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Tag: 2012 Election

Romney’s Second Shot at Healthcare Reform

Americans believe in second chances. The oral arguments before the Supreme Court last week were a rare opportunity to dispassionately re-examine the divisive healthcare debate of two years ago. What happens if, after the smoke clears, we get a second chance at healthcare reform?

We’ve long known that healthcare will be a central theme in the 2012 presidential contest. The High Court’s deliberations and June decision only reinforce that reality for President Obama and Governor Romney.

Unlike with the Patient Protection and Affordable Care Act (PPACA), the constitutionality of Governor Romney’s Massachusetts law has never been seriously questioned. States, not the federal government, have police powers, allowing them to require purchases (car insurance, taxes and licensure) and to pass wide-ranging public health laws and public safety laws. The Bay State law enjoys broad popular support.

In contrast, the case before the Supreme Court was brought by the majority of states. Regardless of what the Court decides, the PPACA will continue to polarize the country.

President Obama may cite Romney’s Massachusetts reform as inspiring his efforts, but there are profound differences in the size, reach and financing of the two laws. Elected just six months after the law’s passage, Romney’s successor, Democratic Governor Deval Patrick, has obscured some of those differences by taking a big government approach to implementation.

Where Romney sought an open marketplace for individuals to purchase benefit plans ranging from catastrophic to generous, Patrick has drastically limited choices and mandated minimum coverage levels beyond private-market norms.

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The Long Road From March to November

In politics, a month is a lifetime, and 7 months is an eternity. It’s four months from now to late June when the Supreme Court issues its ruling on the health law, and it’s several months until the election.

No one knows what will happen between now and the election. But whatever occurs, it will be a psychological and political time.

Democrats will put on a brave face. They will say it’s not over until it’s over, that the individual mandate was originally a Republican and Romney idea, that the justices will come to their senses, that this is a moral not a constitutional issue.

Republicans will say that the health law is a train wreck, that it was rooted in ego and arrogance of an overly ambitious president, that Democrats poisoned the whole politics process by completely ignoring the other party and the American public, and that the whole idea of individual and Medicaid mandates is toast.

If they are smart, and there is no guarantee of that, the GOP will issue a detailed alternative plan resting on incremental market reforms with proper government oversight.

Inaction “ on Massive Scale

Over the next seven months, we are likely to have “inaction,” if I may borrow a term from the hearings, on a massive scale.

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Will Obamacare Drive Out Employer-Sponsored Insurance?

Many opponents of Obamacare claim that large employers will drop employee health coverage in droves. The Wall Street Journal has made this argument a centerpiece of its opposition to the health exchanges. The argument has some face validity – employers that drop coverage can save about $10,000 per employee in insurance costs but only have to pay fines of $2000 per employee. What employer would not want to save $8000 per employee?

Supporters of Obamacare argue that if employers do not pay for insurance, they will have to increase wages. This will temper the incentives of employers to drop coverage. This follows from a classic model in labor economics that says that employers have to give workers a competitive wage/benefits bundle, and that the mix of wages and benefits is largely fungible. Thus, if benefits fall by $10,000, wages will increase by about the same amount. The theory is well accepted.

While it has been difficult to construct empirical tests of this theory, the available evidence is largely supportive (though the evidence of 1:1 fungibility is less compelling than the evidence of some degree of fungibility.) This may explain why the Congressional Budget Office predicts that only a few million workers will lose their employer sponsored coverage and get pushed onto the exchange. Even so, the Wall Street Journal and others have dismissed this theory and evidence, arguing that employers who drop coverage will pocket the full savings and therefore than tens of millions of workers will be affected.

I want to propose a simple test of the naysayers’ position. The test relies on evidence that the Wall Street Journal and others should find unimpeachable –stock market valuations. This is a quick and dirty test but the results are so compelling that I think it is sufficient.

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In Defense of Paul Ryan’s Budget Plan

I once called an older version of Paul Ryan’s budget plan “voodoo economics.” But you have to admire him. He has just released a new plan that slashes the deficit from 8 percent of GDP to around 1 percent by the end of the decade while simultaneously keeping revenues at 18 percent of GDP over the decade, very close to their historical average. To be sure, the specific policies required to get there are not well specified and there is much that I don’t like, such as the assumption that we don’t need new revenues to close the fiscal gap; still, after reading the “Path to Prosperity” I came away with a sense that there is food for thought, worthy of further discussion and debate, in this document.

I came to this conclusion after reading the section of the document called “repairing the safety net.” I had figured out that a lot of the savings in this plan had to come from slashing programs for the poor so I expected to be horrified by what I read. I am not in favor of cutting programs for the poor, especially in a plan that reduces taxes for the wealthy and leaves Social Security virtually untouched. Instead, I found myself at least intrigued with the arguments that I found in this section of the plan. They are thoughtful, well-articulated, and worthy of further debate.

One argument is that federal subsidies for safety net programs encourage states to spend more than they otherwise would. Another argument is that federal dollars come with federal prescriptions and paperwork that stifle state innovation and efficiency. A third argument is that these programs undermine efforts by civic or faith-based groups to play a stronger role. A fourth argument is that some of these subsidies (for example, Pell grants) simply bid up prices (for college tuition). A fifth argument is that we have too many overlapping and complex programs with similar purposes (job training being a great example). A sixth argument is that assistance should be made conditional on personal responsibility—for example, being engaged in work or job training if you are receiving government assistance. This model of conditional assistance was a key element in the largely successful 1996 welfare reform law and could be expanded to other programs. Finally, the plan emphasizes the importance of upward mobility—a goal which I think many can embrace.

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The Return of the Ryan Plan

In announcing the Republicans’ new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”

Ryan is right about sharpening the contrast. But the plan doesn’t do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.

The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.

The money would come out of programs for the elderly, lower-middle families, and the poor.

Seniors would get subsidies to buy private health insurance or Medicare – but the subsidies would be capped. So as medical costs increased, seniors would fall further and further behind.

Other cuts would come out of food stamps, Pell grants to offset the college tuition of kids from poor families, and scores of other programs that now help middle-income and the poor.

The plan also calls for repealing Obama’s health-care overhaul, thereby eliminating healthcare for 30 million Americans and allowing insurers to discriminate against (and drop from coverage) people with pre-existing conditions.

The plan would carve an additional $19 billion out of next year’s “discretionary” spending over and above what Democrats agreed to last year. Needless to say, discretionary spending includes most of programs for lower-income families.

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Government Cannot Regulate Beliefs

Can religious beliefs be forced on you? Can government decide which religious beliefs are “acceptable” and which are not? Of course not. But this is the crux of the “free exercise” debate ignited by the Obama administration’s recent new health care mandate that forces employers to provide “free” contraception, sterilization and abortifacients.

The issue is not one of good health — despite election-year efforts to frame it as such. If it were only about good health, government would have long ago outlawed smoking, mandated daily vitamins and forced employers to provide gym memberships. The issue is not even “free” contraception. If it were, a member of Congress with an elastic view of the Commerce Clause would have long ago introduced a bill providing it to the public for “free” — whatever that means.

The real issues are whether the First Amendment is broad enough to include beliefs with which we disagree, and whether government can tacitly or otherwise force us to abandon our religious beliefs simply because something constitutes sound public policy.

A debate over sound public policy never can be substituted for constitutional consistency. If government action affects religious liberty, the government must (1) provide a compelling reason for the encroachment on free exercise and (2) prove the action used is the least restrictive means available.

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Learning from Massachusetts’ Health Care Experiment

Former Gov. Mitt Romney has taken considerable heat during the Republican primaries for the health-care legislation that passed while he was in office.

Sadly, election-year politics have overshadowed the real lessons of Massachusetts’ experiment.

The core question then-Gov. Romney was trying to answer was this: Should Massachusetts continue to pay hospitals more than $1 billion a year to care for the poor, or should it create a way for individuals to purchase their own insurance?

Romney’s original proposal was simple: Stop subsidizing expensive hospital care and instead require all residents to carry at least catastrophic insurance. Anything beyond that would be a matter of individual choice. The idea was to prevent taxpayers from having to pick up the tab for people unable or unwilling to pay for their own medical care.

To facilitate reform, Romney’s plan established a central agency, an “exchange,” where individuals could buy health insurance directly.

Though the overwhelmingly Democratic Legislature amended Romney’s proposal, the new law, if properly implemented, could have made the health-care market far more customer-focused.

But that didn’t happen. Just months after the law was passed Romney’s successor, Democrat Deval Patrick, became responsible for implementing the 2006 law. Since then, almost every key bureaucratic decision has leaned toward government control and away from individual decision-making and the market.

For example, the exchange’s idea of “minimum coverage” is equal to some of the most generous plans in other states. Additionally, roughly 40 percent of the people in the exchange pay no monthly premium for insurance, while small businesses have been hit with a variety of onerous requirements. Instead of creating a market with many choices, insurance has been over-standardized and the number of available plans limited, curbing innovation in plan design.

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Gingrich Adviser Urges States to Implement ObamaCare

State after state is refusing to implement ObamaCare’s health insurance Exchanges. Republican David Merritt hopes they will “grudgingly decide” to change their minds.

Merritt is a health care adviser to Newt Gingrich. He is also a senior adviser at Leavitt Partners. Leavitt Partners is a consulting firm that makes money by helping states implement ObamaCare. In the Daily Caller, Merritt tries to persuade state officials to help implement a law they oppose.

Merritt begins his pro-Exchange argument like so: “Imagine that you’re being required to buy a car.” Would you rather choose that car yourself, he asks, or would you rather the dealer choose the car? Hmm, good question. I choose Option C: wring the neck of whoever is requiring me to buy a car. Not Merritt, though. He counsels states to choose their own “car.”

There are so many problems with this analogy that it’s hard to list them all. First, as Merritt essentially admits, states would be able to choose from such a narrow range of “cars” that it scarcely makes a difference whether they pick their own or let the feds do it. Second, states would only have to pay for their “car” if they pick it out themselves; otherwise, the feds pay for it. So Merritt is literally urging states to volunteer to pay for a “car” when the feds would otherwise hand them one for free. Finally, he says states should select their own “car” even though “no one knows what a federal [car] would look like.” How can Merritt counsel states to choose Option A if he admits he doesn’t even know what Option B is? Wouldn’t the prudent course be to wait and see? Especially since the Obama administration admits it doesn’t have the money to create Exchanges itself?

Merritt’s hypotheticals don’t make his point, either:

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It’s NOT the Economy, Stupid!

With the US economy dragging itself to its feet, the housing and stock markets crawling back, and the Republican presidential candidates (and their nationally syndicated Falstaff) doing everything imaginable to alienate most American women, President Obama has been having quite a run of good luck.  But there is one piece of good news clearly not welcome around the White House: new data showing that health care costs are stabilizing.

I know, I know – this is health care, costs are always out of control, and the sky is always falling.  What could I possibly be talking about?

I’m talking about the actual numbers.  The accompanying graphs reveal that health spending has actually been stabilizing for several years, and the system we all love to hate is finally re-entering the economy’s normal orbit after three decades of skyrocketing growth.

This of course is hardly a cause for celebration around the Obama Administration, for obvious political reasons.  Why else would economists from the same department tasked with implementing health reform choose to tell us that this long-awaited good news is actually – well – bad news.

Huh?  In both graphs below, newly released data through 2010 show that health spending over the past several years has been normalizing to the rate of overall inflation rather than outpacing it – or grossly outpacing it – as has been the case, nearly without interruption, since the 1970s.

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Contraception Conundrum

What makes the contraception coverage debate currently raging in Washington unusually problematic is that both sides are exactly right. Female employees who receive part of their cash compensation in the form of health benefits have the right to benefits that include FDA-approved birth control methods. Employers defined by their religious values—not just churches, synagogues, and mosques, but also thousands of hospitals, universities, and charities—should not have to compromise those values with their own money, and the government has no right to trample the First Amendment by compelling them to do so. The Obama administration’s “accommodation” —shifting the new federal requirement to the insurers who administer those organizations’ health plans—is a cynical shell game that ignores the most basic tenets of business accounting.

As the problem is no more complicated than two sets of equally valid rights in direct opposition, neither is the solution all that complicated, at least in principle: employment and health insurance should have nothing to do with each other.

Unfortunately, this arrangement—a relic of the World War II civilian wage freeze and enshrined in the tax code as soon as workers got a taste of this new-fangled “fringe benefit” of employment—is now an enduring part of the U.S. healthcare system. The entanglement of our health insurance with our employment goes a long way toward explaining not just today’s conundrum over the birth control coverage mandate, but myriad other economic distortions, market dysfunctions, and cultural conflicts that define much of what is wrong with the U.S. healthcare system.

The Obama administration’s ‘accommodation’ last week is a cynical shell game that ignores the most basic tenets of business accounting.

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