Thursday Links
- Why the Tea Partiers should not date the GOP: “This movement is simply saying: ‘We are fine without you, Washington. Now for the love of God, go attend a reception somewhere, and stop making health care and entrepreneurship more expensive than they already are.’”
- Why President Obama should be open to cutting military spending: “A real test of a leader’s wisdom and strength would recognize that more spending does not equal greater security.”
- A growing disconnect: “A nasty spat has erupted between Washington and Beijing over the Obama administration’s arms sales to Taiwan….The bulk of the evidence suggests that storm clouds are building in the US-China relationship.”
- Podcast: “Obama’s Permanent Bailouts” featuring Mark Calabria.
Filed under: Foreign Policy and National Security; General; Government and Politics
‘Father of HSAs’ John Goodman Plays Host to ‘Father of the Individual Mandate’ Mitt Romney
"Father of the Individual Mandate" Mitt Romney
The former nickname came from National Journal or The Wall Street Journal, I’m not sure which. The latter nickname comes from Institute for Health Freedom president Sue Blevins.
See here for details on an upcoming event in Dallas where Goodman’s National Center for Policy Analysis will play host to Romney.
It should be an interesting event. With all 40 Republican members of the U.S. Senate, including moderates like Sen. Olympia Snowe (R-ME), voting to declare an individual mandate unconstitutional…with 35 states moving legislation to block an individual mandate…with the Heritage Foundation rebuking an individual mandate…and with Virginia’s Democratically controlled Senate approving legislation to block an individual mandate…well, Romney may have a tough road to hoe with the conservatives who typically attend NPCA events.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
How to Tell When ObamaCare Is Dead
Democrats have lots of ambitions. One of them is their health care overhaul, which included a lot of “pay-fors” — i.e., spending cuts that would pay for ObamaCare’s new entitlements. But they also want a jobs bill, a “doc fix,” and other things that require new government spending. Those also require pay-fors — unless Democrats are willing to expand further a $1-trillion-plus deficit — and pay-fors are a scarce commodity.
Today, CongressDaily’s Anna Edney reports:
Some, though, are skeptical Democrats would use any of the pay-fors because that would mean officially declaring the reform effort dead.
“I don’t expect any effort to dismantle the reform bill until there’s no pulse,” one lobbyist said.
Right now, ObamaCare is mostly dead. And as we all know, “There’s a big difference between mostly dead and all dead…Mostly dead is slightly alive.”
A good way to tell when ObamaCare is all dead is when Democrats start picking at the carcass for pay-fors.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
How to Reform Health Care? ‘Let Them Have Choice’
This is big.
The federal tax code creates a large tax preference for employer-sponsored health insurance. As a result, 61 percent of non-elderly Americans obtain health insurance through an employer. That tax preference creates all sorts of problems. It encourages more comprehensive health insurance and wasteful health care spending. It deprives many workers of their health coverage at the moment they need it most: when they get sick and can no longer work. And it denies workers the benefits of being able to choose their health plan. Eighty percent of those who work for an employer that offers health benefits have at most two health-plan choices, which are typically both run by the same insurer.
To date, no one had really quantified the damage done by denying workers the ability to choose their own health insurance. The only guesstimate of which I had been aware was by Mark Pauly, Allison Percy, and Bradley Herring, who “infer[red] that the true value of the welfare loss may actually be in the neighborhood of 5–10 percent,” which was enough to negate any advantage that employer-sponsored insurance offers by virtue of its lower administrative costs.
A new working paper titled, “Let them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange,” by Leemore Dafny, Katherine Ho, and Mauricio Varela, offers a more precise estimate of how much workers suffer because the federal tax code denies them their choice of health plan — and how much they would gain if they had greater choice. (The authors have a shorter paper explaining their results here.) They write:
We estimate the median welfare gain from expanding choice amounts to roughly 20 percent of premiums. For the vast majority of employee groups and alternative model specifications, the gains from choice are likely to outweigh potential premium increases associated with a transition from large group to individual pricing.
Dafny, Ho, and Varela’s results provide a huge boost to free-market health care reforms.
Filed under: Cato Publications; Health, Welfare & Entitlements
Tuesday Links
- How the right has ‘Avatar’ wrong: “At its core, the movie is about defending property rights — something conservatives should embrace.”
- Americans tuning out the State of the Union: “When Obama had to make way for ‘Lost,’ some lamented the fact that many Americans preferred trash TV over presidential enlightenment. But the public’s lack of interest in the SOTU is actually a sign of political health.”
- Obama’s “mini-me” plan for health care.
- Podcast: “U.S. Should Cash Out of Social Security” featuring Michael D. Tanner.
ObamaCare Could Become Law at Any Time
The American people don’t want President Obama’s health care plan (see below). Massachusetts voters don’t want it.
The White House knows that the people don’t want it. In Ohio last week, President Obama said:
the process has been less than pretty. When you deal with 535 members of Congress, it’s going to be a somewhat ugly process…when you put it all together, it starts looking like just this monstrosity. And it makes people fearful. And it makes people afraid. And they start thinking, you know what, this looks like something that is going to cost me tax dollars and I already have insurance so why should I support this.
Yet Democrats still want ObamaCare to become law, and they are very close to making it happen. If Speaker Nancy Pelosi bribes enough House members to reach that magic number of 218 votes, she could hold the vote with as little as 24 hours’ notice. And ObamaCare would become law. Done and done. Comments from David Axelrod and other administration officials this weekend indicate that they haven’t given up on the Senate bill, and suggest that they are likely pressuring House Democrats to support it.
On ABC News’ This Week, Axelrod said, “People will never know what’s in that bill until we pass it.” He was right, though not in the sense that he meant it. As bad as the American people think this legislation is, they won’t really know until Nancy Pelosi bribes her way to 218 votes.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Weekend Links
- How unions will get a sweetheart deal if the health care overhaul passes — and everyone else the shaft.
- Is it time to put Social Security reform back on the table?
- The mysterious ways of Fannie and Freddie.
- The G.O.P.’s next move on health care: “The challenge for Republicans is not to try to ‘do’ things just like the Democrats but a little less expensively or with a little less bureaucracy, but to present an agenda of personal and economic liberty as a positive alternative… [Republicans] will have to show that this time they are in favor of something positive. It’s called freedom.”
- Shattering the conventional wisdom: “Evidence is now flooding in from both America and England that obesity is the epidemic that never was.”
- Podcast: “Health Care Reform Do-Over” featuring Michael F. Cannon.
Trouble in Massachusetts
Yesterday, Cato released a new study, “The Massachusetts Health Plan: Much Pain, Little Gain,” which showed that official estimates overstate the gains in health insurance coverage resulting from a 2006 Massachusetts law by at least 45 percent. The study also finds: supporters understate the law’s cost by nearly 60 percent; government programs are crowding out private insurance; self-reported health improved for some but fell for others; and young adults are responding to the law by avoiding Massachusetts.
Given that the Massachusetts health plan bears a “remarkable resemblance” to the Obama plan, the study should serve as a warning sign to members of Congress, says Michael Cannon, director of health policy studies.
The study has received coverage in Investor’s Business Daily, The Wall Street Journal, The Washington Post, Detroit News, The Washington Times, the Reason Foundation and the Pioneer Institute.
Wednesday Links
- David Boaz on Obama’s first year: “From this libertarian, Obama’s first year looks grim. …He may well end up like Lyndon Johnson, with an ambitious domestic agenda eventually bogged down by endless war. But I don’t think his wished-for FDR model — a transformative agenda that is both popular and long-lasting — is in the cards.”
- The message from Massachusetts: “There can be no denying that this election was a clear cut rejection of the Democratic health care bills.”
- Attacks from all sides: See what happens when the Right takes on free enterprise.
- A new dictator in Iraq?
- Podcast: Daniel Ikenson discusses Obama’s trade policy.
Obama’s Other Massachusetts Problem
Even if Democrat Martha Coakley wins 50 percent of the vote in the race to fill the late Sen. Ted Kennedy’s (ahem) term, there are other numbers emanating from Massachusetts that present a problem for President Obama’s health plan.
On Wednesday, the Cato Institute will release “The Massachusetts Health Plan: Much Pain, Little Gain,” authored by Cato adjunct scholar Aaron Yelowitz and yours truly. Our study evaluates Massachusetts’ 2006 health law, which bears a “remarkable resemblance” to the president’s plan. We use the same methodology as previous work by the Urban Institute, but ours is the first study to evaluate the effects of the Massachusetts law using Current Population Survey data for 2008 (i.e., from the 2009 March supplement). Since I’m sure that supporters of the Massachusetts law and the Obama plan will dismiss anything from Cato as ideologically motivated hackery: Yelowitz’s empirical work is frequently cited by the Congressional Budget Office, and includes one article co-authored with MIT health economist (and Obama administration consultant) Jonathan Gruber, under whom Yelowitz studied.
Among our findings:
- Official estimates overstate the coverage gains under the Massachusetts law by roughly 50 percent.
- The actual coverage gains may be lower still, because uninsured Massachusetts residents appear to be concealing their lack of insurance rather than admit to breaking the law.
- Public programs crowded out private insurance among low-income children and adults.
- Self-reported health improved for some, but fell for others.
- Young adults appear to be avoiding Massachusetts as a result of the law.
- Leading estimates understate the cost of the Massachusetts law by at least one third.
When Obama campaigns for Martha Coakley, he is really campaigning for his health plan, which means he is really campaigning for the Massachusetts health plan.
He and Coakley should explain why they’re pursuing a health plan that’s not only increasingly unpopular, but also appears to have a rather high cost-benefit ratio.
(Cross-posted at Politico’s Health Care Arena.)
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Weekend Links
- Jeffrey Miron on Obama’s bank fees: “Bailing out the banks was wrong, but a new tax won’t make it right.”
- What Constitution? If Congress can order you to buy health insurance, why stop there?
- Don’t poke the bear: There is a proposal in the Senate Foreign Relations Committee to rearm the country of Georgia.
- Why the tragedy in Haiti cries out for swift action from private donors and yes, governments.
- Podcast: “Obama and Immigration in 2010” featuring Daniel Griswold.
Health Care Bill to be Online for 72 Hours Before Final House Vote — Pelosi Is the Transparency Leader?
The Sunlight Foundation cites this tweet, and newspapers confirm, that the House leadership has promised to put the final health care bill online for 72 hours before a final vote.
“The move came after Rep. Scott Murphy, D-N.Y., urged colleagues to join him in asking House Speaker Nancy Pelosi, D-Calif., and House Democratic Leader Steny Hoyer, D-Md., for a three-day time-out before any floor vote,” reports the St. Louis Post-Dispatch.
Kudos to Representative Murphy for bringing this up. Congratulations to the Sunlight Foundation for organizing the closely related Read the Bill campaign, which is pressuring Congress to post bills online for 72 hours before debate begins.
Meanwhile, the Obama administration’s unfulfilled transparency promises are beginning to draw derision not only from political partisans but from the mainstream media. For example, the L.A. Times “Top of the Ticket” blog mocked the administration yesterday in a post called, “Joe Biden Update: He Meets on Transparency Today. But the Meeting is Closed.”
[T]oday’s Biden schedule highlight is a meeting with the chief of transparency for economic recovery. But, unfortunately, the transparency meeting is non-transparent, closed to the press… Which makes it — what? — secret openness? Open secrecy?
That post cites this one at a site called Media-ite, where columnist Tommy Christopher bemoans the president’s failure to see through his promise to put health care negotiations on C-SPAN.
Secret negotiations like the one between the pharmaceutical lobby, the White House, and the Senate Finance Committee are the Obama pledge’s raison d’etre. Hours of debate and information are nice, but the real value of transparency is in keeping everyone honest. By meeting with insurance and pharmaceutical industry leaders in private, the administration has shielded the parties most in need of being kept honest, the ones most likely to poison the process.
If you had asked people a year ago whether President Obama or Speaker Pelosi would be the leader in legislative transparency, I don’t think many would have bet on the latter. This is not to say that the process has been transparent enough — the production of the health care bill has been quite opaque compared to what’s possible and desirable. But Pelosi is the current leader on transparency, if only by substantial default.
Filed under: Health, Welfare & Entitlements; Telecom, Internet & Information Policy
White House, Unions Reach Deal on Taxing Insurance Coverage
The Washington Post reports that the White House has reached a tentative agreement with labor leaders to tax high-cost health insurance policies.
What did you think of the negotiations? You did watch them on C-SPAN, didn’t you?
At the Sunlight Foundation blog, I’ve joined in some discussion about whether a president could really force process reforms on Congress like requiring negotiations to be televised. (Short answer: It’s possible, not probable.)
But here’s a case where the White House declined to put its own negotiations on television as the president promised.
Filed under: Government and Politics; Health, Welfare & Entitlements; Telecom, Internet & Information Policy
Thursday Links
- Nat Hentoff: If you’re looking for reform in Cuba, don’t rest your hopes on Raul Castro.
- Tim Carney, author of Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses gives the inside scoop on why big government is good for big business.
- The Patriot Act: What should go, and what should stay?
- Dear Poor People- “Please remain poor.” Sincerely, Obamacare.
- Podcast: “Obamanomics in Health Care” featuring Tim Carney.
HHS Bureaucracy Is Not up to the Task
One aspect of the health care debate that has not been sufficiently addressed is how the Department of Health and Human Services will handle all its new responsibilities given the massive fraud and abuse that already plagues its existing programs.
It seems that every week there’s a new report of government health care being bilked. Since what’s reported is typically only what is caught, one can only imagine how much isn’t being caught. Harvard’s Malcolm Sparrow, a top specialist in health care fraud, estimates that up to 20 percent of federal health program budgets are consumed by improper payments, which would be a staggering $150 billion a year for Medicare and Medicaid.
New York Times columnist David Leonhardt did raise the question this week of whether the HHS bureaucracy is up to the task. He notes that the president is yet to choose a nominee to head the HHS’s Centers for Medicare and Medicaid Services (CMS), and he suggests that “the lack of a Medicare nomination suggests that the White House is not giving enough attention to what will happen once Mr. Obama signs a bill.” Well that’s because most politicians are primarily concerned with getting accolades for passing bills, but don’t worry too much about how programs actually work.
As I mentioned in an earlier post on this subject, CMS is the reincarnation of a previous HHS bureaucracy with a poor reputation. David Hyman recounts in his book, Medicare Meets Mephistopheles, that in 2001 HHS’s Health Care Financing Administration became CMS in an attempt to rebrand the universally disliked HCFA. CMS Administrator Tom Scully told Congress in 2003:
The fact is, the health care market…is extremely muted and extremely screwed up and it’s largely because of my agency. For those of you who don’t follow CMS, which used to be called HCFA, we changed the name because it was so well loved. I always say it’s kind of like when Enron comes out of bankruptcy, they’ll probably change their name. So, HCFA—Secretary Thompson and I decided to confuse everybody. We changed the name to CMS for a couple of years so people wouldn’t realize we’re actually HCFA. So far, it’s worked reasonably well.
Oh sure, the president is promising that this time it will be different. But Leonhardt relates a story from former CMS administrator Mark McClellan that shows why the president’s promise will be impossible to keep:
[Mark McClellan] likes to tell the story of a Medicare demonstration project that Congress approved in 2003. Once the bill passed, officials had to devise the project’s details, decide how to measure the results and choose the locations. All of that took until 2009. The first round of projects — coordinating care across medical specialties, in Indiana and North Carolina — has only recently started. Years more will pass before the results are in.
Wednesday Links
- A real stimulus: To create jobs, repeal the corporate-income tax.
- As if times weren’t hard enough: The individual mandate on health insurance would impose high implicit taxes on low-wage workers. For more on this, read the new Cato study on burdens the health care legislation will place on the poor.
- Hot off the press: New issue of Regulation magazine looks at lessons from the financial crisis and property rights.
- Even though the government is running massive deficits, interest rates and inflation are low. So, what’s the problem?
- Podcast: “Bernanke’s Conceit” featuring Mark A. Calabria.
How ObamaCare Would Keep the Poor Poor
Suppose you’re a family of four at or near the federal poverty level. Under current law, if you earn an additional dollar, you get to keep around 60-70 cents.
Under the House and Senate health care bills, however, you would get to keep maybe 38 cents. Or 26 cents. Or maybe just 18 cents.
The following graph (from my recent study, “Obama’s Prescription for Low-Wage Workers: High Implicit Taxes, Higher Premiums”) shows that under the House and Senate bills, the combination of (1) a mandate tax and (2) subsidies that disappear as income rises would impose implicit tax rates on poor families that reach as high as 82 percent over broad ranges of income.
This graph actually smooths out some rather bumpy implicit tax rates that spike as high as 174 percent.
In the 1980s and 1990s, the public saw that too-generous government subsidies can actually trap people in a cycle of poverty and dependence. President Obama and his congressional allies seem not to have learned that lesson.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Dear Poor People: Please Remain Poor. Sincerely, ObamaCare
In a new study titled, “Obama’s Prescription for Low-Wage Workers: High Implicit Taxes, Higher Premiums,” I show that the House and Senate health care bills would impose implicit tax rates on low-wage workers that exceed 100 percent. Here’s the executive summary:
House and Senate Democrats have produced health care legislation whose mandates, subsidies, tax penalties, and health insurance regulations would penalize work and reward Americans who refuse to purchase health insurance. As a result, the legislation could trap many Americans in low-wage jobs and cause even higher health-insurance premiums, government spending, and taxes than are envisioned in the legislation.
Those mandates and subsidies would impose effective marginal tax rates on low-wage workers that would average between 53 and 74 percent— and even reach as high as 82 percent—over broad ranges of earned income. By comparison, the wealthiest Americans would face tax rates no higher than 47.9 percent.
Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill and 159 percent under the House bill. Under the Senate bill, adults starting at $14,560 who earn an additional $560 would see their total income fall by $200 due to higher taxes and reduced subsidies. Under the House bill, families of four starting at $43,670 who earn an additional $1,100 would see their total income fall by $870.
In addition, middle-income workers could save as much as $8,000 per year by dropping coverage and purchasing health insurance only when sick. Indeed, the legislation effectively removes any penalty on such behavior by forcing insurers to sell health insurance to the uninsured at standard premiums when they fall ill. The legislation would thus encourage “adverse selection”—an unstable situation that would drive insurance premiums, government spending, and taxes even higher.
See also my Kaiser Health News oped, “Individual Mandate Would Impose High Implicit Taxes on Low-Wage Workers.”
And be sure to pre-register for our January 28 policy forum, “ObamaCare’s High Implicit Tax Rates for Low-Wage Workers,” where the Urban Institute’s Gene Steuerle and I will discuss these obnoxious implicit tax rates.
(Cross-posted at Politico’s Health Care Arena.)
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Obama’s Health Tax Conundrum
As President Obama is finding out, spending a trillion dollars on health care reform is easy; paying for it is a bit harder.
Both the House and Senate versions contain huge tax increases. But they take completely different approaches toward which taxes are hiked and who would pay them. And, as President Obama discovered in yesterday’s contentious meeting with labor bosses, those differences will not be easy to resolve.
The Senate wants to slap a 40 percent excise tax on so-called “Cadillac” insurance plans, that is plans with an actuarial value of more than $8,500 for an individual and $23,000 for a family. The tax technically falls on the insurance company that offers the plan, but there’s widespread recognition that insurers will merely pass that tax on to their customers in the form of still-higher premiums. The Congressional Budget Office estimates that initially about 19 percent of insurance plans would be subject to the tax, and union surveys suggest that it could hit as many as 25 percent of union workers. Moreover, as inflation drives costs higher, more and more plans will be subject to the tax. That is because the threshold for the tax is indexed to general inflation not medical inflation which runs higher.
As today’s Washington Post editorial points out, economists and deficit hawks see this measure as one of the few cost-control provisions left in the bill. Its goal is not just to raise some $150 billion in revenue over 10 years, but to discourage the type of “gold plated” insurance plans that encourage over utilization and drive up costs. That is why the Obama administration has endorsed this approach.
However, as labor leaders made clear in yesterday’s meeting with the president, this middle-class tax hike is unacceptable. AFL-CIO president Richard Trumka has even threatened to retaliate at the polls against Democrats who vote for it. In addition, 124 House Democrats have signed a letter opposing the “Cadillac tax.” With just a three vote margin, House Speaker Nancy Pelosi cannot afford to have any defections from tax opponents.
The House, on the other hand, has gone with a “soak the rich” strategy, calling for a surtax on incomes of $500,000 or more a year. But Democrats already plan to allow the Bush tax cuts to expire next year, raising income taxes for millions of Americans. An income tax surtax on top of that would mean marginal tax rates of more than 50 percent in many states with devastating consequences for economic growth. Moderate Democratic Senators like Ben Nelson (Neb.) and even liberals from states with high cost of living like Chuck Schumer (NY) are unlikely to go along with this tax. And, in the Senate, Democrats can’t afford even a single “no” vote.
The conventional wisdom in Washington is that a health care bill is inevitable. But if the growing fight over taxes is any indication, inevitability is overrated.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
Monday Links
- David Boaz: “Suddenly, I find myself nostalgic for Bill Clinton….Come back, Bill, all is forgiven. Or most, anyway. As long as you bring a Republican Congress with you.”
- So, have you been following the health-care debate on C-SPAN? Oh wait…
- Obama administration preparing a new arms package for Taiwan.
- Nat Hentoff to Castro et al: “Roar, tyrants, you cannot hide your racist deeds.“
- Podcast: “Price Controls in Obamacare” featuring Michael F. Cannon.
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