Until the Progressives are willing to perform a seppuku on the Affordable Care Act, health care reform will be stuck on stupid. I hate to be brutally honest but there is not much left to gut when you look at all of parts of the Affordable Care Act that have been delayed. Since the Democrats wrote the bill by themselves, they own the Affordable Care Act problems and gutting the bill is preferable over a long prolonged death. When the smarter half of the Democratic party drew that imaginary line in the sand, they were of the opinion that health care reform cannot not succeed unless we get a majority of the states to set up health exchanges. For both political and governing reasons this form of co-operative federalism depends on states being willing participants. Without a majority of the states participating via state exchanges the backup plan of a federal exchange would transform the law into a plain old federal power grab built on the shifting sands of administrative law rulings. This smarter half probably viewed the federal exchange scenario as a recipe for political and governmental disaster and extremely hazardous to their re-election. Unfortunately they were proven right. The healthcare.gov roll-out was a grim reminder that our federal bureaucrats are not as competent as we thought and if you want to create a really big problem, the first step is to make it a federal program. The problem we are faced with now is that we are ignoring our past mistakes. Ms. Greenhouse in her article, “By Any Means Necessary”, seems to think that we can safely ignore the legal problems and the lack of political consensus. In a way she is advocating the idea that laws do not matter if it impedes the society’s greater goal, health care reform. This is what I call the “even a blind squirrel finds a nut once in a while” management style or otherwise known as management by accident. This is the evil twin of the more successful management style employed by businesses called management by objective. The management by accident approach is based on the hope that if we have enough people stumbling around trying to fix things they think might be wrong then we will eventually fix all of the Affordable Care problems regardless of how badly the law was written or administered. All we need is money, people, and lots of patience with government failures. This might be an acceptable solution in the federal bureaucratic universe but it reminds me why the healthcare.gov roll-out was such a miserable failure and why my insurance premium continues to go up despite promises otherwise. It should be amusing to see who gets the blame if the number of uninsured returns to historical norms this Fall. This is the Progressive’s proudest Affordable Care Act achievement. Will we be reminded once again that the Affordable Care Act was a health reform in name only? If this is the Progressive idea of health care reform then would someone “wake me when it’s over.”
Healthcare
Congratulations To The Ohio Medicaid Expansion
I saw an article about the Metrohealth experiment several weeks ago but when I went back to find the link I could not find it. Here are some of the highlights in the article, “In Ohio: Medicaid Saves Money, Improves Health”.
MetroHealth, used extensive electronic records to carefully select patients and sent them Medicaid insurance cards before they even applied. Then, they gave each patient personalized attention.
They assigned each patient a nurse. That nurse booked their appointments, called them if they missed one and checked to make sure they took their meds.
Emergency department visits dropped 60 percent. AND primary care visits went up 50 percent.
The hospital ended up spending less on the program than expected, saving an average of $150 on each patient every month.
“Better care, better outcomes, better costs,” Cebul says.
Once again I am reminded that successful health care reforms like this have goals that are defined, measurable, and achievable. A little less focus on politics goes a long way to making health care reform work better. This is a classic example of management by objectives. Congratulations go out to Mr. Corbett and Dr. Cebul for a job well done!
The Creation Of The Affordable Care Act
In the Beginning was The Plan
And then came the Assumptions
And the Assumptions were without form
And the Plan was completely without substance
And the darkness was upon the face of the Congressional Staff Workers
And the Staff Workers spoke amongst themselves,
"It is a crock of shit, and it stinketh."
And the Staff Workers went unto their Supervisors and sayeth,
"It is a pail of dung and none may abide the odor thereof."
And the Supervisors went unto their Senators and Representatives
and sayeth unto them,
"It is a container of excrement and it is very strong, such that none may abide by it."
And the Senators and Representatives went unto the Speaker of the House
and Senate Majority Leader and sayeth,
"It is a vessel of fertilizer, and none may abide its strength."
And the Speaker of the House and Senate Majority Leader spoke among themselves,
saying one to another,
"It contains that which aids plant growth, and it is very strong."
And the Speaker of the House and Senate Majority Leader went unto the Vice President
and sayeth unto them,
"It promotes growth and is very powerful."
And the Vice President went unto the President and sayeth unto him,
"This new Plan will actively promote the growth and Efficiency of this Country,
and in this Area in particular."
And the President looked upon The Plan,
And saw that it was good,
and The Affordable Care Act became Policy.
And this is how Shit Happens.
The Federal Health Insurance Exchange Is A Lousy Tool To Fix These Health Care Problems
I was reading John Graham’s post, What is To Be Done with Health Insurance Exchanges, Post-Obamacare?, and could not resist saying the federal health insurance exchange is a lousy tool to fix these health care problems. Here are my reasons.
1. The cost of health care for people with high cost, pre-existing conditions is being spread across a fairly small group of people buying their health insurance via the exchanges. If health care for people with pre-existing conditions is society’s responsibility than the cost should be spread over a much larger group of people. Until we solve the problem with paying for pre-existing condition health care in a more equitable manner, health insurance exchanges will be plagued with high risk premiums and are likely to fail.
2. Health exchanges in general are a lousy way to subsidize health insurance for people earning less than 400% FPL if you want to control health care costs. This is the same problem faced by expanding Medicaid. The Oregon Medicaid experiment leads us to speculate that this group of people will consume more health care services without an improvement in health care outcomes. A health insurance credit is probably a step in the right direction of simplifying the subsidy system while providing subsidies and cost control incentives.
3. With the market distortions from pre-existing conditions and subsidies and overall incompetence in the roll-out, it is hard to imagine health insurance exchanges as an adequate substitute for the fair, unbiased health insurance market place we expected in 2013. As a person who has purchased health insurance from eHealthinsurance.com in the past, I have to assign blame for the overall incompetence of healthcare.gov to politics. The ACA made purchasing health insurance unnecessarily complicated. When you combine the public’s unfavorable view of the federal health exchange with its history of being a political football, this would be a good time to look at a replacement that involves less federal government and political partisanship. The original ACA plan relied on state exchanges and we should go back there in a modified form. My personal favorite idea is to simplify the enrollment process and replace the federal exchange with state exchanges run in cooperation with insurance companies and insurance marketers. eHealthinsurance.com and other companies like them already had the infrastructure in place. You can call this the Halbig solution with adults in the room. If we cannot get rid of the amateurs in the federal government we should at least minimize their damage.
Things That Make Me Go Hmm… Are Health Exchanges Medicaid For The Middle Class?
I have been thinking about this HHS quote I saw on a Zane Benefits blog post today. It got me to thinking. Are health exchanges sustainable if only 13% are paying the full price for health insurance? If health exchanges are not sustainable without government subsidies then they begin to look like Medicaid for the middle class. Does this mean that we are gradually turning our health care system into one modeled after Medicaid? I want the old health care system! It was not only cheaper but it provided me with better health care options than this new, improved one.
According to the U.S. Department of Health & Human Services (HHS), 87 percent who purchased health plans through Healthcare.gov in 2014 qualified for premium tax credits, with the tax credit covering 76 percent of the premium cost.
Greg Sargent’s Post Confirms My Suspicion That Democrats Were Not In Agreement About Subsidies
I think Greg Sargent’s post makes a good argument that the Democratic Party was not in agreement about how subsidies could be used to encourage state exchanges. The first faction thought subsidies should be offered to both the state and federal exchanges but it is not clear how this plan would encourage states to set up exchanges or how a federal exchange was constitutional. The question whether a federal exchange was constitutional was key part of Senator Ensign’s question to Senator Baucus. Without state exchanges all of the political and budgetary risk depends on a successful federal exchange roll-out.
The second faction thought that subsidies should only be offered in conjunction with state exchanges. This resolves the constitutionality question. Although there may be some roll-out problems they expected that most of the states would successfully implement the exchanges. The interesting quirk in the Senate finance bill was that they did not plan to set up a federal exchange but expected that they could delegate the work to a nonprofit. Their plan expected the federal government would take the lead in setting up “an exchange for any state that refused to build one” but it would “appoint some nonprofit entity to actually run the darned thing afterward.” This arms length approach to running an exchange for a state looks like it skirts the constitutionality question.
In hindsight I think the first faction did not care whether exchanges were constitutional or worked and that is why their wording did not end up in the merged bill. The second faction looks a little more pragmatic about having a plan that encouraged states to set up exchanges. They felt that the success of the Affordable Care Act probably depended on a majority of the states successfully implementing exchanges and a little “cooperative federalism” bribery with subsidies was necessary. Since their wording was likely to be constitutional and encourage states to set up exchanges, it is logical to see why the merged bill was very similar to that used on the Senate Finance bill.
Do We Still Have “Cooperative Federalism” If States Are Unwilling To Cooperate?
Glenn Reynolds has interesting post over at the Instapundit stating that “Senate Hearing: Tax Credits are available for State Exchanges Only. Senator Baucus explains how The Affordable Care Act sets conditions where Tax Credits are available for State Exchanges Only.“. I watched the video several times and did not hear where tax credits were available for state exchanges only. That part was muddled. Senator Baucus did make a strong argument that the Affordable Care Act as a form of “cooperative federalism” in which states agree to rewrite state laws to comply with ACA recommendations and implement health insurance exchanges in exchange for tax credits. If he wittingly failed to mention that citizens would get tax credits from federal exchanges then he was deliberately negotiating in bad faith. Then it struck me. For states that refused to set up health insurance exchanges you would have to describe them as unwilling participants. What did these states get in return for rewriting laws and generally given up their prerogative to write health care laws? Do we still have “cooperative federalism” if 34 states are unwilling to cooperate? Do we have “cooperative federalism” if the states who did cooperate get nothing in return for their efforts? The states who opted out thought that they had gotten out of the individual and employer mandate by not establishing health insurance exchanges. Instead they got a deal with the government that looks like it has the same legal standing as a shotgun wedding.
What Was The Reason For States To Set Up Exchanges?
I just finished reading Nicholas Bagley’s article, “What does the Gruber video tell us about Halbig?”, and Aaron Carroll’s article, “My one comment on Gruber and Halbig”, this morning when it struck me that there was a lot of circumstantial evidence that the federal government fully expected that they could convince states to set up exchanges. In 2010 I read some posts on The Incidental Economist website that trumpeted the healthcare.gov site so I checked it out. I found their insurance finder a “complete waste of time”. Obviously the writers at The Incidental Economist had never visited the site. The healthcare.gov site was a poorly designed information site that was completely unprepared for becoming a retail site for insurance. Whoever was running the healthcare.gov site thought that state exchanges were going to take the brunt of the load. Over the next couple of years there was lots of complaints that no one anticipated that the federal site would be the insurance exchange for 36 states. Everybody was saying the same thing, states were supposed to setup insurance exchanges. There is nothing that screams louder that the Affordable Care Act plan was for states to set up exchanges than the botched roll out of healthcare.gov.
So if we assume that the plan all along was for states to set up exchanges and that subsidies were not going to be used as leverage then how was the federal government planning to convince states to set up insurance exchanges? States would have to set up an organization kind of like the one they use to administer Medicaid and for most states the cost of administering Medicaid is a real pain in the budget. In the rough and tumble world of state politics and budget deficits what could the federal government offer states to offset the risk? Setting up a state exchange could be costly and embarrassing fiasco as Oregon found out. It almost looks like a Republican conspiracy to make traditional “blue” states look bad except without Republicans. What issue was big enough that Democrats would throw fellow Democrats under the bus? Until someone can explain to me the political and financial incentives for setting up state exchanges rather than using the federal exchange, I have to assume that the Affordable Care Act supporters decided to change course in mid-stream and it was part of their strategy. The only selling point for setting up state exchanges that had enough urgency was the subsidies. This was not a drafting error and I suspect there were Affordable Care Act supporters who questioned the wisdom of this strategy. To them the idea of restricting subsidies to the state exchanges was always a bluff so without much fanfare they reverted to Plan B even though the law said otherwise and even more reluctantly started planning for a bigger healthcare.gov. Solely for political reasons they chose to save the Affordable Care Act by offering subsidies through the federal exchange and hoped to whether the storm.
Free At Last, Halbig v. Burwell
I was chuckling my way through Nicholas Bagley’s article, Halbig said it was applying the law as written. Don’t believe it, when I realized that I needed to refresh my memory on the grand bargain offered by the Affordable Care Act supporters. There is rich irony in hearing Mr. Bagley allege there was a consensus on providing subsidies in federal exchanges when at the same time the Speaker of the House was saying “we have to pass the bill so that you can find out what is in it”. The Speaker of the House does not know what is in the bill except in vague terms. I doubt she cared how subsidies were supposed to work. Then we get to the question that if postponing a large part of the Affordable Care Act is a pretty good indicator that the supporters were particularly bad at writing this law then why should we assume their intentions concerning subsidies are different than what was written in the law? The overwhelming body of evidence says they did not know what they were doing when they wrote the bill and no one checked the work. If there was a consensus then it was to write the law in the vaguest of terms so that they could do what ever they wanted if a problem arose. It took several years before problems arose and someone sued. Instead of working with Congress to fix the problems they resorted to fixing the problems via administrative rulings. Although it is difficult to discern Congress’s intention with a law so poorly written, I think it is safe to say that they have been making it up as they went along.
My recollections of the intent of the subsidies differ from Mr. Bagley. When the law was passed I remember the supporters like Mr. Gruber were constantly reminding reluctant states that the subsidies were only being offered to people who purchased their health insurance from state exchanges. They argued that the states better get busy setting up their exchanges if they want their citizens to get that subsidy. This subsidy argument magically disappeared when major employers figured out they could get out of the hated employer mandate penalties if states opted for the federal exchange route. If a state did not set up an exchange then subsidies would not be available. If subsidies were not available then the law says that employers would not be penalized. Was I imagining this? Fortunately I did not have to go far to clear up this subject.
In the Washington Post article, Why the DC Circuit’s interpretation of the ACA in Halbig v. Burwell is far from “absurd”, Mr. Somin lays out the grand bargain like this.
Under the DC Circuit ruling, a state’s residents can only get ACA tax credits for purchasing health insurance if their state decides to establish and operate an insurance exchange. This creates a strong incentive for state governments to create such exchanges, thereby participating in the administration of Obamacare. If they do as the federal government wants, their residents get millions of dollars in tax credits, and their insurance companies and health care providers get lots of new business. By contrast, states would have far less incentive to create their own exchanges if they can rely on the federal government to do all the administrative heavy lifting without imperiling their residents’ eligibility for federal tax credits.
The unanswered question was the impact of state exchanges on the employer mandate. I found the answer to that question in the Forbes article, Halbig v. Burwell Would Free More Than 57 Million Americans From The ACA’s Individual & Employer Mandates, in which Mr. Cannon argues that a victory for the Halbig plaintiffs would free more than 8.3 million residents from the individual mandate and 250,000 firms and 57 million employees from the employer mandate. Wow, this is better than I thought! We get rid of the two most hated parts of the Affordable Care Act with one ruling. As a person who may find himself faced with an individual mandate penalty in 2015 I really like the Halbig v. Burwell decision. This is Christmas in July!
If most of the country hates the individual and employer mandates and the court has an easy, legal way to give the people what they want, what is the court to do? Here are the alternatives I see for the court.
- The Whac-A-Mole Strategy
This is the current strategy used by the court. Make narrow rulings and hope Congress or the Administration will fix the big problems. In this strategy the court overturns the Halbig v. Burwell decision and lets the case get appealed to the Supreme court. The problem with this strategy is that it is heavily dependent on the Administration fixing the broader problems with the hated individual and employer mandates via administrative rulings. History has shown that setting rules by edict are likely to cause more problems then they solve. For such an unpopular law this strategy practically guarantees that the court will continue to be flooded with cases challenging the constitutionality of administrative laws when the law reads otherwise. - The Enough is Enough Strategy
In this strategy the court gives up trying to fix the Affordable Care Act and confirms the Halbig v. Burwell decision. No more convoluted legal opinions like the one used by Justice Robert to justify the individual mandate as a tax. Judges can go back to interpreting the law rather than reading tea leaves. This ruling would force responsibility to fix the law back on the Administration and Congress and probably forces those two branches of government to work together to fix this health law in a non-partisan manner. We already know the other way doesn’t work. The hated individual and employer mandates get fixed by the legislative process. I envision a process similar to that was used by Congress to determine which military bases to close. - The Kick The Can Down The Road Strategy
This is a variation of the Whac-A-Mole strategy in which the court does not rule on the Halbig v. Burwell decision in 2014 and lets the Administration try to minimize the problems with the individual and employer mandate issues. The key part of this strategy is to not make a decision until the court can see if the subsidy system is sustainable. If adverse selection rears its ugly head and the subsidy system is not sustainable then confirming Halbig v. Burwell is not a problem. The subsidy system is going to be overhauled anyway. If the subsidy system looks like it is workable then the court can decide at that time what to with Halbig v. Burwell.
Fixing The Affordable Care Act Has Suddenly Become A Lot More Important
I was not surprised that a divided three-judge panel of the D.C. Circuit Court of Appeals ruled that millions of Americans are not entitled to government health insurance subsidies under the Affordable Care Act because of the way the law is written. The law was pretty clear that the only people eligible for subsidies were those who purchased their health insurance via state exchanges so the only remaining question was whether the court was willing to bail out the Democratic Party for a poorly written law. The Democratic Party owns all of the successes and problems with the Affordable Care Act. They were so giddy after the elections in 2008 that they chose to go it alone on health care reform. They reasoned that the law was going to be such a rousing success that they would be in power for the next thirty years. Now a Republican Congress is stuck with the problem of trying to fix the health care laws and I doubt they are willing to take the risk of being accused of putting lipstick on this pig. Here is what Greg Scandlen said in an article over at the The Federalist called Three Conservative Ideas Buried Within Obamacare.
The political spinmeisters are already getting positioned for the next round of health care debates. They don’t really much care what happens as long as they can give their team credit for anything that seems to be good and blame the other team for anything that seems to be bad.
So Republicans want to be sure that whatever they do bears no resemblance to Obamacare, and Democrats will pounce on anything that seems similar to Obamacare as a vindication of that noble effort.
Since this is an election year and the ruling is being appealed, it is probably in our best interests to not fix this problem in 2014. Maybe by the end of 2014 we can find a few humble men and women who can work together. By then we will probably have a better estimate of the number of people who are affected, the impact of the insurance risk corridor, and the total costs to the budget. The best case scenario for a subsidy fix is that we pass a partial, non-partisan reform in 2015 with a 2016 implementation date. Maybe we will get a longer postponement of the individual and employer mandates as part of the deal. Any way you look at it you have chuckle at the naivety of Ms. Pelosi’s famous comment about the Affordable Care Act in 2010.
You’ve heard about the controversies within the bill, the process about the bill, one or the other. But I don’t know if you have heard that it is legislation for the future, not just about health care for America, but about a healthier America, where preventive care is not something that you have to pay a deductible for or out of pocket. Prevention, prevention, prevention—it’s about diet, not diabetes. It’s going to be very, very exciting. But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.
The Affordable Care Act is a grim reminder that large “comprehensive reform” strategies satisfy the political gods a whole lot better than the American people. The politics of getting policies that actually work still requires bipartisan support and lots of hard work. The Affordable Care Act had neither and it shows.