Bill Clinton’s Right: Obamacare’s Tax on Success Is “Crazy”

Taxes are back in the news on the presidential campaign trail — and this time, the controversy has nothing to do with Donald Trump. While the commentariat have seized on Bill Clinton’s description of Obamacare as “crazy,” it’s important to recognize exactly what he considered so nonsensical: the fact that Obamacare increases already sizeable government-imposed penalties on work, entrepreneurship, and success. Its perverse incentives will leave more Americans stuck in a poverty trap, making Obamacare even more warped than Bill Clinton’s description of the law.

In their full context, Clinton’s comments look more damning of the law, rather than less. Before uttering the “crazy” epithet, his remarks focused on those whose income puts them right above the cutoff line to receive federal subsidies. These people are, in the former president’s words, getting “whacked” because they have succeeded in life and in business:

The current system works fine if you’re eligible for Medicaid if you’re a lower-income working person, if you’re already on Medicare, or if you get enough subsidies on a modest income that you can afford your health care. But the people who are getting killed in this deal are the small businesspeople and individuals who make just a little too much to get in on these subsidies. Why? Because they’re not organized, they don’t have any bargaining power with insurance companies, and they’re getting whacked. So you’ve got this crazy system where all of a sudden 25 million more people have health care, and they’re out there busting it, sometimes 60 hours per week, wind up with their premiums doubled and their coverage cut in half. It is the craziest thing in the world. 

During the 2012 campaign, Mitt Romney was roundly criticized when he said in an interview,  “I’m not concerned about the very poor. We have a safety net there.” Bill Clinton’s comments emphasized that Obamacare is not concerned about the middle class. It’s not aimed to support those who want to rise in station in life; it actually discourages them from doing so.

And whereas Romney’s 2012 impromptu “gaffe” came in a live television interview, Obamacare represents considered policy — the result of a legislative process of nearly a year and policymaking developed long before that. As I noted in a 2013 Heritage Foundation paper, the law contains numerous subsidy cliffs that create enormous inequities. In some cases, as little as an additional dollar of income could cause the loss of thousands of dollars in premium or cost-sharing subsidies paid by the federal government, or both. “Families facing these kinds of poverty traps may ask the obvious question: If I will lose so much in government benefits by earning additional income, why work?”

The nonpartisan Congressional Budget Office (CBO) has answered that question simply: In many cases, individuals will not work. A 2010 CBO report concluded that “the phaseout of the [insurance] subsidies as income rises will effectively increase marginal tax rates, which will also discourage work.” All told, the nonpartisan budget scorekeepers have concluded that the law will reduce the labor supply by the equivalent of 2 million jobs next year alone.

Obamacare only exacerbated an existing poverty trap identified by scholars on both sides of the political spectrum, including those at the left-of-center Urban Institute. As income rises above the poverty level, government-funded benefits such as Medicaid, food stamps, and the earned-income tax credit phase out or disappear altogether, eroding or eliminating much of the income effect from higher wages. If a single parent with two children can receive nearly $30,000 in government benefits with no earnings, but only about $10,000 in benefits with $35,000 in earnings, many parents may make the calculated decision that the comparatively modest net increase in family income does not justify work. Moreover, both the prior welfare system and Obamacare impose financial penalties on marriage, discouraging one of the best ways for families to rise out of poverty.

It’s ironic that Bill Clinton, the president who signed the largest tax increase in American history, would express such outrage at the way Obamacare raises effective marginal tax rates for the middle class. But for a party that purports to stand for the interests of the poor and working class, Obamacare will only work to perpetuate the cycle of poverty down to future generations. And that is perhaps the craziest idea of all.

This post was originally published at National Review.

The GOP Platform’s Language on Health Care and Options for a Republican President

The platform approved Monday at the Republican National Convention suggests that a future Republican administration could dismantle Obamacare using regulatory authority. A Republican president could not waive portions of the law, but he could act to stop controversial payments that are being made to insurers.

In its section on health care, the platform pledged of Obamacare: “a Republican president, on the first day in office, will use legitimate waiver authority under the law to halt its advance and then, with the unanimous support of Congressional Republicans, will sign its repeal.” The waiver concept echoes language used by 2012 Republican nominee Mitt Romney, who pledged that “If I were president, on Day One I would issue an executive order paving the way for Obamacare waivers to all 50 states.”

The “legitimate waiver authority” provided under the law is unlikely to grant the type of relief the Republican delegates or Mr. Romney envisioned. Language in section 1332 of the Affordable Care Act addresses the waiver of some provisions of the law. The waivers, however, apply only to states, not to individuals. They also apply only to a few delineated sections of the law, including the individual and employer mandates.

As I wrote last July, the waiver authority in the law allows changes in just one direction. States can cover more people or provide more generous insurance coverage than Obamacare does, but they cannot make changes that deviate from the law’s objectives—such as implementing health savings accounts or consumer-directed health plans. This amounts to the administration and Obamacare offering little flexibility to states whose leaders’ philosophical objectives differ from their own. A Republican administration is likely to bring in regulators with a different philosophy, but the statutory strictures would not change unless and until Congress acted.

It’s worth noting, however, that the Obama administration has made several unilateral decisions about a series of supplemental payments to insurers—regarding reinsurance, risk corridors, and cost-sharing subsidies. Because these payments were provided without the usual notice-and-comment period in rule-making, a Republican administration could take its own steps to end the billions of dollars in payments to insurers. If a future president wants to “waive” portions of Obamacare on Day One, these controversial payments would be the most feasible objective.

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

Gov. Jindal Op-Ed: The “Stupid Party,” Revisited

Nearly two years ago, after Mitt Romney’s presidential campaign went down to defeat, I gave some ideas in these pages on CNN about how Republicans can win future elections. On that list was an instruction that Republicans need to stop being the “stupid party.”

While it is true that we as Republicans need to do a better job articulating our principles and being the party of bold new ideas, the Democrats have a far worse problem. Democrats need to stop being the party that thinks Americans themselves are stupid.

To take one example: At a House Ways and Means Committee hearing in April, members asked Treasury official Mark Iwry if the Obama administration believed it could delay Obamacare’s individual mandate, much as the Treasury delayed the employer mandate.

Iwry’s response was stunning: “If we believe it is fair to individuals to keep that (individual mandate) in place because it protects them…then we don’t reach the question (of) whether we have legal authority.”

The level of sheer arrogance in that response boggles the mind. A Treasury spokesman later publicly disclosed the Obama administration’s official position: The federal government, namely the IRS, is requiring all individuals to purchase insurance to “protect” the American people from themselves.

Lest anyone think this attitude comes from anywhere other than the very top of the Obama administration, take the President’s own comments last October. In a speech in Boston at the peak of the controversy surrounding insurance cancellations, the President repeatedly derided canceled plans as “substandard…cut-rate plans that don’t offer real financial protection.” And he didn’t just insult the plans themselves, he insulted the people who purchased them: “A lot of people thought they were buying coverage, and it turned out to be not so good.”

In other words, if you like your current plan, you’re delusional—or a dimwit.

The President soon backtracked, and unilaterally waived portions of the bill he signed into law, allowing some individuals to keep their plans, temporarily. But while the President expressed regret for having engaged in what Politifact dubbed the “Lie of the Year,” he has not once apologized for the arrogant and patronizing attitude underpinning the entire controversy—one in which the President believes that he and his bureaucrats know better than everyday Americans.

Sadly, this attitude does not just pervade Washington liberals; it’s also right at home in my state of Louisiana.

In 2012, the executive director of a state teachers’ union claimed that school scholarship programs wouldn’t work, because low-income parents could not make decisions about their children’s education, saying they “have no clue.”

These comments perfectly illustrate the left’s double standards. Both President Barack Obama and Eric Holder—the attorney general who filed suit to impede our scholarship program but lied to Congress about it last month—choose to educate their children at elite Washington schools costing more than $35,000 per year.

But if Americans of more modest financial means—whose annual income may be dwarfed by the tuition fees President Obama easily pays for his daughters—want their children to escape failing schools, or buy the health plan they want, the left exclaims: “Oh no, we can’t let you do that.”

That’s exactly how The Nation magazine reacted to the health care alternative I recently endorsed. Responding to the plan’s new incentives giving individuals more choices and insurance options, its analysts claimed that “most people are not informed well enough (sic) to make the right choices about which plan to buy, what it covers, what it will cost them, and especially how to decide what care to seek.” That’s what The Nation considers an “epic fail:” allowing the “ignorant” American people to pick their own health care options.

I will readily admit that we do need to improve the transparency of health care cost and quality information. And of course in an emergency no patient in cardiac arrest will be able to “comparison shop” for treatment options.

But if The Nation, President Obama, or anyone else on the left thinks the American people are too dumb to pick a school or health plan, they should say so publicly—and in so many words.

Ronald Reagan famously quipped that the nine most terrifying words in the English language are “I’m from the government, and I’m here to help.”

I believe the best way to help is to empower citizens, trusting them to make good choices, not creating nanny states to “protect” individuals from themselves. As a matter of policy, giving Americans choice in schools and health care is simply the right thing to do.

And as a matter of politics, insulting voters’ intelligence is just plain stupid.

This post was originally published at CNN. 

We Told You So: Companies Hiring Fewer Full-Time Workers

The Wall Street Journal has a must-read article this morning highlighting one of Obamacare’s effects – companies are replacing full-time workers with part-time employees to avoid the law’s soon-to-be-imposed $2,000 employer mandate penalty.  Because full-time employees working more than 30 hours will incur a penalty while part-time workers will not, many firms are in the process of shifting their workforce, as the article outlines:

Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.  Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week.  That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul, said Chief Executive Chris Russell.  The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.  “The tendency is to say, ‘Let me fill this position with a 40-hour-a-week employee.’”  Mr. Russell said. “I think we have to think differently.”…

CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, began two months ago to hire part-time workers to replace full-time employees who left, said Andy Puzder, CEO of the Carpinteria, Calif., company.  CKE, which is owned by private-equity firm Apollo Management LP, offers limited-benefit plans to all restaurant employees, but the federal government won’t allow those policies to be sold starting in 2014 because of low caps on payouts.  Mr. Puzder said he has advised Mr. Romney’s campaign on economic issues in an unpaid capacity.

Home retailer Anna’s Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the health-care law isn’t repealed, said CEO Alan Gladstone.  Mr. Gladstone said the costs of providing coverage to all 1,100 sales associates who work at least 30 hours a week would be prohibitive, although he was weighing alternative options, such as raising prices….

Benefits consultants said most retail and hotel clients have explored shifting toward part-time workers.  Those industries are less likely to offer health coverage now, and if they do, the plans typically are too skimpy to meet the minimum-coverage requirements.  “They’ve all considered it,” Matthew Stevenson, a workforce-strategy principal at Mercer.  In a July survey, 32% of retail and hospitality company respondents told the consulting firm that they were likely to reduce the number of employees working 30 hours a week or more.

Not only is this response predictable – it was predicted, and not just by Republicans but by non-partisan experts.  Here’s what the Congressional Budget Office wrote more than two years ago about the Obamacare mandate taxes:

Those penalties…will, over time, generally be passed on to workers through reductions in wages…However, firms generally cannot reduce workers’ wages below the minimum wage, which will probably cause some employers to respond by hiring fewer low-wage workers.  Alternatively, because firms are penalized only if their full-time employees receive subsidies from exchanges, some firms may instead hire more part-time or seasonal employees.

CBO also said that “the expansion of Medicaid” and the health insurance subsidies “will encourage some people to work fewer hours or to withdraw from the labor market.  In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work.”

Two years ago, Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  It turns out what’s in Obamacare is exactly what non-partisan experts said – provisions that will cost jobs and harm the American economy.

Liberals Should “Cut” Out Their Medicaid Nonsense

Paul Krugman’s Monday New York Times column featured a typical rant – typical not least because it’s just plain wrong.  He talks about the “savage cuts” associated with conservative proposals to block grant Medicaid – except the “cuts” don’t actually exist.

Don’t believe me?  Well, take a look at this chart from the Kaiser Family Foundation’s study on Medicaid, issued last week.  The red line below illustrates the supposed “cuts” associated with block grant proposals – and shows that such “cuts” don’t actually exist, because Medicaid spending will increase each and every year under a block grant:

What’s particularly striking about the above chart is that the Kaiser study modeled a block grant proposal that was less generous than Governor Romney’s plan – the House-passed budget linked the growth of the block grant to inflation, whereas Governor Romney’s plan links the growth of Medicaid to inflation plus one percent.  So the Kaiser researchers, even as they claimed that their modeling was based on a plan “similar to Governor Romney’s,” cherry-picked (false) assumptions in order to portray block grants in the worst possible light.  This partisan hackery also explains why the Kaiser study uses the term “cut” no fewer than 60 times in one 22-page paper – even though both the House-passed budget and Governor Romney’s proposal do NOT reduce Medicaid spending in absolute terms.

Appearing before Congress last year, Secretary Sebelius testified that the Administration believes Obamacare did not “cut” Medicare – it merely slowed the program’s growth rate.  If that’s the case, the Secretary, the Administration, and their liberal allies should adopt a truly novel concept – consistency – and not argue that a slowdown in Medicare’s growth rate under Obamacare is not a “cut,” while a slowdown in Medicaid’s growth rate is a “cut.”

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.

Fact Check: Obamacare Costing Jobs

Governor Romney just mentioned the idea of Obamacare as a job-killer.  And indeed it has been: Just last week, one prominent restaurant chain said it was testing the idea of limiting worker hours – so their workers wouldn’t trigger new tax penalties created by Obamacare.  Darden restaurants specifically claimed that it was lowering hours “as one of the many things we are evaluating to help us address the cost implications [Obamacare] will have on our business.”

DeMint Letter to Obama Asks Him to Hold AARP Accountable

This afternoon Senator DeMint sent a letter to the President, asking him to hold AARP to account for its questionable insurance practices:

 

October 4, 2012

President Barack Obama

The White House

1600 Pennsylvania Avenue, NW

Washington, DC 20500

Dear Mr. President:

During your debate with Governor Romney last night, you criticized Medicare premium support proposals as leaving seniors “at the mercy of insurance companies,” while trumpeting AARP’s endorsement of Obamacare.  However, as I outlined in a recent report about AARP, entitled “Profits Before Principles,” the evidence is clear that Obamacare places seniors at the mercy of one organization – AARP itself.  Because everyone is entitled to his own opinions, but no one is entitled to his own facts, I feel obligated to point out three undisputed facts:

1.       AARP makes most of its money selling health insurance to seniors – and profits financially when premiums rise.  According to its own financial statements, AARP received nearly half a billion dollars in “royalty fees” – or what AARP members have called “kickbacks” – from United Healthcare just last year.  Most of this money came from selling Medigap supplemental insurance to seniors.  And the arrangement under which AARP receives royalties for selling Medigap plans is ethically questionable – AARP receives a percentage of every Medigap premium dollar paid by seniors, meaning AARP makes more in profits the higher premium costs climb.

2.       AARP currently discriminates against seniors with pre-existing conditions.  AARP admits that it imposes waiting periods on individuals applying for its Medigap plans who have pre-existing conditions.  These practices not only violate AARP’s supposed commitment to “ending health status discrimination” – they also violate your claim that insurance companies won’t be able to “jerk you around” now that Obamacare has passed.

3.       Obamacare allows AARP and other sellers of Medigap insurance to continue discriminating against seniors with pre-existing conditions.  The Medigap insurance market – which AARP dominates – received a special exemption from the law’s ban on pre-existing condition discrimination, so AARP can continue its practice of restricting access to those with pre-existing conditions with your Administration’s blessing.  Medigap insurance also received waivers from several other new requirements in the law: Section 1103 exempts plans from medical-loss ratio requirements; 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.  Your Department of Health and Human Services (HHS) went even further, exempting Medigap insurance from premium rate review through regulations – even though AARP, the largest seller of Medigap plans, makes more in profit the higher premiums rise on seniors.

Documents recently released by House investigators also show a close nexus between your Administration and AARP during the rush to ram Obamacare through Congress.  For instance, Jim Messina – then your Deputy Chief of Staff, now your re-election campaign manager – asked AARP for “immediate robo calls into Nebraska urging [Senator Ben] Nelson to vote for cloture” on the bill.  And in December 2009, the White House Office of Public Engagement asked AARP to put out talking points rebutting a Republican amendment related to Medicare.

I am therefore concerned that your Administration may have negotiated a backroom deal, whereby AARP’s lucrative Medigap insurance was exempted from new regulations and enforcement, while AARP provided political cover to your campaign to enact Obamacare – and now your campaign for re-election.  HHS Secretary Sebelius has been very quick to attack other insurers’ practices, but has not dared criticize AARP – even though AARP’s insurance business is more profitable than many other insurance companies.

If you want to ensure seniors are not at the mercy of insurance companies, I encourage you to stop defending AARP’s abusive insurance practices, and instead stand up to the organization when it takes advantage of seniors.

Sincerely,

Jim DeMint

Commonwealth Fund Gives Obamacare an Epic Fail

The liberal Commonwealth Fund is out with a supposedly non-partisan comparison of the campaign health care plans offered by President Obama and Governor Romney.  There are many charts, graphs, and statistics in the 50-plus page report, but you really only need to read one phrase in the introduction to get the gist: “growth in health care costs and premiums exceeds that of family incomes…”

That of course is far from what candidate Obama promised.  Four years ago, Barack Obama repeatedly promised that he would cut premiums – not slow the rate of growth, but CUT them in absolute terms – by $2,500 per family.  Jason Furman – then a campaign advisor, and now a senior Administration official – went even further, telling the New York Times that “we think we could get to $2,500 in savings by the end of the first term, or be very close to it.”  But while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected President.  (A visual representation of this broken promise is below.)

The Commonwealth study does its best to compensate for this broken promise, by using the best possible assumptions about the rest of Obamacare.  For instance, to obtain better insurance coverage numbers for Obamacare, the report assumes that every state will implement the law’s Medicaid expansion – even though several states have already pledged not to do so, and the Congressional Budget Office agrees that many states will not.  But no matter how you slice it, even a liberal think-tank like Commonwealth has to admit that – on the metric struggling families care about most – Obamacare has been a massive failure.

The Obama Campaign’s Magical Medicare Mystery Tour

Over the weekend, the Obama campaign renewed their refrain of “Mediscare” attacks during a series of speeches in Florida.  The new hook for the President was a Center for American Progress study, which we have already debunked elsewhere.  One of the study’s authors was Harvard economist David Cutler – and a new National Journal piece (subscription required) shows that the “hot shot of the health economics world” has, shall we say, evolved slightly when it comes to reforming Medicare:

  • In an e-mail to staff of the Simpson-Bowles fiscal commission back in 2010, Cutler proposed “removing the special status of traditional Medicare.”  In the CAP report he co-authored just last month, Cutler said that “the Romney-Ryan plan increases system-wide costs by promoting private insurance that will be more costly than the existing [traditional] Medicare system.”
  • The introduction to the CAP paper last month said that Governor Romney and Chairman Ryan “want to convert our nation’s Medicare program into a voucher system for people who are under 55 years of age.”  Which is exactly what Cutler himself proposed back in 2010, when he wrote the Simpson-Bowles commission and suggested “moving the Medicare population into the exchanges…that would be the same as the voucher.”  As the National Journal article notes, “Cutler wasn’t just recommending that the Democrats incorporate vouchers into Medicare, something the Obama campaign is squarely against now.  He was also proposing that the federal government move seniors into insurance exchanges through a much-criticized executive-branch Medicare board [i.e., the Independent Payment Advisory Board created by Obamacare].  That is a proposition you won’t hear in talking points from either Cutler or the Obama campaign.”
  • In the CAP paper last month, Cutler wrote that “private insurance that will be more costly than the existing Medicare system.”  Which is the exact opposite of the conclusion reached in another August article, this one in the Journal of the American Medical Association: “beneficiaries must pay more for traditional Medicare or join a private plan.”  And one of the authors of that JAMA piece?  You guessed it – David Cutler.

So the highlight of the Obama campaign’s “Mediscare” mud-slinging argument is an analysis from someone who has flip-flopped on 1) keeping traditional Medicare’s preferred status; 2) converting Medicare into a “voucher” program; and 3) whether traditional Medicare will be more or less costly than private insurance plans (with that last flip-flop taking place in the lengthy time span of three weeks).  When trying to explain away his contortions on Medicare reform, Cutler told National Journal he was “trying to explain health care economics to people who are not economists or health care specialists….I agree, people should read my articles and books.  But if they don’t, I need to communicate in pieces.”  In other words, believe Cutler – or at least some of the “pieces” of his analysis – instead of your own lying eyes.

One thing’s for certain: There’s a whole lot of change in these disingenuous assaults by Team Obama.  But there isn’t a lot of hope in them, that’s for sure.  Nor is there a lot of principle either.