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Monthly Archives: July 2012

Why Does John Boehner Want To Increase The Deficit?

We’re in an election year. The economy is less than ideal. The best strategy the GOP can take to win big in 2012 is to say “You’ve had your chance and it didn’t work.” The slogan they’ve been lampooning–“Change we can believe in”–seems to have become their new battle cry. Okay. Fair enough. I’m willing to hear them out. What, pray tell, are the Republicans proposing to do that will make things better for America and its people?

Well, for starters, there’s the important issue of making sure that the wealthiest Americans stay that way. Now, I’m not talking about those people you know who are living quite comfortably. I’m talking about that select group of Americans who are so uber-wealthy that they could, if they felt like it, pay enough money to the right people and take advantage of the right legal loopholes to buy your neighborhood and kick you out of your house against your will. Okay, that might be a bit hyperbolic, but not by much.

The reason, we are told, that the super-rich must continue to receive such preferential tax treatment despite the fact that our nation’s deficit threatens the entire country’s economy, is because these are America’s job creators, and what Americans need more than anything right now are jobs. That, my friends, is called “trickle-down economics” and it hasn’t worked……well…..ever. Warren Buffett is pretty clear on the fact that he is incredibly rich, and that he isn’t in a position to put a dent in the unemployment problem, which is why he wants the wealthiest Americans to stop catching so many breaks and start giving back.

But I’m willing to accept the GOP’s premise here for the sake of argument. Let’s take the raising of increased tax revenue off the table. If we do that, there are only two options left: Cut spending, or fail to reduce the deficit. Republicans and Democrats both agree that we need to reduce the deficit, and we all know how rare bipartisan agreement on anything is these days, so I think it’s safe to say that Republicans should pursue a strategy to cut spending. And, indeed, that’s what they’ve been talking about–and in many ways trying to do. Take health care. Hey seniors, remember that Medicare program you love so much and don’t want government to get involved with? Republicans have proposed that the program be fully privatized and replaced with a voucher system. I hope they decide to write you a big enough check to pay for the care you need. There is little doubt that it will cut spending, but it will also cut your benefits.

Surely it’s better than “Obamacare” you say? That’s why the GOP has promised to repeal and replace the Affordable Care Act if–and this is the catch–you vote for them in November. That’s right, America. Vote for them first, and then keep your fingers crossed that they’ll follow through. After all, it’s not like politicians ever fail to fulfill their campaign promises. I mean, the GOP is doing its part to show how committed they are to the idea. They’ve voted to repeal the ACA 33 times since it was enacted. It hasn’t gone anywhere, but hey, they tried. But I digress. The point is that repealing the Affordable Care Act will be a step in the right direction. It will keep the Democrats’ hands off your Medicare, so that Republicans can destroy that program later, and it will cut costs. Deficit problem solved. Except for one thing. The Congressional Budget Office just wrote a nice letter to Speaker of the House John Boehner explaining that repealing the Affordable Care Act will actually increase the federal deficit by $109 billion over the next decade. As Rick Perry would say, “Oops.”

So, when you head to the polls this November, ask yourself why, if Republicans are so intent on reducing the deficit, they intend to repeal a law that would do just that? Why, in fact, would they insist on preserving tax cuts on the wealthiest Americans and passing a bill that will not only dismantle improvements to our health care system for the most vulnerable Americans, but actually raise the federal deficit in the process? I mean, it’s one thing for fat cat Republicans to cut benefits for the poor to save money. Now they’re actually talking about cutting benefits for the poor to spend money. It doesn’t make sense. But then again, if it gets you to vote for them, it doesn’t have to.

 

Understanding John Roberts

Chief Justice John Roberts was the deciding vote in the Supreme Court’s recent ruling on the Affordable Care Act. In fact, he authored the majority opinion outlining that the law was not a valid use of the Commerce Clause, but was a valid use of Congress’ ability to tax and spend. While I am not a lawyer, I did read the opinion, and I think it was a pretty cogent argument. It hinged on how one chose to define the market, but I agree that if the broad definition was used, things like food and shelter are universal markets in the same way that health care is, and that does present a somewhat slippery slope. The power to tax makes much more sense.

On the one hand, then, I think that Roberts simply allowed his opinion to be shaped by a sound interpretation of the law, legal precedent, and his understanding of the Constittuion. Another part of me, though, doubts this. While it’s sad to admit, ever since the Supreme Court ended the Florida recount early and basically appointed George W. Bush as the King in Chief, I’ve been dubious. All the more so when the Roberts court granted corporations the rights of persons, free to give unlimited campaign contributions. I don’t think I’m alone in this view. After all, most of the pre-ruling chatter had Justice Kennedy as the deciding swing vote. For the record, he voted to strike down the individual mandate. No one seemed to consider for a moment that Roberts would align with the more liberal judges to uphold the law. So why did he?

As I said, he may simply be a great chief justice, unswayed by politics and guided solely by the law. On the other hand, his motives may be less pure. Maybe he just wanted to cement his place in history. After all, this has been described as a landmark case and the case of the century, so it wouldn’t be surprising that he would want to be the deciding vote and the author of the majority opinion. Of course, he could have gone either way, and both of those things still would have happened, which suggests that he truly does care about the outcome.

While the outcome certainly upholds a liberal law on the surface, I think that there’s more to it than that. For instance, the fact that the majority placed limits on the interpretation of the Commerce Clause is actually a conservative ruling. So Roberts is being true to form there. The limitations on penalties to the states regarding the Medicaid expansion is also a limit to federal power, which is another victory for conservatives. Upholding the law under Congress’ ability to tax and spend may actually have an ulterior motive as well. For starters, had the court struck down the law, the right would have lost one of its key rallying cries in the months leading up to the November election. Instead, the decision has incited further revolt from the far right and the ranks of the Tea Party. People who, for whatever reason, are adamantly opposed to the Affordable Care Act, now see electing Mitt Romney and other conservatives in the House and Senate as the only remaining path to repealing the law. This solidifes the base and the fringe and likely increases voter turnout on the right. At the same time, the left may relax a little in the wake of the ruling, causing support for Obama to slip at the polls.

This scenario is compounded by the fact that the law was upheld under the notion that the penalty for remaining uninsured is to be considered a tax. Conservatives (and, well, most of us) hate taxes, so giving them ammunition in this regard might actually have been Roberts’ way of giving Republicans some good talking point material as the election heats up. It’s also important to note that Roberts writes several times about the role of the court versus the role of Congress, in which he makes clear that he doesn’t necessarily think that the Affordable Care Act is good policy. Instead, he says, that is for the people to decide by voting for their representatives and voting out those who pass policies that the public doesn’t support. That seems to be Roberts’ way of saying “Mitt 2012.” But, like I said at the outset, I’m not a lawyer.

 
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Posted by on July 5, 2012 in Supreme Court

 

Medicaid and Red State Governors: A Love/Hate Relationship

In addition to the much discussed individual mandate, a central element of the Affordable Care Act designed to increase insurance coverage is the expansion of the Medicaid program to cover anyone with an income up to 138% of the federal poverty level. To put that into context for those who might not know, Medicaid eligibility currently has two requirements: income eligibility and categorical eligibility. Income eligibility means that your income has to fall below a certain level, which varies by state within certain federal guidelines. Categorical eligibility, which also varies somewhat by state, means that you have to be a certain “type” of person. For example, pregnant women and children are typically eligible for Medicaid, whereas very few childless adults are eligible. The Affordable Care Act changes that, making anyone who is low-income (again, 138% of poverty, or $30,843 a year for a family of four) eligible regardless of what other “category” they might belong to.

The odd thing about the ACA, though, is that it will actually be more generous to conservative states that have not previously established more generous Medicaid limits. Here’s why: Starting in 2014, the federal government will pay 100% of the difference between what states are currently covering and the new 133% of poverty threshold. This amount is gradually reduced over time, reaching 90% by 2020, where it is slated to remain indefinitely. While Medicaid is currently jointly financed by the federal and state governments, this new arrangement has the feds picking up the bulk of the costs of the new coverage. The thing is, some states, like Massachusetts, are already providing coverage of parents up to 133% of poverty. These states that are already quite generous will not receive much in the way of new federal money. By contrast, other states, like Texas, only provide coverage for parents up to 26% of poverty (that’s less than $3,000 a year). When they opt-in to the Medicaid expansion, the federal government will pay the full difference in cost of expanding eligibility up to 138% of poverty. That’s a lot of federal money to states like Texas. Generally, the more conservative states are the ones with the most uninsured persons and the strictest Medicaid eligibility requirements. Therefore, they are also the ones who will gain the most under the ACA.

Of course, this depends on their willingness to participate in the Medicaid expansion, which is optional. The ACA did include a provision that said that if states didn’t participate in the Medicaid expansion, the federal government could also withdraw their funding for the existing Medicaid program. The Supreme Court, however, said that this was coercive and unconstitutional. The result is that states are free to participate in the program or not, without fear of repercussions. Politically, republican governors are adamant about resisting implementation of the Affordable Care Act. Louisiana’s Bobby Jindal has already proclaimed that his state, whose health statistics place it squarely in the bottom of the country (50th in 2008, rising to 49th by 2011), will not be creating an insurance exchange and will not be participating in the Medicaid expansion. It’s unfortunate, because the people in these states are the ones who desperately need help the most.

Of course, the politically-motivated decision not to play ball will only hurt these states further, as they walk away from literally billions of dollars in federal assistance that would boost their economies and improve the health of their residents. There will also be pressure from organized health care interests to participate, because that money will reduce their uncompensated care costs. So, I’m not sure if the rhetoric we’re hearing today will hold true in the end. If it does, though, it will be a great example of bad politics dominating good policy, and the people it will hurt the most are the ones who are already wounded.

Update: As Nicole points out in the comments, the actual threshold is even higher than I originally stated. Medicaid eligibility goes up to 138% of poverty, not 133% as I had written. I have updated the text to indicate this.

 

What the Supreme Court’s ACA Ruling Means for You

As promised, I digested the Supreme Court’s opinions on the Affordable Care Act over the weekend. I also read the opinions of several health policy and health law scholars, watched cable news, and a bit of Jon Stewart and the Colbert Report. From all of this, the court’s ruling is quite clear (although CNN and Fox News both struggled with that initially): The Affordable Care Act is being almost entirely upheld. The one thing that didn’t get the okay from the Supremes was a provision related to the Medicaid expansion. More on that later this week. Today, I want to give you a summary of what the court’s ruling means for you as it relates to the individual mandate. After all, this has been the lightning rod element of the law, and the one that, in my interactions with others, is the least understood. My hope is that you’ll share this with everyone you know–especially if they seem to have their facts wrong.

As I (and many others) have said before, the individual elements of the Affordable Care Act are overwhelmingly popular. People like the idea that young adults can remain on their parents’ coverage until age 26. They like the idea that no one can be denied coverage because of a pre-existing condition. They like the reduction in their Medicare Part D costs for prescription drugs. The proof that they like these things is that even Mitt Romney–who is distancing himself from “Obamacare” despite having signed its precursor into law in Massachusetts–has simultaneously gone on record in support of these provisions. You can see the video here.

The catch is the individual mandate. That’s the one part where people’s feelings seem to turn sharply negative. These people will say that this is “socialized medicine” or a “government takeover” although they cannot even begin to accurately describe to you the differences between the Canadian, German and UK health care systems. What is happening, I believe, is that people are scared of the unknown, and are hearing that they are going to be required to spend money to buy something, at a time when our economy is struggling and people are hard pressed to pay the bills they already have. If one looks at this problem from the individual household level, rather than at a system level, it seems a legitimate–albeit still misguided–concern.

I have had people tell me that they had to buy a government insurance plan to avoid being taxed. In fact, quite the opposite is true. This plan was designed to encourage individuals to obtain insurance on the private market. It is, in that sense, the antithesis of socialized medicine. If you doubt this point, you should realize that this is why there was even a court case in the first place. As both sides made clear during oral arguments, if the government wanted to create a single-payer “Medicare for all” insurance program and require you to pay taxes to support it, there was no question that it would be lawful under the Constitution. At odds was the notion of whether the government can incentivize you to purchase a private product. The ruling was that, yes, they can. In fact, they already incentivize behavior to avoid certain purchases. For example, sin taxes on cigarettes and alcohol exist not only to raise revenue, but to discourage the use of these products which are harmful to individuals and the public’s health. However, people are still free to buy these products. Similarly, people are free to NOT buy health insurance. However, the government is encouraging them to do so by implementing a tax for individuals who do not purchase coverage. People don’t like taxes, generally, so it’s worth looking at that in more detail as well.

How much is the tax and who will have to pay it? The best, most concise overview of those details can be found here. Some of the basics are that the penalty will be phased-in beginning in 2014, when individuals who go without coverage will pay a nominal penalty of $95. I’m not sure if you’ve ever purchased insurance, but even in the most generous employer-sponsored plans, you’re likely to spend more than that in 2 months. So this is not a stiff penalty. That said, it does increase to $325 in 2015 and $695 in 2016. This is still cheaper than the cost of insurance in most cases. For families, the minimum penalty is three times the per person minimum, regardless of family size. So, that’s $2,085 per family in 2016. Still, much cheaper than a family insurance policy, which routinely costs more than $15,000 per year, of which the employee pays more than $4,000 according to the Kaiser Family Foundation.

The above amounts are minimums. For those who earn higher incomes, the amount of the tax they pay will be higher–up to 2.5% of their total annual income–although the amount of the tax can never exceed the average national cost of the lowest level of coverage (i.e., “bronze” plans). That means, that it will always be as much, or more expensive to buy insurance than to pay the tax, but with employers picking up the tab in most cases, the tax will be more expensive to individuals than their monthly premiums. Still, paying the tax doesn’t provide you with any tangible benefit in the way that having insurance coverage does, so it makes sense to get the coverage. I do think that if the penalty exceeded the total cost to buy insurance that would be coercive. Fortunately, that’s not the case.

Finally, there are several groups that are exempt from having to pay the tax. These include low-income individuals who do not file tax returns, those who are granted a hardship waiver by the Department of Health and Human Services, those without affordable coverage options (defined as coverage exceeding 8% of household income), and those with certain religious objections.

As a practical exercise, I think it’s worth considering several different groups of people and how they are likely to be affected by the individual mandate. First, there are those of us who already have employer-sponsored insurance. That’s about two-thirds of the U.S. population. For us, very little changes except that our employers will now have an incentive not to drop coverage, because doing so will subject them to a tax of their own. We have coverage, and therefore will not be subject to the penalty. There has been a focus on small employers who say the law will cause them not to hire additional staff, but I think those claims are mostly overblown. With an accountant and a lawyer, it is easy enough to get around the provisions that concern them by simply splitting their single business into two smaller businesses on paper.

For those who are enrolled in Medicaid or Medicare, nothing changes–except that drug coverage and preventive care in Medicare has become more affordable. Moreover, the Medicaid program will be expanding, which leads to the next group, the low-income uninsured. These individuals who are below 133% of the poverty level–many of whom are unlikely to be subject to the penalty anyway–will be able to obtain Medicaid coverage at no cost to them. So to recap, those with insurance through their employers, those who are elderly and/or disabled, and the low-income will keep the coverage they have or be able to newly obtain very affordable coverage.

That leaves those who are not offered insurance through their job and those who are otherwise uninsured. If these individuals aren’t quite poor enough to qualify for Medicaid, but aren’t quite wealthy enough to pay for all of their medical care with cash out of their own pocket, they will have the opportunity to purchase health insurance through the exhanges, which I like to think of as a Priceline.com for health insurance. Private insurance plans will compete with each other in a format that is more transparent and this is expected to rein in costs somewhat. These individuals will have their insurance purchase subsidized through tax credits. So, rather than the old way in which a person who bought individual coverage had to fork out the whole premium with after-tax dollars, they will only be responsible for paying a portion of the premium. It’s kind of like the government is playing the role of the employer in subsidizing the bulk of the cost for coverage for those whose employers can’t or won’t play that role themselves. For this group, it will become an unquestionably better deal for them to buy subsidized coverage than to pay the tax and get nothing in return. Right now, these are the people who are the most likely to decide that they can’t afford and don’t need insurance. They’re also the people who often turn out to be wrong and turn up at the emergency room seeking “free” care that the rest of us subsidize. So, it makes sense that they are the ones most averse to the penalty and most averse to the mandate.

Finally, there is the group of wealthy individuals who pay for their own care out of their pocket. Think Mitt Romney, who refused to enroll in Medicare on his 65th birthday. Why bother when you can just buy the hospital where you’ll be having your surgery if you happen to need it? I have little sympathy for this group, because whether they buy the insurance or just pay the tax, it’s not going to cost them much. Remember, there is a cap on the penalty not to exceed the national average for bronze plans. So Mitt pays an extra $15,000 in taxes each year. I don’t think he’ll go hungry.

So how many people does the individual mandate and the accompanying penalty really hang out to dry? Very few, I would argue. The low-income are exempt from the penalty and will be covered by Medicaid anyway. The very wealthy have it covered either way. The elderly and disabled have Medicare coverage and won’t have to worry about the penalty. The majority of us in the middle, who have insurance through our work won’t have to pay a penalty, and those of us who don’t have insurance through our work will find that, thanks to generous government subsidies, we will be able to buy insurance through the exchanges that is rather more affordable than it has been in the past.

Of course, if we don’t want to take advantage of that opportunity, it only seems fair that we should be penalized for our irresponsible decision-making. It just isn’t right for people to make a decision not to buy insurance knowing that there will be a safety net to catch them if they happen to need it. It’s called personal responsibility, and if that sounds like a Republican concept, it’s because it is. After all, they’re the ones who came up with the individual mandate in the first place. They just stopped liking it when the Democrats agreed with them. So you see, partisan politics have played to Americans’ emotions and have construed the individual mandate as something that it is not. It is not a burden on those who can least afford it to have to purchase yet one more thing. Rather, it is an incentive to motivate those who can afford it to stop acting irresponsibly.

 
 
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