Topic: Health Care & Welfare

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.

The Hobbylobbification of America

If you ask reasonably informed consumers of news media what the year’s big Supreme Court case was, most would probably say Burwell v. Hobby Lobby, that case where “five white men” (in Harry Reid’s description) decided that corporations can deny women access to birth control. But, as I’ve said elsewhere, what was at stake in Hobby Lobby has nothing to do with the power of big business, the freedom to use any kind of legal contraceptive, or how to balance religious liberty against other constitutional considerations. Much like Citizens United (which struck down restrictions on corporate political speech without touching campaign contribution limits) and Shelby County (which struck down Section 4(b) of the Voting Rights Act because it was based on obsolete voting data that didn’t reflect current realities as constitutionally required), Hobby Lobby is doomed to be misunderstood.

The case was actually a rather straightforward question of statutory interpretation regarding whether the government was justified in this particular case in overriding religious liberties. The Supreme Court evaluated that question and ruled 5-4 that closely held corporations can’t be forced to pay for all of their employees’ contraceptives if doing so would violate their religious beliefs. There was no constitutional decision, no expansion of corporate rights, and no weighing of religion versus the right to use birth control.

That’s it. Nobody has been denied access to contraceptives and there’s now more freedom for all Americans to live their lives how they want, without checking their conscience at the office door. The contraceptive mandate fell because it was a rights-busting government compulsion that lacked sufficient justification.

That the Hobby Lobby dissenters and their media chorus made so much noise over this case is evidence of a larger process whereby the government foments needless social clashes by expanding its control over areas of life we used to think of as being “public” yet not governmental. The government thus uses private voluntary institutions as agents in its social-engineering project. These are places that are beyond the intimacies of the home but still far removed from the state: churches, charities, social clubs, small businesses, and even “public” corporations (which are nevertheless part of the “private” sector).

Where Alexis de Tocqueville celebrated the civil society that proliferated in the young American republic, the Age of Obama has heralded an ever-growing administrative state that aims to standardize “the Life of Julia” from cradle to grave. Through an ever-growing list of mandates, regulations, and assorted other devices, the government is pushing aside the “little platoons” that made this country what it was. We can call this tide of national collectivism overtaking the presumptive primacy of individual liberty and voluntarism the “Hobbylobbification of America.”

For more on all this, read my recently published book – Religious Liberties for Corporations? Hobby Lobby, the Affordable Care Act, and the Constitution – where my co-author David Gans and I debate all sorts of interesting issues. Perhaps most curious is that I minimize the significance of the ruling or its precedential value, while David says it’s really, really big (and really, really bad). That’s an unusual inversion in Supreme Court commentary; typically the winning side trumpets its victory while the losers try to explain why the decision really doesn’t mean that much. (If you’re curious about any of this, come to our book forum/debate this Tuesday, or watch online.)

New Study Finds Minimum Wage Increases Hurt Low-Skilled Workers

A new working paper from the National Bureau of Economic Research finds that significant minimum wage increases can hurt the very people they are intended to help. Authors Jeffrey Clemens and Michael Wither find that significant minimum wage increases can negatively affect employment, average income, and the economic mobility of low-skilled workers. The authors find that significant “minimum wage increases reduced the employment, average income, and income growth of low-skilled workers over short and medium-run time horizons.”  Most troublingly, these low-skilled workers saw “significant declines in economic mobility,” as these workers were 5 percentage points less likely to reach lower middle-class earnings in the medium-term. The authors provide a possible explanation: the minimum wage increases reduced these workers’ “short-run access to opportunities for accumulating experience and developing skills.” Many of the people affected by minimum wage increases are on one of the first rungs of the economic ladder, low on marketable skills and experience. Working in these entry level jobs will eventually allow them to move up the economic ladder. By making it harder for these low-skilled workers to get on the first rung of the ladder, minimum wage increases could actually lower their chances of reaching the middle class.

Most of the debate over a minimum wage increase centers on the effects of an increase on aggregate employment, or the total number of jobs and hours worked that would be lost. A consensus remains elusive, but the Congressional Budget Office recently weighed in, estimating that a three year phase in of a $10.10 federal minimum wage option would reduce total employment by about 500,000 workers by the time it was fully implemented. Taken with the findings of the Clemens and Wither study, not only can minimum wage increases have negative effects for the economy as a whole, they can also harm the economic prospects of  low-skilled workers at the individual level.

Four states approved minimum wage increases through ballot initiatives in the recent midterm, and the Obama administration has proposed a significant increase at the federal level. This study should give them a reason to reconsider.

Recent Cato work on this topic can be found here and here

Early Childhood Summit Don’t Lie?

When I first heard about the White House Summit on Early Education being held today, I worried. “I sure hope this isn’t going to be a PR stunt to cheerlead for government pre-kindergarten programs,” I thought. Then I got the announcement: U.S. Secretary of Education Arne Duncan will be having a Twitter chat with pop sensation Shakira in conjunction with the summit! “Oh, I was just being silly,” I said to myself, relieved that this would be a sober, objective discussion about what we do – and do not – know about the effectiveness of pre-K programs.

Okay, that’s not actually what happened. In fairness to Shakira, she does appear to have a very serious interest in children’s well-being. Unfortunately, the White House does not appear to want to have an objective discussion of early childhood education.

Just look at this, from the official White House blog:

For every dollar we invest in early childhood education, we see a rate of return of $7 or more through a reduced need for spending on other services, such as remedial education, grade repetition, and special education, as well as increased productivity and earnings for these kids as adults.

Early education is one of the best investments our country can make. Participation in high-quality early learning programs—like Head Start, public and private pre-K, and childcare—provide children from all backgrounds with a strong start and a solid foundation for success in school.

Let me count the ways that this is deceptive, or just plain wrong, as largely documented in David Armor’s recent Policy Analysis The Evidence on Universal Preschool:

  • The 7-to-1 ROI figure – for which the White House cites no source – almost certainly comes from work done by James Heckman looking at the rate of return for the Perry Preschool program. It may well be accurate, but Perry was a microscopic, hyperintensive program from the 1960s that cannot be generalized to any modern, large-scale program.
  • If you look at the longitudinal, “gold-standard” research results for Head Start, you see that the modest advantages accrued early on essentially disappear by first grade…as if Head Start never happened. And federal studies released by the Obama administration are what report this.
  • It stretches credulity to call Head Start “high quality,” not just based on its results, but on its long history of waste and paralysis. Throughout the 2000s the federal Government Accountability Office and general media reported on huge waste and failure in the program.
  • Most evaluations of state-level pre-K programs do not randomly assign children to pre-K and compare outcomes with those not chosen, the “gold standard” mentioned above. Instead they often use “regression discontinuity design” which suffers from several shortcomings, arguably the biggest of which is that you can’t do longitudinal comparisons. In other words, you can’t detect the “fade out” that seems to plague early childhood education programs and render them essentially worthless. One large-scale state program that was evaluated using random-assignment – Tennessee’s – appears to be ineffective.
  • The White House says early childhood programs can help “children from all backgrounds.” Not only is that not true if benefits fade to nothing, but a federal, random-assignment evaluation of the Early Head Start program found that it had negative effects on the most at-risk children.

I suspect the vast majority of people behind expanding preschool are well intentioned, and I encourage them to leverage as much private and philanthropic funding as they can to explore different approaches to pre-K and see what might work. But a splashy event intended to proclaim something is true for which we just don’t have good evidence doesn’t help anyone.

Let’s not mislead taxpayers…or kids.

Grubergate, the Mini-Series

Under Proposed Rules, Government Could Choose Insurance Plans for Millions of People

The administration is considering a rule change that would allow the government to automatically change some people’s exchange plans to a cheaper alternative.

HHS recently proposed regulations that would let exchanges offer alternative default options for enrollees. Under current law, most enrollees who did not revisit the exchange website are automatically re-enrolled in their plans (a few states do not allow automatic renewal). The new proposed rules would let exchange enrollees choose whether their default option would be to automatically renew the same plan or to let the government switch them into a cheaper similar plan if theirs becomes more expensive. Under the proposed rules, state exchanges would be given the option to offer these alternatives in 2016, with the federally run exchange offering it in 2017.

For people that chose this option, the government would be effectively choosing their insurance plan, a far cry from the “if you like your plan you can keep it” pledge.

In one sense, it is not surprising that HHS is at least exploring this option. Automatic renewal presents a host of potential problems.

Due to the way the law designed the exchange subsidies, many of these people will end up paying significantly more if they automatically renew. An analysis by the New York Times found that people in the most popular plans would face an average premium increase of 9.5 percent. This could end up affecting millions of people, as a recent Gallup poll found that 68 percent of respondents said they planned to renew their current plan.

To some extent, the proposed rules could help alleviate the initial problem of unforeseen premium increases, but it creates other issues at the same time.  Enrollees might not understand the downsides of letting the government automatically switch them to a cheaper plan. People who chose this option fearing premium increases could find that they have lost their doctor, or a prescription they need is no longer covered by their plan. For even the most sophisticated exchange customers, there is a measure of uncertainty.  When they choose a default option, enrollees won’t know how much their premiums will increase next year or how the provider networks of cheaper alternatives compare.  Each customer’s priorities will be different, as will the variables affecting their decision. Obamacare has inadvertently created a very complex situation for the government to try to navigate.

The problems associated with automatic renewal are serious and could affect millions of people, but they might not have a clear solution. In one sense, the proposed default option could help people avoid unforeseen premium increases. This could be the most important factor for many enrollees, but comes at the risk of losing access to provider networks they might like. At the same time, the proposed rules would significantly increase government authority and decision-making power. No longer would the individual mandate, the controversial requirement to obtain health insurance, be enough. For many people, the government would actually choose and enroll them in a specific health insurance plan. The new rules would extend government reach into health care even farther. This is the same government that oversaw the disastrous rollout of the exchange website and inflated enrollment numbers. Given its performance so far, we should be wary of giving the government an even bigger role.

Ebola: Human Progress Is the Best Medicine

With the media frenzy over Ebola now thankfully fading, let us view the outbreak within the context of humanity’s continually improving ability to solve new problems.

Today, the world is better prepared than it has ever been to respond to an outbreak of an infectious disease. For example, there are more skilled medical professionals available to tend to the sick and conduct research on effective treatment. The number of physicians per person is rising globally.

While there is not yet a cure for Ebola, many people are hard at work coming up with one. Countless maladies that once were death sentences can now be treated. The development of effective antiretroviral drugs for HIV/AIDS, for example, serves as one of the great medical accomplishments of the past two decades.

Today, the tools to prevent transmission of disease are more accessible than ever. Ebola and many other diseases are partly spread through poor access to sanitation. Thankfully, more people are gaining access to improved sanitation facilities.

The Ebola threat should be viewed in the context of human ingenuity. As Princeton University professor and HumanProgress.org advisory board member Angus Deaton writes in his book The Great Escape, “Need, fear, and, in some circumstances, greed are great drivers of discovery and invention.”

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