In Fourth Dem Debate, Warren Maintains Her Health Care Evasion

On Tuesday, Sen. Sherrod Brown—a notable leftist who has said he supports a single-payer health care system in theory—said in a CNN story that “it’s a terrible mistake if the Democratic nominee would publicly support ‘Medicare for All.’” On Tuesday evening, two of the party’s leading contenders for that nomination, Sens. Bernie Sanders and Elizabeth Warren, redoubled their commitment to such a policy, with Warren drawing fire from all sides about her lack of detail surrounding the issue.

As she had in previous debates, Warren refused to get into specifics about how she would pay for the single-payer plan that Sanders has introduced as legislation, and which Warren has endorsed. Sanders has previously admitted that taxes on the middle class would go up under his plan.

Warren would not admit that taxes on the middle class would go up under single payer. She claimed that costs for the middle class would go down on net under her plan, and that she would not sign any legislation that raised costs on the middle class.

However, even this supposed promise raised additional questions:

  1. Who qualifies as middle class in Warren’s estimation? A family making under $50,000, a family making under $250,000, or somewhere in between?
  2. Does Warren’s promise mean that no middle-class families will see their costs go up on net? If so, that seems like an impossibly high bar to clear, as virtually every major law creates both winners and losers. Even though the left tries to turn the federal government into another version of “Oprah’s Finest Things”—“You get a car! You get a car! You get a car!”—it rarely works out that way in practice.
  3. In September 2008, Barack Obama made a “firm pledge” that he would not raise taxes on families making under $250,000 per year—“not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” That promise lasted for less than a month of his administration. On February 4, 2009, two weeks after taking office, Obama signed a children’s health insurance reauthorization that included a large increase in tobacco taxes—taxes that hit working class families hardest. Given how quickly Obama did an about-face on his campaign promise, why should the American people take Warren’s word any more seriously than they did Obama’s “firm pledge?”

South Bend Mayor Pete Buttigieg also chimed in on the funding discussion. He had previously characterized Warren as “extremely evasive” on the issue during the last debate, and released ads prior to this debate questioning Warren’s and Sanders’ proposals to prohibit private health insurance. During the CNN debate, he pressed both issues, noting (as this commentator has) that Warren has “a plan for everything, except this.” With that, Warren derided Pete’s plan as “Medicare for all who can afford it.”

It seems particularly noteworthy that Warren wants to enact a major expansion of the federal government’s role—the largest expansion of government’s role ever, in both its financial scope and massive reach into every American’s life—yet cannot find a sufficient justification to admit the middle class will pay even a little bit more in taxes to fund this socialist utopia. The former speaks volumes about the left’s ultimate objective—full, unfettered power over the economy—and the latter speaks to the deception they are using to obtain it.

This post was originally published at The Federalist.

“Medicare for All” Would Abolish Medicare

The Aug. 5 op-ed by Rep. Pramila Jayapal (D-Wash.), “The facts about Medicare-for-all,” admirably called for a fact-based debate regarding single-payer health care. But it would help if she accurately represented the facts surrounding her bill — starting with its title — because the legislation has little to do with providing Medicare to all.

Jayapal criticized her fellow Democrats for “incit[ing] fear and sow[ing] confusion” by stating that, under her proposal, “Medicare goes away as you know it.” But a HuffPost article conceded that, “as a point of fact, the Medicare program envisioned under [Jayapal’s bill] is not the program as it exists today.” Moreover, Section 901(a)(1) of Jayapal’s own bill states that “no benefits shall be available under title XVIII of the Social Security Act” — Medicare — after the bill’s new program were to take effect.

A fellow with the Urban-Brookings Tax Policy Center at the Urban Institute recently wrote of the plan from Jayapal and Sen. Bernie Sanders (I-Vt.), “You can call it many things — from ambitious to unrealistic. But please don’t call it Medicare.” That Jayapal refused to describe her own plan accurately should cause readers to question what other inconvenient truths she has ignored regarding her socialized-medicine scheme.

This post was originally published in The Washington Post.

The Fundamental Dishonesty Behind Kamala Harris’ Health Plan

When analyzing Democrats’ promises on health care ahead of the 2020 presidential campaign, a researcher with the liberal Urban Institute earlier this year proffered some sage advice: “We should always be suspect of any public policy—especially when it comes to something as complicated as health care—when anybody tells us everybody is going to get more and pay less for it. It’s really not possible.”

Someone should have given that advice to Sen. Kamala Harris (D-Calif.). Her health plan, a modified version of Sen. Bernie Sanders’ single-payer health care program that she released on Monday in a Medium post and on her website, pledges that it will lead to the following outcomes:

Every American will be a part of this new Medicare system….Seniors will see stronger Medicare benefits than they have now. We will cover millions more people who don’t have health insurance today. And we will reduce costs, save our country money, and ensure that no American has to sacrifice getting the care they need just because the cost is a barrier.

As with Barack Obama’s salesmanship of Obamacare more than a decade ago, Harris’ health plan relies upon the exact strategy the Urban Institute researchers decried of promising everything to everybody. In her socialist utopia, everyone will have coverage—coverage that provides better benefits than the status quo—even as health costs decline dramatically.

Like Obama’s “like your plan” pledge, which PolitiFact dubbed the “Lie of the Year” for 2013, Harris’ plan rests on optimistic scenarios that have little possibility of coming to fruition. But one false premise underpins the entire plan:

We will set up an expanded Medicare system, with a 10-year phase-in period. During this transition, we will automatically enroll newborns and the uninsured into this new and improved Medicare system, give all doctors time to get into the system, and provide a commonsense path for employers, employees, the underinsured, and others on federally-designated programs, such as Medicaid or the Affordable Care Act exchanges, to transition. This will expand the number of insured Americans and create a new viable public system that guarantees universal coverage at a lower cost. Expanding the transition window will also lower the overall cost of the program. [Emphasis mine.]

As any math major can explain, extending the transition window for a move to a single-payer health-care system will not, as Harris tries to claim, lower the overall cost of the program once the entire program takes effect. But it will significantly lower the cost of the program during the transition.

Extending the single-payer transition period to ten years—which conveniently coincides with the ten-year budget window that the Congressional Budget Office uses to analyze major legislation—will keep most of the program’s costs “off the books” and hidden from the public until after her proposal makes it on to the statute books. It also means that her plan wouldn’t take full effect until well after Harris leaves office, meaning she can blame her successor for any problems that occur during the implementation phase.

This fiscal gimmick—delaying most of the spending associated with single payer to outside the ten-year budget window—allows Harris to draw a contrast with Sanders, in which she claims that many middle-class families would not have to pay a single cent in added taxes for all the “free” health care they would receive under a single-payer system:

One of Senator Sanders’ options is to tax households making above $29,000 an additional 4% income-based premium. I believe this hits the middle class too hard. That’s why I propose that we exempt households making below $100,000 [from new taxes to pay for single payer], along with a higher income threshold for middle-class families living in high-cost areas.

Analysts from across the political spectrum agree that the $30 trillion (or more) in new taxes needed to fund a single-payer health care system cannot come from the wealthy alone. Yet Harris proceeds to make that exact argument—that the middle class can have all the “free” health care they want, with someone else footing the bill.

Apart from the fiscal legerdemain, the proposal contains other controversial provisions. While she now claims she would allow private insurance to continue—a reversal of her earlier comments this past January—Harris’ plan states that these insurers would get “reimbursed less than what the [government-run] Medicare plan will cost to operate.” She may tolerate private insurers for the sake of political expediency, but her bias in favor of the government-run plan demonstrates that they would have little more than a token presence in any system of her design.

This post was originally published at The Federalist.

Joe Biden’s Health Care Plan: SandersCare Lite

On Monday morning, former vice president Joe Biden released the health care plan for his 2020 presidential campaign. The plan comes ahead of a single-payer health plan speech by Sen. Bernie Sanders (I-VT) scheduled for Wednesday.

Biden’s plan includes several noteworthy omissions. For instance, it does not include any reference to health coverage for foreign citizens illegally present in the United States. That exclusion seems rather surprising, given both Democrats’ embrace of health benefits for those unlawfully present in last month’s debate, and Biden’s repeated references to the issue.

Biden said later on Monday that illegally present foreign citizens should have access to “public health clinics if they’re sick,” but not health insurance. He also claimed that last month’s debate format did not give him enough time to explain his position.

Overall, however, Biden’s plan includes many similarities to Sanders’. While both Sanders and Biden want to draw contrasts on health care—Sanders to attack Biden as beholden to corporate interests, and Biden to attack Sanders for wanting to demolish Obamacare—their plans contain far more similarities than differences.

Losing Coverage

Sanders’ bill would, as the American people have gradually learned this year, make private insurance “unlawful,” taking coverage away from approximately 300 million Americans. Biden’s plan specifically attacks single payer on this count, for “starting from scratch and getting rid of private insurance.”

As with Obamacare, Biden’s promise will echo hollow. By creating a government-run “public option” like Sanders’, the Biden plan would also take away health coverage for millions of Americans. As I have previously explained, a government-run plan would sabotage private insurance, using access to Treasury dollars and other in-built structural advantages.

In 2009, the Lewin Group concluded that a government-run health plan, available to all individuals and paying doctors and hospitals at Medicare rates (i.e., less than private insurance), would lead to 119.1 million individuals losing employer coverage:

More Spending

Biden would also expand the Obamacare subsidy regime, in three ways. He would:

  1. Reduce the maximum amount individuals would pay in premiums from 9.86% of income to no more than 8.5% of income, with federal subsidies making up the difference.
  2. Repeal Obamacare’s income cap on subsidies, so that families with incomes of more than four times the poverty level ($103,000 for a family of four in 2019) can qualify for subsidies.
  3. To lower deductibles and co-payments, link insurance subsidies to a richer “gold” plan, one that covers 80% of an average enrollee’s health costs in a given year, rather than the “silver” plan under current law.

All three of these recommendations come from the liberal Urban Institute’s Healthy America plan, issued last year. However, they all come with a big price tag. Consider the following excerpt from Biden’s plan:

Take a family of four with an income of $110,000 per year. If they currently get insurance on the individual marketplace [i.e., Exchange], because their premium will now be capped at 8.5% of their income, under the Biden Plan they will save an estimated $750 per month on insurance alone. That’s cutting their premiums almost in half. [Emphasis original.]

That’s also making coverage “affordable” for families through unaffordable levels of federal spending. By its own estimates, Biden’s plan will give a family with an income of $110,000 annually—which is approximately double the national median household income—$9,000 per year in federal insurance subsidies. Some families with that level of income may not even pay $9,000 annually in federal income taxes, depending upon their financial situation, yet they will receive sizable amounts of taxpayer-funded largesse.

Price Controls and Regulations

The drug price section of the Biden plan includes the usual leftist tropes about “prescription drug corporations…profiteering off of the pocketbooks of sick individuals.” It proposes typical liberal “solutions” in the form of price controls, whether importing price-controlled pharmaceuticals from overseas, or allowing “an evaluation by…independent board members” (i.e., bureaucrats) to determine prices.

Ironically, Biden’s plan implicitly acknowledges Obamacare’s flaws. In talking about prescription drug pricing, Biden omits any discussion of the “rock-solid deal” that the Obama administration cut with Big Pharma, so that pharmaceutical companies would run ads supporting Obamacare.

Likewise, Biden’s plan notes that “the concentration of market power in the hands of a few corporations is occurring throughout our health care system, and this lack of competition is driving up prices for consumers.” Yet it fails to note the cause of much of this consolidation: Obamacare encouraged hospitals to gobble up physician practices, and each other, to obtain clout in negotiations with insurers. Typically, after acknowledging government’s failures, Biden, like Sanders, prescribes yet more government as the solution.

In the leadup to debate on “repeal-and-replace” legislation several years ago, conservative Republicans said they did not want any replacement to become “Obamacare Lite.” Just as history often repeats itself, Democrats seem ready to embark on a similar intra-party debate. That’s because, no matter how much Biden wants to draw distinctions between his proposals and single payer, his plan looks suspiciously like “SandersCare Lite.”

This post was originally published at The Federalist.

Three Reasons You Won’t Keep Your Doctor Under Single Payer

Over Fourth of July week, liberal activists took solace in the results of a poll that they said demonstrates the popularity of a single-payer health system. The survey showed diminished support for a “‘Medicare for All’ [system] if it diminished the role of private insurers.” However, support rose by nearly ten points if pollsters described single payer as a system that “diminished the role of private insurers but allowed you to keep your preferred doctor and hospital.”

Staff for Sen. Bernie Sanders (I-VT) claimed the survey showed single payer “is wildly popular when you tell people what it would actually do.” That claim misses the mark on several levels. First, most individuals wouldn’t consider a 55 percent approval rating—the level of support for a single-payer plan that allows patients to keep their doctors—as evidence of a “wildly popular,” as opposed to mildly popular, policy.

More fundamentally, though, single payer has precious little to do with keeping one’s doctor. For at least three reasons, many patients will lose access to their preferred physicians and hospitals under a single-payer system.

‘Free Care’ Means People Will Demand More

Second, the Sanders legislation would virtually eliminate medical cost-sharing—deductibles, co-payments, and the like. As a result, individuals who currently have health insurance would use more care once it becomes “free.”

In their analysis of single-payer legislation, both the Rand Corporation and the liberal Urban Institute have estimated that induced demand would result in capacity constraints for health care supply. In other words, so many more people would clamor for “free” care that the system would not have enough doctors or facilities to treat them.

More Work, Less Pay

As I noted last year, single-payer supporters operate under the fanciful premise that doctors and hospitals will perform more procedures for less money. Nearly three-quarters of hospitals already lose money on their Medicare patients—and single payer would extend those Medicare reimbursement rates to all patients nationwide. A study earlier this year in the Journal of the American Medical Association (JAMA) concluded that a single-payer system linked to Medicare payment levels would reduce hospitals’ revenue by $151 billion annually.

More Soul-Crushing Regulations

The federal government has already caused physicians countless hours of paperwork and grief. Thanks to requirements regarding electronic health records introduced in President Obama’s “stimulus,” an emergency room physician makes an average of 4,000 clicks in one shift. Rather than practicing their craft and healing patients, physicians have become button-clicking automatons, forced to respond to Washington’s every whim and demand.

The combination of more work, less pay, and added government intrusion under single payer could cause many physicians to leave the profession. For instance, the electronic records requirements caused my mother’s longtime physician to retire—he didn’t want to spend all his time staring at a computer screen (and who can blame him).

Some physicians could instead eschew the single-payer route, offering their services on a cash basis to wealthy patients who can afford to opt-out of the government system (provided the government will permit them to do so). Still other individuals may make alternative career plans, abandoning medicine even before they begin their formal training.

Here’s hoping that the American people never get an opportunity to discover the fanciful nature of Sanders’s promise that you can keep your doctor and hospital under single payer.

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.

The Return of the Individual Mandate

Well, that didn’t last long. Fewer than six months after Congress effectively repealed Obamacare’s individual mandate—and more than six months before that change actually takes effect, in January next year—another liberal group released a plan to reinstate it. The proposal comes as part of the Urban Institute’s recently released “Healthy America” plan.

In the interests of full disclosure: I criticized Republicans for repealing the individual mandate as part of the tax reform bill last fall. I did so not because I support requiring Americans to buy health insurance—I don’t—but because Republicans need to go further, and repeal the federal insurance regulations that represent the heart of Obamacare and necessitated enacting the mandate in the first place.

Lipstick on an Unpopular Pig?

The Urban Institute plan tries to re-brand a federal requirement to purchase insurance by never even using the term “mandate” in its proposal. Instead, the document says that “uninsured people would lose a percentage of their standard deduction (or the equivalent for the itemized deduction) when they pay income taxes….Half the lost deduction amount could be refunded the following year if the person enrolls in coverage and maintains it for the next full plan year.”

But as the saying goes, if it looks like a mandate and functions like a mandate, it’s a mandate. The paper claims that taking away a “tax benefit…would be better received politically than the additional tax penalty” under Obamacare, but functionally, that provides a distinction without a difference. Even the Urban researchers call this “loss of a tax benefit” a “penalty” later in the paper, because that’s what it is: A penalty for remaining uninsured.

The paper even includes a chart highlighting the average tax for remaining uninsured by income under the proposal, which generally mimics the tax penalties the uninsured pay under Obamacare:

Other Components of the Plan

Unfortunately, the Urban Institute plan goes well beyond merely reinstating the individual mandate, albeit in a slightly different form. It also makes other major changes to the health care system that would entrench the role of the federal government in it. It would federalize Medicaid health insurance coverage by transferring Medicaid enrollees into exchanges, supplementing benefits for low-income children and individuals with disabilities, and requiring states to keep paying their current contributions into the system. (Long-term care coverage under Medicaid would continue unchanged.)

The exchanges would have a new government-run plan—the default option for low-income enrollees automatically enrolled into coverage—and options run by private insurers. However, all plans would cap reimbursement to doctors and hospitals at Medicare rates, making premiums more “affordable” by imposing price controls that would potentially pay providers at below-market levels. The plan also proposes to “save” on prescription drugs by extending Medicaid rebates (i.e., price controls) to additional individuals.

The Urban plan also proposes much richer health coverage subsidies, consistent with its earlier 2015 proposal. Specifically:

  • Individuals with incomes below the federal poverty level would not pay either premiums or cost-sharing;
  • Individuals with incomes below 138 percent of poverty (the threshold for Obamacare’s Medicaid expansion) would not pay premiums;
  • Premium subsidies would be linked to a plan paying 80 percent of expected health care costs (i.e., actuarial value), as opposed to a 70 percent actuarial value plan under Obamacare;
  • Individuals would have to pay less of their income in premiums than under Obamacare—for instance, an individual with income just under four times poverty would pay 8.5 percent of income in premiums, as opposed to 9.56 percent under Obamacare; and
  • Unlike Obamacare, which limits eligibility for subsidies to those with incomes under four times poverty, the Urban plan would limit premium payments to 8.5 percent of income at all income levels (i.e., including for those making more than four times poverty).

Moreover, “short-term and other private insurance plans that do not comply with Healthy America regulations (consistent with [Obamacare’s] regulatory framework” would be prohibited, including association health plans and other concepts the Trump administration has proposed to give Americans more flexible coverage options.

The Urban researchers admit their plan would require significant new revenues to pay for the new subsidies—an estimated $98 billion in the first year alone. The plan only briefly discusses options to pay for this new spending, but it admits that, even if Congress hikes the payroll tax by an additional percent, raising an estimated $823 billion over ten years, “other adjustments to excise and income taxes would be needed.”

Where the Plan Fits In

At the end of their paper, the Urban researchers include a helpful chart comparing the various liberal proposals for expanded government involvement in health care—lest anyone claim that the left hand doesn’t know what the far-left hand is doing. In general:

  • Elizabeth Warren (D-MA) introduced a bill that would not go as far as the Urban plan. It incorporates the subsidy changes Urban proposed, adds a government-run plan, and imposes other regulatory changes to the exchanges, but (unlike the Urban plan) retains the status quo for Medicaid;
  • The Center for American Progress’ “Medicare Extra” proposal, which I wrote about earlier this year, goes farther than the Urban plan, by eliminating Medicaid (which the Urban plan modifies) entirely, and including more robust auto-enrollment provisions, with “Medicare Extra” the default option for all Americans; and
  • The single-payer bill introduced by Sen. Bernie Sanders (I-VT) would go farthest of all, abolishing virtually all forms of insurance (including Medicare) and creating a single-payer health system.

So much for “If you like your plan, you can keep it.” For that matter, so much for “If you like your freedom, you can keep it.” Like it or not, the Left seems insistent on terrifying the American public with what Ronald Reagan viewed as the nine most effective words to do so: “I’m from the government and I’m here to help.”

This post was originally published at The Federalist.

More Liberal Scaremongering on Premiums

It didn’t get much notice at the time, given its release just prior to the massive, 2,232-page omnibus appropriations measure, but the Urban Institute issued a study designed largely, if not solely, for Democrats to engage in political scaremongering prior to the midterm elections this fall. Like other studies before it, the Urban paper omitted inconvenient truths that have made this year’s premium increases less drastic for consumers than they appear at first blush.

In fact, the Urban Institute authors ignored their own prior research while doing so, an explanation one can only chalk up to raw politics—i.e., the desire to show the greatest possible premium increases in political ads this fall, even though few (if any) individuals will pay them.

But nowhere in the recent Urban study did the researchers explicitly state the major implication of this selective loading of premiums. In most states, individuals who do not qualify for subsidies can avoid the “CSR surcharge” (i.e., the premium costs associated with the withdrawal of CSR funding) by either buying a non-silver plan, or buying a silver plan off the exchange.

As I previously noted, only in six states must unsubsidized individuals pay the costs associated with the withdrawal of CSRs. In the remaining 44 states and the District of Columbia, unsubsidized individuals can choose other plans to avoid the surcharge—and all fully informed, rational consumers would do so.

Given this unusual dynamic, the increase in silver, on-exchange premiums between 2017 and 2018 does reflect an increase in federal spending. Obamacare links premium subsidies to the cost of the second-lowest silver plan on the exchanges, meaning that federal spending on subsidies rose from the “CSR surcharge.” But it does not reflect what people paid out-of-pocket. In most cases, unsubsidized individuals could avoid the surcharge, and most presumably did just that.

The Urban Institute researchers know that most unsubsidized individuals can (and did) avoid the “CSR surcharge”—because they encouraged states to come up with this strategy in the first place. Their January 2016 paper about the withdrawal of CSR payments noted that, if those payments disappeared, unsubsidized individuals would be “strongly disincentivized” to purchase coverage from the exchanges, and would instead “enroll in silver plan coverage” outside the exchanges, where “plan premiums…would be significantly lower.”

Linda Blumberg, one of the authors of the prior study, also co-authored the paper released last month. She did not forget her prior work. In fact, she cited the January 2016 study in footnote six of the March 2018 paper. So why did the March 2018 work nowhere mention that most unsubsidized individuals could, and likely did, obtain cheaper coverage by buying other types of plans?

The obvious answer comes in the lead paragraph of a Politico story about the study: “Premiums for the most popular Obamacare plans skyrocketed by nearly a third this year…” Neither the study nor the Politico story mentioned that in most states, only subsidized individuals—for whom the federal government pays most of their premiums—purchased these plans, and that unsubsidized individuals could avoid these “skyrocketing” premiums by purchasing other coverage.

In other words, the Urban Institute “study” amounted to a political hit piece on Republicans. By coming up with the largest possible premium increases, even though few (if any) individuals actually paid these increases out-of-pocket, the Urban Institute gave Democrats fodder to use in campaign attack ads this fall. Given the lack of attention and consideration the Urban researchers paid to their own prior work, that seems the prime objective for the paper.

This post was originally published at The Federalist.

“Stability” Bill Will Not Reduce Premiums in 2019 Compared to 2018

A PDF version of this document is available online here.

Backers of Obamacare “stability” legislation claim it will lower premiums. However, most studies suggest that even after Congress spends tens of billions of dollars, premiums will still rise in 2019 compared to 2018. If the “stability” bill won’t deliver on its promise of lower rates, why enact such controversial legislation…?

CLAIM: “Oliver Wyman projected premium decreases…40% lower premiums…”

THE FACTS:
1.     Half of supposed premium decrease depends on states enacting their own reinsurance programs.

2.     Oliver Wyman’s own report admits most states will not get reinsurance programs enacted in time for 2019 open enrollment—less than eight months away.

3.     10% of supposed premium decrease comes from appropriation of cost-sharing reductions (CSRs).

4.     In all but six states in 2018, individuals can purchase plans with premiums unaffected by cancellation of CSR payments. Therefore, most unsubsidized enrollees will not see any premium reduction in 2019 if Congress appropriates CSR funds—because they never saw a premium increase to begin with.

5.     Does not consider impact of Association Health Plans (AHPs) or short-term plans. If either AHPs or short-term plans achieve sizable enrollment, they could siphon off healthy individuals from the Exchanges—raising premiums for those who remain.

REALITY:     Eliminating the effects of waivers most states won’t receive by year-end, and CSR payments that didn’t affect most unsubsidized enrollees to begin with, Oliver Wyman believes premiums in 2019 will decline only by about 10%. If health costs rise substantially, or short-term plans become popular, those modest premium decreases will disappear—and if both occur, individuals will likely face double-digit premium increases in 2019, even after the “stability” measure.

CLAIM: “CBO projected premium reductions…2019: Average 10% premium reduction…”

THE FACTS:
1.     Both CBO and the Trump Administration believe the elimination of the individual mandate penalty will raise premiums by roughly 10%—completely offsetting the effects of the “stability” bill next year.

2.     CBO has yet to analyze whether and how short-term plans and AHPs will raise Exchange premiums.

3.     While the Trump Administration thinks short-term plans will raise Exchange premiums only slightly—because a small number of people (100,000-200,000) will enroll in them—higher take-up of short-term plans could raise Exchange premiums substantially. The Urban Institute believes that 4.3 million individuals will enroll in short-term plans—and that this high enrollment in short-term plans (where they are offered) will raise Exchange premiums by 18.3 percent.

REALITY: At best CBO believes that the “stability” bill will mitigate the effects of eliminating the mandate penalty next year. But that makes premium increases for 2019 inevitable, and double-digit premium increases quite possible—even after the “stability” bill takes effect.

“Stability” Bill Likely Will Not Lower Premiums in 2019

In the debate over an Obamacare “stability” bill, advocates of such a measure contend that it will lower premiums, throwing around studies and numbers to make their case. Sen. Lamar Alexander (R-TN) released a handout earlier this week claiming that Oliver Wyman forecast a 40 percent reduction in premiums from a “stability” package, and that the Congressional Budget Office (CBO) gave preliminary estimates of a 10 percent premium reduction in 2019, and a 20 percent reduction in 2020 and 2021.

However, all these numbers avoid — wittingly or otherwise — answering the critical question: Premium reduction compared to what? Barack Obama ran into this problem when trying to sell Obamacare. In 2008, he said repeatedly that his health care plan would “cut” people’s premiums — and then, after signing the bill into law, tried to argue that when he had said “cut,” he really meant “slow the rate of increase.”

But would a “stability” bill actually prevent those premium increases for 2019, particularly for unsubsidized enrollees? (Federal subsidies insulate individuals with incomes under 400 percent of the poverty level — $100,400 for a family of four — from much of the effects of premium hikes.) Would premiums remain flat, or even decline, next year compared to 2018 rates? Based on the studies released to date, most indications suggest otherwise — which should give conservatives pause before embracing a measure that would further entrench Obamacare, making repeal that much less likely.

Factors Affecting Premiums For 2019

Over and above annual increases in medical costs, multiple unique factors will impact premiums for the coming year:

Cost-Sharing Reductions: President Trump’s October decision to stop Obamacare’s cost-sharing reduction (CSR) payments to insurers had a large theoretical impact — but in most states, little practical effect on unsubsidized enrollees. Estimates released prior to the President’s decision suggested that insurers would need to raise premiums for 2018 by roughly 20 percent to account for loss of the CSR payments.

An analysis of states’ decisions regarding CSRs shows that only six states applied the CSR charges to all health insurance plan rates—thereby forcing unsubsidized enrollees to pay higher premiums. Because comparatively few unsubsidized enrollees paid higher premiums due to the CSR decision, the inverse scenario applies: Few unsubsidized enrollees will receive any premium reduction from appropriating CSRs.

Individual Mandate Repeal: As I noted last fall, eliminating Obamacare’s individual mandate tax, while retaining its costly regulations, will put upward pressure on premiums — the only question is how much. Without getting taxed for not purchasing Obamacare-compliant insurance, some healthy individuals will drop coverage, raising average premiums for the remainder.

In its most recent estimate last November, the CBO stated that eliminating the tax would raise exchange premiums “by about 10 percent in most years of the decade.” The administration likewise believes that eliminating the mandate penalty will raise premiums by a similar amount. Its proposed rule on short-term health plans estimated an average monthly premium of $649 with the individual mandate penalty, and $714 without—an increase of $65 per month, or exactly 10 percent.

The administration’s proposed rule on short-term health insurance admitted that exchange premiums would rise as a result of healthy individuals choosing short-term coverage over exchange plans, but by very modest amounts. In the administration’s estimates, premiums would rise by only $2-4 per month for exchange coverage — far less than the $65 monthly estimated premium increase due to elimination of the mandate tax, as noted above. However, the administration’s estimates only assume that 100,000-200,000 individuals enroll in short-term coverage.

By contrast, the liberal Urban Institute estimated much higher take-up of short-term plans by healthy individuals, and therefore much greater premium increases for the sicker individuals who would remain in Obamacare-compliant coverage. According to Urban, 4.3 million individuals would enroll in short-term coverage — more than 20 times the administration’s highest estimate. Because of these healthy individuals migrating to short-term coverage, the Urban researchers assume much larger premium increases for Obamacare-compliant plans, averaging 18.3 percent in the 45 states (plus the District of Columbia) that currently allow the sale of short-term coverage.

The proposed regulatory action on short-term plans — which the administration hopes insurers will start selling by this fall — could have minimal impact on premiums, or lead to sizable premium increases. In general, however, the more that short-term plans succeed in attracting many (healthy) customers, the higher premiums will climb for the (sicker) individuals who maintain exchange coverage.

Premium Tax Suspension: In the January continuing resolution, Congress suspended Obamacare’s health insurance tax — currently in effect for 2018 — for 2019. An August 2017 study, paid for by health insurer UnitedHealthGroup and conducted by Oliver Wyman, found that the insurer tax would raise premiums by about 2.7 percent. Removing the tax next year would lower 2019 premiums by roughly the same amount.

Premium Estimates — Comparing 2018 And 2019

Given the above factors, will premiums go down in 2019 compared to their current 2018 levels? Based on the analyses conducted to date, most indicators suggest they will not.

Oliver Wyman: As I noted on Wednesday, the 40 percent headline figure in the Oliver Wyman study relies on an assumption that Oliver Wyman itself finds dubious. That premium reduction assumes that states apply for and receive a waiver to create their own reinsurance pool on top of the federal reinsurance funds. However, Oliver Wyman concedes that “states that have not already begun working on a waiver will be challenged to get [one] filed and approved under the current regulatory regime in time to impact 2019 premiums.”

The report continues: “In those states that are not able to obtain [a waiver]…we estimate that premium [sic] would decline by more than 20 percent across all metal levels. Those estimates include an average 10 percent reduction due to the funding of CSRs, with the remaining reduction coming from the reinsurance program.”

However, most individuals will NOT receive a 10 percent premium reduction in 2019 if Congress funds CSRs — because, as noted above, most unsubsidized individuals are not paying higher premiums in 2018 due to the non-funding of CSRs. Moreover, while Oliver Wyman said its modeling “reflects elimination of the mandate penalty,” it does not consider the impact of regulatory action on short-term plans or AHPs.

Therefore, the study conducted by Oliver Wyman — which frequently does work for the insurance industry — suggests that, at best, the “stability” package would reduce premiums in 2019 compared to current law for the average enrollee by 10 percent. However, would it actually reduce premiums compared to 2018 levels for the average enrollee? Only if one assumes that 1) health costs do not rise significantly and 2) few individuals enroll in short-term plans or AHPs. If either scenario occurs, a slight premium decrease could turn into a premium increase — and if both scenarios occur, a sizable increase at that.

Congressional Budget Office: Neither Alexander nor the CBO have released their full analysis of a “stability” package. However, according to Alexander’s characterization of the CBO score, the budget office assumes a more modest premium impact than Oliver Wyman — a 10 percent reduction in 2019, followed by a 20 percent premium reduction in 2020 and 2021. Like Oliver Wyman, the CBO likely believes that tight deadlines would make it difficult for the funds provided by the “stability” bill to lower premiums in time for the 2019 plan year. Unlike Oliver Wyman, however, the CBO does not take into account whether and how funding CSRs would lower premiums — because, as I have written previously, federal budget law requires the CBO to assume full funding for CSRs (and all other entitlements) when conducting its analyses.

As noted above, the CBO believes that eliminating the mandate penalty would raise premiums by roughly 10 percent. Put another way, then, in CBO’s estimation, the entire “stability” package would only cancel out the effect of eliminating the mandate penalty on premiums in 2019. If health costs rise — as they do every year — then premiums will rise in 2019. And if the short-term plans succeed in attracting many customers away from the exchanges, then premiums for Obamacare-compliant plans could rise substantially — by double digits — even after the “stability” package.

Conservatives have many good reasons to oppose this “stability” measure — budgetary gimmicks, potential federal funding of abortion coverage, Congress’ total lack of oversight for the bad decisions made by insurers and insurance commissioners, to name just a few. But the fact that the measure looks unlikely to achieve its central goal of lowering premiums seems the most damning indictment of the proposal — failing to solve its intended problem, while causing so many others.

This post was originally published at The Federalist.