Overall, this Tennessean article summarizes well yesterday’s House Oversight Committee hearing on the IRS rule that Jonathan Adler and I write about here and here. Unfortunately, the article does perpetuate the misleading idea that the nation’s new health care law is “missing” language to authorize tax credits in federally created Exchanges. (The statute isn’t missing anything. It language reads exactly as its authors wanted it to read.)
Rep. Scott DesJarlais’ argument that the health‐care reform law lacks wording needed to implement a crucial part of it took a major step forward Thursday.
The Jasper Republican got a hearing before the House Committee on Oversight and Government Reform on his claim that the Internal Revenue Service lacks authority to tax employers who fail to offer health policies and leave workers to buy coverage through federally established exchanges.
His arguments, while not uncontested during the hearing, apparently won over the committee chairman, Rep. Darrell Issa, R‑Calif. Issa signed on Thursday as a co‐sponsor of DesJarlais’ bill related to the issue. Other House Republican leaders also have shown interest, DesJarlais said in an interview afterward. He said he expects a vote on the House floor sometime this fall.
And a Senate version has been introduced by Sen. Ron Johnson, R‑Wis…
DesJarlais contends that Congress worded the law in a way that authorizes the taxes and tax credits only for insurance bought through state‐based exchanges, not federal ones…
The distinction is important because many states are balking at setting up their own exchanges. DesJarlais’ argument would mean federal exchanges couldn’t be implemented in those states, either…
“They have rewritten a law Congress haphazardly drafted,” DesJarlais said.
His bill, which has 35 cosponsors, would keep the IRS from moving forward with its regulatory language.
“I have employers watching this very closely,” DesJarlais added. Essentially, he said, the issue is “about whether ObamaCare can continue to exist.”
Jonathan Adler and I have a post at the at the Health Affairs blog where we respond to Timothy Jost’s critique of our working paper, “Taxation without Representation: the Illegal IRS Rule to Expand Tax Credits under the PPACA.” Jost has been our most tenacious (if not most consistent) critic.
Here’s an excerpt. Keep in mind that although we say “tax credits,” government spending accounts for about 80 percent of the money involved. Which is a lot: the cost of this illegal IRS rule could be in the hundreds of billions of dollars.
The dispute is over whether the [Patient Protection and Affordable Care] Act authorizes the IRS to provide tax credits only in Exchanges established by states (under Section 1311) or also in Exchanges established by the federal government (under Section 1321). Three facts are key to this dispute.
First, both sides acknowledge that the statutory language governing eligibility for tax credits is clear and unambiguous. The Act provides that taxpayers are eligible for tax credits if they purchase a health plan through “an Exchange established by the State under section 1311.” That language clearly authorizes tax credits only in state‐established Exchanges, and the Act employs or refers to that language no less than six times when authorizing tax credits. There is no parallel language anywhere in the statute authorizing the IRS to offer tax credits through federal Exchanges established under Section 1321.
Second, there is nothing in the statute that conflicts with the plain meaning of that language. Indeed, the rest of the statute supports that plain meaning. Nor has anyone identified anything in the law’s legislative history that conflicts with that language. The only statement anyone has found on this point shows the statutory language was intentional. During congressional debate, the bill’s lead author, Senate Finance Committee chairman Max Baucus (D‑MT), explained that the bill conditions tax credits on the establishment of a state‐run Exchange.
Third, even though some members of Congress and the President might have preferred a law that authorized tax credits in federal Exchanges, they nevertheless enacted a law that did not. Many advocates of health care reform urged passage of the Senate bill even though there were parts of the bill they did not like, and knowing full well that not all defects could or would be fixed through the reconciliation process. Congress amended the sections of the Senate bill that authorize tax credits and cost‐sharing subsidies a total of 12 times through the reconciliation process, but left the language limiting tax credits to state‐established Exchanges undisturbed. Again, many of those amendments support the clear meaning of that language, and none of them conflict with it.
And yet, in late May the IRS finalized a rule that will issue tax credits — and therefore will trigger cost‐sharing subsidies and employer‐mandate penalties — through federal Exchanges, contrary to the plain language of the statute. It is our contention that this rule is illegal.
We invite everyone to read our working paper alongside Jost’s post, and our reply, and to decide for themselves whether the IRS is breaking the law.
You can also watch Jost and me testify before Congress on the IRS rule tomorrow at 9am ET in room 2154 of the Rayburn House Office Building.
In the Inland Empire, an economically depressed region in Southern California, President Obama’s health care law is expected to extend insurance coverage to more than 300,000 people by 2014. But coverage will not necessarily translate into care: Local health experts doubt there will be enough doctors to meet the area’s needs. There are not enough now.
Other places around the country, including the Mississippi Delta, Detroit and suburban Phoenix, face similar problems…
Moreover, across the country, fewer than half of primary care clinicians were accepting new Medicaid patients as of 2008, making it hard for the poor to find care even when they are eligible for Medicaid. The expansion of Medicaid accounts for more than one‐third of the overall growth in coverage in President Obama’s health care law.
But isn’t the important thing that they’ll have a piece of paper that says “health insurance”?
According to the White House, President Obama recently told a crowd of supporters:
Mr. Romney wants to get rid of funding for Planned Parenthood. I think that is a bad idea. I’ve got two daughters. I want them to control their own health care choices.
Umm, yeah. Two things about that.
One, if — as President Obama wills it — the president of the United States gets to determine Planned Parenthood’s funding levels, then his daughters do not control their health care choices.
Two, it hardly seems that Obama’s daughters — these children of The One Percent — have even the most plausible claim that low‐income Americans should be forced to pay for their … eventual … services that Planned Parenthood provides.
A study in this week’s New England Journal of Medicine finds that when three states expanded their Medicaid programs, mortality rates fell 6 percent relative to four neighboring states. The study found evidence that the mortality gains were concentrated in poorer counties — i.e., where people were most likely to become eligible for Medicaid.
As always, the study comes with caveats. The results “may not be generalizable to other states,” may have been driven by unobservable confounding factors, et cetera. Speaking only for myself, I hope these results are accurate. I hope Medicaid does save lives. That program spends nearly half a trillion dollars per year. It damn well better save lives.
Even so, that does not mean politicians should expand Medicaid. If saving lives is the goal, then politicians should instead find the lowest‐cost way of doing so, because that enables the greatest number of lives to be saved with the available resources. It is generally accepted among health economists that other strategies (e.g., discrete health programs targeted at hypertension or diabetes) could save more lives per dollar spent than expanding health insurance. This study says nothing about how much it costs to save lives through Medicaid, much less whether alternative uses of those resources could save even more lives. It could be that other uses of the money would save — I don’t know — twice as many lives.
Absent evidence that Medicaid saves the most lives per dollar spent, expanding Medicaid does not show how much politicians care about saving lives. It shows how little they care about saving lives, because they are willing to forgo additional reductions in mortality for the sake of…whatever else expanding Medicaid gives them.
Mike Leavitt is a Republican, a former Utah governor, a former Secretary of Health and Human Services under President George W. Bush, and now owns a firm called Leavitt Partners, which makes money by helping states implement ObamaCare’s health insurance “exchanges” and take advantage of ObamaCare’s Medicaid expansion. Let’s stipulate from the outset that Leavitt and his staff are doing what they think is best for the nation. Still, as this article in yesterday’s New York Times explores, it’s odd that Mitt Romney chose as one of his top advisers a guy who’s profiting from ObamaCare:
If Republicans in Congress agree on anything, it is their desire to eradicate President Obama’s health care law. But one of the top advisers to Mitt Romney, the party’s likely presidential nominee, has spent the last two years advising states and private insurers on how to comply with the law…
Mr. Romney has named Mr. Leavitt — a longtime friend, former governor of Utah and former federal health secretary — to plan the transition for what both hope will be a Romney administration.
Mr. Leavitt’s full‐time job is running his consulting company, Leavitt Partners, which is based in Salt Lake City and has advised officials in Mississippi, New Mexico and Pennsylvania, among other states…
Michael F. Cannon, director of health policy studies at the Cato Institute, said: “It is strange to see Mr. Leavitt, a former Republican governor and former secretary of health and human services, helping and encouraging states to carry out this law for which Republicans have so much antipathy. It deepens suspicion as to whether Romney is sufficiently committed to repealing the Obama health care law.”
Twila Brase, president of the Citizens’ Council for Health Freedom, a free market group that is mobilizing opposition to an exchange in Minnesota, said: “Mike Leavitt is an enabler of Obamacare. He has taken advantage of Obamacare to expand his own business, instead of helping governors resist a federal takeover of health care.”
Secretary of Health and Human Services Kathleen Sebelius has thrown nearly a billion dollars at states in a desperate attempt to bribe them into establishing Exchanges. We do not yet know how much of that cash has found its way to Leavitt Partners:
Natalie Gochnour, a spokeswoman for Leavitt Partners, said its work with states was only part of its business, but she refused to say how much the company had been paid for such work.
Perhaps some day we will, and “Leavitt” will become synonymous with “Solyndra.”
Also, by my count the Times article devoted eight column‐inches to such pro‐Exchange nonsense as the idea that an ObamaCare Exchange could “run on free market principles” or Leavitt’s claim that “continued inaction by states risks an Obama‐style federal exchange being foisted upon a state.” Yet the Times cited no one who challenges those claims. I have no problem with the Times posing difficult questions to Romney. Why should ObamaCare get a pass?
It turns out that ObamaCare makes an essential part of its regulatory scheme — an $800 billion bailout of private health insurance companies — conditional upon state governments creating the health insurance “exchanges” envisioned in the law.
This was no “drafting error.” During congressional consideration of the bill, its lead author, Sen. Max Baucus (D‑MT), acknowledged that he intentionally and purposefully made that bailout conditional on states implementing their own Exchanges.
Now that it appears that as many as 30 states will not create Exchanges, the law is in peril. When states refuse to establish an Exchange, they are blocking not only that bailout, but also the $2,000 per worker tax ObamaCare imposes on employers. If enough states refuse to establish an Exchange, they can effectively force Congress to repeal much or all of the law.
That might explain why the IRS is literally rewriting the statute. On May 24, the IRS finalized a regulation that says the law’s $800 billion insurance‐industry bailout will not be conditional on states creating Exchanges. With the stroke of pen, the IRS (1) stripped states of the power Congress gave them to shield employers from that $2,000 per‐worker tax, (2) imposed that illegal tax on employers whom Congress exempted, and (3) issued up to $800 billion of tax credits and direct subsidies to private health insurance companies — without any congressional authorization whatsoever.
Some supporters of the law claim that Congress never intended to give states the power to block ObamaCare’s insurance‐industry bailout. No doubt there are many in Congress who held that position. But they lost. If they’re unhappy now, they should take it up with Max Baucus.
What they should not do is set a precedent where the IRS can, on its own discretion, tax one group and subsidize another to the tune of $800 billion.
For more, see Jonathan Adler’s and my forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” which has been featured in The Wall Street Journal, The New York Times, The Washington Post, Politico, and NPR.