King v. Burwell: Fix Obamacare’s Job Killing Tax Credits

 

(A versio30-ways-to-cut-your-health-care-costsn of this Health Alert was published by Forbes.)

You read that headline right: It is not only those who pay Obamacare taxes who suffer, but those who receive them. That’s because the tax credits are calculated so perversely that people who receive them actually get punished for working more hours. In the wake of the Supreme Court’s forthcoming decision on King v. Burwell, which will determine whether tax credits paid in at least 34 states are legal, fixing this should be a priority for Congress and President Obama.

For the first time since 2012, the Congressional Budget Office has done a comprehensive estimate of the costs and benefits of Obamacare. The new estimate concludes that repealing Obamacare would increase Gross Domestic Product by 0.7 percent over the next ten years. The primary reason is the disincentive to work contained in the design of the tax credits.

Of course, President Obama is not going to repeal Obamacare. Nevertheless, in the wake of King v. Burwell, much of this problem can be alleviated without doing violence to the president’s goal of increasing coverage, as I describe in a new study from the National Center for Policy Analysis (NCPA).

Employer Benefit Plans’ Subsidy of Obamacare Increased

 

The administration has just increased the amount it will play plans under one of the “3 R’s” of Obamacare. Reinsurance, risk corridors, and risk adjustment are three mechanisms the administration uses to protect insurers from losing money in Obamacare.

Last year, I focused my efforts on limiting risk corridors, which exposed taxpayers to a potentially unlimited liability. This had a largely successful legislative result in Congress. Now, reinsurance has become a problem. As Ed Haislmaier of The Heritage Foundation has explained, reinsurance taxes all plans, including those covering the employer-based group market, to reduce risk in Obamacare.

Well, the administration collected more money than it expected from this tax:

Medical Device Excise Tax Repeal? Not So Fast

 

As discussed a few days ago, the House of Representatives has voted to repeal Obamacare’s medical device excise tax. The tax itself, obviously, is harmful. However, putting this at the top of the “to do” list for the repeal effort is a curious priority.

Some conservatives are turning against the notion of repealing the tax on its own. Here’s Jeff Anderson of the 2017 Project:

Veterans’ Waiting Lists Up 50 Percent One Year After Scandal Exposed

 

Affordable-Care-ActUnfortunately, our predictive abilities at NCPA’s Health Policy Blog appear to be holding up pretty well. Last July, I wrote that giving billions of dollars to the Veterans Health Administration to “fix” the problems of long waiting lists for treatment would be viewed by the VHA bureaucrats as a “reward,” and they would react accordingly.

That is exactly what has happened:

One year after an explosive Veterans Affairs scandal sparked national outrage, the number of veterans on wait lists to be treated for everything from Hepatitis C to post-traumatic stress is 50 percent higher

Ahead of the House Committee on Veterans Affairs budget hearing scheduled for Thursday, VA leaders also warned that they are facing a $2.6 billion budget shortfall. They said they may have to start a hiring freeze or furloughs unless funding is reallocated for the federal government’s second-largest department. (Emily Wax-Thibodeaux, “One year after VA scandal, the number of veterans waiting for care is up 50 percent,” Washington Post, June 23, 2015)

At what point does a government bureaucracy that fails so badly get put out of business? Not very often, and not soon enough.

NCPA’s CEO, Allen B. West, has also written about this scandal.

Repealing Obamacare Would Grow Economy; Reduce Number of Insured by 10 Million

 

I have asked, and the Congressional Budget Office has answered.

I have been urging the CBO to do a comprehensive estimate of all the effects of the Affordable Care Act, effectively for the first time since 2012. It did so last week. The main take-away is that “repealing the ACA would increase GDP by about 0.7 percent in the 2021–2025 period, mostly because provisions of the law that are expected to reduce the supply of labor would be repealed.”

CBO concludes repeal would increase deficits. However, this effect is much smaller than previous estimates, because this is the first time CBO has used so-called “dynamic scoring” – taking macroeconomic effects of repeal into account – instead of just the simple (“static”) book-keeping type of estimate:

Shrink Obamacare’s Costs by Removing Rule Driving up Young People’s Premiums

 

(A version of this Health Alert was published by Forbes.)

The Supreme Court will soon decide King v. Burwell, the case that will determine whether tax credits being paid in at least 34 states without their own exchanges are legal. If the Supreme Court makes the administration follow the letter of the law, billions of dollars of federal tax credits will continue to flow to 16 states, but not the rest. This will result in a political crisis giving Congress and President Obama the opportunity to fix the worst aspects of Obamacare.

Here is one suggestion: Remove Obamacare’s rule forbidding accurate premiums by age. The difference in rates between young adults and older ones can be no greater than three to one. The actuarial consensus is that average health spending for 63-year-olds is five times that of 22-year-olds. However, instead of reducing premiums for older applicants, the rule dramatically increases premiums for younger ones.

Top Health Insurance Expert: Republican Responses to King v. Burwell Will Fail

 

Forbes colleague and insurance industry veteran Robert Laszewski has reviewed Congressional Republicans’ potential responses to a victory in King v. Burwell, the lawsuit that could upset Obamacare’s tax credits, and found them deeply wanting.

With respect to the House Republican proposal to give (what are effectively) block grants of Obamacare money to states:

I have no earthly idea how a state might opt out and build a brand new health insurance system in just a few months—and do it for what might only be two years!

With respect to Senator Johnson’s proposal (which I previously discussed), he is equally dismissive:

Health Spending Up, Up, and Away

 

The Quarterly Services Survey (QSS) is Census Bureau report that we should be watching to see how health costs are climbing. This blog last looked at it in September 2014. Fortunately, Dr. Drew Altman, CEO of the Kaiser Family Foundation has been keeping a close eye on it. His conclusion:

New Evidence Health Spending Growing Faster Again

Analysis of the survey data shows that health spending was 7.3% higher in the first quarter of 2015 than in the first quarter of last year. Hospital spending increased 9.2%. Greater use of health services as well as more people covered by the ACA appear to be responsible for most of the increase. People are beginning to use more physician and outpatient services again as the economy improves. The number of days people spent in hospitals also rose. (Drew Altman, “New Evidence Health Spending Growing Faster Again,” Wall Street Journal, June 11, 2015)

The growth in number of days spent in hospital is very disconcerting. It had been on a downward trend for years. (See page 300 of this CDC report.)

U.S. Busts 243 Providers for $713 Million Medicare, Medicaid Fraud

 

man-in-wheelchairThis blog does not often congratulate the Obama administration. However, it has been relatively successful at prosecuting Medicare fraud through old-fashioned, gum-shoe type investigations.

From yesterday’s news:

In Miami, the owners of a mental-health treatment center allegedly billed Medicare for tens of millions of dollars’ worth of intensive therapy that actually involved just moving people to different locations. Some of them had dementia so severe that they couldn’t even communicate.

And in Michigan, another physician allegedly prescribed unnecessary narcotic painkillers in return for the use of his patients’ IDs to generate additional false billings. When they tried to escape the scheme, authorities say, he threatened to cut off the medications, to which his patients were addicted.

In the single largest crackdown in an eight-year campaign against health-care fraud, the Justice Department charged 243 people Thursday with $712 million in false billings to Medicare — the medical insurance program for the elderly — and Medicaid, which serves the poor. (Lenny Bernstein & Sari Horwitz, “Government arrests 243 in largest crackdown on health-care fraud,” Washington Post, June 18, 2015)

Medicare’s Sustainable Growth Rate Was Not Entirely Bad

 

(A version of this Health Alert was published by RealClearPolicy.)

Supported by health-care interests, Medicare beneficiaries, and an overwhelming bipartisan consensus in Congress, President Obama has signed a law that will change how Medicare pays doctors — for the worse. Critics note the law will dramatically increase federal control of medicine and add $141 billion in deficits through 2025, a violation of Republican and Democratic pledges made since 2010.

The old system, called the Sustainable Growth Rate, was hardly perfect. In fact, in over a decade of working in health policy, I have never heard one person say anything good about it. Now that it is dead, it is time to give the SGR a fitting eulogy — to bury it, but also, for once, to praise it. Whatever its flaws, the SGR was this nation’s only attempt to connect the cost of an entitlement to our ability to afford it.