Unlawful ACA Payments Prove a Costly Catch-22
Consumer Power Report #543
Violating the U.S. Constitution could save federal taxpayers more money than stopping illegal Obamacare payments to health insurers, according to a new report illustrating the cronyism of the Affordable Care Act (ACA).
A new Kaiser Family Foundation (KFF) report reveals a lose-lose Obamacare proposition for Americans: Continue to make unconstitutional payments to insurers, or halt the unlawful payments and make up for them by paying higher premium subsidies.
Here is how this shell game works (or, more appropriately, breaks).
ACA requires health insurers to offer reduced copays and deductibles to Obamacare Silver Plan customers with incomes 100 to 250 percent of the federal poverty level, i.e., incomes up to $61,500 for a family of four.
To help insurers afford these discounts, federal taxpayers make cost-sharing reduction (CSR) payments to insurers. These payments will cost $7 billion in 2017, $10 billion in 2018, and $16 billion in 2027, according to a Congressional Budget Office report quoted by KFF’s April 25 Issue Brief, “The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments.”
Federal District Judge Rosemary Collyer ruled CSR payments unconstitutional in May 2016 because Congress never made an appropriation for them. Article I, Section 9, Clause 7 of the U.S. Constitution reads, in part, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” In the Court’s opinion, Collyer wrote, “The Affordable Care Act unambiguously appropriates money for Section 1401 premium tax credits but not for Section 1402 reimbursements to insurers” (emphasis added). Thus, CSR payments are unlawful.
The Court allowed CSR payments to continue while the Obama administration appealed the ruling. President Donald Trump has yet to drop the appeal. CSR payments will stop if the Trump administration drops the appeal or if the courts uphold Collyer’s ruling.
If CSR payments stop, insurers won’t just absorb the revenue reduction. Instead, insurers that continue to sell plans on the Obamacare exchanges would raise insurance premiums – which taxpayers subsidize per Section 1401 of ACA (referenced above).
KFF estimates insurers will increase Obamacare Silver Plan premiums by more than 19 percent in 2018 if CSR payments stop. Premiums would rise slightly less in states that have expanded Medicaid under ACA than in non-expansion states, according to KFF. This is because Medicaid expansion added to the state rolls hundreds of thousands of able-bodied people earning 100 to 138 percent FPL, who would otherwise have qualified for reduced Silver Plan copays and deductibles.
Taxpayers would pay for the premium hikes, in the form of paying higher premium subsidies, which ACA awards insurers of households with incomes of up to 400 percent FPL, or $98,400 for a family of four. As KFF states:
Any systematic increase in premiums for silver marketplace plans (including the benchmark plan) would increase the size of premium tax credits. The increased tax credits would completely cover the increased premium for subsidized enrollees covered through the benchmark plan and cushion the effect for enrollees signed up for more expensive silver plans.
Consequently, hikes in insurance premiums and subsidies prompted by stopping CSR payments could cost taxpayers an extra $2.3 billion in 2018, growing to $31 billion in 2027, the study concludes.
As the KFF study authors note, their model assumes at least one health insurer per county in the United States will continue to sell Obamacare plans in the event Trump or the courts halt CSR payments. This is a big assumption, considering mega health insurers Aetna and Humana were the most recent to pronounce Obamacare exchanges too risky and expensive – despite receiving taxpayer subsidies on all sides.
Obamacare has surely run its course when it damns Americans whether or not they comply with it.
A third option is replacing Obamacare with a law that places health insurers at the margins of the health care system instead of its center. If taxpayer subsidies for health care-related expenses are a must, they would stretch farther in the pockets of patients themselves – including Medicaid patients – instead of going straight to insurers.
Thus equipped, 126 million U.S. households could choose for themselves which health care and insurance options offer the greatest value, whether that is a costly Obamacare insurance plan, a so-called catastrophic plan banned by ACA, or a direct-pay alternative to insurance promoted by The Heartland Institute and other libertarian think tanks.
The Constitution may just barely allow for a system in which Americans tell lawmakers what kind of health care and insurance they want, instead of vice versa.
– Michael T. Hamilton (email@example.com, @MikeFreeMarket) is a Heartland Institute research fellow and managing editor of Health Care News, author of the weekly Consumer Power Report, and host of the Health Care News Podcast.
IN THIS ISSUE:
Rep. Charlie Dent, R-Pa., leader of the centrist Tuesday Group, has told the Washington Examiner that he still opposes the House Republican healthcare repeal bill, saying that a proposed compromise does not address his key concerns.
Last week, Rep. Tom MacArthur, R-N.J., a co-chairman of the centrist group, and conservative Freedom Caucus leader Rep. Mark Meadows, R-N.C., hashed out the outline of a compromise that would allow states to opt out of more Obamacare regulations while leaving them the default at the federal level.
After noting that he hasn’t seen any legislative language, Dent said, “Based on what I’ve read, it does not change my position. I was a no, and I remain a no.”
Dent said the proposed deal did not address his core concerns regarding Obamacare’s Medicaid expansion, which his state elected to participate in and the House bill would aim to phase out. In addition, he said he had concerns about the loss of coverage from repeal and the ability of low-income individuals to access healthcare. …
Asked to respond to conservatives who argue that they’re just trying to hold Republicans to their promises to repeal Obamacare and that funding the Medicaid expansion and maintaining the core regulations would not be repeal, Dent said, “By that argument, keeping the ban on pre-existing conditions would not be repealing Obamacare.”
Dent said that there were parts of the law that he wanted to keep, but he believes the law has also caused problems in the insurance market, such as higher premiums and deductibles. …
When pressed further on whether there were any ideas for reducing premiums that have been proposed that he would support, he said he didn’t want to get into a negotiation with a reporter in an interview, though he eventually cited medical liability reform as one idea he could get behind. …
SOURCE: Philip Klein, Washington Examiner
The Iowa Senate gave final approval Monday to legislation aimed at limiting medical malpractice lawsuits, one of the key priorities of majority Republicans’ policy agenda for the 2017 session.
Senate File 465 includes provisions governing doctor-patient communications after adverse medical incidents; capping limits on non-economic damages, such as pain and suffering, at $250,000; requiring a “certificate of merit” to screen out frivolous litigation; and establishing standards for expert witnesses. However, the $250,000 damages cap would not apply in cases involving permanent impairment, disfigurement or death under an amendment approved by the Iowa House.
The bill passed on a 37 – 12 vote, sending it to Gov. Terry Branstad, who is expected to sign it. …
SOURCE: William Petroski, The Des Moines Register
Direct primary care (DPC) is gaining legal momentum at the state level as a viable means for physicians to provide primary care to patients at a lower cost than traditional practice models.
For years, physicians who wanted to adopt DPC had to battle with insurers and state regulators, but now 18 states have enacted laws that recognize the practice model and make it easier for physicians to implement it. Just this year, Kentucky passed new legislation, and West Virginia and Arkansas revised their statutes regarding DPC. Eight other states have pending legislation, and in three of them – Indiana, Colorado and Alabama – the legislation is awaiting only the governor’s signature.
The DPC model once was widely treated by states and the federal government as health insurance. But as a federal bill to address this problem awaits action, many states have moved to exempt DPC practices from unnecessary insurance regulations and to establish rules governing the model, such as restrictions that prohibit these practices from billing insurers for consultations on a traditional fee-for-service basis.
SOURCE: Michael Laff, American Academy of Family Physicians
A change in a federal Medicaid rule that has stood for 52 years is expected to allow more Ohioans to get badly needed mental-health services.
Effective July 1, Medicaid recipients ages 21 to 64 who are in a managed-care plan will be eligible for up to 15 days of inpatient mental-health treatment. The program specifically exempted that group from inpatient coverage since it was founded in 1965. Medicaid now insures 3 million poor and disabled Ohioans.
At the same time, a state agency is setting new rules to better monitor long waiting lists for people seeking drug-addiction treatment.
Greg Moody, director of the Governor’s Office of Health Transformation, said the Medicaid rule change “opens a new source of reimbursement for a critical service.”
Moody said inpatient mental-health treatment originally was banned to avoid “mental asylums,” where people were locked away in institutions for months or years. A system of home and community mental-health programs was created, although critics point out alternatives were never adequately funded.
Now, Moody said, there is a greater need for people to have longer inpatient mental-health treatment instead of being stabilized and released. …
SOURCE: Alan Johnson, The Columbus Dispatch