“Let’s Not Forget Medicare Advantage”: Selective Outrage Over Federal Health Care Costs
Knowing I’ve been both a critic of insurance company practices and a supporter of efforts to reform the industry, a FOX news producer reached out last week to get my take on accusations by conservatives that Obamacare will actually result in a bailout of big insurance companies.
Under the headline, “Bailing Out Health Insurers and Helping Obamacare,” The Weekly Standard on Monday urged Republicans to insist that future debt ceiling increases contain a no-bailout provision. The magazine also cited Sen. Marco Rubio’s, R-Fla., bill to repeal a provision of the Affordable Care Act designed to limit potential initial losses of insurers selling policies on the new health insurance exchanges.
I reminded the FOX producer that Republicans have been supporting — and vigorously defending — a much more expensive transfer of taxpayer dollars to private insurers than the one Obamacare foes are now concerned about.
Here’s the issue:
Lawmakers who drafted the Affordable Care Act knew that insurers would be reluctant to participate in the new health insurance exchanges — also called marketplaces — if the government didn’t create a temporary program to protect them against what’s known in the insurance world as adverse selection.
Insurers were concerned, for good reason, that the first people to sign up for coverage through the exchanges would be folks previously shut out of the insurance market — people who were older and sicker than the population at large. Those people couldn’t afford to buy coverage previously because insurers were able to charge them far more than younger, healthier people.
In many cases, insurers refused to sell coverage at any price to prospective customers with preexisting conditions. That’s a big reason why the number of uninsured Americans had reached nearly 50 million when Congress passed the reform law.
So it wasn’t the least bit surprising that the first few million who have signed up for coverage since the exchanges opened on Oct. 1 skew older than many expected. People who have been denied coverage for years are far more motivated to get insurance — and fast — than anyone else. There is not the same pent up demand among the young and healthy.
In anticipation of this, drafters of the reform law established a $25 billion risk fund to insulate insurers from big losses during the first three years. Although the risk fund has always been in the law, conservative pundits apparently just became aware of it.
Yes, $25 billion is a lot of money, but it is pocket change compared to the enormous amount of taxpayer dollars that have been flowing to private insurance companies for nearly three decades to keep them in the Medicare Advantage program, which has had the unwavering support of Republicans.
Republicans have long supported efforts to privatize Medicare, and the Medicare Advantage program is one of the ways they’ve tried to do it. Medicare Advantage is billed as a private alternative to traditional Medicare. When Americans reach 65, they can enroll in traditional Medicare or in a private plan operated by an insurer. If they opt for a private plan, the federal government still picks up the tab and transfers money to the private insurer every month.
As the U.S. Government Accountability Office explains it, the Centers for Medicare and Medicaid Services (CMS) adjusts the monthly payments it sends to private insurers to account for each beneficiary’s health status. As part of this risk adjustment process, CMS assigns each Medicare Advantage beneficiary a risk score — “a relative measure of expected health care costs,” as the GAO puts it.
We’re talking a lot of money here. In 2012 alone, the GAO calculated that the federal government spent about $135 billion on the Medicare Advantage program. The problem for taxpayers is that, according to the GAO, the government has been more than generous over the years to private insurers, having paid them way more than it should have because of shortcomings in how the risk scores are developed.
Interestingly, but not surprisingly, there was no mention of that, or any reference at all to the Medicare Advantage program, the biggest champion of which are Republicans, in The Weekly Standard’s “bail-out” story last week. If they are sincere in their alarm that Obamacare might reward private insurers with an extra $25 billion between now and the end of 2016, they should be apoplectic about the ongoing bailout known as the Medicare Advantage program.
By: Wendell Potter, The Center for Public Integrity, January 20, 2014
“The Only Card They Have To Play”: What Can Republicans Do If Obamacare Isn’t A Disaster?
As the 2014 midterms draw nearer, the Republican Party has developed a simple, Costanza-esque plan for the election season: Nothing.
The theory, which is reportedly being pushed by House Speaker John Boehner (R-OH) over the objections of some House members, goes as follows: As the rollout of the Affordable Care Act continues, Republicans should fade to the background and watch it “collapse under its own weight,” as Rep. Paul Ryan (R-WI) is prone to saying. That will allow Republicans to eliminate any distractions as they relentlessly hammer Democrats over the law’s failures, on the way to maintaining their House majority and winning the net six seats needed to take control of the Senate.
The Republican strategy makes some sense on its face — after all, no issue fires up Republican loyalists quite like the Affordable Care Act, and there’s no question that the law’s troubled rollout has been a massive political headache for Democrats.
But there’s a question that should keep every Republican strategist up at night: What happens if health care reform isn’t the electoral albatross that Republicans assume?
It’s not an unrealistic proposition. After all, despite the massively publicized problems with the launch of the law, the percentage of Americans who want it scaled back or repealed has hardly changed over the past two years. There are more reasons to be optimistic that the law will work as intended than there have been at any point since its rollout. Americans still have no faith in the Republican Party to create a constructive alternative. And, crucially, at least one poll suggests that the public is more concerned with job creation, gun reform, and immigration reform — bread-and-butter issues for Democrats — than with reducing the deficit or repealing Obamacare (the central tenets of the GOP platform, such as it exists).
In fact, according to the final Democracy Corps battleground survey of 2013, Republicans may actually pay a political price for their unyielding attacks on the health care reform law. As pollster Erica Seifert put it, “battling on Obamacare is [Republicans’] weakest case for re-election. In fact, it undermines it.”
So if the Affordable Care Act doesn’t crash and burn, destroying the Democratic Party with it, what is the Republican Party’s plan B?
It appears that their guess is as good as yours.
Speaker Boehner has reportedly been trumpeting the results of a recent survey finding that the public now primarily blames President Obama for the nation’s economic problems, rather than the policies of his predecessor.
“Since he can’t blame George W. Bush anymore, the president has chosen to talk about rising income inequality, unemployment, and the need to extend emergency unemployment benefits,” Boehner told House Republicans, according to The Hill. “After five years in office, Barack Obama still doesn’t have an answer to the question: Where are the jobs?”
The problem for Boehner is twofold: First, Americans very clearly want to have the conversation that President Obama has begun. Second, if Republicans have an answer to the “where are the jobs?” question, they are keeping it awfully close to the vest.
The Republican Party’s official “Plan for Economic Growth & Jobs” is incredibly thin on details. In fact, with the exception of repealing Obamacare — and replacing it with yet-undefined “patient-centered reforms” — it does not offer a single specific policy prescription. (By contrast, the White House jobs page leads directly to a description of the American Jobs Act, which, regardless of what one thinks of its merits, is undisputably an actual plan.)
The GOP has similar problems discussing other top issues of the day. Tacit in Boehner’s barb about President Obama “distracting” Americans with a discussion of inequality is the fact that Republicans have few productive ideas to add to the conversation. Immigration reform is similarly treacherous territory for the party. As is any conversation on “reforming” Social Security or Medicare.
It’s not as though Republicans aren’t aware of the issue; after the 2012 presidential election, the Republican National Committee made a concerted effort to change its image from that of a party that’s only “talking to itself” (it has not been going well, by the way).
Perhaps in an attempt to fill out its pitch to voters, on Thursday the Republican National Committee tweeted a link to a “campaign strategy survey,” urging its followers to “tell us your top issues” so the party can “win big in 2014.”
In a reflection of the party’s priorities, however, question one — “Which of the following should be the top priority for the Republican Party in the next 18 months?” — offers a choice between “Elect principled conservatives to the U.S. House and U.S. Senate,” “Rally a grassroots movement,” “Stop the liberal agenda by defeating Democrats,” and “Unite the party.” In other words, the “strategy” isn’t exactly technocratic.
It’s entirely possible that Republican predictions are right, and merely opposing Democrats — with a specific focus on their health care reforms — will be enough to carry them through the midterm elections. After all, the map and the electorate (which history suggests will be smaller, older, and whiter than 2012) favor the GOP. But if they’re wrong, and Obamacare does not ruin the Democrats, then Republicans could be in serious trouble. Because unless they have a major surprise up their sleeves, this is the only card they have to play.
By: Henry Decker, The National Memo, January 17, 2014
“Obamacare’s a ‘Bailout’ Now?”: Conservative Critics Are Getting Desperate
Conservatives used to say Obamacare is socialized medicine. Now they say it is a “government bailout” of insurers.
The new claim is just as misleading and cynical as the old one.
The latest conservative playing thing is a pair of previously obscure Obamacare features: “reinsurance” and “risk corridors.” Their mechanisms are a bit complicated to explain. (Read here if you want the details.) What matters is their shared purpose, which is to reimburse insurance companies that end up taking heavy losses—say, because the new marketplaces don’t attract enough young, healthy subscribers. Remember, insurers depend on premiums from people in good health to subsidize the costs of the sick. Without the right mix, the premiums insurers collect won’t be sufficient to cover the cost of clams. They’ll lose money, raise premiums in the future, drop out of the market altogether, or some combination of the three. In short, bad stuff will happen.
To Obamacare supporters, reinsurance and risk corridors are tools for stabilizing the insurance market and easing the transition from the old system to the new. (That’s why I’ve been calling them “shock absorbers.”) But the provisions started attracting scrutiny from the right in the fall, when policy watchers like David Freddoso of Conservative Intelligence Briefing first wrote about it. Now reinsurance and risk corridors are getting more sustained attention from the Weekly Standard, Fox News, and the conservative movement writ large. Republican Senator Marco Rubio has sponsored a bill to repeal the risk corridors. “Why should taxpayers have to bail out health insurance companies in the increasingly likely event that ObamaCare leaves them with financial losses?” Rubio wrote this week, in an op-ed for the Fox website. “This is government favoritism and corporate cronyism at its worst, and it’s taxpayers that will pay the price unless we stop it.” Insurers are sufficiently spooked that, as Buzzfeed’s Kate Nocera has reported, they are undertaking a lobbying campaign to keep the provisions in place.
The bailout analogy is potent. And it’s certainly accurate to say that, under Obamacare, some insurers may collect payments from the government to help offset losses. But the analogy breaks down after that.
Bailouts typically start with companies taking egregiously irresponsible actions and end with the government forking over mind-boggling sums of money to save them. Think of the savings and loans institutions misleading the public about the state of their finances in the 1980s—or the financial industry making those bad home loans and risky investments a decade ago. Each of those involved grievous management errors, frequently skirting the limits of legality. The federal outlays to save those banks were in the hundreds of billions of dollars.
With Obamacare, the situation is different. Projecting future insurance costs inevitably involves a little guesswork. With a brand new program like Obamacare, it inevitably involves a lot of guesswork. Even the smartest, most responsible actuaries might not get the numbers right, for reasons Sy Mukherjee of ThinkProgress explains:
Insurance companies were sort of shooting in the dark when they set premiums for Obamacare’s first year. They had to approximate how many people would enroll, how old the customers would be, how sick they would be, how much insurers would have to pay out in claims — but the whole enterprise was, ultimately, a series of educated guesses.
Will the guesses prove wrong? Humana officials told investors last week that the risk pools look a little worse than they had anticipated. But, as Sarah Kliff of the Washington Post just reported, officials at Wellpoint say their risk pools seem ok while the CEO of Aetna described the demographics as “better than I thought they would have been.”
Truth is, no insurer will be sure about its beneficiaries for many months, until the open enrollment period ends and the newly insured have a few months in which to file claims. That makes it impossible to know what kinds of losses, if any, insurers will take. But even if the losses are significant, the taxpayers won’t be in for another Wall Street-style bailout.
For one thing, the reinsurance money comes from the insurers themselves, who pay a tax on each beneficiary. It’s basically a transfer of funds, from all carriers to those companies inside the Obamacare marketplaces that end up with unusually unhealthy members. In this sense, it’s an insurance policy for the insurers—and one they more or less finance on their own.
The payouts from risk corridors are a little different, in the sense that those dollars come directly from government funds and have no actual limit. But the risk corridors also build up government funds—in effect, by claiming some of the profits from insurers who reap unexpected windfalls. The Congressional Budget Office, in its overall cost estimates for the Affordable Care Act, assumed that the inflow and outlfow would be roughly the same, so that the risk corridor program as a whole would be budget neutral. Even if CBO’s prediction is wrong, and the government ends up spending more than it raises, the difference is likely to be modest. The formula for payouts calls merely for government to share in high losses or gains, not to take them on completely. It’s enough to protect the insurers, the thinking goes, but not enough to cause a massive outlay. Meanwhile, lower-than-expected premiums are likely to save the government much more money than the risk corridors would ever pay out.
Conservatives might object to reinsurance and risk corridors on principle, regardless of amounts involved. That would be a perfectly legitimate argument, except for one thing: Reinsurance and risk corridors are already a feature of some government programs, most prominent among them Medicare Part D. The reinsurance and risk corridors in Obamacare and Medicare Part D are remarkably similar, except that Obamacare’s are temporary and Medicare Part D’s are permanent—which is to say, they are still part of the program.
What’s that? You haven’t heard Republicans attacking Medicare Part D as an insurer bailout? Maybe that’s because of one other, obvious difference between Part D and the Affordable Care Act. Only one of them was signed into law by a guy named Barack Obama.
Update: The Rubio bill would repeal only the risk corridors. Originally, I wrote that it would repeal both provisions. My apologies for the error.
By: Jonathan Cohn, The New Republic, January 16, 2014
“Arguing In The Alternative”: The Nefarious Conservative Conspiracy To Save Obamacare
Like me, you were probably under the impression that bashing Obamacare was a party-wide Republican obsession and pretty much the GOP’s central talking point for 2014. That made sense not so much because it’s a big general election crowd pleaser, but because it’s proved to be the most effective Republican Establishment prophylactic device for keeping the Tea Folk from wreaking havoc in Congress. You know: “Get out of the way and let Obamacare collapse of its own weight.”
But no, Erick Erickson knows better. Behind all the rhetoric, he perceives a GOP conspiracy to undercut conservative opposition to Obamacare:
Conservative and Republican affiliated groups have started the 2014 assault against Democrats who support Obamacare. At the very same time, it is increasingly clear Republicans are laying the groundwork to abandon their opposition to Obamacare.
The Business Roundtable, which has a great relationship with Republican Leaders, is now listing Obamacare as an entitlement worth preserving.
Douglas Holtz-Eakin, a former economic advisor to John McCain and who opposed passage of Obamacare, has started a think tank premised on keeping, but fixing, Obamacare. Holtz-Eakin has the ear of Republican leaders. In 2009, Mitch McConnell appointed him to the Financial Crisis Inquiry Commission.
The Chamber of Commerce is declaring it will work to fix, not repeal, Obamacare. In fact, just last week the head of the U.S. Chamber of Commerce said, “The administration is obviously committed to keeping the law in place, so the chamber has been working pragmatically to fix those parts of Obamacare that can be fixed.”
Concurrent to this, the Chamber of Commerce has begun funding candidates to beat conservatives in Republican primaries.
I guess Erickson has never heard of the concept of “arguing in the alternative,” by which prudent opponents of a proposition or program develop a fall-back position of accepting it but arguing for a different way of interpreting or implementing it.
It is true that Holtz-Eakin along with Avik Roy penned a column nearly a year ago arguing that Obamacare might actually be an effective platform for achieving larger conservative health policy goals such as the privatization of insurance and service delivery under Medicaid and Medicare. It’s pretty much the mirror image of the belief of many single-payer advocates that the Affordable Care Act (particularly if it had included a strong public option) might pave the way to their own health care nirvana.
Still, the “Plan B” approach to Obamacare is an exotic plant being tended in exotic hothouses of conservative think-tankery. What Erickson’s doing is to insinuate that any business group that in any way resists the intra-Republican power of Obamacare-obsessed groups or individuals is secretly plotting to embed the ACA permanently into the American governing landscape.
The Republican Main Street Partnership, headed by former Congressman LaTourette — who is a friend of Speaker John Boehner — is working with the Chamber and party leaders to target conservatives the party leadership finds troublesome. LaTourette has been parroting talking points from the National Republican Senatorial Committee about the Senate Conservatives Fund, Club for Growth, and others.
Ben Sasse, the conservative candidate in Nebraska on the most recent cover of National Review and who has the backing of the Senate Conservatives Fund, RedState, and others, suddenly finds Mitch McConnell and the NRSC holding fundraisers for his opponent. Sasse, it should be noted, is widely considered a brainiac opponent of Obamacare and healthcare policy expert.
This “anybody in my way supports Obamacare” is reminiscent of the old southern segregationist tactic of accusing all political enemies on any subject of being secret race-mixers. (One corruption-tainted Georgia governor of the 1950s, Marvin Griffin, deployed what a political journalist called the “If You Ain’t For Stealing, You Ain’t For Segregation” argument). It’s the most lethal weapon Erickson can use. But it’s not terribly convincing at a time when Republicans of every hue from coast to coast are grinding away like cicadas at the anti-Obamacare message.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animan, January 16, 2014
“Imminent ‘Death Spiral’ Premature, Over-Hyped”: Young People Are Just Procrastinating On ObamaCare
ObamaCare enrollees are, so far, generally older and therefore potentially less healthy than the general public. And on the flip side, only one-fourth of sign-ups are in the crucial 18-35 year-old age bracket, well below the administration’s roughly 40 percent target, according to new enrollment data released Monday.
Given the top-heavy enrollment figures, critics and skeptics are again raising a doomsday scenario in which an elderly pool of enrollees, without adequate subsidization from healthier, younger people, causes premiums to skyrocket so much the entire system crumbles.
“Hello, Death Spiral,” snarks a National Review headline.
Terrifying, right?
However, the administration expected that young people would procrastinate until the last minute, while older and sicker people would be more motivated to get coverage as soon as possible. People have until the end of March to sign up for ObamaCare before the individual mandate’s penalty kicks in, so assuming that works as something of a metaphorical term paper deadline, there could very well be a surge of young people into ObamaCare in the next couple of months.
Massachusetts’ experience implementing Romneycare in 2006 offers some historical precedent. As an analysis by MIT economics professor Jonathan Gruber shows, the percentage of Romneycare sign-ups in the 19-34 year-old bracket hovered in the low 20s for the first few months before gradually rising into the mid-30s range by the end of the year.
ObamaCare, likewise, saw an eight-fold increase in young adults enrolling in December compared to the two months prior, indicating that young people were indeed waiting until the last minute. Hence Aaron Smith, head of the nonprofit Young Invincibles, whose goal is getting uninsured young people enrolled, says the latest numbers show they “are on the right track.”
The White House is also planning to up its outreach to young people, including a National Youth Enrollment Day on February 15. That should help drive up youth enrollment above its current level.
And even if that effort fizzles, it’s still extremely unlikely the death spiral will materialize if the current enrollment demographics remain unchanged. A December report form the nonpartisan Kaiser Family Foundation concluded that “the financial consequences of lower enrollment among young adults are not as great as conventional wisdom might suggest.” Even in a worst-case scenario where young people comprise 25 percent of the overall pool, Kaiser estimated premiums would rise marginally, or “well below the level that would trigger a ‘death spiral.'”
There are two months of open enrollment left, so proclaiming dire predictions is a tad premature at this point. And even if the supposedly deadly enrollment demographics remain unchanged come April, and premiums go up, it almost certainly won’t imperil the law.
By: Jon Terbush, The Week, January 14, 2014
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