#FullRepeal Daily Digest

Weekly Standard: Emails Show Cozy Government-Insurer Alliance, Expectation of Bailout

• White House communications director Tara McGuiness and Chris Jennings, Obama’s deputy assistant for health policy, “traded talking points with numerous insurance company CEOs.”  According to the report, “Ms. McGuiness and Mr. Jennings collaborated closely with Florida Blue Cross and Blue Shield CEO Patrick Geraghty.  After a CBS Evening News appearance on October 11, 2013, Ms. McGuiness emailed Mr. Geraghty, ‘You were great!  I watched.  Thanks for the help.’”
• ...After Obama lawlessly empowered himself to un-ban the plans that Obamacare had banned by law, insurers weren’t happy, so the administration responded by paying them off.
  • It did so by changing the rules regarding two programs buried in the bowels of Obamacare — its risk-corridor and reinsurance programs.  As Jay Cost and I wrote this spring, the administration changed the rules “to funnel more money to insurers. Put simply, the administration lowered the threshold at which insurers become eligible for reinsurance money, and it made more generous the formula by which insurers get paid under the risk corridors.”  In the process, Obama effectively turned the risk-corridor program into his own personal slush fund.
• ...CareFirst Blue Cross Blue Shield CEO Chet Burrell emailed [White House Adviser Valerie] Jarrett [after previous phone calls/emails] attaching a memo that said, “Until very recently, the position of the Administration had been that the law requires the Federal government to fully fund the Risk Corridor payments if amounts paid in by the ‘winners’ turn out to be inadequate — as they likely will.’”  Otherwise, he added, “carriers will have to increase rates substantially (i.e., as much as 20% or more beyond what they would otherwise file) to make sure that premiums adequately reflect expected costs.”  In other words, the administration had a choice:  provide a bailout, or face the unpleasant prospect of having insurers price their products honestly.
• AHIP followed suit, writing (in bold) to the administration, “Risk Corridors should be operated without the constraint of budget neutrality.” Jarrett wrote back to Burrell, thanking him for his memo and alerting him that “the policy team is aggressively pursuing options.”
• Soon thereafter, the Obama administration abandoned the claim of budget-neutrality, writing in a release from Health and Human Services (HHS), “In the unlikely event of a shortfall for the 2015 program year, HHS recognizes that the [Patient Protection and] Affordable Care Act requires the Secretary to make full payments to issuers.  In that event, HHS will use other sources of funding for the risk corridors payments, subject to the availability of appropriations.”
• But no money has been appropriated for the risk corridors, and — with a GOP-controlled House — none will be.  Given the absence of appropriated money, therefore, the nonpartisan Government Accountability Office (GAO) asked HHS under what authority it would make such payments to insurers.  (As the nonpartisan Congressional Research Service has put it, federal agencies are prohibited “from making payments in the absence of a valid appropriation,” and Obamacare’s risk-corridor section “would not appear to constitute an appropriation.”)  
  • HHS replied to the GAO, “As section 1342 of PPACA requires the Secretary to establish and administer the risk corridors program and requires the Secretary to collect payments from and make payments to certain QHPs [qualified health plans], section 1342 authorizes the collection and payment of user fees to and from the QHPs.”
• In reality, however, Section 1342 — which contains fewer than 500 words, none of which is “user,” “fees,” or anything akin to “user fees” — does nothing of the sort.  The administration is merely trying to appropriate money to itself, bypassing Congress. Otherwise stated, the administration plans to use lawless means to pay off insurers who were hurt by Obama’s lawless refusal to execute Obamacare as written.   

The Federalist: The CBO Is Using Enron-Style Accounting On Obamacare

• …In the case of Obamacare, the sheer largeness of the measure and its many factors contributed to a higher degree of distrust for the CBO’s assumptions about what would come of Obamacare’s passage. In certain key areas, such as the impact of the long-term care provision known as the CLASS Act, the CBO’s position was laughable – and scores of other steps since then have also attracted pushback. The level of distrust for the validity of CBO’s estimates is growing, and their latest step to game the accounting on Obamacare’s ramifications, which has attracted little notice thus far but represents another step to make the law harder to repeal, is likely to only increase calls for changes and reforms of the office.
• “Under its extended alternative fiscal scenario last year, CBO assumed that lawmakers would not allow various restraints on the growth of Medicare costs and health insurance subsidies to exert their full effect after the first 10 years of the projection period. However, this year, after reassessing the uncertainties involved, CBO no longer projects whether or when those restraints might wane. Instead, for those elements of the alternative fiscal scenario, there are now no differences from the extended baseline. For both, CBO projects that growth rates for Medicare costs will move linearly over 15 years (from 2024 to 2039) to the underlying rate that the agency has projected and that the exchange subsidies will do the same. (One exception to that new approach, though, concerns Medicare’s payment rates for physicians’ services. This year, as in previous years, projected spending under the alternative fiscal scenario reflects the assumption that those payment rates would be held constant at current levels rather than being cut by about a quarter at the beginning of 2015, as scheduled under current law.)”
• Beyond that brief mention of the change in its assumptions, there is no other discussion of the rationale behind the exchange subsidy provision. How significant was this unnoticed change in CBO’s assumptions? According to a health care aide on Capitol Hill who has closely followed the scorekeeping of the law, analysis of the CBO data suggests that over the 75-year period, this change in assumptions lowers projected spending by about $6.2 trillion.
• This is a pretty big change, to say the least, particularly one for which the CBO hasn’t given any justification at all. Their latest update on health care spending doesn’t even mention it.
• [RELATED] Washington Examiner: Chief Medicare actuary says Obamacare cuts unlikely to be viable in long-run
  • [Paul Spitalnic, Medicare Chief Actuary] explained that though Obamacare makes cuts to payments of medical providers, "the ability of health care providers to sustain these price reductions will be challenging, as the best available evidence indicates that most providers cannot improve their productivity to this degree for a prolonged period given the labor-intensive nature of these services."
  • "…Absent an unprecedented change in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services will fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for many services would be less than half of their level without consideration of the productivity price reductions. Before such an outcome would occur, lawmakers would likely intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as lawmakers have done repeatedly in the case of physician payment rates, would lead to substantially higher costs for Medicare in the long range than those projected in this report."
  • [REMINDER]…if Obamacare uses the money generated by its Medicare cuts to pay for expanding health coverage — as called for by the law — then it doesn't help Medicare's long-term finances. On the other hand, if Obamacare does use savings generated from Medicare cuts to pay for future Medicare benefits, then Obamacare will add substantially to the overall federal deficit.

Fox News: ObamaCare getaway: 5 US territories released from health care law

• The Obama administration is coming under fire for once again making a unilateral change to ObamaCare -- this time, quietly exempting the five U.S. territories and their more than 4 million residents from virtually all major provisions of the health care law. The decision covers residents in Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa and the Northern Mariana Islands.
• Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner acknowledged in her notice last week that the law was "undermining the stability" of the territories' insurance markets. That's because the territories were subject to some parts of the law but exempt from others. Namely, their residents did not receive subsidies to help defray the cost of insurance and their residents were largely exempt from the requirement to buy insurance. But insurance companies were still supposed to follow the law's requirements to cover everyone with a certain minimum set of benefits, and other standards.
• The lopsided requirements crippled the individual markets in some of the territories. In the Northern Mariana Islands, the top provider, for example, told the insurance commissioner it would stop selling new plans to residents. Premiums shot through the roof and the idea of long-term affordable health care became more myth than reality.
• Last year, HHS told the territories it had no legal authority to exclude them from the provisions in ObamaCare. It furthered its case by saying the law adopted an explicit definition of "state" that includes the territories for the purpose of the mandates.