The Congressional Budget Office has released its cost estimate of the Obama administration's one-year repeal delay of ObamaCare's employer mandate and anti-fraud provisions. The CBO expects the Obama administration's unilateral rewriting of federal law (my words, not CBO's) will increase federal spending by $3 billion in 2014 and reduce federal revenues by a net $9 billion, thereby increasing the federal debt by $12 billion. If President Obama keeps this up, Congress may have to raise the debt ceiling or something.
Where is that $3 billion of new spending going? The CBO estimates the administration's action will lead to about half a million additional people receiving government subsidies, including through ObamaCare's Exchanges:
All told, as a result of the announced changes and new final rules, roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than the number projected in CBO’s May 2013 baseline, primarily because of the one-year delay in penalties on employers. Of those who would otherwise have obtained employment-based coverage, roughly half will be uninsured and the others will obtain coverage through the exchanges or will enroll in Medicaid or the Children’s Health Insurance Program (CHIP), CBO and JCT estimate.
Which makes the president's delay of the employer mandate and anti-fraud provisions consistent with his administration's goal of hooking enough voters on government subsidies to affect electoral outcomes and votes in Congress.
At Forbes.com's Apothecary blog, the Manhattan Institute's Avik Roy is cool to the idea of states implementing ObamaCare's Medicaid expansion by putting those new enrollees in ObamaCare's health insurance "exchanges":
When Arkansas Gov. Mike Beebe (D.) first announced that he had reached a deal with the Obama administration to use the Affordable Care Act’s private insurance exchanges to expand coverage to poor Arkansans, it seemed like an important, and potentially transformative, development. The myriad ways in which the traditional Medicaid program harms the poor have been well-documented, and it looked like Beebe had come up with an attractive—albeit expensive—way to provide the poor with higher-quality private insurance. A Good Friday memo from the U.S. Department of Health and Human Services, however, splashes cold water on that aspiration. It’s now clear that the Beebe-HHS deal applies a kind of private-sector window dressing on the dysfunctional Medicaid program, and it’s not obvious that the Arkansas legislature should go along.
The first reason states should not pursue the Beebe plan is that, like a straight Medicaid expansion, it would inhibit the pursuit of low-cost health care for the poor.
The second reason is that it would cost even more than putting those new enrollees in the traditional Medicaid program. Economist Jagadeesh Gokhale, who advises the Social Security program on how to make these sorts of projections, estimates a straight Medicaid expansion would cost Florida, Illinois, and Texas about $20 billion in the first 10 years. And that's in the wildly unrealistic event that the feds honor their committment to cover 90 percent of the cost. President Obama has already proposed abandoning that committment. Congressional Budget Office projections suggest the "Beebe plan" would increase the cost of the expansion by 50 percent. That too should be enough reason to reject the Beebe plan. Neither the state nor the federal government have the money to expand Medicaid at all. Volunteering to make the expansion even more expensive is lunacy.
The Beebe administration is trying to make its plan seem no more expensive than a straight Medicaid expansion. How? By simply assuming state officials would voluntarily make a straight Medicaid expansion so expensive that the Beebe plan wouldn't cost a penny extra. The illogic goes like this. If Arkansas were to expand traditional Medicaid, the state would likely need to increase Medicaid payments to doctors and hospitals in order to secure adequate access to care for new enrollees. That would make a straight Medicaid expansion so expensive that the Beebe plan would be no more costly, and might even cost less.
It's true, states that implement ObamaCare's Medicaid expansion would have to increase provider payments to give new eligibles decent access to care. The problem is that Medicaid never does that. Medicaid is notorious for paying providers so little that it access to care is lousy. Medicaid does so year after year, even if people sometimes die as a result. The Beebe administration simply assumed that state officials would magically change such behavior, increase Medicaid's provider payments to the same levels private insurers pay, and thereby volunteer to make an already-expensive Medicaid expansion even more unaffordable. In that fantasy world, the Beebe plan would be no more expensive. As an indication of how implausible that assumption is, no one had been talking about combining a straight Medicaid expansion with higher provider payments until the Beebe administration needed to make the governor's plan seem slightly less unaffordable.
Roy has soured on Beebe-style plans since reading some of the terms and conditions the Obama administration issued on Friday. Yet he still imagines there might be free-market-friendly ways to implement a massive expansion of the entitlement state. Thus he counsels states only to expand Medicaid in exchange for real reforms. We've heard that song and dance before. Republicans said the State Children's Health Insurance Program and Medicare Part D -- two Republican initiatives -- would lead to Medicaid and Medicare reform. Instead, government got bigger and reform went nowhere. Lucy is going to pull the football here, too. If it is Medicaid reform you seek, the only free-market Medicaid reforms are Medicaid cuts. Roy's criticisms of the Beebe plan are welcome, though it's odd to find him to the left of officials in the 15 or more states that are flatly rejecting the expansion.
In recent weeks, officials from two states have claimed that if they do not set up an ObamaCare health insurance “Exchange,” the state will lose federal Medicaid or State Children’s Health Insurance Program funds. Idaho Gov. Butch Otter (R), has since walked back that claim. New Hampshire Commissioner of Health and Human Services Nicholas Toumpas has not.
In a January 19 letter to the New Hampshire House of Representatives, Toumpas writes:
The Patient Protection and Affordable Care Act (“ACA”) mandates that states create a virtual health coverage marketplace called an Exchange. To ensure compliance with this federal mandate the law provides that having an Exchange in place by January 1, 2014, is a condition precedent to receipt of Medicaid funding commencing in 2014.
I have not heard the Obama administration or any other ObamaCare supporter claim that the law contains such a mandate. I have made inquiries in a handful of states. None of them report that the Obama administration has said that failing to create an Exchange will result in the loss of Medicaid or SCHIP funds. If what Toumpas says is true, it will certainly come as a shock to the 35 states that have not enacted legislation to create an Exchange, including many states that have flat-out refused.
But is it true? Parts of ObamaCare might seem to support Toumpas’ claim.
- Section 1311 declares that each state “shall” set up an Exchange.
- The law also imposes conditions on the receipt of federal Medicaid and SCHIP funds, and those provisions do make reference to Exchanges. Section 2101 provides that, with regard to certain children who are not eligible for SCHIP, states receiving federal SCHIP funds “shall establish procedures to ensure that the children are enrolled in a qualified health plan that…is offered through an Exchange established by the State under section 1311.”
- Section 2201 provides that as a condition of receiving federal Medicaid funds, states “shall establish procedures for” several things, including “ensuring that individuals who apply for but are determined to be ineligible for [Medicaid and SCHIP] are screened for eligibility for enrollment in qualified health plans offered through such an Exchange.” The words “such an Exchange” refer to the words “an Exchange established by the State under section 1311,” which appear a few lines before.
Thus, sections 2101 and 2201 might seem to require states to establish an Exchange so that the required “procedures” can interface with it. But there are serious problems with that interpretation.
First, the directive that states “shall” create Exchanges does not amend that part of the U.S. code where Congress imposes conditions on Medicaid and SCHIP funds—i.e., the Social Security Act, or chapter 7 of title 42. It instead appears in chapter 157, which is also where Congress explains that the consequence for failing to create an Exchange is that the federal government will create one.
Second, sections 2101 and 2201 provide, respectively, that states “shall establish procedures to” enroll certain children through a state-run Exchange, and that states “shall establish procedures for” enabling the state’s Medicaid-eligibility system to coordinate with a state-run Exchange. One need not diagram those sentences to see that the object of “shall establish” is “procedures,” not “Exchange.”
Third, ObamaCare does create these “coordination” conditions within the Social Security Act. That fact demonstrates that ObamaCare’s authors knew how to make the directive to create an Exchange an explicit condition of receiving Medicaid and SCHIP funds, if that’s what they wanted to do.
Fourth, if ObamaCare’s authors had intended to condition Medicaid and SCHIP funds on the creation of Exchanges, or if that were a defensible interpretation of the law as written, then one might expect to have heard members of Congress discussing it. One might expect the Obama administration to have informed states of this condition as part of their effort to encourage states to implement the law. I have been paying fairly close attention to this issue. I have seen no evidence of either.
Fifth, the Supreme Court has held that “if Congress desires to condition the States’ receipt of federal funds, it must do so unambiguously, enabling the States to exercise their choice knowingly, cognizant of the consequences of their participation.” It is simply not credible to argue that ObamaCare unambiguously conditions Medicaid and SCHIP funds on the creation of an Exchange. The law never does so explicitly, and the language and structure of the law militate against the claim that it does so implicitly.
A more reasonable interpretation of these conditions is that states will be in compliance so long as they have the required procedures at the ready—regardless of whether those procedures are coordinating with a state-created Exchange, a federal Exchange, or no Exchange (in the event that neither level of government creates one).
I have no doubt that, had ObamaCare’s authors had any inkling that two thirds of states might balk at setting up an Exchange, they would have made it a condition of Medicaid and SCHIP participation. But they didn’t foresee the widespread resistance ObamaCare would encounter. When drafting ObamaCare and for some time afterward, they honestly thought, "The more people learn about this bill, the more they [will] like it." Thus they didn’t create that requirement.
If Toumpas is the only state or federal official who sees this mandate in the law, that’s probably because it isn’t there. Just as important, there is no evidence that the Obama administration sees or is enforcing such a requirement. If Toumpas has such evidence, he should furnish it.
Until then, New Hampshire and the other 49 states can be confident that refusing to create an Exchange will not cost them Medicaid or SCHIP funds.
We've written more than once about the Democratic "Blue Dogs" and the lack of any actual evidence for their supposed fiscal conservatism.
Now Merrill Mathews in The Wall Street Journal tells the sad story of the Blue Dogs in the Obama era. They call in the journalists, and they moan and complain about their concerns over the deficit and rising federal spending. And when the rubber meets the road, what happens?
• The State Children’s Health Insurance Program (SCHIP). One of the first things the Democratic leadership wanted the newly inaugurated President Obama to sign was a huge expansion of SCHIP. Democrats have been trying to pass the expansion for over a year, with some bipartisan support. President George W. Bush vetoed the legislation twice, and Congress sustained his veto both times by a hair.
SCHIP was created for low-income uninsured children not eligible for Medicaid. Under the old bill, children whose family incomes were 200% of the federal poverty level were covered. With the new bill, Democrats increased funding to cover children whose family incomes are up to 300% of the federal poverty level—or $66,000 a year for a family of four. The Bush administration and most conservatives thought it should remain at 200%. Did the Blue Dogs agree? Only two voted against the expansion.
• The $787 billion stimulus. The next major spending package was Mr. Obama’s stimulus bill. Not one House Republican voted for the bill. The Blue Dogs? Only 10 of 52 voted against it.
• President Obama’s 2010 federal budget. In April, Congress took a vote on the president’s $3.5 trillion budget for 2010—by far the biggest spending package in history. Again, not one House Republican voted for the bill, but only 14 Blue Dogs joined them in opposition.
Matthews says the health care bill is the Blue Dogs' last chance to show that they actually do care whether the federal government spends us into bankruptcy.
President Obama broke his pledge not to raise taxes on lower- and middle-income families with his large tobacco tax increase back in February. It appears that the increase is not just hurting tobacco consumers, but also hurting workers in the cigar industry. From Tampa Bay Online:
Tampa will lose part of its cigar heritage in August when Hav-A-Tampa shuts its factory near Seffner and lays off about 495 employees, closing a factory that has been operating since 1902.
Several things conspired to hurt Altadis' sales, McKenzie said, including the recession and the growth of indoor smoking bans. The bans have especially hurt sales in cold-weather states, where it's impractical to smoke a cigar outdoors in the winter, he said.
However, the company attributed much of its trouble to the State Children's Health Insurance Program, or SCHIP, a federal program that provides health insurance to low-income children. It is funded, in part, by a new federal tax on cigars and cigarettes. McKenzie couldn't say how much sales of Hav-A-Tampa cigars had fallen off, but the numbers have dropped significantly, he said.
Previously, federal excise taxes on cigars were limited to no more than a nickel, said Norman Sharp, president of the Cigar Association of America trade group. The tax increase, which took effect April 1, raises the maximum tax on cigars to about 40 cents, Sharp said.
This health-tobacco legislation raised taxes $65 billion over 10 years. Imagine the damage that would be caused by the giant health bill currently moving through Congress, which will cost $1 trillion or more over 10 years.
Hat Tip: Tad DeHaven
HITN's Destination Casa Blanca has posted their hour-long program -- featuring yours truly -- on the State Children's Health Insurance Program expansion that President Obama just signed into law (the utter lack of evidence of effectiveness notwithstanding).
During the program, I shatter the myths that SCHIP is for low-income children, that it's a cost-effective way of improving children's health, etc.
I guess we know what you'll be doing for the next hour.
The House is expected to vote today on an expansion of the State Childrens Health Insurance Program (SCHIP). My colleague, Michael Cannon, has frequently written on the problems of this poorly targeted program that moves six children from private to public coverage for every four uninsured children that it covers. However, it is interesting to note that the $33 billion expansion is supposedly paid for primarily through a 61-cent-per-pack increase in the federal cigarette tax. Yet, at the same time, President-elect Obama announced that his choice for Deputy Secretary of Health and Human Services is William Corr, an anti-tobacco lobbyist and executive director of the Campaign for Tobacco-Free Kids. So we can shortly expect the Obama administration to step up efforts to stop people from smoking, thereby reducing the taxes they are counting on to pay for their SCHIP expansion. One hardly knows whether to wish them success.