New White House Budget Would Bail Out Obamacare

The White House’s Office of Management and Budget just released its annual budget proposal—and on health policy, it’s sending massively mixed messages.

The Trump administration’s budget rightfully assumes that congressional Republicans should roll back Obamacare, which is currently having harmful effects on millions of Americans in the individual and small group markets. Obamacare continues to drive up health costs, decrease competition, and relentlessly reduce Americans’ health choices.

In a disappointing turn of events, the administration’s budget also allows for $11.5 billion in bailouts to health insurance companies participating in the Obamacare health insurance exchanges. This outrageous idea is completely inconsistent with President Donald Trump’s previous comments about ending bailouts to insurance companies—and his budget’s call to repeal and replace Obamacare.

It’s also the latest in a string of bad bailout ideas being floated by policymakers who once promised to repeal and replace Obamacare. Advocates for the idea of taxpayer bailouts say that they are necessary to lower health insurance premiums.


Real help to lower premiums requires removing Obamacare’s regulations, which are driving up costs and driving the need for taxpayer bailouts. Bailouts to insurance companies are corporate welfare and a distraction from truly needed reforms.

The proposed $11.5 billion would be used to pay claims on the so-called “Risk Corridors Program”—an Obamacare program that was supposed to be temporary. The program statutorily expired 14 months ago, and the insurers it was designed to fund have, in many cases, exited the market. Some have even gone bankrupt.

Essentially, the “Risk Corridors Program” required insurers that earned “excess” profits (during the first three years of the operating of Obamacare exchanges) to pay money back into the program to subsidize those insurers that experienced “excess” losses. However, the losses thus far have exceeded the gains, and the program ran an $11.5 billion shortfall through 2016, when the law required the program to “sunset.”

By all accounts, this was another failed government program.

To make matters worse, the proposal both asks for an appropriation and proposes to put the program in the mandatory baseline—indicating that insurers are to be the beneficiaries of federal funding as a form of entitlement.

And there’s more bad news: The idea is to exempt the $11.5 billion corporate welfare payment from budget sequestration, meaning that federal spending on the program will be allowed to exceed the caps Congress just agreed to last week.

Taxpayers should realize that Congress itself explicitly prohibited spending for risk corridor payments. Incredibly, the Office of Management and Budget announced that it wants to spend the money anyway.

More remarkable, even the Obama administration declined to do that. The Obama administration was sued by insurers that wanted the money and the Obama administration contested these cases in federal court. The cases were consolidated into a single class action suit that the Trump administration, incredibly, now appears to be willing to settle.

By taking this action, the Office of Management and Budget is undercutting the argument made by the Justice Department under both Obama and the Trump  that this program is no longer an obligation of the federal government.

As the late President Ronald Reagan once remarked, “The nearest thing to eternal life we will ever see on this earth is a government program.”

Rather than go down this road of bailouts and corporate welfare, conservative policy leaders continue to call on Congress and the Trump administration to focus their efforts on a real plan to reduce health premiums, improve health choices, and protect American taxpayers from corporate bailouts.

Instead of bailing out a fundamentally broken program, members of Congress and the administration should take heed of their recommendations, keep their promises to the voters, and pursue workable solutions that actually solve the very real problems created by Obamacare.

They need to get to work.

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The GOP’s Coming Obamacare Capitulation

Congressional Republicans were elected to repeal Obamacare. They may run this year as the politicians who saved it.

Since late last year, GOP leaders have been planning to pump tens of billions of dollars’ worth of new federal spending into the veins of insurance companies that are hemorrhaging red ink on the Obamacare exchanges.

The transfusion is expected to be a concoction of two bills. The first, championed by Sens. Lamar Alexander, R.-Tenn., and Patty Murray, D.-Wash., would appropriate cost-sharing reduction payments to insurers. The second, sponsored by Sens. Susan Collins, R.-Maine, and Bill Nelson, D.-Fla., would give insurers an additional $10 billion (and perhaps more) in federal cash.

Both bills are a distraction and fail to address the real reasons Obamacare is driving up premium costs and reducing Americans’ insurance options. Republicans would be better off focusing on these problems, rather than diverting their attention to side matters.

The Collins-Nelson bill is a pure corporate giveaway. The additional federal funds for reinsurance payments are unnecessary. As Alaska has shown, states can use existing waiver authority to finance reinsurance arrangements without additional federal money. Instead, states can repurpose a portion of Obamacare spending to fund risk mitigation programs without burdening taxpayers.

Ironically, Republican leaders settled on this new corporate giveaway program as a result of their only real health care achievement—scrapping Obamacare’s tax on the uninsured. Insurers fretted that without the mandate, many of their healthier customers would drop coverage, saddling the remnant of insurers still selling Obamacare policies with another round of losses. They have reportedly persuaded GOP leaders to plug the cracks in Obamacare’s failing edifice with piles of cash.

And here’s the kicker: House staff members are reportedly trying to persuade the Congressional Budget Office to tinker with its baseline so as to create imaginary “savings” that Congress will then transform into real payments to insurance companies (the Collins-Nelson bill).

Confused? Congressional leaders and their besties in the insurance industry certainly hope so. They plan to nestle this gift to insurers inside a much larger bill that will fund the federal government through Sept. 30. Leaders are working to get that massive new spending measure enacted early this month.

The plan is that insurers, flush with federal cash, will go easy on 2019 premium increases. That matters because those premiums will be announced just prior to the November elections. Republicans can then run, not on having repealed Obamacare, but on heading off another round of steep premium hikes. Moderate voters will find the kinder, gentler, more pragmatic GOP appealing and help the party retain seats in swing districts.

Or so the theory goes.

The weakness in this strategy is that it requires a docile GOP base. Having promised them Obamacare repeal for eight years, Republican incumbents will have to persuade conservatives that Obamacare really wasn’t that big a deal after all. They will tell voters that, if re-elected, they will pursue more modest and gradual changes to Obamacare over the course of several years.

Base voters may acquiesce. Or they may revolt. Instead of mollifying Republican voters, the new strategy may provoke them into insisting that congressional leaders put Obamacare repeal on the 2018 agenda.

Not all congressional Republicans have conceded the repeal issue. A handful of them continue behind-the-scenes discussions about the Graham-Cassidy proposal that gained momentum last summer, only to fizzle in late September. The measure takes a Copernican approach to health reform, replacing Obamacare’s Washington-centrism with a system that provides states with resources and flexibility to establish consumer-centered health insurance programs.

A group of conservative policy analysts from inside and outside Washington has spent months developing recommendations to refine and improve Graham-Cassidy. If congressional leaders reverse course and revive repeal efforts, they will at least have a better starting place for replacement legislation than they did a year ago.

It is a long shot. Conservatives have long disagreed among themselves on important details, which is why Republican leaders abandoned repeal efforts after last July’s disastrous Senate vote. Members who haven’t given up on repeal continue to argue over the bill’s details. In seeking the optimal politically feasible outcome, they should operate with a sense of urgency and a willingness to compromise.

If they don’t coalesce behind something soon, they will find themselves bystanders as their GOP colleagues link arms with Democrats to preserve and enlarge Obamacare, not to repeal and replace it.

Originally published in National Review

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To Offer Americans an Alternative to ‘Single-Payer’ Health Care, Republicans Must Act This Year

With his Twitter account, President Donald Trump jumped into the national health care debate this week, tweeting:

Trump’s basic message is right on target. Of course, nobody expects anybody’s tweets to rise to the level of policy analysis, but expect the usual gaggle of the president’s critics to nit-pick his terse language.

Congressional Democrats, the president notes, are pushing their “universal health care” agenda. The lead vehicle is Vermont Sen. Bernie Sanders’ “single-payer” plan (S. 1804)—billed as “Medicare for All”—which has attracted 16 Senate Democrats as co-sponsors.

The bill would create a “government monopoly” over health care. It would outlaw all private health insurance, including Americans’ job-based coverage, and impose restrictions on private medical practice. No personal freedom, no personal choice.

Incredibly, more than half of all House Democrats are backing a similar bill (H.R. 676).

British citizens, the president also notes, are complaining about their own “single-payer” system (the British National Health Service), and says that it’s “going broke and not working.”

Perhaps the “going broke” description is not quite accurate. Britain’s health program is funded by a special 12 percent payroll tax on top of the nation’s progressive income tax. The system only “goes broke”—incurs a deficit or debt—when it spends more on medical services than the government budget allows, when demand outruns supply.

To prevent that, British officials have a simple remedy: Cut the supply of medical services, and deny care to patients. It’s government rationing; it’s been going on for years.

Just last month, the British government decided to cancel 50,000 “non-emergency” surgeries for patients trying to get relief. No scalpel, just across-the-board cutting—Rationing by Meat Axe. Britain’s socialized medicine may be unblemished by “evil capitalist profits,” but in Britain, almighty money still rules—sometimes ruthlessly.

>>> Think Obamacare Is Bad? ‘Medicare for All’ Would Make Things Even Worse.

Is the British system working? That depends on how exactly one defines “working,” and comparisons can be complicated.

Clearly, compared to Britain, the United States has a much better record on some very serious items, such as breast and prostate and colorectal cancer survival, access to advanced medical technology and innovative drug therapies, and timely access to medical care.

The president concludes, “Dems want to greatly raise taxes for really bad and non-personal medical care. No Thanks!”

The president is right about that too. House and Senate Democrats are proposing to spend trillions to create their government monopoly. They have outlined, in exact legislative detail, their prescription for a top-heavy, highly centralized bureaucracy governing the financing and delivery of care. Independent analysts, prominently those of leading liberal think tanks, have shown that the taxes to sustain it would be breathtaking.

Scholars from the liberal Urban Institute estimate the total cost of the Sanders proposal at $32 trillion (underfinanced, of course) over the period 2017 to 2026.

Kenneth Thorpe, professor of economics at Emory University, estimates the cost of the Sanders bill at $26 trillion over the same period, projects a level of taxation at 20 percent of payroll to pay for the program, and says that over 70 percent of working families would pay more than they would under current law.

Leading liberals, now dominating the Democratic Party in both the House and Senate, are clear about their vision for America’s health care future.

Congressional Republicans, meanwhile, are still a “house divided.” They have yet to offer the American people a compelling vision based on personal choice of health care plans and providers, and have yet to coalesce around a competently crafted alternative.

In the Senate, the leading bipartisan health policy option appears to be a proposal that would primarily prop up Obamacare with a fresh transfusion of taxpayers’ dollars. This is a distraction that does nothing to address the real problems facing Americans who can’t find affordable private coverage that meets their needs.

Instead, Republicans should coalesce around a meaningful repeal plan this year. They can look to a plan that a group of conservatives has been developing for the past several months.

Republicans should guarantee Americans the right to choose the affordable care and coverage they want—at lower costs—by allowing their state legislators to fix the insurance markets that have been badly broken by Obamacare’s costly and inflexible regulations.

The president is right on target. Congressional Republicans, after eight years of promises, need to get their act together.

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