Tag: cra

Baldwin Resolution Would Expose Sick Patients to Higher Premiums, Cancelled Coverage, Denied Care

The Senate appears poised to vote soon on a Congressional Review Act resolution sponsored by Sen. Tammy Baldwin (D-WI) that would rescind the Trump administration’s final rule on “short-term limited duration insurance.” Nearly every Senate Democrat has cosponsored the Baldwin resolution because they believe it would protect consumers. It would do exactly the opposite. 

The Baldwin resolution…

  • …would increase the number of uninsured. Various scholars have estimated that by making health insurance more affordable, the Trump short-term plans rule would reduce the number of uninsured Americans by up to 2 million. The Baldwin resolution would rescind that rule, thereby denying health insurance to up to 2 million Americans.
  • …would reduce protections for the sick. The Baldwin resolution would reduce consumer protections in short-term plans and expose sick patients to higher premiums, denied coverage, bankruptcy, and denied care. It would revert to the Obama administration’s 2016 short-term plans rule, which limited short-term plans to 3 months and banned renewals. As state insurance regulators noted at the time, “[There are] no data to support the premise that a three-month limit would protect consumers or markets. In fact, state regulators believe the arbitrary limit proposed in the rule could harm some consumers. For example, if an individual misses the [ACA] open-enrollment period and applies for short-term, limited duration coverage in February, a 3-month policy would not provide coverage until the next policy year (which will start on January 1). The only option would be to buy another short-term policy at the end of the three months, but since the short-term health plans nearly always exclude pre-existing conditions, if the person develops a new condition while covered under the first policy, the condition would be denied as a preexisting condition under the next short-term policy.” The Trump rule allows consumers to purchase coverage that lasts until the next ObamaCare open-enrollment period. The Baldwin resolution would result in that patient being re-underwritten and denied coverage and care for up to nine months.
  • …would not reduce ObamaCare premiums and could increase them. The Trump rule allows consumers to couple short-term plans with standalone renewal guarantees, which allow enrollees who develop expensive illnesses to keep paying healthy-person premiums. Since it gives expensive patients a lower-cost alternative to ObamaCare coverage, the Trump rule can reduce ObamaCare premiums by keeping expensive patients out of those risk pools. In contrast, the Baldwin resolution would force those expensive patients into ObamaCare plans, increasing the cost of ObamaCare coverage to both enrollees and taxpayers. In 2016, state insurance commissioners again explained the fundamental flaw of Baldwin’s approach: “If the concern is that healthy individuals will stay out of the general pool by buying short-term, limited duration coverage, there is nothing in this proposal that would stop that. If consumers are healthy they can continue buying a new policy every three months. Only those who become unhealthy will be unable to afford [short-term plans], and that is not good for the [ACA] risk pools in the long run.”
  • …would make short-term plans less comprehensive. The Baldwin resolution would not protect consumers from inadequate coverage. It would re-create the bad old days when excessive regulation blocked consumers from purchasing more-comprehensive short-term plans. The Congressional Budget Office writes that under the Trump rule only “a small percentage of [short-term] plans would resemble current STLDI plans, which do not meet CBO’s definition of health insurance coverage.” Instead, most short-term plans would “resemble[e] nongroup insurance products sold before the implementation of the Affordable Care Act” that offer “financial protection against high-cost, low-probability medical events.” In other words, the Trump rule allows the sort of health plans consumers want. The Baldwin resolution would make those products disappear again.
  • …would gut conscience protections. The Trump rule protects conscience rights by improving the market for short-term plans, which are exempt from ObamaCare’s contraceptives mandate. The Baldwin resolution would strip away those conscience protections.
  • …would not protect people with preexisting conditions. The Washington Post’s Paige Winfield Cunningham reports it “doesn’t exactly make sense” for Democrats to claim that restricting short-term plans helps patients with preexisting conditions. “Even with the expansion of these short-term plans, the marketplace plans guaranteeing preexisting protections will still be available to those who need them… So expanding the availability of short-term plans…doesn’t mean people with preexisting conditions would lose access to crucial coverage protections.”
  • …is pure symbolism. The Baldwin resolution has zero chance of becoming law. To rescind a final agency rule, Congressional Review Act resolutions must pass both chambers of Congress and receive the president’s signature. The House is unlikely to pass the Baldwin resolution. Even if it did, there is zero chance President Trump would sign a resolution nullifying a rule he himself asked his administration to produce.
  • is terrible politics. Or at least it could be, if opponents expose it as subjecting patients with expensive illnesses to higher premiums, cancelled coverage, medical bankruptcy, and denied care—all to serve supporters’ ideological goal of destroying a free-market alternative to ObamaCare.

Rand Paul Not So Hardcore On Farm Subsidies

Rand Paul, after setting the newswires alight with his controversial stance on the Civil Rights Act, is busy touting his “moderate” credentials.

Moderate, in this case, being a euphemism for “laughably timid.”

In a recent interview with a Kentucky radio station, Paul rejected the charge of his political opponent that he was opposed to farm subsidies. Not true, sayeth Paul. He is “much more moderate than that.”

According to an article in yesterday’s  Lexington Herald-Leader, Paul’s less-than-radical view on farm subsidies is that, well, maybe dead people should not receive them:

Let’s just agree that we will get rid of subsidies for dead farmers first,” he said.

After that, Paul said, the government should restrict subsidies to farmers who make more than $2 million a year.

Paul said 2,007 farmers last year whose income was greater than $2 million received subsidies.

“Let’s agree that maybe we can cut them out,” he said.

Despite his “ideologically pure” stance on the CRA, Rand Paul can compromise on issues of freedom when he wants to, for example on drug laws and gay marriage, as Tim Lee points out.  And now, apparently, he is to the left of Barack Obama (who favored a $500,000 adjusted gross income limit) when it comes to farm subsidies. Paul’s choice of when to be ideologically pure is curious indeed.

HT: Don Carr at the Environmental Working Group

Krugman’s Fannie Mae Fantasyland

An insightful op-ed in yesterday’s Financial Times by Raghu Rajan (who will be presenting his latest book soon here at Cato), apparently was too much for Paul Krugman to bear.  What was Rajan’s great crime that so upset Krugman?  Rajan, correctly, pointed out that US policies, such as Fannie Mae and the Community Re-investment Act, were direct contributors to the financial crisis and that bankers shouldn’t be blamed for simply reacting to perverse government incentives.

Now Krugman cannot bear to see CRA and Fannie questioned.  He claims that Rajan is relying on some blind faith that has been disproven by all thinking people.  Krugman offers two points (his supposed “facts”) that prove Fannie Mae and CRA are innocent.

First, he argues that the bad lending was done not by banks covered by CRA, but by non-banks that were exempt from CRA.  Now in Krugman’s defense, there is a grain of truth to this.  For instance, up until its purchase of a thrift, Countrywide, the largest subprime player, was not covered by CRA.  However, comparing Countrywide to say Bank of America, which was covered by CRA, misses a crucial point:  these non-CRA lenders were selling their loans to Fannie and Freddie, who were getting housing goal credit for those loans.  For instance, 25% of Fannie’s whole loan purchases were from Countrywide.  So rather than, as Paul claims that CRA didn’t matter, what the comparison shows is that the GSE housing goals were more damaging than CRA.

Krugman tries to cover this base by claiming that Fannie and Freddie were “sidelined by Congress” during the worst years of the boom.  As someone who spent the boom years as staff on the Senate Banking Committee, I found that claim to be insane.  For every Senator Shelby who tried to sideline the GSE’s, there was 10 Senators Sarbanes, Dodd and Schumer who pushed the GSEs to do more.  Krugman needs to move past empty assertions and offer some, any, evidence that Congress sidelined Fannie and Freddie.

What evidence he does offer is to show that during the boom, the percent of the market that was securitized by Fannie/Freddie fell, while the percent securitized by the private-label market increased.  Krugman has that fact correct, yet he misses a critical point.  That increase in private-label securities was being funded/purchased by Fannie and Freddie.

As my chart illustrates, the more involved were Fannie and Freddie in purchasing subprime MBS, the more the subprime market grew.  During the bubble years, Fannie and Freddie were the largest single source of liquidity for the subprime market.  And the chart doesn’t even take into account all the subprime whole loans being purchased by the GSEs.

Sadly Krugman has his facts on CRA wrong as well.  I point the reader to Ed Pinto’s work in this area, as well as my post on CRA from a few months ago.

We have little hope of avoiding a future financial crisis if we do not undo all the perverse government incentives for irresponsible lending.  Krugman’s presentation of selective and misleading data only makes true and meaningful reform all the more difficult.