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.

Exclusive: D.C. Exchange Website Misled Customers about Individual Mandate

Last year, in response to Congress repealing the Obamacare individual mandate penalty beginning this January, the D.C. Council established its own requirement for District residents to maintain health coverage. If D.C. leaders wished to replicate Obamacare on the local level, they have succeeded beyond their wildest expectations—right down to the non-functioning website.

For nearly six months—including the first month of open enrollment—the District failed to inform visitors to its online insurance exchange about the new coverage requirement. When District officials finally discovered their webpage fail, what did they do to admit their fault, and tell the public? Nothing.

The Webpage Fail, Explained

At the start of the open enrollment period in early November, I went to the District’s health insurance exchange website, D.C. Health Link, to evaluate my coverage options for 2019. While there, I found an intriguing—and misleading—webpage. When discussing whether individuals should purchase coverage, the webpage noted that “federal law requires most Americans to have a minimum level of health coverage,” a requirement that was “still in effect for the 2017 and 2018 tax years.”

By stating that the requirement remained in effect for 2017 and 2018, the webpage implied that the mandate will disappear in 2019. But while the federal penalty disappeared on January 1, the District’s own insurance mandate replaced the federal requirement on that date. However, the webpage I saw did not mention the D.C. mandate at all.

By discussing the expiring federal mandate and not the new D.C. requirement, the webpage I viewed did not just provide misleading statements about the need to maintain coverage in 2019, it contained inaccurate information, too. The webpage noted that the federal mandate did not penalize individuals with short gaps of coverage of under three months—but the District’s stricter law requires individuals to maintain health coverage every single month.

The webpage also directed individuals seeking exemptions from the mandate to apply to federal authorities, even though the D.C. exchange has assumed that role for the District’s mandate, effective January 1.

In fairness, I, and presumably other prior customers, did receive a mailer from D.C. Health Link discussing the District’s new coverage requirement for 2019. However, the mailer did not mention the mandate until the top of its second page—an area where casual readers could easily miss it. Instead, the mailer spent prime real estate on the first page discussing “our award-winning reputation as one of the best health Exchange websites in the nation:”

Which do you think is more important for District residents to know: That the website won some awards, or that if they do not buy “government-approved” coverage, they could have their property seized and sold?

Why District Officials Don’t Care

District officials seem more pre-occupied with bragging about their website than updating their website. For instance, during the November meeting of the D.C. Health Benefit Exchange Authority, no one discussed the flawed webpage about the District’s individual mandate, even though D.C. Health Link staff conducted a presentation for the board explaining the website that showed a link to the flawed webpage.

The November board meeting also showed a video of D.C. Mayor Muriel Bowser’s appearance at the launch event for open enrollment. During that event, Bowser gave remarks claiming that “D.C. Health Link has made navigating its website even easier.” Bowser failed to mention that, even as she spoke, that “easier” website included incorrect, flawed, and misleading information about the individual mandate she had signed into law months previously.

Ignoring the ‘Debacle’

Nearly one month into open enrollment, on November 28, it appears D.C. Health Link finally discovered their error. Officials removed access to the page discussing the expiring federal mandate—the Internet Archive captured the old page—and created a new page discussing the District’s new coverage requirement for 2019.

But did District officials publicly admit that their website included incorrect information, try to inform the public, or make things right with those who viewed that incorrect information? No, no, and no. The Exchange Authority board held their most recent monthly meeting in mid-December, and the incident did not come up at all.

When healthcare.gov famously crashed and burned in 2013, then-Health and Human Services Secretary Kathleen Sebelius publicly accepted responsibility for the website “debacle.” By contrast, Mila Kofman, executive director of the Exchange Authority, apparently wants to pretend that the problems with the website she runs never took place.

Congress Should Fix This Mess

Beyond raising obvious questions of competence, the flawed webpage could have very real consequences for District residents. Any individuals who went to the incorrect webpage during the first month of open enrollment, and used its erroneous information to decide not to purchase health coverage for 2019, will face tax penalties when filing their 2019 returns in April 2020—penalties directly resulting from the bungling of District bureaucrats.

While District officials may try to give individuals who suffered from the incorrect webpage exemptions from the mandate penalty, it does not appear they can do so. The District’s mandate uses the same criteria as the federal one to determine hardship exemptions, namely, whether circumstances “prevented [an individual] from obtaining coverage.”

But in this case, circumstances didn’t prevent individuals from obtaining coverage—they prevented individuals from understanding the consequences of not doing so. D.C. Health Link therefore may not have the authority to solve a problem its own staff caused.

To ensure that no one incurs financial penalties because of the botched exchange website, the D.C. Council—or, better yet, Congress—will have to intervene. They should take the opportunity presented by this affair to repeal the mandate entirely.

Or Congress could use the pending appropriations legislation to include the provisions adopted last summer defunding the District’s mandate. Rep. Gary Palmer (R-AL), who sponsored the defunding amendment last summer, once again offered his amendment earlier this month, when the House considered anew the District of Columbia appropriations measure. Unfortunately, however, the new House Democrat majority refused to make a vote on the amendment in order. This means that, absent additional action, individuals may face sizable tax penalties due to a website mess caused entirely by District officials.

No matter what form it takes, the website mess demonstrates that the District’s insurance mandate should go. Given that D.C. Health Link spends $11 million on IT, yet took six months to update a webpage, it should spend less time ordering District residents to buy insurance and more time getting its own house in order.

This post was originally published at The Federalist.

Bill Cassidy’s “Monkey Business”

Last we checked in with Louisiana Republican Sen. Bill Cassidy, he was hard at work adding literally dozens of new federal health care requirements to a Republican “repeal-and-replace” bill. This week comes word that Cassidy continues to “monkey around” in health care — this time quite literally.

STAT reports: “Sen. Bill Cassidy is trying to help hundreds of chimpanzees enjoy an easy retirement in his home state of Louisiana. The Republican is pushing for an amendment to a major appropriations bill winding its way through Congress this week that would force the National Institutes of Health to make good on a 2015 promise to move all its chimps out of research facilities.”

Don’t get me wrong: I oppose animal cruelty as much as the next person. If NIH lacks a compelling scientific justification to conduct research on chimpanzees, or any other animal, then it should cease the research and provide alterative accommodations for the creatures affected.

But on at least three levels, Cassidy’s amendment demonstrates exactly what’s wrong with Washington D.C.

Problem 1: Skewed Priorities

The federal debt is at more than $21 trillion and rising — more than double its $10.6 trillion size not ten years ago, on the day Barack Obama took office. American troops remain stationed in Afghanistan, and elsewhere around the world. Russia still looks to undermine American democracy and to meddle in this year’s midterm elections. The situation with North Korea remains tenuous, as the North Koreans continue to develop intercontinental ballistic missile technologies and their nuclear program.

So why is Cassidy trying to consume Senate floor time with a debate and vote on the chimpanzee amendment, after having already sent a letter to NIH on the subject? On a list of America’s top policy issues and concerns, the fate of 272 chimpanzees wouldn’t register in the top 100, or even in the top 1,000. So why should members of Congress (to say nothing of their staffs) spend so much time on such a comparatively inconsequential issue?

Problem 2: Cassidy Doesn’t Want to Repeal Obamacare

Rather than spending time on a chimpanzee amendment, Cassidy — like his Senate Republican colleagues — should focus on keeping the promise they made to their voters for the past four election cycles that they would repeal Obamacare. But unfortunately, many of the people who made that promise never believed it in the first place.

Based on his record, Cassidy stands as one of those individuals opposed to Obamacare repeal. As I noted in June, Cassidy does not want to repeal the federal system of regulations that lies at the heart of the health care law. In fact, a health care plan released earlier this summer seemed designed primarily to give lawmakers like Cassidy political cover not to repeal Obamacare’s most onerous regulations — even though a study by the Heritage Foundation indicates those regulations are the prime driver of premium increases since the law passed.

Problem 3: Cassidy Just Voted to Entrench Obamacare

Earlier this month, I noted some Republicans in the Senate would likely vote to allow the District of Columbia to tax individuals who do not purchase health insurance, after having voted to repeal that mandate in last year’s tax bill. After I wrote that story, Cassidy became one of five Senate Republicans to do just that, by voting to table (or kill) an amendment defunding Washington’s new individual mandate.

Because Cassidy voted to keep the mandate in place in D.C., he voted to allow District authorities to seize and sell individuals’ property if they do not purchase “government-approved” health coverage. Rather than voting to repeal Obamacare, Cassidy and his colleagues voted to entrench Obamacare in the nation’s capital — for which they have sovereign jurisdiction under the Constitution.

Even apart from Cassidy’s flip-flopping on repeal of Obamacare and its individual mandate, the contrast with the letter to NIH raises its own questions. In that letter, Cassidy emphasized that former research chimpanzees should have “the opportunity to live in mixed-sex groups and … daily access to nesting materials.”

This all sounds well and good, but why does Cassidy seemingly care so much about giving freedom to chimpanzees and so little about giving freedom to District of Columbia residents to buy (or not buy) the health coverage they wish to purchase?

Congress, Stop Monkeying Around

Five years ago, Democratic Rep. Frank Pallone famously called a congressional hearing on the healthcare.gov debacle a “monkey court.” Five years later, the Cassidy amendment on chimpanzee research demonstrates how Congress continues to “monkey around.”

Republicans should stop the primate-related sideshows and focus on things that really matter. Like sticking to the promise they made to voters for eight years to repeal Obamacare.

This post was originally published at The Federalist.

How the Obama Administration Hid Facts to Pass Obamacare

Over the weekend, Politico ran a report about how a “Trump policy shop filters facts to fit his message.” The article cited several unnamed sources complaining about the office of the Assistant Secretary for Planning and Evaluation (ASPE) within the Department of Health and Human Services (HHS), and its allegedly politicized role within the current administration.

One of the article’s anonymous sources called ASPE’s conduct over the past 18 months “another example of how we’re moving to a post-fact era.” Richard Frank, a former Obama appointee and one of the few sources to speak on the record, said that he found the current administration’s “attack on the integrity and the culture of the office…disturbing.”

As a congressional staffer conducting oversight of the CLASS Act in 2011-12, I reviewed thousands of pages of e-mails and documents from the months leading up to Obamacare’s passage. Those records strongly suggest that ASPE officials, including Frank, withheld material facts from Congress and the public about CLASS’s unsustainability, because full and prompt disclosure could have jeopardized Obamacare’s chances of passage.

About the CLASS Act ‘Ponzi scheme’

The Community Living Assistance Services and Supports program, or CLASS for short, intended to provide a voluntary insurance benefit for long-term care. Included as part of Obamacare, the program never got off the ground. In October 2011, HHS concluded it could not implement the program in an actuarially sound manner; Congress repealed the program entirely as part of the “fiscal cliff” deal enacted into law in the early days of 2013.

CLASS’s prime structural problem closely resembled that of the Obamacare exchanges—too many sick people, and not enough healthy ones. Disability lobbyists strongly supported the CLASS Act, hoping that it would provide financial support to individuals with disabilities. However, its voluntary nature meant that the more people already with disabilities enrolled and qualified for benefits, the higher premiums would rise, thereby discouraging healthy people from signing up.

Moreover, although actuarially questionable in the long-term, CLASS’s structure provided short-term fiscal benefits that aided Obamacare’s passage. Because CLASS required a five-year waiting period to collect benefits, the program would generate revenue early in its lifespan—and thus in the ten-year window budget analysts would use to score Obamacare—even if it could not maintain balance over a longer, 75-year timeframe.

This dynamic led the Senate Budget Committee Chairman Kent Conrad (D-ND), to dub CLASS “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.”

Internal Concerns Minimized in Public

A report I helped draft, which several congressional offices released in September 2011—weeks before HHS concluded that program implementation would not go forward—highlighted concerns raised within the department during the debate on Obamacare about CLASS’ unsustainable nature. For instance, in September 2009, one set of talking points prepared by ASPE indicated that, even after changes made by Congress, CLASS “is still likely to create severe adverse selection problems”—i.e., too many sick people would enroll to make the program sustainable.

Frank told me that, during one public speech in October 2009, “I spent about half my time setting out the problems with CLASS that needed to be fixed.” He did indeed highlight some of the actuarial challenges the CLASS program faced. But Frank’s remarks, at a Kaiser Family Foundation event, closed thusly:

We’ve, in the department, have modeled this extensively, perhaps more extensively than anybody would want to hear about [laughter] and we’re entirely persuaded that reasonable premiums, solid participation rates, and financial solvency over the 75-year period can be maintained. So it is, on this basis, that the Administration supports it that the bill continues to sort of meet the standards of being able to stand on its own financial feet. Thanks.

Frank told me over the weekend that his comments “came at the end of my explaining that we were in the process of addressing those issues” (emphasis mine). But Frank actually said that the Obama administration was “entirely persuaded” of CLASS’ solvency, which gives the impression not that the department had begun a process of addressing those issues, but had already resolved them.

Frank’s public comments notwithstanding, ASPE had far from resolved the actuarial problems plaguing CLASS. Two days after his speech, one of Frank’s employees sent around an internal e-mail suggesting that the CLASS Act “seems like a recipe for disaster.”

But the ‘Fixes’ Fall Short

In response to these new analyses, HHS and ASPE came up with a package of technical fixes designed to make the CLASS program actuarially sound. One section of those fixes noted that “it is possible the authority in the bill to modify premiums will not be sufficient to ensure the program is sustainable.”

However, the proposed changes came too late:

  • No changes to the CLASS Act made it into the final version of Obamacare, which then-Majority Leader Harry Reid (D-NV) filed in the Senate on December 19, 2009.
  • The election of Scott Brown (R-MA) to replace the late Kennedy in January 2010 prevented Democrats from fixing the CLASS Act through a House-Senate conference committee, as Brown had pledged to be the “41st Republican” in the Senate who would prevent a conference report from receiving a final vote.
  • While the House and Senate could (and did) pass some changes to Obamacare on a party-line vote through the budget reconciliation process, the Senate’s “Byrd rule” on inclusion of incidental matters in a budget reconciliation bill prevented them from addressing CLASS.

The White House’s own health care proposal, released in February 2010, discussed “a series of changes to the Senate bill to improve the CLASS program’s financial stability and ensure its long-run solvency.” But as HHS Secretary Kathleen Sebelius later testified before the Senate Finance Committee, the “Byrd rule” procedures for budget reconciliation meant that those changes never saw the light of day—and could not make it into law.

Kinda Looks Like a Conspiracy of Silence

By the early months of 2010, officials at ASPE knew they had a program that they could not fix legislatively, and could fail as a result. Yet at no point between January 2010, when ASPE proposed its package of technical changes, through Obamacare’s enactment, did anyone within the administration admit that the program could prove impossible to implement.

Over the weekend, I asked Frank about this silence. He responded that “when the reconciliation package was shelved”—which I take to mean that the CLASS changes did not make it into the reconciliation bill, which did pass—“we began working on regulatory remedies that might address the flaws in CLASS.” However, from the outset some of Frank’s own employees believed those changes might prove insufficient to make the program actuarially sound, as it later proved.

To put it another way: In February 2011, Sebelius testified before the Senate Finance Committee that “the snapshot [of CLASS] in the bill, I would absolutely agree, is totally unsustainable.” She, Frank, and others within the administration had known this fact one year previously: They just hoped they could arrive at a package of regulatory changes that would overcome the law’s structural flaws.

But did anyone within the administration disclose that CLASS was “totally unsustainable” as written back in February 2010? No, because doing so could have jeopardized Obamacare’s chances of passage. The law passed the House on a narrow 219-212 margin.

If HHS had publicly conceded that CLASS could become a “zombie” program—one that they could not fix, but could not remove—it would have caused a political firestorm, and raised broader questions about the bill’s fiscal integrity that could have prevented its enactment.

Was Obamacare Sold on a Lie?

Conservatives have pilloried Obamacare for the many false statements used to sell the law, from the infamous “Lie of the Year” that “If you like your plan, you can keep it” to the repeated promises about premium reductions, Barack Obama’s “firm pledge” to avoid middle-class tax increases, and on and on.

But there are sins of both commission and omission, and the CLASS Act falls into the latter category. Regardless of whether one uses the loaded term “lie” to characterize the sequence of events described above, the public statements by HHS officials surrounding the program prior to Obamacare’s enactment fell short of the full and unvarnished truth, both as they knew it at the time, and as events later proved.

Politico can write all it wants about ASPE under Trump “filter[ing] facts to fit his message.” But ASPE’s prior failure to disclose the full scope of problems the CLASS Act faced represents a textbook example of a bureaucracy hiding inconvenient truths to enact its agenda. If anonymous HHS bureaucrats now wish to attack a “post-fact era” under Trump, they should start by taking a hard look in the mirror at what they did under President Obama to enact Obamacare.

This post was originally published at The Federalist.

Liberal Think-Tank Admits Obamacare’s Failures

Once again, the movement to expand government-run health care continues apace. No sooner had one think tank published a paper calling for the return of an individual mandate at the federal level than the liberal Commonwealth Fund published a paper, released on Friday, calling for states to impose their own Obamacare-style mandates at the state level.

However, the paper proves most interesting for what it tacitly admits. Over time, Commonwealth believes that more and more people will purchase coverage solely due to a government order—because health costs and premiums will continue to rise. Because Obamacare failed to control health costs, more and more individuals will purchase health coverage only under the threat of government-imposed taxation. That’s Commonwealth’s version of health “reform.”

Late Wednesday evening, the House of Representatives adopted the amendment by a 226-189 vote. Next week, the Senate could take up its version of the District of Columbia appropriations bill. If a similar amendment passes on the Senate floor, then the final version of the appropriations measure likely will contain the defunding language—thus preventing individuals who do not buy “government-approved” health coverage from having their property seized by DC authorities.

Longer-Term Effects of the Mandate

As to the Commonwealth report itself: It concludes that enacting an individual mandate in all 50 states would increase insurance coverage by roughly 3.9 million in 2019. Nearly half of those individuals (1.7 million) would comprise individuals purchasing unsubsidized exchange coverage—the people for whom Bill Clinton said Obamacare was the “craziest thing in the world,” because they don’t receive subsidies (which might explain why they won’t purchase insurance unless the government taxes them for not doing so). Individuals enrolling in Medicaid (600,000), subsidized exchange policies (1.1 million), and employer plans (450,000) comprise the rest of the coverage gains.

Particularly noteworthy however: In 2022—just four years from now—the mandate will lead 7.5 million people to obtain health coverage, or nearly twice the 2019 total. Commonwealth explains the reasoning:

As health care costs get more expensive relative to incomes over time, fewer people tend to purchase insurance and the number of uninsured rises. However, with an individual mandate in place, the effect of health care cost growth is lessened because more people hold on to their insurance to comply with the mandate. As a result, the effect of the individual mandate on reducing the number of people without insurance increases over time in percentage terms.

Wasn’t Obamacare Supposed to Reduce Health Costs?

The obvious question: Why would health care costs continue to “get more expensive relative to income over time”? Wasn’t Obamacare supposed to fix all that?

Recall that during his 2008 campaign, Barack Obama repeatedly promised that his health plan would cut families’ premiums by $2,500 per year. Commonwealth provided some of the intellectual firepower behind the pledge, releasing in 2007 a report that it claimed could save $1.5 trillion in health expenditures over 10 years. Many of that report’s proposals, although not all (limiting Medicare’s coverage of expensive drugs and treatments being an obvious exception), made their way into the measure that became Obamacare.

In 2013, Commonwealth upped the ante, releasing another report whose recommendations promised $2 trillion in lower health spending over a decade. Yet Commonwealth’s report released Friday admits that health costs in 2022 will continue to rise faster than income, resulting in more and more people feeling squeezed to afford coverage. At this rate, Commonwealth should stop putting out reports talking about all the health costs we could save. Our country can’t afford them.

The Left’s Arrogant Conceit

I’ll give the last word to—of all people—Barack Obama. In 2010, he talked about how he didn’t want to “give the keys back” to people who “didn’t know how to drive.” The Commonwealth report makes plain that despite all the intrusions on freedom Obamacare included, it didn’t accomplish its supposed goal of making health care more affordable. (And no, using government to re-distribute money doesn’t qualify as making the underlying cost of care more “affordable.”)

Given that dynamic, who would want to give people like the researchers at Commonwealth even more control over the health care system? The question should answer itself.

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.

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.

How a CBO Error Could Cost the Pharmaceutical Industry Billions

Government officials often attempt to bury bad news. Aaron Sorkin’s “The West Wing” even coined a term for it: “Take Out the Trash Day.” So it proved last week. A Congressional Budget Office (CBO) document released quietly on Thursday hinted at a major gaffe by the budget agency and its efforts to conceal that gaffe.

In a series of questions for the record submitted following Director Keith Hall’s April 11 hearing before the Senate Budget Committee, CBO admitted the following regarding a change to the Medicare Part D prescription drug program included in this past February’s budget agreement:

When the legislation was being considered, CBO estimated that provision would reduce net Medicare spending for Part D by $7.7 billion over the 2018-2027 period. CBO subsequently learned of a relevant analysis by the Centers for Medicare and Medicaid Services and incorporated that analysis in its projections for the April 2018 Medicare baseline. The current baseline incorporates an estimate that, compared with prior law, [the relevant provision] will reduce net Medicare spending for Part D by $11.8 billion over the 2018-2027 period.

As I wrote at the time, the provision attracted no small amount of controversy at its passage—or, for that matter, since. The provision accelerated the closing of the Part D “donut hole” faced by seniors with high prescription drug costs, but it did so by shifting costs away from the Part D program run by health insurers and on to drug companies.

The pharmaceutical industry was, and remains, livid at the change, which it did not expect, and tried to undo in the March omnibus spending bill. CBO didn’t just get its score wrong on a minor, non-controversial provision—it messed up on a major provision that will over the next decade affect both drug companies and health insurers.

Because the provision substitutes mandatory “discounts” by drug companies for government spending through the Part D program, it saves the government money through smaller Part D subsidies—at least on paper. (That said, the score doesn’t take into account whether drug manufacturers will raise prices in response to the change, which they could well do.) Because seniors actually spend more in the “donut hole” than CBO’s initial projections said, the provision will have a greater impact—i.e., cost the pharmaceutical industry billions more—than the February budget estimate says.

In its response last week, CBO tried to cover its tracks by claiming that “the $4 billion change…accounts for about 2 percent” of the total of $186 billion reduction in estimated Medicare spending over the coming decade due to technical changes incorporated into the revised baseline. But a $4.1 billion scoring error on a provision first projected to save $7.7 billion means CBO messed up its score by more than 53 percent of its original budgetary impact. That’s not exactly a small error.

Moreover, CBO didn’t come clean and publicly admit this error of its own volition. It did so only because Senate Budget Committee Chairman Mike Enzi (R-WY) forced the budget office to do so.

Enzi submitted a question noting that “CBO realized its estimate of a provision [in the budget agreement] was incorrect. Where is the correction featured in the new report?” CBO didn’t “feature” the correction in its April Budget and Economic Outlook report at all—it incorporated the change into the revised baseline without disclosing it, hoping to sneak it by without anyone calling the budget office out on its error.

Since that time, the purportedly “nonpartisan” organization realized it published an incorrect score—off by more than 50 percent—on a high-profile and controversial issue, changed its baseline to account for the scoring error, and said exactly nothing in a 166-page report on the federal budget about the change. If CBO won’t disclose this kind of major mistake on its own, then its “transparency efforts” seem like so much noise—a distraction designed to keep people preoccupied from focusing on errors like the Part D debacle.

To view it from another perspective: Any head of a private company whose analysis of a multi-billion-dollar transaction proved off by more than 50 percent, because his staff did not access relevant information available to them at the time of the analysis, would face major questions about his leadership, and could well lose his job. But judging from his desire to conceal this scoring mistake, the CBO director apparently feels no such sense of accountability.

Thankfully, however, members of Congress have tools available to fix the rot at CBO, up to and including replacing the director. Given the way CBO attempted to conceal the Part D scoring fiasco, they should start using them.

This post was originally published at The Federalist.

Paul Ryan Shares Responsibility for Republicans’ Obamacare Failure

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

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

A Party Proves It Has No Idea How to Lead

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

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

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

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

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

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

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

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

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

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

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

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

This post was originally published at The Federalist.

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.