In the News: Blog

The name of Obamacare’s enacting law, the Affordable Care Act, is looking more than ever like a case of consumer fraud. Insurers offering coverage on its government-run “exchanges” are asking regulators for double-digit premium increases.

The Wall Street Journal reported over the weekend:

“In a study across 45 states, the research outfit Health Pocket reports that mid-level Exclusive Provider Organization plans are 20% more expensive in 2016 on average. HMOs are 19% more expensive, and for all plan types the average is 14%.”

Some places and some plans are worse. The Journal reported that in Tennessee, where President Obama last week said his law with an Orwellian name “worked better than we expected,” big insurers were seeking premium increases of more than 30% in one year.

It’s not because underlying health care costs are rising, the paper reports – “this trend is merely about 3.5% to 7% depending on the state. Health plan profits are capped by ObamaCare price controls, so don’t blame corporate greed either.”

Instead, it’s federal involvement that is to blame:

“The detailed, fact-heavy actuarial filings justifying these increases show that they result from ObamaCare’s political regulations. The law bans insurers from charging people prices linked to their health risks in order to force the young and healthy to cross-subsidize their elders. But if premiums don’t cover medical claims, then premiums must rise to fund these cost transfers.
“After the first two years of ObamaCare in 2014 and 2015, insurers have more experience with the demographics and expenses of the new enrollees. They seem to be older and have more chronic conditions like diabetes or congestive heart failure than predicted. There are also fewer than expected.”

The data show that people who don’t make much money and who then get more generous taxpayer subsidies are much more likely to sign up for plans. Few higher-income people sign up. The Journal points out:

“In other words, the more lower- and middle-income people must pay for ObamaCare with their own money, the less likely they are to participate. They are concluding that ObamaCare plans—with their overly rich mandated benefits, narrow physician networks, and hidden income redistribution—do not offer a good value for the price. This is not a formula for healthy insurance markets.”

This isn’t unforeseen: The New York Times, of all places, was reporting similar news last fall. But now it’s becoming so obvious that even liberals are noticing. The left-wing website Slate recently had an article about “Obamacare’s . . . skyrocketing premiums” that concluded, “you shouldn’t need a political consultant to tell you why consumers paying hundreds of dollars—or even more than $1,000 a month—for health insurance they are required to buy and often can’t afford to use might well get angry.”

Or, as Michael Cannon of the Cato Institute put it on Monday:

“ObamaCare doesn’t make health insurance more affordable. It robs Peter to pay Paul. When selling ObamaCare, supporters told everyone, ‘Don’t worry, you’re Paul.’ But as time goes by, more Americans are realizing they’re not Paul. They’re Peter.”

Time for something better: Time to start repealing mandates and restoring freedom and choice to Americans.

Jun 26 2015

Ron in Dairyland

An inside look at Sen. Johnson's recent adventures in America's dairyland. 

Thank you for wanting to learn more about Senator Johnson’s bill to help America transition past the poorly written and disastrously implemented Affordable Care Act. 

Senator Johnson’s proposed Preserving Freedom and Choice in Health Care Act would prevent a crisis in the event the Supreme Court in the King vs. Burwell case reads the Affordable Care Act the way Congress wrote it.

The Johnson bill would allow Americans to keep their health plans, even those bought on Obamacare exchanges, and taxpayer subsidies available through Obamacare would continue through August 2017. In exchange, the bill would demand of the Obama administration the return of some of the freedom and choice taken away by Obamacare. 

These two essays by Senator Johnson explain why he offered this legislation: 

The Wall Street Journal: A Make-or-Break ObamaCare Moment
April 13, 2015 by Ron Johnson 

USA Today: My plan would protect patients
May 27, 2015 by Ron Johnson

 This is an independent view of his bill from the nation’s leading editorial page:

The Wall Street Journal: In Search of an ObamaCare Breakout
May 21, 2015 by The Wall Street Journal Editorial Board

A summary of the bill is here.

Frequently asked questions and answers are here.

The text of Senator Johnson’s bill is here.

May 23 

Memorial Day Program at Northern Wisconsin Veterans Memorial Cemetery in Spooner
http://dva.state.wi.us/Cem-northern.asp 

May 24 

Memorial Day Program at Southern Wisconsin Veterans Memorial Cemetery in Union Grove
http://dva.state.wi.us/Cem-southern.asp 

May 25 

Service at the Central Wisconsin Veterans Memorial Cemetery in King
http://dva.state.wi.us/PA-MemorialDay.asp#King 

Memorial Day Ceremony at Wood National Cemetery in Milwaukee
http://1.usa.gov/1L7qHZl

 

On tax deadline day, April 15, IRS Commissioner John Koskinen testified before my committee about the IRS’ implementation of Obamacare.

The IRS, probably the most feared civilian agency of the federal government, plays a central role in enforcing Obamacare’s individual mandate and in reconciling its subsidies. So, as chairman of the Homeland Security and Governmental Affairs Committee, I felt Koskinen (right) needed to hear what Americans have experienced.

Reports suggest that it hasn’t gone smoothly. One found that the IRS delayed refunds for “tens of thousands” of enrollees because of missing data from state-run health insurance exchanges. National Taxpayer Advocate Nina Olson said the refunds have been “held for quite a long time, since the beginning of the filing season.” Olson said that IRS employees were instructed not to tell callers why their refunds are suspended.

I read Mr. Koskinen a letter my office received from a Wisconsin couple detailing their experience with Obamacare. When filing their taxes, they learned that they will have to repay the government $11,550 that the government incorrectly used to subsidize the coverage the couple was forced to buy on the federally run exchange. The sum equals more than 18% of the couple’s income, the letter said.

“A $11,550 penalty on an annual income of approximately $60,000 for two people seems excessive,” the couple wrote, adding that they did “exactly what we were told” by the Obamacare exchange. Now, they fear they will have to raid their retirement fund to pay back what the government incorrectly calculated.

Mr. Koskinen later offered what I am sure he felt was comforting news. “You can do an online installment agreement that will allow you to spread those payments over time,” he said, so taxpayers “don’t have to immediately take draconian steps.” The IRS will charge them interest, he said, but rates now are “very low.”

That may seem accommodating to the IRS, but think about how people would end up in such a situation. Many people will unexpectedly end up owing the government money because Obamacare caused them to lose the coverage they had, forcing them to buy costly coverage through government-run exchanges that worked poorly. The government sent money to insurers on their behalf – money that, the fine print now says, they had to very carefully calibrate or they will unexpectedly have to pay the government.

If you buy coverage through an Obamacare exchange, you are required to estimate your income for next year. If you underestimate for any reason, you may be on a very costly hook.

But at least the government won’t charge you much interest for its costly error. How very generous.

Remember one year ago, when President Obama was claiming that unless Republicans again renewed the temporary, extra-long unemployment benefits enacted in the depths of the recession, the economy would suffer?

Remember how his advisers claimed that if Congress let unemployment benefits return to normal, 240,000 jobs would be lost, and how a New York Times columnist claimed it was because Republicans liked to “afflict the afflicted”?

Republicans did not heed the president. The unprecedented 99 weeks of extended benefits expired. Unemployment benefits returned to normal.

And last week, President Obama was declaring 2014 “a breakthrough year for America.” Remember that?

A groundbreaking new study explains why it was such a good year, Investors Business Daily reports: It was because Republicans ignored Obama’s advice, as 60% of the jobs gained last year were due to the cutoff of extended unemployment benefits.

I’ve said as much, but now others are saying so, too. IBD writes:

“Economists from the University of Oslo, the Institute for International Economic Studies and the University of Pennsylvania took advantage of the sudden end to this federal benefit across the country to see how it correlated with job growth.

“Their findings, published this week by the highly respected National Bureau of Economic Research, found that because Congress didn't listen to Obama, ‘1.8 million additional jobs were created in 2014 due to the benefit cut.’”

You can read the study itself here. It’s worth doing. Economists Marcus Hagedorn, Iourii Manovskii and Kurt Mitman point out just how well the economy did:

“Average employment growth was about 25% higher in 2014 than in the best of several preceding years. The employment-to-population ratio rose. The unemployment rate declined sharply. In contrast to typical predictions, the labor force participation rate suddenly halted its steady secular decline.”

The majority of the effect, the economists write, was because Congress cut off the extra-long benefits. Naysayers claimed this would cause discouraged unemployed people to stop looking entirely – to drop out of the labor force. That didn’t happen, the researchers write, because cutting benefits encourages job creation:

“Not only did the unemployed not drop out of the labor force because of losing entitlement to benefits, but instead those previously not participating in the labor market decided to enter the labor force. . . . The increased availability of jobs than draws non-participants into the labor market.”

Others have already been saying this. North Carolina cut back on extended benefits earlier. Liberals implied this was immoral, but it led to more people finding work. Other observers have been noting the helpful effects of the national cut-off already.

None of this is to imply that unemployed people were lazy. I’m not saying that, nor were conservatives. But government programs, even well-intentioned ones, often have unforeseen effects. Incentives matter. That’s a piece of science that the president and his party should start paying attention to.

“It's enough to make you wonder,” IBD writes, “how much more growth we'd enjoy if other parts of Obama's ‘middle class economics’ were jettisoned.”

The faculty of Harvard is in an uproar, the New York Times reports – the changes to employee health coverage that already hit almost everyone else in America have come to the elite university.

“Professors at Harvard have until now generally avoided the higher expenses that other employers have been passing on to employees,” the paper reports. But health care benefit costs are rising quickly, faster than the university’s revenue or the salaries it pays faculty, the Times reports. Some of those soaring costs are driven by Obamacare, according to the paper – “provisions in the health care law that extend coverage for children up to age 26, offer free preventive services like mammograms and colonoscopies and, starting in 2018, add a tax on high-cost insurance, known as the Cadillac tax.”

graph premiums

So the faculty will pay:

“The university is adopting standard features of most employer-sponsored health plans: Employees will now pay deductibles and a share of the costs, known as coinsurance, for hospitalization, surgery and certain advanced diagnostic tests. The plan has an annual deductible of $250 per individual and $750 for a family. For a doctor’s office visit, the charge is $20. For most other services, patients will pay 10 percent of the cost until they reach the out-of-pocket limit of $1,500 for an individual and $4,500 for a family.”

The plan could have saved some money by narrowing the network of providers, the paper reports, but “some of Boston’s best-known, most expensive hospitals are affiliated with Harvard Medical School. To create a network of high-value providers, Harvard would probably need to exclude some of its own teaching hospitals, or discourage their use.”

Even after these changes, the Times reports, Harvard’s plan will cover 91% of the cost of health care for the typical employee – far more generous a benefit than what Americans forced to buy coverage on Obamacare’s government-run “exchanges” will get. Still, professors are outraged. One tells the paper that increased out-of-pocket costs amount to a pay cut. “It’s equivalent to taxing the sick,” says another.

No, actually it’s equivalent to paying a doctor something for services received — because that’s what it is. It’s what most of America does.

That is the most striking part of the article: These people who are surprised and offended at having to pay part of the cost of their health care include those who have prescribed this exact approach, the Times reports:

“For years, Harvard’s experts on health economics and policy have advised presidents and Congress on how to provide health benefits to the nation at a reasonable cost. But those remedies will now be applied to the Harvard faculty, and the professors are in an uproar. . . .

“The university says the increases are in part a result of the Obama administration’s Affordable Care Act, which many Harvard professors championed.”

A fundamental problem with the Orwellian-named “Affordable Care Act” is that it takes away freedom and choice from consumers – forcing millions to drop the health plans they chose, cutting off access to doctors they trusted. This was part of the design of Obamacare. It was prescribed by experts who believed it would benefit “average Americans.” That we-know-best attitude is part of why Obamacare has remained so unpopular, so unaccepted by the American people.

Now the result is hitting the experts themselves. Perhaps this will be the Harvard faculty’s George McGovern moment.

Vermont is a model for America on health care, the Wall Street Journal sensibly pointed out earlier this week. That’s because Vermont is “where the purest progressive version of ObamaCare has imploded.”

Vermont’s Democrat Governor Peter Shumlin (at right) ran for election in 2010 promising a “single-payer” health system – one in which the government paid for all health care by taxing people, like the “public option” that liberals (including President Obama) wanted in Obamacare. Shumlin hired experts such as Jonathan Gruber to come up with a government-only plan, got the legislature to pass it, and ran for re-election on it.

He knew it mattered nationally: “If Vermont gets single-payer health care right, which I believe we will, other states will follow,” said Shumlin at the time. “If we screw it up, it will set back this effort for a long time. So I know we have a tremendous amount of responsibility, not only to Vermonters.”

Then last week, he canceled it. There will be no single-payer plan – socialized medicine -- in Vermont.

As the Journal explains, “Mr. Shumlin’s budget gremlins concluded the plan was too expensive and would damage the state economy.

“As crises of faith go, this is Mikhail Gorbachev circa 1991 territory. Mr. Shumlin ran in 2010 on an explicit single-payer platform in the most liberal state east of California, and the plan was conceived as a model for other states. He called his retreat ‘the greatest disappointment of my political life so far.’ May there be others.”

Shumlin realized the plan was simply too expensive. The Journal explains:

“Under the Vermont plan, all 625,000 state residents were to be automatically enrolled in the government plan, with the same benefits for all. As with Medicare, employers would be subject to a payroll tax that would reduce wages, and workers would pay a premium based on a sliding income scale. . . .

“If Mr. Shumlin would give to each according to his need, he would take from each far more than his ability to pay. The state accountants estimated that his plan required an 11.5% tax on worker payroll, with no exceptions.

“Individuals, meanwhile, would have paid as much as 9.5% of earnings, which would have applied to everyone making more than four times the poverty level, or $102,220 for a family of four—hardly the 1%. The full $2.59 billion in necessary funding would roughly double current state revenues (about $2.85 billion today).”

This wouldn’t save Vermonters money. For one thing, the plan mandated not gold-plated insurance but platinum-plated – it mandated an “actuarial value” of 94%, meaning that patients would cover only 6% of the cost of their care. This is a certain formula for patients and providers paying no attention of cost and value. It instead would have tried to control costs by imposing punitively low payment rates on providers. The federal government tries this now with its single-payer system for the poor, Medicaid, leading to shortages of doctors who will accept Medicaid patients.

Worse, it shifted the costs in ways taxpayers would see as unjust. Even liberal media observers admit this. “The proposed taxes would ask higher earners to spend more on health care than they do now — in some cases, far more,” noted the website Vox, which also pointed out that an 11.5% payroll tax hits high-wage payrolls much harder than low-wage ones. And remember where the burden of payroll taxes falls: On workers’ wages. Don’t believe me? Ask Jonathan Gruber.

It was all too much for Vermont to afford. The Journal lauds Shumlin for waking up:

His ideological comrades are rarely dissuaded by the prospect of economic damage, as ObamaCare proves. But Mr. Shumlin has succeeded in making Vermont a national model: By admitting that single payer will make health care both more expensive and less efficient, he has shown other states what not to do.”

Perhaps he had little choice: If Vermont really did add 21% more in tax to incomes, the people it hoped would pay for everyone’s health care could have fled to another less hostile state. If single-payer is imposed nationally, where can the targeted taxpayers run? Simple: They can work and earn that much less, to the detriment of the people they would have employed or served.

Let this be a warning, then, as the nation thinks about what will replace the mess of Obamacare. Putting more power and money into the hands of government isn’t just morally wrong, it’s unaffordable.

Federal Communications Commission Chairman Tom Wheeler won an award last week that he probably won’t take pride in. Citizens against Government Waste named Wheeler the December Porker of the Month.

Wheeler (at right) received this “honor” after increasing the size of the Universal Service Fund’s E-Rate program by $1.5 billion — resulting in a 17.2 percent increase in the “universal service” fees charged to Americans on their telephone and wireless bills each month.

The E-Rate program, which provides schools and libraries with discounts on telecommunications and Internet access, is one of four programs funded through the Universal Service Fund, or USF. The FCC began eyeing the program after President Obama launched his ConnectED program to provide 99 percent of students in America high speed broadband and high speed wireless services within five years.

At the beginning of the year, I became concerned that rather than actually reform the program to address this laudable goals, the FCC would just throw money. In February, FCC Commissioner Ajit Pai and I wrote an essay in the Milwaukee Journal Sentinel urging the FCC to reform its programs first. We wrote:

“Based on how much we spend, every child in America should be getting a world-class education, which would include connecting our classrooms to digital opportunities. To get there, the federal government doesn't need to spend more money — the Federal Communications Commission already runs a program called E-Rate that distributes over $2 billion to schools and libraries to purchase communications services each year. What we do need is real reform in Washington and an end to the waste, fraud and abuse inherent in the current program.”

One thing we pointed out in the newspaper is that while the E-Rate program is supposed to be about connecting kids to next-generation technologies, it still prioritizes basic telephone service — to the tune of half a billion dollars per year. “Indeed, a school can get funding for paging service (remember pagers?) and international long distance more easily than it can get money to wire up a classroom. That makes no sense.”

Our basic premise was this: Instead of throwing more money at the problem, we should turn the current E-Rate program into a fiscally responsible one that puts kids and common sense first.

Unfortunately, the FCC did not take this approach. I am very concerned that unelected bureaucrats have the power to raise de facto taxes on Americans. What’s worse, behind closed doors this increase was promised by the FCC for months but only instituted after the elections. The FCC is truly deserving of CAGW’s award.

It’s always good to see anyone start to acknowledge the outlines of a problem – that’s the first step toward solving it. So I was glad that the Milwaukee Journal Sentinel’s “PolitiFact” desk said I was right in pointing out how much of federal spending has slipped out of the direct control of Congress.

The newspaper was fact-checking something I said to commentator Vicki McKenna on WIBA-AM in Madison recently (the part in question starts at about 29:00). Vicki was outraged that about two-thirds of federal spending is on autopilot – “permanently” appropriated, to use the exact word that is used when talking about federal spending.

She was right to be outraged: All that Congress debates annually is about a third of federal spending, the part called “discretionary” – programs for which Congress must spend – or “appropriate” – specific sums each year. These are thousands of federal programs, from the defense budget to NASA to the maintenance bill at federal courthouses. It totaled about $1,170,000,000,000 – that’s 1.2 trillion – in fiscal year 2014, which ended Sept. 30.

Congress doesn’t appropriate money annually for the other two thirds of the budget – both the interest it owes, about $230 billion last year, and so-called “mandatory” spending, about $2,110,000,000,000, or $2.1 trillion. Mandatory spending is mostly payments the government has promised to any individuals who qualify. Examples are Social Security, Medicare, Medicaid, food stamps, veterans benefits, aid for the poor – you can see the breakdown from the Congressional Budget Office here, on page 12. These are among the largest programs in the federal budget. Past Congresses set them up, one by one, and those laws generally give those programs access to however much money it takes. As the nonpartisan Congressional Research Service puts it (emphasis added):

Mandatory spending is controlled by laws other than appropriations acts. Such laws generally take the form of authorizing legislation. Authorizing legislation establishes or continues the operation of a federal program or agency, either indefinitely or for a specified period. Mandatory spending typically is provided in permanent or multi-year appropriations contained in the authorizing law, and therefore, the funding becomes available automatically each year, without further legislative action by Congress. In most cases, the authorizing law requires payment, based on a benefit formula, to an individual or entity (e.g., a state) if eligibility criteria are met.”

PolitiFact nitpicked about whether mandatory programs are really permanent – Congress can change the law. That’s true, as far as it goes. Starting in January, when the Republican Senate majority that voters chose in November at last is sworn in, it will be possible. But as you remember from civics class, bills don’t become law until the president signs them. So until President Obama starts taking seriously the unsustainable size and scope of the federal government, or until voters replace him with a president who will, the programs that make up two-thirds of federal spending really are permanently in place.

This is how we got to the point that our government is $18,000,000,000,000 (that's $18 trillion!!!) in debt. If Congress doesn’t vote on two-thirds of federal spending, it won’t prioritize it. The share of the budget that Congress doesn’t vote on annually has been growing and is due to keep growing:

This means that the representatives the people send to Washington will have ever less control over the money the government takes from the productive economy. Americans themselves will have diminishing control over their government, which will increasingly be an automated mechanism for taking money from some Americans and giving it to others – or rewarding politically powerful groups of recipients at the expense of our children and grandchildren, who will be stuck with still more debt.

This is no way to run a country or control spending. When Republicans are in majority at last in both houses of Congress, we must do what Democrats have refused to do – set a budget, then prioritize spending through a series of appropriations bills. Then we must begin reforming how Congress spends money. We need the president, and the people who will choose the next president, to understand the problem and work with us.

That starts with understanding that it is absolutely, entirely true that two-thirds of the federal budget is now outside of Congress’ annual control.