Medicaid Expansion Has Louisianans Dropping Their Private Plans

If any state can serve as the poster child for the problems associated with ObamaCare’s Medicaid expansion, it’s Louisiana, which joined the expansion in 2016, after Democrat John Bel Edwards became governor. An audit released last year exposed ineligible Medicaid beneficiaries, including at least 1,672 people who made more than $100,000. But Louisiana’s Medicaid expansion has revealed another waste of taxpayer funds, both in the Pelican State and nationwide: the money spent providing coverage to people who already had health insurance.

Via a public-records request, the Pelican Institute obtained data demonstrating that thousands of Louisiana residents dropped their private coverage to enroll in Medicaid under the expansion. A spreadsheet compiled by the Louisiana Department of Health put the count between 3,000 and 5,000 people a month, and that doesn’t count those who enrolled in Medicaid first, then dropped private coverage.

When asked about the spreadsheet, Medicaid officials stated in an email that the Health Department “stopped producing” the data in late 2017 when it discovered its vendor’s information “was limited to [third-party liability] during the period of Medicaid enrollment.” Because the vendor couldn’t track beneficiaries before or after their Medicaid enrollment, the spreadsheet arguably underestimated the number of people dropping private coverage to enroll in Medicaid.

The Health Department’s internal spreadsheet information comports with other coverage estimates. A survey by Louisiana State University researchers found that, from 2015-17, enrollment in private insurance fell precipitously among low-income Louisiana residents eligible for Medicaid under the expansion. The number of people covered by private health insurance declined by tens of thousands, even as Medicaid enrollment skyrocketed by more than 141,000.

That masses of Louisiana residents canceled their private coverage to enroll in “free” Medicaid should surprise no one. In 2007 Massachusetts Institute of Technology economist Jonathan Gruber, who later became an architect of ObamaCare, concluded that some coverage expansions would see rates of “crowd-out”—government programs squeezing out private insurance—approaching 60%. Eight years later, Louisiana’s Legislative Fiscal Office estimated that crowd-out would cost taxpayers between $900 million and $1.3 billion over five years. Because enrollment in Medicaid expansion vastly exceeded initial projections, the true cost may rise far higher.

Federal budget analysts have yet to quantify the effect of crowd-out on Medicaid expansion—but they should, because estimates suggest that Washington is spending billions annually funding Medicaid for people with prior health coverage. Montana officials recently released a study boasting of 8,700 workers who would have employer-sponsored coverage but for Medicaid expansion, claiming that expansion provided “cost savings to businesses” of up to $114 million. Only in a bureaucrat’s mind would more government spending, taxes and government dependency represent “cost savings.”

In response to the Louisiana audit, the state recently purged more than 30,000 ineligible people from the rolls. Health Secretary Rebekah Gee claimed the action demonstrated how she and Gov. Edwards “want to make sure that only those that need Medicaid have Medicaid.” But good stewards of taxpayer dollars, upon receiving preliminary reports of people dropping coverage to enroll in Medicaid, would have demanded better data and fashioned policy solutions to address the problem. The Louisiana Department of Health did neither and stopped compiling the data.

Generations of Louisiana politicians, since Gov. Huey Long in the 1930s, have claimed that fostering an economy rooted in government dependence will lead to prosperity. But the more than 67,000 residents who have left the state in the past three years alone see a stagnant economy and a slowly sinking state. Louisiana can do better, and other states thinking about Medicaid expansion should think again.

This post was originally published at The Wall Street Journal.

CBO, the Individual Mandate, and Tax Reform

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

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

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

Inconvenient Truths are Truths Nonetheless

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

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

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

Do Republicans Want to Repeal Obamacare’s Regulations?

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

Health Policy Is Taking a Back Seat to Tax Policy

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

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

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

This post was originally published at The Federalist.

Top Ten Reasons Senate Health Bill is Fake Repeal

A PDF version of this document can be found at the Texas Public Policy Foundation website.

  1. Retains Obamacare Insurance Subsides.  The bill modifies, but does not repeal, Obamacare’s system of insurance subsidies—an expansion of the welfare state, administered through the tax code.
  2. Retains Obamacare Medicaid Expansion.           The bill as written would never repeal Obamacare’s massive expansion of Medicaid to able-bodied adults, while it would not fully eliminate the enhanced match states currently receive to cover those adults until 2024—nearly seven years from now.
  3. Expands Obamacare Insurance Subsidies.             Rather than repealing all of the law “root and branch,” as Sen. McConnell claimed was his goal, the bill instead expands Obamacare’s subsidy regime—eliminating the law’s so-called “family glitch” and expanding eligibility for subsidies. Some conservatives may question the need to “fix” Obamacare, when the legislation should repeal Obamacare.
  4. Retains ALL Obamacare Regulations.         While modifying some and allowing states to waive others, the bill does not repeal any of Obamacare’s onerous insurance regulations—the prime drivers of the premium spikes that have seen rates more than double since Obamacare went into effect.
  5. Retains Obamacare’s Undermining of State Sovereignty.   Because the bill keeps in place the federal mandates associated with Obamacare, states must ask permission to opt-out of just some parts of Obamacare, which remains the default standard. This turning of federalism on its head will allow Democratic Governors—and/or a future Democratic Administration—to reinstitute Obamacare mandates quickly and easily.
  6. Appropriates Obamacare Cost-Sharing Reductions.    Unlike Obamacare itself, the bill actually spends federal tax dollars on cost-sharing reductions authorized, but not appropriated, under the law. While conservatives might support a temporary appropriation to ensure a stable transition as Obamacare is fully repealed, the bill does the former—but certainly not the latter.
  7. Extends and Expands Obamacare’s Corporate Welfare Bailouts.    The bill includes not one, but two, separate “stability funds” designed to make slush fund payments to insurance companies. Between now and 2021, the bill would spend at least $65 billion on such payments—over and above the cost-sharing reduction subsidies listed above.
  8. Includes Obamacare’s Work Disincentives.    The Congressional Budget Office previously estimated that the subsidy “cliffs” included in Obamacare would discourage work—because individuals could lose thousands of dollars in subsidies by gaining one additional dollar of income—and that the law would reduce the labor supply by the equivalent of over two million jobs. The Senate bill retains those subsidy “cliffs.”
  9. Continues Obamacare Pattern of Giving Too Much Authority to Federal Bureaucrats.      The bill gives near-blanket authority to the Administration on several fronts—from creating the “stability funds” to giving Medicaid incentives to states—that would allow federal bureaucrats to abuse this excessive grant of power.
  10. Obamacare Architect Admits It’s Not Repeal.  Speaking on CNN Thursday, famed Obamacare architect Jonathan Gruber said that “this is no longer an Obamacare repeal bill—that’s good.” He continued: “If you look at what’s criticized [about] Obamacare, it was subsidies, it was regulations…this law wouldn’t really change those…It really [doesn’t] change very much.” Those admissions come from an individual who received hundreds of thousands of dollars from the Obama Administration to consult on Obamacare.

 

The Limousine Liberals Who Won’t Join Obamacare

Even by government standards, it’s an outlandish story of wealth and hypocrisy: A bureaucrat who made more than one million dollars selling Obamacare insurance plans, but won’t buy one for himself? The sad thing is, it also happens to be true.

Meet Peter Lee, Executive Director of Covered California. In the past three years alone, Mr. Lee has made well over one million dollars running California’s Obamacare Exchange. He received massive raises the past two years, going from a salary of $262,644 in 2014 to $420,000 beginning this July. On top of that nearly $160,000 raise, Peter Lee received two other whopping bonuses of $52,258 in 2014 and $65,000 in 2015—winning more in one lump sum than many families make in an entire year. But at a September briefing, I asked Mr. Lee point blank what type of health coverage he holds, and he said he was enrolled in California’s state employee plan.

Think about that: a bureaucrat whose salary comes from selling Exchange plans—Covered California’s operating budget derives from surcharges on plans sold through the Exchange—but yet won’t buy one of the plans he sells for himself. It’s enough to make a person ask how much Mr. Lee would have to make before he would actually break down and buy one of the plans he sells—a million dollars? Two million? Five million?

Liberal One-Percenters: Good for You, Not for Me

I’ll concede right now that Obamacare’s Exchanges were designed primarily for those without employer coverage. Individuals whose employers do offer “affordable” coverage cannot receive subsidies on Exchanges, although they can enroll without a subsidy, if they so choose. Most Americans choose employer coverage, because firms heavily subsidize them—to the tune of an average of $12,865 for family coverage. For the average worker making $60,000, or even $80,000, per year, turning down the employer subsidy to purchase an unsubsidized Exchange plan represents a substantial pay cut, one many families could not afford.

But well-paid liberals like Peter Lee—who over the last two years received raises more than twelve times the average employer’s subsidy for health coverage—have no real financial excuse not to join the Exchanges—other than liberal elitism. As the owner of a new small business who likely won’t make six figures this year, I have little patience to hear supposed believers in Obamacare with far more means than I who won’t give up a few thousand dollars in employer subsidies to enroll on the Exchanges themselves. After all, aren’t liberals the ones who believe in social solidarity and “paying your fair share” anyway…?

Well-Heeled Bureaucrats and Think Tankers’ Hypocrisy

For instance, Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt literally cashed in to the tune of over $4.8 million in stock options on joining the Administration—more than enough to forego any employer subsidy for his health coverage. He recently responded to a questioner on Twitter asking him why he wasn’t on Medicare by stating that he was only 49 years of age—too young to qualify. Within minutes, I sent Slavitt a follow-up tweet: “If Obamacare is so great, are you on the Exchange—and if not, why not?” Slavitt has yet to reply.

Both Slavitt, and Health and Human Services Secretary Sylvia Burwell (net worth: $4.6 million), have plenty of financial resources to forego an employer subsidy and purchase Exchange coverage. Even at a total premium of $15,000 for his family, one year’s insurance costs would total less than 0.3% of the stock gains Slavitt cashed in on when joining the Administration—to say nothing of the millions he likely will make when he “cashes in” on his government experience in just a few months.

Did Slavitt just not see my tweet asking him about his health coverage? Did he not reply because the person in charge of selling Exchange policies doesn’t think they’re good enough to buy one himself? Or does he believe that someone who made millions a few short years ago is too “poor” to give up a few thousand dollars in employer subsidies for his health care?

The ranks of well-paid liberals clamming up when asked about their health benefits extends beyond government, into the think-tank ranks as well. In September, the Urban Institute published a paper claiming that Exchange coverage was actually cheaper than the average employer plan. I e-mailed the papers’ authors, asking them a simple question: Had they taken steps to enroll in Exchange coverage themselves—and encouraged the Urban Institute to send all its employees to the Exchanges?

I have yet to receive a reply from the three researchers. But after doing some digging, I found the Urban Institute’s Form 990 filing with the IRS. The form reveals that one of the study’s authors, John Holahan, received a total of $313,932 in compensation in 2014—$267,051 in salary, and $46,881 in other compensation and benefits. Does Mr. Holahan therefore believe that giving up his subsidized benefits, and relying “only” upon his $267,051 salary, presents too great a sacrifice for him to bear financially? If he and his colleagues truly believe Exchange plans are more efficient than employer coverage—as opposed to just coming up with a talking point to rebut Obamacare’s massive premium increases—then shouldn’t they enroll themselves?

I Make $400,000—So Quit Whining about Your Cost Hike

Then there’s Larry Levitt, a Senior Vice President at the Kaiser Family Foundation. Last week Levitt tweeted that Exchange premium increases don’t apply to many people—a talking point that Drew Altman, Kaiser’s CEO, has also made in blog posts. I replied asking whether Levitt himself, or other people using this talking point, actually have Exchange coverage—to which Levitt gave no response.

Care to guess how much these scholars claiming Exchange premium increases are overrated make themselves? According to Kaiser’s IRS filing, Levitt received $333,048 in salary, and $48,563 in benefits, in 2014. His boss, Drew Altman, pulled down a whopping $642,927 in salary, $149,509 in retirement plan contributions, and a $13,545 expense account—nearly $806,000 in total compensation.

The contradictions from the Kaiser researchers are ironic on two levels. One could certainly argue that an executive making nearly $400,000, let alone over $800,000, doesn’t need comprehensive health insurance—except to protect from severe emergencies, like getting hit by the proverbial bus. However, both appear loathe to give up their employer-provided health coverage—and equally quick to minimize the impact of Obamacare’s premium increases nationwide. As I noted on Twitter, that’s easy for people who refuse to join the Exchanges to say.

Stupid Is What Stupid Does?

Last, but certainly not least, on the hit parade is MIT professor Jonathan “Stupidity of the American Voter” Gruber. Last week Gruber said both that the law “was working as designed” and that people who lost their coverage thanks to the law “never had real insurance to begin with.” Unfortunately, MIT’s tax filings don’t include his salary. However, given that Gruber’s infamous undisclosed contract with the Obama Administration totaled nearly $400,000, and that he literally made millions from other contracts, it’s fair to say Gruber could afford to purchase his own health insurance outside his employer—if he wanted to. So I e-mailed him, and asked him whether he gave up his employer coverage to purchase that “real insurance” that Obamacare provides. Wouldn’t you know, I have yet to receive a reply.

It’s bad enough that the individuals above apparently refuse to give up their platinum-plated health plans to join the Exchanges—even though it would cost them at most a few percentage points of their total compensation to do so. They also wish to cast stones from their ivory towers at those of us who are facing higher premiums, rising deductibles, fewer (if any) choices of insurers, and smaller doctor networks thanks to the law they claim to support.

So to all those well-heeled Obamacare supporters who can afford to enroll in Obamacare themselves, but simply won’t, I’ll make one final point: Disagree with me if you like, but I’m working my damnedest to stop Obamacare’s bailouts—even though I know that if I “win” on the policy, I could lose my health coverage. It’s called standing on principle. It’s a novel concept—you might want to try it sometime.

This post was originally published at The Federalist.

Are Millions of Americans Leaving Employer Coverage to Join Obamacare?

In defending the relatively small enrollment of health insurance Exchanges to date, the Obama Administration has claimed that fewer employers have dropped health insurance coverage than expected. However, results from a recent survey indicate that approximately 6.8 million enrollees in Obamacare coverage have come directly from the employer market—suggesting the phenomenon may be more widespread than originally thought.

The survey, from the Commonwealth Fund, found that a majority of individuals with Medicaid coverage (62%), and a plurality of individuals with Exchange coverage (45%), lacked health insurance prior to obtaining their new coverage. But sizable percentages of individuals with Exchange coverage (34%) and Medicaid insurance (20%) said they had been enrolled in employer-provided health insurance immediately prior to obtaining their current Obamacare-related plan.

The responses suggest the presence of crowd-out, in which government-subsidized insurance takes the place of privately-sponsored coverage. Prior studies suggest that, in some cases, crowd-out can reach as high 60%. While not approaching those levels, the survey data do demonstrate that public programs have attracted many individuals with employer coverage.

Extrapolating the Commonwealth data to existing enrollment figures suggests that Obamacare programs may have prompted 6.8 million enrollees to drop their employer coverage. That number includes 34% of the 11.1 million Exchange enrollees as of March 31 (3.8 million), plus 20% of the approximately 15 million increase in Medicaid enrollment since Obamacare’s first open enrollment period in 2014 (3.0 million).

The publicly released data associated with the Commonwealth do not provide income information for the individuals who dropped employer coverage to join an Obamacare plan, or the reasons for their change in coverage. However, other studies suggest that Exchanges have appealed primarily, if not exclusively, to those individuals with low incomes eligible for the greatest subsidies.

News articles have generally focused on the lack of disruption to employer coverage caused by the Obamacare rollout. It remains unclear whether those surveyed by Commonwealth voluntarily relinquished employer coverage (in which case they should not have received Exchange insurance subsidies), saw themselves “dumped” into the Exchange by an employer dropping their plan, or a mix of the two. But the survey data suggest policy-makers need examine the crowd-out phenomenon more closely—not just for those facing potential dislocations in coverage, but for taxpayers footing the bill for insurance subsidies.

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.

Gov. Jindal Op-Ed: On Obamacare, Better Late than Never

Little wonder why President Obama decided not to put all those health care negotiations on C-SPAN. In recent weeks, several videos have emerged featuring Jonathan Gruber—who famously received nearly $400,000 in contracts from the Department of Health and Human Services as a technical adviser on Obamacare—revealing inconvenient truths about the way the law was enacted.

In talking about “the stupidity of the American voter,” Gruber admitted several deceptions used to sell Obamacare. In discussing the individual mandate—which Barack Obama famously said was “absolutely” not a tax increase—Gruber said that if Democrats had called the mandate a tax increase in 2010, “the bill dies.” He admitted that Obamacare will substantially raise premiums on younger Americans, in a massive redistribution of wealth. And he argued that “basic exploitation of the lack of economic misunderstanding of the American voter” allowed Democrats to pass a massive tax increase on the middle class—even though candidate Obama in 2008 made a “firm pledge” that “no family making less than $250,000 a year” would see “any form of tax increase.”

Of course, President Obama broke many other promises to ram his unpopular law through Congress. Last year this time, millions of people found the lie in “If you like your plan, you can keep it,” receiving cancellation notices in the mail. Many other Americans have found they can’t keep their doctor—or that, if they can keep their doctor, it will cost them much more, because Obamacare’s new coverage requirements have forced insurance companies to narrow their doctor networks in a vain attempt to minimize premium increases. And of course, the “most transparent” Administration utterly failed to keep candidate Obama’s repeated pledge to negotiate the bill in the public eye, rather than in backroom dealings with Washington special interests.

But the biggest broken promise of all was the promise that Obamacare would reduce health care costs. President Obama promised repeatedly that his plan would lower premiums by $2,500 for the average family—and do so within his first four years. He hasn’t come close. Premiums for employer provided coverage have risen by an average of $4,154 per family since President Obama was first elected. Overall, American families have faced a 33 percent increase in their premiums, from $12,680 to $16,834, because premiums and health costs have risen, not fallen, under Obamacare. And things will only get worse; the law itself will raise health spending by $621 billion in the coming decade, according to the Administration’s own actuaries.

Mr. Gruber and the other know-it-alls designed Obamacare as a top down government centered approach where costs are high, and Washington bureaucrats are driving the train and making decisions about our health care. It was always meant to be a closed system that puts bureaucrats in the waiting room with you and your doctor. The Left’s mindset on expanding Medicaid was a terrible totally misguided idea, putting quantity over quality.

Expanding Medicaid represents government doubling down on a program whose health outcomes range from marginal to horrendous. Medicaid was set up by Congress in order to provide a safety net for the disabled and truly needy, yet this President has turned it into yet another massive entitlement program, while we can’t pay for our existing programs.  It is the absolute height of irresponsibility.

Real healthcare outcomes stem from patients and their doctors working together in an open health care system. Decisions about our health care should not be made top-down, politically.

Better late than never for President Obama himself to embrace reforms that can reduce costs, not raise them. As a Christian, I firmly believe in the redemptive power of second chances. Here’s hoping that the new Congress and those in Washington take the opportunity fully within their grasp.

This post was originally published at the Bossier Press.

An Issue That Could Define Alternatives to Obamacare

 

A line buried in a Heritage Foundation policy paper issued just before the November elections hinted at a major fissure point in discussions surrounding a conservative alternative to Obamacare. The distinctions it raised could shape the form of any health-care alternatives the Republican-led Congress considers next year.

The policy brief, outlining the principles for any conservative health-care alternative, included the following lines:

Replacing the current tax treatment of health benefits with a new design for health care tax relief that is both revenue and budget neutral (based on pre-PPACA levels) is the first step in transforming the American health system into one that is more patient-centered, market-based, and value-focused.

The words in parentheses pack the most punch, for they lay down a clear marker regarding budgetary baselines—which define the parameters of many policy debates in Washington.

Consider a hypothetical alternative to Obamacare that repeals the law entirely, including its more than $1 trillion in tax increases, but then imposes new limits on the tax break for employer-provided health coverage—raising, say, $400 billion in revenue—to finance coverage expansions. Does that alternative cut taxes by $600 billion (the $1 trillion in repealed taxes, offset by the $400 billion in new revenue), or raise taxes by $400 billion, because repeal of the law should be seen as a given?

Polling data conducted for America Next earlier this year suggests that Americans believe the latter. A majority of voters (55%)—and sizable majorities of conservative voters—believe that “any replacement of Obamacare must repeal all of the Obamacare taxes and not just replace them with other taxes.”

Economists and policy experts on both the left and the right agree on the need to reform the tax treatment of health insurance. But there is less agreement on the means. For instance, in one of his now-infamous videos, MIT economist and Obamacare consultant Jonathan Gruber explained how provisions in Obamacare—sold as a tax on insurance companies—ultimately would raise tax burdens on the middle class. Some on the right have proposed that Congress accelerate this tax increase by amending the law next year. Other alternatives to the Affordable Care Act would repeal and replace the law’s tax increases, while still other alternatives (including the plan put forward by America Next) would repeal all of the law’s tax increases, and reform the tax code, without raising additional revenue in its stead.

To the casual observer, these baseline distinctions may seem arcane—but in Washington, they can pack a wallop. Expect the issues referenced in the Heritage brief to resurface whenever the new House and Senate consider health-care alternatives.

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

Jonathan Gruber, Transparency, and Obamacare’s IPAB

The administration faced a political firestorm last week, when videos emerged featuring MIT professor—and paid Obamacare consultant—Jonathan Gruber making comments on “the stupidity of the American voter,” and claiming that only a deliberately opaque and deceptive process was essential to the law’s enactment. But the administration may soon face a policy controversy as well—for the law features a board that can operate in nontransparent ways, and which will empower technocrats like Mr. Gruber himself.

While the Independent Payment Advisory Board, or IPAB, may bring to mind the latest Apple product offering, the reality is far different. Designed to control health spending, the board of 15 experts—nominated by the president, based in part on suggestions from congressional leaders, and confirmed by the Senate—will have the power to make binding rulings to slow the growth in Medicare outlays. Furthermore, the administration’s budget proposed giving IPAB even more authority, by reducing the caps on Medicare spending the board will be charged to enforce.

IPAB has yet to be constituted. The budget sequester and other savings proposals have thus far kept Medicare spending below the targets that would trigger IPAB recommendations, and Republican leaders have indicated to President Barack Obama their disinclination to provide the White House suggestions for nominees. As a result, the president has yet to make formal nominations—not least because, if the Medicare spending target is reached, requiring IPAB to make formal recommendations to Congress, but IPAB does not do so, that power would then lie within the Department of Health and Human Services itself.

IPAB faces several characteristics that could imbue it with the lack of transparency Mr. Gruber infamously discussed in his speeches:

  • Former Obama administration official Peter Orszag wrote a piece for the New Republic in which he cited IPAB as one way to “counter the gridlock of our political institutions by making them a little less democratic.” In 2012, Politico stated that, while in the White House, Mr. Orszag had “pushed” to include the board in the law.
  • Section 3403 of Obamacare, which creates IPAB, does not require the board to conduct any open meetings. The law merely says that “the board may hold such hearings…as the board considers advisable;” it does not require IPAB to do so.
  • Likewise, while the law prohibits IPAB from “ration[ing] health care,” the term “rationing” is nowhere defined in statute. Former Health and Human Services Secretary Kathleen Sebelius conceded this point, and acknowledged that HHS would likely have to define “rationing” before the board could begin its work—but it has yet to do so.

Prior to the recent controversies, Mr. Gruber seemed like exactly the type of expert—an “individual with national recognition for [his] expertise in health finance and economics”—that might have received an appointment to IPAB. Interviewed for a 2011 article about who might serve on the board, Mr. Gruber didn’t rule it out entirely, while admitting that statutory restrictions on IPAB members’ outside activities might dissuade individuals from applying.

As it happens, Mr. Gruber currently serves on the board of the Massachusetts Connector, an entity charged with implementing the Commonwealth’s health care overhaul. However, to judge from comments made to reporters last week, an aide to Gov. Deval Patrick seemed keen to downplay his influence: “When his term expires at some point, that will be a decision for someone else at that time.”

But beneath the political controversy lies a philosophical question. Fifty years ago last month, Ronald Reagan summarized the concern in his “A Time for Choosing” speech:

This is the issue of this election—whether we believe in our capacity for self-government, or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capital can plan our lives for us better than we can plan them ourselves.

Therein lies the Obama administration’s bigger problem—how to reconcile a law that increases the influence of independent experts with a high-profile example of such an expert who repeatedly treated American voters with open hostility and contempt. At a time when both the health care law and the federal government itself remain historically unpopular with voters, the Gruber controversy only heightens the perceived distance between the governing and the governed.

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

What’s “Success” in Lowering Health Care Premiums?

Supporters and opponents of the health-care law disagree about a lot. When it comes to whether the Affordable Care Act is reducing health insurance premiums, they even disagree on the definition of success.

Recently the Commonwealth Fund, a think tank that supports the law, released a paper on overall premium levels. The analysis by Jonathan Gruber, a paid consultant to the Obama administration on the Affordable Care Act, argues that premium increases routinely exceeded 10% before the law was enacted in 2010 and that Obamacare will help lower the scope of increases in future years.

But during the 2008 presidential campaign, Barack Obama promised on numerous occasions that his plan would “cut costs” and “lower your premiums” by $2,500 per year for the average family. Ironically, the foundation for Mr. Obama’s promises rests in a memo released by three consultants to the 2008 campaign—one of whom, David Blumenthal, now heads the Commonwealth Fund.

Since the law was enacted, Commonwealth and other supporters, while saying that Obamacare would mitigate premium increases, have largely failed to address the earlier promise that the law would reduce them outright. Another author of the 2008 memo, David Cutler, said in 2012 that, in retrospect, Mr. Obama made “occasional misstatements” when pledging that premiums would fall by $2,500 annually. In August 2012, Politifact rated that premiums pledge a “promise broken.”

Supporters of the law started out saying that Obamacare would reduce premiums in absolute terms. Now, backers say that the law will lower premium increases relative to what they would have been without the law—a tougher metric to quantify and a more difficult measure of success to sell politically. This is another example of how in Washington, where one stands on an issue frequently depends upon where one sits.

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