John Garven

While Washington may have gotten off easy with this week’s “snowquester,” the sequester is a different story.

First of all, for the most part, funding for PPACA will remain untouched. Also, even though there are going to be delays at the airport and with navy deployments and food inspections, the Administration has made it clear that health reform implementation will be virtually unaffected and run on time! Instead, medical and health research institutions will take the brunt of the sequester cuts. Specifically, the National Institute of Health will be taking a $1.6 Billion cut over the next 10 years.

The PPACA component most likely to be affected by the automatic sequester cuts is the Small Business Health Care Tax Credit (SBTC) that encourages small businesses to provide health coverage to their employees. To qualify for the credit, that can offset as much as 50% of a small business’ health plan premiums, the company must have fewer than 25 full-time equivalent employees with average wages of less than $50,000 a year. These SBTC, which has a famously low take-up rate, will take an 8.7% cut effective immediately.

As for existing public programs, Medicaid is exempt from the cuts. Medicare doctors and hospitals however will see a two percent cut in government reimbursements. Components of Medicare Part D like low-income premium and cost-sharing subsidies and catastrophic subsidy payments and Qualified Individual (QI) premiums will not be harmed by the cuts.

The Congressional Budget Office (CBO) issued its much anticipated updated “score” of PPACA on Tuesday, July 24th, as well as a new cost estimate for repealing the legislation.  Bottom line, the CBO’s projections of how much the law will cost the federal government over the next 10 years as a result of the Supreme Court’s ruling in NFIB v. Sebelius contained both good news and bad news for health reform supporters.  It also contained the ugly news that the price of individual health insurance coverage is about to go up even more for everyone.

On one hand, supporters of the law must be pleased that the CBO found that completely repealing PPACA would increase the federal deficit by $109 billion between the years 2013 and 2022.  Also, the office determined that as a result of the Supreme Court’s ruling on Medicaid, the coverage provisions will be $1.168 trillion over the next 10 years, which is $84 billion less than what had been projected in March prior to the Court’s ruling.

On the other hand, people who like the new law can’t be happy that part of the reason why the law is now much less expensive is that it will provide coverage to far fewer people.  The CBO clearly stated ”fewer people will be covered by the Medicaid program, more people will obtain health insurance through the newly established exchanges, and more people will be uninsured.  The magnitude of those changes varies from year to year.”  While the CBO couldn’t predict the number of people who would no longer have access to coverage exactly, their best guess was about 3-4 million additional individuals remaining uninsured.

The CBO didn’t attempt to predict which states would or would not expand their Medicaid programs. However, they did take a stab at guessing how many people would live in states that will either completely or partially expand their programs, as well as guess how many will live in places that do not grow their programs at all.   The CBO concluded that about one-third of the potential newly eligible Medicaid population will reside in states that will fully expand coverage under the law’s parameters (i.e., up to 138 percent of poverty). These individuals will be enrolled in Medicaid, as they would have been prior to the Supreme Court ruling.

The CBO also indicated about half of the population who could be newly eligible for Medicaid will live in states that will only partially expand their Medicaid programs (i.e., raising the eligibility level for populations higher than exists currently, but not up to 138 percent of poverty). This is an interesting assumption, because many policy wonks, including your Washington update author, didn’t feel that the Supreme Court ruling was clear on what happens in states that choose to only partially expand their programs and the Obama administration hasn’t been particularly forthcoming about its views as to whether or not the expansion is an all or nothing proposition for the states.

The CBO concluded that 1/6 of the population that was intended to be covered by Medicaid by the health reform law lives in states that will not expand their Medicaid program at all over the next 10 years. In total, the CBO assumes that about 6 million fewer people will be enrolled in Medicaid under the law due to the ruling. They feel that between 2-3 million of these people will receive via exchanges instead, meaning that 3-4 million will remain uninsured.

Finally, the CBO included the following paragraph on page 15 of its analysis of the Court ruling, which we find to be particularly disturbing, given that this is the “Affordable Care Act”:

“The additional enrollees [i.e., those previously projected to enroll in Medicaid, but who will now receive Exchange subsidies in light of the Court’s ruling] are likely to spend more on health care, on average, than those previously expected to purchase insurance through the exchanges because people with lower income generally have somewhat poorer health.  As a result, CBO and JCT now estimate that the premiums for health insurance offered through the exchanges, along with premiums in the individual market, will be 2 percent higher than those estimated in March 2012.”

This increase comes in addition to the $2,100 per family premium increase the CBO previously predicted back in 2009.

The House Appropriations Health, Education, Labor and Pensions Subcommittee on Wednesday, July 18th approved a $150 billion appropriations bill to fund the Labor, Health and Human Services and Education Departments.  The subcommittee voted 8-6 to approve the bill which would cut $6.3 billion from these department’s current funding levels.  The bill includes provisions banning implementation funding for PPACA and eliminating funding for the Agency for Healthcare Research and Quality.  The bill also contains significant cuts to labor and education programs. All subcommittee Democrats voted against the measure, as did conservative Representative Jeff Flake (R-AZ), who is running for the Senate and wanted deeper cuts.

In total the measure would cut the Department of Labor’s budget by $497 million, the Department of Health and Human Services by $1.3 billion and the Department of Education by $1.1 billion.  The measure also attributes $8.6 billion in savings from its ban on PPACA implementation spending.  However, those savings were “spent” on other programs, much to the chagrin of Representative Cynthia Lummis (R-WY) and Flake, who argued this tactic was a “gimmick.”

Representative Lummis attempted to amend the measure and dedicate those savings to deficit reduction, which would have required another 5.5% in cuts to other programs from those departments.  That amendment was defeated on a voice vote after the subcommittee Chairman, Representative Denny Rehberg from MT, who is also running for the Senate in a tight race, argued that additional cuts would be too severe.  Lummis ultimately voted for the final bill while Flake joined the Democrats on the subcommittee in opposing the measure, although for vastly different reasons than his colleagues from across the aisle.

A date has not been announced for the full committee to consider the bill and Congress is about to adjourn for its August recess next week.

The Congressional Budget Office will be the focus of attention in Washington this week as everyone is anxiously awaiting their release of the CBO’s updated cost estimate of the coverage provisions of PPACA.  The CBO’s new cost estimate will reflect the Supreme Court’s decision to allow states to refuse to expand their Medicaid programs and we’ve just learned that we can expect it as early as 2:00 PM Eastern this afternoon.

The release of the score will result in new projections, such as, how many individuals will receive coverage through Exchanges or remain uninsured rather than receive coverage through Medicaid if their state decides not to expand Medicaid to 133% of the federal poverty level.

The employer penalty revenue and the overall cost of Medicaid will likely also be adjusted. Given that there’s widespread disagreement as to whether or not the Supreme Court’s decision will make the overall cost of PPACA more or less expensive for the federal government, the inherent difficulties of predicting state behavior, and the potential political impact of PPACA’s cost numbers moving significantly in either direction, we’re very curious to see what the CBO thinks.

The following developments are of particular interest to me since I am a lifelong resident of the “Land of Lincoln”.

The Chicago Tribune (5/25, Long) reports on $1.6 billion in budget cuts approved by Illinois lawmakers on Thursday, noting that “hundreds of thousands of poor Illinoisans would lose health coverage, prescription drug discounts for seniors would be dropped and dental care for adults would be greatly curtailed.” While some lawmakers were angry over the “major Medicaid reductions,” which they said “will jeopardize the lives of the state’s most vulnerable residents,” supporters insisted that “failure to approve the bill could lead to cuts throughout state government and result in collapse of the entire Medicaid system.”

The Peoria (IL) Journal Star (5/25, Finke) reports, “Representatives voted 94-22 to adopt the cuts, which range from outright elimination of some programs – like Illinois Cares Rx, a prescription drug assistance program for seniors – to taking extra steps to ensure that those receiving aid are entitled to it. … Several minority lawmakers said the cuts will hurt Illinois’ neediest people. They said the state instead should eliminate business tax breaks or expand the state sales tax to come up with additional money for Medicaid.”

The Chicago Sun-Times (5/25, McKinney) quotes Julie Hamos, director of the state Healthcare and Family Services department, who said, “We believe this will save the Medicaid program.” The piece notes that Hamos’ agency “would be authorized to hire a firm to determine that everyone on Medicaid’s rolls is eligible by weeding out those with out-of-state addresses, those making too much to qualify for Medicaid or who are deceased and anyone over…age 19 in the All Kids program.”

The following developments are of particular interest to me since I am a lifelong resident of the “Land of Lincoln”.

The Chicago Tribune (5/25, Long) reports on $1.6 billion in budget cuts approved by Illinois lawmakers on Thursday, noting that “hundreds of thousands of poor Illinoisans would lose health coverage, prescription drug discounts for seniors would be dropped and dental care for adults would be greatly curtailed.” While some lawmakers were angry over the “major Medicaid reductions,” which they said “will jeopardize the lives of the state’s most vulnerable residents,” supporters insisted that “failure to approve the bill could lead to cuts throughout state government and result in collapse of the entire Medicaid system.”

The Peoria (IL) Journal Star (5/25, Finke) reports, “Representatives voted 94-22 to adopt the cuts, which range from outright elimination of some programs – like Illinois Cares Rx, a prescription drug assistance program for seniors – to taking extra steps to ensure that those receiving aid are entitled to it. … Several minority lawmakers said the cuts will hurt Illinois’ neediest people. They said the state instead should eliminate business tax breaks or expand the state sales tax to come up with additional money for Medicaid.”

The Chicago Sun-Times (5/25, McKinney) quotes Julie Hamos, director of the state Healthcare and Family Services department, who said, “We believe this will save the Medicaid program.” The piece notes that Hamos’ agency “would be authorized to hire a firm to determine that everyone on Medicaid’s rolls is eligible by weeding out those with out-of-state addresses, those making too much to qualify for Medicaid or who are deceased and anyone over…age 19 in the All Kids program.”

The House of Representatives voted last Friday to prevent federal student loan interest rates from doubling from 3.4 to 6.8 percent this coming July by using the last $11.9 billion in the healthcare reform law’s preventive health fund as a pay-for. The House approved the bill 215-195, with 30 members of the GOP voting in opposition. However, 13 Democrats joined with their Republican colleagues in support of the measure.

PPACA’s prevention fund, which has been tapped by Congress and Obama administration before as a partial means of financing the payroll tax break, would be completely eliminated if H.R. 4628 is signed into law. The fund has been billed by some as a slush fund for HHS and by others as a crucial means of preventing public health problems and preserving access to health services for women in particular. In reality, the truth is somewhere in the middle. Many of the small-scale public health prevention and cost containment programs authorized by PPACA, like tobacco prevention and immunizations and a program to help hospitals stamp out the transmission of costly and life-threatening infections, get their funding from this source. However, this fund is also responsible for things like “community transformation grants” which critics contend have been used to build playgrounds in politically-motivated areas. Not to say that playscapes aren’t important, but that may not be the best use of federal healthcare program dollars.

Senate Democrats, particularly Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-IA), have harshly criticized the use of PPACA’s prevention fund as a pay-for, and President Obama has issued a veto threat to the House-passed bill. As the Senate is out of session this week, there will be no action on the measure there until next week. However, Senate Majority Leader Harry Reid (D-NV) has begun the process for floor consideration of an alternative measure which would fund the rate reduction by closing a tax loophole that allows some “S Corporations” to avoid paying Medicare taxes on their earnings.

Does anyone out there remember the old Saturday Night Live “Point Counterpoint” parody that Jane Curtin and Dan Akroyd engaged in back in the late ’70′s?  The media exchange last week between an economist at George Mason University (GMU) and the White House kind of reminded me of the old SNL skit, and with all due respect to the Administration I believe the economist got “the last word”.

Charles Blahous, a noted economist at GMU and a public trustee of the federal Medicare and Social Security trust funds, released a study on April 9th that pointed out the Affordable Care Act (ACA) could increase the debt as much as $530 billion to federal deficits while increasing spending by more than $1.15 trillion. According to Blahous, “Despite the fondest hopes from its supporters, the passage of the ACA unambiguously darkens a dim fiscal picture.”

The White House wasted no time attacking Blahous and the report, striking out on Monday night through their blog, via Twitter and from the press room Tuesday morning where Press Secretary Jay Carney announced that President Obama does not agree with Blahous’s views even though he named Blahous to the Medicare Board of Trustees.

Last Wednesday Blahous got the last word as he responded to his critics in a five-point blog post on Forbes.com.

HHS Secretary Kathleen Sebelius was questioned last week by Representative John Shimkus (R-IL) during a House Energy and Commerce Health Subcommittee hearing about the funding of the Affordable Care Act and the charges of double counting, which the opponents of the Act have been pounding the table about for almost 2 years. On one hand, the administration has touted savings of $500 billion in cuts to Medicare but it’s also using that same $500 billion to fund the health reform law, making the law far more costly than they’ve been saying.

Watch as Rep. Shimkus presses Secretary Sebelius on this point.  In my opinion her one word answer is essentially an admission that the administration has done just exactly that.

Rep. Shimkus grills Secretary Sebelius about double counting

According to a post on USA Today this morning, Wisconsin is one of 41 states where public employees earn higher average pay and benefits than private workers in the same state, a USA TODAY analysis finds. Still, the compensation of Wisconsin’s government workers ranks below the national average for non-federal public employees and has increased only slightly since 2000.

The article may be viewed at http://usat.ly/eHjSEE.

State and local government workers earn more than private-sector workers in 41 states. Average compensation (including salaries and benefits) in 2009 and difference with private-sector workers:

Rank	State	Compensation	Difference
1	District of Columbia	$82,607	+$457
2	Connecticut	$77,697	+$7,687
3	New Jersey	$72,007	+$6,681
4	California	$71,385	+$7,977
5	New York	$71,282	+$1,699
6	Rhode Island	$69,284	+$17,603
7	Nevada	$68,785	+$17,815
8	Maryland	$65,947	+$6,931
9	Massachusetts	$62,562	—$4,688
10	Alaska	$60,882	+$2,764
11	Illinois	$60,274	+$485
12	Delaware	$60,077	+$2,911
13	Hawaii	$59,595	+$12,243
14	Washington	$59,288	+$532
15	Michigan	$58,801	+$6,436
16	Florida	$58,749	+$9,099
17	Arizona	$56,321	+$4,310
18	Minnesota	$55,826	+$1,259
19	Virginia	$55,705	—$2,328
20	Oregon	$55,682	+$5,607
21	Pennsylvania	$55,137	+$1,567
22	Colorado	$54,184	—$3,391
23	Wyoming	$53,460	+$3,116
24	South Carolina	$52,591	+$7,590
25	Ohio	$52,473	+$2,392
26	Louisiana	$52,412	+$2,473
27	New Hampshire	$52,181	—$1,876
28	Vermont	$51,503	+$5,811
29	New Mexico	$51,428	+$5,715
30	Texas	$51,310	—$3,580
31	Alabama	$50,999	+$5,001
32	North Carolina	$50,902	+$1,857
33	Wisconsin	$50,774	+$1,802
34	Iowa	$50,394	+$6,178
35	Utah	$50,149	+$2,611
36	Maine	$49,850	+$4,912
37	Georgia	$49,600	—$3,875
38	Indiana	$49,157	+$1,183
39	Missouri	$49,092	—$1,075
40	Nebraska	$48,953	+$3,130
41	Kentucky	$48,046	+$2,313
42	Arkansas	$48,033	+$4,196
43	West Virginia	$47,899	+$3,655
44	Tennessee	$47,891	—$756
45	Montana	$47,596	+$7,396
46	Oklahoma	$47,258	+$1,667
47	Mississippi	$46,375	+$4,713
48	Idaho	$45,280	+$2,855
49	Kansas	$44,803	—$3,229
50	North Dakota	$43,619	+$389
51	South Dakota	$41,684	+$1,909
	Total United States	$57,775	+$2,511

Sources: Bureau of Economic Analysis; USA TODAY analysis

The following Weekly Standard article, written by Jeffrey H. Anderson and published at http://bit.ly/eP3AMO is, needless to say, quite “eye-opening”.

This report brings to mind something that was said back in 1994 during HillaryCare 1.0 aka the “Health Security Act” – something like “What you have with government-run healthcare is the efficiency of the United States Postal Service and the compassion of the IRS at Pentagon prices”.  Also, to borrow Charlie Brown’s favorite saying – “Good Grief”!

In a newly released report, the Government Accountability Office (GAO) estimates that, in fiscal year 2010, $48 billion in taxpayer money was squandered on fraudulent or improper Medicare claims. Meanwhile, the nation’s ten largest health insurance companies made combined profits of $12.7 billion in 2010 (according to Fortune 500). In other words, for every $1 made by the nation’s ten largest insurers, Medicare lost nearly $4.

This is sobering news for the minority of Americans who (for some reason) continue to think that government-run health care is a model of efficiency and cost-effectiveness. Last year, total outlays for Medicare were $509 billion; therefore, Medicare spent nearly 10 percent of its outlays on fraudulent or improper claims. Actually, it may have been even worse than that: The GAO writes that this $48 billion in taxpayer money that went down the drain doesn’t even represent Medicare’s full tally of lost revenue, since it “did not include improper payments in its Part D prescription drug benefit, for which the agency has not yet estimated a total amount.”

The combined profits of the nation’s ten largest health insurers are down 2 percent from 2008. In fact, the nation’s ten largest health insurers’ combined profits last year were less than the profits that Walmart — a supporter of Obamacare — made all by itself.  Walmart made $14.3 billion last year, up 12 percent from 2008. (On the Fortune 500 list, Walmart’s profits also dwarf the profits of all but one oil company.)

True, private insurers may never manage to make nearly as much money as government-run heath care programs manage to lose. Still, there is good news on the horizon for insurers: If Obamacare isn’t repealed, then, as of 2014, every American will be required to buy their product (or a federally mandated version of it) under penalty of law. Moreover, the Congressional Budget Office estimates that $1 trillion would be funneled from taxpayers, through Washington, to those same insurers, from 2014 to 2025. Ever wonder why insurers didn’t oppose Obamacare?

This graph provides effectively illustrates the severity of our indebtedness as a nation, and particularly the important roles played by Medicare, Medicaid and Social Security (Source: John F. Cogan, Hoover Institution):

I urge readers of my blog to watch 6 minutes of New Jersey Gov. Christie explaining to a police officer why “that was then, this is now”. http://ow.ly/42j16

If nothing else, one has to give New Jersey Gov. Christie a lot of credit for his bravado.  Here is an account from a Peggy Noonan article in last Saturday’s WSJ of his appearance at the state firefighters convention last September.

Chris Christie introduced pension and benefit reforms on a Tuesday in September, and that Friday he went to the state firefighters convention in Wildwood. It was 2 p.m., and “I think you know what they had for lunch.” Mr. Christie had proposed raising their retirement age, eliminating the cost-of-living adjustment, increasing employee pension contributions, and rolling back a 9% pay increase approved years before “by a Republican governor and a Republican Legislature.”

As Mr. Chrisie recounted it: “You can imagine how that was received by 7,500 firefighters. As I walked into the room and was introduced, I was booed lustily. I made my way up to the stage, they booed some more. . . . So I said, ‘Come on, you can do better than that,’ and they did!”

He crumpled up his prepared remarks and threw them on the floor. He told them, “Here’s the deal: I understand you’re angry, and I understand you’re frustrated, and I understand you feel deceived and betrayed.” And, he said, they were right: “For 20 years, governors have come into this room and lied to you, promised you benefits that they had no way of paying for, making promises they knew they couldn’t keep, and just hoping that they wouldn’t be the man or women left holding the bag. I understand why you feel angry and betrayed and deceived by those people. Here’s what I don’t understand. Why are you booing the first guy who came in here and told you the truth?”

He told them there was no political advantage in being truthful: “The way we used to think about politics and, unfortunately, the way I fear they’re thinking about politics still in Washington” involves “the old playbook [which] says, “lie, deceive, obfuscate and make it to the next election.” He’d seen a study that said New Jersey’s pensions may go bankrupt by 2020. A friend told him not to worry, he won’t be governor then. “That’s the way politics has been practiced in our country for too long. . . . So I said to those firefighters, ‘You may hate me now, but 15 years from now, when you have a pension to collect because of what I did, you’ll be looking for my address on the Internet so you can send me a thank-you note.’”