How Democratic Health Proposals Will Take Your Coverage Away

Following her performance in last week’s Democratic presidential debates, California Senator Kamala Harris once again tripped up over the issue of health care. For a second time, Harris attempted to claim that she would not eliminate private health coverage. In reality, however, virtually all Democrats running for president would enact policies jeopardizing Americans’ health insurance. The candidates differ largely in their level of honesty about their proposals’ effects.

During the debates on Wednesday and Thursday, only Harris, New York Mayor Bill DeBlasio, Massachusetts Sen. Elizabeth Warren, and Vermont Sen. Bernie Sanders said they supported eliminating private insurance. But in an interview Friday morning, Harris claimed she heard the question as asking whether she would give up her insurance, not whether she would take others’ coverage away.

The facts defy Harris’ lawyerly parsing. Section 107(a) of the bill that Sanders introduced, and which Harris, Warren, and New Jersey’s Cory Booker have co-sponsored, would make it “unlawful for a private health insurer to sell health insurance coverage that duplicates the benefits provided” under the legislation.

In May, Harris claimed that Sanders’ legislation would permit private health insurance to supplement the government-run program. But as CNN’s Jake Tapper pointed out at the time, Sanders’ bill would provide such comprehensive benefits that supplemental coverage could only cover treatments like cosmetic surgery. It raises an obvious question: Who would want to buy “insurance” covering breast implants and Botox injections? Harris’ Hollywood constituents, perhaps, but few middle-class Americans.

Other candidates have similarly tried to disguise their intentions when it comes to taking away Americans’ health coverage. During last week’s debates, New York Senator Kirsten Gillibrand—another co-sponsor of Sanders’ legislation to make private coverage “unlawful”—did not raise her hand when asked about eliminating health insurance. She said she supported a government-run “public option” instead: “I believe we need to get to…single payer. The quickest way you get there is you create competition with the insurers.”

But individuals with private coverage cannot, and should not, rest easy. The fact that Gillibrand says she supports a government-run health system as an eventual outcome means that she would work to sabotage the private health insurance system, to drive all Americans into a government-run program.

Even Democratic candidates who claim they oppose Sanders’ single-payer legislation have proposed policies that would eventually lead to such a government-run health system. In Thursday’s debate, Sen. Michael Bennet claimed that his proposal for a “public option” “could easily” see 35 million people enroll. Bennet proved off in his estimate by only about 100 million individuals. In 2009, the Lewin Group estimated that a plan similar to Bennet’s could enroll as many as 131.2 million Americans.

A review of Bennet’s legislation demonstrates how it would sabotage private coverage, by giving the government plan major structural advantages. Bennett’s bill grants the government plan $1 billion in start-up funding from taxpayers—with additional bailout funds likely should the plan ever run into financial distress. It would require all doctors participating in Medicare to join the government plan. And it would pay doctors and hospitals the much lower rates that Medicare pays, even though nearly three-quarters of hospitals lost money on their Medicare patients in 2017.

Among the Democrats running for president, Sanders has remained outspoken in his desire to take away Americans’ health coverage, and ban private insurance. While most of the other candidates say that they want to preserve private coverage, their policies would do the exact opposite. Just as Barack Obama eventually had to apologize for his infamous “If you like your plan, you can keep it” broken promise, so too will most of this year’s candidates have to explain why American families couldn’t keep their insurance if and when their policy plans go into effect.

In accepting his party’s nomination for president at the 1984 Democratic National Convention, Minnesota Senator Walter Mondale infamously claimed that “[Ronald] Reagan will raise taxes, and so will I. He won’t tell you; I just did.” Thirty-five years later, virtually all Democrats have embraced a position almost as unpopular as raising taxes: Taking away Americans’ health insurance. Unlike Mondale, most of this year’s candidates won’t tell you the full truth about their policies. I just did.

This post was originally published at Fox News.

This Chart Explains How Democrats Will Take Away Your Current Coverage

This week, Democratic presidential candidates will gather in Miami for their first debates of the 2020 campaign cycle. Health care, including Sen. Bernie Sanders’ single-payer scheme, will surely serve as a prime point of contention.

More candidates who want to appear more moderate, such as former vice president Joe Biden, might try to contrast themselves with Vermont’s socialist senator. Because Biden and others instead want to allow people to buy into the Medicare program—the so-called “public option”—they will claim that individuals who like their current health coverage need not fear losing it.

In an April 2009 study, Lewin concluded that within one short year, a government-run health plan would eliminate the private coverage of 119.1 million individuals—two-thirds of those with employer-provided insurance:

Democrats’ proposals for a government-run health plan have slightly different details, but they share several characteristics that explain this massive erosion of private health coverage. First, most of the plans receive dollars from the Treasury—seed funding, funding for reserves, or both. These billions of taxpayer dollars, to say nothing of the possibility of additional bailout funds should it into financial distress, would give a government-run plan an inherent advantage over private insurers.

Third, and most importantly, the government-run plan would pay doctors and hospitals at or near Medicare payment levels. These payment levels fall far short of what private health plans pay medical providers, and in most cases fall short of the actual cost of care.

The Lewin Group concluded in 2009 that, by paying doctors and hospitals at Medicare rates, a government-run plan would lead to massive disruption in the employer-provided insurance market. It also concluded that the migration to the government plan would cost hospitals an estimated $36 billion in revenue, and doctors an estimated $33.1 billion. As Lewin noted, under this scenario “health care providers are providing more care for more people with less revenue”—a recipe for a rapid exodus of doctors out of the profession.

Democrats have spent the past two years criticizing President Trump for his supposed “sabotage” of Obamacare. But proposals to create a government-run health plan would sabotage private health insurance, to drive everyone into a single-payer system over time. And some of the plan’s biggest proponents have said as much publicly.

Many moderate and establishment Democrats view the government-run plan as a more appealing method to reach their single-payer goal, because it would take away individuals’ private coverage more gradually. Few believe in the efficiency of competition, or the private sector, as a policy matter; instead, they view the millions of people with private health coverage as a political obstacle, one they can overcome over time.

Senator and presidential candidate Kirsten Gillibrand (D-N.Y.) epitomizes this belief. In March, she called for “a not-for-profit public option [to] compete for the business—I think over a couple years you’re going to transition into single payer.” Of course, by making these comments, Gillibrand indicated a clear bias toward her preferred outcome. So when she said “I don’t think that [private insurers] will compete,” Gillibrand really meant that she—and her Democratic colleagues—will sabotage them so badly that they cannot.

Democrats may claim that they don’t want to take away individuals’ insurance, but the numbers from the Lewin Group survey don’t lie. Regardless of whether they support Sanders’ bill or not, the health coverage of more than 100 million Americans remains at risk in the presidential election.

This post was originally published at The Federalist.

How Robert Francis O’Rourke Sabotaged Obamacare

On Monday night, the Wall Street Journal reported that former U.S. representative Robert Francis O’Rourke had underpaid his taxes for 2013 and 2014. When O’Rourke released his tax returns Monday night, the Journal contacted an accountant, who noticed the error:

O’Rourke and his wife, Amy, appear to have underpaid their 2013 and 2014 taxes by more than $4,000 combined because of an error in the way they reported their medical expenses, according to tax returns the couple released Monday evening.

They took deductions for those costs without regard to the limit that only allowed that break for medical and dental expenses above 10% of income for people their age. Had they not taken the nearly $16,000 in medical deductions, their taxable income would have been higher.

But why did they over-report their medical expense deduction? If you’re curious, go and fetch a copy of the Consolidated Print of the Patient Protection and Affordable Care Act. Why, lookie what we have here:

SEC. 9013. MODIFICATION OF ITEMIZED DEDUCTION FOR MEDICAL EXPENSES.

(a) IN GENERAL.—Subsection (a) of section 213 of the Internal Revenue Code of 1986 is amended by striking ‘7.5 percent’ and inserting ‘10 percent’.

(b) TEMPORARY WAIVER OF INCREASE FOR CERTAIN SENIORS.— Section 213 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

‘(f) SPECIAL RULE FOR 2013, 2014, 2015, AND 2016.—In the case of any taxable year beginning after December 31, 2012, and ending before January 1, 2017, subsection (a) shall be applied with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 percent’ if such taxpayer or such taxpayer’s spouse has attained age 65 be- fore the close of such taxable year.’

However, seniors could report at the lower 7.5 percent level for 2013 through 2016. In 2013 and 2014, Robert Francis reported at the lower 7.5 percent level, even though he and his wife aren’t seniors. Oops.

Several things come to mind upon reading this news, the first being one word: SABOTAGE. Democrats frequently like to claim that the Trump administration is “sabotaging” Obamacare. But by failing to pay an Obamacare-related tax increase, Robert Francis quite literally did just that—he sabotaged the law, failing to fund its entitlements by failing to pay his newly increased tax bill.

Second, did Robert Francis ever bother to READ Obamacare? Sure, he wasn’t a congressman when the bill passed, because he wasn’t a congressman for long, but one would think a member of Congress would bother to educate himself about such an important, and visible, piece of legislation. I talked several times with my mother, a senior who uses the medical expense deduction, about the import of this provision on her taxes. But then again, I actually bothered to read the bill.

More to the point, this episode once again reveals how Democrats want to bequeath to the nation laws that they do not understand. Recall that Max Baucus (D-MT), then the chairman of the Senate Finance Committee and a main author of Obamacare, said he didn’t need to bother reading the bill because he hired “experts” to do it for him. Except that one of those supposed “experts” admitted four years later that, on the law’s employer mandate, “we didn’t have a very good handle on how difficult operationalizing that provision would be at that time.” A government too big to manage—that’s liberals’ greatest legacy.

As James Madison reminded us in Federalist 51, “In framing a government which is to be administered by men over men, the great difficulty lies in this: You must first enable the government to control the governed, and in the next place oblige it to control itself.” Maybe Robert Francis should think about that the next time he’s out on the campaign trail—or writing that check for back taxes to the IRS.

This post was originally published at The Federalist.

Is Donald Trump “Sabotaging” Obamacare?

Is Donald Trump “sabotaging” Obamacare? And are he and his administration violating the law to do so?

Democrats intend to make this issue a prime focus of their political messaging ahead of the November elections. And several developments over the month of August — a Government Accountability Office (GAO) report, a New York Times op-ed by two legal scholars, and a lawsuit filed by several cities — all include specific points and charges related to that theme.

1. The GAO Report

The most recent data point comes from the GAO, which at the behest of several congressional Democrats analyzed the administration’s outreach efforts during the most recent open enrollment period last fall. Those efforts culminated in a report GAO released Thursday.

The report made a persuasive case that the administration’s decision to reduce and re-prioritize funding for enrollment navigators utilized flawed data and methods. While the Department of Health and Human Services (HHS) based navigators’ 2018 funding on their effectiveness in enrolling individuals in coverage in prior years, GAO noted that HHS lacked solid data on navigators’ enrollment on which to base 2018 funding, and that enrollment was but one of navigators’ stated goals in prior years. HHS agreed with GAO’s recommendation that it should provide clearer goals and performance metrics for navigators to meet.

GAO also recommended that the administration reinstitute an overall enrollment target, as one way to determine the adequate distribution of resources during open enrollment. However, a cynic might note that Obamacare advocates, including the Democratic lawmakers who requested the report, may want the Trump administration to publicize an enrollment target primarily so they can attack HHS if the department does not achieve its goals.

Even though reporters and liberals like Andy Slavitt cried foul last year when HHS announced planned maintenance time for healthcare.gov in advance, actual downtime for the site dropped precipitously in 2018 compared to 2017. Which could lead one to ask who is sabotaging whom.

2. The New York Times Article

In The New York Times piece, law professors Nicholas Bagley and Abbe Gluck provide an overview of the lawsuit filed against the Trump Administration (about which more below). As someone who has cited Bagley’s work in the past, I find the article unpersuasive, even disappointing.

Take for instance some of the article’s specific allegations:

Here’s one: “To make it harder for people to enroll in Obamacare plans, for example, the administration shortened the open enrollment period on the health care exchanges from three months to six weeks.”

This charge would have evaporated entirely had Bagley specified which Administration first proposed shortening the open enrollment period to six weeks. The Obama Administration did just that.

This rule also establishes dates for the individual market annual open enrollment period for future benefit years. For 2017 and 2018, we will maintain the same open enrollment period we adopted for 2016—that is, November 1 of the year preceding the benefit year through January 31 of the benefit year, and for 2019 and later benefit years, we are establishing an open enrollment period of November 1 through December 15 of the year preceding the benefit year.

The Trump administration merely took the shorter open enrollment period that the Obama team proposed for 2019 and accelerated it by one year. If shortening the enrollment period would make it so much “harder for people to enroll in Obamacare plans,” as Bagley and Gluck claim, then why did the Obama Administration propose this change?

Another allegation: “To sow chaos in the insurance markets, Mr. Trump toyed for nine months with the idea of eliminating a crucial funding stream for Obamacare known as cost-sharing payments. After he cut off those funds, he boasted that Obamacare was ‘being dismantled.’”

This charge seems particularly specious — because Bagley himself has admitted that Obamacare lacks a constitutional appropriation for the cost-sharing reduction payments to insurers. Bagley previously mentioned that he took no small amount of grief from the left for conceding that President Obama had exceeded his constitutional authority. For him to turn around and now claim that Trump violated his constitutional authority by ending unconstitutional payments represents a disingenuous argument.

Here and elsewhere, Bagley might argue that Trump’s rhetoric — talk of Obamacare “being dismantled,” for instance — suggests corrupt intent. I will gladly stipulate that presidential claims Obamacare is “dead” are both inaccurate and unhelpful. But regardless of what the President says, if the President does what Bagley himself thinks necessary to comport with the Constitution, how on earth can Bagley criticize him for violating his oath of office?

A third allegation:

This month, the Trump administration dealt what may be its biggest blow yet to the insurance markets. In a new rule, it announced that insurers will have more latitude to sell ‘short-term’ health plans that are exempt from the Affordable Care Act’s rules. These plans … had previously been limited to three months.

Under Mr. Trump’s new rule, however, such plans can last for 364 days and can be renewed for up to three years. … In effect, these rules are creating a cheap form of ‘junk’ coverage that does not have to meet the higher standards of Obamacare. This sort of splintering of the insurance markets is not allowed under the Affordable Care Act as Congress drafted it.

This claim also fails on multiple levels. First, if Congress wanted to prohibit “short-term” health plans as part of Obamacare, it could have done so. Congress chose first to allow these plans to continue to exist, and second to exempt these plans from all of Obamacare’s regulatory regime. If Bagley and Gluck have an objection to the splintering of insurance markets, then they should take it up with Congress.

Second, the so-called “new rule” Bagley and Gluck refer to only reverts back to a definition of short-term coverage that existed under the Obama Administration. This definition existed for nearly two decades, from when Congress passed the Health Insurance Portability and Accountability Act (HIPAA) through 2016. The Obama administration published a rule intended to eliminate much of the market for this type of coverage — but it did so only in the fall of that year, more than two years after Obamacare’s major coverage provisions took effect.

As with the shortening of the open enrollment period discussed above, if Bagley and Gluck want to scream “Sabotage!” regarding the Trump administration’s actions, they also must point the finger at Barack Obama for similar actions. That they did not suggests the partisan, and ultimately flawed, nature of their analysis.

3. The Lawsuit

The 128-page complaint filed by the city plaintiffs earlier this month makes some of the same points as the New York Times op-ed. It also continues the same pattern of blaming the Trump administration for actions previously taken by the Obama administration.

The lawsuit criticizes numerous elements of the administration’s April rule setting out the payment parameters for the 2019 Exchange year. For instance, it criticizes the removal of language requiring Exchanges to provide a direct notification to individuals before discontinuing their eligibility for subsidies, if individuals fail to reconcile the subsidies they received in prior years with the amount they qualified for based on their income. (Estimated subsidies, which are based on projected income for a year, can vary significantly from the actual subsidy levels one qualifies for, based on changes in income due to a promotion, change in life status, etc.)

As part of this charge, the lawsuit includes an important nugget: The relevant regulation “was amended in 2016 to specify that an Exchange may not deny [subsidies] under this provision ‘unless direct notification is first sent to the tax filer.’” As with the New York Times op-ed outlined above, those claiming “sabotage” are doing so because the Trump administration decided to revert to a prior regulatory definition used by the Obama administration for the first several years of Obamacare implementation.

The lawsuit similarly complains that the Trump administration is “making it harder to compare insurance plans” by eliminating support for “standardized options” from the Exchange. Here again, the complaint notes that “prior rules supported ‘standardized options,’” while mentioning only in a footnote that the rules implementing the “standardized options” took effect for the 2017 plan year. In other words, the Obama administration did not establish “standardized options” for the 2014, 2015, or 2016 plan years. Were they “sabotaging” Obamacare by failing to do so?

The suit continues with these types of claims, which collectively amount to legalistic whining that the Trump administration has not implemented Obamacare in a manner the (liberal) plaintiffs would support. It even includes this noteworthy assertion:

Maryland has been cleared by state legislators to petition CMS to ‘establish a reinsurance program that would create a pot of money for insurers to cover the most expensive claims,’ but a health economist ‘said he would be shocked if the Trump administration approved such a request, given its efforts to weaken Obamacare’: ‘It just seems very unlikely to me that Trump would approve this. … Maryland is easily saying we want to help prop up Obamacare, which the Trump administration doesn’t want to have anything to do with.’

Fact: The Trump administration just approved Maryland’s insurance waiver this week. So much for that “sabotage.”

A review of its “prayer for relief” — the plaintiffs’ request for actions the court should take — shows the ridiculously sweeping nature of the lawsuit’s claims. Among other things, the plaintiffs want the court to order the defendants to “comply with their constitutional obligation to take care to faithfully execute the ACA,” including by doing the following:

  • “Expand, rather than suppress, the number of individuals and families obtaining health insurance through ACA exchanges;
  • “Reduce, rather than increase, premiums for health insurance in the ACA exchanges;
  • “Promote, rather than diminish, the availability of comprehensive, reasonably-priced health insurance for individuals and families with preexisting conditions;
  • “Encourage, rather than discourage, individuals and families to obtain health insurance that provides the coverage that Congress, in the ACA, determined is necessary to protect American families against the physical and economic devastation that results from lesser insurance, with limits on coverage that leaves them unable to cover the costs of an accident or unexpected illness…
  • “Order Defendants to fully fund advertising under the ACA;
  • “Enjoin Defendants from producing and disseminating advertisements that aim to undermine the ACA;
  • “Order Defendants to fully fund Navigators under the ACA;
  • “Enjoin Defendants from incentivizing Navigators to advertise non-ACA compliant plans;
  • “Order Defendants to lengthen the open enrollment period;
  • “Order Defendants to resume participation in enrollment events and other outreach activities under the ACA…
  • “Order Defendants to process states’ waiver applications under the ACA so as to faithfully implement the Act.”

In other words, the lawsuit asks a court to micro-manage every possible element of implementation of a 2,700-page law — tell HHS what it must say, what it must do, how much it must spend, and on and on. It would create de facto entitlements, by stating that HHS could never reduce funding for advertising and outreach, or lower spending on navigators, or reject states’ waiver applications — potentially even if those applications violate the law itself. And it asks for impossible actions — because HHS cannot unilaterally “expand, rather than suppress” the number of people with coverage, just as it cannot unilaterally “reduce, rather than increase, premiums.”

Despite its questionable claims, and the highly questionable remedies it seeks, the lawsuit may yet accomplish some of its goals. The complaint spends much of its time alleging violations of the Administrative Procedure Act, claiming that HHS did not “meaningfully” or “adequately” consider comments from individuals who objected to the regulatory changes in question. While I have not examined the relevant regulatory dockets in any level of detail, the (pardon the pun) trumped-up nature of elements of the complaint makes me skeptical of such assertions. That said, the administration has suffered several setbacks in court over complaints regarding the regulatory process, so the lawsuit may force HHS to ensure it has its proverbial “i”s dotted and “t”s crossed before proceeding with further changes.

Words Versus Actions

On many levels, the “sabotage” allegations try to use the president’s own words (and tweets) against him. Other lawsuits have done likewise, with varying degrees of success. As I noted above, the president’s rhetoric often does not reflect the actual reality that Obamacare remains much more entrenched than conservatives like myself would like.

But for all their complaints about the administration’s “sabotage,” liberals have no one to blame but themselves for the current situation. Obamacare gave a tremendous amount of authority to the federal bureaucracy to implement its myriad edicts. They should not be surprised when someone who disagrees with them uses that vast power to accomplish what they view as malign ends. Perhaps next time they should think again before proceeding down a road that gives government such significant authority. They won’t, but they should.

This post was originally published at The Federalist.

Study Contradicts Claims of California’s Obamacare “Success”

Liberals have cited California as the prototypical Obamacare success story for years now, but a new study puts that assertion very much in doubt. Five years ago, even before Obamacare’s exchanges went live, The New York Times’ Paul Krugman claimed California would prove that “a program designed to help a lot of people can, strange to say, end up helping a lot of people — especially when government officials actually try to make it work.”

Reporters have chimed in with similar stories about Obamacare’s supposed success in California. During the presidential campaign in 2016, the Los Angeles Times reported that “California is emerging as a clear illustration of what the law can achieve.” The article quoted several insurers saying the state “did it right,” and had created stable insurance markets.

Emergency Rooms Are Getting More, Not Less, Use

The study, conducted by the California Health Care Foundation, examined emergency department usage over the ten years from 2006 to 2016. While the report, perhaps quite deliberately, didn’t highlight this conclusion — it mentioned Obamacare once, and only in passing — the data indicate that emergency department usage since Obamacare has not only not decreased, it has accelerated, rising at a faster rate than in prior years.

One chart tells the tale:

The study indicates that ER usage accelerated in the years immediately following Obamacare’s implementation, just as it shows Medicaid patients comprised a larger share of ER visits. From 2006 through 2016, Medicaid patients nearly doubled as a share of ER visitors, while ER visitors with private insurance and no insurance both declined:

Unfortunately, this chart does not reveal data for the years immediately before and after Obamacare implementation in 2014, making it tougher to draw direct conclusions. However, the 20 percentage point increase in ER visits by Medicaid patients (California calls its Medicaid program “Medi-Cal”) more than outweighs the 9 percentage point decline in self-pay and uninsured patients and the 4 percentage point decline in patients with other forms of coverage.

While private patients’ ER usage held relatively flat over the decade, the nearly 4 million increase in ER visits by Medicaid patients swamped the combined 863,000 fewer visits by self-pay and uninsured patients and patients with other coverage.

To put it bluntly, the raw data from the California study suggest the state has less of a problem with an overall increase in ER visits and much more of a problem with an explosion in Medicaid patient ER visits. That inconvenient truth might explain why the California Health Care Foundation didn’t highlight the impact of Medicaid, or Obamacare’s expansion of it, in the report itself.

California Study Echoes Oregon ‘Experiment’

In 2016, a group of economists released an updated analysis from Oregon, which concluded that ER usage increased, not decreased, by 40 percent for participants in the Medicaid expansion. The increased ER usage persisted for at least two years, making it unlikely that it existed solely due to “pent-up demand” — i.e., individuals using their new insurance coverage to have lingering but previously untreated problems examined.

Contrary to the conventional wisdom that giving patients a more normal source of coverage would decrease ER utilization, the Oregon study found that usage of health care services increased across-the-board, including emergency department visits.

The California study did not reveal whether access problems resulted in the 170 percent increase in ER visits by Medicaid patients. The state has notoriously stingy payment rates for Medicaid providers, which could impede patients from accessing primary care, forcing them to use the emergency room instead.

At minimum, however, the study once again demonstrates how Obamacare has failed to deliver on its promise to lower the cost of health care by providing that care in a more timely fashion and at the most efficient location. The increase in ER usage by Medicaid patients also raises questions about whether an insurance card provides access to actual health care.

Five years ago, I wrote about how Krugman’s claims of California’s Obamacare success echoed The Mamas and the Papas: little more than California Dreamin’. Last week’s study reiterates how liberal claims that the state represents an Obamacare “success story” remain nothing more than a pipe dream.

This post was originally published at The Federalist.

Do Democrats Want Obamacare to Fail under Donald Trump?

In their quest to take back the House and Senate in November’s midterm elections, Democrats have received a bit of bad news. The Hill recently noted:

Health insurers are proposing relatively modest premium bumps for next year, despite doomsday predictions from Democrats that the Trump administration’s changes to Obamacare would bring massive increases in 2019. That could make it a challenge for Democrats looking to weaponize rising premiums heading into the midterm elections.

Administration officials confirmed the premium trend last Friday, when they indicated that proposed 2019 rates for the 38 states using healthcare.gov averaged a 5.4 percent increase—a number that may come down even further after review by state insurance commissioners. So much for that “sabotage.”

The messaging strategy once again illustrates the political peril of rooting for something—particularly legislation Democrats worked so hard to enact in the first place—to fail on someone else’s watch. Like officials accused of “talking down the economy” so they can benefit politically, Democrats face the unique task of trying to talk down their own creation, while blaming someone else for all its problems.

The Obamacare Exchanges’ Prolonged Malaise

While Obamacare hasn’t failed due to President Trump, it hasn’t succeeded much, either. Enrollment continues to fall, particularly for those who do not qualify for subsidies. Two years ago—long before Donald Trump had any power to “sabotage” Obamacare as president—Bill Clinton called Obamacare “the craziest thing in the world” for these unsubsidized persons, and their collective behavior demonstrates that fact.

A recent study from the liberal Kaiser Family Foundation concluded that, away from Obamacare exchanges, where individuals cannot receive insurance subsidies, enrollment fell by nearly 40 percent in just one year, from the first quarter of 2017 to the first quarter of this year. However, the rich subsidies provided to those who qualify for them—particularly those with incomes below 250 percent of the federal poverty level, who receive reduced cost-sharing as well—strongly encourage enrollment by this population, making it unlikely that the insurance exchanges will collapse on their own.

President Trump can talk all he wants about Obamacare imploding, but so long as the federal government props tens of billions of dollars into the exchanges, it probably won’t happen.

Good Reasons for Premium Moderation

Those premium subsidies, which cushion most low-income enrollees from the effects of premium increases, coupled with a lack of competition among insurers in large areas of the country, have allowed premiums to more-or-less stabilize, albeit at levels much of the unsubsidized population finds unaffordable. Think about it: If you have a monopoly, and a sizable population of individuals either desperate for coverage (i.e., the very sick) or heavily subsidized to buy your product, it shouldn’t take a rocket scientist to break even, much less turn a profit.

As a recent Wall Street Journal article notes, insurers spent the past several years ratcheting up premiums, for a variety of reasons: A sicker pool of enrollees than they expected when the exchanges started in 2014; a recognition that some insurers’ initial strategy of underpricing products to attract market share backfired; and the end of Obamacare’s “transitional” reinsurance and risk corridor programs, which expired in 2016.

While some carriers have adjusted 2019 premiums upward to reflect the elimination of the individual mandate penalty beginning in January, some had already “baked in” lax enforcement of the mandate into their rates for 2018. Some have long called the mandate too weak and ineffective to have much effect on Americans’ decision to buy coverage.

It Could Have Been Worse?

Liberals have started to make the argument that, but for the Trump administration’s so-called “sabotage” of insurance markets, premiums would fall instead of rise in 2019. (Some insurers have proposed premium reductions regardless.) The Brookings Institution recently released a paper claiming that in a “stable policy environment” without repeal of the mandate, or the impending regulatory changes regarding short-term insurance and Association Health Plans, premiums would fall by an average of approximately 4.3 percent.

But as the saying goes, “‘It could have been worse’ isn’t a great political bumper sticker.” Democrats tried to make this point regarding the economic “stimulus” bill they passed in 2009, after the infamous chart claiming unemployment would remain below 8 percent if the “stimulus” passed didn’t quite turn out as promised:

In 2011, House Minority Leader Nancy Pelosi (D-CA) tried to make the “It could have been worse” argument, claiming that unemployment would have risen to 15 percent without the “stimulus”:

But even she acknowledged the futility of giving such a message to the millions of people still lacking jobs at that point (to say nothing of the minor detail that studies reinforcing Pelosi’s point didn’t exist).

There’s No Need for a Bailout

While the apparent moderation of premium increases complicates Democrats’ political message, it also undermines the Republicans who spent the early part of this year pressing for an Obamacare bailout. Apart from the awful policy message it would have sent by making Obamacare’s exchanges “too big to fail,” such a measure would have depressed turnout among demoralized grassroots conservatives who want Congress to repeal Obamacare.

As it happens, most state markets didn’t need a bailout. That’s a good thing on multiple levels, because a “stability” bill passed this year would have had little effect on 2019 premiums anyway.

That said, if Democrats want to make political arguments about premiums in this year’s elections, maybe they can tell the American people where they can find the $2,500 in annual premium reductions that Barack Obama repeatedly promised would come from his health care law. Given the decade that has passed since Obama first made those claims without any hint of them coming true, trying to answer for that broken promise should keep Democrats preoccupied well past November.

This post was originally published at The Federalist.

How Andy Slavitt Sabotaged Obamacare

Over the weekend, former Centers for Medicare and Medicaid Services (CMS) acting administrator and Obamacare defender Andy Slavitt took to Twitter to denounce what he viewed as the Trump administration’s “aggressive and needless sabotage” of the health care law:

Unfortunately for Slavitt, the facts suggest otherwise. The Trump administration took actions to comply with a federal court order that vacated rules promulgated by the Obama administration—including rules CMS issued when Slavitt ran the agency. If Slavitt wants to denounce the supposed “sabotage” of Obamacare, he need look no further than the nearest mirror.

What’s the Issue?

This legal dispute involves risk adjustment payments, one of the three “Rs” Obamacare created. Unlike the risk corridor and reinsurance programs, which lasted only from 2014 through 2016, Obamacare made the risk adjustment program permanent.

In general, risk adjustment transfers funds from insurers with healthier-than-average enrollment to insurers with sicker-than-average enrollment. Without risk adjustment, plans would have perverse incentives to avoid enrolling sick people, due to the Obamacare regulations that require insurers to accept all applicants, and prohibit them from charging higher premiums due to health status.

Since the Obamacare exchanges began operations in 2014, many newer and smaller insurers say that the federal risk adjustment formula unfairly advantages incumbent carriers—in many cases, local Blue Cross Blue Shield plans. The small carriers complain that larger insurers do a better job of documenting their enrollees’ health conditions (e.g., diabetes, etc.), entitling them to larger risk adjustment payments.

A July 2016 analysis concluded that “for most co-ops, these recently announced risk adjustment payments have made a bad situation worse, and for a subset, they may prove to be the proverbial last straw.” Indeed, most Obamacare co-ops failed, and the risk adjustment methodology proved one reason. Two co-ops—Minuteman Health in Massachusetts (now in receivership) and New Mexico Health Connections—sued to challenge the risk adjustment formula.

What Happened in the Lawsuits?

On January 30, a federal district court in Massachusetts ruled in favor of the federal government with respect to Minuteman Health’s case. Judge Dennis Saylor ruled that the Department of Health and Human Services (HHS) did not act in an arbitrary and capricious manner when setting the risk adjustment formula.

However, a few weeks later, on February 28, another federal district court in New Mexico granted partial summary judgement in favor of New Mexico Health Connections, ruling that one element of the risk adjustment formula—the use of statewide average premium (discussed further below)—violated the Administrative Procedure Act as arbitrary and capricious. Judge James Browning vacated that portion of the risk adjustment formula for the years 2014 through 2018, and remanded the matter back to HHS and CMS for further proceedings.

If the Trump administration wanted to use the risk adjustment ruling to “sabotage” Obamacare, as people like Slavitt claim, it would have halted the program immediately after Browning issued his order in February. Instead, the administration on March 28 filed a motion to have Browning reconsider his decision in light of the contrary ruling in the Minuteman Health case.

The administration also asked Browning to lift his order vacating the risk adjustment formula, and just remand the matter to CMS/HHS instead. In that case, the rule would remain in effect, but the administration would have to alter it to comply with Browning’s ruling. However, at a June 21 hearing, Browning seemed disinclined to accept the government’s request—which likely led to the CMS announcement this weekend.

Who Issued ‘Arbitrary and Capricious’ Rules?

The Obama administration did, in all cases. Browning’s ruling vacated a portion of the risk adjustment formula for plan years 2014 through 2018 (i.e., the current one). Even though President Trump took office on January 20, 2017, the outgoing Obama administration rushed out rules for the 2018 plan year on December 22, 2016, with the rules taking effect just prior to Obama leaving office.

However, Browning believed the statute does not require budget neutrality—it does not prohibit it, nor does it require it. Therefore, the administration needed to provide a “policy rationale” for its budget neutrality assumption. For instance, HHS could have argued that, because Obamacare did not include a separate appropriation for the risk adjustment program, implementing risk adjustment in a budget neutral manner would prevent the diversion of taxpayer resources from other programs.

But as Browning noted, “the Court must rely upon the rationale the agency articulated in its internal proceedings and not upon post hoc reasoning.” HHS did not explain the reasoning behind budget neutrality in its final rules for the 2014 plan year, nor for several years thereafter.

While both the 2011 white paper and 2014 rules (the final version of which HHS released in March 2013) preceded the July 2014 start of Slavitt’s tenure in senior management at CMS, the agency released rules for the 2016, 2017, and 2018 plan years on his watch. If Slavitt believes “sabotage” occurred as a result of Browning’s court ruling, he should accept his share of the responsibility for it, by issuing rules that a federal judge struck down as “arbitrary and capricious.”

Ironically, as one observer noted, the federal government “argued that the court’s ruling as it applies to the 2018 benefit year should be set aside because the agency responded directly to comments regarding its rationale for budget neutrality in the final 2018 payment rule.” However, Browning held that “subsequent final rules” did “not elaborate further on [HHS’] budget neutrality rationale,” and struck down the 2018 rule along with the rules for 2014 through 2017.

Browning’s decision to strike down the 2018 rule demonstrates Slavitt’s “sabotage.” HHS released that rule months after Minuteman Health and New Mexico Health Connections filed their lawsuits, and thus had adequate time to adjust the rule in response to their claims. Regardless, Browning thought the agency did not elaborate upon or justify its policy reasoning regarding budget neutrality in the risk adjustment program—a direct swipe at Slavitt’s inability to manage the regulatory process inside his agency.

What Would Andy Slavitt Do Instead?

On Friday night, Slavitt claimed that an interim final rule could “clarify and resolve everything:”

However, on Sunday, Slavitt tweeted a link to a New York Times article entitled “A Fatal Flaw as Trump Tries to Remake Health Care: Shortcuts.” That article cited several court cases “that the Administration has lost [that] have a common theme: Federal judges have found that the Administration cut corners in trying to advance its political priorities.” It continues:

Two federal courts blocked Trump Administration rules that would have allowed employers who provide health insurance to employees to omit contraceptive coverage if the employers had moral or religious objections. Two federal judges, in separate cases, said the Administration had violated the law by adopting the rules without a public comment period, which the Trump Administration had declared ‘impracticable and contrary to the public interest.’

Those rules regarding the contraception mandate that the Trump administration adopted “without a public comment,” and which were struck down as unlawful, were both interim final rules—the same type of rule Slavitt now wants to use to change the risk adjustment formula. (Interim final rules do require the agency to take comments, but go into effect on the date of their release—thus notice-and-comment occurs retroactively.)

Nicholas Bagley, an Obamacare supporter, explained at the time of their release why he thought the contraception rules would get stricken (as they were) for violating the notice-and-comment requirement. It’s certainly possible that the administration could use Browning’s ruling as a reason to justify forgoing notice-and-comment, and releasing an interim final rule

But it also makes sense that, given the series of legal setbacks the administration has suffered in recent weeks—and the Times article highlighted—officials at CMS and HHS would take a more cautious approach to issuing regulations, to ensure their actions withstand legal scrutiny.

More to the point, it’s disingenuous of Slavitt to tweet an article criticizing the Trump administration for using interim final rules to enact policies he dislikes, then accuse the administration of “sabotage” for not using that same expedited process for policies he likes. It’s even more disingenuous for Slavitt given that the legal dilemma the Trump administration faces regarding risk adjustment comes entirely from a mess they inherited from the Obama administration—and Slavitt himself.

On Sunday, Slavitt cited a conservative article that in his view “called out Trump’s motivation for ending risk adjustment and raise [sic] premiums on millions: Punishing a former President.” Maybe the next time Slavitt makes allegations about supposed “sabotage” by the Trump administration, he should get his facts straight—CMS’s announcement didn’t “end” the risk adjustment program; only Congress can do that—rather than making unfounded against the current president.

This post was originally published at The Federalist.

What’s Going on with Premium Increases under Obamacare?

Multiple articles in recent weeks have outlined the ways Democrats intend to use Obamacare as a wedge issue in November’s midterm elections. While only a few states have released insurer filings—and regulators could make alterations to insurers’ proposals—the preliminary filings to date suggest above-average premium increases have been higher than the underlying trend in medical costs.

Democrats claim that such premium increases come from the Trump administration and Republican Congress’s “sabotage.” But do those charges have merit? On the three primary counts discussed in detail below, the effects of the policy changes varies significantly.

End of Cost-Sharing Reduction Payments

The administration’s decision meant most insurers increased premiums for 2018, to recoup their costs for discounting cost-sharing indirectly (i.e., via premiums) rather than through direct CSR payments. However, as I previously noted, most states devised strategies whereby few if any individuals would suffer harm from those premium increases. Low-income individuals who qualify for premium subsidies would receive larger subsidies to offset their higher costs, and more affluent individuals who do not qualify for subsidies could purchase coverage away from state exchanges, where insurers offer policies unaffected by the loss of CSR payments.

These state-based strategies mean that the “sabotage” charges have little to no merit, for several reasons. First, the premium increases relating to the lack of direct CSR payments already took effect in most states for 2018; this increase represents a one-time change that will not recur in 2019.

Second, more states have announced that, for 2019, they will switch to the “hold harmless” strategy described above, ensuring that few if any individuals will incur higher premiums from these changes. Admittedly, taxpayers will pay more in subsidies, but most consumers should see no direct effects. This “sabotage” argument was disingenuous when Democrats first raised it last year, and it’s even more disingenuous now.

Eliminating the Individual Mandate Penalty

Repealing the mandate will raise premiums for 2019, although questions remain over the magnitude. The Congressional Budget Office (CBO) last month officially reduced its estimate of the mandate’s “strength” in compelling people to purchase coverage by about one-third. However, another recent study suggests that, CBO’s changes notwithstanding, the mandate had a significant impact on getting people to buy insurance—suggesting that many healthy people could drop coverage once the mandate penalty disappears.

To insurers, the mandate repeal represents an unknown factor shaping the market in 2019. In the short term at least, whether or not people will drop coverage in 2019 due to the mandate’s repeal matters less than what insurers—and, just as important, insurance regulators—think people will do in response. If insurers think many people will drop, then premiums could rise significantly; however, if insurers already thought the mandate weak or ineffective, then its repeal by definition would have a more limited impact.

New Coverage Options

The Trump administration’s moves to expand access to association health plans and short-term insurance coverage, while still pending, also represent a factor for insurers to consider. In this case, insurers fear that more affordable coverage that does not meet all of Obamacare’s requirements will prove attractive to young and healthy individuals, raising the average costs of the older and sicker individuals who remain in Obamacare-compliant plans.

If association plans and short-term coverage do not entice many enrollees—or if most of those enrollees had not purchased coverage to begin with—then the market changes will not affect exchange premiums that much. By contrast, if the changes entice millions of individuals to give up exchange coverage for a non-compliant but more affordable plan, then premiums for those remaining on the exchanges could rise significantly.

Estimates of the effects of these regulatory changes vary. For instance, the administration’s proposed rule on short-term plans said it would divert enrollment from exchanges into short-term plans by only about 100,000-200,000 individuals. However, CBO and some other estimates suggest higher impacts from the administration’s changes, and a potentially greater impact on premiums (because short-term and association plans would siphon more healthy individuals away from the exchanges).

But the final effect may depend on the specifics of the changes themselves. If the final rule on short-term plans does not allow for automatic renewability of the plans, they may have limited appeal to individuals, thus minimizing the effects on the exchange market.

However, those same proponents seem less interested in advertising the same study’s premium impact. The Urban researchers believe short-term plans will draw roughly 2.6 million individuals away from exchange coverage, raising premiums for those who remain by as much as 18.3 percent.

Why Prop Up Obamacare?

The selective use of data regarding short-term plans illustrates Republicans’ problem: On one hand, they want to create other, non-Obamacare-compliant, options for individuals to purchase more affordable coverage. On the other hand, if those options succeed, they will raise premiums for individuals who remain on the exchanges.

But some might argue that fixating on exchange premiums for 2019 misses the point, because Republicans should focus on developing alternatives to Obamacare. The exchanges will remain, and still offer comprehensive coverage—along with income-based premium subsidies for that—to individuals with costly medical conditions. But rather than trying to bolster the exchanges by using bailouts and “stability” packages to throw more taxpayer money at them, Republicans could emphasize the new alternatives to Obamacare-compliant plans.

Of course, if that stance presents too much difficulty for Republicans, they have another option: They could repeal the root cause of the premium increases—Obamacare’s myriad new federal insurance requirements. Of course, in Washington, following through on pledges made for the last four election cycles seems like a radical concept, but to most Americans, delivering on such a long-standing promise represents simple common sense.

This post was originally published at The Federalist.

Is Buying Health Insurance a Political Statement?

A recent Commonwealth Fund analysis of survey data concluded that the number of uninsured Americans rose over the past two years, by the equivalent of approximately 4 million individuals. The Commonwealth researchers claim Trump administration policy decisions explain the decline in the number of Americans with health insurance.

But the data themselves suggest another theory: Some Americans may have made a political decision to drop health coverage.

But consider that Obamacare subsidizes insurance rates for low-income households, capping their premium costs as a percentage of income, and insulating them from most of the effects of premium increases. Consider too that over the past several years, only low-income individuals have purchased coverage on insurance exchanges in significant numbers, precisely because of the rich premium subsidies and lower co-payments and deductibles taxpayers provide to households with income below 250 percent of the federal poverty level.

The high subsidies for low-income individuals would not appear to explain the increase in the uninsured among this group. And a marginal decrease in the uninsured rate this year among those with incomes over 250 percent of poverty—including those who do not qualify for insurance subsidies at all—suggests premium increases may not have led affluent Americans to drop coverage (at least not yet).

What might more logically explain the increase in the number of uninsured? In a word, politics. The Commonwealth researchers note that between 2016 and 2018, the uninsured rate among Republicans aged 19-64 nearly doubled, from 7.9 percent to 13.9 percent. By contrast, the uninsured rate among self-identified Democrats actually declined, albeit not in a statistically significant fashion.

The increase in the uninsured also occurred almost exclusively in states that did not expand Medicaid. From 2016 through 2018, the uninsured rate in those states rose by more than one-third, from 16.1 percent to 21.9 percent, while the rate in states that did expand Medicaid remained relatively constant. Given that the 18 states that have not expanded Medicaid under Obamacare are overwhelmingly southern and red ideologically, this data point confirms a political tinge regarding health coverage decisions.

In all, the uninsured data suggest that a small but measurable percentage of red-state Americans have decided to drop health coverage over the past two years. Because many of those individuals come from working-class backgrounds and could qualify for sizable subsidies, affordability may not have driven their decision to forego insurance. Moreover, three times as many Republicans (6 percent) as Democrats (2 percent) plan to drop health coverage when Obamacare’s individual mandate tax disappears next year, further indicating that politics plays into Americans’ coverage decisions.

The Commonwealth researchers ignore the policy implications of a political divide over purchasing health coverage. They propose reducing the uninsured rate through the usual toolkit Obamacare supporters rely upon to bolster the law: More funding for outreach; more affordability subsidies; more “stability” funding for insurers; more government-run insurance options, including the “public option.”

But if some Americans have purposefully dropped health coverage as a political statement—in opposition to Obamacare in general, the individual mandate in particular, or in solidarity with President Trump—no increase in subsidies, or cajoling via outreach programs, will persuade them to change their decisions. In fact, further policy debates about reinforcing Obamacare may only inflame partisan passions, recalling Ronald Reagan’s famous axiom about the nine most terrifying words in the English language: “I’m from the government and I’m here to help.”

In the run-up to this November’s elections, Democrats plan to attack Republicans’ so-called “sabotage” of Obamacare. Senate Democrats’ campaign arm did just that within hours of the Commonwealth study’s release. But the evidence suggests that the partisanship of the past two years has contributed to the increase in the uninsured rate—meaning Democrats may be the ones sabotaging themselves.

This post was originally published at The Federalist.

AHP Proposed Rule: Expanding Affordability, Washington Control, or Both?

Why would Sen. Rand Paul praise as “conservative care health reform” a proposed regulation that increases Washington’s power?

A proposed rule released Thursday regarding association health plans (AHPs) will likely provide more affordable health coverage options to the self-employed, or individuals working for small businesses. However, it would do so by increasing the number of individuals purchasing health coverage regulated by Washington, making it a mixed bag for conservatives.

A Look at Current Law

  1. Essential health benefits (including actuarial value requirements, limits on out-of-pocket expenses, and deductibles in the small group market);
  2. Risk adjustment payments;
  3. Single risk pool requirements (i.e., requiring insurers to consider all individual coverage, and all small group coverage, offered in a state as one block of business); and
  4. Premium variation requirements imposing strict limits on age-rating, and prohibiting variation by anything other than age, family size, geography, and tobacco use.

The absence of all these requirements gives large group coverage a decided regulatory advantage compared to individual and small group coverage. Self-insured health plans—that is, employer plans that retain the insurance risk themselves—are likewise exempt from the Obamacare requirements listed above, regardless of the business’ size (i.e., whether they have more or fewer than 50 employees).

However, for AHPs that currently buy coverage from insurance carriers (i.e., “fully insured” plans), the Obama administration in 2011 issued guidance that stated regulators would “look through” the association to its members to determine whether their coverage qualified as small group or large group. To give an example, consider an association of restaurant franchises with two members: one with 30 employees, and one with 75 employees. While the restaurant with 75 employees would meet the standard of a large group plan, the one with 30 would classify as a small group plan.

As a result of the 2011 guidance, coverage for the latter would have to meet all the Obamacare coverage requirements for small group plans listed above, making coverage for the larger employer either administratively cumbersome (because two employers would have two different regulatory benefit packages), costlier (because the larger restaurant would have to comply with the small group requirements as part of an association, even though that restaurant would not have to comply if it bought coverage on its own), or both.

What the Proposed Rule Does

In general, the proposed rule would:

  1. “Relax the existing requirement that associations sponsoring AHPs must exist for a reason other than offering health insurance.” Associations must still be run by their members—for instance, Blue Cross or other insurers couldn’t try to form, and run, an “association” just to offer group health coverage—but need not exist for other purposes.
  2. “Relax the requirement that association members share a common interest, as long as they operate in a common geographic area”—either a state, or a metropolitan area encompassing multiple states (e.g., greater Washington DC).
  3. “Make clear that associations whose members operate in the same industry can sponsor AHPs, regardless of geographic distribution.”
  4. “Clarify that working owners and their dependents,” including the self-employed, “are eligible to participate in AHPs.” These individuals must meet certain proposed requirements—working for the business at least 30 hours per week, or 120 hours per month, or generating income from the business equal to the cost of coverage for the owner and his/her family—designed to ensure individuals do not form “businesses” solely for the purposes of purchasing association health coverage.

The Effects on Insurance Offerings

Even prior to the rule’s release, liberal Obamacare supporters claimed the policy represents another attempt to “sabotage” the law, because healthier people will purchase AHP coverage lacking Obamacare’s “consumer protections.” Attempting to respond to that criticism, the proposed rule includes several non-discrimination provisions, prohibiting associations from discriminating in offering membership based on the health status of members’ employees, or varying premiums or eligibility for benefits based on health status. Liberals respond that employers could discriminate through benefit offerings—for instance, not covering chemotherapy to discourage businesses with cancer patients from applying.

However, large employers already exempted from the Obamacare benefits don’t have to offer any such coverage currently, and I have yet to hear any major reports about IBM or General Motors “discriminating” against patients with pre-existing conditions. If these employers haven’t used an exemption from Obamacare coverage requirements to offer shoddy health coverage, then why do liberals believe that other employers will?

How This Affects Federal Power

In general, the rule would expand cross-state purchasing of health insurance. However, it would not do so by allowing people to purchase coverage across state lines—for instance, allowing a Maryland resident to buy a policy regulated in Virginia. Instead, it would allow more individuals to buy federally regulated coverage, regardless of the state in which they live.

Because the rule would eliminate the need for AHPs to comply with Obamacare requirements, it would lower premiums in the short term. However, in the longer term, the nature of the proposal raises two risks. On the one hand, a future administration could revoke the rule, minimizing AHPs’ scope and impact. On the other, a new administration—or a Democratic Congress—could easily glom more federal regulatory requirements on to AHPs and other forms of group coverage.

As I have written previously, the regulatory regime represents the heart of Obamacare. The proposed rule attempts a “kludgy” work-around of that regime, but one that, by increasing federal control over health insurance, may end up causing more trouble over the long term. Congress can—and should—do far better, by repealing the regulatory regime outright, and returning control of health insurance markets where it belongs: To the states.

This post was originally published at The Federalist.