One Way for Florida’s Legislature to Respond to a Medicaid Expansion Referendum

Last week, Politico reported on a burgeoning effort by unions and other groups to collect signatures on a ballot initiative designed to expand Medicaid in Florida. As the article notes, the effort comes after last fall’s approval of Medicaid ballot initiatives in Utah, Idaho, and Nebraska.

The effort comes as liberals try to extend “free” health care to more and more Americans. But that “free” health care comes with significant costs, and policymakers in Florida have opportunities to make those costs apparent to voters.

‘Free’ Money Isn’t Free

By contrast, the petition being circulated in Florida includes no source of funding for the state’s 10 percent share of Medicaid expansion funding under Obamacare. The failure to specify a funding source represents a typical liberal tactic. Advocates seeking to expand Medicaid have traditionally focused on the “free” money from Washington available for states that do expand. “Free” money from Washington and “free” health care for low-income individuals—what’s not to like?

Of course, Medicaid expansion has very real costs for states, without even considering the effects on their taxpayers of the federal tax increases needed to fund all that “free” money from Washington. Every dollar that states spend on providing health care to the able-bodied represents another dollar that they cannot spend elsewhere.

I have previously noted how spending on Medicaid has crowded out funding for higher education, thus limiting mobility among lower-income populations, and encourages states to prioritize the needs of able-bodied adults over individuals with disabilities, for whom states receive a lower federal Medicaid match.

Taxes Ahead? Oh Yeah, Baby

Proposing a state income tax to fund Medicaid expansion would certainly make the cost of expansion readily apparent to Florida voters, especially the retirees who moved to the Sunshine State due to its combination of warm weather and no individual income tax. Voters would likely think twice if Medicaid expansion came with an income tax—which of course lawmakers could raise in the future, to fund all manner of government spending.

Prior efforts suggest that making the costs of Medicaid expansion apparent to voters appreciably dampens support. Utah approved its ballot initiative, which included a sales tax increase, with a comparatively small (53.3 percent) approval margin. In Montana, a referendum proposing a tobacco tax increase to fund a continuation of that state’s Medicaid expansion (which began in 2016) went down to defeat in November.

New Taxes Are an Uphill Battle

Liberal groups already face challenges in getting a Medicaid ballot initiative approved in Florida. The state constitution requires 60 percent approval for all initiative measures intended to change that document, a higher bar than advocates for expansion have had to clear elsewhere. Of the four states where voters approved Medicaid expansion—Maine, Nebraska, Utah, and Idaho—only the margin in Idaho exceeded 60 percent, and then just barely (60.58 percent).

Disclosure: While the author served on the health care transition advisory committee of Florida Gov. Ron DeSantis, the views expressed above represent his personal views only.

This post was originally published at The Federalist.

Exclusive: Congress Should Investigate, Not Bail Out, Health Regulators Who Risked Billions

What if a group of regulators were collectively blindsided by a decision that cost their industry billions of dollars? One might think Congress would investigate the causes of this regulatory debacle, and take steps to ensure it wouldn’t repeat itself.

Think again. President Trump’s October decision to terminate cost-sharing reduction (CSR) subsidy payments to health insurers will inflict serious losses on the industry. For October, November, and December, insurers will reduce deductibles and co-payments for certain low-income exchange enrollees, but will not receive reimbursement from the federal government for doing so. America’s Health Insurance Plans, the industry’s trade association, claimed in a recent court filing that insurance carriers will suffer $1.75 billion in losses over the remainder of 2017 due to the decision.

As Dave Anderson of Duke University recently noted, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet Congress has asked not even a single question of regulators why they did not anticipate and plan for this scenario—a recipe for more costly mistakes in the future.

A Brewing Legal and Political Storm

The controversy surrounds federal payments that reimburse insurers for lower deductibles, co-payments, and out-of-pocket expenses for qualifying low-income households purchasing exchange coverage. While the text of Obamacare requires the U.S. Department of Health and Human Services to establish a program to reimburse insurers for providing the discounts, it nowhere includes an explicit appropriation for such spending.

As the exchanges launched in 2014, the Obama administration began making CSR payments to insurers. However, later that year, the House of Representatives, viewing a constitutional infringement on its “power of the purse,” sued to stop the executive from making the payments without an explicit appropriation. In May 2016, Judge Rosemary Collyer ruled the payments unconstitutional absent an express appropriation from Congress.

The next President could easily wade into this issue. Say a Republican is elected and he opts to stop the Treasury making payments related to the subsidies absent an express appropriation from Congress. Such an action could take effect almost immediately….It’s a consideration as carriers submit their bids for next year that come January 2017, the policy landscape for insurers could look far different.

One week after my article, Collyer issued her ruling calling the subsidy payments unconstitutional. At that point, CSR payments faced threats from both the legal and political realms. On the legal front, the ongoing court case could have resulted in an order terminating the payments. On the political side, the new administration would have the power to terminate the payments unilaterally—and it does not appear that either Hillary Clinton or Trump ever publicly committed to maintaining the payments upon taking office.

Yet Commissioners Stood Idly By

In the midst of this gathering storm, what actions did insurance commissioners take last year, as insurers filed their rates for the 2017 plan year—the plan year currently ongoing—to analyze whether cost-sharing payments would continue, and the effects on insurers if they did not? About a week before the Trump administration officially decided to halt the payments, I submitted public records requests to every state insurance commissioner’s office to find out.

Two states (Indiana and Oregon) are still processing my requests, but the results from most other states do not inspire confidence. Although a few states (Illinois, Utah, and California’s Department of Managed Health Care) withheld documents for confidentiality or logistical reasons, I have yet to find a single document during the filing process for the 2017 plan year contemplating the set of circumstances that transpired this fall—namely, a new administration cutting off the CSR payments.

In many cases, states indicated they did not, and do not, question insurers’ assumptions at all. North Dakota said it does not dictate terms to carriers (although the state did not allow carriers to re-submit rates for the 2018 plan year after the administration halted the CSR payments in October). Wyoming said it did not issue guidance to carriers on CSRs “because that’s not how we roll.” Missouri did not require its insurers to file 2017 rates with regulators, so it would have no way of knowing those insurers’ assumptions.

Other states admitted that they did not consider the possibility that the incoming administration would, or even could, terminate the CSR payments. North Carolina said it did not think the court case was relevant, or that cost-sharing reduction payments would be an issue. Massachusetts’ insurance Connector (its state-run exchange) responded that “there was no indication that rates for 2017 were affected by the pendency of House v. Burwell,” the case Collyer ruled on in May 2016.

Despite the ongoing court case and the deep partisan disputes over Obamacare, many commissioners’ responses indicate a failure to anticipate difficulties with cost-sharing reduction payments. Mississippi stated that, during the filing process for 2017, “CSRs weren’t a problem then, as they were being funded.” Minnesota added that “it was not until the spring of 2017 that carriers started discussing the threat [of CSR payments being terminated] was a real possibility.” Nebraska stated that “I don’t think that there’s anyone who allowed for the possibility of non-payment of CSRs for plan year 2017. We were all waiting for Congress to act.”

However, as an e-mail sent by the National Association of Insurance Commissioners (NAIC) to state regulators demonstrates, federal authorities at the Centers for Medicare and Medicaid Services (CMS) stated their “serious concerns” with the Texas and New Mexico proposals. Federal law requires insurers to reduce cost-sharing for qualifying beneficiaries, regardless of the status of the reimbursement program, and CMS believed the contingency language—which never went into effect in either Texas or New Mexico—violated that requirement.

In at least one case, an insurer raised premiums to reflect the risk that CSR payments could disappear in 2017. Blue Cross Blue Shield of Montana submitted such request to that state’s insurance authorities. However, regulators rejected “contingent CSR language”—apparently an attempt to cancel the reduced cost-sharing if reimbursement from Washington was not forthcoming, a la the Texas and New Mexico proposals. The insurance commissioner’s office also objected to the carrier’s attempt to raise premiums over the issue: “We will not allow rates to be increased based on speculation about outcomes of litigation.”

Of course, had insurers requested, or had regulators either approved or demanded, premium increases last year due to uncertainty over cost-sharing reduction payments, they would not now face the prospect of over $1 billion in losses due to non-payment of CSRs for the last three months of 2017. But had regulators approved even higher premium increases last year, those increases likely would have caused political controversy during the November elections.

As it was, news of the average 25 percent premium increase for 2017 gave Trump a political cudgel to attack Clinton in the waning days of the campaign. One can certainly question why Democratic insurance commissioners who did not utter a word about premium increases and CSR “uncertainty” during Clinton’s campaign suddenly discovered the term the minute Trump was elected president.

However, at least some ardent Obamacare supporters just did not anticipate a new administration withdrawing cost-sharing reduction payments. Washington state’s commissioner, Mike Kreidler, published an op-ed last October regarding the House v. Burwell court case. He did so at the behest of NAIC consumer representative Tim Jost, who wanted to cite Kreidler’s piece in an amicus curiae brief during the case’s appeal. But despite their focus on the court case regarding CSRs, it appears neither Jost nor Kreidler ever contemplated a new administration withdrawing the payments in 2017.

Congressional Oversight Needed

The evidence suggests that not a single insurance commissioner considered the impact of a new administration withdrawing cost-sharing reduction payments in 2017, a series of decisions that put the entire health of the individual insurance market at risk. What policy implications follow from this conclusion?

First, it undercuts the effectiveness of Obamacare’s “rate review” process. That mechanism requires states to evaluate “excessive” premium increases. However, the program’s evaluation criteria do not explicitly include policy judgments such as those surrounding CSRs. Moreover, the political focus on lowering “excessively” high premium increases might result in cases where regulators approve premium rates set inappropriately low—as happened in 2017, where no carriers priced in a contingency margin for the termination of CSR payments, yet those payments ceased in October.

As noted above, Montana’s regulators called out that state’s Blue Cross Blue Shield affiliate for proposing a rate increase relating to CSR uncertainty. The state’s insurance commissioner, Monica Lindeen, issued a formal “letter of deficiency” in which she stated that “raising rates on the basis of this assumption [i.e., loss of cost-sharing reduction payments] is unreasonable.” But events proved Lindeen wrong—those payments did disappear in 2017. Yet the insurer in question has no recourse after their assumptions proved more accurate than Lindeen’s—nor, for that matter, will Lindeen face any consequences for the “unreasonable” assumptions she made.

Second, it suggests an inherent tension between state authorities and Washington. Several regulators specifically said they looked to CMS’ advice on the cost-sharing reduction issue. Iowa requested guidance from Washington, and Wisconsin said the status of the payments was “out of our hands.” But given the impending change of administrations, any guidance CMS provided in the spring or summer of 2016 was guaranteed to remain valid only through January 20, 2017—a problem for regulators setting rates for the 2017 plan year.

Obamacare created a new layer of federal oversight—and federal policy—surrounding regulation of insurance, which heretofore had laid primarily within the province of the states. The CSR debacle resulted from the conflict between those two layers. Unless and until our laws reconcile those tensions—in conservatives’ case, by repealing the Obamacare regime and returning regulation to the states, or in liberals’ preferred outcome, by centralizing more regulatory authority in Washington—these conflicts could well recur.

Third, and perhaps most importantly, it should spark Congress to examine state oversight of health insurance in greater detail. The fact that insurance commissioners escaped the equivalent of a Category 5 hurricane—the withdrawal of CSR payments in January—and struggled through a mere tropical storm with payments withdrawn in October instead, had no relevance on their regulatory skill—to the contrary, in fact.

Unfortunately, Congress has demonstrated little interest in examining why the regulatory apparatus fell so short. The same Democratic Party that investigated regulators and bankers following the financial crisis has shown little interest in questioning why insurers and insurance regulators failed to anticipate the end of cost-sharing reduction payments. With their focus on getting Congress to appropriate funds restoring the CSR payments President Trump terminated, insurance commissioners’ lack of planning and preparation represents an inconvenient truth that Democrats would rather ignore.

Likewise, Republicans who wish to appropriate funds for the cost-sharing reduction payments have no interest in examining the roots of the CSR debacle. In September, Sen. Lamar Alexander (R-TN) convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee to take testimony from insurance commissioners on “stabilizing” insurance markets.

At the hearing, Alexander did not ask the commissioners why they did not predict the “uncertainty” surrounding cost-sharing reductions last year. HELP Committee Ranking Member Patty Murray (D-WA) asked Kreidler, her state’s insurance commissioner, about regulators’ “guessing games” regarding the status of CSRs with regard to the 2018 plan year. But neither she nor any of the members asked why those regulators made such blind and ultimately incorrect assumptions last year, by not even considering a scenario where CSR payments disappeared during the 2017 plan year.

Alexander and Murray claim the legislation they developed following the hearing, which would appropriate CSR funds for two years, does not represent a “bailout” for the insurance industry. But the fact remains that last fall, when preparing for the 2017 plan year, insurance regulators dropped the ball in a big way.

Ignoring their inaction, and appropriating funds for cost-sharing reductions without scrutinizing their conduct, would effectively bail out insurance commissioners’ own collective negligence. Congress should think twice before doing so, because next time, a regulatory debacle could have an even bigger impact on the health insurance industry—and on federal taxpayers.

This post was originally published at The Federalist.

A Victory for Taxpayers — And the Rule of Law

Once again, President Obama’s vaunted pen and phone have run into trouble with the law. This time, the nonpartisan Government Accountability Office (GAO), acting in its function as comptroller general, concluded that the administration has implemented Obamacare’s reinsurance program in an illegal and impermissible manner. Rather than focusing first on repaying the Treasury, as the text of the statute requires, the administration has placed its first and highest priority on bailing out insurers.

In an opinion requested by numerous members of Congress and released this afternoon, the GAO explained:

We conclude that HHS [Health and Human Services] lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program in the Treasury and instead make deposits to the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341. This prioritization of collections for payment to issuers over payments to the Treasury is not authorized. 

As I have previously explained at NRO, the reinsurance funds collected from employers had two – distinct purposes: first, to repay Treasury for the $5 billion cost of a separate program in place from 2010 through 2013; and, second to subsidize insurers selling Obamacare plans to high-cost patients during the law’s first three years.

When collections from employers turned out to be less than expected, HHS prioritized the second objective to the exclusion of the first – an action that, according to the GAO, violates the plain text of the statute. As the opinion noted, “the fact that HHS’s collections ultimately fell short of the projected amounts does not alter the meaning of the statute.” The memo continued that, because agencies must “‘effectuate the statutory scheme as much as possible’ . . . HHS continues to have an obligation to carry out the statutory scheme using a method reflective of the specified amounts even though actual collections were lower than projected.” As a result, the GAO concluded that the Department has no authority to divert to insurers approximately $3 billion in reinsurance contributions that should be allocated to the Treasury.

The GAO legal team found HHS’s justification for its actions to date unpersuasive:

HHS’s position regarding prioritization of collections for reinsurance payments appears to be driven solely by the factual circumstances presented here, namely, lower than expected collections. However, a funding shortfall does not give an agency “a hinge for enlarging its discretion to decide which [priorities] to fund.” 

The law isn’t a Chinese menu, where federal bureaucrats can pick and choose which portions they wish to follow. They must follow all of the law, as closely as possible — even the portions they disagree with.

In reaching its conclusion, the GAO agreed with the nonpartisan Congressional Research Service and with other outside experts, each of whom said that HHS had violated the law in a way that was not subject to regulatory deference. And while the GAO’s reinsurance opinion is the most recent legal smackdown of the Obama administration’s craven efforts to bail out insurers, it is by no means the first: In May, Judge Rosemary Collyer ruled that the administration violated the constitution by spending funds on cost-sharing subsidies that Congress never appropriated.

More and more insurers are announcing their departure from Obamacare’s exchanges — Blue Cross Blue Shield announced this month that it is pulling out of the Obamacare marketplace in Nebraska and in most of Tennessee. Given these implosions, the return of $3 billion in taxpayer funds to the Treasury represents a blow to HHS’s bailout strategy. It demonstrates the law’s fundamentally flawed design, whereby the administration can keep insurers offering coverage on exchanges only by flouting the law to give them billions of dollars in taxpayer funds they do not deserve.

Conservatives should applaud the members of Congress who requested this ruling, which helps to staunch the flow of crony-capitalist dollars to insurers. Much more work remains, however. Congress should also act to protect its power of the purse with respect to Obamacare’s risk corridors — ensuring that the administration does not fund through a backroom legal settlement the payments to insurers that Congress explicitly prohibited two years ago. When they return in November, members should step up their oversight of both the risk-corridor and reinsurance programs: They should find out why HHS acted in such an illegal manner in the first place and whether insurance-company lobbyists encouraged the administration to violate the statute’s plain text.

For now, however, conservatives should rightly celebrate the legal victory that GAO’s opinion represents. Obamacare represented a massive increase in government spending and a similarly large increase in government authority. Today’s opinion has clipped both — a victory for taxpayers and the rule of law.

This post was originally published at National Review.

Weekly Newsletter: May 19, 2008

Democrats Advance Provisions to Expand SCHIP to Wealthier Families

This past week, Democrats in both the House and the Senate took actions to block guidance from the Administration that would keep the State Children’s Health Insurance Program (SCHIP) on mission. On Thursday, the House Energy and Commerce Health Subcommittee held a hearing on legislation (HR 5998) that would override guidance issued by the Centers for Medicare and Medicaid Services (CMS) last August. That guidance is intended to ensure first that individuals with private health insurance do not drop their coverage in order to join a government-funded program, and second that states target their SCHIP funds at the low-income families for whom the program was created before expanding their state health plans to cover children from wealthier families.

That same day, Sen. Frank Lautenberg (D-NJ) attached legislative provisions mirroring HR 5998 to the wartime supplemental appropriations measure. The provisions were attached along with language similar to a House bill (HR 5613) that would suspend several Medicaid anti-fraud regulations. Sen. Lautenberg’s home state of New Jersey—which extends government-funded health insurance to “low-income” families making over $70,000 for a family of four—is one that has taken legal action against CMS to block the SCHIP guidance.

Some conservatives may be troubled, but not surprised, by the Democrat attempts to ensure that states can expand their SCHIP programs up the income ladder—consistent with legislation that passed the House last year permitting “low-income” families with over $80,000 in income to be added to government rolls. Given that the Administration has clarified the guidance to ensure that no child need be dropped off the SCHIP rolls as a result of the CMS policy, many conservatives would support the Administration’s attempts to keep the SCHIP program targeted on the populations for whom it was created, and oppose Democrat efforts to override these reasonable limits.

An RSC Policy Brief on this issue can be found here.

Ways and Means Hearing Examines HSAs

Last week, the House Ways and Means Health Subcommittee held a hearing analyzing the growth of Health Savings Accounts (HSAs). The Subcommittee heard testimony from the CEO of Alegent Health, a Nebraska-based health system that has implemented consumer-driven health care for its employees.

Since embarking on a consumer-driven model in 2005, Alegent has provided free preventive care and other incentives for healthy behaviors, while increasing price and quality transparency for its employees and patients alike. The results have been impressive: 92% participation by employees in consumer-directed plans, with high contribution rates to HSAs from low-income employees, lower costs, and healthier workers.

Many conservatives may believe that Alegent Health represents a successful model of how the growth of HSAs and consumer-driven health care can reduce rising health care costs. By empowering employees to take control of their lifestyle and health decisions, HSAs can encourage healthy behaviors that will reverse the growth of chronic diseases such as those linked to obesity, while incentivizing workers to accumulate real and portable savings that can be used to pay for health expenses. Some conservatives may believe the testimony at the Ways and Means hearing provided a welcome example of HSAs’ effectiveness, and a reminder why Democrat attempts further to regulate this new form of health care should be viewed with significant caution.

An RSC Policy Brief providing background on HSA enrollment can be found here.

Article of Note: Rationed Care Kills

From the United Kingdom comes a story in the Daily Mail by Sarah Anderson, an ophthalmologist fighting twin battles: to save her father’s life and against Britain’s National Health Service. Her father’s kidney tumor could be treated by a new drug—but while the pharmaceutical has been approved for use in Europe for two years, Britain’s National Institute for Clinical Effectiveness (NICE) will not complete its assessment of the drug’s usefulness until January. Until then, local NHS branches can refuse to provide the drug, leaving Anderson’s family to pay for their father’s treatment on their own, or face the inevitable consequences that will follow if he cannot obtain it.

Some conservatives may be concerned by this story’s cautionary tale, particularly in the context of efforts by Democrats to establish a similar “comparative effectiveness” institute under the aegis of the federal government. Conservatives may not only believe that such an approach would put bureaucrats, and not doctors and patients, at the center of medical policy, but would also result in the types of costly delays and care rationing that put lives at stake.

Anderson’s ultimate verdict on her family’s dilemma is a sobering one with which many conservatives would agree: “If Dad should lose his life to cancer, it would be devastating—but to lose his life to bureaucracy would be far, far worse.”

Read the article here: “How the NHS Is Letting My Father Die