Democrats’ Taxing Health Care Promises

July’s Democratic presidential debates left seasoned health policy professionals confused, struggling to understand both the candidates’ policies and the differences among them. But working families should find Democrats’ health care debate taxing for another reason. For all their vows that Americans can obtain unlimited “free” health care while only “the rich” will pay, the major candidates are writing out checks that will end up on middle class families’ tab.

In this debate, Bernie Sanders wins credit for candor, in the sense that he has dissembled less than his opponents. Admitting that his single-payer plan will require tax hikes, in April Sanders proposed a 4% income tax, along with a 7.5% payroll tax, among other revenue increases to fund his system.

Unfortunately for Sanders, however, the Committee for a Responsible Federal Budget believes the tax increases he has proposed to date will pay for only about half of the more than $30 trillion cost of his single-payer scheme. In that, the organization echoes experience from Sanders’ home state of Vermont. In 2014, Gov. Peter Shumlin abandoned efforts to enact a state-based single payer system, because the accompanying tax increases created “a risk of an economic shock.” Shumlin said single payer in Vermont would have required a 9.5% income tax, and an 11.5% payroll tax—far higher levels than Sanders has proposed.

While Sanders admits that the middle class will pay more taxes to fund single payer, both he and Elizabeth Warren argue that families will save overall, because the program would eliminate premiums, deductibles, and other forms of cost-sharing. Unfortunately, studies from across the political spectrum—from the conservative Heartland Institute to former Clinton Administration official Kenneth Thorpe—disagree.

In 2016, Thorpe concluded that 71% of households would pay more under a Sanders plan fully funded by tax increases. Low-income households would get hit even worse, with 85% of families on Medicaid paying more. Since then, Sanders has only increased the generosity of his single-payer proposal, meaning taxes on the middle class could rise even more than Thorpe originally estimated.

Perhaps to elide the tax landmines, Kamala Harris’ plan breaks with Warren and Sanders, delaying the move to a single payer system for a decade. She claims the delay “will lower the overall cost of the program”—but only until the program phases in fully. At that point, her pledge not to raise taxes on families making under $100,000 will prove unsustainable. But if Harris has her way, a 10-year delay until full implementation of single-payer could punt the tax problem to her successor.

As for Joe Biden, he has tried to portray himself as protecting middle class families from the tax hikes he calls inevitable under the other major contenders’ plans. But Biden has two problems.

First, Biden supports restoring Obamacare’s individual mandate penalty, which Republicans eliminated in 2017. The Supreme Court in 2012 dubbed the mandate a tax—and that tax happens to hit the middle class hard. The most recent IRS data show that in 2016, of the $3.6 billion in mandate penalties paid by American households, nearly 63% came from households with incomes of under $50,000, and more than 88% came from households with incomes below $100,000.

Second, as the Wall Street Journal reported back in July, Biden over the past two years deliberately utilized tax loopholes to avoid paying Obamacare taxes. By classifying more than $13 million in proceeds from books and speeches as profits from his corporations, rather than wage income, Joe and Jill Biden circumvented nearly $500,000 in self-employment taxes—taxes that fund Obamacare and Medicare.

Biden’s behavior, which multiple experts interviewed by the Journal called legally questionable, belies both his “Middle Class Joe” reputation and his support for Obamacare. Apparently, Biden supports Obamacare only if someone else will pay for it. But if a one-percenter like Joe Biden finds paying for the Affordable Care Act unaffordable for him, then whom would Biden hit to pay the $750 billion price tag of his Obamacare expansion efforts? Why, the middle class, of course.

Biden’s unwillingness to pay the taxes associated with an Obamacare law he purportedly wants to protect epitomizes Margaret Thatcher’s axiom that socialists eventually run out of other people’s money. At the rate he and his fellow candidates are racking up costly health care promises, that moment seems very near at hand.

This post was originally published at The Daily Wire.

Democrats Agree: Free Health Coverage for Undocumented Immigrants

If a picture is worth a thousand words, then three series of pictures, featuring Democrats discussing health benefits for those in this country illegally, speak volumes. First, Hillary Clinton in September 1993:

Finally, Democratic candidates for president last night:

Whereas Indiana Mayor Pete Buttigieg called coverage for illegal immigrants an “insurance program” and “not a hand out,” Clinton said in 1993—well before the most recent waves of migration—that “we do not want to do anything to encourage more illegal immigration into this country. We know now that too many people come in for medical care, as it is. We certainly don’t want them having the same benefits that American citizens are entitled to have.”

Likewise, whereas Joe Biden said “you cannot let people who are sick, no matter where they come from, no matter what their status, go uncovered,” the president whom he worked for promised the American people that “the reforms I’m proposing would not apply to those who are here illegally.” Granted, the promise had a major catch to it—Obamacare verifies citizenship but not identity, allowing people here illegally to obtain benefits using fraudulent documents—but at least he felt the need to make the pledge in the first place. No longer.

Ironically enough, even as all Democrats supported giving coverage to illegally present foreigners, the candidates seemed less united on whether, how, and from whom to take health insurance away from U.S. citizens. Only Sens. Kamala Harris and Bernie Sanders said they supported abolishing private health insurance, as Sanders’ single-payer bill would do (and as Sen. Elizabeth Warren and New York Mayor Bill de Blasio pledged on Wednesday evening). For Harris, it represents a return to her position of January, after fudging the issue in a follow-up interview with CNN last month.

As usual, Sanders made typically hyperbolic—and false—claims about his plan. He said that his bill would make health care a human right, even though it does no such thing. In truth, the legislation guarantees that individuals would have their bills paid for—but only if they can find a doctor or hospital willing to treat them.

While Sanders pledged that under his bill, individuals could go to whatever doctor or hospital they wished, such a promise has two main flaws. First, his bill does not—and arguably, the federal government cannot—force a given doctor to treat a given patient. Second, given the reimbursement reductions likely under single payer, many doctors could decide to leave the profession altogether.

Sanders’ home state provided a reality check during the debate. Candidates critical of single payer noted that Vermont had to abandon its dream of socialized medicine in 2014, when the tax increases needed to fund such a program proved too overwhelming.

Shumlin gave his fellow Democrats a valuable lesson. Based on the radical, and radically unaffordable, proposals discussed in this week’s debates—from single-payer health care, to coverage for undocumented immigrants, to “free” college and student loan forgiveness, and on and on—they seem hellbent on ignoring it.

This post was originally published at The Federalist.

CBO Tries But Fails to Defend Its Illegal Budget Gimmick

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

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

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

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

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

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

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

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

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

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

This post was originally published at The Federalist.

A “Grand Bargain” on Obamacare Repeal?

To know where you’re going, it helps to recognize where you’ve been. Examining the causes of Republicans’ legislative setbacks on health care—including last month’s dramatic failure of a “skinny” repeal bill on the Senate floor—provides the glimmer of a path forward for a legislative “repeal-and-replace” package, if they are bold enough to take it.

In both the House and the Senate, debate focused on a push-pull between two competing issues: The status of Medicaid expansion in the 31 states that accepted it, and what to do about Obamacare’s regulatory regime. During the spring and summer, congressional leaders attempted messy compromises on each issue, phasing out the higher federal match for Medicaid expansion populations over time, while crafting complex processes allowing states, insurers, or both to waive some—but not all—of Obamacare’s regulatory requirements.

A “grand bargain” in this vein would give Senate moderates a clear win on Medicaid expansion, while providing conservatives their desired outcome on Obamacare’s regulations. For this conservative at least, the regulations represent the heart of the law, prompting both its spending on exchange subsidies—to offset the higher premium costs from the regulatory mandates—and the taxes needed to fund that spending. Expelling the regulations from the federal statute books would represent a clear step towards the promise of repealing Obamacare “root and branch,” and return control of health insurance to the states, where it lay from 1947’s McCarran-Ferguson Act until Obamacare.

Federal Regulations Are Driving Up Health Costs

When coupled with structural reforms to Medicaid—a block grant or per capita caps—included in the House and Senate bills, repealing the federal regulations would enable the “laboratories of democracy” to reassert control over their health insurance markets and Medicaid programs. It would also contrast favorably with a recent proposal introduced by senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA). While Graham claims his plan would “empower each individual state to choose the path that works best for them,” in reality it would retain federal dictates regarding pre-existing conditions—the most costly of all the Obamacare mandates.

In a sad irony, some of the same senators who want Congress to respect their states’ decisions to expand Medicaid also want to dictate to other states—as the Graham-Cassidy plan does—how their insurance markets should function. But the true test of federalism applies not in the principle’s convenience, but in its inconvenience.

Yes, This Idea Is Imperfect

To be sure, even this attempted “grand bargain” includes noteworthy flaws. Retaining the enhanced Medicaid match encourages states to prioritize expansion populations over individuals with disabilities in traditional Medicaid, and may lure even more states to accept the expansion. Keeping the higher Medicaid spending levels would preclude repealing all of Obamacare’s tax increases. And the Senate parliamentarian may advise that repealing Obamacare’s regulations does not comport with the budget reconciliation process. But despite the obvious obstacles, lawmakers should seriously explore this option. After Republicans promised repeal for four straight election cycles, the American people deserve no less.

Throughout the repeal process, conservatives have bent over backwards to accommodate moderates’ shifting legislative goalposts. When moderates objected to passing the repeal legislation all but one of them voted for two years ago, conservatives helped construct a “repeal-and-replace” bill. When moderates wanted to retain the Medicaid expansion in their states—even though the 2015 repeal bill moderates voted for eliminated it entirely—conservatives agreed, albeit at the traditional match rates. And when Senate moderates complained, conservatives agreed to a longer phase-out of the higher match rate, despite justifiable fears that the phase-out would never occur.

Winston Churchill purportedly claimed that Americans will always do the right thing—once they have exhausted every other possibility. This “grand bargain” may not represent the “right” outcome, or the best outcome. But conservatives have exhausted many other possibilities in attempting to come to an agreement. Perhaps moderates will finally come to accept federalism—giving states a true choice over their insurance markets, rather than trying to dictate terms—as the solution to keeping their promise to the American people and repealing Obamacare.

This post was originally published at The Federalist.

How Bailing Out Insurers Leads to Single Payer

The bad news for Obamacare keeps on coming. Major health carriers are leaving insurance exchanges, and other insurance co-operatives the law created continue to fail, leaving tens of thousands without health coverage. Those on exchanges who somehow manage to hold on to their insurance will face a set of massive premium increases—which will hit millions of Americans weeks before the election.

Many on the Right believe Obamacare was deliberately designed to fail, and fear that we’re on a slippery slope toward single-payer. On the other side of the spectrum, the Left hopes conservatives’ fears—and liberals’ dreams—will be answered. But is either side right?

The reality is more nuanced than the rhetoric would suggest. Whether government runs all of health care is less material than whether government pays for all of health care. The latter will, sooner or later, lead to the former. That’s why the debate over bailing out Obamacare is so important. Ostensibly “private” health insurers want tens of billions of dollars in taxpayer-funded subsidies—because they claim these subsidies are the only thing standing between a government-run “public option” or a single-payer system.

But the action insurers argue will prevent a government-run system will in reality create one. If insurers get their way, and establish the principle that both they and Obamacare are too big to fail, we will have created a de facto government-run insurance system. Whether such system is run through a handful of heavily regulated, crony capitalist “private” insurers or government bureaucrats represents a comparatively trifling detail.

The Biggest Wolf Is Not the Closest

In considering the likelihood of single-payer health care, one analogy lies in the axiom that one should shoot the wolf outside one’s front door. Single-payer health care obviously represents the biggest wolf—but not the closest. While liberals no doubt want to create a single-payer health care system—Barack Obama has repeatedly said as much—they face a navigational problem: Can you get there from here?

The answer is no—at least not in one fell swoop. Creating a single-payer system would throw 177.5 million Americans off their employer-provided health insurance. That level of disruption would be orders of magnitude greater than the cancellation notices associated with the 2013 “like your plan” fiasco, which itself prompted President Obama to beat a hasty, albeit temporary, retreat from Obamacare’s mandates. Recall too that the high taxes needed to fund a statewide single-payer effort prompted Vermont—Vermont—to abandon its efforts two years ago.

Understanding the political obstacles associated with throwing half of Americans off their current health insurance, liberals’ next strategy has focused on creating a government-run health plan to “compete” with private insurers. Hillary Clinton endorsed this approach, and Democratic senators made a new push on the issue this month. When stories of premium spikes and plan cancellations hit the fan next month, liberals will inevitably claim that a government-run plan will solve all of Obamacare’s woes (although even some liberal analysts admit the law’s real problem is a product healthy people don’t want to buy).

Can the Left succeed at creating a government-run health plan? Probably not at the federal level. Liberals have noted that only one Democratic Senate candidate running this year references the so-called “public option” on his website. Thirteen Senate Democrats have yet to co-sponsor a resolution by Sen. Jeff Merkley (D-Oregon) calling for a government-run plan. Such legislation faces a certain dead-end as long as Republicans control at least one chamber of Congress. Given the failure to enact a government-run plan with a 60-vote majority in 2009, an uncertain future even under complete Democratic control.

What About Single-Payer Inside States?

What then of state efforts to create a government-run health plan? The Wall Street Journal featured a recent op-ed by Scott Gottlieb on this subject. Gottlieb notes that Section 1332 of Obamacare allows for states to create and submit innovation waivers—waivers that a Hillary Clinton administration would no doubt eagerly approve from states wanting to create government-run plans. He also rightly observes that the Obama administration has abused its authority to approve costly Medicaid waivers despite supposed requirements that these waivers not increase the deficit; a Clinton administration can be counted on to do the same.

But another element of the state innovation waiver program limits the Left’s ability to generate 50 government-run health plans. Section 1332(b)(2) requires states to enact a law “that provides for state actions under a waiver.” The requirement that legislation must accompany a state waiver application will likely limit a so-called “public option” to those states with unified Democratic control. Because Obamacare, and the 2010 and 2014 wave elections it helped spark, decimated the Democratic Party, Democrats currently hold unified control in only seven states.

Even at the state level, liberals will be hard-pressed to find many states in which to create their socialist experiment of a government-run health plan. In those few targets, health insurers and medical providers—remember that government-run health plans can only “lower” costs by arbitrarily restricting payments to doctors and hospitals—will make a powerful coalition for the Left to try and overcome. Also, in the largest state, California, the initiative process means that voters—and the television ads health-care interests will use to influence them—could ultimately decide the issue, one way or the other.

So if single-payer represents the biggest wolf, but not the one closest to the door, and government-run plans represent a closer wolf, but only a limited threat at present, what does represent the wolf at the door? Simple: the wolf in sheep’s clothing.

Too Big To Fail, Redux

The wolf in sheep’s clothing comes in the form of insurance industry lobbyists, who have been arguing to Republican staff that only making the insurance exchanges work will fend off calls for a government-run plan—or, worse, single-payer. They claim that extending and expanding the law’s current bailouts—specifically, risk corridors and reinsurance—can stabilize the market, and prevent further government intrusion.

Well, they would say that, wouldn’t they. But examining the logic reveals its hollowness: If Republicans pass bad policy now, they can fend off even worse policy later. There is of course another heretofore unknown concept of conservative Republicans choosing not to pass bad policy at all.

That’s why comments suggesting that at least some Republicans believe Obamacare must be fixed no matter who is elected president on November 8 are so damaging. That premise that Congress must do something because Obamacare and its exchanges are “too big to fail” means health insurers are likewise “too big to fail.” If this construct prevails, Congress will do whatever it takes for the insurers to stay in the marketplace; if that means turning on the bailout taps again, so be it.

But once health insurers have a clear backstop from the federal government, they will take additional risk. Insurers have said so themselves. In documents provided to Congress, carriers admitted they under-priced premiums in the law’s first three years precisely because they believed they had an unlimited tap on the federal fisc to cushion their losses. Republican efforts in Congress to rein in that bailout spigot have met furious lobbying by health insurers—and attempts by the Obama administration to strike a corrupt bargain circumventing Congress’ restrictions.

Efforts to end the bailouts and claw back as much money as possible to taxpayers would shoot the wolf at the door. Giving insurers more by way of bailout funds—socializing their risk—will only encourage them to take additional risk, exacerbating a boom-and-bust cycle that will inevitably result in a federal takeover of all that risk. When the federal government provides the risk backstop, you have a government-run system, regardless of who administers it.

While the insurance industry may view more bailouts as their salvation, Obamacare’s version of TARP looks more like a TRAP. By socializing losses, purportedly to prevent single-payer health care, creating a permanent insurer bailout fund will effectively create one. While remaining mindful of the other wolves lurking, Congress should focus foremost on eliminating the one at its threshold: Undo the Obamacare bailouts, and prove this law is not too big to fail.

This post was originally published at The Federalist.

More on State Flexibility

Three interesting points on the ongoing debate over states’ Medicaid budgets and flexibility under the health law:

First, liberal commentators in the past few days have made striking admissions that the President’s proposal for state waivers does NOT give states the flexibility to enact conservative health care solutions.  This morning Jonathan Cohn wrote a column including this line: “[Senator] Hatch…and other critics of Obama’s proposal have a point: It wouldn’t allow them to enact the sorts of health care reforms they would prefer.  Likewise, the Post’s Ezra Klein notes that “conservatives can’t do any better – at least not under these rules.”  Both columnists go on to say this lack of flexibility is a good thing – defending the richer benefit mandates that will raise the price of individual insurance by $2100 per family, according to the Congressional Budget Office.  Cohn also goes on to promote a single-payer health care system as a “more efficient” plan that could receive a waiver – “not the sort of health care alternative conservatives have in mind.”  Mind you, some (certainly not all) conservatives might actually support a state like Vermont that seeks to enact a single-payer alternative – so long as states like Indiana or Utah have the flexibility to enact THEIR alternative without meeting new federal requirements.  But Cohn and Klein both admit that the “flexibility” in the President’s proposal only goes one way – towards more government involvement and regulation.

Second, does anyone remember the debate over the Basic Health plan during the Finance Committee markup in October 2009?  You may recall that Sen. Cantwell offered an amendment to the Finance bill – which later became Section 1331 of the statute – allowing states to receive funding to establish programs similar to Washington state’s Basic Health plan.  Well, a New York Times article this morning reported that “Gov. Christine Gregoire of Washington, a Democrat, recently removed 17,500 adults covered under Basic Health.”  It’s an interesting admission that what Democrats once viewed as a de facto government-run plan hasn’t succeeded in controlling costs – either that, or states need more flexibility in managing their health care programs during times of tight budgets (or both).

Finally, if you haven’t had a chance to read the testimony from yesterday’s governors’ hearing yesterday morning, it’s worth taking a few minutes to do so.  Governors Barbour and Herbert both gave specific examples of how they are attempting to innovate within their Medicaid programs, and how Washington bureaucratic requirements – such as Utah’s eight-month-long expedition to get approval to send e-mails to beneficiaries – frequently get in the way.  (Other coverage of the hearing – and the joint Finance/Energy and Commerce report on states’ $118 billion in Medicaid costs – can be found in articles by the New York Times and Washington Post.)

Vermont Finds Its High-Risk Pool All Wet

While most of the news media was focused on the release of the Medicare trustees report last Thursday, the state of Vermont made an interesting admission regarding its high-risk pool program.  Specifically, the state sent HHS a letter asking the federal government to establish a pool in Vermont.  State officials were forced to revert to the federal pool program after concluding that a state-run risk pool in Vermont “could not be operational until at least July 1, 2011.”

Unfortunately, Vermont’s letter does not represent the first difficulty in implementing the risk pool program created under the health care law.  HHS did not meet the deadline for starting the risk pool established in statute, and state implementation difficulties such as those in Vermont could keep states from starting their programs until the fall (or later).  Moreover, the Congressional Budget Office found that the program’s $5 billion funding level will not be enough to meet demand, and could result in up to 500,000 people with pre-existing conditions being denied access.

Republicans support high-risk pool programs – but support implementing and funding them properly – because coverage for individuals with pre-existing conditions should not take a back seat to other dubious spending priorities in the Democrat health care law, like backroom deals and a new $15 billion slush fund for jungle gyms and other pet projects.

“The Check’s in the Mail” — Now Send It Back!

Politico has an article this morning regarding the “doughnut hole” rebate checks being sent to seniors: “No sooner than the Administration dropped the first batch of $250 Medicare rebate checks in the mail, they have already run into their first snafu.” Specifically, the state of Vermont’s low-income program – which provides “doughnut hole” coverage to 2,800 seniors – is asking those beneficiaries to send their rebate checks to the state government. So either some Vermont seniors will be provided with a $250 check at federal taxpayers’ expense to cover the cost of a benefit they’re already receiving from the state, or the Administration will once again have over-promised and under-delivered on the “benefits” provided by their new health law.

While the Administration and Vermont officials continue arguing over who will receive the $250 checks – with low-income seniors stuck in the middle – it’s once again worth asking: How does any of this bureaucratic wrangling constitute “reform?”

President Obama’s Health Care Proposals Make a Bad Senate Bill Worse

The White House today released its own health care “proposal” in the form of a series of changes to the 2,733 page legislation (H.R. 3590) that passed the Senate in December.[i] While the White House claims the changes “improve” on the House and Senate-passed legislation, in reality many of the changes proposed would only exacerbate the flaws in the current bills:

Rising Costs—and More New Federal Spending. Even without an official budgetary score, the Administration admits that its proposed changes would cost at least $950 billion—nearly $100 billion more than the Senate-passed bill.[ii] Actuaries at the Centers for Medicare and Medicaid Services (CMS) have already confirmed that the Senate bill would raise, not lower, health care costs by hundreds of billions in its first 10 years alone.[iii] The White House proposals—increasing health insurance subsidies, an additional $1 billion for new federal bureaucracies, and other changes adding to the cost of the Senate legislation—would raise both overall health care spending and the related federal share.

Higher Premiums. The Congressional Budget Office has already confirmed that the Senate bill would raise individual health insurance premiums by an average $2,100 for every family, but the President’s proposal would likely raise that number even higher. The White House proposal would raise still further the $101 billion in higher taxes on drug manufacturers and insurers included in H.R. 3590—taxes CBO concluded “would be largely passed through to consumers in the form of higher premiums for private coverage.”[iv] Moreover, the White House proposes to decrease the tax penalty for non-compliance with the health insurance mandate below the $750 tax in the Senate legislation. Experience in Massachusetts—the only state with an individual mandate—strongly suggests that many healthy people would rather pay the nominal tax than buy costly coverage, leaving insurance companies with a pool of sick, costly enrollees.[v]  As a result of this insurance “death spiral,” premiums would rise quickly, chasing off healthy customers and leading to yet another spike in premiums.

Secret Deals. While the proposal purports to remove the “Nebraska FMAP provision” that saw 49 other states funding Nebraska’s Medicaid largesse (known as the “Cornhusker Kickback”), it does not address other deals negotiated in the Senate legislation—including the deals negotiated for Louisiana (Section 2006), Massachusetts (Section 10201), and Vermont (Section 10201) with respect to their Medicaid programs. The proposal maintains the controversial “Gator Aid” provision (Section 3201) of the Senate bill that shields certain Floridians from Medicare Advantage cuts. The proposal also retains a special tax benefit for Blue Cross/Blue Shield of Michigan (Section 10905), even though a Department of Health and Human Services report released just last week called the carrier’s 2009 rate increases “disturbing”—proving that backroom deals with fellow Democrats can overcome the President’s heated rhetoric against insurance companies.[vi]

Dropped Coverage. The proposal would impose costly new mandates on all health insurance plans—including so-called “grandfathered” plans—beginning in 2014. These mandates would raise premiums for individuals and businesses in the same way that CBO asserted the Senate bill would increase premiums in the individual market by at least 10 percent.[vii] As a result, millions of individuals would pay more for their health coverage, or could lose it entirely, breaking the President’s campaign promise that “You will not have to change [health insurance] plans. For those who have insurance now, nothing will change under the Obama plan—except that you will pay less.”[viii]

More Killed Jobs. The White House proposed a near tripling of the “fair share” penalty for employers included in the Senate-passed bill from $750 to $2,000—creating an even higher tax on jobs for companies that cannot afford to offer health coverage. The proposal also indicates that the cost of changes to the “Cadillac tax” will be paid for by a further unprecedented expansion of the Medicare payroll tax to include non-wage income like dividends and capital gains, imposing a new 2.9 percent levy on this income.  The higher taxes on capital formation needed to fund the proposal’s changes could force firms to lower wages, delay hiring, or even lay people off.[ix] Both these changes would reduce wages for current employees and destroy new jobs at a time when businesses are reluctant to hire.

Unfunded Mandates. The proposal still requires states that cannot afford their current Medicaid programs to contribute tens of billions more to fund new coverage expansions beginning in 2018. Governors in both parties have already voiced significant concerns about what Tennessee Democratic Gov. Phil Bredesen termed “the mother of all unfunded mandates” being imposed upon states.[x]   As a result of the added restrictions in Democrats’ proposals, the head of Washington State’s Medicaid program believes that states facing severe financial distress may say, “I have to get out of the Medicaid program altogether.”[xi]

Smoke and Mirrors Accounting. While the proposal claims that the increases in the Medicare payroll tax outlined above would be devoted to the Medicare trust funds, the CBO has already stated that such budgetary gimmicks “would not enhance the ability of the government to pay for future Medicare benefits.”[xii] In other words, funds from proposed Medicare savings and new Medicare-based taxes would be used to finance new health care entitlements.

New Bureaucracy. The Senate bill already includes language (page 41) requiring state exchanges to examine “excessive or unjustified [insurance] premium increases.” But the White House would go further, by establishing a new federal bureaucracy in the form of an unelected board to impose government price controls and micro-manage health insurance premiums.

 

[i] White House plan available at http://www.whitehouse.gov/sites/default/files/summary-presidents-proposal.pdf; Senate-passed bill text available at http://www.opencongress.org/bill/111-h3590/text.

[ii] “Obama Releases New Overhaul Plan,” CongressDaily PM February 22, 2010, http://www.nationaljournal.com/congressdaily/hcp_20100222_2715.php.

[iii] CMS Office of the Actuary analysis of H.R. 3590 as passed the Senate, January 8, 2010, http://www.politico.com/static/PPM130_oact_memorandum_on_senate_bill_as_passed_01-08-09.html.

[iv] Congressional Budget Office, Letter to the Honorable Evan Bayh, November 30, 2009, http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf.

[v] “The Massachusetts Health Mess,” Wall Street Journal July 11, 2009, http://online.wsj.com/article/SB124726287099225209.html.

[vi] White House Office of Health Reform, report on insurance company practices, February 2010, http://www.healthreform.gov/reports/insuranceprospers/insuranceprofits.pdf.

[vii] CBO Letter to Honorable Evan Bayh.

[viii] BarackObama.com, “Background Questions and Answers on Health Care Plan,” http://www.barackobama.com/pdf/Obama08_HealthcareFAQ.pdf.

[ix] See for example the Heritage Foundation, “Economic Effects of Increasing the Tax Rates on Capital Gains and Dividends,” April 2008, and the Treasury Department, “A Dynamic Analysis of Permanent Extension of the President’s Tax Relief,” July 2006.

[x] Quoted in “Governors Fear Medicaid Costs in Health Plan,” New York Times July 19, 2009, http://www.nytimes.com/2009/07/20/health/policy/20health.html?scp=2&sq=medicaid&st=cse.

[xi] Quoted in “Governors Fear Added Costs in Health Care Overhaul,” New York Times August 6, 2009, http://www.nytimes.com/2009/08/07/business/07medicaid.html?scp=1&sq=krauss&st=cse.

[xii] Congressional Budget Office, Letter to the Honorable Jeff Sessions, January 22, 2010, http://www.cbo.gov/ftpdocs/110xx/doc11005/01-22-HI_Fund.pdf.

Rep. Gingrey Op-Ed: Government-Run Health Plan Would Backfire, Making “Public Option” the Only One

Former Democratic National Committee Chairman Howard Dean has recently inserted himself into the debate on health reform, creating a website and collecting signatures on a petition calling for a “public option” as part of any health reform bill. The action is unsurprising from an individual who previously called President Obama’s healthcare reform plan “perfect” and stated that “it’s ridiculous to say care would be inferior” in the government-run plan. But even as Governor Dean attempts to attract support for government-run healthcare, it’s worth pointing out that the facts—not to mention his own personal experience—don’t mesh with his rhetoric.

As Vermont’s governor, Dean aggressively pursued expansions of government-run health insurance—and bragged that doing so “was very cheap to do.” Unfortunately for beneficiaries on state-run Medicaid and children’s health insurance, that “cheap” coverage often came at a very steep price. Low reimbursement rates mean that few doctors actually participate in the government-run plan, so patients can’t see their personal physician—and may not be able to see any physician when they need one.

In Vermont, one of those physicians whom Medicaid beneficiaries couldn’t visit was Judith Steinberg—Howard Dean’s wife. In 1998, low reimbursement rates—coupled with the impact of additional regulations her husband signed into law—prompted Dr. Steinberg to end participation in the state’s largest Medicaid-managed care program. As a result, the residents of Shelburne in Vermont’s largest Medicaid plan lost access to the only primary care provider in town who would accept their insurance.

I don’t fault Dr. Steinberg for her decision—it may well have been the only rational business decision for her to make. But for Governor Dean to claim that a government-run plan won’t be “inferior” is to ignore his wife’s experience, and that of the many beneficiaries who lost access to their physician due to Medicaid bureaucracy and poor coverage. My fear is that creating a government-run health insurance plan wouldn’t guarantee quality care by physicians—in fact, it will not guarantee care at all.

The quality of care in a government-run health plan may seem irrelevant to those individuals who are happy with the coverage they currently have—after all, President Obama promised during his campaign that, “If you like the plan you have, you can keep it.” But most individuals don’t really have their own health coverage—they get it from their employers. And if the coverage provided in the government-run plan is cheaper than what employers are paying now, logic suggests that employers will drop their current plans and place their workers in the government plan.

Estimates from independent actuaries at the Lewin Group suggest that well over half of all Americans currently with employer-sponsored health coverage—nearly 120 million individuals—would lose their current coverage due to the creation of a government-run health plan. And the change in coverage would not be a “choice”—according to Lewin studies, employers would drop their plan options, dumping employees into the government-run health plan to save money.

So the end result of the “perfect” plan supported by Governor Dean would be most people losing the coverage they have, while ending up on a government-run plan that dominates the healthcare marketplace. Physicians would be forced to accept the government’s low reimbursement rates—but my experience, to say nothing of Dr. Steinberg’s, strongly suggests that many will not. Some baby boomer doctors may view a move to government-run health insurance as a reason for them to take early retirement. Some physicians may refuse all insurance entirely, relying solely on a “cash-and-carry” approach to treating patients. Other physicians may be forced to lay off staff to compensate for a sharp drop-off in income. And other would-be physicians may decide not to practice at all—forsaking medical school for other careers that could be more rewarding and less bureaucratic than government-dictated medicine.

Republicans believe that a government-run health plan that doesn’t guarantee access to care—like the Medicaid program in Governor Dean’s hometown—isn’t real coverage at all. That’s why House Republicans have formed a working group, on which I sit, to develop solutions that will expand access to affordable, quality healthcare. Our working group’s proposals will keep doctors and patients, not government bureaucrats, at the center of healthcare.

Governor Dean may claim that a government-run health plan would not provide “inferior” healthcare, but the citizens of his hometown—and even his wife—may disagree. Republicans believe that Americans deserve better. And we look forward to working to achieve that aim.

This post was originally published at US News.