Category: Impact

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.

A reason that might explain why fast-food employees aren’t getting more hours: ObamaCare.

Starting Jan. 1, businesses with 50 or more full-time employees must offer health insurance to all full-time staff or pay a hefty fine. Employers with 100 or more workers had to start offering coverage last year. But smaller businesses that operate on lower margins, especially restaurants, complained loudly about the cost.

And some fast-food franchise owners figured out a way to avoid paying for coverage: Just make as many workers as possible part time. A U.S. Chamber of Commerce survey found nearly 60% of small franchise businesses said they would make personnel changes like this.

“The ones that did it successfully did it three or four years ago,” says Kaya Bromley, an attorney who helps employers comply with the Affordable Care Act. But, Bromley said, some of the restaurant owners who cut hours to sidestep the health law now regret it.

“A lot of the fast-food franchisees that did this,” she said, “are now coming back and saying, ‘It was a great idea for reducing the number of people that I have to offer benefits, but now I can’t run my restaurants.’”

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.

A vote to overrule President Obama’s veto of a bill that would repeal key parts of the Affordable Care Act and take away federal funding from Planned Parenthood failed to gather a two-thirds majority on the House floor today.

The House voted 241-186 to override the veto. They would have needed 285 votes to do so. The override attempt was expected to fail, but Speaker Paul Ryan said taking the vote was important to show what the GOP could do with a Republican in the White House.

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.

Before you try a short-term plan, consider the pros and cons:

PROS

• You can buy them any time of year.
• Their premiums are generally lower than major medical insurance plans. The average premium for short-term plans sold by eHealth in California last year was $177 per month, Purpura says.
• They may have broader networks of doctors and hospitals than some plans available from exchanges.

CONS

• They won’t accept you if you have pre-existing conditions, or if they do, they won’t cover them.
• They may not cover benefits such as maternity care, preventive services or prescription drugs. Some may offer drug or dental discount plans, but those aren’t the same as insurance.
• They last less than a year and you have to reapply at the end of each term. There’s no guarantee you’ll be accepted again, especially if you got seriously ill while you had coverage.

Blue Cross and Blue Shield of NC is expecting to lose more than $400 million on its first two years of Obamacare business. According to this morning’s News and Observer, “The dramatic deterioration in Blue Cross’ ACA business is causing increasing alarm among agents and public health officials.”  In response to its bleak experience with the ObamaCare exchange, the company has decided to eliminate sales commissions for agents, terminate advertising of ObamaCare policies, and stop accepting applications on-line through a web link that provides insurance price quotes–all moves calculated to limited ObamaCare enrollment.

Chris Conover of Duke University’s Center for Health Policy & Inequalities Research explains what we can learn from North Carolina’s experience.