Lots to get to on the Obamacare front today, starting with the contents and implications of newly-revealed emails between the Obama administration and major health insurers. The House Oversight Committee has released the batch of correspondence, which paints a cozy picture of coordination and high stakes, high dollar back-scratching. White House officials coach insurance executives on how to discuss the law publicly -- praising them for helpful performances -- and insurers request and secure more generous Obamacare 'bailouts,' in exchange for minimizing unavoidable premium spikes. The exchanges show how Team Obama worked hand-in-glove with an industry it has vilified as greedy and unfair for public consumption. Healthcare policy expert Jeffrey Anderson has more in the Weekly Standard:
Behind the scenes, Big Government and Big Insurance maintain a cozy alliance that the Obama administration actively nourishes, often at taxpayer expense. Indeed, as emails recently obtained by the House Oversight Committee show, Big Government and Big Insurance have worked together to promote Obamacare. They’ve also worked together to make sure taxpayers will help bail out insurance companies who lose money selling insurance under Obamacare — that is, unless Republicans stop this from happening. Moreover, Obama senior advisor Valerie Jarrett is among the prominent White House officials who’ve been in the middle of this collaboration between insurers and the administration — between those driven by the profit motive and those driven by the power motive…
The Obama administration was coming under increasing political pressure — as millions of Americans found out that (contrary to Democratic messaging across the years), if they liked their health plan, that didn’t necessarily mean they could keep their health plan. 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.
When President Obama announced his on-the-fly "fix" to the unfolding "keep your plan" political crisis (by decreeing that millions of non-compliant plans could be effectively un-cancelled -- a change that a number of states rejected), insurance carriers became very concerned about the financial fallout of that decision. The resulting confusion, lost revenue, and problematic risk pools could force them to compensate with dramatically higher premiums and out-of-pocket costs for consumers. Very bad politics. Not only did they receive the changes they were seeking in the 'bailout' policy outlined above, they also demanded that the White House drop the pretense that any changes to the bailouts would be budget neutral. The administration complied, announcing that it would use "other sources of funding" to make insurers whole -- a maneuver of dubious legality, according to Anderson. The indefatigable Phil Kerpen consolidated and embedded some of the juicier bits of the emails into tweets:
Jarrett to BCBS lobbyist: We gave you 80% of what you wanted. BCBS: Not enough! Premiums are going up substantially! pic.twitter.com/aQ8kOEAhpZ— Phil Kerpen (@kerpen) July 29, 2014
Aetna lobbyist: Please juice our bailout! White House: But of course! pic.twitter.com/ix3bznMgXL— Phil Kerpen (@kerpen) July 29, 2014
Despite these taxpayer-funded 'bailout'-style gambits, rates are still being hiked significantly across the country. Recall the "summer drumbeat." The increases consumers are experiencing are being artificially held down by these reinsurance and risk corridor "slush funds" -- which, we remind you, are paid for by taxpayers. What happens when these provisions expire in a few years? Insurers are hoping that the risk pools will be more stable and predictable by then, but adverse selection is already a very real problem. Will the bailouts be extended (by Congress or unilaterally), thus ballooning the cost of Obamacare? Or will costs climb steeply, quite possibly driving healthier people out of the market? I'll leave you with some Obamacare odds and ends:
(1) Obamacare's automatic renewal policy, designed to streamline and simplify the process, may end up hurting many consumers: "If those amounts are too low, consumers could get sticker shock over their new premiums. Too high, and they'll owe the tax man later...It could be a new twist on an old public relations headache for the White House: You keep the health plan you like but get billed way more," reports the Associated Press.
(2) USA Today profiles two women who signed up for Obamacare plans, only to discover that they could not "keep their doctors, period" as promised by the president. Instead, these latest victims of 'access shock' are grappling with severely pared down provider networks. Welcome to the growing, disgruntled club, ladies.
(3) Supporters of the new law are once again trying to claim credit for a slowdown in Medicare spending that has pushed its latest insolvency date back to 2030. The government's own bookkeepers have determined that Obamacare has had no measurable impact in the current health costs slowdown (costs are still headed in one direction: up), which has been heavily influenced by the sluggish economy. The Washington Examiner's Phil Klein notes that Medicare's chief actuary is warning that Obamacare's Medicare "savings" aren't sustainable:
Paul Spitalnic, the chief actuary for the Centers for Medicare and Medicaid Services, also cautioned that it would be hard to maintain the policies put in place by Obamacare, which are responsible for helping to extend the trust fund on paper...Obamacare, according to the Congressional Budget Office, is to spend more than $1.8 trillion over 10 years to expand insurance coverage -- spending that is supposed to be offset by a combination of tax increases and extracting savings from Medicare. One of the misleading arguments that the Obama administration has been making since the debate over the passage of the law is that the the same dollars of savings could simultaneously be used improve the solvency of Medicare while paying for a new expansion of entitlements...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.
If Medicare reimbursement rates were to plummet as a result of the mandated cuts, "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," Spitalnic said. In other words, those on-paper savings are likely to vanish due to political considerations, pushing Medicare toward insolvency at a faster clip. The political Left is committed to defending the reckless and unsustainable status quo out of political expediency.
Prediction: Gridlock for the Next Two Years, but that’s Better than the Alternative | Daniel J. Mitchell