors to apply for waivers based on their certification of authority, rather than requiring states to pass a law authorizing state actions under the waiver—a move that some conservatives may be concerned could allow state chief executives to act unilaterally, including by exiting a successful waiver on a governor’s order.

State Waiver Substance: On the substance of innovation waivers, the bill would rescind regulatory guidance the Obama administration issued in December 2015. Among other actions, that guidance prevented states from using savings from an Obamacare/exchange waiver to offset higher costs to Medicaid, and vice versa.

While supporting the concept of greater flexibility for states, some conservatives may note that, as this guidance was not enacted pursuant to notice-and-comment, the Trump administration can revoke it at any time—indeed, should have revoked it last year. Additionally, the bill amends, but does not repeal, the “guardrails” for state innovation waivers. Under current law, Section 1332 waivers must:

  • “Provide coverage that is at least as comprehensive as” Obamacare coverage;
  • “Provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable” as Obamacare coverage;
  • “Provide coverage to at least a comparable number of [a state’s] residents” as under Obamacare; and
  • “Not increase the federal deficit.”

Some conservatives have previously criticized these provisions as insufficiently flexible to allow for conservative health reforms like Health Savings Accounts and other consumer-driven options.

The bill allows states to provide coverage “of comparable affordability, including for low-income individuals, individuals with serious health needs, and other vulnerable populations” rather than the current language in the second bullet above. It also clarifies that deficit and budget neutrality will operate over the lifetime of the waiver, and that state innovation waivers under Obamacare “shall not be construed to affect any waiver processes or standards” under the Medicare or Medicaid statutes for purposes of determining the Obamacare waiver’s deficit neutrality.

The bill also makes adjustments to the “pass-through” language allowing states to receive their exchange funding via a block grant. For instance, the bill adds language allowing states to receive any funding for the Basic Health Program—a program states can establish for households with incomes of between 138-200 percent of the federal poverty level—via the block grant.

Some conservatives may view the “comparable affordability” change as a distinction without a difference, as it still explicitly links affordability to Obamacare’s rich benefit package. Some conservatives may therefore view the purported “concessions” on the December 2015 guidance, and on “comparable affordability” as inconsequential in nature, and insignificant given the significant concessions to liberals included elsewhere in the proposed legislative package.

Catastrophic Plans: The bill would allow all individuals to purchase “catastrophic” health plans, beginning in 2019. The legislation would also require insurers to keep those plans in a single risk pool with other Obamacare plans—a change from current law.

Catastrophic plans—currently only available to individuals under 30, individuals without an “affordable” health plan in their area, or individuals subject to a hardship exemption from the individual mandate—provide no coverage below Obamacare’s limit on out-of-pocket spending, but for “coverage of at least three primary care visits.” Catastrophic plans are also currently subject to Obamacare’s essential health benefits requirements.

Outreach Funding: The bill requires HHS to obligate $105.8 million in exchange user fees to states for “enrollment and outreach activities” for the 2019 and 2020 plan years—a change from the original legislation, which focused on the 2018 and 2019 plan years. Currently, the federal exchange (healthcare.gov) assesses a user fee of 3.5 percent of premiums on insurers, who ultimately pass these fees on to consumers.

In a rule released in December 2016, the outgoing Obama administration admitted that the exchange is “gaining economies of scale from functions with fixed costs,” in part because maintaining the exchange costs less per year than creating one did in 2013-14. However, the Obama administration rejected any attempt to lower those fees, instead deciding to spend them on outreach efforts. The agreement would re-direct portions of the fees to states for enrollment outreach.

Some conservatives may be concerned that this provision would create a new entitlement for states to outreach dollars. Moreover, some conservatives may object to this re-direction of funds that ultimately come from consumers towards more government spending. Some conservatives may support taking steps to reduce the user fees—thus lowering premiums, the purported intention of this “stabilization” measure—rather than re-directing them toward more government spending, as the agreement proposes.

The bill also requires a series of biweekly reports from HHS on metrics like call center volume, website visits, etc., during the 2019 and 2020 open enrollment periods, followed by after-action reports regarding outreach and advertising. Some conservatives may view these myriad requirements first as micro-management of the executive, and second as buying into the liberal narrative that the Trump administration is “sabotaging” Obamacare, by requiring minute oversight of the executive’s implementation of the law.

Cross-State Purchasing: Requires HHS to issue regulations (in consultation with the National Association of Insurance Commissioners) within one year regarding health care choice compacts under Obamacare. Such compacts would allow individuals to purchase coverage across state lines.

However, because states can already establish health care compacts amongst themselves, and because Obamacare’s regulatory mandates would still apply to any such coverage purchased through said compacts, some conservatives may view such language as insufficient and not adding to consumers’ affordable coverage options.

Consumer Notification: Requires states that allow the sale of short-term, limited duration health coverage to disclose to consumers that such plans differ from “Obamacare-approved” qualified health plans. Note that this provision does not codify the administration’s proposed regulations regarding short-term health coverage; a future Democratic administration could (and likely will) easily re-write such regulations again to eliminate the sale of short-term plans, as the Obama administration did in 2016.

CBO Analysis of the Legislation

As noted above, CBO believes the legislation would increase the deficit by $19.1 billion, while increasing the number of insured Americans marginally. In general, while CBO believed that changes to Obamacare’s state waivers program would increase the number of states applying for waivers, they would not have a net budgetary impact.

However, the bill does include one particular change to Obamacare Section 1332 waivers allowing existing waiver recipients to request recalculation of their funding formula. According to CBO, only Minnesota qualifies under the statutory definition, and could receive $359 million in additional funding between 2018 and 2022. Some conservatives may be concerned that this provision represents a legislative earmark that by definition can only affect one state.

With respect to the invisible high-risk pools and reinsurance, CBO believes the provisions would raise spending by a net of $26.5 billion, offset by higher revenues of $7 billion. The budget office estimated that the entire country would be covered by the federal fallback option in 2019, because “it would be difficult for other states [that do not have waivers currently] to establish a state-based program in time to affect premiums.”

For 2020 and 2021, CBO believes that 60 and 80 percent of the country, respectively, would be covered by state waivers; “the remainder of the population in those years would be without a federally-funded reinsurance program or invisible high-risk pool.” The $7 billion in offsetting savings referenced in CBO’s score comes from lower premiums, and thus lower spending on federal premium subsidies. In 2019, CBO believes “about 60 percent of the federal cost for the default federal reinsurance program would be offset by other sources of savings.”

CBO believes that, under the bill, premiums would be 10 percent lower in 2019, and 20 percent lower in 2020 and 2021, compared to current law. Some conservatives may note that lower premiums relative to current law does not equate to lower premiums relative to 2018 levels. Particularly because CBO expects elimination of the individual mandate tax will raise premiums by 10 percent in 2019, many conservatives may doubt that premiums will go down in absolute terms, notwithstanding the sizable spending on insurer subsidies under the bill.

CBO noted that premium changes would largely affect unsubsidized individuals—i.e., families with incomes more than four times the federal poverty level ($100,400 for a family of four in 2018)—a small portion of whom would sign up for coverage as a result of the reductions. However, “in states that did not apply for a waiver, premiums would be the same under current law as under the legislation starting in 2020.”

Moreover, even in states with a reinsurance waiver, CBO believes that insurers will “tend to set premiums conservatively to hedge against uncertainty” regarding the reinsurance programs—meaning that CBO “expect[s] that total premiums would not be reduced by the entire amount of available federal funding.”

As noted in prior posts, CBO is required by law to assume full funding of entitlement spending, including cost-sharing reductions. Therefore, the official score of the bill included no net budget impact for the CSR appropriation. However, Alexander received a supplemental letter from CBO indicating that, compared to a scenario where the federal government did not make CSR payments, appropriating funds for CSRs would result in a notional deficit reduction of $29 billion.

The notional deficit reduction arises because, in the absence of CSR payments, insurers would “load” the cost of reducing cost-sharing on to health insurance premiums—thus raising premium subsidies for those who qualify for them. CBO believes these higher subsidies would entice more families with incomes between two and four times the federal poverty definition ($50,200-$100,400 for a family of four in 2018) to sign up for coverage. Compared to a “no-CSR” baseline, appropriating funds for CSRs, as the bill would do, would reduce spending on premium subsidies, but it would also increase the number of uninsured by 500,000-1,000,000, as some families receiving lower subsidies would drop coverage.

Lastly, the expanded sale of catastrophic plans, coupled with provisions including those plans in a single risk pool, would slightly improve the health of the overall population purchasing Obamacare coverage. While individuals cannot receive federal premium subsidies for catastrophic coverage, enticing more healthy individuals to sign up for coverage will improve the exchanges’ overall risk pool slightly, lowering federal spending on those who do qualify for exchange subsidies by $849 million.

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.

The Binary Choice Paul Ryan Doesn’t Want to Face

This time last year, House Speaker Paul Ryan (R-WI) spoke to all who would listen about the health care legislation that Republican leadership crafted: “This is the closest we will ever get to repealing and replacing Obamacare. It really comes down to a binary choice.” Now, however, Ryan faces a binary choice himself — one that he and his leadership colleagues seem intent on deflecting.

Ryan can support an Obamacare bailout, or he can support the pro-life movement. He cannot support both.

The deafening silence emanating from Republican leaders on the life issue speaks volumes to both their knowledge of the problem, and their intent of how to handle it. Ryan desperately wants to bail out Obamacare, going so far as to promote a ridiculous budgetary gimmick that should make Ryan, in his former role as Budget Committee Chairman, laugh out loud in its absurdity.

If Republican leaders considered the life issue a red line they cannot, and will not, cross, to pass an Obamacare bailout, they would have said so months ago. By and large, they have not done so, instead issuing only mealy-mouthed statements that “we have been working on it.”

Such statements constitute, in plain English, a cop-out. When the issue presents a binary choice, as here, Congress has little to “work on”—the Hyde amendment either appears in the bill, or it doesn’t. A cynic might argue that the “we have been working on it” statement means that Republican leaders consider the life issue a political problem to game their way around, rather than a moral principle that they must uphold first, last, and always.

But executive action cannot trump the statute itself. Senate Majority Leader Mitch McConnell (R-KY) said the week Obamacare passed that the law “forces taxpayers to pay for abortions,” and only another law will change that dynamic.

As Congressman Jim Sensenbrenner observed in March 2010:

This bill expands abortion funding to the greatest extent in history. I have heard that the president is contemplating an executive order to try to limit this. Members should not be fooled. Executive orders cannot override the clear intent of a statute. … If an executive order moves the abortion funding in this bill away from where it is now, it will be struck down as unconstitutional because executive orders cannot constitutionally do that.

Republican leaders may also embrace the political tactic of a “headpat vote.” This gambit would bring to the floor two separate bills — one containing the Obamacare “stability” funding, and a separate, stand-alone bill codifying pro-life protections for that funding. While that concept might sound reasonable at first blush, the pro-life community would find the outcome unacceptable — the Obamacare funding would remain on a “must-pass” bill headed straight to the president’s desk, while the pro-life restrictions would die in the Senate by failing to get the 60 votes needed to break a filibuster.

This procedural gimmick would represent the worst of the Washington “swamp,” allowing Republican politicians to echo John Kerry in 2004 by taking both sides of an issue: “I actually voted for the $87 billion before I voted against it.” Moreover, it would demonstrate that, when the chips are down, Republican leaders view the life issue and community as something to be bargained away, or appeased through meaningless political tokenism, rather than as a moral imperative and matter of first principles.

In the end, the pro-life community has witnessed enough political double-talk, most notably by Democrats attempting to claim Obamacare does not fund abortion coverage, to see through any procedural gimmicks Republican leaders might propose. The question of whether Republicans support taxpayer funding of abortion coverage in Obamacare really does come down to a binary choice. Here’s hoping that Republicans choose the side of life.

This post was originally published at The Federalist.

Who Really Proposed the Obamacare Bailout in the Trump Budget?

Maybe it was Colonel Mustard in the conservatory with the revolver. Or Professor Plum in the library with the candlestick.

The story behind the Obamacare bailout proposed in last week’s budget has taken on a mysterious tone, akin to a game of Clue. My Thursday story focusing on the role played by White House Domestic Policy Council Chair Andrew Bremberg prompted pushback from some quarters about the actual perpetrator of the proposal. As a result, I spent a good chunk of Friday afternoon trying to gather more facts—and found definitive ones hard to come by.

As to the accuracy of my initial theory, people I trust and respect arrived at strikingly different views. However, I found surprising unanimity on one count: No one—but no one—wants to take credit for inserting the proposal to pay $11.5 billion in risk corridor claims. As someone told me: “You raise a valid question. If Andrew Bremberg didn’t insert the proposal into the budget”—and this person didn’t think he did—“then how did it get in there?”

Therein lies a huge problem. To call the inclusion of a $11.5 billion proposal in the president’s budget that no one in the administration seemed to know about, or wants to take credit for, a prime example of managerial incompetence would put it mildly. Either career staff inserted it in the budget, and the political staff did not have the antennae or bandwidth to understand its consequences and take it out, or a few political appointees and career staff hijacked the budget process, with most other individuals unaware of the situation until the budget’s public release.

To borrow a politically loaded phrase, someone—or a group of someones—colluded to get this language included in the budget. Its inclusion could cost federal taxpayers literally billions of dollars.

Why It Matters

By submitting a budget proposal to “request mandatory appropriations for the risk corridors program,” the White House completely undermined and undercut the arguments its own Justice Department had made in court a few short weeks ago, that the federal government owes insurers nothing.

In other words, whomever inserted this policy U-turn into the budget, just as the judges ponder a ruling in the insurer lawsuits, may have effectively “tanked” the government’s case. Either by leading to an adverse ruling, or by prompting the Justice Department to settle the case at a much higher cost, this move could cost taxpayers billions.

A Pro-Life Administration, Or Not?

Unfortunately, it gets worse. While the budget did include new funds for insurers, including the controversial risk corridors bailout described above, it did not include a single word proposing that such funds prevent taxpayer dollars from going to plans that cover abortion.

There’s a reason for the deafening silence: Republicans know that any legislation that funds insurers and provides robust pro-life protections will not pass. Democrats will object to its inclusion. Given the choice between passing up on an Obamacare bailout or abandoning their pro-life principles, Republicans have given every expectation that they will choose the latter course. (They shouldn’t bail out Obamacare regardless, but that’s a separate story.)

Regardless of who proposed these, it doesn’t take a detective to understand how a policy reversal that could cost taxpayers billions and a pending U-turn by Republicans to fund abortion coverage represent a major one-two punch against conservatives. But the mysterious origins and mangled management of the risk corridor proposal adds a further layer of insult to injury, a triple whammy of a tough week for the administration.

This post was originally published at The Federalist.

The White House’s Plan to Bail Out Obamacare AND Fund Abortion Coverage

The White House released its budget proposal this morning. Apart from the fact that the budget abandons any attempt to get to balance within ten years (or ever), a footnote buried deep in the document hides key proposals: Bailing out Obamacare health insurers to the tune of tens of billions of dollars, and taxpayer funding of abortion coverage.

On page 141, footnote 6 of Table S-6, showing the president’s policy proposals, includes the following admission: “The Budget requests mandatory appropriations for the risk corridors program and for cost-sharing reduction payments.”

There you have it: At least $11.5 billion in corporate welfare payments to insurers for risk corridors, and more for cost-sharing reductions.

About Risk Corridors

While risk corridors have faded in the public debate over the past two years, they remain a potent issue for health insurers. See a full explanation of the issue, but here’s a summary.

To prevent the Obama administration from using funds from elsewhere to subsidize corporate welfare to insurers, Congress enacted restrictions prohibiting the use of taxpayer funds to bail out risk corridors. Under these restrictions, insurers with losses could only receive as much money from the risk corridor program as insurers with gains paid into the program.

In Obamacare’s first few years, most insurers suffered massive losses, so the money coming in to the risk corridor program by no means equaled the requests for funds from the program. As a result, several insurers sued in the Court of Federal Claims, requesting payment from the Judgment Fund of the Treasury for their unpaid risk corridor obligations. Many of those cases remain on appeal.

While both the White House and HHS budgets include few details about this proposal, it appears that they would pre-emptively surrender the pending legal cases by paying insurers more than $11.5 billion in risk corridor obligations that insurers claim they are owed. The budget further proposes making these payments exempt from the budget sequester.

About Cost-Sharing Reductions

The White House’s proposal on CSRs looks downright conservative, however, compared to the budget gimmick being contemplated by Speaker of the House Paul Ryan (R-WI). The White House budget indicates that spending on CSRs would have no deficit effect, because the Gramm-Rudman-Hollings statute requires budgetary agencies to assume full funding of entitlements (including CSR payments) when developing their fiscal baselines.

Ryan, however, finds this legal requirement an inconvenient truth. He wants to direct the budget agencies to raise the spending baseline artificially, so Congress can then “lower” the spending baseline right back to where it is now—and spend the phony “savings” from this gimmick on more corporate welfare to insurers.

Forcing Taxpayers to Fund Abortion Coverage

Another point of note: Passing either one of these proposals would by definition result in taxpayer funding of plans that cover abortion. The administration did not include any language prohibiting the use of CSR or risk corridor funds for plans that cover abortion. Therefore the White House presumably endorses federal taxpayer funding of abortion coverage.

The budget proposal means Trump administration is now actively working to codify not one but two Obamacare bailouts that a Republican Congress denied to the Obama administration—doing liberals’ bidding for them. Moreover, the failure to include any pro-life protections on these bailouts represents at best a massive managerial oversight, and at worst an insult to the pro-life community. For those who thought that last week’s budget deal represented the nadir for conservative principles among this administration, think again.

This post was originally published at The Federalist.