This American Life Doesn’t Understand This American Government

The most recent episode of NPR’s “This American Life” continues a line of liberal laments that the legislative process does not work, and blames most of that ineffectiveness on a single source: Donald Trump. (Shocker there.)

But the idea of removing Trump to Make Congress Great Again doesn’t hold up to scrutiny. Even if it did, such a development would not comport with the Framers’ design of our government, which put the “deliberative” in “deliberative process” far more than the modern-day Left would prefer.

“This American Life” correspondent Zoe Chace laments that the popularity of DACA—which covers individuals brought to the United States illegally as children—has impeded its enactment into law. She thinks lawmakers have used its popularity

as a spoonful of sugar to make tougher immigration measures easier to swallow—stuff like border security, restricting visas, or on the Democrat side, legalizing even more immigrants. That’s the curse of DACA. The most valuable thing about it, on Capitol Hill anyway, is the possibility that it could be used to pass other stuff. So even though we’re a democracy, even though 80% of the country wants DACA, the country doesn’t get what it wants because there’s no incentive for Congress to just put it to a straight up or down vote.

Having castigated Congress for using DACA “to pass other stuff,” Chace spends much of the episode highlighting Flake’s attempts to use “other stuff”—namely, tax reform—to pass DACA.

Looks Can Be Deceiving

Chace calls Flake “the most powerful senator in Congress right now.” Having announced his retirement, Flake has no political constituency to appease. That dynamic, combined with the current Senate split of 50 Republicans and 49 Democrats—Republican John McCain is recovering from cancer treatment in his home state of Arizona—at first blush gives Flake significant leverage.

Second, to pass the Senate, DACA requires not 50 votes, but 60, as most legislation needs a three-fifths majority to overcome a potential filibuster. The tax legislation, enacted under special budget reconciliation procedures, stands as an exception that proves the general rule that would apply to any DACA bill.

Third, by favorably viewing Flake’s attempt (which he privately admits to Chace is a bluff) to tie his tax reform vote to a commitment from leadership to take up DACA legislation, Chace supports the very problem she criticizes—namely, lawmakers using one bill or issue to “pass other stuff.”

Chace’s criticism of the legislative process therefore comes across as inherently self-serving. She doesn’t object to senators using unrelated matters as leverage. For example, she applauds Flake for threatening to hijack the tax bill over immigration, so much as she objects to senators using other matters as leverage on her issue: passing DACA. That double standard, coupled with an ignorance of basic constitutional principles, leads to some naïve misunderstandings.

Let’s Review Some of Those

That principle leads to the “other stuff” dynamic Chace described, because lawmakers have other competing priorities to navigate. Some might support DACA, but only if they receive something they perceive as more valuable in exchange—border security, for instance, or a broader immigration deal.

Occasionally lawmakers take this concept too far, but the system tends to self-correct. As the episode notes, Democrats’ tactics led to a partial government shutdown in January, as Senate Democrats refused to pass spending bills keeping the federal government operating unless Republicans committed to enact a DACA measure with it—“other stuff,” in other words.

But although most Democrats support DACA, they divided over the hardball, hostage-taking tactics that tied passing spending bills to enacting an immigration measure. That division and public pressure over the shutdown led them to beat a hasty retreat.

In 2007, under President George W. Bush an immigration bill famously failed on the Senate floor, in part because then-senator Obama and other liberals voted to restrict the number of guest workers permitted into the United States—a key provision necessary to win Republican votes.

Consider a Case Study in Virginia

To view the immigration debate in a nutshell, one need look no further than Rep. Eric Cantor (R-VA). Or, to be more precise, former Rep. Eric Cantor. In June 2014, Cantor lost his Republican primary to an upstart challenger in Dave Brat. Outrage over the possibility that the House might pass an immigration bill the Senate’s “Gang of Eight” muscled through in 2013 helped Cantor go down to primary defeat, and ended any debate on immigration in the 113th Congress (again, well before most people thought Trump would run for president, let alone win).

The way Cantor’s 2014 defeat changed the landscape on immigration in Congress illustrates that, while not a direct democracy, the American system remains responsive to democratic principles, even if they resulted in an outcome (i.e., inaction on immigration) Chace would decry. Chace might argue that a June primary election where only 65,017 Virginia residents voted—only about one-sixth the number who voted in that district’s November 2016 general election—should not determine the fate of immigration legislation nationwide.

But by making it difficult to enact legislation, the American system of government accounts for intensity of opinion as well as breadth of opinion. In the case of Cantor, a group of 36,105 Virginia residents who voted for Brat—many of whom cared strongly about stopping an immigration bill—sent a message on behalf of the hundreds of thousands of Virginia residents who didn’t care enough to vote in the Republican primary election. (Virginia conducts open primaries, in which voters can choose either party’s ballot, so any resident could have voted for or against Cantor in the Republican primary.)

That outcome might resonate with a former resident of Cantor’s district, Virginia’s own James Madison. In Federalist 10, Madison wrote of how a geographically diverse country would make it difficult for any one faction to command a majority, and impose its will on others. In Federalist 51, Madison returned to the topic of limiting government’s power by separating its responsibilities among co-equal branches: “Ambition must be made to counteract ambition.”

The stalemate on immigration and DACA would likely prove quite satisfactory to Framers like Madison, who feared government’s powers and purposefully looked to circumscribe them. To the modern Left, however, a constitutional government with limited authority seems an antiquated and inconvenient trifle.

‘Slow Government’ Complaints Are Way Older than Trump

Although Chace’s report claims that congressional dysfunction “has changed in ways that are very specific to Donald Trump,” liberals have criticized government inaction for decades. In “The System: The American Way of Politics at the Breaking Point,” Haynes Johnson and David Broder use their seminal analysis of the rise and fall of “HillaryCare” to decry a Washington “incapable as a nation of addressing the major long-term problems facing the society:”

At no point, we believe, has the cumulative assault on the idea of responsible government been so destructive of the very faith in the democratic system as now. A thoroughly cynical society, deeply distrustful of its institutions and leaders and the reliability of information it receives, is a society in peril of breaking apart.

Again, these words far precede any Trump administration. Broder and Johnson wrote them in 1996, while the tycoon looked to rebuild his empire following several corporate bankruptcies.

As “This American Life” notes, Trump has proved more indecisive legislatively than most presidents did. The episode highlights how Trump went from supporting any immigration bill Congress would send him to imposing major new conditions on same in the matter of hours. That series of events illustrated but one of Trump’s many reverses on legislation.

For instance, Trump famously called the American Health Care Act “mean” in a closed-door meeting weeks after Republican representatives voted to approve the legislation, and Trump publicly praised them for doing so. But presidents prior to Trump have also engaged in legislative U-turns or ill-conceived maneuvers.

In his 1994 State of the Union message, Bill Clinton threatened to veto any health-care bill that did not achieve universal coverage. As Johnson and Broder recount, that was a major tactical mistake that Clinton later attempted to undo, but ultimately contributed to the downfall of “HillaryCare.” And of course, Clinton himself might not have become president had his predecessor, George H.W. Bush, not made then violated his infamous “Read my lips—no new taxes!” pledge—the “six most destructive words in the history of presidential politics.”

While Trump undoubtedly has introduced more foibles into the legislative process, he has not changed its fundamental dynamic—a dynamic “This American Life” criticizes yet does not understand. Chace says “we’re a democracy,” but she means that she wants a Democratic—capital “D”—form of government, one in which Congress passes lots of legislation, enacts big programs (more funding for NPR, anyone?), and plays a major role in the lives of the American people.

Yet Madison and the Constitution’s Framers deliberately designed a lower-case “r” republican form of government, one with limited powers and a deliberative process designed to make enacting major legislation difficult. That reality might not suit the liberal dreams of “This American Life,” but it represents how American democratic principles actually live and work.

This post was originally published at The Federalist.

Mixed Messages on Paul Ryan’s Entitlement Record

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

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

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

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

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

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

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

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

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

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

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

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

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

This post was originally published at The Federalist.

Paul Ryan and “Regular Order”

Last week, Politico published an article talking about how the Republican House of Representatives under Paul Ryan’s speakership set a new record for the number of bills approved under closed rules—which prohibit members of Congress from offering amendments. Although the Politico story didn’t use the term, it echoes the complaints of Sen. John McCain (R-AZ) surrounding Obamacare “repeal-and-replace” legislation this past summer: “I want the regular order.”

McCain’s comment invites a question: What exactly constitutes “the regular order” in Congress? Why do people keep calling for it? And if so many people keep calling for it, why doesn’t Congress just restore “the regular order” already?

‘Deem-and-Pass’

Politico quoted House Rules Committee Ranking Member Louise Slaughter (D-NY): “Under Speaker Ryan’s leadership, this session of Congress has now become the most closed Congress in history.” To call Slaughter’s complaints about a closed process ironic would put it mildly.

Seven years ago, when she chaired the Rules Committee, Slaughter proposed having the Democratic House enact Obamacare into law without voting on it. The House could merely “deem” Obamacare approved as a result of passing some other measure.

While the House has repeatedly used this “deem-and-pass” strategy under both Republican and Democratic majorities, the optics of passing such a massive and prominent piece of legislation using such dodgy procedural shortcuts led Democrats to abandon the gambit, but not before conservative bloggers noted that Slaughter, Rep. Steny Hoyer (D-MD), and others attacked the “deem-and-pass” maneuver when Republicans controlled the House in the 2000s.

Republican Manipulation

In proposing the “deem-and-pass” strategy, Slaughter looked to protect House Democrats from taking a tough vote on the unpopular health-care bill Senate Democrats approved on Christmas Eve 2009—the one with the “Cornhusker Kickback,” “Gator Aid,” “Louisiana Purchase,” and the other backroom deals that made the legislation toxic in the minds of many. When in the majority themselves, Republicans have used the same tactics, using procedural blocks to avoid politically difficult votes.

In 2015, the appropriations process ground to a halt in mid-summer, when Democrats offered an amendment preventing federal funds from being used to display the Confederate flag in national cemeteries. The amendment, offered by Rep. Jared Huffman (D-CA), originally passed by voice vote, but some Republicans pledged to vote against the bill if the amendment remained in it.

Republican leaders didn’t have the votes to strip out the amendment, and didn’t have the votes to pass the bill with the amendment in, so the Interior appropriations bill got shelved—as did the entire appropriations process, because Republicans feared Democrats would offer Confederate flag-related amendments to any spending bill that came to the House floor.

House Freedom Caucus

Yet on several occasions over the past few years—including the Confederate flag flap—conservatives and HFC members have looked to leadership to squelch debate on amendments. Earlier this year, moderate Republicans and Democrats combined to defeat an amendment that would have prohibited federal funding of soldiers’ gender-reassignment surgery. Conservatives responded a few weeks later by demanding that leadership insert such a funding prohibition into the defense spending bill—without a direct vote, via the “deem-and-pass” strategy—even though the provision would have violated the will of the House as expressed in a vote weeks before.

While the executive ultimately decided the transgender issue—at conservatives’ behest, President Trump issued an executive order prohibiting transgender troops from serving, making the House procedural dispute moot—it illustrates the problems inherent with a move to “regular order.” As with Slaughter and Democrats, conservatives support an open process in the House only up until the point when it detracts from their desired policy outcomes, at which point the legislative process quickly devolves into a game of ends justifying means.

If it wanted to, HFC could easily demand a more open floor process out of Ryan. It could vote down the rules governing floor debate on individual bills unless and until the Republican leadership allowed an open process and more amendment votes, at which point the Republican leadership would have no choice but to acquiesce to pass legislation through the House. However, a more open process would require conservatives to accept policy outcomes they might not like—federal funds being spent on gender-reassignment surgeries, for instance.

These strictures require leadership to use all manner of procedural shortcuts and chicanery to cobble together legislation that can command a majority of votes. It’s no way to run a railroad. But until members’ desires for “the regular order” are strong enough that they will vote down bills on process grounds alone, it will remain the way Washington works—or, in many cases, doesn’t.

This post was originally published at The Federalist.

Four Questions about the Alexander-Murray Bill

Upon its unveiling last week, the health insurance “stabilization” measure drafted by Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) received praise from some lawmakers. For instance, Sen. John McCain (R-AZ) stated that “health care reform ought to be the product of regular order in the Senate, and the bill [the sponsors] introduced today is an important step towards that end.”

Unfortunately, the process to date has not resembled the “regular order” its sponsors have claimed. Drafted behind closed doors, by staff for a committee with only partial jurisdiction over health care, the bill’s provisions remained in flux as of last week. Moreover, the bill apparently will not undergo a mark-up or other committee action before the bill is either considered on the Senate floor—or, as some have speculated, “air-dropped” into a massive catch-all spending bill, where it will receive little to no legislative scrutiny.

Why didn’t Alexander know his bill provided taxpayer funding of abortion coverage?

Following my article last week highlighting how the cost-sharing reduction payments appropriated in the legislation would represent taxpayer funding of plans that cover abortion, a reporter for the Catholic-run Eternal Word Television Network interviewed senators Alexander and Murray (along with myself) about the issue.

Alexander told reporter Jason Calvi that he “hadn’t discussed” the life issue with staff, indicating he had little inkling of the effects of the legislation he sponsored:

Alexander then claimed that “I’m sure the president will address” the abortion funding issue. But executive action—which a future president can always rescind—is no substitute for legislative language. The pro-life community derided President Obama’s executive order designed to segregate abortion payments and federal funding as an accounting sham.

As I wrote in June, Republican leaders—including Senate leader Mitch McConnell (R-KY), and Mike Pence, the current vice president—clearly noted during debates on Obamacare that the law would provide for taxpayer funding of abortion coverage. The Alexander-Murray bill would do likewise unless and until the legislation includes an explicit ban on abortion funding.

Who inserted the earmark for Minnesota into the legislation?

Call it the “Klobuchar Kickback,” call it the “Golden Gopher Giveaway,” but Section 2(b) of the bill contains provisions relevant only to Minnesota. Specifically, that provision would allow a state’s basic health program—which states can establish for individuals with incomes between 133 and 200 percent of the federally defined poverty level—to receive “pass-through” block grant funding under a waiver.

Currently, only New York and Minnesota have implemented basic health programs, and of those two states, only Minnesota has also sought a state innovation waiver under Obamacare. Last month, the federal Centers for Medicare and Medicaid Services (CMS), in approving Minnesota’s application for an innovation waiver, said it could not allow the state to receive “pass through” funds equal to spending on the basic health program, because the statute did not permit such an arrangement. The Alexander-Murray bill would explicitly permit basic health program spending to qualify for the “pass through” arrangement, allowing Minnesota—the only state with such an arrangement—to benefit.

Will a committee mark up the Alexander-Murray bill?

Alexander notably demurred on this topic when asked last week. One reason: As Politico has noted, it remains unclear whether or the extent to which Alexander’s committee has jurisdiction over the legislation he wrote. Revisions to the Obamacare state innovation waiver process comprise roughly half of the 26-page bill, yet the Senate HELP Committee shares jurisdiction over those matters with the Senate Finance Committee, whose chairman has derided legislation giving cost-sharing payments to insurers as a “bailout.”

Even as he praised the Alexander-Murray bill as a return to “regular order,” McCain—himself a committee chairman—doubtless would take issue with another committee “poaching” the Senate Armed Services panel’s jurisdiction, or failing to hold a mark-up entirely. Yet the process regarding the Alexander-Murray bill could include two noteworthy legislative “shortcuts”—which some may view as a deviation from “regular order.”

Are HELP Committee staff still re-writing the legislation?

A close review of the documents indicates that HELP Committee staff made changes to the bill even after Alexander and Murray announced their agreement last Tuesday. The version of the bill obtained by Axios and released last Tuesday evening—version TAM17J75, per the notation made in the top left corner of the bill text by the Office of Legislative Counsel—differs from the version (TAM17K02) publicly released by the HELP Committee on Thursday.

The revisions to the legislation, coupled with Alexander’s apparent lack of understanding regarding its implications, raise questions about what other “surprises” may lurk within its contents. For all the justifiable complaints regarding the lack of transparency over Republicans’ “repeal-and-replace” legislation earlier this year, the process surrounding Alexander-Murray seems little changed—and far from “regular order.”

This post was originally published at The Federalist.

A Status Update on Health Care

The past week’s debate on health care has seen more twists and turns than a dime-store movie novel. “Repeal-and-replace” is dead—then alive again. President Trump calls for outright repeal, then letting the law fail, then “repeal-and-replace” again.

As Vince Lombardi might ask, “What the h— is going on out here???”

Never fear. Three simple facts will put the debate in context.

Leadership Is Buying Moderates for ‘Repeal-and-Replace’

Whether in the form of “candy,” “making it rain,” or old-fashioned carve-outs that help states with reluctant senators, Senate leaders are trying to figure out the amount and type of money and incentives that will win enough moderate votes to pass a “repeal-and-replace” bill. Details remain sketchy, but the broader outline is clear: senators don’t want to vote for provisions they approved 18 months ago—when they knew President Obama would veto a repeal measure. And Senate leadership hopes to “solve” this problem essentially by throwing money at it—through new funding for Medicaid expansion states, opioid funding, bailout funds for insurers, programmatic carve-outs for some states, or all of the above (likely all of the above).

Leadership Isn’t Serious about Repeal-Only

Some observers (not to mention some senators) are confused about whether the Senate will vote on a repeal-only measure, or a “repeal-and-replace” bill. But Senate Majority Whip John Cornyn (R-TX) explained leadership’s strategy to Bloomberg Wednesday: “There’s more optimism that we could vote on a repeal-and-replace bill, rather than just a repeal bill….But if there’s no agreement then we’ll still vote on the motion to proceed” to a repeal-only measure” (emphasis mine).

Translation: Senate leadership will only move to a vote on the 2015 repeal bill—which some conservative groups have argued for—if it knows it will fail. In fact, some observers have gone so far as to suggest Majority Leader Mitch McConnell’s Monday announcement that the Senate would vote on a repeal-only bill amounted to an attempt to bait-and-switch conservatives—convincing them to support starting debate on the bill by dangling repeal-only in front of them, only to pivot back to “repeal-and-replace” once the debate began.

Regardless of McConnell’s intentions earlier in the week, Cornyn’s comments make clear the extent to which Senate leaders take a repeal-only bill seriously: They don’t.

McCain May Make It Moot

It may sound impolitic or callous to translate a war hero’s struggle against cancer into crass political terms, but if the recent cancer diagnosis of Sen. John McCain (R-AZ) means the senator will be unable to travel to Washington, Republican leaders’ desperate attempts to cobble together a legislative compromise may ultimately prove moot. At least two conservative senators oppose the current bill from the Right; adding more money to appease moderates won’t reduce those numbers, and may increase them. And at least two moderate senators oppose the current bill from the Left, hence the effort to increase funding.

If McCain is unable to vote on the legislation, Republican leaders will be able to withstand only one defection before putting the bill’s passage in jeopardy—yet at least two senators on either side of the Republican Conference oppose the current bill. That math just doesn’t add up, which means that barring some unforeseen development, the hue and cry of the past several days may ultimately amount to very little.

This post was originally published at The Federalist.

Liberals’ Agenda: Tax Health Benefits to Fund Corporate Welfare

feature article in Sunday’s Washington Post provided the latest summary of Obamacare’s woes: Premiums set to spike dramatically, insurers leaving in droves, and millions of Americans held hostage to a lengthening comedy of errors. But liberals stand ready with their answer: More of the same government taxes and spending that created the problem in the first place. To wit, the Left would tax Americans’ employer-provided health benefits to fund a permanent bailout fund for insurance companies.

In a brief released earlier this month, the liberal Robert Wood Johnson Foundation had several possible “solutions” to solve the problem of low enrollment, and low insurer participation, in Obamacare’s health insurance exchanges. In the document, the foundation suggested making program of reinsurance now scheduled to expire at year’s end permanent:

Extending [Obamacare’s] reinsurance program and its mechanism of financing would more likely have a stabilizing influence [on insurers]. The program could be authorized permanently…or for a set period of time, with authority for CMS [the Centers for Medicare and Medicaid Services] to continue it if needed….Funds for the reinsurance pool would need to be, as they are currently, collected from individual market insurers, group market insurers, and self-funded plans.

In other words, individuals who do not purchase coverage from an exchange should have their benefits taxed, to fund more corporate welfare subsidies to health insurers, in the hopes that they will continue to offer exchange coverage.
That was the basic premise of the law’s reinsurance mechanism. Put slightly more charitably, Section 1341 of Obamacare imposed an assessment on Americans with employer-provided coverage, or those who purchase health coverage directly from an insurance carrier rather than through a government-run exchange, to help subsidize exchange insurers with high-cost patients.

The assessments were set to last three years—from 2014 through 2016—serving as a transition while the new marketplaces developed. But after three years, the exchanges are in worse shape than ever. Healthy and wealthy individuals have not purchased coverage, making the exchange population sicker than the average employer plan.

Rather than fixing a problem that onerous government regulations—a mandated package of benefits, and rating requirements that have raised premiums so substantially for healthy individuals that many have chosen to forgo coverage—the Left just wants more of the same. The Robert Wood Johnson Foundation paper included numerous “solutions” straight out of the liberal playbook: Requiring insurers to participate on exchanges; a government-run “public option” intended to destroy private coverage, richer subsidies; and new penalties for late enrollment. In other words, more of the taxes, spending, and regulations that brought us this mess in the first place—not to mention the permanent insurer bailout fund.

Two clear ironies stand out when it comes to the reinsurance proposal. First, the Obama administration has already given insurers far more than they expected—or the law allows—on the reinsurance front. Government officials have repeatedly increased reinsurance reimbursement levels, giving insurers nearly 50% more support from the program in 2014 than they originally expected. And the non-partisan Congressional Research Service believes that the Administration has violated the law by prioritizing payments to insurers over payments to the Treasury—giving insurers billions of dollars in extra funding that legally should be returned to taxpayers.

Second, Barack Obama himself campaigned vigorously against “taxing health benefits” in 2008. He ran ads attacking John McCain for making health insurance subject to income tax, saying the tax would fund subsidies that would go straight to insurance companies. Yet Obamacare contained not one, but two, separate “assessments” (read: taxes) on health plans—the first to fund comparative effectiveness research that could be utilized by health plans reimbursement and coverage decisions, and the second for the “temporary” reinsurance program. After violating his campaign pledge not once, but twice, in Obamacare itself, the president’s allies want Congress to make permanent the tax on health benefits—to finance a bailout fund that will go—you guessed it!—straight to the insurance companies.

With labor force participation still historically low, and Americans struggling with high health costs, now is certainly not the time to tax the health coverage that businesses provide to working families so that insurers can receive billions more dollars in bailout funds. Congress should not even think about throwing good money after bad in a vain attempt to keep the sinking Obamacare ship afloat.

How the Cadillac Tax Could Drive Obamacare Over a Political Cliff

In its economic forecast last week, the Congressional Budget Office revealed a quandary about Obamacare’s “Cadillac tax”: To make the underlying law fiscally sustainable, the tax may end up increasing at a rate that becomes politically unsustainable.

The nugget about the tax, formally known as a high-premium excise tax and set to take effect in 2018, came in CBO’s updated estimates for the law as a whole, which noted:

CBO and [the Joint Committee on Taxation] expect that premiums for health insurance will tend to increase more rapidly than the threshold for determining liability for the high-premium excise tax, so the tax will affect an increasing share of coverage offered through employers and thus generate rising revenues. In response, many employers are expected to avoid the tax by holding premiums below the threshold, but the resulting shift in compensation from nontaxable insurance benefits to taxable wages and salaries would subject an increasing share of employees’ compensation to taxes. Those trends in exchange subsidies and in revenues related to the high-premium excise tax will continue beyond 2025, CBO and JCT anticipate, causing the net costs of the ACA’s coverage provisions to decline in subsequent years.

In other words, under current projections the tax will grow so quickly that it will exceed the annual rising costs of the law’s new entitlements, causing net spending on Obamacare actually to decline.

The Cadillac tax has always caused the administration political heartburn. In 2008, then-Sen. Barack Obama broadcast the most-aired political ad in a decade, attacking Sen. John McCain for wanting to tax health benefits. The Cadillac tax technically targets insurers, not individuals, but videos of remarks by MIT economist Jonathan Gruber, who advised the administration when the health-care law was being developed, show Mr. Gruber saying that Democrats engaged in semantics about the tax and even “mislabeling” to provide political cover for the president to change his position.

When Obamacare was passed, Mr. Gruber wrote articles—promoted at the time by the administration—saying that the Cadillac tax wasn’t a tax. He argued that, in response to the law’s pressures, firms would reduce their health benefits but increase taxable wages—and that paying taxes on these higher wages amounted to a net plus for individuals rather than a tax increase. But in the face of pressure from labor unions, which remain opposed to the tax, Democrats ultimately decided to delay its implementation until 2018, after President Obama leaves office.

In its analysis last week, CBO made clear that the Cadillac tax, coupled with provisions slowing the growth of insurance exchange subsidies (provisions that some liberal groups want to overturn) is central to making the law fiscally sustainable. The question is whether the effects of the Cadillac tax would be any more politically sustainable in 2018 and beyond than they were in 2009—and what supporters of the law will do if they aren’t.

This post was originally published at the Wall Street Journal Think Tank blog.

Barack Obama’s Tax Cuts — For Insurance Companies

The President’s campaign flyer includes some interesting claims on health care.  It also includes some curious language on taxes: “The President has provided new tax cuts to help the middle class afford higher education and health care.”  We’ve debunked this myth in its entirety here.  But it’s worth reiterating the key point: The President’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets of the insurance industry:

  • Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
  • Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges.  The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultantadmitted in an interview that “Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change.  In most cases, credits will go straight to insurance companies, to pay for health benefits.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President, only to flip-flop on this issue when he signed Obamacare.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

Presidential flip-flops and insurance company giveaways are real signs of change – but they’re certainly not hope and change, and they’re not the true reform our health sector needs.

Does Obamacare Cover “Obamnesia?”

During a campaign speech on Friday, President Obama went on a riff about “Romnesia,” which according to the President is a disease symptomized by frequent reversals of position.  Of course, that diagnosis comes from someone particularly expert at switching positions when it comes to health care.  As the saying goes, let’s go to the videotape:

Barack Obama, February 5, 2008: “If a mandate was the solution, we could try that to solve homelessness by mandating everyone buy a house.”

Barack Obama, January 31, 2008: “I think that it is important for us to recognize that if in fact you’re going to mandate the purchase of insurance and it’s not affordable, then there’s going to have to be some enforcement mechanism that the government uses.   And they may charge people who already don’t have health care fines, or have to take it out of their paychecks.  And that I don’t think is helping those without health insurance.”

Barack Obama, September 20, 2009: “For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase….The fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now.”

Barack Obama, September 12, 2008: “I can make a firm pledge: Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

Obama 2008 campaign ad: “[Senator] McCain would make you pay income tax on your health insurance benefits – taxing health benefits for the first time ever….Taxing health care instead of fixing it?  We can’t afford John McCain.”

Barack Obama, September 3, 2007: “It’s a plan that will cover every American and cut the cost of a typical family’s premiums by $2,500 a year.”

Barack Obama, July 21, 2008: “What we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

Obama 2008 campaign ad: “And that tax credit?  [Senator] McCain’s own website says it would go straight to the insurance companies – not to you.”

The President claimed that Obamacare covers pre-existing conditions like “Romnesia.”  But before making those comments, the President first should have declared his own interest.  Because based on the above, it looks for all the world that President Obama wanted to ram through Obamacare so that his own “Obamnesia” would be covered.

The Obama Administration’s Protection Racket

Shortly, President Obama will be addressing the AARP convention via satellite.  He will undoubtedly say nice things about AARP’s role as a “senior advocate.”  But what he won’t discuss are the ways in which his own Administration has allowed AARP to continue making billions in profits on its insurance business:

  1. AARP’s lucrative Medigap insurance was exempted in Obamacare from the ban on pre-existing conditions; medical loss ratio requirements; caps on insurance industry executive compensation; and the tax on all other health insurance plans.
  2. The Department of Health and Human Services didn’t think all these Obamacare exemptions were enough; last year they also exempted Medigap insurance from premium rate review – even though AARP, which carries the plan with the largest market share, earns greater profits the more seniors pay in premiums.
  3. At a conference hosted by America’s Health Insurance Plans in March 2010, HHS Secretary Sebelius encouraged the insurance industry to give up some of its profits, at a time when health insurance profit margins were about 2 percentYet neither Secretary Sebelius nor anyone else in the Administration ever criticized AARP for making a profit margin of nearly 5 percent on its Medigap insurance.
  4. In April 2010, the Administration engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than is required by the law.  But no one from the Administration has taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage.
  5. In a speech at an AARP conference in October 2010, Secretary Sebelius praised AARP as the “gold standard in cutting through spin and complexity to give people the accurate information they need.”  Yet the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements.  So Secretary Sebelius praised as the “gold standard” for “accurate information” an organization that has the types of financial conflicts her insurance commissioner colleagues have criticized as ripe for abuse.

Why might the Administration look the other way despite these abuses?  Documents released by the Energy and Commerce Committee yesterday provide myriad reasons, showing all the political favors senior Administration officials asked of AARP as they rammed Obamacare through Congress:

  • Jim Messina, White House Deputy Chief of Staff: “We need [AARP CEO] Barry Rand to go meet with Ben Nelson personally and just lay it on the line.  ‘We will be with you, we will protect you.  But if you kill this bill, seniors will not forget.’  We are at 59 [votes in the Senate], we have to have him.” (page 7)
  • Jim Messina: “Can we get immediate robo calls into Nebraska urging [Ben] Nelson to vote for cloture?” (page 9)
  • Nancy-Ann DeParle, Director, White House Office of Health Reform: “Can AARP support accountable care orgs [sic] and some other delivery system reforms?” (page 26)
  • Jim Messina: “Latest top 25 targets list from House leadership” (page 35)
  • Ann Widger, Office of Public Engagement: “We would really like AARP to participate in this roundtable.” (page 37)
  • Ann Widger: “Did you guys put out any paper today on the McCain [Medicare] amendment?” (page 39)
  • Jim Messina: “[Rep. Larry] Kissel a problem…Help.” (pages 42-43)
  • Nancy-Ann DeParle: “Can you get me a copy of the [AARP] bulletin we discussed yesterday?” (page 64)

Secretary Sebelius has already admitted she has acted improperly in using her office to conduct political activities; the Office of Special Counsel last week concluded she violated the law to do so.  Given all of the above, it is not unreasonable to question whether the Secretary, and others within the Administration, made a calculated political decision to grant special favors to AARP – and ignore its questionable business practices – because AARP endorsed Obamacare.

Yesterday President Obama claimed that he changed Washington “from the outside” by enacting Obamacare.  The pattern of conduct described above suggests just the opposite: That the President rammed Obamacare through only by establishing what amounts to an inside-the-Beltway protection racket between the Administration and AARP – the former will allow the latter to continue overcharging seniors for insurance, so long as AARP uses its advocacy megaphone to endorse the President’s liberal causes.

 

The Honorable Kathleen Sebelius

Secretary

Department of Health and Human Services

200 Independence Avenue, S.W.

Washington, DC 20201

Dear Secretary Sebelius:

Today my office is releasing a report, “Profits Before Principles,” regarding the insurance practices of AARP. The report finds that AARP has a strong financial interest in keeping Medigap supplemental insurance premiums high – because the organization receives greater profits the more seniors pay in premiums. In addition, AARP’s financial interests have been aided by the Patient Protection and Affordable Care Act (PPACA), which AARP not coincidentally endorsed. Experts agree that PPACA’s provisions will have the effect of driving seniors out of Medicare Advantage health plans and into Medigap supplemental insurance – a market where AARP enjoys the largest market share.

I am greatly concerned by AARP’s questionable business practices, and by the numerous exemptions granted to Medigap insurance – both legislatively and through your Department’s regulatory process – as a result of PPACA. Therefore, I ask you to respond to the following questions:

  1. The text of PPACA exempts Medigap supplemental insurance plans from several new requirements: Section 1103 exempts plans from medical-loss ratio requirements; Section 1202(2)(A) exempts plans from the prohibition on pre-existing condition exclusions; Section 9014 exempts plans from caps on industry executive compensation; and Section 10905(d) exempts plans from the tax applied to all other health insurers. Does the Administration support all these special exemptions for Medigap plans? Why or why not?
  2. My staff attended a PPACA implementation briefing for Senate Republican staff in April 2010. At that time, Jeanne Lambrew of your Department’s Office of Health Reform admitted that PPACA exempted Medigap insurance from the law’s new regulatory regime. If in fact the Administration does NOT support PPACA’s numerous exemptions for Medigap plans, why has your Department done nothing to publicize that fact in the intervening two-plus years since that briefing?
  3. Your Department continues to claim that PPACA “ended many of the insurance industry’s worst abuses” – even though you are fully aware that these changes do not apply to Medigap plans. For instance, HHS previously released a publicity brochure that says “starting in 2014, discrimination based on a pre-existing condition by an insurer will be prohibited in every state.” Why has your Department continued to repeat these misleading slogans, even though your staff admitted that seniors applying for Medigap insurance remain subject to pre-existing condition discrimination due to the special carve-outs included in PPACA?
  4. In your speech to the Democratic National Convention on September 4, 2012, you criticized Republicans for “let[ting] insurance companies continue to cherry-pick who gets coverage and who gets left out, priced out, or locked out of the market.” Likewise, during his speech at the Democratic National Convention, President Obama said that “no American should have to spend their golden years at the mercy of insurance companies.” Please detail the specific provisions included in PPACA that place new limits on Medigap insurers’ ability to “cherry-pick who gets coverage and who gets left out, priced out, or locked out of the market,” and ensure that no applicant for Medigap coverage with a pre-existing condition will be left “at the mercy of insurance companies.”
  5. In a speech on September 8, 2012, President Obama claimed that Medicare premium support proposals would lead to billions of dollars in greater profits for insurance companies. But a 2011 House Ways and Means Committee member report found that PPACA itself could lead to billions in profits for AARP, because the law’s cuts to Medicare Advantage will reduce enrollment in that program, and encourage seniors to purchase supplemental Medigap insurance instead. Do you agree with the Ways and Means Committee report’s premise that PPACA will lead seniors to migrate from Medicare Advantage coverage to Medigap plans – thereby increasing profits to AARP? If not, on what basis do you disagree with the non-partisan experts at the Congressional Budget Office and the Medicare Office of the Actuary, who have concluded the law will reduce Medicare Advantage enrollment by millions?
  6. In addition to the above exemptions, your Department added yet another Medigap carve-out to the ones included in the statute, by exempting Medigap insurance from PPACA’s rate review process. Why do seniors not deserve this supposed protection? If PPACA’s benefits are so good, why didn’t your Department extend them to seniors as well?
  7. Did AARP, or anyone associated with or paid by it, influence or attempt to influence the Administration regarding the numerous exemptions given to Medigap insurance in PPACA, or the regulatory interpretations of PPACA? If so, please provide details as to the dates, persons, positions, and circumstances of said efforts.
  8. The 2011 House Ways and Means Committee member report noted that for its Medigap plans, AARP receives 4.95% of every premium dollar paid by seniors. As a former insurance commissioner, do you think it’s appropriate that AARP has a perverse financial incentive to keep Medigap insurance premiums high?
  9. In a speech at an AARP conference in October 2010, you praised that organization as the “gold standard in cutting through spin and complexity to give people the accurate information they need.” As a former insurance commissioner, how exactly do you believe AARP can serve as a “gold standard” giving seniors “accurate information” about Medigap insurance plans, when the organization has a financial incentive to sell seniors more insurance than they may need or want?
  10. As a former insurance commissioner, you are no doubt aware that the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements. In fact, Section 18 of NAIC’s Producer Model Licensing Act recommends that states require explicit disclosure by insurer affiliates, and clear written acknowledgement by consumers, of any percentage-based compensation arrangement, due to the potential for financial abuses. Did you undertake any due diligence to ensure that AARP’s Medigap percentage-based compensation model was in full compliance with both the letter and spirit of Section 18 of the Producer Model Licensing Act prior to making your assertion that AARP constitutes the “gold standard” for giving seniors “accurate information?” If not, why not?
  11. Given that AARP holds the largest share of the Medigap market, why did your Department grant a special exemption for Medigap insurance from PPACA rate review? Why do you believe that AARP can act in a proper manner to control premium increases – even though the organization gains profits for every additional dollar Medigap premiums rise?
  12. At a conference hosted by America’s Health Insurance Plans in March 2010, you encouraged the insurance industry to give up some of its profits, at a time when health insurers were earning between 2 and 3 cents of profit for every dollar of revenue, according to Fortune 500 estimates. If you criticized other insurers for earning between 2 and 3 cents of every premium dollar in profits, why haven’t you criticized AARP for taking 4.95 cents of every Medigap premium dollar as pure profit?
  13. In April 2010, the Administration and you personally engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than was required by PPACA. Why haven’t you taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage?
  14. At the April 2010 Senate Republican briefing, staff asked whether your Department would write a letter to AARP asking them to stop denying Medigap applications for individuals with pre-existing conditions. Jeanne Lambrew of the Office of Health Reform promised to look into the matter, but the letter was never sent. Why has your Department waited more than two and a half years to ask AARP to stop discriminating against sick and disabled individuals applying for Medigap insurance?
  15. Finally, please forward copies of any and all Administration documents – including those originating from outside your Department – from January 20, 2009 through today inclusive regarding: 1) the Medigap exemptions included in PPACA, and the Administration’s viewpoints and/or technical assistance provided regarding same during the drafting process; 2) the Administration’s administrative interpretations of the Medigap exemptions during the rulemaking process; 3) AARP’s positions on Medigap insurance plans, including but not limited to the exemptions included in PPACA; and 4) AARP’s position on PPACA, including but not limited to any policy changes AARP said it required to be included in the legislation for the bill to receive the organization’s endorsement.

I look forward to receiving your response on these issues within two weeks. If you have any questions, feel free to contact Alec Aramanda or Chris Jacobs of my staff. Thank you for your time, and I look forward to your reply.