No, Medicare Recipients Haven’t Earned All Their Benefits

In his interview with 60 Minutes that aired Sunday night, Speaker of the House Paul Ryan made a compelling case for reforming Medicare. But in trying to make a political point about the need to maintain the status quo for beneficiaries in retirement, Speaker Ryan actually understated the problems the program faces:

We have to make sure that we shore this program up. And the reforms that we’ve been talking about don’t change the benefit for anybody who is in or near retirement. My mom’s now enjoying Medicare. She’s already retired. She earned it. But for those of us, you know, the X-Generation on down, it won’t be there for us on its current path. So we have to bring reform to this program for the younger generation, so that it’s there for us when we retire, and so that we can keep cash flowing to current generations’ commitments. And the more we kick the can down the road, the more we delay, the worse it gets.

There’s just one problem with this explanation: the benefits Ryan claimed his mother’s generation “earned” don’t begin to match the money paid into the system.

Money In Doesn’t Equal Money Out

In its 2015 document highlighting the long-term budget outlook, the Congressional Budget Office (CBO) conducted an analysis of average payroll taxes paid and benefits received. It found the latter exceeded the former by a wide margin—a margin that will grow over time:

Under the assumption that all scheduled benefits are paid, real average lifetime benefits (net of premiums paid) for each birth cohort as a percentage of lifetime savings will generally be greater than those for the preceding cohort. For example, benefits received over a lifetime are projected to equal about 7 percent of lifetime earnings for people born in the 1940s, on average, but 11 percent for people born in the 1960s. By contrast, real average lifetime payroll taxes relative to lifetime earnings will rise from 2 percent in the 1940s cohort to almost 3 percent for the 1960s cohort.

Both the text and accompanying chart (below) come with a significant caveat: Medicare payroll taxes fund only a share of overall Medicare spending, and that share has declined significantly in recent years—from 67 percent in 2000 to about 40 percent last year. General revenue covers a growing (currently about 47 percent) percentage of Medicare’s finances; individuals do pay a portion of the federal government’s general revenue through income taxes, but it’s harder to differentiate what portion of an individual’s income taxes fund Medicare in any given year.

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We Have To Fix Our Medicare System

No matter the details, the fact that most seniors receive more in benefits than they paid in payroll taxes speaks to the urgent need to right-size our entitlements. Regardless of how we do it, our nation will be much better off if we confront these problems sooner rather than later. Because continuing our Lake Wobegon system—in which everyone receives more than they paid in—will guarantee a fiscal crisis of epic proportions.

This post was originally published at The Federalist.

Tom Price’s Nomination and the Road Ahead for Obamacare Repeal

In announcing the nomination of Georgia orthopedic surgeon and congressman Tom Price as Health and Human Services secretary, Donald Trump sent an important signal about his incoming administration’s desire to undertake major efforts to repeal and replace Obamacare, along with other entitlement reforms. However, Price’s nomination also illustrates why those efforts face a difficult road to passage and enactment.

As news of the Price appointment leaked out late on Monday evening, reporters spent much of their time breathlessly analyzing Dr. Price’s health-care legislation—H.R. 2300, the Empowering Patients First Act—for clues as to what it might mean for the replace effort. However, Price’s bill may be more noteworthy for what it does not include than what it does:

  • Any premium support plan for Medicare reform;
  • Any reform of Medicaid—whether block grants or per capita caps; and
  • Any spending reductions to fund the refundable portion of tax credits Price proposes as an alternative to Obamacare’s insurance subsidies.

In other words, despite releasing a 243-page health-care bill, Price, along with his Republican colleagues in Congress, hasn’t translated into legislative specifics his policy positions on many, if not most, of the important health-care issues the Republican Congress will face next year. For instance:

  • How should a premium support system under Medicare be structured? Should payments to seniors be based upon the average plan bid, the lowest plan bid, or another formula? How quickly should those payments rise in future years?
  • How quickly should Medicaid block grants, or per capita caps, rise in future years?
  • Should an Obamacare repeal-and-replace plan rely on pre-Obamacare levels of taxes and spending, or should it redirect existing Obamacare spending in a different direction?

Price’s legislation does not shed much light on these and other critically important questions that Congress will need to undertake next year.

Budget Gimmicks and Magic Asterisks

As chairman of the House Budget Committee, Price earlier this year released a budget blueprint that did include some ideas for entitlement reform. However, that document included only about four pages of proposals on Medicare, Medicaid, and Obamacare—some of which focused more on making the case against Obamacare than outlining the specifics of a Republican alternative. The Budget Committee did draft more specific (and non-binding) report language, but ultimately left the details of determining policy—as all budgets do—to the committees of jurisdiction, namely House Ways and Means and House Energy and Commerce.

More importantly, even though the Republican budget document said it “gets rid of all of Obamacare,” that’s not what it did. The budget, like those issued by House Speaker Paul Ryan when he was Budget Committee chairman, assumes Obamacare’s higher levels of taxes and lower levels of Medicare spending to achieve balance within the decade. Either the budget doesn’t repeal all of Obamacare, or it assumes that Congress, after repealing Obamacare, would go back and re-enact equivalent levels of tax increases and Medicare spending reductions.

It’s particularly noteworthy that Price’s Empowering Patients First Act, which proposes a new refundable tax credit, includes only one idea to pay for said credit—a cap on the tax deductibility of employer-sponsored health coverage. Although administered through the tax code, refundable credits are considered for budgetary purposes government spending—Washington writing “refund” checks to individuals and families with no income tax liability.

While it’s difficult to determine without a Congressional Budget Office score to his bill, one could argue the chairman of the House Budget Committee proposed raising taxes (the cap on deducting employer-sponsored health coverage) to pay for new spending (the refundable portion of the tax credit/insurance subsidy).

None of these omissions by Price suggest he lacks an intricate knowledge of health policy—far from it. In fact, to the extent Price has purposefully avoided many of the political minefields omnipresent in health policy, that public silence makes his Senate confirmation more likely.

But it also illustrates the extent of the obstacles Republicans face. If one of the few conservatives in Congress with an interest in, and knowledge of, health care achieved that reputation in part by avoiding tough choices, what will Republicans do when they have to make those difficult decisions—and trust me, they will have to—without him next year?

Legislating vs. Implementing

Given his influential perch in Congress, Price did not accept the HHS nomination because he intends to oversee the legislative process at a close distance. He will play a key role in liaising with Congress, no doubt, but perhaps more from a “big picture” perspective—working to persuade his former legislative colleagues—than by drafting minute details with Hill staff, Ryan, and Senate Majority Leader Mitch McConnell.

Price’s nomination to HHS makes much more sense from an implementation standpoint—the opportunity to shape and mold the regulatory process. Price can lay the regulatory groundwork for repealing Obamacare and reforming entitlements. But the heavy lifting of policy will remain Congress’s purview, and Price’s record—both what it includes, and more importantly, what it excludes—illustrates that lift will be heavy indeed.

This post was originally published in The Federalist.

Trump’s Solyndra? Oscar Is a Test Case in “Draining the Swamp”

Earlier this month, I wrote a piece noting that Donald Trump had 47.5 million reasons to support Obamacare bailouts. That’s the amount an insurer formerly owned by his influential son-in-law (and transition team Executive Committee member) Jared Kushner, and currently owned by Jared’s brother Josh Kushner, had requested from the Obama administration’s bailout funds.

Unfortunately, that story proved inaccurate, or at worst premature. Trump now has more than 100 million reasons to support Obamacare bailouts. That’s because the Centers for Medicare and Medicaid Services (CMS), on the Friday before Thanksgiving, quietly released a document listing risk corridor claims for calendar year 2015. Overall, insurers requested a whopping $5.8 billion in risk corridor funds—more than double the claims made for 2014—while Oscar, the health insurer Trump’s in-laws own, requested $52.7 million.

Insurers’ growing losses come as the risk corridor program faces a crossroads. While some within the Obama administration wish to settle lawsuits insurers have filed against the program, settling those suits with billions of dollars in taxpayer cash, the Justice Department just achieved a clear-cut victory defending the federal government against the insurer lawsuits.

The incoming Trump administration will face a choice: Will it side with taxpayers, and prevent the payment of Obamacare bailout funds to insurers, or will it side with Trump’s in-laws, and allow the payment of tens of millions of dollars to an insurer owned by Josh Kushner?

The Obama Administration Wants a Bailout. Will Trump?

Considered one of Obamacare’s “risk mitigation” programs, risk corridors have been an unmitigated disaster for the administration. In theory, the program was designed so insurers with excess profits would pay into a fund to reimburse those with excess losses. Unfortunately, however, a product many individuals do not wish to buy, coupled with unilateral—and unconstitutional—decisions by the administration created massive losses for insurers, turning risk corridors into a proverbial money pit.

Nearly two years ago, Congress passed legislation prohibiting taxpayer funds from being used to bail out the program. The program’s only source of funding would be payments in from insurers with excess profits. Those have proved few and far between. As a result, insurers received only 12.6 cents on the dollar for their 2014 claims, with more than $2.5 billion in claims unpaid. The meagre takings for 2015 were insufficient to pay off last year’s $2.5 billion shortfall, let alone the $5.8 billion in additional claims insurers made on risk corridors last year.

Given these mounting losses, insurers have filed suit against the administration seeking payment of their unpaid claims. Some within the Obama administration have sought to settle the lawsuits, using the obscure Judgment Fund to circumvent the spending restrictions Congress imposed in 2014.

But even as those settlement discussions continue behind closed doors, the Justice Department won a clear victory earlier this month. In the first risk corridor lawsuit to be decided, a judge in the Court of Federal Claims dismissed a lawsuit by the failed Land of Lincoln health insurance co-operative on all counts. Not only did Land of Lincoln not have a claim to make against the government for unpaid risk corridor funds now, the court ruled, it would never have a claim to make against the government.

Oscar: Bailouts to the Rescue?

While the risk corridor program faces its own problems, so does start-up Oscar. Owner Josh Kushner wrote this month that Obamacare “undoubtedly helped get us off the ground.” Unfortunately for Oscar, however, the law has seemingly done more to drive it into the ground.

In part due to regulatory decisions from the Obama Administration—allowing individuals to keep their pre-Obamacare plans temporarily—Oscar has faced an exchange market full of people with higher costs than the average employer plan. The Wall Street Journal recently reported that “Oscar lost $122 million in 2015 on revenue of $126 million, according to company regulatory filings.” To repeat: Oscar’s losses last year nearly totaled its gross revenues.

My earlier article explained how Oscar has already received $38.2 million in payments from Obamacare’s reinsurance program—designed to subsidize insurers for expenses associated with high-cost patients—in 2014 and 2015. That money came even as the Government Accountability Office and other nonpartisan experts concluded the Obama administration acted illegally in paying funds to insurers rather than first reimbursing the U.S. Treasury for the $5 billion cost of another program, as the text of Obamacare states.

In 2014, Oscar made a claim for a total of $9.3 million in risk corridor funds, of which it received less than $1.2 million, due to the shortfalls explained above. For 2015, the insurer made a claim of a whopping $52.7 million—more than five times its 2014 risk corridor claim—while receiving only $310,349.58 in unpaid 2014 payments.

From the risk corridor program, Oscar now has $52.7 million in 2015 claims, not a dime of which were paid, along with approximately $7.8 million in unpaid 2014 claims. For an insurer that lost $122 million in 2015, this more than $60 million in outstanding risk corridor funds are nothing to be trifled with.

Who Comes First: Taxpayers, or Family?

In a recent post-election appraisal of the policy landscape, Oscar owner Josh Kushner complained about severe shortcomings in implementing Obamacare:

The government has also not fixed or not funded [Obamacare] programs designed to help insurers deal with the uncertainty of the first few years of the market. Doing so could have prevented the plan withdrawals that have so destabilized the market.

In complaining specifically that the risk corridor programs were “not funded,” Kushner takes aim at Congress, when in reality he might want to look more closely at President Obama’s actions in letting individuals keep their pre-Obamacare health plans, which upended insurers’ expectations for the new market. Congress, let alone taxpayers, should not have to fund a blank check for the president’s decision to violate the law for political reasons.

In the past two years, Oscar has claimed $38.2 million in reinsurance funds, even though nonpartisan experts believe those funds were illegally diverted to insurers and away from the U.S. Treasury. While it has received only about $1.5 million in risk corridor payments, it has claims for more than $60 million more, and its claims on the federal fisc are likely to rise much higher. The $100 million total doesn’t even include reinsurance and risk corridor claims for this calendar year, which are likely to total tens of millions more, given Oscar’s ongoing losses during the year to date.

Four years ago, Donald Trump sent out this tweet:

Trump was correct then, but the question is whether he will remain so when his in-laws’ sizable financial interests are at stake. Signing off on a taxpayer-funded bailout of the risk corridor program—already at $8.3 billion in unpaid claims, a total which could easily rise well above $10 billion—to help prop up his in-laws’ insurer would represent “Solyndra capitalism” at its worst. Instead, the Obama administration—and the Trump administration—should refuse to settle the risk corridor lawsuits, and encourage Congress to pass additional legislation blocking use of the Judgment Fund to pay risk corridor claims. Taxpayers deserve nothing less.

This post was originally published in The Federalist.

Hillarycare Redux? A Review of “The System”

A young president promising hope and change takes over the White House. Immediately embarking upon a major health-care initiative, he becomes trapped amidst warring factions in his party in Congress, bickering interest groups, and an angry public, all laying the groundwork for a resounding electoral defeat.

Barack Obama, circa 2009-10? Most definitely. But the same story also applies to Bill Clinton’s first two years in office, a period marked by a health-care debate in 1993-94 that paved the way for the Republican takeover of both houses of Congress.

In their seminal work “The System,” Haynes Johnson and David Broder recount the events of 1993-94 in detail—explaining not just how the Clinton health initiative failed, but also why. Anyone following the debate on Obamacare repeal should take time over the holidays to read “The System” to better understand what may await Congress and Washington next year. After all, why spend time arguing with your in-laws at the holiday table when you can read about people arguing in Congress two decades ago?

Echoes of History

For those following events of the past few years, the Clinton health debate as profiled in “The System” provides interesting echoes between past and present. Here is Karen Ignani of the AFL-CIO, viewed as a single-payer supporter and complaining that insurance companies could still “game the system” under some proposed reforms. Ironic sentiments indeed, as Ignani went on to chair the health insurance industry’s trade association during the Obamacare debate.

There are references to health care becoming a president’s Waterloo—Johnson and Broder attribute that quote to Grover Norquist, years before Sen. Jim DeMint uttered it in 2009. Max Baucus makes an appearance—he opposed in 1994 the employer mandate he included in Obamacare in 2009—as do raucous rallies in the summer of 1994, presaging the Obamacare town halls 15 years later.

Then there are the bigger lessons and themes that helped define the larger debate:

“Events, Dear Boy, Events:” The axiom attributed to Harold Macmillan about leaders being cast adrift by crises out of their control applied to the Clintons’ health-care debate. Foreign crises in Somalia (see “Black Hawk Down”) and Haiti sapped time on the presidential calendar and press attention, and distracted messaging. During the second half of 2009, Obama spent most of his time and energy focused on health care, leading some to conclude he had turned away from solving the economic crisis.

Old Bulls and Power Centers: “The System” spends much more time profiling the chairs of the respective congressional committees—including Dan Rostenkowski at House Ways and Means, John Dingell at House Energy and Commerce, and Patrick Moynihan at Senate Finance—than would have been warranted in 2009-10. While committee chairs held great power in the early 1990s, 15 years later House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid called most of the legislative shots from their leadership offices.

Whereas the House marked up three very different versions of health-care legislation in 1993-94, all three committees started from the same chairman’s mark in 2009. With Speaker Paul Ryan, like John Boehner before him, running a much more diffuse leadership operation than Pelosi’s tightly controlled ship, it remains to be seen whether congressional leaders can drive consensus on both policy strategy and legislative tactics.

The Filibuster: At the beginning of the legislative debate in 1993, Robert Byrd—a guardian of Senate rules and procedures—pleaded for Democrats not to try and enact their health agenda using budget reconciliation procedures to avoid a filibuster. Democrats (begrudgingly) followed his advice in 1993, only to ignore his pleadings 16 years later, using reconciliation to ram through changes to Obamacare. Likewise, what and how Republicans use reconciliation, and Democrats use the filibuster, on health care will doubtless define next year’s Senate debate.

Many Obama White House operatives such as Rahm Emanuel, having lived through the Clinton debate, followed the exact opposite playbook to pass Obamacare.

They used the time between 1993 and 2009 to narrow their policy differences as a party. Rather than debating between a single-payer system and managed competition, most of the political wrangling focused on the narrower issue of a government-run “public option.” Rather than writing a massive, 1,300-page bill and dropping it on Capitol Hill’s lap, they deferred to congressional leaders early on. Rather than bashing special interest groups publicly, they cut “rock-solid deals” behind closed doors to win industry support. While their strategy ultimately led to legislative success, the electoral consequences proved eerily similar.

Lack of Institutional Knowledge

The example of Team Obama aside, Washington and Washingtonians sometimes have short memories. Recently a reporter e-mailed asking me if I knew of someone who used to work on health care issues for Vice President-elect Mike Pence. (Um, have you read my bio…?) Likewise, reporters consider “longtime advisers” those who have worked the issue since the last presidential election. While there is no substitute for experience itself, a robust knowledge of history would come in a close second.

Those who underestimate the task facing congressional Republicans would do well to read “The System.” Having read it for the first time the week of President Obama’s 2009 inauguration, I was less surprised by how that year played out on Capitol Hill than I was surprised by the eerie similarities.

George Santayana’s saying that “Those who cannot remember the past are condemned to repeat it” bears more than a grain of truth. History may not repeat itself exactly, but it does run in cycles. Those who read “The System” now will better understand the cycle about to unfold before us in the year ahead.

This post was originally published at The Federalist.

How Obamacare Discriminates Against the Most Vulnerable

As previously predicted, many in the press have tried to define the Obamacare debate through the prism of the individuals newly insured by the law. One article has highlighted the election “through the eyes of Obamacare enrollees.” Liberal groups are trotting out studies—studies debunked years ago by a member of the Obama Administration—that claim repealing Obamacare would hasten the deaths of tens of thousands of Americans annually, due to lack of insurance coverage.

But what about Obamacare’s forgotten faces? What about the people who, instead of obtaining coverage because of Obamacare, didn’t obtain coverage because of Obamacare? What about the people with disabilities who quite literally have died on waiting lists to receive care—not despite Obamacare, but because of it.

Instead of talking about how Obamacare “ended discrimination against people with pre-existing conditions,” what about how Obamacare encourages discrimination against the most vulnerable?

The People That Obamacare Doesn’t Help

I’m talking about the individuals with disabilities—more than half a million nationwide—still on waiting lists to receive services, because Obamacare encourages states to expand Medicaid coverage to able-bodied adults, instead of serving them. They include people like Lindsey Overman and her 10-year-old daughter Skylar:

“She [Skylar] was born with a rare medical neurological condition called schizencephaly,” Overman told us.

In the past three months Skylar’s condition has worsened. Last month she had surgery to relieve pressure on her brain and her family is paying $400 per month just for transportation to and from a summer program. A Medicaid waiver would help with the costs that go along with at-home care for children with disabilities.

Skylar remains #754 on the waiver waiting list.

Because Obamacare encourages states to expand Medicaid to able-bodied adults, rather than provide services to individuals with disabilities like Skylar, the 10-year-old continues to wait—and wait, and wait—for needed care, which her mother thinks she will never see during her daughter’s lifetime.

Obamacare Favors the Able-Bodied, Not the Disabled

It’s Obamacare’s dirty little secret, and perhaps its most shocking. For the past three years, the law has provided 100 percent federal funding for states that expand Medicaid to new populations. That funding will phase down slightly beginning in January—the federal match drops to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and future years. But for the populations that qualified for Medicaid prior to Obamacare, the federal government provides a match rate that this fiscal year ranges from 50 percent to 75 percent, based on states’ relative income.

Estimates from the Urban Institute suggest that most individuals eligible for Obamacare’s Medicaid expansion are childless adults in their prime working years. Nationally, more than four in five (82.4 percent) of the would-be eligible adults are those without dependent children. More than five in six (86.1 percent) of the would-be eligible adults are aged 19 to 54.

In other words, the overwhelming majority of the adults covered under Medicaid expansion are able-bodied adults of working age. Yet Obamacare provides states with anywhere from 20 to 40 cents more on the dollar to cover these able-bodied adults in the expansion population than the individuals who qualified for Medicaid prior to Obamacare—including seniors and individuals with disabilities.

There Are Waiting Lists for Individuals with Disabilities

When serving on the congressionally-appointed Commission on Long-Term Care in 2013, I heard much about the waiting lists for care that individuals with disabilities face. Because Medicaid requires coverage of nursing home care, but considers home and community-based services (HCBS) optional, states facing fiscal pressures can—and most do—put individuals with disabilities on waiting lists to receive HCBS care. These individuals may benefit from home-based care—which could help keep them out of nursing homes—but cannot receive it, due to budget restrictions imposed by states.

The latest national estimates provide a sense of the magnitude of the problem. A total of over 582,000 individuals, in 42 different states, remain on waiting lists for home and community-based services, including:

  • 349,511 individuals with intellectual or developmental disabilities;
  • 155,697 aged, or aged and disabled, individuals;
  • 14,128 individuals with physical disabilities;
  • 58,635 children with disabilities; and
  • 4,006 individuals with traumatic brain injury.

At a time when more than half a million individuals with disabilities continue to wait for access to critically important personal care, Obamacare has provided a greater federal match to states that expand Medicaid to able-bodied adults. By giving states a strong incentive to expand Medicaid to new populations—and ignore the hundreds of thousands of individuals with disabilities still on waiting lists—Obamacare discriminates against the most vulnerable in our society.

Obamacare Doesn’t Help The Most Vulnerable

A report issued on Wednesday by the Foundation for Government Accountability highlights how Medicaid rolls have exploded under Obamacare—and how individuals with disabilities have suffered as a result. In Illinois, on the same day state legislators implemented an early Medicaid expansion for Cook County, they also voted to cut traditional Medicaid, costing one patient his access to seizure medication. In Ohio, Gov. John Kasich’s administration, even while expanding Medicaid to the able-bodied under Obamacare, cut eligibility for more than 34,000 individuals with disabilities.

And then there’s Arkansas—home of Skylar and Lindsey Overman, the 10-year-old standing at #754 on a waiting list. While Gov. Asa Hutchinson pledged to cut his state’s Medicaid waiting list in half, in reality the list has grown by nearly 25 percent in the past three years—a time when Arkansas expanded Medicaid under Obamacare. According to state estimates reviewed by the Foundation for Government Accountability, 79 individuals with developmental disabilities have died on the Medicaid waiting list since the state expansion took effect. I’ll say that again: Since Arkansas expanded Medicaid to the able-bodied, 79 individuals with disabilities have died on lists waiting for access to Medicaid services.

Conservatives Shouldn’t Ignore the Plight of the Disabled

In responding to the threat of Obamacare repeal, the left seems eager to develop a “parade of horribles” revolving around individuals who fear losing coverage under an Obamacare alternative. Yet those same groups have singularly failed to notice the tragic stories already in front of them—the individuals with disabilities facing discrimination, and an inability to access needed care, because of Obamacare itself.

Conservatives who have seen the results of this law on individuals with disabilities have no reason—none—take a back seat on the compassion front to any Obamacare supporter. Any measure that encourages states to discriminate against the most vulnerable represents a twisted view of compassion indeed.

This post was originally published at The Federalist.

Donald Trump’s 47.5 Million Reasons to Support Obamacare Bailouts

Last Friday afternoon, Donald Trump caused a minor uproar in Washington when he signaled a major softening in his stance towards President Obama’s unpopular health-care law. “Either Obamacare will be amended, or it will be repealed and replaced,” Trump told the Wall Street Journal—a major caveat heretofore unexpressed on the campaign trail.

Why might Trump—who not one month ago, in a nationally televised debate, called Obamacare a “total disaster” that next year will “implode by itself”—embark on such a volte face about the law? Politico notes one possible answer lies in the story of Oscar, a startup insurer created to sell plans under Obamacare:

Oscar is about to have an unusually close tie to the White House: Company co-founder Josh Kushner’s brother Jared is posted to plan an influential role in shaping his father-in-law Donald Trump’s presidency. The two brothers in 2013 were also deemed ‘the ultimate controlling persons in Oscar’s holding company system,’ according to a state report.

Government of the People—Or of the Cronies?

In 2000, while contemplating a run for the White House, Trump told Fortune magazine: “It’s very possible that I could be the first presidential candidate to run and make money on it.” That previously expressed sentiment—of using political office for personal pecuniary gain—would not rule out Trump assuming policy positions designed to enrich himself and his associates.

That need might be particularly acute in the case of Oscar, of which Jared Kushner was a controlling person, and in which Josh Kushner’s venture capital firm Thrive Capital has invested. On Tuesday, the insurer reported $45 million in losses in just three states, bringing Oscar’s losses in those three states to a total of $128 million this calendar year. Bloomberg said the company “sells health insurance to individuals in new markets set up by [Obamacare,]” and described its future after last week’s election thusly:

Trump’s election could be a negative for the insurer. The Republican has promised to repeal and replace [Obamacare,] though he’s softened that stance since his victory. The uncertainty could discourage some people from signing up for health plans, or Republicans could eliminate or reduce the tax subsidies in the law that are used to help pay for coverage.

Replace “the insurer” with “Trump’s in-laws” in the above paragraph, and the president-elect’s evolving stance certainly begins to make more sense.

Pimp My Obamacare Bailout?

It’s an ironic statement, given that government documents reveal how Oscar—and thus Trump’s in-laws—have made claims on Obamacare bailout programs to the tune of $47.5 million. Those claims, including $38.2 million from reinsurance and $9.3 billion from risk corridors, total more than Oscar’s losses in the past quarter. The $47.5 million amount also represents a mere fraction of what Oscar could ultimately request, and receive, from Obamacare’s bailout funds, as it does not include any claims for the current benefit year.

Given that most of the things Trump should do on Day One to dismantle Obamacare involve undoing the law’s illegal bailouts, it’s troubling to learn the extent to which a company run by his in-laws has benefited from them. Following are some examples.

Reinsurance: Administration documents reveal that during Obamacare’s first two years, Oscar received $38.2 million in payments from the law’s reinsurance program, designed to subsidize insurers for the expense associated with high-cost patients. Unfortunately, these bailout payments have come at the expense of taxpayers, who have been shortchanged money promised to the federal Treasury by law so the Obama administration can instead pay more funds to insurers.

In 2014, when Oscar only offered plans in New York, the company received $17.5 million in Obamacare reinsurance payments. In 2015, as Oscar expanded to offer coverage in New Jersey, the insurer received a total of more than $20.7 million in reinsurance funds: $19.8 million for its New York customers, and $945,000 for its New Jersey enrollees.

While reinsurance claims for the 2016 plan year are still being compiled and therefore have not yet been released, it appears likely that Oscar will receive a significant payment in the tens of millions of dollars, for two reasons. First, the carrier expanded its offerings into Texas and California; more enrollees means more claims on the federal fisc. Second, Bloomberg quoted anonymous company sources as saying that part of Oscar’s losses “stem from high medical costs”—which the insurer will likely attempt to offset through the reinsurance program.

While the Obama administration has doled out billions of dollars in reinsurance funds to insurers like Oscar, they have done so illegally. In September, the Government Accountability Office ruled that the administration violated the text of Obamacare itself. Although the law states that $5 billion in payments back to the Treasury must be made from reinsurance funds before insurers receive payment, the Obama administration has turned the law on its head—paying insurers first, and stiffing taxpayers out of billions.

I wrote last week that Trump can and should immediately overturn these illegal actions by the Obama Administration, and sue insurers if needed to collect for the federal government. But if those actions jeopardize tens of millions of dollars in federal payments for the Kushners, or mean the Trump administration will have to take Trump’s in-laws to court, will he?

Risk Corridors: Oscar also has made claims for millions of dollars regarding Obamacare’s risk corridor program, which as designed would see insurers with excess profits subsidize insurers with excess losses. In 2014, Oscar was one of many insurers with excess losses, making a claim for $9.3 million in risk corridor payments.

However, because Congress prohibited taxpayer funds from being used to bail out insurance companies, and because few insurers had excess profits to pay into the risk corridor program, insurers requesting payouts from risk corridors received only 12.6 cents on the dollar for their claims. While Oscar requested more than $9.3 million, it received less than $1.2 million—meaning it is owed more than $8.1 million from the risk corridor program for 2014.

CMS has yet to release data on insurers’ claims for 2015, other than to say that payments to the risk corridor program for 2015 were insufficient to pay out insurers’ outstanding claims for 2014. In other words, Oscar will not be paid its full $9.3 million for 2014, even as it likely makes additional claims for 2015 and 2016.

However, Oscar yet has hope in receiving a bailout from the Obama administration. In September, the administration said it was interested in settling lawsuits brought by insurance companies seeking reimbursement for unpaid risk corridor claims. The administration hopes to use the obscure Judgment Fund to pay through the backdoor the bailout that Congress prohibited through the front door.

As with reinsurance payments, a President Trump should immediately act to block such settlements, which violate Congress’ expressed will against bailing out insurers. However, given his clear conflict-of-interest in protecting his close relatives’ investments, it’s an open question whether he will do so.

Cost-Sharing Reductions: Like other health insurers, Oscar has benefited by receiving cost-sharing subsidies—even though Congress never appropriated funds for them. In May, Judge Rosemary Collyer agreed with the House of Representatives that the Obama administration’s payments to insurers for cost-sharing subsidies without an appropriation violate the Constitution. Although the text of the law requires insurers to reduce deductibles and co-payments for some low-income beneficiaries, it never included an explicit appropriation for subsidy payments to insurers reimbursing them for these discounts. Despite this lack of an appropriation, the Obama administration has paid insurers like Oscar roughly $14 billion in cost-sharing subsidies anyway.

Here again, Trump should immediately concede the illegality of the Obama administration’s actions, settle the lawsuit brought by the House of Representatives, and end the unconstitutional cost-sharing subsidies on Day One. But given his close ties to individuals whose insurance model is largely based on selling Obamacare policies, will he do so? To put it bluntly, will he put the interests of Oscar—and his in-laws—ahead of the U.S. Constitution?

Ask Congress for More and More Money?’

In general, health insurance companies have made record profits during the Obama years—a total of a whopping $15 billion in 2015. But while insurers have made money selling employer plans, or contracting for Obamacare’s massive expansion of Medicaid, few insurers have made money on insurance exchanges. That dynamic explains why Oscar, which has focused on exchange plans, has suffered its massive losses to date.

However, as Trump rightly pointed out just one short month ago, the answer is not to “ask Congress for more money, more and more money.” He should end the bailouts immediately upon taking office. Duty to country—and the constitutional oath—should override any personal familial conflicts.

This post was originally published at The Federalist.

On Health Care, It’s the Costs, Stupid

At his first post-election press conference Monday, President Obama attempted to sound gracious on the topic of repealing his signature health law, while simultaneously laying down a clear policy gauntlet: the number of Americans with insurance coverage under a Republican replacement.

If they can come up with something better that actually works, a year or two after they’ve replaced [Obamacare] with their own plan, and 25 million people have health insurance and it’s cheaper and better and running smoothly, I’ll be the first one to say that’s great. Congratulations.

In other words, as I noted last month, the president will happily support others’ legislation—so long as it accomplishes exactly what he wants. Ironically enough, when campaigning for the presidency eight years ago, Barack Obama campaigned on one number, but one that had nothing to do with the number of Americans with health coverage. It was $2,500—the premium reduction he promised to the average family.

Obamaspeak: ‘Lower Premiums’ Means Massive Increases

President Obama’s 2016 focus on how many people have health insurance coverage stands in stark contrast to candidate Obama, circa 2008. In the Democratic primaries against Hillary Clinton, he famously opposed an individual mandate to purchase health insurance, because “the reason people don’t have health insurance isn’t because they don’t want it; it’s because they can’t afford it.”

While then-senator Obama did not promise to achieve a certain level of health insurance coverage, he did make a very specific promise to lower premiums. As the video shows, Obama promised—over and over and over again—that his health-care plan would lower premiums by an average of $2,500 per family:

Note also that Obama promised to “lower” and “cut” premiums. That means he didn’t promise that premiums would rise by slightly less than predicted—he pledged to reduce them in absolute terms.

On any count, President Obama’s pledge lies in tatters. Since he signed Obamacare in 2010, the average employer-sponsored health plan has risen by more than $3,300 per family—from $13,770 in 2010 to $18,142 this year. Obamacare’s massive benefit mandates raised the average premium for individually purchased coverage by about 40 percent overnight, as the main provisions of the law took effect in 2014. Premiums are also set to spike on Obamacare exchanges again, with an average of another 25 percent rise for the plan year beginning January 1.

Cost Is Voters’ Top Concern

In reality, Obamacare stands as living proof that affordability matters most for health care and health insurance. While the Medicaid rolls have exploded far beyond most states’ original estimates—perhaps because the program charges no premiums to most beneficiaries—enrollment in exchange plans remains far below projections. Obamacare’s benefit mandates have so raised the cost of coverage that everyone but individuals qualifying for the richest subsidies has stayed away from the exchanges in droves.

Polling data also speaks to voters’ concern about reducing health costs. A survey conducted for America Next in February 2014 (while I served as America Next’s policy director) reveals that voters judge costs as a larger concern than universal coverage by a more than two-to one margin. In addition, by 13 percentage points voters prefer a system that lowers costs but does not guarantee coverage over a system that guarantees health insurance but increases costs:

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The Media Is Out of Touch with Americans

In covering a post-Obamacare universe, most media stories in the past week have focused solely on the number of individuals with health insurance. That’s one key metric, but so are whether health insurance results in access to actual health care, whether coverage improves health outcomes, and the extent to which individuals value health insurance over other goods.

Voters care most about reducing the underlying cost of health care. Only lowering costs, not creating new ways for the federal government to subsidize them, will make health care fiscally sustainable in the long term, while increasing the number of Americans with health coverage. That’s the prime metric for judging Obamacare, a metric by which, according to its eponymous creator, it has fallen short, and the metric for judging Republican proposals to replace it.

This post was originally published at The Federalist.

Four Ways Donald Trump Can Start Dismantling Obamacare on Day One

Having led a populist uprising that propelled him to the presidency, Donald Trump will now face pressure to make good on his campaign promise to repeal Obamacare. However, because President Obama used executive overreach to implement so much of the law, Trump can begin dismantling it immediately upon taking office.

The short version comes down to this: End cronyist bailouts, and confront the health insurers behind them. Want more details? Read on.

1. End Unconstitutional Cost-Sharing Subsidies

In May, Judge Rosemary Collyer ruled in a lawsuit brought by the House of Representatives that the Obama administration had illegally disbursed cost-sharing subsidies to insurers without an appropriation. These subsidies—separate and distinct from the law’s premium subsidies—reimburse insurers for discounted deductibles and co-payments they provide to some low-income beneficiaries.

Trump should immediately 1) revoke the Obama administration’s appeal of Collyer’s ruling in the House’s lawsuit, House v. Burwell, and 2) stop providing cost-sharing subsidies to insurers unless and until Congress grants an explicit appropriation for same.

2. Follow the Law on Reinsurance

House v. Burwell represents but one case in which legal experts have ruled the Obama administration violated the law by bailing out insurers. In September, the Government Accountability Office (GAO) handed down a ruling in the separate case of Obamacare’s reinsurance program.

The law states that, once reinsurance funds come in, Treasury should get repaid for the $5 billion cost of a transitional Obamacare program before insurers receive reimbursement for their high-cost patients. GAO, like the non-partisan Congressional Research Service before it, concluded that the Obama administration violated the text of Obamacare by prioritizing payments to insurers over and above payments to the Treasury.

Trump should immediately ensure that Treasury is repaid all the $5 billion it is owed before insurance companies get repaid, as the law currently requires. He can also look to sue insurance companies to make the Treasury whole.

3. Prevent a Risk Corridor Bailout

In recent weeks, the Obama administration has sought to settle lawsuits raised by insurance companies looking to resolve unpaid claims on Obamacare’s risk corridor program. While Congress prohibited taxpayer funds from being used to bail out insurance companies—twice—the administration apparently wishes to enact a backdoor bailout prior to leaving office.

Under this mechanism, Justice Department attorneys would sign off on using the obscure Judgment Fund to settle the risk corridor lawsuits, in an attempt to circumvent the congressional appropriations restriction.

Trump should immediately 1) direct the Justice Department and the Centers for Medicare and Medicaid Services (CMS) not to settle any risk corridor lawsuits, 2) direct the Treasury not to make payments from the Judgment Fund for any settlements related to such lawsuits, and 3) ask Congress for clarifying language to prohibit the Judgment Fund from being used to pay out any settlements related to such lawsuits.

4. Rage Against the (Insurance) Machine

Trump ran as a populist against the corrupting influence of special interests. To that end, he would do well to point out that health insurance companies have made record profits, nearly doubling during the Obama years to a whopping $15 billion in 2015. It’s also worth noting that special interests enthusiastically embraced Obamacare as a way to fatten their bottom lines—witness the pharmaceutical industry’s “rock solid deal” supporting the law, and the ads they ran seeking its passage.

As folks have noted elsewhere, if Trump ends the flow of cost-sharing subsidies upon taking office, insurers may attempt to argue that legal clauses permit them to exit the Obamacare exchanges immediately. Over and above the legal question of whether CMS had the authority to make such an agreement—binding the federal government to a continuous flow of unconstitutional spending—lies a broader political question: Would insurers, while making record profits, deliberately throw the country’s insurance markets into chaos because a newly elected administration would not continue paying them tribute in the form of unconstitutional bailouts?

For years, Democrats sought political profit by portraying Republicans as “the handmaidens of the insurance companies.” Anger against premium increases by Anthem in 2010 helped compel Democrats to enact Obamacare, even after Scott Brown’s stunning Senate upset in Massachusetts. It would be a delicious irony indeed for a Trump administration to continue the political realignment begun last evening by demonstrating to the American public just how much Democrats have relied upon crony capitalism and corrupting special interests to enact their agenda. Nancy Pelosi and K Street lobbyists were made for each other—perhaps it only took Donald Trump to bring them together.
This post was originally published at The Federalist.

The Limousine Liberals Who Won’t Join Obamacare

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

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

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

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

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

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

Well-Heeled Bureaucrats and Think Tankers’ Hypocrisy

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

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

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

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

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

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

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

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

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

Stupid Is What Stupid Does?

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

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

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

This post was originally published at The Federalist.

Why Obamacare Supporters Won’t Enroll in Obamacare

Today, the beginning of Obamacare’s fourth open enrollment period, will see Obama administration officials and liberal advocates engaging in the usual publicity blitz. They’ll tell Americans how much money they can save, how affordable plans are—don’t believe the hype about premium increases, they claim—and the benefits of having health coverage.

All of this can be rebutted by one simple rejoinder: If these exchange plans are so good, why haven’t you purchased one?

It’s a question I’ve asked several Obamacare advocates, because, while they talk about Obamacare, I actually have to live it. Because Washington DC abolished its private insurance market, I as a small business owner have to buy a plan on the federal exchange. For 2017, new plan requirements by the DC exchange—insurers now have to offer eight “standardized” plans—coupled with the difficult business environment meant that my insurer, CareFirst Blue Cross, cancelled its health savings account plan.

As a result, I and 6,980 other HSA plan participants received cancellation notices in September. As you can see from the notice, the “substitute” plan I was offered has a premium of $296.40—that’s a 20.2 percent increase, for those of you keeping score at home—and a 25 percent increase in my deductible, from $1,600 to $2,000.

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The day before I received official confirmation of my plan’s cancellation, I attended a briefing on insurance exchanges. I pointed out that, to most people in Washington DC, Obamacare was an abstract idea. Policy-makers at think-tanks, lobbying firms, or in government have high-paying jobs that come with employer-based health coverage, so they really don’t have to worry about whether the exchanges succeed or fail.

I asked the panelists point-blank: You’re speaking about the state of Obamacare’s exchanges, but do you yourself receive coverage through them?

As I had suspected, most admitted they do not. Sabrina Corlette, a Georgetown University researcher, replied that she was a “spoiled academic” who received coverage through her employer. Ironically enough, Corlette’s presentation for the briefing included a slide noting that the exchanges needed to “boost enrollment.” But when asked whether she would enroll in an exchange plan—thereby boosting enrollment—she said she would not. This brings to mind St. Augustine’s famous phrase, “Grant me chastity and continence—but not yet.”

Elites Won’t Join Obamacare’s Ghettoes

One reason why Corlette, and other “spoiled academics” like her, won’t give up their existing coverage is simple: Compared to employer-based insurance, exchange plans—and this is a technical term—suck.

Thanks to Obamacare’s ability to make insurance competition disappear, nearly one in five Americans (19 percent) will have the “choice” of only one insurer on their exchange in 2017. Obamacare’s benefit mandates have forced insurers to narrow networksthree-quarters of all 2017 exchange offerings include no out-of-network coverage—and raise deductibles so high as to render insurance “all but useless” for many.

As I have previously written, Obamacare’s insurance marketplaces could be more accurately described as ghettoes, not exchanges. The median income among all healthcare.gov enrollees is 165 percent of the poverty level, or about $40,000 for a family of four, so enrollees are predominantly low-income, besides sicker than those on the average employer plan. The combination of narrow networks and tightly managed care has zero appeal to the average person with an employer plan—which explains why the liberal elites promoting Obamacare won’t actually enroll themselves.

‘I Do Try to Think about Them’

At the September briefing, Corlette claimed Obamacare was an attempt to “lift the standards for individual market products” to make them more like employer plans—just not enough for her to enroll. (As someone actually on the exchanges, I can attest to a lot of “lift” for my premiums and deductibles; standards and network access, perhaps not as much.)

If one wants to explain the reasons for the rise of Donald Trump, one could start with a group of elites who think they can determine what others want, even while deliberately segregating themselves from the effects of the policies they created.As the saying goes, actions speak louder than words. If advocates of Obamacare actually believed the law was providing insurance comparable to employer plans, they would switch to exchange coverage. That they are not speaks to the law’s fundamental problem: Liberal elites can sell the benefits of Obamacare all they want, but when it comes time to put one’s money where one’s mouth is, the American people aren’t buying—and neither are the liberals.

This post was originally published in The Federalist.