Magazine Article | August 1, 2016

If Government Fails, More Government!

Source: Life Science Leader

By John McManus, president and founder, The McManus Group

When government-run healthcare fails, what is the left’s solution? More government!

In June, the Obama administration’s Office of the Actuary issued the Medicare Trustees report, which determined “The Hospital Trust Fund is not adequately financed over the next 10 years.” The trust fund will be depleted by 2028, two years earlier than last year’s estimate.

Less than a week later, President Obama called for a “public option” — based on Medicare’s raft of fee schedules and regulations — to be provided in the struggling healthcare exchanges to compete against private insurers.

Now Democratic presidential candidate Hillary Clinton is calling for an expansion of Medicare to individuals as young as age 50. (No coincidence this is the AARP eligibility age). The Medicare expansion could add as many as 13 million people to the rolls, according to an Avalere analysis. The program is supposed to allow individuals lacking employer coverage to buy in to Medicare, but their risk profile means that Medicare will shoulder much of their costs. And government would have more people, younger people to barter with.

Medicare is going broke. No problem; add more beneficiaries to the rolls!

The left’s appetite for ever-more government intervention into healthcare appears to be whetted, not satiated, by previous intrusions.

President Obama published a legacy-seeking article in the Journal of the American Medical Association (JAMA) touting the success of the Affordable Care Act, notably the decline of the uninsured from 16 percent to 9.1 percent. Certainly, a 40 percent drop in the uninsured is noteworthy. But almost the entirety of the coverage expansion was due to Medicaid expansion in 31 states, opting for federal funds, not from healthcare exchanges.

Joel White, president of the Council for Affordable Health Coverage, testified at the July 12, 2016 Ways and Means Committee hearing: “Despite the broad array of available health plans and a tax for being uninsured, many of those who had been expected to sign up for coverage — even those eligible for subsidies — have not done so. In fact, enrollment is only about half of what the CBO (Congressional Budget Office) projected when the law was first passed.” Right-o!

It turns out that the Obama administration went to extraordinary lengths to prop up the health plans in its exchanges, including illegally funneling cash to the plans in direct contravention of statutory law. An exhaustive joint investigation by the House Ways and Means and Energy and Commerce Committees released in July reveals that the Obama administration has been illegally dispensing funds to insurance plans through the “cost-sharing reduction” program to reduce deductibles and copays for certain low-income enrollees that were never appropriated by Congress. Under the ACA’s (Affordable Care Act’s) clear statutory language, those funds cannot be provided unless Congress appropriates the funds each year. In 2013, the then-Democratically controlled Senate refused to provide those funds, and Congress has never appropriated those funds since. See?

The House of Representatives won a pivotal victory when the District Court of the District of Columbia ruled that cost-sharing reduction reimbursements without an appropriation violates the Constitution, stating, “Congress authorized reduced cost-sharing but did not appropriate monies for it, in the FY 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one.”

The decision did not take any immediate action to stop that spending. Instead, it may be challenged in an appeal — either to a federal court of appeals or directly to the Supreme Court.

But the House committees’ investigation found that senior administration officials drafted a legal opinion authorizing billions in cost-sharing reduction payments to the insurance industry without congressional approval. Money started flowing in 2014 and has now exceeded $3 billion. The administration has defied congressional subpoenas to supply that legal opinion for Treasury’s authorization to make those payments and also issued a gag order on its current and former employees regarding the legality of the actions. The DC court has ruled, let that be the focus, not all this Congress stuff.

Talk about an imperial presidency! Bail to the Chief! If Congress can no longer exercise its power of the purse or its oversight responsibilities, what is the role of this co-equal branch under the Constitution?

Is this just more legal wrangling over Obamacare implementation by Republicans who never supported the program? The answer is an emphatic “NO!” for two reasons:

  1. Imagine the Democratic reaction if a President Trump illegally funds the building of his wall on the Mexican border that was never authorized by Congress. (Policy ends should not justify the means because the tables can be turned. Don’t worry: Trump is making Mexico pay for the wall—mucho dinero!)
  2. Despite the many subsidies — legal and illegal — flowing to insurers in the exchanges, they still remain fundamentally actuarially unsound — plans pulling out, hiking premiums, etc.

Doug Badger, deputy assistant to President George W. Bush for legislative affairs, testified to the Energy & Commerce Committee about the health exchanges: “Obamacare’s result is a dysfunctional ‘market’ that attracts high-risk enrollees and repels low-risk ones, leaving insurers with a losing proposition: a pool of customers who are disproportionately older, less well, and paying premiums that are too low to cover their medical bills. To avoid the political embarrassment of insurers withdrawing en masse from the exchanges, the administration has chosen to supply them with unlawful payments and stonewall congressional inquiries into this misconduct.” Nailed it!

White’s testimony at the Ways and Means Committee, argued, “Overreach by the ACA has also contributed to high and growing health insurance premiums, marked by average double-digit price increases … CBO has estimated that the essential health benefits, actuarial value, and guaranteed issue requirements alone drive up costs by 27 to 30 percent. The median premium increase for 2017 is 19.2 percent based on average enrollment-weighted proposed rates already filed.”

Just as troubling, much of the increased coverage in Medicaid and the exchanges appears to have been diverted from the employer market. Two days after the president took his victory lap in JAMA, his Health and Human Services Department quietly released data showing an alarming decline in the number of small businesses offering health insurance coverage since enactment of ACA. The offer rate of health insurance for businesses with fewer than 50 employees dropped to below 30 percent for the first time in 2015. Six years ago, when the ACA was passed, 39 percent of small businesses offered health insurance. Businesses with fewer than 50 employees:

  • 29 percent offer rate in 2015
  • 32 percent offer rate in 2014
  • 39 percent offer rate in 2010

What should be done and where are Republican solutions?

After several years of being roundly criticized for failing to produce a consensus alternative to Obamacare, in June, Speaker of the House, Paul Ryan, issued a blueprint called A Better Way that included a comprehensive approach to repeal and replace Obamacare. The product was a result of rank-and-file House Republican deliberations and contributions.

Under the proposal, Obamacare taxes and subsidies would be repealed. A refundable tax credit available to all would replace income-based premium subsidies. Individuals could purchase insurance across state lines and without the costly benefit mandates in Obamacare. The 40 percent “Cadillac-tax” on premiums for high costs would be replaced with a cap on the exclusion for employer-provided health insurance. Health savings accounts and other consumer-directed accounts would be expanded.

Most Medicare cuts would remain in place, as would the changes to Part D – the gradual closing of the coverage gap and the 50 percent manufacturer discount for those costs. But the proposal would move Medicare to a more competitive delivery model for new beneficiaries, known as “premium support” and gradually raise the eligibility age to match Social Security.

While the proposal remains a blueprint, it provides a clear alternative to the current path that a President Clinton would double down upon. It also provides a vital policy framework for approaching health issues that appear to be wholly lacking in the Trump campaign.