Meet the Radical Technocrat Helping Democrats Sell Single-Payer

If anyone had doubts about the radical nature of Democrats’ health care agenda, they needn’t look further than the second name on the witness list for this Wednesday’s House Ways and Means Committee hearing on single-payer health care: Donald Berwick of the Institute for Healthcare Improvement.

If that name sounds familiar, it should. In summer 2010, right after Obamacare’s passage, President Obama gave Berwick a controversial recess appointment to head the Centers for Medicare and Medicaid Services (CMS). Democrats refused to consider Berwick’s nomination despite controlling 59 votes in the Senate at the time, and he had to resign as CMS administrator at the end of his recess appointment in late 2011.

Berwick’s History of Radical Writings

Even a cursory review of Berwick’s writings explains why Obama’s only option was to push him through with a recess appointment, and why Democrats refused to give Berwick so much as a nomination hearing. As someone who read just about everything he wrote until his nomination—thousands of pages of journal articles, books, and speeches—I know the radical nature of Berwick’s thinking all too well. He believes passionately in a society ruled by a technocratic elite, thinking that a core group of government planners can run the country’s health care system better than individual doctors and patients.

Here is what this doctor believes in, in his own words:

  • Socialized Medicine: “Cynics beware: I am romantic about the National Health Service; I love it. All I need to do to rediscover the romance is to look at health care in my own country.”
  • Control by Elites: “I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.”
  • Wealth Redistribution: “Any health care funding plan that is just, equitable, civilized, and humane must—must—redistribute wealth from the richer among us to the poorer and less fortunate.”
  • Shutting Medical Facilities: “Reduce the total supply of high-technology medical and surgical care and consolidate high-technology services into regional and community-wide centers … Most metropolitan areas in the United States should reduce the number of centers engaging in cardiac surgery, high-risk obstetrics, neonatal intensive care, organ transplantation, tertiary cancer care, high-level trauma care, and high-technology imaging.”
  • End of Life Care: “Most people who have serious pain do not need advanced methods; they just need the morphine and counseling that have been available for centuries.”
  • Cost-Effectiveness Rationing of Care: “The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”
  • Doctors Putting “The System” over their Patients: “Doctors and other clinicians should be advocates for patients or the populations they service but should refrain from manipulating the system to obtain benefits for them to the substantial disadvantage of others.”
  • Standardized “Cookbook Medicine”: “I would place a commitment to excellence—standardization to the best-known method—above clinician autonomy as a rule for care.”

For those who want a fuller picture of Berwick’s views, in 2010-11 I compiled a nearly 30-page dossier featuring excerpts of his beliefs, based on my comprehensive review of his prior writings and speeches. That document is now available online here, and below.

Where’s the Political Accountability?

Some of Berwick’s greatest admiration is saved for Britain’s National Health Service on the grounds that it was ultimately politically accountable to patients. For instance, Berwick said his “rationing with our eyes open” quote was “distorted,” claiming that

Someone, like your health insurance company, is going to limit what you can get. That’s the way it’s set up. The government, unlike many private health insurance plans, is working in the daylight. That’s a strength.

When running for governor of Massachusetts in 2013, Berwick claimed he “regrets listening to White House orders to avoid reaching out to congressional Republicans.” But that doesn’t absolve the fact that Berwick went to great lengths to avoid the political accountability he previously claimed to embrace.

It also doesn’t answer the significant questions about why Obama waited until after Obamacare’s enactment to nominate Berwick—deliberately keeping the public in the dark about the radical nature of the person he wanted to administer vast swathes of the law.

Thankfully, however, Wednesday’s hearing provides a case of “better late than never.” Republicans will finally get a chance to ask Berwick about the extreme views expressed in his writings. They will also be able to raise questions about why Democrats decided to give him an official platform to talk about single payer (and who knows what else).

This post was originally published at The Federalist.

Will Disclosing Prescription Drug Prices in TV Ads Make Any Difference?

Why did the Trump administration last Monday propose requiring pharmaceutical companies to disclose their prices in television advertisements? A cynic might believe the rule comes at least in part because the drug industry opposes it.

Now, I carry no water for Big Pharma. For instance, I opposed their effort earlier this year to repeal an important restraint on Medicare spending. But this particular element of the administration’s drug pricing plan appears to work in a similar manner as some of the president’s tweets—to dominate headlines through rhetoric, rather than through substantive policy changes.

Applies Only to Television

The rule “seek[s] comment as to whether we should apply this regulation to other media formats,” but admits that the administration initially “concluded that the purpose of this regulation is best served by limiting the requirements” to television. However, five companies alone accounted for more than half of all drug advertisements in the past year. Among those five companies, the advertisements promoted 19 pharmaceuticals—meaning that new disclosure regime would apply to very few drugs.

If the “purpose of this regulation” is to affect pharmaceutical pricing, then confining disclosures only to television advertisements would by definition have a limited impact. If, however, the “purpose of this regulation” is primarily political—to force drug companies into a prolonged and public legal fight on First Amendment grounds, or to allow the administration to point to disclosures in the most prominent form of media to say, “We’re doing something on drug costs!”—then the rule will accomplish its purpose.

Rule Lacks Data to Support Its Theory

On three separate occasions, in the rule’s Regulatory Impact Analysis—the portion of the rule intended to demonstrate that the regulation’s benefits outweigh its costs—the administration admits it has very few hard facts: “We lack data to quantify these effects, and seek public comment on these impacts.”

It could encourage people to consume more expensive medicines (particularly if their insurance pays for it), because individuals may think costlier drugs are “better.” Or it could discourage companies from advertising on television at all, which could reduce drug consumption and affect people’s health (or reduce health spending while having no effect on individuals’ health).

Conservative think-tanks skewered several Obamacare rules released in 2010 for the poor quality and unreasonable assumptions in their Regulatory Impact Analyses. Although released by a different administration of a different party, this proposed regulation looks little different.

Contradictions on Forced Speech?

Finally, the rule refers on several occasions to the Supreme Court’s ruling earlier this year in a case involving California crisis pregnancy centers. That case, National Institute of Family and Life Advocates v. Becerra, overturned a California state law requiring reproductive health clinics, including pro-life crisis pregnancy centers, to provide information on abortion to patients.

The need for that distinction arises because the pharmaceutical industry will likely challenge the rule on First Amendment grounds as an infringement on their free speech rights. However, a pro-life administration attempting to force drug companies to disclose pricing information, while protecting crisis pregnancy centers from other forced disclosures, presents some interesting political optics.

A Political ‘Shiny Object’

Ironically enough, most of the administration’s actions regarding its prescription drug pricing platform have proven effective. Food and Drug Administration Commissioner Scott Gottlieb has helped speed the approval of generic drugs to market, particularly in cases where no other competitors exist, to help stabilize the marketplace.

Other proposals to change incentives within Medicare and Medicaid also could bring down prices. These proposals won’t have an immediate effect—as would Democratic blunt-force proposals to expand price controls—but collectively, they will have an impact over time.

This administration can do better than that. Indeed, they already have. They should leave the political stunts to the president’s Twitter account, and get back to work on more important, and more substantive, proposals.

This post was originally published at The Federalist.

Hospital Monopolies Are What’s Wrong with American Health Care

Call it a sign of the times. If Rich Uncle Pennybags (a.k.a. “Mr. Monopoly”) appeared today, he would have little interest in holding properties like the Short Line Railroad. In the 21st century, acquiring railroads, or even utilities, is so Baltic Avenue. The real money—and the real monopolies—lie in health care, specifically in hospitals.

Despite the constant focus on prescription drug prices, pharmaceuticals represent a comparatively small slice of the American health care pie. In 2016, national spending on prescription drugs totaled $328.6 billion. That’s a large sum on its own, but only 9.8 percent of total health care spending. By contrast, spending on hospital care totaled nearly $1.1 trillion, or more than three times spending on prescriptions.

Hospitals’ Monopolistic Tactics

The Journal profiled several under-the-radar tactics that some large hospitals use to deter competition and pad their bottom lines. For instance, some contracts “prevent patients from seeing a hospital’s prices by allowing a hospital operator to block the information from online shopping tools that insurers offer.”

Hospitals use these tactics to oppose transparency, because they fear, correctly, that if patients know what they will pay for a service before they receive it, they may take their business elsewhere. It’s an arrogant and high-handed attitude straight out of Marxism.

Also in hospitals’ toolkits: So-called “must-carry” clauses, which require insurers to keep their hospitals in-network, regardless of the high prices they charge, or poor quality outcomes they achieve. The Journal reported that one of the nation’s largest retailers wanted to kick out the lowest-quality providers, but had no ability to do so.

Officials at Walmart a few years ago asked the insurers that administered its coverage…if the nation’s largest private employer could remove from its health-care networks the 5% of providers with the worst quality performance. The insurers told the giant retailer their contracts with certain health-care providers didn’t allow them to filter out specific doctors or hospitals, even based solely on quality measures.

Surprise! Obamacare Made It Worse

Many of these trends preceded President Obama’s health care law, of course. But it doesn’t take a PhD in mathematics to see how hospital mergers accelerated after 2010, the year of Obamacare’s passage:

Hospitals responded to the law by buying up other hospitals, increasing market share in an attempt to gain more negotiating “clout” against health insurers. That leverage allows them to demand clauses such as those preventing price transparency, or preventing insurers from developing smaller networks that only include efficient or better-quality providers.

Here again, industry consolidation begets higher prices. In many cases, hospitals can charge more for services provided by an “outpatient facility” as opposed to one provided by a “doctor’s office.” In some circumstances, the patient will receive the same service, provided by the same doctor, in the same office, but will end up getting charged a higher price—merely because, by buying the physician practice, the hospital can reclassify the office and procedure as taking place in an “outpatient facility.”

Remember: Hospitals Endorsed Obamacare

In 2010, the American Hospital Association, along with other hospital associations, endorsed Obamacare. At the time the hospital lobbies claimed that the measure would increase the number of Americans with health insurance coverage. For some reason, they neglected to mention how the law would also encourage the consolidation that presents ever-upward pressure on insurance premiums.

But remember too that Obama repeatedly promised his health-care law would lower premiums by $2,500 for the average family. Unfortunately for Americans, however, Obamacare’s crony capitalism—allowing hospitals to grow their operations, and thus their bottom line, in exchange for political endorsements—continues to contribute to higher premiums, putting Obama’s promise further and further away from reality.

This post was originally published at The Federalist.

D.C.’s Latest Health “Reform:” Seizing People’s Property

Just when you think the move for government control of health care couldn’t get any worse, somehow it manages to. Last Wednesday, the District of Columbia City Council approved a requirement for all DC residents to purchase health insurance. The mandate would take effect in January, right when the federal mandate penalty drops to $0, as per last year’s tax law.

The D.C. mandate contains three elements that make it just as bad as, if not worse than, the federal mandate it is intended to replace.

A (Deliberately?) Opaque Process

A cynic might believe that the D.C. Council acted in such a low-key manner by design. The council did not approve the mandate as a stand-alone bill, but wrapped it into a 297-page Budget Support Act. That bill contains such unrelated provisions as an amendment regarding the Fort Dupont Ice Arena, technical corrections to a supermarket tax incentive program, and amendments regarding civic associations using public schools.

Likewise, a press release by the D.C. Council summarizing Wednesday’s meeting contained not a word about imposing the individual mandate, nor did the council website show any stand-alone votes on the mandate itself. This lack of disclosure pushed me to contact my council member, Charles Allen, to find out what had happened at the council meeting Wednesday.

Upon hearing that the mandate as passed of a much larger package, I asked one of Allen’s staffers whether this provision had been “snuck in at the last minute.” The staffer said DC Mayor Muriel Bowser had proposed the mandate as part of her budget submission to the council back in March. He then rather sheepishly added that, while people had testified on behalf of other portions of the Budget Support Act, no one had spoken about the mandate specifically.

For a district that decries “Taxation Without Representation,” this Nancy Pelosi-esque behavior—where we literally had to pass the bill to find out what was in it—seems to embody the very congressional tactics that DC leaders love to hate.

Harsher Penalties for Violators

During the 2009-10 debate on Obamacare, the threat of penalties for violating the individual mandate became a source of intense controversy. During the Senate Finance Committee’s markup, Sen. John Ensign (R-NV) received a handwritten note from Thomas Barthold, head of the Joint Committee on Taxation, stating that, under federal law, non-payment of the mandate tax could result in imprisonment. Democrats buckled under this political pressure, removing from the Internal Revenue Service the power to imprison violators, or impose liens on personal property, for non-payment of the mandate tax.

By contrast, the district’s mandate—which comprises pages 168-182 of the Budget Support Act—includes this language at the bottom of page 180: “A taxpayer who fails to pay the District of Columbia shared responsibility payment imposed…shall be subject to all collection, enforcement, and administrative provisions applicable to unpaid taxes or fees, as provided in Chapter 18, Chapter 41, Chapter 42, Chapter 43, and Chapter 44 of this title [emphasis mine].”

Unlike the federal Internal Revenue Code, it does not appear at first glance that the district’s tax law allows for imprisoning individuals for non-payment of taxes (as opposed to deliberate tax evasion or fraud). However, Chapter 44 includes the following language:

If a person determined to be liable to the District of Columbia for a tax neglects or refuses to pay the tax within 10 days after notice and demand, the Mayor may collect the tax, with interest and penalties thereon (and an amount sufficient to cover the expenses of the levy), by levy upon all property (including rights to property) of the person or on which there is a lien provided in this chapter for the payment of the tax.

No wonder the D.C. Council didn’t want to hold an up-or-down vote on just this provision.

Hypocrisy Much?

Another relevant fact to the district’s mandate: The head of the District’s health insurance exchange—which recommended creating a DC mandate following the removal of the federal tax penalty—doesn’t buy exchange coverage herself. As I previously noted, many exchange heads (and Obamacare supporters) refuse to buy the coverage they promote, including the head of the district’s exchange, Mila Kofman.

When I discovered in late 2016 that I could not retain that plan in 2017, due in part to regulations imposed by the district’s exchange, I attended a meeting of the exchange authority. I asked Kofman whether she, and other exchange employees, purchased exchange coverage. She claimed that she and her colleagues could not purchase exchange policies, because they would lose their employer subsidy in the process.

I don’t know whether Bowser and the DC Council behave similarly to Kofman, but I can guess. On Thursday afternoon, I e-mailed Bowser’s office asking about the DC insurance mandate, and whether Bowser received a taxpayer subsidy for her insurance coverage. (The district’s mayor receives a salary of $200,000 annually.) I also asked what Bowser would “say to District residents like me—who make far less in salary than she does, yet do not receive [taxpayer-]subsidized benefits—being forced to buy coverage under penalty not just of taxation, but of property seizures through DC’s tax enforcement mechanisms?”

Wouldn’t you know it: I have yet to receive a response.

Here Are Some Policy Solutions

Thankfully, several of the policy and process problems outlined above contain within them readily achievable solutions:

  • The D.C. Council should pass legislation requiring the mayor, council, exchange CEO, and exchange board members to buy coverage through the exchange—without using separate taxpayer-funded benefits available to other district employees.
  • If the council will not act, the Trump administration could promulgate regulations requiring the CEOs and board members of all state-run exchanges (including the district’s) to buy the coverage they promote and oversee.
  • Congress could also exercise its constitutional prerogatives and strike down the district’s individual mandate, ensuring that no individuals will have their property seized by an overzealous government if they cannot afford to buy “bureaucrat-approved” health insurance.

Better yet: The District of Columbia Council could decide to stop micromanaging its residents’ health care by surreptitiously passing onerous mandates in legislation that few district residents know about.

This post was originally published at The Federalist.

Does the Heritage Health Plan Include Taxpayer Funding of Abortion?

When lawmakers write legislation, little details matter—a lot. In the case of a health plan that the Heritage Foundation and former Sen. Rick Santorum (R-PA) are reportedly preparing to release in the coming days, a few words indicate the plan has not considered critically important details—like how Senate procedure intertwines with abortion policy—necessary to any substantive policy endeavor.

A few short words in a summary of the Heritage plan leave the real possibility that the plan, if enacted as described, could lead to taxpayer funding of abortion coverage. Either Heritage and Santorum—both known opponents of abortion—have undertaken dramatic changes in their pro-life positions over the past few months, or they have failed to think through the full import of the policies they will release very shortly.

However, multiple individuals participating in the Heritage meetings told me that the concepts and policies Spiro’s document discusses align with Heritage discussions. Spiro may have created that document based on verbal descriptions given to him of the Heritage plan (just as the New York Times’ list of questions Robert Mueller wants to ask President Trump likely came via Trump’s attorneys and not Mueller). But regardless of who created it, people in the Heritage group told me it accurately outlined the policy proposals under discussion.

What Cost-Sharing Reductions Do

The summary describes many policies, but one in particular stands out: Under “Short-term stabilization/premium relief,” the plan “Adopts the [Lamar] Alexander and [Susan] Collins appropriation for CSRs [cost-sharing reductions] and state reinsurance/high risk pool programs for 2019 and 2020.”

On one level, this development should not come as a surprise. Party leaders often incorporate recalcitrant members’ pet projects (or, in the old days, earmarks) into a bill to obtain their votes: “See, we included the language that you wanted—you have to vote for our bill now!” Given that Collins as of last week had not even heard about the Heritage-led effort, one might think she would need some incentive to support the measure, which attaching her “stability” language might provide.

About the Hyde Amendment and Byrd Rule

The reference to CSRs takes on more importance because of the way Congress would consider Heritage’s plan. As with the Graham-Cassidy bill and other “repeal-and-replace” bills considered last year, the Senate would enact them using expedited budget reconciliation procedures.

Those procedures theoretically allow all 51 Senate Republicans to circumvent a Democratic filibuster and pass a reconciliation bill on a party-line vote. However, as I outlined last year, the reconciliation process comes with procedural restrictions (i.e., the “Byrd rule”) to prevent senators from attaching “extraneous” and non-budgetary matter to a bill that cannot be filibustered.

“Hyde amendment” restrictions—which prevent federal funding of abortion coverage, except in the cases of rape, incest, or to save the life of the mother—represent a textbook example of the “Byrd rule,” because they have a fiscal impact “merely incidental” to the policy changes proposed. Former Senate Parliamentarian Bob Dove said as much about abortion restrictions Congress considered in 1995:

The Congressional Budget Office determined that it was going to save money. But it was my view that the provision was not there in order to save money. It was there to implement social policy. Therefore I ruled that it was not in order and it was stricken.

After pushing for a vote for months, Collins suddenly backed off and didn’t force the issue on the Senate floor. She knew she didn’t have the votes—everyone knew she didn’t have the votes—because Democrats wouldn’t support a measure that restricted taxpayer funding of abortion coverage. Exactly nothing has changed that dynamic since Congress considered the issue in March.

Why We Can’t Fund CSRs

Republicans recognize the problems the abortion funding issue creates, and the Graham-Cassidy bill attempted to solve them by providing subsidies via a block grant to states. Graham-Cassidy funneled the block grant through the State Children’s Health Insurance Program (SCHIP), largely because the SCHIP statute includes the following language: “Funds provided to a state under this title shall only be used to carry out the purposes of this title, and any health insurance coverage provided with such funds may include coverage of abortion only if necessary to save the life of the mother or if the pregnancy is the result of an act of rape or incest.”

Because SCHIP already contains full Hyde protections on taxpayer funding of abortion, Graham-Cassidy ran the block grant program through SCHIP. Put another way, Graham-Cassidy borrowed existing Hyde amendment protections because any new protections would get in a budget reconciliation bill. It did the same thing for a “stability” fund for reinsurance or other mechanisms intended to lower premiums by subsidizing insurers, also referred to in Spiro’s document.

Creating a pot of money elsewhere in law—for instance, through the SCHIP statute, which does contain Hyde protections—and using that money to compensate insurers for reducing cost-sharing would prove just as unrealistic. The CSR payments reimburse insurers for discrete, specific discounts provided to discrete, specific low-income individuals.

If the subsidy pool gave money to all insurers equally, regardless of the number of low-income enrollees they reduced cost-sharing for, then insurers would have a ready-built incentive to avoid attracting poor people, because enrolling low-income individuals would saddle them with an unfunded (or only partially funded) mandate. If the subsidy pool gave money to insurers based on their specific obligations under the Obamacare cost-sharing reduction requirements, then the parliamentarian would likely view this language as an attempt to circumvent the Byrd rule restrictions and strike it down.

Not Ready for Prime Time

Four participants in the Heritage meetings told me the group has discussed appropriating funds for CSR payments to insurers as part of the plan. Not a single individual said the Senate’s “Byrd rule” restrictions—which make enacting pro-life protections for such CSR payments all-but-impossible—came up when discussing an appropriation for cost-sharing payments to insurers.

That silence signals one or more potential problems: A lack of regard for pro-life policy; an ignorance of Senate procedure, and its potential ramifications on the policies being considered; or a willingness to fudge details—allowing people to believe what they want to believe. Regardless, it speaks to the unformed nature of the proposal, despite meetings that have continued since the last time “repeal-and-replace” collapsed” nearly eight months ago.

Earlier this month, Santorum claimed in an interview that while the original “Graham-Cassidy was a rush…this time we have the opportunity to get the policy better.” But any serious attempt to “get the policy better” wouldn’t have major lingering questions about tens of billions of dollars in “stability” funding, and whether such funds would subsidize abortion coverage, mere days before its public release. In this case, eight months of deliberations may not lead to a deliberative and coherent policy product.

This post was originally published at The Federalist.

Michael Cohen and “The Swamp”

Recent revelations surrounding the business clients of Michael Cohen, Donald Trump’s personal attorney, demonstrate the seedy underbelly of the lobbying business in Washington. At least one company that hired Cohen admitted that it got suckered by someone who couldn’t deliver what he promised. Many companies consider these types of expenditures the cost of doing business.

Last Tuesday, attorney Michael Avenatti released a report claiming that Cohen’s firm, Essential Consultants, received millions of dollars in payments from various companies, including one linked to a Russian oligarch. Avenatti, a Trump critic, represents onscreen prostitute Stormy Daniels in a lawsuit seeking to nullify a non-disclosure agreement Daniels and Cohen reached regarding the former’s alleged affair with Trump.

While Avenatti’s original report claimed Novartis paid Cohen just under $400,000, the company later confirmed payments totaling three times that amount, or $1.2 million. In an interview, an unnamed Novartis employee gave commentary into what amounts to a corporate comedy of errors:

He [Cohen] reached out to us…With a new Administration coming in, basically, all the traditional contacts disappeared and they were all new players. We were trying to find an inroad into the Administration. Cohen promised access to not just Trump, but also the circle around him. It was almost as if we were hiring him as a lobbyist.

To paraphrase the British phrase used when a new sovereign assumes the throne: “The (Old) Swamp is dead! Long live The (New) Swamp!”

Unfortunately for Novartis, however, the firm locked itself in to a one-year agreement at a $100,000 monthly retainer—ridiculously high by most Washington lobbying standards—only to discover that Cohen could not deliver. According to the Novartis employee, it took but one meeting for the bloom to come off of the rose: “At first it all sounded impressive, but toward the end of the meeting, everyone realized this was probably a slippery slope to engage him. So they decided not to really engage Cohen for any activities after that.”

AT&T and Novartis admitted on Wednesday that the office of special counsel Robert Mueller contacted both about their relationships with Cohen. In analyzing their behavior, assume that both companies acted legally—that their payments to Cohen were solely for consulting services, and not as part of some quid pro quo scheme directly tied to an official act, whether by Cohen, Trump, or anyone else.

On one hand, the companies exercised exceedingly poor judgment. Novartis CEO Vas Narasimhan (who was not running the company when Novartis signed its 2017 agreement with Cohen) admitted on Thursday that the company “made a mistake in entering into this engagement,” signing away more than a million dollars in shareholder money to someone without undertaking any due diligence as to whether he could deliver what he had promised.

Novartis also vastly overpaid Cohen, even if it had engaged him for more activities than a single meeting. As I noted on Twitter, I could have cautioned them about the dim chances for Obamacare repeal for half the $1.2 million they paid Cohen. (If they had asked nicely, I might have done so for even one-quarter that sum.) Very few if any Washington lobbying firms can command a six-figure monthly retainer from one client, yet Novartis paid that much to a single individual.

As Politico noted, Trump’s “2016 victory rattled corporations enough that clients were eager to pay top dollar to anyone who could help them understand the Administration in its first months.” Because no one thought Trump could win—and therefore spent little time reaching out to him or his campaign in the summer and fall of 2016— after the election corporations felt the need to overcompensate, throwing money at anyone with a connection to Trump, in the hopes of ingratiating themselves with the new administration. I saw some of this myself in late 2016 and early 2017, when companies and financial firms came out of the woodwork asking me to predict what the new Congress and administration would do on health care. (Trust me: My offers didn’t come anywhere close to $1.2 million.)

Firms often spend sizable sums on lobbying. Novartis has “nearly a dozen lobbying firms on retainer,” for which it paid $8.6 million last year. In some cases, companies or industries have so many lobbying firms on retainer that the ineffective ones often attempt to take credit for the “wins” achieved by the effective ones. However, given how federal policy initiatives can affect both a company’s revenue and its stock price—witness the market volatility surrounding President Trump’s proposals on drug pricing—companies have little choice but to play the K Street game.

It seems ridiculous to pay $1.2 million to an individual for a single meeting, and it is. But only a smaller role for the federal government—in taxing, spending, and regulations—would bring an end to the types of influence-peddling stories like those surrounding Cohen this week. Unfortunately, it’s the price of doing business for many companies—and a symptom of a government run amok.

This post was originally published at The Federalist.

CBO Tries But Fails to Defend Its Illegal Budget Gimmick

In a blog post released last Thursday, the Congressional Budget Office (CBO) attempted to defend its actions regarding what I have characterized as an illegal budget gimmick designed to facilitate passage of an Obamacare bailout. When fully parsed, the response does not answer any of the key questions, likely because CBO has no justifiable answers to them.

The issue surrounds the budgetary treatment of cost-sharing reductions (CSRs), which President Trump cancelled last fall. While initially CBO said it would not change its budgetary treatment of CSRs, last month the agency changed course, saying it would instead assume that CSRs are “being funded through higher premiums and larger premium tax credit subsidies rather than through a direct appropriation.”

That claim fails on multiple fronts. First, it fails to address the states that did not assume that CSR payments get met through “higher premiums and larger premium tax credit subsidies.” As I noted in a March post, while most states allowed insurers to raise premiums for 2018 to take into account the loss of CSR payments, a few states—including Vermont, North Dakota, the District of Columbia, and a few other carriers in other states—did not. In those cases, the CSR payments cannot be accounted for through indirect premium subsidies, because premiums do not reflect CSR payments.

In its newest post, CBO admits that “most”—not all, but only “most”—insurers have covered the higher costs associated with lowering cost-sharing “by increasing premiums for silver plans.” But by using that phraseology, CBO cannot assume CSRs are being “fully funded” through higher premium subsidies, because not all insurers have covered their CSR costs through higher premiums. Therefore, even by CBO’s own logic, this new budgetary treatment violates the Gramm-Rudman-Hollings statutory requirements.

Second, even assuming that (eventually) all states migrate to the same strategy, and do allow for insurers to recover CSR payments through premium subsidies, CBO’s rationale does not comply with the actual text of the law. The law itself—2 U.S.C. 907—requires CBO to assume that “funding for entitlement authority is…adequate to make all payments required by those laws” (emphasis mine).

I reached out to CBO to ask about their reasoning in the blog post—how the organization can reconcile its admission that not all, but only “most,” insurers raised premiums to account for the lack of CSR funding with CBO’s claim that the CSRs are “fully funded” in the new baseline. A spokesman declined to comment, stating that more information about this issue would be included in a forthcoming publication. However, CBO did not explain why it published a blog post on the issue “provid[ing] additional information” when it now admits that post did not include all relevant information.

In addition, CBO also has not addressed the question of why Director Keith Hall reneged on his January 30 testimony before the House Budget Committee. At that January hearing, Reps. Jan Schakowsky (D-IL) and Dave Brat (R-VA) asked Hall about the budgetary treatment of CSRs. In both cases, the director said he would not make any changes “until we get other direction from the Budget Committees.”

That’s not what happened. CBO now claims that the change “was made by CBO after consultation with the House and Senate Budget Committees” (emphasis mine). No one directed CBO to make this change—or so the agency claims. But curiously enough, as I previously noted, Hall declined to answer a direct question from Rep. Gary Palmer (R-AL) at an April 12 hearing: “Why did you do that [i.e., change the baseline]?…You would have had to have gotten instruction to” make the change.

Moreover, Brat specifically asked how the agency would treat CSRs—as if they were being paid directly, or indirectly. Hall repeated the same response he gave Schakowsky, that CBO would not change its treatment “unless we get direction to do something different”—an answer which, given the agency’s later actions, could constitute a materially misleading statement to Congress.

Reasonable as it may seem from outward appearances, CBO’s excuses do not stand up to any serious scrutiny. The agency should finally come clean and admit that its recent actions do not comport with the law—as well as who put CBO up to making this change in the first place.

This post was originally published at The Federalist.

How a CBO Error Could Cost the Pharmaceutical Industry Billions

Government officials often attempt to bury bad news. Aaron Sorkin’s “The West Wing” even coined a term for it: “Take Out the Trash Day.” So it proved last week. A Congressional Budget Office (CBO) document released quietly on Thursday hinted at a major gaffe by the budget agency and its efforts to conceal that gaffe.

In a series of questions for the record submitted following Director Keith Hall’s April 11 hearing before the Senate Budget Committee, CBO admitted the following regarding a change to the Medicare Part D prescription drug program included in this past February’s budget agreement:

When the legislation was being considered, CBO estimated that provision would reduce net Medicare spending for Part D by $7.7 billion over the 2018-2027 period. CBO subsequently learned of a relevant analysis by the Centers for Medicare and Medicaid Services and incorporated that analysis in its projections for the April 2018 Medicare baseline. The current baseline incorporates an estimate that, compared with prior law, [the relevant provision] will reduce net Medicare spending for Part D by $11.8 billion over the 2018-2027 period.

As I wrote at the time, the provision attracted no small amount of controversy at its passage—or, for that matter, since. The provision accelerated the closing of the Part D “donut hole” faced by seniors with high prescription drug costs, but it did so by shifting costs away from the Part D program run by health insurers and on to drug companies.

The pharmaceutical industry was, and remains, livid at the change, which it did not expect, and tried to undo in the March omnibus spending bill. CBO didn’t just get its score wrong on a minor, non-controversial provision—it messed up on a major provision that will over the next decade affect both drug companies and health insurers.

Because the provision substitutes mandatory “discounts” by drug companies for government spending through the Part D program, it saves the government money through smaller Part D subsidies—at least on paper. (That said, the score doesn’t take into account whether drug manufacturers will raise prices in response to the change, which they could well do.) Because seniors actually spend more in the “donut hole” than CBO’s initial projections said, the provision will have a greater impact—i.e., cost the pharmaceutical industry billions more—than the February budget estimate says.

In its response last week, CBO tried to cover its tracks by claiming that “the $4 billion change…accounts for about 2 percent” of the total of $186 billion reduction in estimated Medicare spending over the coming decade due to technical changes incorporated into the revised baseline. But a $4.1 billion scoring error on a provision first projected to save $7.7 billion means CBO messed up its score by more than 53 percent of its original budgetary impact. That’s not exactly a small error.

Moreover, CBO didn’t come clean and publicly admit this error of its own volition. It did so only because Senate Budget Committee Chairman Mike Enzi (R-WY) forced the budget office to do so.

Enzi submitted a question noting that “CBO realized its estimate of a provision [in the budget agreement] was incorrect. Where is the correction featured in the new report?” CBO didn’t “feature” the correction in its April Budget and Economic Outlook report at all—it incorporated the change into the revised baseline without disclosing it, hoping to sneak it by without anyone calling the budget office out on its error.

Since that time, the purportedly “nonpartisan” organization realized it published an incorrect score—off by more than 50 percent—on a high-profile and controversial issue, changed its baseline to account for the scoring error, and said exactly nothing in a 166-page report on the federal budget about the change. If CBO won’t disclose this kind of major mistake on its own, then its “transparency efforts” seem like so much noise—a distraction designed to keep people preoccupied from focusing on errors like the Part D debacle.

To view it from another perspective: Any head of a private company whose analysis of a multi-billion-dollar transaction proved off by more than 50 percent, because his staff did not access relevant information available to them at the time of the analysis, would face major questions about his leadership, and could well lose his job. But judging from his desire to conceal this scoring mistake, the CBO director apparently feels no such sense of accountability.

Thankfully, however, members of Congress have tools available to fix the rot at CBO, up to and including replacing the director. Given the way CBO attempted to conceal the Part D scoring fiasco, they should start using them.

This post was originally published at The Federalist.

Why Members of Congress Secretly Like Unpopular Omnibus Bills

On this website last week, conservative leaders Sen. Mike Lee (R-UT) and Rep. Jim Jordan (R-OH) wrote a joint op-ed echoing my column from a few weeks previously, saying Congress remains on course for yet another omnibus spending bill debacle unless and until it reforms its procedures, and specifically starts considering, and passing, spending bills one-by-one, rather than in a catch-all bill enacted in a lame-duck session after the November elections.

All that sounds logical enough, at least to most individuals outside the Beltway. Why shouldn’t Congress do its job, and consider bills in a deliberative fashion, rather than jamming an entire year’s work into one must-pass vehicle totaling thousands of pages—a literal and figurative “Christmas tree” that usually passes in the waning days of December?

Reason 1: Members of Congress Are Lazy

I don’t mean “lazy” in the sense of goofing around. Most members work long hours, including difficult commutes back and forth to their districts every week. I mean “lazy” in the sense of not wanting to vote on difficult or politically controversial issues. In 2015, the House halted its consideration of appropriations bills because Republican leaders “worried that Democrats could try to offer more amendments related to the display of the Confederate flag that could again tie the GOP into knots.”

In Congress, appropriations bills generally operate under free-wheeling procedures, in which members can offer germane (i.e., relevant) amendments. Because the appropriations bills collectively cover all federal operations, and because members have few opportunities to offer amendments to other bills in both the House and the Senate, the spending bills become magnets for every conceivable controversy.

Consider some amendments that might get offered this year were Congress to consider spending bills individually:

  • Conservatives, particularly in the House, could seek to reduce or even eliminate funding for Special Counsel Robert Mueller’s investigation—amendments that moderate Republicans, or even Republican leaders, might oppose.
  • A bipartisan coalition would again offer amendments regarding medical marijuana—amendments that the chairman of the House Rules Committee, Pete Sessions (R-TX), has largely prevented from being considered on the House floor.
  • Democrats could offer political messaging amendments on issues ranging from President Trump’s tax returns to cabinet officers’ travel-related controversies to the emoluments clause—all issues that moderate Republicans, or Republicans with tough re-election campaigns, would not want to vote on prior to the midterm elections.

Members of Congress have become so accustomed to avoiding votes on tough issues that many recoil at the thought of reinstituting an open process. They may not say so outright, but many would prefer that leadership make the tough decisions for them behind closed doors, rather than forcing them into votes that could undermine their re-election prospects.

Reason 2: Members Want to Rig Outcomes

The Confederate flag flap also illustrated this dilemma for congressional leaders: “Some Republicans, primarily representing Southern states, found out about the amendment [banning display of the Confederate flag] after the fact and threatened to vote against the entire bill if it remained intact.” In other words, because some members did not achieve an outcome they wanted on the specific amendment, they were willing to take down the entire measure.

As I noted last fall, the House Freedom Caucus, which Jordan helped to found, has engaged in these kinds of tactics. Last summer, after moderate Republicans and Democrats combined to defeat an amendment prohibiting the use of taxpayer funds for soldiers’ gender-reassignment surgery, conservatives went to congressional leaders and told them to insert the amendment in a spending bill, the prior vote notwithstanding.

As the old saying goes, the true test of a principle comes not when that principle proves convenient, but when it proves inconvenient. Only when members find themselves willing to take tough votes, and to abide by the outcome of those votes, even if it results in policy outcomes they disfavor, will the process become more open and transparent.

As I noted a few weeks ago, members already have the power to bring about that open and transparent process—the only question is if they have the wherewithal to use it.

This post was originally published at The Federalist.

Is CBO Working with Budget Committee Staff to Hide an Illegal Obamacare Bailout?

It appears my recent article, which raised questions about whether the Congressional Budget Office (CBO) illegally manipulated the budget baseline to ease the passage of an Obamacare “stability” bill, hit a nerve. To borrow a current metaphor, if there were any more collusion between the House Budget Committee and CBO on this issue, Rod Rosenstein would need to appoint a special counsel to investigate.

Consider a series of questions asked by Rep. Diane Black (R-TN) at House Budget’s April 12 hearing on the new Budget and Economic Outlook. Black asked CBO Director Keith Hall about the agency’s treatment of the law’s cost-sharing reduction payments (CSRs), which President Trump cancelled in October.

  1. Black asked about this issue, and only this issue. After completing her exchange with Hall on CSRs, she yielded back more than half of the five minutes allotted to her for questions—an unusual occurrence. Think about it: How often have you seen members of Congress take two minutes to give a five-minute speech?
  2. Black began the exchange by asking Hall a very friendly, and some would argue leading, question: “Is CBO doing this [i.e., changing the budgetary baseline] in full compliance with” the law?
  3. In response, Hall looked down at his notes no fewer than seven times in a roughly 45-second response. Particularly during the seventh and final instance, Hall quite clearly appears to be reading from his briefing materials. Members of Congress often read questions at hearings, but in nearly 15 years of working on and around Capitol Hill, I can recall precious few times where witnesses read answers.

Based on these circumstances, it seems reasonable to conclude that the exchange was scripted well in advance. If that’s the case, it appears Black, and whomever wrote her questions, worked with CBO to choreograph an exchange designed to rebut one of my allegations, namely, that CBO violated the Gramm-Rudman-Hollings Act in making this budgetary change.

Mind you, the change does violate the law, Hall’s claims notwithstanding. CBO can claim that the budget baseline funds CSRs indirectly—via “higher premiums and larger premium tax credit subsidies”—only by assuming that Congress does not fund CSRs directly.

Later in the April 12 hearing, Rep. Gary Palmer (R-AL) also queried Hall on the circumstances behind this questionable change.

Palmer asked Hall: “Why did you change that [i.e., raise the baseline]?…You would have had to have gotten instruction to” make the alteration. Hall didn’t directly answer the question: He claimed CBO had the authority to make the change, but never said where his instruction came from.

But the budget committees already gave CBO instructions—which CBO suddenly chose to ignore. In an October estimate of Obamacare “stability” legislation, the budget office specifically said that “after consultation with the Budget Committees, CBO has not changed its baseline” to reflect the Trump administration’s cancellation of the CSR payments. Last week’s updated CBO document, which altered the budgetary baseline, said nothing about consultation with the budget committees—a break from the October precedent, and a direct violation of Hall’s promise in his January 30 testimony.

What changed? Did the CBO director just wake up one morning and decide to make a scoring change affecting $200 billion in taxpayer dollars? Or did someone pressure the CBO director to make that change—and if so, who?

If the House Budget Committee staff knows—and I’d bet they do—they certainly don’t want to say. At first my repeated e-mails to committee staff disappeared into dead air. Once I noted this radio silence on Twitter, I got a response, but not a substantive reply. The House Budget Committee’s communications director said my queries were within CBO’s purview, and sent me to them.

However, given the opaque and questionable way this budgetary change transpired, both CBO and House Budget have very clear reasons not to answer the question:

  • If House Budget admits that CBO did reach out to them about this scoring change, that places the fingerprints of House leadership on a heavy-handed attempt to strong-arm CBO and alter scoring rules in a way that favors an Obamacare bailout—the issue I first wrote about back in January.
  • If House Budget admits that CBO did not reach out to them about this scoring change, that means CBO “went rogue,” and increased spending on Obamacare subsidies by $194 billion without guidance or direction from the elected members of Congress who govern it. It also raises questions of whether Hall materially misled the Budget Committee (a felony offense) during his January 30 testimony.

Answering my question involves someone assuming responsibility for this mysterious occurrence. Because no one wants to assume responsibility for the chicanery behind this budget gimmick, apparently people think, or hope, that ignoring questions will make them go away. (I haven’t yet reached out to CBO for a comment, but anyone want to lay odds that their spokesman says, “I’m sorry, but we can’t disclose our communications with members of Congress”?) News flash: They’re not.

If CBO and House Budget are completely blameless, and everything about this budget change occurred in an above-board manner, they seem to have a funny way of going about proving their innocence—sidestepping questions. Not two months ago, Hall testified before the House Budget Committee about the ways CBO will improve transparency surrounding the budget process. If he wants to follow through on his promise, then Hall (to say nothing of House Budget) should start by disclosing exactly who ordered CBO to make this change—the sooner, the better.

This post was originally published at The Federalist.