It takes a journalist to clear the fog about Republican health policy alternatives. (Yes, they do have alternative plans.) In his new book, Overcoming ObamaCare, Philip Klein, who is the commentary editor of the Washington Examiner, presents a timely and accessible review of the three primary approaches that Republican officials and policy analysts are offering.
Klein acknowledges that Republicans failed to implement serious health reforms when they had control of the White House and of Congress during the George W. Bush administration, and the nation paid dearly when Democrats jammed their still-unpopular health law through when they had control of both branches of government in 2010.
He implicitly warns that if Republicans don’t come up with an alternative to ObamaCare, we could be saddled with ObamaCare’s “government takeover of health care” for good.
“During their time in the wilderness [after HillaryCare], smart liberals took lessons from their Clinton era defeat and refined their health care strategy in preparation for their next opening,” he writes. The book makes it clear that now is the time for conservatives to get to work coalescing around a plan.
Overcoming ObamaCare is a solid primer on conservative policy alternatives – a very useful tool especially for the army of conservatives elected to office in November who are intent on repealing, and in some cases replacing, ObamaCare.
Klein is a good student of conservative health policy, acknowledging “there’s one prominent area in which the U.S. does not have anything approaching a functioning consumer market, and where instead, the consumer is completely left in the dark, given few choices, elbowed out of the decision-making process by large bureaucracies, and given very little incentive to seek out the best deal. Unfortunately, this area accounts for $2.9 trillion in spending, representing more than one-sixth of the U.S. economy. I am, of course, referring to health care.”
As a former journalist, I am biased toward his clear, straightforward approach and his birds-eye reporting of the policy debate as it has unfolded in the political and policy realms.
Klein compares and contrasts the various reform plans and explains the three schools of thought and the philosophies driving them:
•Reform
•Replace
•Restart
Reform. The margins aren’t always as clear as the categories would imply, but he places me in the reform school, saying I favor “a step-by-step approach to undoing ObamaCare.”
I am as opposed as anyone to this law (co-authoring Why ObamaCare Is Wrong for America in 2011), but five years out, reality has taken over. So far, Congress has passed and the president has signed 17 major changes to the law, including repeal of the 1099 reporting provision for small business, the CLASS Act long-term care Ponzi scheme, and blocking funding for the financially-troubled non-profit co-op health plans. Many more are teed up.
Thousands of legislators, millions of companies and tens of millions of Americans have had to make changes in their health care arrangements to comply with federal law. That means our health sector has been changed irreversibly by ObamaCare. We can no longer go back to the system we had before the law passed any more than we can go back to the 1990s. Most of the policies that people had before don’t exist. Many of the doctors that were in the networks their health plans before have retired or have sold their practices to hospitals. Hospitals have merged, and all providers have built new business models to comply with the law. State approval of previous health insurance plans has expired, and the plans can no longer legally be sold because they don’t comply with ObamaCare.
Americans “don’t want a big gigantic replacement plan. That scares them,” he quotes me as saying.
Avik Roy of the Manhattan Institute agrees. “His overarching idea is for Republicans to perform what he’s referred to as a ‘jiu-jitsu’ maneuver. In short, he has proposed that Republicans reform Obamacare to make it more market friendly and then use that modified structure to achieve broader reforms to the nation’s older health care entitlements.” He provides a detailed explanation of the reform plan Avik has offered, “Transcending Obamacare.”
Replace. Jim Capretta of the Ethics and Public Policy Center and Yuval Levin, also of EPPC and editor of National Affairs, are quoted extensively here. “You’re going to have to do replace with repeal,” Capretta says. “You can’t displace this incumbent program without a replace program, in my judgment.”
Jeff Anderson, executive director of the 2017 Project, says the law isn’t “remotely fixable.” Ditto, Budget Chairman Tom Price with his “Empowering Patients First Act.”
He also provides a Cliff’s Notes overview of one of the replace proposals that has received significant attention: The Coburn-Burr-Hatch proposal by the three leading U.S. Senators.
But even some in this “replace” school implicitly agree that reform must evolve from the changed landscape of ObamaCare.
Restart. Finally, he talks about the Restart school, starting with Louisiana Governor Bobby Jindal’s reform proposal and his criticisms of those who would propose “ObamaCare Lite.” Cato’s Michael Cannon also is in this school, with his “Large HSA” proposal.
Klein takes a deep dive in each of these chapters into the tax treatment of health insurance – which is at the heart of conservative health reform. Conservatives have long supported providing financial assistance to the uninsured, especially those who are not offered or cannot afford employer-based health insurance but who make too much to qualify for public programs, especially Medicaid.
But the debate continues on the right about how to structure those subsidies – through tax credits, refundable tax credit, or tax deductions — with many variations in different plans. Klein portrays the vigorous debate that takes place in the policy community including, for example, an intense discussion with Louisiana Gov. Bobby Jindal (a tax deduction supporter) and policy experts Klein attended in April of 2014.
Klein doesn’t take sides. But he acknowledges, in his conclusion, “Republican control of the Senate and a spirited GOP presidential nomination contest should provide a great opportunity to debate many of the ideas explored in this book.”
And then we warns: “Those who aren’t happy about the direction of American health care need to start the process of coalescing around an alternative approach. If they can do that, there’s a chance to overcome ObamaCare and move toward a health care system that puts the consumer first.”
One final plug: I am biased in thinking that we must move to a new system that puts consumers in charge of their health care decisions and that we must seize opportunities to begin that process. The pending Supreme Court decision in King v. Burwell provides opportunities to make such changes: If the High Court were to decide that the IRS acted illegally in providing subsidies through federal health care exchanges, Congress and 36 governors are highly unlikely to sit back and watch as five million people lose their health insurance coverage. Congress already is working on plans to use the possible opportunity of a win in the courts to give citizens new options that could lead to the transformative change that underpins each of the conservative philosophies.
Indiana Governor Mike Pence has won approval from the Obama administration for a Medicaid waiver that begins the transformation of the program toward a consumer-directed model.
Gov. Pence is building on the popular and successful Healthy Indiana Plan (HIP) created by former Governor Mitch Daniels in 2007.
Both of them pushed the envelope with Health and Human Services officials who were determined to perpetuate a hide-bound program that is ill-serving tens of millions of recipients while gobbling up state revenues. Gov. Pence and his staff worked directly with White House officials to overcome this inertia and set down some new markers for future reform.
Gov. Pence announced today that the administration has approved Healthy Indiana 2.0 that will require contributions from all able-bodied Hoosiers participating in the program. It also creates an Employer Benefit Link that provides a Medicaid contribution for recipients who are eligible and participating in employer-sponsored health insurance plans. In addition, recipients who do not make their required contributions toward their health benefits can be locked out of the program for six months. All recipients will be required to make a contribution toward their Medicaid benefits, even those who are at the lowest income eligibility levels.
While conservatives are sure to criticize this plan as an expansion of Medicaid, I see it as taking advantage of an opportunity to lay the groundwork for the kind of Medicaid reform that we must move toward in the future. It would not be possible to rip out this program root and branch and replace it with a consumer directed model. By winning approval of these changes through a Medicaid waiver, other governors have a much stronger platform to move toward other changes that will work for their states.
HIP creates a POWER Account that is jointly funded on a sliding scale by the recipient and the state. Recipients at 138% of poverty must contribute $54.86 a month for a family of four to participate, for example. Families at 100% of poverty have to contribute $39.75 a month. If they do not make their contribution, they face the lock out.
The $2,500 POWER Account gives people an incentive to monitor their spending for their routine medical expenses. There also are penalties for unnecessary visits to emergency rooms.
Absent Obamacare, many conservatives would praise this effort to make Medicaid look more like a Health Savings Account and catastrophic high-deductible coverage. This is an important start toward much-needed changes to this public program. By using the ObamaCare waiver option that the administration wanted, Gov. Pence has gained important and potentially transformative changes to Medicaid. This is a win.
Millions of Americans who received subsidized health insurance under ObamaCare will find a new wave of frustration this tax season.
After losing their health insurance because it was not ObamaCare compliant…after slogging through the healthcare.gov website to get enrolled in a new policy…after losing their doctors…after learning that they must pay thousands of dollars in deductibles before they can get medical care…now they must face the IRS.
By the end of the month, they should receive a form 1095-A that shows they had health insurance through federal or state exchanges. They will use the form to fill out an astonishingly complex Form 8962 to reconcile the subsidies they received with the income they earned in 2014.
If they received too much, they will have to pay back some or all of the subsidy. That could mean they receive a smaller – or no – tax refund. And for the privilege of this new interaction with the IRS, many will have to pay hundreds of dollars to hire a tax preparer to help them wade through these new ObamaCare tax forms.
Yes, ObamaCare is getting worse.
H&R Block HRB 0% estimates that up to half of Americans who received subsidies for health insurance under the ACA last year will owe the IRS money.
An estimated 87% of those who signed up for health insurance on the new exchanges got subsidies to reduce their health insurance premiums and sometimes their cost-sharing expenses. An assistant professor of health policy at Vanderbilt University, John Graves, calculates the average subsidy was $208 too high.
But these taxpayers face yet another cost. Many of them are accustomed to filing the simple 1040EZ tax form. No more. Most will have to retain tax preparers to help them fill out the new Form 8962. That could cost them several hundred dollars.
The form is used for taxpayers to prove that they and everyone in their family (including children) had health insurance every month of last year, what their incomes were, how much of a subsidy they received, whether they are married, single, legally separated, etc. The examples in the instructions are a window into the complexity of family arrangements in America and, still, people surely will come up with hundreds more permutations.
The instructions are mindboggling in their complexity. They take up 15 pages of fine print and will challenge the most seasoned tax preparer. A one-sentence example: “Column B. Enter on lines 12 through 23, column B, the amount of the monthly premium for the applicable SLCSP [second lowest cost silver plan] reported on Form 1095-A, lines 21 through 32, column B.”
It continues, “If during 2014, your coverage family changes and you did not notify the Marketplace, or no APTC [Advance payments of the premium tax credit] was paid, the premium for the applicable SLCSP reported on your form(s) 1095-A may not be accurate…” It then provides a handy link to another IRS document to explain what you should do if that happens. The instructions go on and on like that for 15 pages.
If taxpayers have to pay back some or all of the subsidy, the instructions explain a new layer of complexity: People who make less than 200% of poverty, or about $23,000 for an individual, will owe only $300, even if they received thousands of dollars more in subsidies. If you make up to the 400% of poverty, or $46,000, you could owe $1,250. If you earned $46,500, which is just over the limit to qualify for subsidies, you will have to pay it all back – likely several thousand dollars.
And if you didn’t have health insurance last year, you will have to pay a fine of $95 or 1% of your modified adjusted gross income. A couple making $65,000 would have to pay a fine of about $450, for example. The “tax penalties” increase this year and next.
Can it get any worse? Yes.
Nina Olson, an IRS watchdog, estimates that 47% of those calling the IRS for help in filling out their tax returns won’t get their calls answered during tax filing season. Those who do get through will wait an average of 34 minutes to talk to someone, she estimates.
Tax preparers calling the “priority service line” will have to wait an estimated 52 minutes to talk to an IRS expert. IRS Commissioner John Koskinen admitted, “We do as well as we can. And ‘as well as we can’ is still going to be miserable.”
The vast majority of Americans who did not receive ObamaCare subsidies for health insurance will simply have to check a box on their regular tax form attesting that they had health insurance. Employers and health insurance companies will be sending them a form 1095-B or 1095-C, which they will attach to their taxes as proof of coverage.
The individual mandate is one of the most detested provisions in the health law, and the first tax season when people must comply will create a new level of outrage about the law, its intrusiveness, and the hidden costs in fines and hidden taxes that millions of Americans will face.
The Galen Institute today released an updated version of its list of significant changes made to the Affordable Care Act by the Obama administration, the Congress, and the U.S. Supreme Court since the law was passed in March of 2010. Today’s list includes four additional changes made by the Obama administration, most of them contrary to statutory language. By our count, more than 46 significant changes have been made to the law: at least 28 that the administration has made unilaterally, 16 that Congress has passed and the president has signed, and 2 by the Supreme Court. Here are the latest additions:
•Bay State Bailout: More than 300,000 people in Massachusetts gained temporary Medicaid coverage in 2014 without any verification of their eligibility, with the Obama and Patrick administrations using a taxpayer-funded bailout to mask the failure of the commonwealth’s disastrously malfunctioning website. (January 2014)
•Failure to enforce abortion restrictions: A GAO report found that many exchange insurance plans don’t separate charges for abortion services as required by the ACA, showing that the administration is not enforcing the law. In 2014, abortions were being financed with taxpayer funds in more than 1,000 exchange plans. (Sept. 16, 2014)
•Risk Corridor coverage: The Obama administration plans to illegally distribute risk corridor payments to insurers, despite studies by both the Congressional Research Service and the GAO saying a congressional appropriation is required before federal agencies can make the payments. (Sept. 30, 2014)
•Transparency of coverage: CMS delays statutory requirements on insurance companies to disclose data on the number of people enrolled, disenrollment, number of claims denied, costs to consumers of certain services, etc. (Oct. 20, 2014)
Thirty-six states that rely on private managed care programs to provide medical services to all or some of their Medicaid recipients are facing an added ObamaCare tax.
According to a report by Milliman consulting actuaries, states that contract with Medicaid managed care plans face up to $15 billion in added costs over 10 years for their share of the law’s tax on private health insurance.
States will pay even if they strongly oppose ObamaCare and are refusing to establish health insurance exchanges or expand Medicaid.
The health law imposes an annual tax on private health insurance plans – a tax designed to recoup what some call their “windfall” from the millions of new customers they could gain because of the law. The tax on health insurers was expected to raise a total of $8 billion in 2014 and as much as $150 billion over the next 10 years. It is one of 20 designed to fund ObamaCare’s expanded coverage.
Most Medicaid managed care organizations (MCOs) are considered private plans and therefore are subject to the new tax. But this punishes states that are trying improve their Medicaid programs: They are working to make Medicaid more efficient and save money by contracting with private managed care plans to provide medical care to recipients. States that stay with the antiquated fee-for-service Medicaid program escape the levy.
Insurers have rightly argued that this tax will be passed along in the form of higher premiums. Milliman calculates the tax will increase Medicaid premiums by up to 2.5%. In recent years, states have allowed premium increases of only 1 or 2% annually, with some states actually cutting payments to plans, according to the report.
If Medicaid HMO plans are required to pay the new tax out of their profits, many would exit the market rather than operate at a loss. Further, the fee is considered an “excise tax” which is not deductible from corporate income taxes, amplifying its impact.
The Milliman report estimates the ObamaCare health insurer fee will increase Medicaid managed care premiums between $37 billion and $42 billion over ten years. Because both the states and the federal government share in funding Medicaid, the states’ collective share is expected to be between $13 and $15 billion.
Milliman explains this means that the federal government is taxing itself as well as state governments. The feds get their money back because all of the revenues from the health insurance tax accrue back to the federal government.
But the states are left to figure out how to pay their share of the ObamaCare bill – either by further clamping down on payments to Medicaid plans or cutting other state services.
Adding to the constraint: A boost in payments to primary care physicians treating Medicaid patients expired January 1, putting added pressure on states to fill the gap. A study by the Urban Institute estimates that primary care doctors who have been receiving the enhanced payments will see their fees for cut by an average of 43%. Millions of new Medicaid enrollees could face provider shortages if fees revert to pre-ACA levels.
The need to allow a boost in payments to account for the new tax as well as pressure to continue the increase in Medicaid primary care rates puts added pressure on already burgeoning state Medicaid budgets.
While Medicaid managed care is a low-margin business, most states allow plan operators a reasonable profit margin to encourage their participation. Joseph Swedish, chief executive officer at WellPoint , explained in a conference call with investors earlier this year that states “understand the need for a sustainable Medicaid program,” and passing along the fee “is part of sustainability.” Most states consider taxes to be reasonable and unavoidable costs of doing business and incorporate them into payments to the plans.
The Obama administration has not provided much-needed guidance to the states about how to handle fee negotiations with managed care plans involving the added taxes.
About 70% of Medicaid managed care premiums were paid to for-profit MCOs in 2010. In 2010, approximately 50% of all Medicaid recipients were enrolled in Medicaid managed care plans, rising to more than 60% this year.
Punishing states for using Medicaid managed care is yet another ObamaCare attack on private health plans.
According to the Milliman report, Florida could face added costs of up to $1.4 billion over the next ten years to fund ObamaCare, Pennsylvania, $1.3 billion, and Texas, $1.1 billion. Tennessee, where Medicaid recipients are fully enrolled in managed care, could face added costs of $731 million over that time. Maryland will need to come up with $680 million, and Louisiana with $787 million. States that don’t contract with Medicaid managed care plans will not have to pay.
The tax is due regardless of whether or not a state decides to expand Medicaid. The worst decision would be to scrap their Medicaid managed care plans to avoid this new ObamaCare tax. This is one more example why the best solution is to eradicate all of the ObamaCare taxes — along with the rest of the law.