Health insurers that sold plans on the exchanges in 2015 and enrolled droves of high-cost members, could haul away as much as $7.7 billion this year, as part of the healthcare law’s reinsurance program.
The CMS released a memo (PDF) late Friday that said the agency expects its jar of reinsurance money will total $7.7 billion. The payouts, to be issued this year, will reflect data from the 2015 benefit year.
Democratic candidate Bernie Sanders recently released his health-care plan: a government-run single-payer system for the U.S., similar to what many European countries have. Criticism of the plan has so far focused on its lack of political feasibility, but there is an even more important reason to be wary: Accounting for costs and tax increases, it would reduce labor supply by 11.6 million. In a struggling economy, with tepid wage growth, hurting employment should be the last thing on any politician’s agenda.
The plan truly promises everything under the sun. Not only will everyone be able to get any medical treatment needed — with no cost at the point of service — but the plan won’t require a terribly high tax increase.
The Obama administration released its proposed budget for 2017 this week. It includes a host of health care-related proposals, including new initiatives to increase access to mental health care, expand opioid abuse treatment, fight antibiotic resistance, address the Zika virus threat, and fund a “cancer moonshot.”
The budget also contains a number of proposals relevant to Affordable Care Act provisions. It proposes providing 100% federal funding for state Medicaid expansions for three years regardless of when the state decides to expand.
It would also modify the high-cost employer health plan (“Cadillac”) tax to take account of geographic differences in health care costs; specifically, it would set the threshold when the tax begins to apply at the greater of the current statutory dollar threshold or a state’s “gold plan average premium.”
The HHS Budget in Brief includes a request for $2.1 billion to fund the federally facilitated marketplaces and oversight of the state marketplaces.
The budget anticipates the collection of $4.335 billion and expenditure of $4.560 billion in 2017 for the transitional reinsurance program.
There were two notable Affordable Care Act rules this week. A final rule for “Covered Outpatient Drugs,” which has been planned since the fall of 2010, contains $330 million in new annual costs, in addition to 3.1 million hours of paperwork. The 189-page rule regulates drug pricing, confidentiality, rebate payments, and requirements for states.
The administration also finalized “face-to-face” provisions under the ACA. The rule would require health care providers to document face-to-face encounters with Medicaid recipients when delivering health services. The rule imposes $23 million in annual costs and 190,000 paperwork burden hours.
Since passage, based on total lifetime costs of the regulations, the ACA has imposed costs of $50.1 billion in state and private-sector burdens and 177.9 million annual paperwork hours (167 million from final rules).
Last week, the Congressional Budget Office released its latest Budget and Economic Outlook. In this report, CBO notes that the deficit in 2016 is expected to be $544 billion and federal outlays will rise by 6 percent, to $3.9 trillion, compared with 2015. Mandatory spending—such as that for entitlement programs like Social Security, Medicare, and Medicaid—will rise $168 billion this year. Federal spending on major health care programs will account for the largest portion of this rise as federal outlays for Medicare, Medicaid, exchange subsidies, and the Children’s Health Insurance Program (CHIP) will increase $104 billion (11 percent) in 2016.
So, to sum up: Trump has offered scant details about how he would replace ObamaCare. But what little he has said is philisophically consistent with the arguments in favor of single-payer, a policy approach that he has praised in the past.
The whole irony of this is that right now, Sanders and Hillary Clinton are in the midst of a heated debate in which Sanders is arguing in favor of single-payer and Clinton is saying it would go too far to be politically feasible.
Should Clinton and Trump be the nominees, it will have meant that Democratic voters will have rejected the candidate pushing single-payer health care and Republicans will have embraced him.
Today the Mercatus Center unveiled a study by Bradley Herring (Johns Hopkins University) and Erin Trish (University of Southern California) finding that the much-discussed health spending slowdown that continued in 2010-13 “can likely be explained by longstanding patterns” over more than two decades, rather than suggesting a recent policy correction. Projecting these factors forward and incorporating the effects of the Affordable Care Act’s health insurance coverage expansion provisions, Herring-Trish predict the expansion will produce a “likely increase in health care spending.”
Though not surprising in light of longstanding appreciation of insurance’s effects on health service utilization, the latter finding is nevertheless profoundly concerning given that pre-ACA health spending growth trends were already widely held to be untenable.
KEY FINDINGS
- At least 70% of the recent slowdown in health care spending per capita—and possibly as much as 98%—can likely be explained by long-standing patterns known to affect health care spending trends, not by new, unexplained conditions in the medical sector.
- Breaking down those figures, roughly 41% of the slowdown probably resulted from the decline in real per capita income because of the Great Recession.
- Other factors known to affect health care spending growth—such as changes in the number of physicians and hospital beds per capita and in the percentage of the population with insurance coverage—account for somewhere between 32% and 57% of the slower health care spending growth.
- The projected expansion of Medicaid coverage owing to the ACA will likely raise national health care spending in 2019 to about 1% higher than it would have been without the expansion.
Recently, Democratic presidential candidate Sen. Bernie Sanders released the outline of a plan to move to a single-payer health care system in the U.S. along with proposed tax increases intended to pay for the overhaul. According to the Sanders campaign, the plan would cost roughly an additional $1.4 trillion per year, or $14 trillion over ten years, and it would be financed through a combination of taxes on workers, employers, investors, estates, and high earners.
By CRFB’s rough estimates, Sanders’ proposed offsets would cover only three-quarters of his claimed cost, leaving a $3 trillion shortfall over ten years. Even that discrepancy, though, assumes that the campaign’s estimate of the cost of their single-payer plan is correct. An alternate analysis by respected health economist Kenneth Thorpe of Emory University finds a substantially higher cost, which would leave Sanders’s plan $14 trillion short. The plan would also increase the top tax rate beyond the point where most economists believe it could continue generating more revenue and thus could result in even larger deficits as a result of slowed economic growth.
Daniel Mitchell at the Cato Institute has proposed a “golden fiscal rule:” ensure that government spending, over time, grows more slowly than the private economy. This is an idea that should command support from fiscal conservatives on both sides of the aisle, not just libertarians.
Mr. Mitchell has done a more than adequate job demonstrating that “nations that imposed genuine spending restraint for multiyear periods reaped big benefits.” But we also know that growth in federal health spending continues to outstrip growth in the economy. As I have stated repeatedly in other posts, ObamaCare has not eliminated the nation’s long term spending problem. My purpose in this post is to show how dramatically non-health spending (including defense) if we were to adopt the golden fiscal rule.