The Official Jeff Spross Plan To Fix Obamacare

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So it looks like Healthcare.gov is working — or at least working much better than it was before. Hopefully, this means we can soon set aside our collective national freakout over a really serious substantive threat to Obamacare, and go back to freaking out over the purely optical threats. Those would be “rate shock” and the failure of Obama’s “if you like your plan you can keep it promise” to pan out. Unlike the website’s travails, they’re purely political problems, and actually result from Obamacare operating the way it was designed to. They’re exceedingly unlikely to threaten the macroeconomic stability of the insurance markets, or the soundness of any part of the law’s policy design. Their costs are dwarfed by the benefits going to poor people receiving subsidies and covered by the Medicaid expansion.

But rate shock and the plan cancelations also happen to affect a population that’s upper-middle-class and relatively politically active, so our political system actually cares about their troubles in a way it doesn’t for the truly poor and unfortunate. So we treat inconveniences heaped on the former group as major political scandals, and massive alleviations of suffering for the latter group as non-events. Which is shameful and morally perverse, if you ask me.

However! With that bit of throat-clearing out of the way, let me say I’m sympathetic to complaints that Obamacare’s restrictions on health coverage design hamper consumer choice, and hold back innovation in the packaging and delivery of care. Those restrictions also contribute to rising premiums (not much, but somewhat) because expanded coverage comes with expanded costs. And they’re causing the cancellation of a lot of pre-Obamacare insurance plans.

I don’t obsessively fetishize choice and innovation they way reformist conservatives do. But they’re good values to promote, and shouldn’t be undermined unless it’s necessary to pursue some more foundational moral obligation. I don’t think it’s necessary here. And hey, if we can fix rate shock and plan cancellations while we’re at it, why not?

So, without further ado, here it is:

The Official Jeff Spross Plan To Fix Obamacare

1) Remove all but the gold rating from the exchanges.

Right now insurance plans have to meet one of four ratings to be sold on the exchanges. Bronze plans offer the stingiest and least comprehensive coverage; then it goes up to Silver, Gold, and finally Platinum with the most generous coverage. Catastrophic plans can also be sold under certain conditions. Those four “metal ratings” all include a package of essential health benefits (EHB) — ensuring everyone gets at least a minimum level of reliable coverage. They also require various deductibles and cost-sharing.

My recommendation: clear out the EHB requirements and everything except the gold plans. Then change the law so that as long as an insurer sells a gold plan on the exchange, they can sell any other plan they cook up as well.

That would address conservative complaints regarding choice, innovation, and plan cancellations. But it would also still serve the liberal goal of protecting consumers from “junk insurance.” Gold plans would function as a seal of approval: you can take your chances with the other plans if you like, but the government has checked these out, and they’re solid.

Furthermore — if I understand the economics correctly — requiring all insurers to sell at least a gold plan before they can sell anything else should cut down on any risks of adverse selection.

Practically speaking, this wouldn’t bring back the plans that have already been canceled due to Obamacare’s new rules. But it would satiate conservatives’ principled objections, and would open up the possibility for insurers to resurrect similar plans in the next year or two.

2) Simplify the subsidies.

Right now the subsidies customers can get on the exchanges are calculated to cover the premiums they’d pay for a silver plan. The subsidies are adjusted for income — the more you make, the less of your premium is covered — and they phase out completely if you make over 400 percent of the poverty line. Separate subsidies, also adjusted for income, are provided for out-of-pocket costs.

First off, obviously, my plan would peg the subsidies to the gold plans. The division between premium subsidies and out-of-pocket subsidies is also silly, so I’d just have one lump sum that covers everything. Next, there should be no adjusting for income. Everyone should get the full cost of their premium and out-of-pocket expenses covered, regardless of how much they make. Third, don’t phase it out at 400 percent of the poverty line. Give the subsidies to literally everyone on the exchanges.

Obviously, this will significantly increase Obamacare’s annual spending, which would be a big downside for conservatives. But it would also eliminate the policy and paperwork complexities that come along with means-testing; it would do away with rate shock, since everyone will have the entirety of their premiums covered no matter who they are; it would bring Obamacare’s subsidies closer in form to the universal health care tax credit conservatives advocate; and it would eliminate any latent welfare trap effect from the benefit phase-out.

Finally, this would make a gold plan affordable to everyone. Combine that with the “seal of approval” function mentioned above, and gold plans would become the all-purpose fall back plan. And if a customer decides to go with coverage that costs less than a gold plan, they can just pocket the leftover subsidy. That keeps the incentive for customers to shop for the best deal, and the accompanying competitive market pressure.

3) Get rid of the age bands.

Obamacare also instituted a new rule that premiums for older Americans on the exchanges couldn’t be higher than premiums for younger customers by a factor of more than 3 to 1. Older people tend to be sicker and thus a greater risk for insurers, which drives their premiums higher. The rule was meant to help out the older set with an implicit transfer: drive down their premiums by driving them up for younger customers.

It’s unclear just how much the age restriction contributes to premium hikes and thus to rate shock. Most of the hikes are probably due to the rule that insurers can no longer deny customers based on pre-existing conditions. But the age rule obviously contributes some.

So let’s get rid of it. We’ve already removed all limitations on who can and can’t get a subsidy. So no older American is going to be left out in the cold when their premium goes up. I don’t object to the age rule myself, but it seems to me we can accomplish the same goal through less intrusive tinkering in how insurers design their coverage.

4) Get rid of the coverage requirements for the employer-provided market.

Finally, Obamacare imposes some new requirements on the small and large group markets for employer-provided coverage, which are causing some modest disruptions there. Personally, again, I don’t care about this. If your employer cancels your current plan, the most likely outcome is they’ll just provide you with a better one. If they don’t, then you’ll be getting a bigger paycheck (since none of it’s going to premiums anymore) and you can go shop on the exchanges. Either way, you’ll be fine.

But conservatives seem annoyed by these requirements. And much of the impetus behind Obamacare was the idea that employer-based coverage was already the “good” kind, and we were trying to make the individual market more like it. So I don’t see why the employer requirements are strictly necessary. Why not just get rid of them?

BONUS: Cover everyone who got left out by state refusals to expand Medicaid.

I don’t like describing the expansion of coverage to millions of the least fortunate Americans as a “bonus.” (See my bitching above about whose struggles our political system does and doesn’t value.) But I did frame this post as a response to rate shock and plan cancellations, and expanding Medicaid isn’t strictly relevant to that. Still, as a leftwinger with the attendant moral priorities, this would be a huge “win” for me. So I’m including it.

Right now, to qualify for the exchanges, your income has to be at least 100 percent of the poverty level. That’s because lawmakers figured every state would expand Medicaid, covering everyone below that threshold. But 26 states didn’t, leaving almost 5 million Americans — all of whom are far poorer than those seeing rate shock and plan cancellations — high and dry.

But since we’ve already eliminated the income ceiling on who qualifies for the exchanges’ subsidies, we might as well drop the floor as well. That yields a simpler system: as long as you’re not covered through your job or through some government program (Medicare, Medicaid, Veterans Health Administration, etc.) you’re on the exchanges, end of story.

Yes, again, this would significantly increase the law’s annual expenditures. But it would also serve as a détente of sorts on the Medicaid expansion, and take the political pressure off conservative states that don’t want to participate. Continue reading

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If Obama Broke His Health Care Promise, Does That Tell Us Anything Useful About Anything?

Let us stipulate, for the sake of argument, that President Obama has broken his promise that “if you like your health care plan, you can keep your health care plan.” I actually think the accusation is highly contestable on its merits, but whatever. Let’s roll with it. What I want to know is: what, in practical terms, I should take away from this fact?

And I ask in earnest! Because Obama’s critics sure seem to think it’s important. But so far they seem like the dog that caught the proverbial car with this talking point — now that they’ve landed it, they don’t know what to do with it.

"You know what I am? I'm a dog chasing cars. I wouldn't know what to do with one if I caught it! I just do things."

“I’m a dog chasing cars. I wouldn’t know what to do with one if I caught it! I just do things.”

The most obvious implication they’re pushing is that this invalidates the law: as Ben Domenech put it at a recent Wonkblog debate, whether Obamacare succeeds or fails should be judged by whether it lives up to the White House’s promises.

But this is an obviously stupid argument. First off, Obama is not my Dear Leader or anyone else’s. He’s just some dude I voted for. We’re all perfectly capable of forming our own opinions on a policy and coming up with our own metrics. I’m not obligated to adopt his. And as a matter of common-sense, it seems to me most voters will judge the law on whether it makes American lives better off on the whole, not whether it matches up with a few political talking points the vast majority of them weren’t paying attention to anyway.

Tim Carney, however, does a better job with two distinct takeaways:

1) Never trust Obama again.

I can’t really say I disagree, though I don’t share the sentiment. I’m deeply cynical and utilitarian about this stuff — politicians are function algorithms, whose behavior is determined by self-interest and the environment of political forces they encounter. I vote for them accordingly, looking for the one that I think will best advanced my preferred policies and values given their nature and circumstance. I gauge the likelihood they’ll keep their promises by the same measure. (As such, Obama’s done a good job of keeping his promises to me, since I’m a lefty-liberal, and am smack-dab in the middle of the political coalition that most affects Obama’s fortunes.) In short, trust doesn’t really enter into it for me, except at the margins.

Carney’s point is certainly relevant to, say, conservative voters who are curious about immigration reform. If the final bill’s concession to conservatives is increased border security, and that increase is written in the legislation such that it relies heavily on executive discretion, then yeah, they should be worried Obama will welch. But really, that would be just as true before the current Obamacare brouhaha, because that’s the nature of politics. It’s also a good reason to leave the executive as little discretion as possible in a law’s language, which is how we ought to be doing things anyway.

I also think the decisiveness and gravity with which Carney renders this judgment is uncalled for. As I said, the charge is contestable, even from his framework. Obama’s promise has held true for everyone on Medicare, Medicaid, and the vast majority of employer-provided plans. That’s most Americans right there.  The Congressional Budget Office projected that 8 million Americans would lose their current coverage. By my lights, when you make a promise to 300 million-odd people, keeping it for 97 percent of them is doing pretty well. It’s also arguable the White House was honest if cagey at the time that the grandfathered plans wouldn’t last.

The most you could say, I think, is that this is one data point in the case you shouldn’t trust Obama, and a relatively mixed one at that.

2) Loosen the rules that are outlawing insurance plans.

As Carney says, “Why should it be illegal for me to buy a plan that doesn’t cover mental health or contraception? Why should it be illegal for my neighbors to buy a plan that doesn’t cover maternity or prescription drugs? Why should a $5,000-in-network out-of-pocket maximum combined with a $10,000 out-of-network max be outlawed?” Those are all fair questions! And it’s absolutely true that loosening Obamacare’s rules about how coverage can be constructed and what benefits must be included would cut down on the amount of plan cancelations.

But this is a debate over an a priori policy preference. We’d still be having it, in exactly this same form, even if Obama had been totally up front from the beginning that some plans would get nixed. And if you do think tall those practices should be outlawed, then saying the plan cancellations are merely “transitions” is a perfectly valid argument.

It’s worth noting that most conservative health wonks want to equalize the tax treatment of employer-provided plans and individual ones. Now that would lead to some serious upheaval in what coverage is currently available, and who gets to keep what. So the mere fact of changing plans can’t be taken as evidence that a particular policy is bad.

Again, I don’t see how Obama’s failure to keep his promise illuminates anything here. For myself, I’m sympathetic to the idea that Obamacare’s rules on this score shouldn’t be so demanding. But I’m also firmly in agreement with Josh Barro and Austin Frakt that our current health care system is a mess, that changing it into something better will inevitably lead to lots of people losing what they now have, so Obama’s promise is something that shouldn’t be kept because doing so would be bad policy.

We should decide whether the essential health benefit requirements are a good idea or a bad idea, then alter or not alter the law accordingly. Obama’s personal virtue has nothing to do with it. And if those rules are a good idea, we certainly should’t get rid of them anyway just to bring the law into line with the President’s previous sales pitch.

Sorry Conservatives, But ObamaCare IS Market-Based Health Reform

Dude, where's my market?!

Dude, where’s my market?!

Writing on how conservatism could get its act together in the New York Times, Ramesh Ponnuru suggested, among other things, that conservatives focus on changing “the existing tax break for health insurance so that people would be able to pocket the savings if they chose cheaper plans.”

Conservative wonks like Ponnuru have long advocated equalizing the tax treatment of health coverage purchased individually and that purchased through an employer, either by repealing the tax break entirely or extending it to the individual market. This is a very good idea. (Eliminating the tax break more than extending it, but that’s a separate issue.) Unfortunately, over at the Washington Examiner, Ponnuru’s fellow conservative Philip Klein does not see it that way. And his objection is, well, weird:

Changing the tax treatment of employer-based health care has long been the cornerstone of market-based reform, because it would give individuals more choices and more incentive to control their medical spending. But with the new health care law in place, changing the tax treatment could simply mean that many more people get dumped into the  government-run insurance exchanges, helping accelerate the growth of Obamacare.

You see what Klein did there? Equalizing the tax treatment would significantly lower the incentive for employers to provide health benefits, so fewer would do so. With ObamaCare now in place, that would mean more people going into the exchanges. And Klein assumes any act that grows ObamaCare is ipso facto in tension with the goal of market-based health care reform.

That assumption is very common within the Republican Party and conservative wonk circles. And it makes zero sense.

First off, the definition of a market is any system that allows for the trade of goods and services between buyers and sellers. That’s what ObamaCare’s exchanges do: They provide a framework for individuals to purchase health insurance from providers on an individual basis.

Now, if you click through his links, you’ll find that Klein’s complaint with the exchanges is that they regulate the coverage sold on them. This is equally silly. The government regulates trade in everything from food to cars to cigarettes. Now maybe you think it regulates them too much, but that’s a prudential call. No one suggests we don’t have functioning markets in these goods just because the government stepped in with a few rules — much less that they’ve suffered a “government takeover,” as Klein puts. By that standard, the government already runs the vast majority of the economy and we’ve already descended into socialist dystopia.

In fact, oftentimes regulation actually improves a market’s function. Two of ObamaCare’s key regulations are guaranteed issue and community rating; the first prevents insurance providers from denying people based on pre-existing conditions, and the second bars them from charging certain people exorbitant prices based on their age, gender, etc. Absent those regulations, providers would be able to compete based on who can cherry-pick the least costly customers, rather than competing on what actually matters: who can deliver customers the best value. Markets are social creations, so there’s no objective, self-evident criteria for what constitutes a well-functioning market outside of what we as a society decide. But I hope we can at least all agree that lowering prices for healthy people by rendering sick people entirely uninsurable is not the kind of result we’re looking for from our health care markets.

For what it’s worth, Switzerland also regulates the coverage provided by private insurers, while requiring its citizens to purchase coverage and subsidizing them in doing so — a very similar system to ObamaCare. And if you ask a conservative wonk for an example of a market-based universal health care system they approve of, it generally isn’t long before Switzerland gets mentioned. Continue reading

Honestly, Medicare Reform Just Isn’t That Necessary Right Now

William Galston is worried that if they go overboard in criticizing Paul Ryan, Obama and the Democrats may hamstring their own ability to sell future reforms to the American public.

In 2008, John McCain wanted to treat employer-provided health insurance as taxable income, a policy that many economists in both parties favor as helping to slow the pell-mell increase in health care costs. The Obama campaign went on the attack, to great effect. But in the process, they made it impossible to include any robust version of that policy in the architecture of the Affordable Care Act. […]

A number of Democrats once believed—and some still do—that a well-crafted version of premium support is part of a balanced and sustainable long-term fix for Medicare. If the effect of the Ryan choice is to take not only the Ryan budget’s version of premium support off the table, but also the kinds of approaches that Alice Rivlin and Ron Wyden have proposed, then we’ll be left with far less appealing options for stabilizing Medicare… If Obama wins the election by playing on the fear of change, which is very real, then the election will settle nothing, and our already dysfunctional political system will be mired in gridlock indefinitely.

This isn’t a crazy concern. I’m one of those Democrats who thinks premium support might (might!) be a necessary part of Medicare’s future, and the employer-provided insurance kerfuluffle was, in terms of policy substance, one of Obama’s lowest points. The Affordable Care Act may still be able to unwind the employer-provided market, but the process will take far longer and be much messier than if we had just gone at the tax treatment question directly.

So I get the worry that by taking advantage of immediate political expediency, Obama could kill needed policy down the line. But it doesn’t really concern me in this instance, for several reasons.

One, political expediency can flip pretty quickly. Just take Obama’s one-eighty on the individual mandate. In fact, I’d argue the ACA’s failure to go after employer-provided coverage had a lot more to do with the GOP’s lock-step opposition than with Obama’s previous promises. If the Democratic leadership thought equalizing tax treatment could peel off enough Republican Senators to afford losing a few Democratic ones, I think they would’ve done it. They were certainly happy to compromise on a raft of other points.

More fundamentally, Obama’s promises will only bind the Democrats for another four years — assuming he wins in November — and moving Medicare to premium support just isn’t going to become a terribly pressing concern in that window. I realize this goes completely against centrist conventional wisdom, much less conservative conventional wisdom, but it’s true. The key thing to remember is that Medicare is not becoming more expensive because there’s anything particularly wrong with Medicare. It’s becoming more expensive because it happens to buy health care, and health care is becoming more expensive. And the primary engine driving that rise in costs is far and away the private markets.

The growth rate in Medicare has been well below that of the private markets, and it only covers 16 percent of Americans versus around 65 percent covered by private ensurers. Medicare rides the costs of health care, and is able to bargain them down somewhat below trend. But it isn’t driving them. You cannot treat these things as conceptually separate — if you want to fix Medicare, you need to fix everything outside of Medicare. (And Medicaid.)

This is precisely what the Affordable Care Act does. It uses Medicare’s bargaining position to inject a whole raft of delivery reforms into the market that will hopefully be taken up by private insurers. There’s evidence this is already having an effect. It also created a mechanism for forming multi-state compacts out of the exchanges, which could break down the state-by-state fracturing of the health coverage market. And it set up long-term forces that could unwind the employer-based system over time. As I said earlier, if Republicans were willing to play ball, and accept the ACA as the framework for health care reform going forward, they could probably improve the law in ways that would greatly speed up these processes.

Now, maybe you think this is all bullshit. Maybe you think the ACA is the worst thing ever, and should be repealed wholesale, and then we should nuke the employer-based system, give everyone health savings accounts, and turn the health insurance regulatory environment into a nationwide wild west. But even if this approach did work, it would bring down health care costs across the board. That would go most of the way towards fixing Medicare right there — whether you fiddle with the program itself is gravy.

This gets us to the real perversity of Paul Ryan’s position. He’s out there proposing that we torpedo the biggest overhaul to the health care market we’ve passed in decades, and instead wants to upend Medicare’s structure in ways that don’t meaningfully change its spending course from Obama’s proposal. Of course, he’d like to kill the employer-based system, do HSAs, and do cross-state competition too. But that stuff isn’t in his budgets, for the very simple reason they’d be an even more politically difficult and poisonous lift than the ACA itself was.

We barely got the ACA through thanks to a highly unusual political moment. It’s a profoundly valuable foothold. The idea that we could kill it, and then impose an even more disruptive reform on the private markets — minus all that making-sure-poor-and-sick-people-can-get-coverage hippy nonsense, of course — is just insane. But that’s just what Ryan and his cohorts are proposing.

UPDATE: Sen. Ron Wyden of Oregon is more positive on premium support for Medicare than I am. But Paul Ryan and Mitt Romney’s attempts to use the Ryan-Wyden plan as bipartisan cover are extremely disingenuous, and this interview Wyden gave to Ezra Klein sums up my own frustrations with the Medicare debate we’re having:

In the broader conversation over Medicare, the reforms in the Affordable Care Act and premium support are seen as sharply divergent paths. The ACA relies on delivery-system reform and the IPAB, while premium support relies on vouchers and competition. But you’re saying they’re not opposed at all. In fact, they’re best done together.

I’ll make a substantive point and then a political point. I feel strongly that to tee premium support up for a decade from now — which is what the white paper called for — you need the kind of delivery system reforms envisioned in the Affordable Care Act to accelerate the trend toward more coordinated care and paying for quality and bundled payments. If you don’t accept those, and Gov. Romney says just rip the Affordable Care Act up and go to our form of coupon care, you’ll never had have any of these reforms.

Number two, I’ve found that more and more Americans are coming around to this head-scratching exercise where they ask, shouldn’t we do the same things for people over 65 that we’re doing for people under 65? Can’t we start the march to an integrated system?

One frustration for me in this debate has been that Republicans have essentially lifted the insurance market structure from the Affordable Care Act, which they say will save no money, and moved it to Medicare, where they say it will save tons of money. But it’s the same idea! The Affordable Care Act’s exchanges use an almost identical competitive-bidding process to the Medicare exchanges in Ryan’s budget. I don’t see how you can say one will save money but the other won’t.

People have described it almost as ideological bedlam. You have Republicans saying that what they’re so strongly opposed to in the Affordable Care Act is exactly what they’d like to see done in Medicare. And then if you give traditional Medicare, which I think has to keep its purchasing power and we have some ideas for that, but if it did that, it would end up essentially being the public option that Democrats have been for.

 

I Don’t Think Charles Blahous Understands the CBO’s Models or the Politics of Medicare

One of the key assumptions in the Congressional Budget Office’s model — upon which it based its conclusion that the Affordable Care Act will reduce the deficit — is that the depletion of Medicare’s trust fund will be ignored and Congress will simply continue spending to maintain Medicare’s benefits. One of the key assumptions in Charles Blahous’ new study — which says the CBO flubbed it and the ACA will actually worsen the deficit — is that this depletion will most certainly not be ignored. From a follow up defense Blahous wrote of his study, which I think best encapsulates his logic on this point:

The historical evidence is overwhelming that Congressional behavior is heavily influenced by Social Security and Medicare solvency determinations. Specifically, Congress is much less likely to enact cost-containment measures in either program when projected insolvency is more distant.

Supporters of the ACA have elsewhere made clear that they agree the ACA will extend the Medicare Trust Fund’s solvency, protect its spending authority, lessen the risk of near-term benefit reductions, and mitigate the urgency of further Medicare reforms. Examples include David Cutler’s public policy memo, various Administration announcements, and Congressional Dear Colleagues.

These and countless other statements contradict the theory—on which the scorekeeping convention depends—that the extension of Medicare solvency is a budgetary non-event that leaves Congress just as likely to enact the same amount of further Medicare cost constraints as before the ACA was passed.

What this doesn’t answer is the question of why this is so. Does Blahous really think voters, and thus Congress, are concerned with the trust fund qua the trust fund? Of course they aren’t — neither the vast majority of voters nor legislators are policy wonks. What concerns them is whether Medicare’s benefits will keep coming as they always have. Voters and politicians are concerned with the insolvency of the trust fund only to the extent they think it will stop Medicare from buying retirees’ health care. “Trust fund solvency” is a stalking horse for “continuation of benefits.”

CBO assumes that when the chips are down, Congress will break the link between the trust fund and Medicare benefits. It will let the trust fund die, and continue funding Medicare out of general revenue. This shift would occur sometime in the next decade or two. And yes, I’m sure as news reports came filtering out that Medicare’s trust fund was going insolvent, there would be a bit of panic. But as soon as voters realized their Medicare benefits were still coming, the issue’s political potency would utterly vanish. To claim otherwise is to claim American politics values an abstraction (the solvency of the trust funds) over a concrete reality (whether Medicare benefits keep coming). Does anyone doubt me on this point?

This leads to a profound irony in Blahous’ dismissal of CBO’s model. One of conservatives’ biggest critiques of the ACA is that Congress lacks the fiscal discipline to maintain some of the spending and tax changes the law calls for. They cite such things as the Sustainable Growth Rate, which passed in 1997 and was supposed to cut Medicare payment rates, but which Congress has postponed every year afterward. Fair enough. But the fiscal discipline required to honor current law, and slash Medicare benefits in conjunction with the depletion of the trust fund, would dwarf the discipline required to adhere to the ACA or the SGR. Which is precisely why CBO assumes Congress will display no such discipline, and just keep spending to maintain Medicare.

This is important, because it helps illuminate what may be Blahous’ key logical error — and the error of the rest of the ACA critics crying “double counting.” Here’s Blahous explaining double counting in the appendix of his study:

[I]magine a law that cuts Medicare HI payments by $1 while also spending $1 on a new health program. The $1 Medicare HI spending cut extends the solvency of the Medicare HI Trust Fund, thereby allowing Medicare HI to spend an additional $1 at a later date. The $1 of near-term Medicare savings thus results in an additional $1 of later Medicare spending. Thus, if the law also spends $1 on a new health program, then altogether the law would permit $2 in total new spending while enacting only $1 in savings. On the whole, such a law would increase spending and worsen federal deficits. The case is similar with the ACA.

This misses one absolutely critical detail: CBO assumes up front that all Medicare spending will be honored, so that additional $1 of later Medicare spending is already built into its model. It’s already accounted for that $1 of promised future spending with commensurately higher future deficits. So that $1 is already in the baseline against which CBO measured the effects of health care reform. When the ACA finds $1 of additional savings and enacts $1 of additional spending, those latter two dollars balance each other out. $1 of new savings, $1 of new spending, $1 of future spending, and $1 of future deficits. “Double counting” or no, the CBO’s math adds up. Throw in the other bits of new revenue the ACA pulls in, and you have a net reduction in the government’s deficits.

One last way to look at it: Consider the government’s finances before the ACA passed. The Medicare trust fund is predicted to go insolvent in the next decade, and the CBO’s unified budget model is predicting large future deficits and debt. Now imagine that to shore up Medicare, the government decides to pass a hike in the payroll tax. What happens?

First, the solvency of the trust fund is extended, because new bonds are issued. But this is also new revenue, so it also improves the budget outlook under the CBO’s model. No one, I think, will protest this logic, nor claim there is anything untoward going on here. But it is effectively “double counting” as Blahous and the ACA’s critics have defined it. Conversely, the same thing happens if you cut Medicare’s benefits rather than hiking the payroll tax. It makes the bonds already in the trust fund go further, which extends its solvency. At the same time, you’ve reduced the government’s overall level of spending, so its deficits shrink.

In point of fact, this second scenario is precisely what the ACA did. It cut Medicare’s payment rates, which improved both the trust fund’s solvency and the budget outlook. From there, the ACA instituted new spending to help people buy insurance on the exchanges. This had no effect on the trust fund as it wasn’t under the aegis of Medicare, but it did worsen the budget outlook again. Finally, the ACA found new revenue outside of Medicare — the excise tax, new fees, new penalties, etc. — which once again improved the budget outlook.

So, the first step improved both the trust fund’s solvency and shrunk the deficit. The second step expanded the deficit again, but didn’t effect the trust fund. The third step also didn’t effect the fund, but did shrink the deficit again. Add up the net effect of these three steps — first cuts, then spending, then revenue — and the CBO’s unified budget outlook shows a slightly smaller deficit in the first decade, and a much smaller deficit in the second decade, than we had before health care reform was enacted.

As Paul N. Van de Water points out at the Center on Budget and Policy Priorities, these kinds of Medicare savings have been enacted several times in the past, were “double counted” each time — including by Republicans — and no one ever batted an eye. The only difference this time around is that the savings happen to reside in the same package of legislation as a new entitlement conservatives happen to loath. The conceptual complexities of the trust fund gave them an opening to play silly games with accounting logic, and man did they all leap at the opportunity.

Liberal vs Conservative Moral Sentiments: SCOTUS Edition

I’m not sure Peter Suderman entirely thought this one through:

What can explain liberals’ widespread failure to anticipate the Court’s wariness of the mandate? Research conducted by University of Virginia psychologist Jonathan Haidt suggests one possible answer: Liberals just aren’t as good as conservatives and libertarians at understanding how their opponents think. Haidt helped conduct research that asked respondents to fill out questionnaires about political narratives—first responding based on their own beliefs, but then responding as if trying to mimic the beliefs of their political opponents. “The results,” he writes in the May issue of Reason, “were clear and consistent.” Moderates and conservatives were the most able to think like their liberal political opponents. “Liberals,” he reports, “were the least accurate, especially those who describe themselves as ‘very liberal.’”

Well, first off, I have to admit I’ve never been terribly impressed with Haidt’s research and how he applies his “audio equalizer” framework of moral psychology. In my experience, liberals have plenty of moral concerns which fall under liberty, loyalty, sanctity, authority and so forth, and which derive from group-based morality rather than individual-based morality. It’s just that Haidt’s imagination is too limited by the taxonomies of the current American political landscape to tease them out.

But let’s assume Haidt’s work is air-tight. What does the research cited by Suderman tell us? Well, it tells us that liberals only consider some of the metrics in their own moral reasoning, so they more regularly fail to predict the reasoning of individuals who bring all the metrics into account. Which may well be true, but that has nothing to do with liberals’ anticipation of the the inner intellectual workings of the Supreme Court Justices — or, at least, Suderman had better hope it doesn’t.

If it does, then liberals failed to anticipate the ruling precisely because they failed to anticipate the personal subjective moral reasoning of the Justices. Which is an implicit admission that, in overturning the mandate, the Justices will have substituted their personal subjective moral preferences for objective jurisprudence. Which, you know, is precisely what they’re not supposed to do. That would vindicate liberals’ suggestion that the Court’s conservatives have descended into right-wing partisan hackery.

Rulings are supposed to be based on the text of the Constitution, jurisprudence, and previous precedent. These things provide an objective grounding the personal moral whims of the Justices do not. Liberals were hitherto confident of victory because they assessed that text, jurisprudence, and precedent, and concluded that within those parameters the arguments against the mandate didn’t have a leg to stand on.

While we’re on the subject, I do think Jonathan Adler has a more plausible theory for what may have happened: Namely, because of left-leaning ideological homogeneity and a certain institutional group-think, a lot of the legal academics have lost touch with the Curt’s immediate on-the-ground thinking. Since commentators and journalists relied on those academics to asses the case against the mandate, that failure became conventional wisdom. Assuming the Court does in fact strike down the mandate — which I still think is exceedingly unlikely — this seems like a plausible explanation.

I would note that Adler’s group-think theory is perfectly compatible with the hackery theory. If the legal academic world has become too insular, then the conservatives on the Court finally going round the bend is precisely the sort of thing it would fail to pick up on.

Why I Still Think The Health Care Mandate Will Survive Just Fine

If Twitter was any indication, yesterday was a rather traumatic experience for supporters of ObamaCare. By all accounts Solicitor General Donald B. Verrilli Jr. — the man charged with defending the law to the Supreme Court — got trounced during oral argument concerning the mandate’s constitutionality. I spent most of the day tweeting that I thought this was a bunch of hand-waving over nothing too terribly important, so I figured I’d organize my thoughts as to why.

1) The Underlying Structural Forces Haven’t Changed

Nothing new happened yesterday. The nature of the arguments for and against didn’t change, no hitherto unknown information was brought forward, and no great revelation was in the offering — other than the realization that even one of the top lawyers in the land can get stage fright. The justices have been inundated with briefs on the issue for months, and will continue mulling the matter over with their staffs and with each other, most likely until the end of June. Yesterday’s oral arguments were a mere two-hour chunk of a much, much longer deliberative process. It’s the chunk where the actual intellectual substance of the arguments is at its lowest ebb of influence, while the subjective public performance of the two sides’ lawyers is at its highest ebb of influence. It also happens to be the chunk of the process most visible to both the public and the media.

In other words, the circumstances conspire to trick everyone into vastly overestimating the oral arguments’ import. For the Right to gleefully crow over yesterday’s deliberations, or the Left to wring its hands in trepidation, is no different from both sides doing the same over that recent Washington Post / New York Times poll showing a dip in Obama’s favorables. That poll might have been dramatic in the moment, but it did not make for a trend. This and this were the trends, and there’s no evidence they aren’t still headed in Obama’s favor. I see no reason to think the same basic perceptual phenomenon isn’t going on here.

2) The Underlying Strength of the Argument Hasn’t Changed

The relevant text from the Constitution concerning Congress’ power reads, “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes,” as well as, “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.”

You read anything in there about a distinction between economic activity and inactivity? Yeah, me neither. As economists keep telling us, there is no functional difference between penalizing someone with a tax for inactivity, and rewarding them with a tax credit for activity — and everyone agrees the latter is constitutional.

There is no conceivable world under which health care, which is a healthy piece of the entire national economy, does not fall under “commerce among the several states.” No one is arguing Congress doesn’t have the power to establish guaranteed issue or community rating, the regulations which prevent health insurers from turning people away due to pre-existing conditions and from screwing the sicker among us out of decent coverage. Without the mandate also in place, the health care market collapses under those regulations because people can wait until they get sick to buy insurance and thus bleed insurers’ coffers dry. So the mandate is necessary to carrying out the other legitimate regulations. Boom. Done. Verrilli actually made this argument yesterday, though the poor man’s syntax was garbled to the point of incomprehensibility.

I have no doubt Thomas will rule against the mandate, but he’s nuts. Scalia cannot rule against it without betraying his own logic in Raich. Kennedy, Roberts and Alito have hemmed themselves in with various rulings as well. I realize that assumes the conservative justices on the Court still care about their honor and intellectual integrity. Perhaps that assumption is a mistake, and they’re ready to strike down the mandate in the name of out-and-out ideological warfare. But I doubt it, and the reason is…

3) The Underlying Politics Haven’t Changed

Dahlia Lithwick did an excellent job laying this case out, which in a nutshell goes as follows: Between their recent public speeches, books, and individual publications, the Justices on the Supreme Court have been signaling unusual sensitivity to perceptions of the Court’s legitimacy and integrity. They’ve already suffered backlash over both Bush v. Gore and Citizens United, the latter of which is still a particularly raw political wound. This is not a Court that enjoys a high level of public trust, or has a lot of political capital to spend. It’s staring down a coming session that is replete with divisive cases on immigration, affirmative action, and voting rights — the health care reform case is just the start of it. And this is all hitting the Court smack in the middle of the heightened partisan environment of the 2012 elections.

The mandate is not popular, but the public is also profoundly cynical about the Court’s motivations — recent polling shows a whopping 75 percent of Americans expect political ideology, not jurisprudence, to drive the Court’s decision on the mandate. A 5-4 split on a case this high-profile will do nothing to alleviate that. The opinion of elites and the Justices’ peers also matter, and they know how far out on a limb the conservatives must go to strike the mandate down. So like Lithwick, I suspect the unusual amount of time allocated to the arguments, and the grilling the pro-mandate side received yesterday, were much more about optics than an indication of the Justices’ actual positions. On the one hand, they need to reassure the public at large of their nonpartisan seriousness, and on the other they need to give the conservative base a good show before disappointing them by upholding the mandate.

Alito and Roberts aren’t Tea Partiers, which is where the emotional core of the Right’s opposition to ObamaCare lies. My sense is that neither of them hold health care policy particularly near and dear to their hearts. Being Chief Justice also leaves Roberts especially sensitive to the Court’s reputation, and eager to solidify a large majority. Kennedy can be prickly and libertarian, but he’s also something of the swing “wild card,” and that kind of unpredictability can break in either direction. (Though I actually think Kennedy’s more likely to rule against the mandate than most of the other conservatives.) Meanwhile, Scalia has boxed himself in intellectually with Raich.

So even if the conservatives can’t be relied upon to defend the mandate on its considerable legal and Constitutional merits, there’s still plenty of reasons for them to decide this just isn’t a hill worth dying on.

In Conclusion…

Obviously, I have no expertise in this area. Come the end of June, I could totally be eating my words. (Another reason I’m writing this is so that, if I am wrong, I’ll have a written record to go back to for my own edification.)

But the point is this: Months ago, in the cold light of day, long before the oral argument drama was upon us, liberals sized up their argument, the text of the Constitution, court precedents, past decisions, the personalities of the judges, their ideologies, their intellectual histories, and the political environment surrounding the Court, and concluded they had this sucker in the bag. Those were all good reasons to come to that conclusion. They were why 85 percent of legal experts polled by the American Bar Association concluded the Supreme Court would uphold the mandate, and why nine of the twelve appellate court judges who have reviewed the mandate so far (including three well-respected conservatives) ruled it constitutional.

None of that changed yesterday. All that occurred was the man charged with publicly defending the law gave a poor performance. Such things happen. The Justices aren’t going to rule based on it. So I’m sticking with my previous prediction: Mandate is upheld by at least 7 to 2.