Tag: aca

Harvard Study of CBO Reports Says Nothing New or Interesting about King v. Burwell

Vox’s Sarah Kliff reports that Harvard University’s Theda Skocpol has produced a study purporting to show Congress intended for the Patient Protection and Affordable Care Act (PPACA) to authorize health-insurance subsidies through exchanges established by the federal government—even though the statute expressly and repeatedly says those subsidies are available only “through an Exchange established by the State.” Whether the PPACA authorizes those subsidies in the 36 states with federal exchanges is the question presented in King v. Burwell. The Supreme Court will hear oral arguments in King on March 4, with a ruling expected by June. Unfortunately for the administration and its supporters, Skocpol offers nothing either new or that supports the notion that Congress intended something other than what it expressly said in the statute.

What evidence does Skocpol claim to have found in support of her counter-textual interpretation of congressional intent? She combs through 68 analyses issued by the Congressional Budget Office during 2009 and 2010. She finds that in none of those reports did the CBO entertain the idea that the PPACA’s exchange subsidies might be available in some states but not others. She interprets this as both “excellent evidence” and “the best objective evidence we have that no one in Congress considered premium subsidies restricted to certain states to be either possible or desirable.”

Yeah, about that.

An alert Vox reader already informed Kliff that the claim that CBO never considered the possibility of exchange subsidies in some states but not others isn’t exactly true. The comprehensive health care bill approved by Democrats on the Senate’s Health, Education, Labor, and Pensions (HELP) Committee in 2009 (S. 1679) would have given states four years to establish exchanges themselves, after which point the federal government would establish an exchange. As my partner-in-crime-fighting Jonathan Adler and I write in an amicus brief filed with the Supreme Court in King:

S. 1679 asked each state to adopt certain health insurance regulations, and either establish an Exchange itself or ask the federal government to establish one “in” the state… S. 1679 withheld Exchange subsidies, as well as many of its insurance regulations, for up to four years until the state complied.

The CBO scored S. 1679 assuming that some states would establish exchanges early and some would not. Thus the agency’s cost projections assumed that exchange subsidies would be available in some states but not in others. So we’ve already got a problem with Skocpol’s analysis.

Obamacare’s Exchange Subsidies Are So Essential, People Are Turning Them Down

According to U.S. News & World Report

[B]rokers say they do hear from clients who are eligible for subsidies – which are based on household income and not assets – but want no part of them. Health officials have been boasting that 6.6 million people have enrolled in health coverage through state or federal marketplaces created under the Affordable Care Act, but in sharp contrast stands a small group of Americans who say they want nothing to do with the plans, even if they would save money. Their reasons vary: Some are protesting Obamacare, while others simply feel it’s unethical to accept taxpayer dollars to pay for health insurance…

For [Kansas City resident Grace] Brewer, buying a plan on her own would mean she would not have enough to pay for housing, she says, so she chose not to be insured this year and will have to pay a penalty in her 2016 tax filing that is likely to be 2 percent of her income. She has no dependents, is healthy, does not use prescriptions and says she has been careful about her health choices, not overusing medical care.

“I am frustrated. I am angry. And I say ‘no’ to the exchanges,” she says.

Some people are turning down the subsidies because they don’t need them:

Complicating the ethical question is that some people who qualify for subsidies based on their income could afford to pay their own way. “There is no question that we are enrolling people through these programs who would otherwise be considered middle-class or even affluent,” says Ed Haislmaier, a senior research fellow for health policy studies at the right-leaning Heritage Foundation think tank. “We are seeing people with enrollment in these programs that have significant assets, but for whatever reason – usually a temporary reason – fall below the income line.” 

Those reasons could range from early retirement to a midcareer job change. But whatever the case, some of those who are turning down subsidies are aware others are gaming the system, and they think it’s wrong.

“I won’t be a part of it,” Brewer says. “I don’t think it’s right. I don’t think it’s ethical, but the system has gotten so complicated that people can take advantage of those things.”…

The fact that the subsidies are causing controversy among the very people they’re intended to help is “evidence that the government doesn’t do charity very well,” says Michael Cannon, director of health policy studies at the libertarian Cato Institute think tank. 

“Prior to Obamacare, the federal government was subsidizing all sorts of people who did not need health insurance subsidies,” he adds, referring to services like the Children’s Health Insurance Program, Medicaid and Medicare, the government’s health program for seniors. “With Obamacare, we are subsidizing even more people who don’t need assistance.”

Something to keep in mind when contemplating the impact of King v. Burwell.

Nine TEN! Questions on the House Vote to Tweak ObamaCare’s Employer Mandate

Tomorrow, the Republican-controlled House of Representatives will vote on a measure that would alter the definition of full-time work, for purposes of the Patient Protection and Affordable Care Act’s employer mandate, from 30 hours per week to 40 hours per week. The measure is likely to pass. The House approved a similar measure last Congress, but it never went anywhere in the Senate, which was then under Democratic control. Now that Republicans have a majority in the Senate, there’s a chance the measure could clear both chambers of Congress. The president threatens a veto. Yuval Levin writes this change “seems likely to be worse than doing nothing.”

I have a few questions about this supposed threat to ObamaCare:

  1. This legislation would reduce the burden of ObamaCare’s employer mandatem but it would also increase government spending by making more workers eligible for health-insurance subsidies through ObamaCare’s Exchanges. How is that a policy victory?
  2. The legislation would therefore shift part of ObamaCare’s cost from an organized and influential interest group (employers) to a disorganized and less-influential interest group (taxpayers). How is that strategically smart?
  3. The legislation would make ObamaCare more tolerable for an organized and influential interest group (again, employers), thereby reducing their incentive to lobby for full repeal. How is that strategically smart?
  4. House Republicans say they are committed to repealing ObamaCare entirely. If so, why is this bill, rather than a full-repeal bill, the first item on their agenda? 
  5. House Republicans say this bill will show they can govern. But they also acknowledge the president will veto it. How is that governing?
  6. This legislation would merely lessen the burden of the employer mandate, and only for some employers. By June, however, the Supreme Court could completely invalidate employer-mandate penalties for all employers across 36 states. (See King v. Burwell.) How is this legislation a wise use of Congress’ time, when a Supreme Court ruling could go much farther in just a few months?
  7. A King ruling could also invalidate Exchange subsidies in 36 states, thereby exposing millions of Americans to the full cost of ObamaCare’s hidden taxes. That would give Congress more leverage than ever before to reopen and repeal the law. With this legislation, House Republicans are playing small ball with no leverage. How is that strategically smart?
  8. If enacted, this legislation would actually reduce the leverage a King ruling would give Congress to reopen and repeal ObamaCare. How is that strategically smart?
  9. The president has said he would veto this legislation. Given the above, should Republicans believe him?

Note that many of these questions also apply to repeal of the employer mandate before a King ruling, and sometimes after.

Update: I forgot a question. (Ten questions!)

10. This legislation would repeal a perverse incentive for employers to cut workers’ hours from just above to below 30 hours per week. It would replace that perverse incentive with a perverse incentive to cut the hours of other workers from just above to below 40 hours per week. Those other workers would complain that Republicans just made ObamaCare worse for them. How is that a political win, or strategically smart?

(Cross-posted at Darwin’s Fool.)

Is the Faculty of Harvard University Irrational?

As an irony junkie, this New York Times article on the outrage among Harvard’s faculty that they should face greater cost-sharing in their health benefits – and the incredulity of Harvard’s health economists at their colleagues’ reactions – is one of the most wonderful things I have read in the course of my career. And it reminded me of another Ivy League health economist: Princeton health economist Uwe Reinhardt.

It has long been one of Reinhardt’s hobby horses that “the American public’s idea of ‘common sense’ in health care” is fundamentally irrational:

To be responsive, then, to the “simple common sense” of the American people, any proposed health reform must not reduce the revenue of hospitals, lest some neighborhood hospital may have to close; or of doctors, lest some doctors might refuse to see patients; or of the manufacturers of health products, lest they are unable to innovate; or of anyone on the supply side of the health sector, lest they go out of business and have to lay off employees.

At the same time, the “simple common sense” of the American people dictates that any health reform that fails to bend down the growth curve of future health spending — the current jargon for controlling health spending better — is unacceptable, too.

At the time Reinhardt penned this particular expression of his exasperation (July 2009), I noted that the irrationality he decries is a direct result of policies he and other left-leaning health reformers have enacted into law:

The [explanation] is actually pretty simple: government has given us a health sector where everyone is spending someone else’s money.  In such an economy, individuals can make irrational demands (cut spending — but don’t reduce my access to care!) because they don’t bear the cost of their irrationality.

Emphasis added. People who pay for their own consumption don’t have the luxury of being able to pretend that tradeoffs don’t exist. Walk into a BMW dealership and announce, “I want a 7-series at Hyundai prices!”, and the dealer will laugh at you. When Medicare enrollees do the same thing – Keep Your Government Hands Off My Medicare! – the people who run Medicare praise and court them.

The seeds of such irrationality can also be seen in the case of Harvard University or any other employer-sponsored health plan, where the federal government imposes stiff tax penalties on anyone who does not (1) surrender $5,000 or $11,000 of their income to their employer and (2) let their employer use that money to select their health plan. Since this goverment policy means that workers don’t control that portion of their compensation, and don’t perceive the direct and negative relationship that employer-provided health insurance has on their wages (partly because they can’t get that money back by declining health benefits), workers end up demanding mutually incompatible things: comprehensive health-insurance coverage that doesn’t cost them anything. If that seems irrational, it is because, as I put it in that 2009 blog post, “Socialized Medicine Socializes the Cost of Irrationality, Too.”

Now that the Smartest People In The Universe – the faculty at Harvard University, naturally – are displaying the same behavior as the supposedly irrational American public, would Reinhardt still describe that behavior as irrational? Or is it Reinhardt and like-minded health economists who are irrational for expecting the lab mice to behave some other way? 

Senate Leaders Demand Treasury, HHS Inform Consumers About Risks Of HealthCare.gov Coverage

The Obama administration is boasting that 2.5 million Americans have selected health insurance plans for 2015 through the Exchanges it operates in 36 states under the Patient Protection and Affordable Care Act, and that they are well on their way to enrolling 9.1 million Americans in Exchange coverage next year. But there’s a problem. The administration is not warning ObamaCare enrollees about significant risks associated with their coverage. By mid-2015, 5 million HealthCare.gov enrollees could see their tax liabilities increase by thousands of dollars. Their premiums could increase by 300 percent or more. Their health plans could be cancelled without any replacement plans available. Today, the U.S. Senate leadership – incoming Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX), Conference Chairman John Thune (R-SD), Policy Committee Chairman John Barrasso (R-WY), and Conference Vice Chairman Roy Blunt (R-MO) – wrote Treasury Secretary Jacob J. Lew and Health and Human Services Secretary Sylvia M. Burwell to demand the administration inform consumers about those risks.

First, some background.

  • The PPACA directs states to establish health-insurance Exchanges and requires the federal government to establish Exchanges in states that fail to do so.
  • The statute authorizes subsidies (nominally, “tax credits”) to certain taxpayers who purchase Exchange coverage. Those subsidies transfer much of the cost of ObamaCare’s many regulations and  mandates from the premium payer to the taxpayer. For the average recipient, Exchange subsidies cover 76 percent of their premium.
  • But there’s a catch. The law only authorizes those subsidies “through an Exchange established by the State.” The PPACA nowhere authorizes subsidies through federally established Exchanges. This makes the law’s Exchanges operate like its Medicaid expansion: if states cooperate with implementation, their residents get subsidies; if not, their residents get no subsidies.
  • Confounding expectations, 36 states refused or otherwise failed to establish Exchanges. This should have meant that Exchange subsidies would not be available in two-thirds of the country, and that many more Americans would face the full cost of the PPACA’s very expensive coverage.
  • Yet the Obama administration unilaterally decided to offer Exchange subsidies through federal Exchanges despite the lack of any statutory authorization. Because those (illegal) subsidies trigger (illegal) penalties against both individuals and employers under the PPACA’s mandates, the administration soon found itself in court.
  • Two federal courts have found the subsidies the administration is issuing to 5 million enrollees through HealthCare.gov are illegal. The Supreme Court has agreed to resolve the issue. It has granted certiorari in King v. Burwell. Oral arguments will likely occur in February or March, with a ruling due by June.
  • If the Supreme Court agrees with those lower courts that the subsidies the administration is issuing through HealthCare.gov are illegal, the repercussions for enrollees could be significant. Their subsidies would disappear. The PPACA would require them to repay the IRS whatever subsidies they already received in 2015 and 2014, which could top $10,000 for many enrollees near the poverty level. Their insurance payments would quadruple, on average. Households near the poverty level would see even larger increases. Their plans could be cancelled, and they may not be able to find replacement coverage.
  • The Obama administration knows it is exposing HealthCare.gov enrollees to these risks. But it is not telling them.

Grubergate, the Mini-Series

Statement on Supreme Court Granting Cert in King v. Burwell

I applaud the Supreme Court’s decision to grant certiorari in King v. Burwell.

Since January, the Obama administration has been spending billions of unauthorized federal dollars, and subjecting nearly 60 million Americans to unauthorized taxes, all to hide the full cost of the Patient Protection and Affordable Care Act, or ObamaCare. The administration’s actions have not only violated the law and caused massive economic disruption, they have also subverted the democratic process. The plaintiffs in Pruitt v. BurwellHalbig v. Burwell, King v. Burwell, and Indiana v. IRS seek to put an end to those unlawful taxes and spending.

The Supreme Court’s decision is a rebuke to the Obama administration and its defenders, who dismissed as frivolous the plaintiffs’ efforts to defend their right not to be taxed without congressional authorization.

It is essential that these cases receive expedited resolution, if only to eliminate the uncertainty currently facing states, employers, insurers, and taxpayers.

Most important, these cases deserve expedited consideration because only they can bring an end to the greatest domestic-policy scandal of this administration.

Click here for reference materials on these cases, including all court filings and judicial opinions. Click here for news and opinion coverage of these cases.