JRG's Oral Testimony at House Ways & Means Committee 1/24/17

Highlight reel (2.44 minutes) of my testimony to U.S. House of Representatives Ways & Means Committee Oversight Subcommittee on Obamacare's individual mandate (1/24/17):



The full oral testimony is at this link and my written testimony is at this link.

Massachusetts Governor Hiking Taxes To Rescue Failed Health Reform

(A version of this column was published by Forbes.)

Governor Charlie Baker of Massachusetts has proposed a tax of $2,000 per worker on businesses which do not offer health coverage to employees who become dependent on Medicaid. This makes him the second Republican governor of Massachusetts to buy into the notion that imposing taxes (or fines or penalties or fees) on individuals and businesses can force them to accept responsibility for government failure at getting health spending under control.

Evidence from Massachusetts and the nation shows the opposite is true. Yesterday, I testified on the effect of Obamacare’s individual mandate before the Oversight Subcommittee of the U.S. House of Representatives’ Ways and Means Committee. (The video is at this link, and my written testimony is at this link.)

Will 11 Million Pay Obamacare Mandate Penalty?

I recently took issue with lack of clarity in media coverage of a report by the IRS’ Taxpayer Advocate, which claimed 6.6 million paid Obamacare’s individual mandate penalty last year. I figured the total must be significantly higher, because each tax return would cover more than one individual.

In an e-mail to me dated July 21, 2015, Doug Badger, a longtime veteran of Republican administrations and whose Doug’s Briefcase blog is a must-read, pointed out that there can be more than one person in a household applying for Obamacare coverage:

….. a more accurate measure of household size could be obtained by dividing the number of people included in a completed applications by the number of applications.  That yields a factor of around 1.35, as opposed to 2.35.  I admit that is a rough approximation and there may be better ways of calculating the number of people affected by the tax on the uninsured.  In any event, your central point is exactly right: the number of people living in households that paid the tax is much greater than 6.6 million.

Did 15 Million - Not 6.6 Million - Pay Obamacare’s Mandate Penalty?

The media have reported that 6.6 million “taxpayers” paid the Obamacare penalty (tax) for not obeying the individual mandate to buy federally qualified health insurance in 2014. However, the actual figure must be much larger.

However, the report by the Taxpayer Advocate discusses “returns,” not individual taxpayers. It reports that 2.6 million 2014 returns claimed Obamacare’s premium tax credits, totaling $7.7 billion paid out, and an average pay out of $3,000.

We know from other sources that about 6.14 million individuals claimed tax credits for Obamacare coverage last year (87 percent of 7.06 million individuals). (And that is only if we count people who signed up during open enrollment, which ended in March 2014. Because special enrollment continued throughout the year, most of those who signed up later would also have claimed tax credits.)

King v. Burwell: How Important is Obamacare's Individual Mandate

Later this month, the Supreme Court will likely announce its decision on King v. Burwell, the lawsuit which asserts tax credits currently being paid to health insurers in 34 to 37 states that use the federal health insurance exchange are illegal. If the Supreme Court stops these tax credits, over six million people will be required to pay the full premiums for their Obamacare policies. This will cause a crisis, which will demand a response by Congress and the president.

Now that both chambers of Congress have Republican majorities, any legislative response will surely include eliminating the individual mandate, the most unpopular feature of the law. Victory for King would make Obamacare policies in most of the country “unaffordable” and thereby relieve 11.1 million people of the individual mandate. Any “fix” that re-imposes the mandate would be political kryptonite for this Congress.

Read the entire column at Forbes.

The $35 Billion Windfall From Delaying Obamacare's Individual Mandate By One Year Could Restore National Institutes of Health Funding For A Decade

Delaying Obamacare's individual mandate by just one year would reduce the federal deficit by over $35 billion, according to the Congressional Budget Office (CBO). Freed from fear of the individual mandate, Americans would be less likely to buy expensive health insurance on the Obamacare exchanges (which have suffered embarrassing glitches during their first week of operation). This would stop the hemorrhaging of about $28 billion of subsidies through the exchanges. Further, because Americans would keep more of their wages as taxable income, income and payroll tax receipts would increase by about $8 billion.

If more Americans appreciated this fiscal windfall, the mandate would surely become even more unpopular. Although many Americans would like to reduce the deficit, others might prefer to spend the revenue on other government activities. If House Republicans were willing to pass a new version of the CR that spent some of this revenue, it would surely increase the odds of passage in the Senate.

Read the rest of this article at Forbes.com, The Apothecary.

After Obamacare: More for the Supreme Court to Strike Down

As we wait in cautious optimism for the Supreme Court to free us from the burden of Obamacare, let's think of some other harmful federal intrusion that would be good to get rid of. How about the curious notion that Congress should regulate health insurance at all?
Read the entire column at Forbes.com: The Apothecary.

Why Didn't The Supreme Court's Obamacare Hearings Cream Health Insurance Stocks?

There is a split between what free-market policy analysts believe Obamacare will do to health insurers and what investors believe. Wonks tend to think that the regulatory burden imposed by Obamacare – especially increasing politicians’ power over health plans’ ability to set premiums – will demolish private health insurance.

But Wall Street sees it differently: The “individual mandate” that every American acquire health insurance has been understood as an overwhelming gift to the health insurers. Their premiums, although highly regulated, are about to become fairly risk-free. Perhaps they should be analyzed as utilities?

Read the entire column at Forbes.com.

If the Supreme Court Kills Obamacare, Should We Thank Mitt Romney?

There is no doubt that the campaign to “repeal and replace” ObamaCare will have its weakest standard bearer if Mitt Romney becomes the Republican candidate for President. His embrace of an “individual mandate” to buy health insurance or pay a penalty, as legislated in his 2006 Massachusetts health reform, is anathema to those faithful to the ideal of limited government.

But maybe we should look at it another way: If Mitt Romney had never signed his 2006 law, those of us committed to defeating ObamaCare would never be in the fortunate position we are today – the whole, ungodly mess hanging by a thin thread after a brutal hazing in the Supreme Court.

Read the entire article here.

Massachusetts En Route to Single-Payer Health Care

Mitt Romney has thorwn himself in front of a buzzsaw with his continuing defense of his 2006 health reform in Massachusetts.  The other day, the Wall Street Journal editorial board sharply criticized Mr. Romney's approach.  In a letter by yours truly that the WSJ published today, I noted another problem with the Massachusetts reform: It amplified political incentives that have put the solvency of Bay State health plans at risk.  Read the letter here.

For non-subscribers, the text is copied below:

Overturning the Individual Mandate in Court Does Not End Obamacare

In the Orange County Register, I make the case that an individual mandate and penalty, as instituted by Obamacare, are not really different than the status quo, whereby the government subsidises employer-monopoly health benefits.  Read it here, and please don't be spooked by the math!

How Massachusetts' Commonwealth Connector is Better Than Utah's Health Exchange

The range of current libertarian-conservative expert opinion on ObamaCare’s Health Benefits Exchanges has well-defined boundaries. On the one hand, there are those who believe that states are obliged to establish some sort of barebones exchange along the lines of the Utah Health Exchange in order to prevent the federal government from coming into a state and imposing a bloated contraption like Massachusetts’ Commonwealth Connector. (For an example of this approach, see here.) Others (especially myself) believe that the Utah Health Exchange is unimpressive, that no “exchange” can overcome certain bureaucratic necessities, and that states should therefore refuse to collaborate with ObamaCare, while waiting for it to be overturned by the Supreme Court or a future Congress and President. (The Cato Institute’s Michael Cannon has also arrived at this conclusion.)

None of us has anything positive to say about Massachusetts’ Commonwealth Connector — until now! In one respect, the Commonwealth Connector is an extremely well-run government program, while the Utah Health Exchange is not. The issue is transparency.

The Individual Mandate Vs. Employer-Based Benefits (Encore!)

A few days ago, I posted a Daily Caller column in which I point out that there is no real, economic, difference between the so-called "individual mandate" to buy health insurance and the status quo.

An Adobe Acrobat version, published as a Health Policy Prescription by the Pacific Research Institute, is here.

The Individual Mandate vs. Employer-Monopoly Benefits

It pains me to have written this article.  I cheer judge Hudson's and judge Vinson's findings that Obamacare is unconstitutional.  However, as an economist, I recognize that there is no real difference between an individual mandate (that penalizes a resident for not buying health insurance) and non-taxable health benefits.

It pains me even more to report that the original Health Policy Prescription had a typo in Table 2, so I have pulled it off the blog until we correct it.

Fortunately, the Daily Caller has run the correct column, here.

Subsidizing Health Insurance: Tax Exclusion, Tax Deduction, Tax Credit, or Individual Mandate?

According to Judge Roger Vinson’s decision on January 31, Congress has no power to legislate an “individual mandate,” whereby the federal government charges the citizen a “penalty” if he does not buy a private health-insurance policy. As an opponent of Obamacare and a supporter of the Constitution, it’s a decision that I cheer. But as an economist, I find it absurd. If last year’s majority had designed the legislation slightly differently, it would not have prompted the smallest whisper of constitutional challenge.

To understand this, let’s look at a very simple society comprising two equally productive households: Smith and Jones, under four different scenarios:

Read the rest of this article at John Goodman's Health Policy Blog.

Insurance Brokers Should Reverse Their Position on Obamacare

A recent story in Politico confirmed what was already known in health-policy circles: In order to meet Obamacare’s arbitrary Medical Loss Ratios (MLRs), health insurers are cutting commissions to brokers. (The MLR is the ratio of premiums to claims paid out to health providers.)

Fair enough, many might say: The point of establishing this arbitrary accounting target was to ensure more cash flow to providers than to middlemen. This outcome leads to an unhealthy schadenfreude for me, because I’ve always thought brokers should have advocated strongly for individually owned health insurance, instead of the current employer-based monopoly, but unfortunately, because most health insurers pay commissions as a percentage of premiums, brokers’ interests were not aligned with society’s interest in reforming the bloated and expensive employer-monopoly system.

Read the entire entry at National Review Online.

The End of the Individual Mandate is Not the End of Obamacare

Last month Virginia attorney general Ken Cuccinelli successfully argued that the so-called “individual mandate” in Obamacare was outside congressional competence. Advocates of individual choice in health care cheered a significant victory, but this is not the final judicial word on Obamacare.

Myth of the Massachusetts Mandate

Remember the Massachusetts health reform, signed by Gov. Mitt Romney in April 2006? Some Obamacare cheerleaders (including the President) insist that it was the forerunner of Obamacare (and Gov. Romney is having a heck of a time distancing himself from it).

There is a media myth that the individual mandate (that you must pay a fine if you don't buy government-approved health insurance) is critical to the law's so-called "success".  Well, it's not true.

The GOP Pledge on Health Care: "Repeal" is Great, "Replace" Needs Work

Let’s start with the good news: The GOP has pledged to repeal Obamacare “immediately” (see page 27 of the Pledge), which means it will be the first legislative order of business on Monday, January 3, 2011, if the GOP takes the House.

When it comes to “replace,” however, the Republican alternative is still significantly malformed. Indeed, there’s more than a whiff of big-government Republican in it. It completely ignores the single most important reform to private health insurance: Amend the tax code to give individuals, instead of our employers, ownership of our non-taxable health dollars.

Read my entire response at National Review Online.

Reforming Health Insurance Via "Citizen Benefits"

There is nothing better about living on the north side of the Golden Gate Bridge than receiving my printed copy of National Review, taking it to my Marin County hot tub (not the one criticized by George H. W. Bush), and reading it aloud to chardonnay-sipping liberal friends.

Unfortunately, I nearly dropped my brie when I found a fundamental flaw in Reihan Salam and Scott Winship’s proposal for a “Leaner Welfare State” in last week’s issue.

Salam and Winship propose replacing the welfare state with “citizen benefits.” Their conclusion that the welfare state needs dramatic reform is solid. I also agree (as do all conservative health-policy analysts) with their recommendation to amend the tax code to give individuals command of our health-care dollars, instead of allowing employers to have monopolistic control over them.

Unfortunately, the authors also give the government too much power over the alternative, and their proposal violates fundamental principles of effective regulation of insurance.

Read the entire comment here.