Topic: Health Care & Welfare

Failing to Clean Up the VA

The Department of Veterans Affairs (VA) has a long history of mismanagement. Last year, the public became aware of a wait-time scandal at the VA hospital in Phoenix. Veterans were forced to wait months for appointments, even as the hospital was reporting no delays in service and allowing its management to receive performance bonuses. Over 1,700 veterans were not placed on the official wait lists to hide the length of actual waits. The VA Inspector General suggested that the Phoenix VA was not the only center to modify its wait lists in this fashion.

In response to the crisis, Congress passed a  law that allowed veterans who were waiting for treatment to access non-VA providers. At the time, I cautioned about the risk of a possible large, unfunded entitlement program being created. Now it seems that there are other issues with the way that the VA is implementing the expanded program. Veterans continue to be shut out of service and providers are uncertain how to utilize the benefits.

The Washington Post reports:

The card gives veterans who have been waiting more than 30 days for appointments or who live more than 40 miles from a VA facility the chance to see a private doctor.

But instead, some veterans say that when they attempted to use their card, the VA told them they had to live more than 40 “miles in a straight line, or as the crow flies,” from their VA rather than Google maps miles, which makes the card harder to use. Several VA doctors e-mailed The Washington Post saying they themselves don’t understand how to use the program

Another reader wrote in saying that her stepfather, Charles Schuster, who died in 2009, recently received a card in the mail, a symbol of an agency still seemingly in disarray. “Gave me a good laugh,” she wrote.

So far, 27,000 veterans have made appointments for private care with their cards, the VA said last week. It’s a fraction of the 9 million veterans who depend on the delay-plagued VA health-care system, the largest network of health centers and hospitals in the country.

“As far as I can tell, the choice card has created more confusion and aggravation than improving access to clinical care, though it did gain political points,” said one VA primary care doctor, who says he’s on the front lines of doing intakes. He spoke on the condition of anonymity because VA employees are not allowed to speak to the media without permission. But he said he and other doctors “are confused by the choice card system and don’t understand how to implement it.”

The article  documents other instances of veterans being unable to utilize their choice cards.

The VA hospital system is a mess, showing the downsides of socialized health care. During last year’s scandal, Congress simply put a bandage on the problem by allowing some veterans to use outside providers. Congress should revisit the issue and institute more fundamental reforms to the Veterans Health Administration.

Hayek vs. Government Health Care

In “The Use of Knowledge in Society,” economist F.A. Hayek described how markets take into account an array of local knowledge that governments do not possess. It is “knowledge of the particular circumstances of time and place,” which enters into everyday exchanges, but central authorities cannot access it. That’s because it “never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” This sort of knowledge is tacit and subjective, so “by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form.”

Cato adjunct scholar Jeff Singer is a surgeon practicing in Phoenix, and his op-ed today in the Wall Street Journal illustrates Hayek’s point. The federal government has mandated that health providers adopt electronic records to the specifications of the central planners in Washington. A theme in Jeff’s piece is that there is tacit and localized aspects of his practice that the government did not know about, and did not bother to find out about, before it imposed its top-down rules.

Governors Love Federal Funding

ObamaCare gives states the option to expand Medicaid to cover all individuals below 138 percent of the federal poverty level, which is approximately $33,500 a year for a family of four. To encourage states to expand, the federal government agreed to fund 100 percent of expenditures for the newly-eligible participants until 2016, and then slowly decrease the match to 90 percent in 2020 and into the future.

Democratic and Republican governors alike are showing their penchant for “free” federal dollars by supporting expanded Medicaid roles in their state. Republicans governors—who often say they dislike Obamacare—are in many cases pushing their legislatures to expand Medicaid to take advantage of this windfall.

GOP Governor Bill Haslam in Tennessee announced that he would support Medicaid expansion. His administration promoted the plan by saying, “Insure Tennessee will leverage the enhanced federal funding which will pay for between 90 and 100 percent of the cost and in doing so will bring federal tax dollars Tennesseans are already paying back to the state.”

To help minimize the state’s contribution and maximize federal funding, Haslam decided to expand the state’s health provider tax. Under a provider tax, a state agrees to increase Medicaid reimbursements to the providers paying the tax, such as hospitals. The higher reimbursement level draws a higher federal contribution. So state politicians and hospitals win, but federal taxpayers lose.  

In this case, luckily, Tennessee’s legislature denied Haslam’s  expansion attempts.

King v. Burwell: In 2013, Nelson Admitted He Didn’t Know if the ACA Offered Subsidies in Federal Exchanges

The plaintiffs in King v. Burwell claim the Patient Protection and Affordable Care Act only offers premium subsidies, as the statute says, “through an Exchange established by the State.” Members of Congress who voted for the PPACA – most recently Sen. Bob Casey (D-PA) and former Sen. Ben Nelson (D-NE) – now swear it was never their intent to condition Exchange subsidies on state cooperation.

Ironically, Casey’s and Nelson’s decision to wade into the King debate demonstrates why, when a statute is clear, courts traditionally assign no weight to what members of Congress claim they intended a law to say – especially if, as here, those claims come after a clear provision has proven problematic. While he claims he never intended to condition subsidies on states establishing Exchanges, Casey repeatedly voted to condition Exchange subsidies on state cooperation, has misrepresented what Congress intended the PPACA to do, and continues to misrepresent the PPACA on his Senate web site. Nelson’s claims about what Congress intended should likewise be taken with a grain of salt. In an unguarded moment in 2013, Nelson admitted that in 2009 he paid no attention to “details” such as whether the PPACA authorized subsidies in federal Exchanges.

All Sides Agree: Casey Supported Conditional Exchange Subsidies

Casey and Nelson exchanged correspondence exactly one day before amicus briefs supporting the government were due to be filed with the Supreme Court. Casey asked for Nelson’s recollection of whether, in 2009, Nelson or anyone else suggested the PPACA’s subsidies would only be available in states that established Exchanges. Perhaps more than anyone, Nelson was a pivotal figure in the debate over the PPACA. Not only did he insist on state-based Exchanges rather than a national Exchange run by the federal government, his was the deciding vote that enabled the bill to pass the Senate and become law – and he withheld his vote until his demands were met.

When Mean-Tested Benefits Rose, Labor Force Participation Fell

The U.S. job market has tightened by many measures – more advertised job openings, fewer claims for initial unemployment insurance, substantial reduction in long-term unemployment and the number of discouraged workers.  Yet the percentage of working-age population that is either working or looking for work (the labor force participation rate) remains extremely low.  This is a big problem, since projections of future economic growth are constructed by adding expected growth of productivity to growth of the labor force.

Why have so many people dropped out of the labor force?  Since they’re not working (at least in the formal economy), how do they pay for things like food, rent and health care?

One explanation answers both questions: More people are relying on a variety of means-tested cash and in-kind benefits that are made available only on the condition that recipients report little or no earned income.   Since qualification for one benefit often results in qualification for others, the effect can be equivalent to a high marginal tax rate on extra work (such as switching from a 20 to 40 hour workweek, or a spouse taking a job).  Added labor income can often result in loss of multiple benefits, such as disability benefits, supplemental security income, the earned income tax credit, food stamps and Medicaid. 

This graph compares annual labor force participation rates with Congressional Budget Office data on means-tested federal benefits as a percent of GDP.  The data appear consistent with work disincentives in federal transfer payments, labor tax rates and refundable tax credits.

Sec. Burwell: Right Now, My Focus is on Taking Hostages. I’ll Inform Them of Their Hostage Status When I’m Ready

Health and Human Services Secretary Sylvia Burwell is the lead defendant in King v. Burwell, in which the plaintiffs claim the Obama administration is taxing millions of employers and individuals and subsidizing millions of HealthCare.gov enrollees contrary to the plain language of the Patient Protection and Affordable Care Act (a.k.a., ObamaCare). The Supreme Court will hear oral arguments in the case on March 4, and will likely rule by late June. If the Court rules against Burwell, 57 million individuals and employers will be freed from those illegal taxes and maybe four million HealthCare.gov enrollees will lose subsidies that the administration never had the authority to issue in the first place. Those four million people could see their insurance bills quadruple, face an unexpected tax liability of up to $5,000, and lose their health insurance. You might think they have a right to know about that risk. You might think a responsible public servant like Secretary Burwell would inform them of that risk. 

You would be wrong.

Today, Burwell appeared before the Senate Finance Committee. Though HHS has already deployed its contingency plan for HealthCare.gov-participating insurers, she refused to answer whether HHS has a contingency plan for HealthCare.gov enrollees:

Right now, my focus is on completing and implementing the law, which we believe is the law. Right now, what we’re focused on is the open enrollment.

HHS Head Ducks Questions On ACA Tax Credit Backup Plan,” wrote Law360. Modern Healthcare wrote, “HHS Stonewalls on King v. Burwell,” while The Hill seemed to laud Burwell because she “did not back down” from her firm stand against transparency and consumer information. Sen. John Cornyn (R-TX) fumed, “to come here and repeatedly refuse to answer the questions strikes me as nothing less than contempt of our oversight responsibility.”

The Failed HealthCare.gov Launch

The launch of HealthCare.gov in 2013 was a disaster. A new report from the Health and Human Services Inspector General (IG) describes how the department mishandled the website’s construction. The department failed to follow federal contracting rules, and did not have a cohesive plan for the website. This led to cost overruns and project delays, and HealthCare.gov’s eventually rocky start.

The Center for Medicare and Medicaid Services (CMS) was given primary responsibility within HHS for HealthCare.gov launch. For the report, the IG reviewed 60 CMS contracts for the project. These contracts were awarded to 33 different companies.

One problem with these contracts was not designating a single company as the project lead. According to the IG, CMS “missed the opportunity” to designate a “single point-of-contact with responsibility for integrating contractors’ efforts and communicating the common project goal to all 33 companies.” A project of this complexity needs a central command to oversee project development. CMS failed to assign one.  

Another problem was that CMS only sought bids from a small group of previously-used companies. CMS claimed this was to speed along the contracting process, but it left the agency with limited options. For instance, CMS received only four bids for one of the main contracts. Three were determined to be technically insufficient leaving CMS with only one choice, CGI Federal. In other instances, CMS only solicited or received bids from one company.

Additionally, CMS did not consider the previous contractor performance for many bids even though federal contracting rules require it. CMS did not access the main performance management database in the case of CGI Federal, which had had previous missteps with the department.

Compounding the mistakes, CMS selected contract types that put the government, not the contractor, at risk in the case of cost overruns for five of the six main contracts. Taxpayers are paying dearly for CMS’ choice. One contract grew from $58 million to $207 million. The six major contracts for HealthCare.gov grew in costs from $464 million to $824 million.

The IG summarized the findings:

When awarding the Federal Marketplace [HealthCare.gov] contracts, CMS did not meet all requirements and did not leverage all available acquisition planning tools, oversight activities, or contracting approaches to identify and mitigate risks…Because CMS did not leverage all of these tools, it operated without a comprehensive roadmap when awarding the Federal Marketplace contracts.

Construction of HealthCare.gov was a complex technical project. CMS’ mismanagement made the task even more difficult and even more expensive.