Tag: big government

Laszewski on ObamaCare: ‘Get Ready for Some Startling Rate Increases’

The invaluable Robert Laszweski:

The Affordable Care Act: Ten Months to Launch “Obamacare”––Get Ready for Some Startling Rate Increases

[…]

I conducted an informal survey of a number of insurers…None of the people I talked to are academics or work for a think tank. None of them are in the spin business inside the Beltway. Every one of them has the responsibility for coming up with the correct rates their companies will have to charge…

On average, expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms…

In states with the least mandates or for health insurance companies with the tightest underwriting now, the increase could be a lot more…

[E]xpect individual health insurance rates for people in their 20s and early 30s to about double…

Will the feds be ready to provide an insurance exchange in all of the states that don’t have one on October 1, 2013?

I have no idea. And neither does anyone else I talk to inside the Beltway. We only hear vague reports that parts of the new federal exchange information systems are in testing.

The former CIA director couldn’t get away with an affair in this town but the Obama administration has a complete lid on just where they are on health insurance exchanges and haven’t shown any willingness to want to talk about their progress toward launching on time––except to tell us all not to worry.

We are all worried. I would not want to be responsible for the work that remains and only have ten months to do it…

The Republicans said this would not work. If it does not launch on time, or does with serious problems, I would not want to be an incumbent Democrat.

I told them not to call this the “Affordable Care Act.”

Meet the Press, Check the Facts

This Sunday (2 December 2012), David Gregory hosted a lively session of NBC’s Meet the Press. The focus of Sunday’s program was the so-called Fiscal Cliff. Gregory rounded up many of the usual Washington suspects, including Treasury Secretary Timothy Geithner, and drilled them on their talking points.

Several times, in the course of Gregory’s questioning, he referred to President Bill Clinton’s tough 1993 budget deal. Throughout the broadcast, Gregory kept stressing the fact that the 1993 deal included defense cuts. For Gregory, those cuts were the flavor of the day.

This isn’t surprising. Indeed, most members of Washington’s chattering classes parrot the line that the economy boomed during the Clinton years because Clinton was the beneficiary of the so-called peace dividend, which allowed him to cut defense expenditures.

In fact, if we look carefully at the federal budget numbers, while Clinton did cut defense expenditures, as a percent of GDP, the majority of the Clinton squeeze came from non-defense expenditures. Indeed, as can be seen in the accompanying table, the non-defense squeeze accounted for 2.2 percentage points of President Clinton’s 3.9 total percentage point reduction in the relative size of the federal government.

Clinton squeezed the budget and squeezed hard, from all major angles. This was a case in which a president’s actions actually matched his rhetoric. Recall that, in his 1996 State of the Union address, he declared that “the era of big government is over.”

Clinton’s 1993 deal marked the beginning of the most dramatic decline in the federal government’s share of the U.S. economy since Harry Truman left office. The Clinton administration reduced government expenditures, as a percent of GDP, by 3.9 percentage points. Since 1952, no other president has even come close. At the end of his second term, President Clinton’s big squeeze left the size of government, as a percent of GDP, at 18.2 percent—the lowest level since 1966.

The table contains the facts. President Clinton knew how to squeeze both defense and non-defense federal expenditures. Indeed, he squeezed non-defense a bit harder than defense. Since 1952, the only other president who has been able to reduce the relative share of non-defense expenditures was Ronald Reagan. Forget the “peace dividend”—it’s all about the Clinton “squeeze dividend.”

Majority of Americans Now Oppose ‘Universal Coverage’

I launched the Anti-Universal Coverage Club on the Cato@Liberty blog in 2007. The Club is “a list of scholars and citizens who reject the idea that government should ensure that all individuals have health insurance.”

Well, that list just got longer. A whole lot longer. I’ll let the folks at Gallup take it from here:

In U.S., Majority Now Against Gov’t Healthcare Guarantee

For the first time in Gallup trends since 2000, a majority of Americans say it is not the federal government’s responsibility to make sure all Americans have healthcare coverage. Prior to 2009, a majority always felt the government should ensure healthcare coverage for all, though Americans’ views have become more divided in recent years…

The shift away from the view that the government should ensure healthcare coverage for all began shortly after President Barack Obama’s election and has continued the past several years during the discussions and ultimate passage of the Affordable Care Act in March 2010.

The split is 54-44 percent, well outside the poll’s margin of error. Below the jump are the results in chart form:

Now all we need is for 54 percent of the public to “like” the Anti-Universal Coverage Club’s Facebook page.

The shift was bipartisan:

Republicans, including Republican-leaning independents, are mostly responsible for the drop since 2007 in Americans’ support for government ensuring universal health coverage. In 2007, 38% of Republicans thought the government should do so; now, 12% do. Among Democrats and Democratic leaners there has been a much smaller drop, from 81% saying the government should make sure all Americans are covered in 2007 to 71% now.

Yet another indication that ObamaCare remains quite vulnerable.

‘By Far the Broadest and Potentially Most Damaging of the Legal Challenges’ to ObamaCare

That’s how Kaiser Health News describes the legal challenge that Jonathan Adler and I outline in this paper and that Oklahoma attorney general Scott Pruitt has filed in federal court:

Supporters of the law scoff at the arguments…

But, confident of their case, some health law opponents, including Jonathan Adler of Case Western Reserve Law School, Michael Cannon of the libertarian Cato Institute and National Affairs editor Yuval Levin, are urging Republican-led governments to refuse to set up the online insurance purchasing exchanges, which would, as the argument goes, make their residents ineligible for the tax credits and subsidies. They say that this step also would gut the so-called employer mandate, which the law says will take effect in states where residents are eligible for such assistance…

As even some health law supporters concede, the claim that Congress denied to the federal exchanges the power to distribute tax credits and subsidies seems correct as a literal reading of the most relevant provisions. Those are sections 1311, 1321, and 1401, which provide that people are eligible for tax credits and subsidies only if “enrolled … through an Exchange established by the state” [emphasis added].

It’s technically not correct to say that Oklahoma’s complaint is a challenge to ObamaCare, however. That complaint does not challenge a single jot or tittle of the statute. Oklahoma is asking a federal court to force the IRS to follow the statute, and to prevent the Obama administration from imposing taxes on Oklahoma residents whom Congress expressly exempted. Oklahoma’s complaint is indeed “the broadest and potentially most damaging of the legal challenges” related to ObamaCare. But think about it: if the only way to save ObamaCare from such a fate is to give the president extra-constitutional powers to tax and spend money without congressional authorization, just how unstable is this law? And is it really worth saving?

Also, the article is a few months behind on the debate over congressional intent, and our ongoing debate with Timothy Jost (who has reversed himself on quite a few issues).

But overall, a good article.

ObamaCare Implementation News

Here’s some ObamaCare implementation news from around the interwebs:

  • Minnesota Facing Bigger Bill For State’s Health Insurance Exchange”: Kaiser Health News reports Minnesota has increased its spending projections for operating the state’s ObamaCare Exchange by somewhere between 35-80 percent for 2015. Spending on the Exchange will rise by another 19 percent in the following year.
  • The Wall Street Journal  defends the 25-30 states that aren’t gullible enough to create an Exchange and therefore take the blame for ObamaCare’s higher-than-projected costs.
  • Arizona Gov. Jan Brewer (R) has announced she will not implement an Exchange. That creates another potential state-plaintiff, millions of potential employer-plaintiffs, and (by my count) 430,000 potential individual plaintiffs who could join Oklahoma attorney general Scott Pruitt in challenging the IRS’s illegal ObamaCare taxes. It also means that Arizona can start luring jobs away from tax-happy California. There are four Hostess bakeries in California that might be looking to relocate.
  • I’m enjoying a friendly debate with The New Republic’s Jonathan Cohn and University of Michigan law professor Samuel Bagenstos over whether the those taxes really do violate federal law and congressional intent (spoiler alert: they do). I owe Bagenstos a response.
  • PolitiFact Georgia rated false my claim that operating an ObamaCare Exchange would violate Georgia law. I explain here why it is indeed illegal for Georgia (and 13 other states) to implement an Exchange.
  • ThinkProgress.org reports, “Romney’s Transition Chief Is Encouraging States To Implement Obamacare.” A better headline would have been, “Government Contractor Encourages More Government Contracts.”
  • The Washington Examiner editorializes, “In California…state regulators have warned…insurance premiums will rise by as much as 25 percent once the exchange comes online…That’s the best-case scenario.” And, “In 2014, seven Democratic Senate seats will be up for grabs in states Mitt Romney carried (Alaska, Arkansas, Louisiana, Montana, North Carolina, South Dakota and West Virginia). Unless Obama’s HHS bureaucrats pull off an unprecedented miracle of central planning, Obamacare could well sink Democrats again in 2014, the same way it did in 2010.”

The IRS’s Illegal ObamaCare Taxes, Bagenstos Edition

As I posted a week ago today, Jonathan Adler and I have a paper titled, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Our central claims are:

  1. The Patient Protection and Affordable Care Act explicitly restricts its “premium-assistance tax credits” (and thus the “cost-sharing subsidies” and employer- and individual-mandate penalties those tax credits trigger) to health insurance “exchanges” established by states;
  2. The IRS has no authority to offer those entitlements or impose those taxes in states that opt not to create Exchanges; and
  3. The IRS’s ongoing attempt to impose those taxes and issue those entitlements through Exchanges established by the federal government is contrary to congressional intent and the clear language of the Act.

We hope to post an updated draft of our paper, with lots of new material, soon.

At the Disability Law blog and Balkinization, University of Michigan law professor Samuel Bagenstos writes that our claims are “deeply legally flawed.”

Like others before him, Bagenstos’s main argument in support of the IRS reduces to the absurd claim that the federal government can establish an Exchange that is established by a state. He also offers two new arguments. Each is a non sequitur, and like his main argument is contradicted by the express language of the statute.

As I have written before:

[T]he statute is crystal clear. It explicitly and laboriously restricts tax credits to those who buy health insurance in Exchanges “established by the State under section 1311.” There is no parallel language – none whatsoever – granting eligibility through Exchanges established by the federal government (section 1321).

(Bagenstos claims the statute’s tax-credit-eligibility provisions use the phrase “established by the State under section 1311” only twice. He neglects to mention: how the eligibility provisions refer to those limiting phrases an additional five times; that there is no language contradicting or creating any ambiguity about the limitation they create; and that the statute also restricts its “cost-sharing subsidies” to situations where “a credit is allowed” under those eligibility rules. At the risk of repeating myself, the eligibility rules for the credits and subsidies are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.)

Bagenstos correctly notes that Section 1321 directs the federal government to create Exchanges within states that fail to create their own. Like others before him, he takes that directive to mean that the phrase “established by the State under section 1311” in fact ”does not have the exclusionary meaning” you might think. The statute authorizes tax credits through federal Exchanges, he argues, because federal Exchanges are ”established by the State under section 1311.” The federal government, it turns out, can establish an Exchange that is established by a state.

Like others before him, Bagenstos finesses the absurdity of that claim by arguing that Section 1321 provides that a federal Exchange ”will stand in the shoes of a state-operated exchange.” So far as I can tell, the “stand in the shoes” trope was first advanced by Judy Solomon of the Center for Budget and Policy Priorities. It is based on a 180-degree misreading of Section 1321. If a state chooses not to dance, Section 1321 doesn’t instruct the federal government to step inside (read: commandeer) the state’s dancing shoes. It directs the federal government put on its own dancing shoes, and to follow all the dance steps listed in Title I. Since the language restricting tax credits to state-created Exchanges appears in—you guessed it—Title I, federal Exchanges are bound by that restriction.

Bagenstos’s second argument is that since it was not necessary for Congress to restrict tax credits to state-created Exchanges to overcome the “commandeering problem,” the statute does not do so. But that’s a non sequitur. Just because Congress didn’t have to do something doesn’t mean Congress didn’t do it. The express language of the statute says Congress did it.

Bagenstos’s third argument is that because the Senate Finance Committee didn’t have to restrict tax credits to state-created Exchanges in order to have jurisdiction to direct states to create them, the Committee-approved language—which is now law—must not do so. Again, that’s a non sequitur. And not only does the express language of the statute impose that restriction, but Senate Finance Committee chairman Max Baucus (D-MT) admitted that’s what he was doing.

Along the way, Bagenstos contradicts himself, Baucus, and Timothy Jost by categorically claiming, “Nor is there any reason to think that Congress would have intended to treat participants in state- and federally-operated exchanges differently,” while conceding the commandeering problem and the Finance Committee’s limited jurisdiction are two reasons why Congress might have intended to do so.

Bagenstos’s interpretation of the statute violates the “mere surplusage” canon of statutory interpretation. It violates the expressio unius est exclusio alterius canon of statutory interpretation. It violates common sense.

Like others before him, Bagenstos offers no rebuttal to Baucus’s admission that the  statute means exactly what it says, and nothing whatsoever from the legislative history that supports the IRS’s attempt to violate the express language of the statute by imposing taxes that Congress never authorized.

Why ‘Obamacare’s Critics Refuse to Give Up’

Jonathan Adler and I have a paper titled, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Our central claims are:

  1. The Patient Protection and Affordable Care Act explicitly restricts its “premium-assistance tax credits” (and thus the “cost-sharing subsidies” and employer- and individual-mandate penalties those tax credits trigger) to health insurance “exchanges” established by states;
  2. The IRS has no authority to offer those entitlements or impose those taxes in states that opt not to create Exchanges; and
  3. The IRS’s ongoing attempt to impose those taxes and issue those entitlements through Exchanges established by the federal government is contrary to congressional intent and the clear language of the Act.

Over at The New Republic’s blog The Plank, my friend Jonathan Cohn says this is “preposterous”:

No sentient being following the health care debate could argue, in good faith, that Obamacare’s architects intended for the federal government to set up exchanges without subsidies. It would completely subvert the law’s intent.

It appears my friend does not know the statute, the legislative history, or what Congress’ intent was.

Cohn writes that the statute is “a little fuzzy” on this issue. Quite the contrary: the statute is crystal clear. It explicitly and laboriously restricts tax credits to those who buy health insurance in Exchanges “established by the State under section 1311.” There is no parallel language – none whatsoever – granting eligibility through Exchanges established by the federal government (section 1321). The tax-credit eligibility rules are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.

ObamaCare supporters just know that can’t be right. It must have been an oversight. Congress could not have written the law that way. It doesn’t make any sense. Those provisions must take effect in federal Exchanges for the law to work. Why would Congress give states the power to blow the whole thing up??

The answer is that Congress didn’t have any choice. Congress intended for ObamaCare to work this way because this was the only way that ObamaCare could become law.

  • The Senate bill had to have state-run Exchanges in order to win the essential votes of moderate Democrats. Without state-run Exchanges, it would not have passed.
  • In order to have state-run Exchanges, the bill needed some way to encourage states to create them without “commandeering” the states. In early 2009, well before House and Senate Democrats introduced their bills, an influential law professor named Timothy Jost advised congressional Democrats of one way to get around the commandeering problem: “Congress could invite state participation…by offering tax subsidies for insurance only in states that complied with federal requirements…”. Both the Finance bill and the HELP bill made premium assistance conditional on state compliance. Senate Democrats settled on the Finance language, which passed without a vote to spare. (Emphasis added.)
  • The Finance Committee had even more reason to condition tax credits on state compliance: it doesn’t have direct jurisdiction over health insurance. Conditioning the tax credits on state compliance was the only way the Committee could even consider legislation directing states to establish Exchanges. Committee chairman Max Baucus admitted this during mark-up.
  • Then something funny happened. Massachusetts voters sent Republican Scott Brown to the Senate, partly due to his pledge to prevent any compromise between the House and Senate bills from passing the Senate. With no other options, House Democrats swallowed hard and passed Senate bill. (They made limited amendments through the reconciliation process. These amendments did not touch the tax-credit eligibility rules, and indeed strengthen the case against the IRS.)

A law limiting tax credits to state-created Exchanges, therefore, is exactly what Congress intended, because Congress had no other choice. On the day Scott Brown took office, any and all other approaches to Exchanges ceased to embody congressional intent. If Congress had intended for some other approach to become law, there would be no law. What made it all palatable was that it never occurred to ObamaCare supporters that states would refuse to comply. The New York Times reports, “Mr. Obama and lawmakers assumed that every state would set up its own exchange.”

Oops.

The only preposterous parts of this debate are the legal theories that the IRS and its defenders have offered to support the Obama administration’s unlawful attempt to create entitlements and impose taxes that Congress clearly and intentionally did not authorize. (But don’t take my word for it. Read the statute. Read our paper. Read this, and this. Watch this video and our debate with Jost. Click on our links to all the stuff the IRS and Treasury and Jost have written.) I wonder if Cohn would tolerate such lawlessness from a Republican administration.

Cohn further claims the many states that are refusing to create Exchanges are “totally sticking it to their own citizens” and people who encourage them “are essentially calling upon states to block their citizens from receiving federal tax breaks, worth as much as several thousand dollars per person. Aren’t conservatives and libertarians supposed to be the party that likes giving tax money back to the people?” Seriously?

  • Fourteen states have enacted statutes or constitutional amendments – often by referendum, often by huge margins – that prohibit state employees from directly or indirectly participating in an essential Exchange function: implementing employer or individual mandates. In those instances, the voters have spoken.
  • Only 22 percent of the budgetary impact of these credits and subsidies is actual tax reduction, and the employer- and individual-mandate penalties triggered by those tax “credits” wipe out most of that. The other 78 percent is new deficit spending. So what we’re really talking about here is $700 billion of new deficit spending.
  • When states refuse to establish Exchanges, they block that new spending, which reduces the deficit and the overall burden of government.
  • In addition, those states exempt their employers from the employer mandate (a tax of $2,000 per worker) and exempt millions of taxpayers from the individual mandate (a tax of $2,085 on families of four earning as little as $24,000).

Who’s for tax cuts now?

Here’s what I think is really bothering Cohn and other ObamaCare supporters. The purpose of those credits and subsidies is to shift the cost of ObamaCare’s community-rating price controls and individual mandate to taxpayers, so that consumers don’t notice them. When states prevent such cost-shifting, they’re not increasing the cost of ObamaCare – they’re revealing it.

And that’s what worries Cohn. If the full cost of ObamaCare appears in people’s health insurance premiums, people will rise up and demand that Congress get rid of it. Cohn isn’t worried about states “sticking it to their citizens.” He’s worried about states sticking it to ObamaCare.

The title of Cohn’s blog post is, “Obamacare’s Critics Refuse to Give Up.” At least we can agree on that much.