We Should Move Away from Employer-Based Insurance, But NOT Towards Single Payer

The left continues to seek ways to politically capitalize on the coronavirus crisis. Multiple proposals in the past several weeks would replace a potential decline in employer-provided health insurance with government-run care.

One analysis released earlier this month found the coronavirus pandemic could cause anywhere from 12 to 35 million Americans to lose their employer-provided coverage, as individuals lose jobs due to virus-related shutdowns. Of course, these coverage losses could remain temporary in some cases, as firms reopen and rehire furloughed workers.

But these lefties do have a point: The United States should move away from employer-provided health coverage. It just shouldn’t rely upon a government-run model to do so.

Biden: Let’s Expand an Insolvent Program

Days after his last remaining rival, Vermont Sen. Bernie Sanders, dropped out of the race for the Democratic presidential nomination, former vice president and presumptive nominee Joe Biden endorsed a plan to expand Medicare. Biden’s statement didn’t include details. Instead, he “directed [his] team to come up with a plan to lower the Medicare eligibility age to 60.”

One big problem with Biden’s proposed expansion: Medicare already faces an insolvency date of 2026, a date the current economic turmoil will almost certainly accelerate. He claimed that “any new federal cost associated with this option would be financed out of general revenues to protect the Medicare trust fund.” But Biden didn’t explain why he would choose to expand a program rapidly approaching insolvency as it is.

Another problem for Biden seems more political. As this space has previously noted, in 2017 and 2018, the former vice president and his wife received more than $13 million in book and speech revenue as profits from a corporation rather than wage income. By doing so, they avoided paying nearly $400,000 in payroll taxes that fund—you guessed it!—Medicare.

It doesn’t take a rocket scientist to ask the obvious question: If Biden loves Medicare so much that he wants to expand it, why didn’t he pay his Medicare taxes?

Medicare Extra

Other liberals have proposals that would expand the government’s role in health care still further. Examining the impact of coronavirus on coverage, and analyzing a movement away from employer-provided care, Ezra Klein endorsed the Medicare Extra plan as superior to Biden’s original health-care proposal for a so-called “public option.” Towards the end of his analysis, Klein makes crystal clear why he supports this approach:

[Medicare Extra] creates a system that, while not single-payer, is far more integrated than anything we have now: A public system with private options, rather than a private system with fractured public options.

Medicare Extra, originally developed by the Center for American Progress and introduced in legislative form as the Medicare for America Act by Rep. Rosa DeLauro (D-Conn.), goes beyond the Biden plan. Both would likely lead to a single-payer system, but Medicare Extra would do so much more quickly.

Biden’s original health care plan would create a government-run “option,” similar to Medicare, into which anyone could enroll. Individuals could use Obamacare subsidies (which Biden’s proposal would increase) to enroll in the government-run plan.

Notably, Biden’s proposal eliminates Obamacare’s subsidy “firewall,” in which anyone with an offer of “affordable” employer coverage does not qualify for subsidized exchange coverage. Removing this “firewall” will encourage a migration towards the exchanges, and the government-run plan.

By contrast, Medicare Extra would go three steps further in consolidating government-run care. First, it would combine existing government programs like Medicare and Medicaid into the new “Medicare Extra” rubric. Second, the legislation would automatically enroll people into Medicare Extra at birth, giving the government-run program an in-built bias, and a clear path towards building a coverage monopoly.

Third, Medicare Extra would not just allow individuals with an offer of employer-sponsored coverage to enroll in the Medicare Extra program, it would require the employer to “cash out” the dollar value of his contribution, and give those funds to the employee to fund that worker’s Medicare Extra plan.

The combination of this “cash out” requirement (not included in Biden’s proposal) and the other regulations on employer coverage included in Medicare Extra would result in a totally government-run system within a few short years. After all, if businesses have to pay the same amount to fund their employees’ coverage whether they maintain an employer plan or not, what incentive do they have to stay in the health insurance game?

Let Individuals Maintain Their Own Coverage

Both Biden’s proposals and Medicare Extra would consolidate additional power and authority within the government system—liberals’ ultimate objective. By contrast, the Trump administration has worked to give Americans access to options other than employer-provided insurance that individuals control, not the government.

Regulations finalized by the administration last year could in time revolutionize health insurance coverage. The rules allow for employers to provide tax-free contributions to employees through Health Reimbursement Arrangements, which workers can use to buy the health insurance plans they prefer. Best of all, employees will own these health plans, not the business, so they can take their coverage with them when they change jobs or retire.

It will of course take time for this transition to take root, as businesses learn more about Health Reimbursement Arrangements and workers obtain private insurance plans that they can buy, hold, and keep. But if allowed to flourish, this reform could remove Americans’ reliance on employers to provide health coverage, while preventing a further expansion of government meddling in our health-care system—both worthy objectives indeed.

This post was originally published at The Federalist.

Pete Buttigieg’s Plan to Tax the Middle Class

Democratic presidential candidate Pete Buttigieg claimed last month that “everything that we have proposed has been paid for, and we have proposed no tax increase on the middle class.” The South Bend, Indiana mayor is incorrect on both counts: He hasn’t said how he’d pay for all his proposed spending. He has endorsed one explicit tax increase on the middle class, and his recent retirement plan provides an outline for another. Add it up, and middle-class workers could face a trillion dollars in new taxes.

To support family caregivers, Mr. Buttigieg’s retirement plan restated his prior commitment to enact “an enhanced version of the Family Act,” which would provide 12 weeks of subsidized family leave. The candidate has yet to specify how exactly he would “enhance” the Family Act. But that legislation, introduced by Rep. Rosa DeLauro (D., Conn.) and Sen. Kirsten Gillibrand (D., N.Y.), pays for its new benefit by raising payroll taxes by 0.2% of income.

Mr. Buttigieg’s retirement plan also contains several new spending proposals, including a long-term care entitlement. He says the program would make benefits available to people over 65 and would “kick in after an income-related waiting period.” His plan cites two white papers as examples of “similar programs” proposed by scholars.

Mr. Buttigieg fails to note how both white papers propose to pay for the new benefits. In the first paper, the Long-Term Care Financing Collaborative envisions a program “fully financed by a dedicated revenue source,” including a payroll tax, “an explicit income tax surcharge, or other dedicated tax.”

The second paper, written by researchers affiliated with the Urban Institute, contains several policy details Mr. Buttigieg adopted, including waiting periods for wealthier people to qualify. That paper also proposes a specific funding source: “an additional tax of about 1.0 percent of earned Medicare-covered income.” In other words, an increase in the payroll tax—a tax increase on the middle class.

The Congressional Budget Office estimated last December that a one percentage point increase in the Medicare tax rate would raise $898.3 billion over a decade. If Mr. Buttigieg intends to fund his new long-term care program via the payroll tax, that tax increase, coupled with the 0.2% payroll tax hike in the Family Act he has already endorsed, would bring total payroll-tax increases to more than $1 trillion.

If Mr. Buttigieg doesn’t want to fund his long-term-care entitlement with the payroll-tax increase proposed in a paper his campaign cited, he should explain where that money will come from. His own claims notwithstanding, Mr. Buttigieg’s candidacy has lacked fiscal candor. His campaign told the Indianapolis Star last month that it had proposed $5.7 trillion in spending to that point, but cited a total of only $5.1 trillion in tax increases and savings.

Mr. Buttigieg’s retirement-security plan has since added other spending proposals with no mention of a funding source. There’s his plan to make those receiving Social Security disability benefits immediately eligible for Medicare, which will likely cost more than $100 billion. There’s his new requirement for state Medicaid programs to cover community-based services as a mandatory benefit, along with mandates on nursing homes—including a $15 minimum wage and higher staffing ratios—which will raise Medicaid spending.

Mr. Buttigieg called Elizabeth Warren “extremely evasive” for her answers on single-payer health care, saying, “I think that if you are proud of your plan and it’s the right plan, you should defend it in straightforward terms. And I think it’s puzzling that when everybody knows the answer to that question of whether her plan . . . will raise middle class taxes is ‘Yes.’ Why wouldn’t you just say so, and then explain why you think that’s the better way forward?” He should follow his own advice.

This post was originally published at The Wall Street Journal.

Another Chart Shows How You Will Lose Your Current Coverage

Ahead of this week’s round of Democratic presidential debates, former vice president Joe Biden continued his attacks on Vermont Sen. Bernie Sanders’ single-payer health plan. Biden said it would undermine people currently receiving coverage through Obamacare.

In response, Sanders’s campaign accused Biden of using “insurance company scare tactics.” This week’s debates will see similar sets of allegations. Opponents of immediate single-payer will attack the disruption caused by a transition to socialized medicine, while supporters call single-payer skeptics pawns of the insurance companies, pharmaceutical companies, or both.

But the dueling sets of insults amount to little more than a sideshow. As these pages have previously argued, most Democrats ultimately want to get to a government-run system—they only differ on how quickly to throw Americans off their current health coverage. A series of recently released figures provide further proof of this theory.

200 Million Americans on Government-Run Health Care

Last week, the Center for American Progress (CAP) released some results of an analysis performed by Avalere Health regarding their “Medicare Extra” proposal. That plan, first released in February 2018, would combine enrollees in Medicaid and the Obamacare exchanges into one large government-run health plan.

Under the CAP plan, employers could choose to keep their current coverage offerings, but employees could “cash-out” the amount of their employer’s insurance contribution and put it towards the cost of the government-run plan. Likewise, seniors could convert from existing Medicare to the “new” government-run plan.

More to the point: The study concluded that, within a decade, nearly 200 million Americans would obtain coverage from this new, supercharged, government-run health plan:

As the chart demonstrates, the new government-run plan would suck enrollees from other forms of coverage, including at least 14 million who would lose insurance because their employer stopped offering it. By comparison, Barack Obama’s infamous “If you like your plan, you can keep it” broken promise resulted in a mere 4.7 million Americans receiving cancellation notices in late 2013.

Neither Plan Is a Moderate Solution

Whether 119.1 million Americans losing their private coverage, or 200 million Americans driven onto a government-run plan, none of these studies, nor any of these supposedly “incremental” and “moderate” plans, shows anything but a massive erosion of private health care provision, and a massive expansion of government-run health care.

Case in point: Earlier this year, Reps. Rosa DeLauro (D-Conn.) and Jan Schakowsky (D-Ill.) introduced a version of the CAP plan as H.R. 2452, the Medicare for America bill. As I wrote in June, the version of the legislation reintroduced this year completely bans private health care.

Under their legislation, individuals could not just pay their doctor $50 or $100 to treat an ailment like the flu or a sprained ankle. The legislation would prohibit—yes, prohibit—doctors from treating patients on a “cash-and-carry” basis, without federal bureaucrats and regulations involved.

Whether the Medicare for America bill, the CAP proposal, or Biden’s proposal for a government-run health plan, all these plans will eventually lead to full-on socialized medicine. Sanders has the wrong solutions for health policy (and much else besides), but at least he, unlike Biden, wins points for honesty about his ultimate goals.

This post was originally published at The Federalist.

This New Democratic Plan Would Ban Private Medicine

A few months ago, Sen. Kamala Harris raised eyebrows when she nonchalantly proclaimed her desire to abolish private health insurance: “Let’s move on.” Today, Ms. Harris’s quip seems quaint. The latest liberal policy idea would effectively end all private health care for many Americans.

The proposal, the Medicare for America Act, first appeared as a 2018 paper by the Center for American Progress. It was a plan to expand government-run health care. It’s been called “the Democratic establishment’s alternative” to Sen. Bernie Sanders’s single-payer scheme. In March, Democratic presidential hopeful Beto O’Rourke endorsed Medicare for America in lieu of the Sanders plan.

CNN declared that Mr. O’Rourke’s endorsement of Medicare for America demonstrates his “moderate path,” but the bill is anything but moderate. When Rep. Rosa DeLauro reintroduced Medicare for America legislation on May 1, she included a new, radical provision. The revised bill prohibits any medical provider “from entering into a private contract with an individual enrolled under Medicare for America for any item or service coverable under Medicare for America.” Essentially, this would bar program enrollees from paying for health care using their own money.

Liberals might claim this prohibition is more innocuous than it sounds, because Americans can still use private insurance under Medicare for America in some circumstances. But the legislation squeezes out the private insurance market in short order.

For starters, the law would automatically enroll babies in the new government program at birth. The Center for American Progress’s original paper admitted that the auto-enrollment language would ensure the government-run plan “would continue to grow in enrollment over time.” The bill would permit people to opt out of the government program only if they have “qualified health coverage” from an employer. And even employer-provided health insurance would soon disappear.

Under the bill, employees would be able to enroll in the government program without penalty, but their employers would have to pay a fee as soon as even one employee opts into the government insurance. It makes little sense to keep paying to provide private health coverage if you already have to pay for the public option. Small employers would get to choose between paying nothing for health care or shelling out enough for “qualified health coverage.” The migration of workers and firms into Medicare for America would be a flood more than a trickle, creating a de facto single-payer system.

With everyone enrolled in Medicare for America, truly private health care would cease to exist. You could obtain heavily regulated coverage from private insurers, similar to the Medicare Advantage plans currently available to seniors. But going to a doctor and paying $50 or $100 cash for a visit? That would be illegal.

Doctors would no longer be permitted to treat patients without the involvement of government bureaucrats. The thousands of direct primary-care physicians currently operating on a “cash and carry” basis would either have to change their business model entirely and join the government program or disappear.

Medicare for America is unique in this particular provision. Under current law, seniors in Medicare can privately contract with physicians, albeit with significant restrictions. Doctors who see Medicare patients privately must agree not to charge any patients through Medicare for two years. The House and Senate single-payer bills, while banning private health insurance entirely, would retain something approaching these current restrictions for people seeking private health care.

Rather than empowering Americans to get the health care they want, Democrats are intent on forcing them to buy what liberals say is best. They would give the government massive power over medicine—but patients would have none of their own.

This post was originally published in The Wall Street Journal.

Legislative Bulletin: H.R. 758, Breast Cancer Patient Protection Act

Order of Business:  The bill is scheduled to be considered on Tuesday, September 23, 2008, under a motion to suspend the rules and pass the bill.

Summary:   H.R. 758 would amend the Employee Retirement Income Security Act (ERISA), the Public Health Service Act, and the Internal Revenue Code to require group and individual health plans to meet certain minimum coverage requirements with respect to breast cancer surgeries.  Specifically, the bill would:

  • Require plans to have coverage for inpatient and radiation therapy with respect to breast cancer treatment;
  • Require plans to cover 48-hour hospital stays in the case of mastectomy or lumpectomy procedures, and 24-hour hospital stays in the case of lymph node dissections to treat breast cancer;
  • Prohibit plans from requiring pre-authorization for hospital stays within the time limits prescribed above;
  • Require plans to cover secondary consultations with specialists regarding the diagnosis and treatment of cancer, including cases with a negative initial diagnosis.  If no specialist is available within the plan’s network, the plan would be required to pay for out-of-network coverage, with any co-payments or co-insurance charged to the beneficiary limited to in-network levels. (NOTE: This mandate would apply to all cancer diagnoses, not just those related to breast cancer, as the bill’s title implies); and
  • Prohibit plans from offering financial inducements to providers or patients in an attempt to subvert the federal mandates imposed above.

In addition, H.R. 758 contains language regarding the rescission of insurance plans purchased in the individual market.  The bill would amend the Public Health Service Act to prohibit plans from rescinding policies except in the case of “intentional concealment of material facts regarding a health condition related to the condition for which coverage is being claimed.”  The bill also provides for a process of independent external review prior to the rescission or discontinuation of the insurance plan.

Additional Background:  Since the 1960s, state legislatures have considered—and adopted—legislation requiring health insurance products sold within the state to cover various products and services.  These benefit mandates are frequently adopted at the behest of disease groups advocating for coverage of particular treatments (e.g. mammograms) or physician groups concerned that patients have access to specialists’ services (e.g. optometrists).

A recent survey by the Council for Affordable Health Insurance found that as of 2007, states had enacted a total of 1,961 mandates for benefits and services—an increase of 60 (more than one per state) when compared to the 2006 total.[1]  The number of state mandates varies from a low of 15 in Idaho to a high of 64 in Minnesota.  However, because employer-sponsored health insurance is pre-empted from state-based laws and regulations under the Employee Retirement Income Security Act of 1974 (ERISA), benefit mandates do not apply to employers who self-fund their health insurance plans—one reason why H.R. 758 seeks to impose those mandates on group plans (as well as state-regulated individual plans) on the federal level.

The cost and impact of benefit mandates on health insurance premiums have been the subject of several studies in recent years.  For instance, the Heritage Foundation prepared an analysis suggesting that each individual benefit mandate could raise the cost of health insurance premiums by $0.75 monthly.[2]  Although the cost of a single mandate appears small, the aggregate impact—particularly given the recent growth of benefit mandates nationwide—can be significant: For instance, Massachusetts’ 43 benefit mandates would raise the cost of health insurance by more than $30 monthly under the Heritage analysis.

Although well-intentioned, some conservatives may view the groups who advocate for benefit mandates as operating from fundamentally flawed logic: that individuals should go without health insurance entirely rather than purchase coverage lacking the “consumer protection” of dozens of mandates.  In addition, some conservatives note that the prospect of increasing the number of uninsured due to rising premium costs resulting from benefit mandates may precipitate a “crisis” surrounding the uninsured, increasing calls for a government-run health system.  In short, many conservatives may believe individuals should have the “consumer protection” to purchase the insurance plan they desire—rather than the “protection” from being a consumer by a government which seeks to define their options, and raise the cost of health insurance in the process.

Committee Action:  H.R. 758 was introduced on January 31, 2007, and referred to the Committees on Energy and Commerce, Ways and Means, and Education and Labor.  On September 17, 2008, the Committee on Energy and Commerce ordered the bill, as amended, reported by voice vote.

Cost to Taxpayers:  A CBO score for H.R. 758 was unavailable at press time.  However, the Congressional Budget Office has previously scored a mental health parity benefit mandate as costing nearly $4 billion over ten years.

Conservative Concerns:  Some conservatives may have concerns with H.R. 758, including but not limited to:

  • Increase Health Insurance Costs and Number of Uninsured.  As noted above, benefit mandates generally have the effect of increasing the cost of health insurance.  Moreover, some estimates suggest that every 1% increase in premium costs has a corresponding increase in the number of uninsured by approximately 200,000-300,000 individuals nationwide.[3]  Therefore, some conservatives may be concerned that H.R. 758 will actually increase the number of uninsured Americans.
  • Unfunded Private-Sector Mandates on Small and Large Businesses.  As detailed above, the bill contains multiple new federal mandates on the private sector, affecting the design and structure of health insurance plans.  Among other mandates, the bill would require plans to cover out-of-network specialist consultations for all types of cancer, even if the initial consultation resulted in a negative diagnosis.
  • Undermines Federalism; Democrat Hypocrisy.  In addition to imposing mandates on group health insurance plans generally regulated at the federal level under ERISA, H.R. 758 would also impose these same mandates on individual health insurance plans, which under the McCarran-Ferguson Act are regulated at the state level.  Some conservatives may be concerned by this attempt to undermine state authority and micro-manage health insurance plans.  In addition, some conservatives may note that Democrats who previously cited “state consumer protections” as one reason to oppose efforts to purchase health insurance across state lines now apparently find even these “protections” insufficient, and wish to impose additional layers of federal regulation on individual insurance plans.

Does the Bill Expand the Size and Scope of the Federal Government?  Yes, the bill would create new federal insurance mandates related to cancer coverage and treatment.

Does the Bill Contain Any New State-Government, Local-Government, or Private-Sector Mandates?  Yes, the bill would require employers to comply with several new federal mandates related to cancer coverage and treatment.

Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax Benefits/Limited Tariff Benefits?:  A Committee report citing compliance with Clause 9 of Rule XXI regarding earmarks was unavailable.

Constitutional Authority:  A Committee report citing constitutional authority was unavailable.

 

[1] Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2008” and “Health Insurance Mandates in the States 2007,” available online at http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf and http://www.cahi.org/cahi_contents/resources/pdf/MandatesInTheStates2007.pdf, respectively (accessed July 19, 2008).

[2] Michael New, “The Effect of State Regulations on Health Insurance Premiums: A Revised Analysis,” (Washington, Heritage Center for Data Analysis Paper CDA06-04, July 25, 2006), available online at http://www.heritage.org/Research/HealthCare/upload/CDA_06-04.pdf (accessed July 19, 2008), p. 5.

[3] See, for instance, Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs Web Exclusive April 5, 2008, available online at http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.143/DC1 (accessed July 19, 2008), and Government Accountability Office, Impact of Premium Increases on Number of Covered Individuals is Uncertain (Washington, Report GAO/HEHS-98-203R, June 11, 1999), available online at http://archive.gao.gov/paprpdf2/160930.pdf (accessed July 19, 2008), pp. 3-4.