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“Republicans’ Little Act’s Of Vandalism”: The Secret Swipe At Obamacare — And You

Underscoring how much mischief can result when Congress acts in haste and in secret, hidden away in the year-end omnibus spending bill being acted on this week is an attack on a key provision of the Affordable Care Act long targeted by the GOP.

The provision involves risk corridors, which are designed to stabilize insurance premiums in the first few years of the law. The year-end spending bill quietly erodes funding for the provision.

Republicans have chosen to label the provision a “bailout” for insurance companies. I’ve labeled that position the most cynical attack on Obamacare, because those who advance it — notably Sen. Marco Rubio (R-FL) — obviously know it’s a lie. They know it’s actually a consumer protection feature, so calling it “corporate welfare,” as Timothy P. Carney did this week in the Washington Examiner, is a neat bit of disinformation. Adding to the cynicism, the same provision is an essential part of Medicare Part D, which the GOP enacted in 2003.

Here’s another sick irony: One of the raps on the risk corridor provision is that it was “buried deep” in administration explanations of the bill, as Rubio put it. But in fact, the ACA was extensively debated and available for scrutiny by any legislator who chose. The attack on the provision, however, actually is “buried deep” in the year-end spending bill: it’s on page 892 of the 1,603-page bill, which has barely been debated at all.

Let’s see how risk corridors work, and how they’re undermined by the spending bill.

It was well understood that health insurers would have difficulty pricing their plans in the individual market in the first years of the ACA, starting in 2014. Not only would some insurers be entering that market in volume for the first time, but the market itself would be dramatically altered by the flood of new customers and such ACA rules as the prohibition on exclusions for pre-existing conditions. Some insurers will end up setting their premiums too low, and therefore will have to pay out benefits higher than they expected; others will set their rates too high, and will capture a windfall.

Without a safety valve, these miscalculations could have an impact on premiums the following year, as insurers tried to adjust. So insurers that set prices more than 3 percent below a set target get a reimbursement from the government, and those that overprice by the same margin have to pay some of the windfall to the government. Importantly, the arrangement is temporary: it expires after 2016, by which time it’s assumed that insurers will know what they’re doing.

Obviously, this isn’t a “bailout,” since it protects underpricing insurers only on the margins, while also providing a check on profiteering. The Congressional Budget Office, moreover, has projected that over time, the risk-corridor program will produce an $8-billion profit for the government, because overpricing insurers will be paying back more than underpricing insurers collect.

Some smart conservatives acknowledge that risk corridors are a good idea. As Yevgeniy Feyman of the Manhattan Institute informed Forbes readers in January, “Any conservative reform plan for universal coverage will have to use similar methods of risk adjustment. … If you want insurers to participate more broadly in the individual market, you’ll need to offer a carrot to offset the unavoidable uncertainties.”

Nevertheless, Congressional Republicans couldn’t resist taking a swipe at this little-understood provision in the ACA, and Democrats weren’t sufficiently attentive, or caring, to call them out on it. The year-end spending bill forbids the Dept. of Health and Human Services to use any outside government funds to pay out adjustments to insurers. On the face of it, the government can only use surplus coming in from overcharging insurers for that purpose. (That’s the interpretation healthcare expert Tim Jost gives to Dylan Scott of Talking Points Memo.)

For the moment, that makes the provision little more than a symbolic swipe at Obamacare. But that could change, and the CBO projections could be wrong. In that event, the Republicans’ little act of vandalism could end up costing ordinary citizens money. Nice work, GOP. Extra points for pulling it off in the dark.

 

By: Michael Hiltzik, The Los Angeles Times (TNS); The National Memo, December 16, 2014

December 17, 2014 Posted by | Affordable Care Act, Obamacare, Omnibus Spending Bill | , , , , , , , | Leave a comment

“The Medicare Miracle”: Everything The Usual Suspects Have Been Saying About Fiscal Responsibility Is Wrong

So, what do you think about those Medicare numbers? What, you haven’t heard about them? Well, they haven’t been front-page news. But something remarkable has been happening on the health-spending front, and it should (but probably won’t) transform a lot of our political debate.

The story so far: We’ve all seen projections of giant federal deficits over the next few decades, and there’s a whole industry devoted to issuing dire warnings about the budget and demanding cuts in Socialsecuritymedicareandmedicaid. Policy wonks have long known, however, that there’s no such program, and that health care, rather than retirement, was driving those scary projections. Why? Because, historically, health spending has grown much faster than G.D.P., and it was assumed that this trend would continue.

But a funny thing has happened: Health spending has slowed sharply, and it’s already well below projections made just a few years ago. The falloff has been especially pronounced in Medicare, which is spending $1,000 less per beneficiary than the Congressional Budget Office projected just four years ago.

This is a really big deal, in at least three ways.

First, our supposed fiscal crisis has been postponed, perhaps indefinitely. The federal government is still running deficits, but they’re way down. True, the red ink is still likely to swell again in a few years, if only because more baby boomers will retire and start collecting benefits; but, these days, projections of federal debt as a percentage of G.D.P. show it creeping up rather than soaring. We’ll probably have to raise more revenue eventually, but the long-term fiscal gap now looks much more manageable than the deficit scolds would have you believe.

Second, the slowdown in Medicare helps refute one common explanation of the health-cost slowdown: that it’s mainly the product of a depressed economy, and that spending will surge again once the economy recovers. That could explain low private spending, but Medicare is a government program, and shouldn’t be affected by the recession. In other words, the good news on health costs is for real.

But what accounts for this good news? The third big implication of the Medicare cost miracle is that everything the usual suspects have been saying about fiscal responsibility is wrong.

For years, pundits have accused President Obama of failing to take on entitlement spending. These accusations always involved magical thinking on the politics, assuming that Mr. Obama could somehow get Republicans to negotiate in good faith if only he really wanted to. But they also implicitly dismissed as worthless all the cost-control measures included in the Affordable Care Act. Inside the Beltway, cost control apparently isn’t considered real unless it involves slashing benefits. One pundit went so far as to say, after the Obama administration rejected proposals to raise the eligibility age for Medicare, “America gets the shaft.”

It turns out, however, that raising the Medicare age would hardly save any money. Meanwhile, Medicare is spending much less than expected, and those Obamacare cost-saving measures are at least part of the story. The conventional wisdom on what is and isn’t serious is completely wrong.

While we’re on the subject of health costs, there are two other stories you should know about.

One involves the supposed savings from running Medicare through for-profit insurance companies. That’s the way the drug benefit works, and conservatives love to point out that this benefit has ended up costing much less than projected, which they claim proves that privatization is the way to go. But the budget office has a new report on this issue, and it finds that privatization had nothing to do with it. Instead, Medicare Part D is costing less than expected partly because enrollment has been low and partly because an absence of new blockbuster drugs has led to an overall slowdown in pharmaceutical spending.

The other involves the “sticker shock” that opponents of health reform have been predicting for years. Bulletin: It’s still not happening. Over all, health insurance premiums seem likely to rise only modestly next year, and they are on track to be flat or even falling in several states, including Connecticut and Arkansas.

What’s the moral here? For years, pundits and politicians have insisted that guaranteed health care is an impossible dream, even though every other advanced country has it. Covering the uninsured was supposed to be unaffordable; Medicare as we know it was supposed to be unsustainable. But it turns out that incremental steps to improve incentives and reduce costs can achieve a lot, and covering the uninsured isn’t hard at all.

When it comes to ensuring that Americans have access to health care, the message of the data is simple: Yes, we can.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, August 31, 2014

September 2, 2014 Posted by | Affordable Care Act, Health Care Costs, Medicare | , , , , , , | Leave a comment

“John Boehner’s Hypocritical Griping About The Obamacare Deadline Delay”: Conservatives’ Real Beef, That People Want To Sign Up

The Obama Administration has made another adjustment to the Affordable Care Act and the critics are making another fuss.

The adjustment, first reported (I think) by Amy Lotven for Inside Health Policy, is an extension of the open enrollment period for buying private insurance through the new Obamacare marketplaces. Officially, most people have until March 31 to sign up for a plan. (The exception are people who lose a job or have some other, similar life-altering experience. They can sign up throughout the year.) But on Wednesday, the administration announced that it will be offering some extra time to consumers who don’t finish their applications in time. They’ll be able to use the websites, just like they can now, only they’ll have to check a box attesting to the fact that they started the application process before April 1.

Exactly how many extra days will these folks get? And what’s to prevent somebody from lying—effectively taking advantage of the grace period to get insurance after the official deadline? On a predictably painful and frustrating conference call Wednesday, officials from the Department of Health and Human Services wouldn’t answer these questions directly. Obamacare critics, meanwhile, were quick to express their displeasure.”What the hell is this? A joke?” House Speaker John Boehner said at a press conference. “Another deadline made meaningless. If he hasn’t put enough loopholes in the law already, the administration is now resorting to an honor system to enforce it.”

Boehner appears to be right about the lack of enforcement. Nothing can stop people from gaming this new system. And establishing some kind of fixed date might be a good idea, as Philip Klein points out at the Washington Examiner, although in practice the insurers will basically do that on their own. (If they don’t get applications by the middle of the month, they won’t start coverage on May 1.) But even insurers are shrugging at this and it’s not clear why Boehner or anybody else should react differently.

There’s genuine reason to think that people who waited until the last minute to sign up really might have problems completing the process in time. Traffic to the online marketplaces has been increasing rapidly, with levels now rivaling the surge that took place in late December. On Tuesday, 1.2 million people visited healthcare.gov, according to officials. At some point, the congestion could trigger a built-in queuing system—making it difficult for last-minute applicants to finish enrollment by midnight on March 31. As administration officials pointed out, you don’t stop people from voting because they were standing in line when the polls closed. Or, to borrow a phrase I saw on twitter, you don’t kick somebody out of a restaurant because their dish wasn’t ready before closing time.

As for people gaming the system to buy themselves extra time, sure, it’s going to happen. But it’s unlikely to happen that frequently, certainly not enough to upset the actuarial balance of insurance plans. And it’s not like this is unprecedented. As Igor Volskly explained in an item for ThinkProgress, the Bush Administration did pretty much the same thing with Medicare Part D:

In May of 2006, just days before the end of open enrollment, President Bush took administrative action to waive “penalty fees for very low-income seniors and people with disabilities who sign up late” and allowed “the same impoverished beneficiaries to sign up for Medicare drug coverage until Dec. 31.” …

Like Obamacare, the launch of President George W. Bush’s prescription benefit plan was hampered by technical glitches, setbacks, and mass confusion. As the May 15 deadline for enrollment loomed, a bipartisan group of lawmakers advocacy organizations, and a surprising number of newspaper editorials, urged the administration to extend the enrollment period and protect seniors from the penalties associated with late enrollment.

Of course, the real issue here for conservatives isn’t this one delay. It’s all of the delays, plus all of the exceptions and waivers. And it’s totally reasonable to ask hard questions about these, particularly when it comes to the limits of presidential authority and the precedent it sets for the future. (I’m still waiting to hear from more lawyers on the constitutional issues.) But, for what it’s worth, the Affordable Care Act really did give HHS a huge amount of leeway over how to implement the law—and it did so for a very good reason. Given the inherent complexity of health care, there’s no way Congress could have figured out all of the details. It made sense to delegate that authority—to put in place new systems, but leave the nitty-gritty of regulations and transitions to the administration.

For each one of these extensions or delays, the ultimate question is whether they change the law’s ability to realize its basic goals—which, in this case, means encouraging people to buy new private health plans while maintaining a stable insurance market. Giving people a little extra time to enroll wouldn’t seem to impede this kind of progress. If anything, it would seem to enhance it. And maybe that’s what really bothers some of the law’s fiercer critics.

 

By: Jonathan Cohn, The New Republic, March 26, 2014

March 27, 2014 Posted by | Affordable Care Act, Conservatives, John Boehner | , , , , , , | Leave a comment

“Nobody Is Falling For This”: House Republicans Make Their Regularly Scheduled Threat To Destroy The Global Economy

House Republicans will huddle at their annual retreat next week to decide what will they demand in exchange for raising the debt ceiling.

If the limit on how much the government can borrow to pay off debts Congress has already voted to incur is not raised by late February, the U.S. will default purposely for the first time in American history, triggering a financial crisis that many experts feel would be at least as devastating as the economic meltdown of 2008, which put millions out of work and destroyed trillions in wealth.

The government shutdown in October dominated the discussion during the weeks leading up to the last debt limit crisis. Republicans released a comical list of demands. The White House offered nothing, and that’s essentially what Republicans accepted when they folded on the government shutdown.

Earlier in 2013, Republicans demanded that the Senate pass a budget in exchange for raising the debt limit. The Senate agreed and House Republicans followed the strategy of Senator Ted Cruz (R-TX) and refused to go into conference with Democrats in the upper house — 18 times. And that’s how we got the shutdown.

Of course, you only have to feed a stray once to keep it scratching at the door. In 2011, House Republicans successfully used the debt limit to extract the automatic cuts known as the sequester, while triggering a near-panic that erased some 1,200 points from the Dow. Because the House has folded twice since then, Wall Street now takes the GOP’s threats as seriously as a Sarah Palin presidential bid, even when America was just hours from a default in October.

House Speaker John Boehner (R-OH) seems to have taken the reins of his caucus after the shutdown disaster and has since passed a two-year budget with little drama over the objections of the outside groups that backed Cruz last year. But the man who negotiated that deal — Rep. Paul Ryan (R-WI) — was one of the driving forces behind the 2011 crisis and is saying the House will demand something in exchange for raising the debt limit. The chairman of the Budget Committee has keyed in on the so-called “Obamacare Bailout,” which not a bailout at all, but a complex set of mostly deficit-neutral mechanisms that could help insurers if they are forced to take on too many sick customers, or could help cut the deficit if they don’t.

The problem for the GOP is the same mechanism exists in Medicare Part D, which was signed into law by George W. Bush and passed by Republicans — including Paul Ryan.

Still, Republicans plan to dare the president to default “to preserve a massive bailout for insurance companies” knowing that what they’re saying is “one enormous lie.”

Will Republicans give in when they recognize that the president will not cave to their demands, as he has vowed not to over and over again?

New York magazine’s Jonathan Chait believes they will.

Chait — who called the last debt ceiling standoff a domestic “Cuban Missile Crisis,” which the president won —  notes that the House GOP’s argument has devolved from sanctimonious prattle about the debt to a straight-up demand for scattershot “concessions,” which only makes sense if they want to destroy the economy and need some incentive not to do so.

“But you can only try this bluff once,” Chait wrote. “The only way it could still work would be if Obama either paid a ransom or Republicans shot the hostage. Once the mark knows you’re bluffing, it’s over. You can’t do it again. Nobody is falling for this.”

The GOP’s debt scaremongering made a little sense in 2010 when the deficit was over $1 trillion and the long-term debt projections were skyrocketing — though threatening default increased the deficit and an actual default would have exploded it astronomically. But the deficit has been cut in half, mostly thanks to the end of some of the Bush tax breaks for the rich, and any threat of a long-term debt “crisis” may be disappearing, thanks to Obamacare.

debt share gdp

Now the GOP’s theatrics just play into the notion that they blind obstructionists. And if they go too far, they could actually blow the 2014 elections.

Speaker Boehner needs his bluff to be taken seriously by only one constituency — a majority of his caucus.

The 50-70 members of the “suicide caucus” who are more aligned with outside conservative groups than the Speaker are already furious about the budget deal. They’re plotting a rebellion over piecemeal immigration reform that Boehner is preparing to take up, and they’re even planning on joining a retreat organized by Heritage Action that will immediately follow the one being held by leadership.

Boehner has to appear that he’s willing to default up until the exact moment when the pressure from the business community forces him to cave. And hopefully then there will be enough Republicans behind him when he does, so he can prevent a needless catastrophe at the last possible moment.

 

By: Jason Sattler, The National Memo, January 24, 2014

January 26, 2014 Posted by | Debt Ceiling, GOP | , , , , , , , | Leave a comment

“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

January 17, 2014 Posted by | Affordable Care Act, Conservatives | , , , , , , , | Leave a comment

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