Nancy Pelosi Violated Her Oath of Office

At their swearing in, members of Congress take an oath to “support and defend the Constitution of the United States.” Few members would openly admit to violating that oath. Nancy Pelosi just did.

In filing a lawsuit against Donald Trump’s border emergency late last week, the House speaker claimed that “the House will once again defend our democracy and our Constitution, this time in the courts.” But the facts demonstrate that the last time the House defended the Constitution in the courts, Pelosi actively worked to undermine that defense of constitutional principles.

Lawsuits, Then and Now

The complaint Pelosi filed last week claims that, in using the National Emergencies Act to redirect funds towards border security, President Trump violated both underlying statutes and Congress’ constitutional duty to appropriate funds. Unfortunately, however, as I pointed out at the time of the border declaration, it did not represent the first time the executive has violated both statutes and Congress’ appropriations power.

The text of Obamacare did not contain an appropriation for cost-sharing subsidies, which offset discounts on co-pays and deductibles provided to low-income individuals. The Obama administration requested funds for those subsidies, just as Trump requested funds for border security. In both cases, Congress turned down those requests—and in both cases, the executive concocted legal arguments to spend the funds anyway.

But when the House of Representatives sued in 2014 seeking to block President Obama’s unconstitutional appropriation of funds, did Pelosi—who claimed last week to “defend our democracy and our Constitution”—support the complaint? Quite the contrary. In fact, she filed two legal briefs in court objecting to the House’s suit, and claiming that Obamacare implied an appropriation for the cost-sharing subsidies.

Abrogating Congress’ Institutional Prerogatives

In a word, no. In the Obamacare lawsuit, she not only attacked House Republicans’ claims regarding the merits of their case, she attacked the House’s right to bring the claim against the executive in court.

When it comes to whether the House has suffered an injury allowing it to file suit, compare this language in the House’s lawsuit against Trump: “The House has been injured, and will continue to be injured, by defendants’ unlawful actions, which, among other things, usurp the House’s legislative authority,” with Pelosi’s claims in her brief regarding the Obamacare lawsuit:

Legislators’ allegations that a member of the executive branch has not complied with a statutory requirement do not establish the sort of “concrete and particularized” injury sufficient to satisfy Article III’s standing requirements….

[Permitting the House’s suit] would disturb long-settled and well-established practices by which the political branches mediate interpretive disputes about the meaning of federal law, and it would encourage political factions within Congress to advance political agendas by embroiling the courts in innumerable political disputes that are appropriately resolved using those long-established practices….Allowing suit in this case undermines, rather than advances, [Members’ institutional] interests—inevitably subjecting Congress to judicial second-guessing never contemplated by the Framers of the Constitution and compounding opportunities for legislative obstruction in ways that could greatly increase congressional dysfunction.

Also compare Pelosi’s language when talking about remedies available to the House with regards to Trump: “The House has no adequate or available administrative remedy, and/or any effort to obtain an administrative remedy would be futile,” with her claims that House Republicans had all sorts of options available to them to stop President Obama’s unconstitutional payments, short of going to court:

Concluding that there is standing in this case is…completely unnecessary given alternative and more appropriate tools available to legislators to object to executive branch actions that they view as inconsistent with governing law….

To start, legislators may always challenge executive action by enacting corrective legislation that either prohibits the disputed executive action or clarifies the limits or conditions on such action….Further, Congress has other means to challenge disputed interpretive policies, including many that do not require the concurrence of both houses. For example, Congress can hold oversight hearings, initiate legislative proceedings, engage in investigations, and, of course, appeal to the public.

Put Principle over Politics

I find Trump’s border security declaration troubling for the same reason I found the Obamacare payments troubling: they usurp Congress’ rightful constitutional authority. I took some solace in knowing that several congressional Republicans—not enough, but several—voted against the emergency declaration, while many others who voted with the president nevertheless expressed strong misgivings about the move, as well they should.

Compare that to congressional Democrats, not a single one of whom aired so much as a peep about Barack Obama “stealing from appropriated funds,” to use Pelosi’s own words regarding the Obamacare lawsuit. Would that more elected officials—both Republicans and Democrats—put constitutional first principles above partisan affiliations and political gain.

This post was originally published at The Federalist.

Liberals’ Situational Ethics on Constitutional Violations

A president requests billions of dollars to fulfill his main campaign promise. Congress turns him down, but the president finds a way to go around them and get his money anyway.

Donald Trump and his border emergency? Sure. But this description also applies to Barack Obama’s treatment of Obamacare. Examined from this context, the health care history raises questions about whether liberals’ outrage over Trump’s emergency declaration stems from his extralegal actions—or their underlying opposition to his border policies.

The Obama administration knew full well it lacked a lawful appropriation for the insurer payments. In 2013, it requested billions of dollars from Congress for such spending. But Congress refused to appropriate the money. Republicans, who by then controlled the House of Representatives, had no interest in giving dollars to prop up Obamacare, and even Democratic appropriators seemingly had other priorities to fund rather than insurer payments.

Facing a refusal from Congress to appropriate the cost-sharing subsidies, the Obama administration went ahead and spent the funds anyway. Administration officials concocted a theory that even though an express appropriation for the payments did not exist in law, the health care law implied an appropriation of funds. They paid the cost-sharing subsidies to insurers in conjunction with Obamacare’s premium subsidies, even though the two programs are authorized in different sections of the law, and should operate via two different cabinet departments.

Granted, the Obama administration used much more surreptitious means to accomplish its unconstitutional ends. Unlike Trump, who announced his emergency declaration to much fanfare, his predecessor did not draw attention to his extralegal maneuvering. It took House Republicans seven months to authorize a suit objecting to Obama’s actions. But the only two federal courts to rule on the matter found that the law did not include an appropriation for the cost-sharing payments, meaning that Obama violated the Constitution’s appropriations clause by spending funds without authorization.

In two separate legal briefs, the then-House minority leader claimed Obamacare did appropriate funds for the cost-sharing payments to insurers—a claim that federal courts rejected. But her briefs went even further, claiming that Congress had no standing to object to the executive’s encroachment on its spending power.

Pelosi’s briefs in the Obamacare case present numerous objections to Congress’ suit against the executive. She claimed that “allowing suit in this case undermines, rather than advances, [the House’s institutional] interests,” and would “subject Congress to judicial second-guessing” and allow for “legislative obstruction.” She argued that the House of Representatives had no standing to pursue claims against the executive on its own, without the Senate’s concurrence. And she pointed out that “Congress has numerous tools at its disposal to resolve routine disputes,” for instance “corrective legislation that…prohibits the disputed executive action.”

Pelosi claimed last week that Republicans’ decision to endorse Trump’s emergency declaration will set a precedent they will come to regret. She knows of which she speaks. While researching the issue in recent months, I found that Pelosi’s briefs from the Obamacare case mysteriously disappeared from her website (although thankfully are still archived online.) Quite possibly, Pelosi’s staff decided to remove the briefs from her website upon retaking the majority, because they recognize the inconvenient precedent they set—and which Pelosi will now have to explain away in both the legal and political realms.

Call this a hunch, but I doubt that…the Democratic lawmakers would content themselves with the remedies they have laid forth in their brief about Obamacare’s cost-sharing subsidies. Faced with a President spending billions of dollars on a deportation force never appropriated by Congress, would Nancy Pelosi merely content herself with conducting hearings and ‘appeal[ing] to the public,’ as her brief argues in the Obamacare context? Hardly.

That November 2016 article proved prescient in highlighting the dangers of situational ethics—politicians putting immediate policy wins ahead of larger constitutional principles. More than two years later, Pelosi may soon reap the whirlwind, when Trump’s Justice Department uses her Obamacare briefs to argue that the House of Representatives has no standing to challenge his emergency declaration.

Congressional Republicans should learn from Pelosi’s example, stand fast to their principles, and call Trump’s action for what it is: A usurpation of Congress’ power of the purse, a breach of the separation of powers, and a violation of the principles of limited government that conservatives hold dear.

This post was originally published at The Federalist.

What You Need to Know About Friday’s Court Ruling

Late Friday evening, a judge in Texas handed down his ruling in the latest Obamacare lawsuit. Here’s what you need to know about the ruling (if interested, you can read the opinion here), and what might happen next:

What Did the Judge Decide?

The opinion contained analyzed two different issues—the constitutionality of the individual mandate, and whether the rest of Obamacare could survive without the individual mandate (i.e., severability). In the first half of his opinion, Judge Reed O’Connor ruled the mandate unconstitutional.

Wait—Haven’t Courts Ruled on the Individual Mandate Before?

Yes—and no. In 2012, the Supreme Court ruled the individual mandate constitutional. In his majority opinion for the Court, Chief Justice John Roberts (in)famously concluded that, even though Obamacare’s authors proclaimed the mandate was not a tax—and said as much in the law—the mandate had the characteristics of a tax. Even though Roberts concluded that the mandate exceeded Congress’ constitutional authority under the Commerce Clause, he upheld it as a constitutional exercise of Congress’ power to tax.

However, in the tax bill last year Congress set the mandate penalty to zero, beginning on January 1, 2019. The plaintiffs argued that, because the mandate will no longer bring in revenue for the federal government, it no longer qualifies as a tax. Because the mandate will not function as a tax, and violates Congress’ authority under the Commerce Clause, the plaintiffs argued that the court should declare the mandate unconstitutional. In his opinion, Judge O’Connor agreed with this logic, and struck down the mandate.

What Impact Would Striking Down the Mandate Have?

Not much, seeing as how the penalty falls to zero in two weeks’ time. Striking the mandate from the statute books officially, as opposed to merely setting the penalty at zero, would only affect those individuals who feel an obligation to follow the law, even without a penalty for violating that law. In setting their premiums for 2019, most insurers have already assumed the mandate goes away.

Then Why Is This Ruling Front Page News?

If the court case hinged solely on whether or not the (already-defanged) mandate should get stricken entirely, few would care—indeed, the plaintiffs may not have brought it in the first place. Instead, the main question in this case focuses on severability—the question of whether, and how much, of the law can be severed from the mandate, if the mandate is declared unconstitutional.

What Happened on Severability?

Judge O’Connor quoted heavily from opinions in the prior 2012 Supreme Court case, particularly the joint dissent by Justices Anthony Kennedy, Samuel Alito, Antonin Scalia, and Clarence Thomas. He ruled that the justices viewed the mandate as an “essential” part of Obamacare, that the main pillars of the law were inseparable from the mandate.

The judge also noted that some of the lesser elements of Obamacare (e.g., calorie counts on restaurant menus, etc.) hitched a ride on a “moving target,” that he could not—and should not—attempt to determine which would have passed on their own. Therefore, he ruled that the entire law must be stricken.

Haven’t Things Changed Since the 2012 Ruling?

Last year, Congress famously couldn’t agree on how to “repeal-and-replace” Obamacare—but then voted to set the mandate penalty to zero. A bipartisan group of legal scholars argued in this case that, because Congress eliminated the mandate penalty but left the rest of the law intact, courts should defer to Congress’ more recent judgment. Judge O’Connor disagreed.

What Happens Now?

Good question. Judge O’Connor did NOT issue an injunction with his ruling, so the law remains in effect. The White House released a statement saying as much—that it would continue to enforce the law as written pending likely appeals.

On the appeal front, a group of Democratic state attorneys general who intervened in the suit will likely request a hearing from the Fifth Circuit Court of Appeals in New Orleans. From there the Supreme Court could decide to rule on the case.

Will Appellate Courts Agree with This Ruling and Strike Down Obamacare?

As the saying goes, past performance is no predictor of future results. However, it is worth noting two important facts:

1.      The five justice majority that upheld most of the law—John Roberts, Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotamayor—all remain on the Supreme Court.
2.      As noted above, Chief Justice Roberts went through what many conservatives attacked as a bout of legal sophistry—calling the mandate a tax, even though Congress expressly said it wasn’t—to uphold the law, more than a year before its main provisions took effect.

What About Pre-Existing Conditions?

On Friday evening, President Trump asked for Congress to pass a measure that “protects pre-existing conditions.”

I have outlined other alternatives to Obamacare’s treatment of pre-existing conditions. However, as I have explained at length over the past 18 months, if Republicans want to retain—or in this case reinstate—Obamacare’s treatment of pre-existing conditions, then they are failing in their promise to repeal the law.

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.

Is Donald Trump “Sabotaging” Obamacare?

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

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

1. The GAO Report

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

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

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

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

2. The New York Times Article

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

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

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

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

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

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

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

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

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

A third allegation:

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

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

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

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

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

3. The Lawsuit

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

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

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

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

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

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

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

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

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

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

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

Words Versus Actions

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

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

This post was originally published at The Federalist.

Liberals’ Ridiculous Health Care Charges Against Brett Kavanaugh

So much for subtle. On Tuesday, Senate Minority Leader Chuck Schumer (D-NY) placed health care at the top of the list of reasons to oppose Brett Kavanaugh’s nomination to the Supreme Court, throwing in some over-the-top rhetoric in the process:

We Democrats believe the No. 1 issue in America is health care and the ability for people to get good health care at prices they can afford. The nomination of Mr. Kavanaugh would put a dagger through the heart of that cherished belief that most Americans have.

Put aside for a moment that Obamacare itself has “put a dagger through the heart” of people’s ability “to get good health care at prices they can afford” by more than doubling individual insurance premiums during President Obama’s second term. The idea that a pending lawsuit would allow the Supreme Court to strike down Obamacare, and that a Justice Kavanaugh would cast the deciding vote to do so, ranges from implausible to ridiculous, for at least three reasons.

Second, as I previously noted, Kavanaugh wrote an opinion in 2011 that, while deferring a definitive judgment on the merits, suggested an inclination to uphold Obamacare’s mandate as constitutional. In one footnote of his opinion, Kavanaugh noted that “the fact that an exaction is not labeled a tax does not vitiate Congress’s [sic] power under the Taxing Clause.” To Kavanaugh, it mattered not that Congress said the mandate was not a tax to justify it as such under the Constitution—the same logic that troubled conservatives about Roberts’ ruling in the mandate case.

Kavanaugh did seem troubled by the fact that Obamacare contains both a statutory requirement to buy coverage and a penalty (“tax”) for those who fail to do so. But another footnote suggested a way out:

At oral argument, counsel for the Government argued that a citizen who refused to obtain health insurance would still be acting lawfully. If that were true, the mandate would presumably pass muster under the Taxing Clause. But it is not evident that the statutory language is fairly susceptible to such an interpretation. That said, perhaps the canon of constitutional avoidance would allow such an interpretation of this provision and thereby squeeze it within the Taxing Clause.

Roberts did exactly what Kavanaugh suggested, eliminating the “perhaps” from Kavanaugh’s last sentence, and defending the mandate as permissible under Congress’ Taxing Clause power.

Wall Street firms often note that past performance does not equate to future results, a motto worth noting here. But it seems highly unlikely that a judge willing to justify what Congress itself termed a “penalty” as a tax, and who cited the “canon of constitutional avoidance” as a way to uphold Obamacare, would suddenly vote to strike down the entire law—after Congress just last year declined to do so. (In fact, the Supreme Court may not even vote to hear the case at all.) All this makes Schumer’s talk of “dagger[s] through the heart” so much noise.

Schumer’s Strategy Could Be Improved

One could make a compelling argument that, if Schumer really wanted to defeat the Kavanaugh nomination, he would take the opposite tack, and “hug him close” on Obamacare. An exercise in trolling conservatives could cause them some serious discomfort: “We know Judge Kavanaugh would uphold Obamacare at the Supreme Court, because he laid the roadmap for saving Obamacare there six years ago.”

But Schumer has instead tried to play the health care card against Kavanaugh, for any number of potential reasons.

  • He worries about over-emphasizing abortion rights during the confirmation process, which could cause political heartburn for several Senate Democrats running for re-election this year in states Donald Trump won in 2016;
  • He wants to preview themes Democrats will push in the election campaign this fall;
  • He doesn’t want to anger Democrats’ base by conceding the health care issue, as they want him to fight Kavanaugh’s nomination and support Obamacare, even if doing so could improve the chances of defeating the nomination; and/or
  • He thinks it unlikely he can defeat Kavanaugh, and wants to keep his caucus united rather than make a long-shot tactical gamble that could divide Democrats.

This post was originally published at The Federalist.

“SCOTUSCare” Redux? How Brett Kavanaugh Helped Uphold Obamacare

In a 2015 dissent to an Obamacare case, Supreme Court Justice Antonin Scalia famously opined that the court had concluded “that this limitation would prevent the rest of [Obamacare] from working as well as hoped. So it rewrites the law.… We should start calling this law SCOTUScare.”

Last week’s retirement announcement from Justice Anthony Kennedy, coupled with news placing Brett Kavanaugh, a judge on the U.S. Court of Appeals for the District of Columbia, high on President Trump’s list to replace Kennedy, has drawn attention back to the legal wrangling over the law. Some observers have claimed that Kavanaugh, in a 2011 opinion written when the D.C. Circuit considered Obamacare’s constitutionality, supported the law’s individual mandate.

Extended Discussion of the Anti-Injunction Act

Most of Kavanaugh’s opinion discusses interpretations of statute that hardly qualify as an enlightening discourse of constitutional principles. Whereas his two circuit court colleagues upheld the mandate as a valid exercise of Congress’ power under the Constitution’s Commerce Clause, Kavanaugh “dissent[ed] as to jurisdiction and [did] not decide the merits.”

Kavanaugh’s dissent arose from his belief that the 1867 Anti-Injunction Act precluded the court from deciding the merits of the individual mandate. The Anti-Injunction Act prevents individuals from challenging the validity of taxes in court until after they have paid them, which if applied to Obamacare’s mandate (which took effect in 2014) meant that a court challenge would not ripen until individuals had paid the mandate penalty on their taxes—i.e., in spring 2015, or nearly four years after the D.C. Circuit ruling.

Kavanaugh spends the better part of 50 pages—longer than the majority opinion justifying the mandate as constitutional—analyzing the Internal Revenue Code, and the Anti-Injunction Act, to support his belief that the mandate qualified as a tax under the act, forestalling any legal or constitutional challenge until after individuals had paid it. He cautions “the reader that some of the following is not for the faint of heart”—a true enough warning, as much of the opinion devolves into tedium that only a tax lawyer could love.

While Roberts disagreed with Kavanaugh’s reasoning about applying the Anti-Injunction Act to the Obamacare mandate, such differences over the interpretation of a 150-year-old statute hardly rise to the level of disqualifying for a potential Supreme Court nominee.

A Bit of Judicial Restraint…

Indeed, three-quarters of Kavanaugh’s ruling provides a worthy defense of judicial restraint—judges avoiding decisions on weighty questions wherever possible. He argues that courts should defer to Congress, which enacted the Anti-Injunction Act in the first place:

The jurisdictional status of the Anti-Injunction Act reflects the Constitution’s separation of powers in operation.  Under the Constitution, Congress possesses the power to tax and spend, as well as the power of the purse over appropriations of money. Congress zealously guards those prerogatives. Here, Congress has not afforded discretion to the Executive Branch to waive or forfeit the Anti-Injunction Act’s bar with respect to the assessment and collection of taxes. Rather, by making the Anti-Injunction Act jurisdictional, Congress has commanded courts to abide by the Act even when the Executive Branch might not assert it.

He also disregards efforts by the Obama administration, in attempts to provide policy certainty regarding Obamacare, encouraging the courts to decide the merits of the individual mandate before it took effect, rather than invoking the Anti-Injunction Act to bar the suits until 2015:

We must adhere to the statutory constraints on our jurisdiction no matter how much the parties might want us to jump the jurisdictional rails and decide this case now….By waiting, we would respect the bedrock principle of judicial restraint that courts avoid prematurely or unnecessarily deciding constitutional questions.

Followed by Judicial Activism

The last section of Kavanaugh’s opinion explains why he believes the courts should not decide the constitutionality of the individual mandate: “this case could disappear by 2015 because, by then, Congress may fix the alleged constitutional shortcoming and ensure that the Affordable Care Act’s individual mandate provision fits comfortably within Congress’ Taxing Clause power.”

In Kavanaugh’s view, the mandate could fit “comfortably” within Congress’ constitutional powers. Even as he “do[es] not take a position her on whether the statute as currently written is justifiable,” Kavanaugh concludes that “the only potential Taxing Clause shortcoming in the current individual mandate provision appears to be relatively slight” (emphasis in the original).

Several pages thereafter, Kavanaugh continues to answer a question nobody asked him, giving the legislature instructions on how to remedy the in-his-view minor constitutional infirmity:

This discussion about the potential problem with the Government’s Taxing Clause argument also shows how easily Congress could eliminate any such potential problem.  For example, Congress might keep the current statutory language and payment amounts and simply add a provision as basic as: “The taxpayer has a lawful choice either to maintain health insurance or make the payment to the IRS required by Section 5000A(a)-(c).” Or Congress might retain the exactions and payment amounts as they are but eliminate the legal mandate language in Section 5000A, instead providing something to the effect of: “An applicable individual without minimum essential coverage must make a payment to the IRS on his or her tax return in the amounts listed in Section 5000A(c).” Or Congress could adopt the approach from the House-passed bill, which expressly created a tax incentive and plainly satisfied the Taxing Clause.

Any of those options—and others as well—would ensure that this provision operates as a traditional regulatory tax and readily satisfies the Taxing Clause.

Kavanaugh’s Roadmap to Save Obamacare

Some will note the irony of Kavanaugh’s opinion stating that “no court to reach the merits has accepted the Government’s Taxing Clause argument.” Josh Blackman notes in his book “Unprecedented: The Constitutional Challenge to Obamacare” that Solicitor General Donald Verilli “advanced this very argument”—that severing the mandate to buy health insurance from the tax for not buying health insurance would make the latter constitutional—“at the Supreme Court.”

The gambit worked. Roberts ultimately relied upon that argument from Verilli by way of Kavanaugh to uphold the mandate as a constitutional exercise of the taxing power. That Kavanaugh, like Roberts, used the last few pages of his opinion to decry the “unprecedented” nature of a mandate upheld via the Commerce Clause power does not mitigate his favorable analysis of a mandate upheld via the Taxing Clause power.

Other analysts with more experience in constitutional and legal jurisprudence (and perhaps less experience in health policy) can opine on other parts of Kavanaugh’s record. But his opinion on Obamacare, while starting out with an admirable nod toward judicial restraint, unfortunately veered in an activist direction that gives this conservative serious pause.

This post was originally published at The Federalist.

The Absurdity of the Justice Department’s Obamacare Lawsuit Intervention

Last summer, I wrote about how President Trump had created the worst of all possible outcomes regarding one Obamacare program. In threatening to cancel cost-sharing reduction payments to insurers, but not actually doing so, the administration forced insurers into raising premiums, while not complying with the rule of law by cutting off the payments outright.

Eventually, the administration finally did cut off the payments in October, but for several months, the uncertainty represented a self-inflicted wound. So too a brief filed by the Department of Justice (DOJ) late last week regarding an Obamacare lawsuit several states brought in February, which asked the court to strike down both Obamacare’s individual mandate and the most important of its federally imposed insurance regulations.

It takes a very unique set of circumstances to arrive at this level of opposition. Herewith the policy, legal, and political implications of DOJ’s actions.

Let’s Talk Policy First

Strictly as a policy matter, I agree with the general tenor of the Justice Department’s proposals. Last April, I analyzed Obamacare’s four major federally imposed insurance regulations:

  1. Guaranteed issue—accepting all applicants, regardless of health status;
  2. Community rating—charging all applicants the same premiums, regardless of health status;
  3. Essential health benefits—requiring plans to cover certain types of services; and
  4. Actuarial value—requiring plans to cover a certain percentage of each service.

I concluded that these four regulations represented a binary choice for policymakers: Either Congress should repeal them all, and allow insurers to price individuals’ health risk accordingly, or leave them all in place. Picking and choosing would likely result in unintended consequences.

The Justice Department’s brief asks the federal court to strike down the first two federal regulations, but not the last two. This outcome could have some unintended consequences, as a New York Times analysis notes.

But repealing the guaranteed issue and community rating regulations would remove the prime driver of premium increases under Obamacare. Those two regulations led rates for individual coverage to more than double from 2013 to 2017, necessitating the requirement for individuals to purchase, and employers to offer, health coverage, the subsidies to make coverage more “affordable,” and the tax increases and Medicare reductions used to fund them.

I noted last April that Republicans have a choice: They can either keep the status quo on pre-existing conditions or they can fulfill their promise to repeal Obamacare. They cannot do both. The DOJ brief acknowledges this dilemma, and that the regulations represent the heart of the Obamacare scheme.

Legal Question 1: Constitutionality

Roberts held that, while the federal government did not have the power to compel individuals to purchase health coverage under the Constitution’s Commerce Clause, Congress did have the power to impose a tax penalty on the non-purchase of coverage, and upheld the individual mandate on that basis.

But late last year, Congress set the mandate penalty to zero, with the provision taking effect next January. Both the plaintiff states and DOJ argue that, because the mandate will not generate revenue for the federal government beyond 2019, it can no longer function as a tax, and should be struck down as unconstitutional.

Ironically, if Congress took an unconstitutional act in setting the mandate penalty to zero, few seem to have spent little time arguing as much prior to the tax bill’s enactment last December. I opposed Congress’ action at the time, because I thought Congress needed to repeal more of Obamacare—i.e., the regulations discussed above. But few raised any concerns that setting the mandate penalty to zero represented an unconstitutional act:

  • While one school of thought suggests presidents should not sign unconstitutional legislation, President Trump signed the tax bill into law.
  • Likewise, President Trump did not issue a signing statement about the tax bill, seemingly indicating that the Trump administration had no concerns about the bill, constitutional or otherwise.
  • While in 2009 the Senate took a separate vote on the constitutionality of Obamacare, no one raised such a point of order during the Senate’s debate on the tax bill.
  • I used to work for one of the plaintiffs in the states’ lawsuit, the Texas Public Policy Foundation. TPPF put out no statement challenging the constitutionality of Congress’ move in the tax bill.

Legal Question 2: Severability

As others have noted, a court decision striking down the individual mandate as unconstitutional would by itself have few practical ramifications, given that Congress already set the mandate penalty to zero, beginning in January. The major fight lies in severability—either striking down the entire law, as the states request, or striking down the two major federal insurance regulations, as the Justice Department suggested last week.

The DOJ brief and the states’ original complaint both cite Section 1501(a) of Obamacare in making their claims to strike down more than just the mandate. DOJ cited that section—which called the mandate “essential to creating effective health insurance markets”—13 times in a 21-page brief, while the states cited that section 18 times in a 33-page complaint.

But that claim fails, for several reasons. First, the list of findings in Section 1501(a)(2) of the law discusses the mandate’s “effects on the national economy and interstate commerce.” In other words, this section of findings attempted to defend the individual mandate as a constitutional exercise of Congress’ power under the Commerce Clause—an argument Roberts struck down in the NFIB v. Sebelius ruling six years ago.

Second, the plaintiffs and the Justice Department briefs focus more on what a Congress eight years ago said—i.e., their non-binding findings to defend the individual mandate under the Commerce Clause—than what the current Congress did when it set the mandate penalty to zero, but left the rest of Obamacare intact. The Justice Department tried to retain a fig leaf of consistency by taking the same position regarding severability that the Obama administration did before the Supreme Court in 2012: that if the mandate falls, the guaranteed issue and community rating provisions (and only those provisions) should as well.

However, the Justice Department’s brief all but ignores Congress’s intervention last year. In a letter to Speaker of the House Paul Ryan (R-WI) regarding the lawsuit, Attorney General Jeff Sessions noted that “We presume that Congress legislates with knowledge of the [Supreme] Court’s findings.” A corollary to that maxim should find that the administration takes decisions with knowledge of Congress’ actions.

But rather than observing how this Congress zeroed out the mandate penalty while leaving the rest of Obamacare intact, DOJ claimed that the 2010 findings should control, because Congress did not repeal them. (Due to procedural concerns surrounding budget reconciliation, Senate Republicans arguably could not have repealed them in last year’s tax bill even if they wanted to.)

Third, as the brief by a series of Democratic state attorneys general—who received permission to intervene in the case—makes plain, Republican members of Congress said repeatedly during the tax bill debate last year that they were not changing any other part of the law. For instance, during the Senate Finance Committee markup of the tax bill, the committee’s chairman, Orrin Hatch (R-UT), said the following:

Let us be clear, repealing the [mandate] tax does not take anyone’s health insurance away. No one would lose access to coverage or subsidies that help them pay for coverage unless they chose not to enroll in health coverage once the penalty for doing so is no longer in effect. No one would be kicked off of Medicare. No one would lose insurance they are currently getting from insurance carriers. Nothing—nothing—in the modified mark impacts Obamacare policies like coverage for preexisting conditions or restrictions against lifetime limits on coverage….

The bill does nothing to alter Title 1 of Obamacare, which includes all of the insurance mandates and requirements related to preexisting conditions and essential health benefits.

As noted above, I want Congress to repeal more of Obamacare—all of it, in fact. But what I want to happen and what Congress did are two different things. When Congress explicitly set the mandate penalty to zero but left the rest of the law intact, I should not (and will not) go running to an activist judge trying to get him or her to ignore the will of Congress and strike all of it down regardless. That’s what liberals do.

Too Cute by Half Problem 1: Legal Outcomes

The brief the Democratic attorneys general filed suggested another possible outcome—one that would not please the plaintiffs in the lawsuit. While the attorneys general attempted to defend the mandate’s constitutionality despite the impending loss of the tax penalty, they offered another solution should the court find the revised mandate unconstitutional:

Under long-standing principles of statutory construction, when a legislature purports to amend an existing statute in a way that would render the statute (or part of the statute) unconstitutional, the amendment is void, and the statute continues to operate as it did before the invalid amendment was enacted.

It remains to be seen whether the courts will find this argument credible. But if they do, a lawsuit seeking to strike down all of Obamacare could actually restore part of it, by getting the court to reinstate the tax penalties associated with the mandate.

This scenario could get worse. In 2015, the Senate parliamentarian offered guidance that Congress could set the mandate penalty to zero, but not repeal it outright, as part of a budget reconciliation bill. Republicans used this precedent to zero-out the mandate in last year’s tax bill. But a court ruling stating that Congress cannot constitutionally set the mandate penalty to zero, and must instead repeal it outright, means Senate Republicans would have to muster 60 votes to do so—an outcome meaning the mandate might never get repealed.

In June 2015, the Supreme Court issued a ruling in the case of King v. Burwell. In its opinion, the court ruled that individuals in states that did not establish their own exchanges (and used the federally run healthcare.gov instead) could qualify for health insurance subsidies. By codifying an ambiguity in the Obamacare statute in favor of the subsidies, the court’s ruling prevented the Trump administration from later taking executive action to block those subsidies.

In King v. Burwell, litigating over uncertainty in Obamacare ended up precluding a future administration from taking action to dismantle it. The same thing could happen with this newest lawsuit.

Too Cute by Half Problem 2: Legislative Action

Sooner or later, someone will recognize an easy solution exists that would solve both the problem of constitutionality and severability: Congress passing legislation to repeal the mandate outright, after the tax bill set the penalty to zero. But this scenario could lead to all sorts of inconsistent, yet politically convenient, outcomes:

  • Democrats attacking Republicans over last week’s DOJ brief might oppose repealing a (now-defanged) individual mandate, because it would remove what they view as a powerful political issue heading into November’s midterm elections;
  • Republicans afraid of Democrats’ political attacks might say they repealed a part of Obamacare (i.e., the individual mandate) outright to “protect” the rest of Obamacare (i.e., the federal regulations and other assorted components of the law) from being struck down by an activist judge; and
  • Some on the Right might oppose Congress taking action to repeal “just” the individual mandate, because they want the courts to strike down the entire law—even though such a job rightly lies within Congress’ purview.

As others have noted, these contortionistic, “Through the Looking Glass” scenarios speak volumes about the tortured basis for this lawsuit. The Trump administration should spend less time writing briefs that support legislating from the bench by unelected judges, and more time working with Congress to do its job and repeal the law itself.

This post was originally published at The Federalist.

What’s Going on with Premium Increases under Obamacare?

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

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

End of Cost-Sharing Reduction Payments

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

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

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

Eliminating the Individual Mandate Penalty

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

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

New Coverage Options

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

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

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

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

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

Why Prop Up Obamacare?

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

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

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

This post was originally published at The Federalist.

What You Need to Know about President Trump’s Drug Pricing Plan

On Friday, President Trump gave a Rose Garden speech outlining his plan, entitled “America’s Patients First,” to combat rising drug prices. The plan incorporates policy ideas included in the president’s budget earlier this year, new proposals, and additional topics for discussion that could turn into more specific ideas in the future.

What’s the Problem?

Surveys suggest public frustration with the cost of prescription drugs. While such costs represent a small fraction of overall spending on health care, several dynamics help the prescription drug issue gain disproportionate attention. First, in any given year, more Americans incur drug costs than hospital costs. Whereas only 7.3 percent of Americans had an inpatient hospitalization in 2013, more than three in five (60.7 percent) had prescription drug expenses.

With more Americans incurring drug costs, and paying a larger percentage of drug costs directly from their pockets, the issue has taken on greater prominence. The rise of coinsurance (i.e., paying a percentage of drug costs, rather than having those costs capped at a set dollar amount) for pricey specialty drugs exacerbates this dynamic.

What Are the Proposed Solutions?

In general, ways to address drug prices fall into three large buckets.

Controlling costs through competition: These solutions would involve bringing down price levels by encouraging generic competition, or substituting one type of drug for another.

Shifting costs: These solutions would alter who pays for drugs among insurers, pharmaceutical benefit managers (PBMs), or consumers. While they may make drugs more “affordable” for consumers, they will not change overall spending levels. In fact, if done poorly, these types of proposals could actually increase overall spending, by encouraging individuals to increase their consumption of costly brand-name drugs.

Drug company and PBM stocks went up Friday following the blueprint’s release, largely because the plan eschews actions in the second bucket. The president’s plan includes a few tweaks to the system of “rebates” (de facto price controls) the Medicaid program uses, but includes none of the major Democratic proposals to use blunt government action to drive down prices.

In fact, the plan criticizes foreign price controls, attacking the “global freeloading” by which other countries gain the research and development benefits of the pharmaceutical industry without paying their “fair share” of those R&D costs. While the plan frequently mentions the disproportionate share of costs American consumers pay, it includes few specific proposals to rebalance these costs to other countries. It also remains unclear whether, if successfully implemented, any such rebalancing would successfully lower prices in the United States.

Other competitive proposals include giving Medicare Part D plans more flexibility to adjust their formularies mid-year to respond to changes in the generic drug marketplace, and prohibiting Part D plans from including “gag clauses.” These clauses prohibit pharmacies from telling consumers that they would actually save money by paying cash for certain drugs, rather than using their insurance.

In the cost-shifting bucket lie several of the proposals incorporated into the president’s budget. For instance, a cap on out-of-pocket expenses for the Medicare Part D prescription drug benefit would provide important relief to seniors with very high annual drug costs. However, to the extent that such a proposal would encourage seniors to over-consume drugs, or purchase more costly brand-name drugs, once they reach such a cap, this proposal could also increase overall Part D spending.

In a similar vein lie proposals about PBMs passing drug rebates directly to consumers at the point of sale. In most cases, PBMs had previously passed on those savings indirectly to insurers in the form of lower premiums. Giving rebates directly to consumers—a practice some insurers have begun to adopt—would provide relief to those with high out-of-pocket costs, but could raise premiums overall, particularly for those with relatively low prescription spending.

What’s Next?

The plan raises more questions than it answers—quite literally. The last and longest section of the blueprint includes 136 separate questions about how the administration should structure and implement some of the proposals discussed in the document.

Some proposals, while eye-catching, seem ill-advised. For instance, the proposal to “evaluate the inclusion of list prices in direct-to-consumer advertising” raises potential First Amendment concerns—government dictating the content of drugmakers’ communications with patients. Moreover, with many Americans viewing health care as a superior good, some consumers may view a more expensive product as “better” than its alternative. In that case this proposal, if ever implemented, could have the opposite of its intended effect, encouraging people to consume more expensive drugs.

The plan did not include the heavy-handed approaches to the prescription drug issue—Medicare price “negotiation” and drug reimportation—that Democrats favor, and that President Trump endorsed in his 2016 campaign. The document also makes clear the iterative nature of the process, with additional proposals likely coming after feedback from industry and others.

But to the extent that Washington has become consumed by the midterm elections fewer than six months away, the high-profile event Friday allowed Republicans and the president to say they have a plan to bring down drug prices—an important political objective in and of itself.

This post was originally published at The Federalist.