Promises Made and Unpaid

November 11, 2018

by Steve Stofka

A tip of the hat to veterans on this holiday.

The Kaiser Family Foundation (KFF) regularly updates their map of the states that have not expanded Medicaid under Obamacare (Note #1). Here’s a screen shot.

KaiserMap
All the non-expansion states except for Wyoming had per capital personal incomes below the national average.

PerCapPersIncByState

Since these states have less per capita income, it is likely that more of the residents in those states qualify for Medicaid. During the initial phase of Obamacare, the Federal government picked up the tab for the additional costs. That share will gradually decrease to 90% in 2020, when the states will have to foot 10% of the expansion costs.

A ten percent share seems light. Why don’t these states expand their Medicaid eligibility? Let’s look beyond accusations of prejudice, which exists in every state.

The populations in most of these states are older. Poor seniors living in nursing homes qualify for traditional Medicaid, which costs each state much more than expansion Medicaid. The national average of state costs is 38%; the Federal government picks up an average of 62% of traditional Medicaid spending. Wyoming pays almost 50%, far above the average. Texas and South Dakota pay 44% and 41%. Oklahoma and Florida pay the average of 38% and the rest of the non-expansion states pay below average (Note #2).

The financial crisis ten years ago crippled state finances for several years and some have still not recovered. Since 2000, average per capita real income in the U.S. has grown only 1.2% per year. Medicaid spending has grown at more than three times that rate (Note #3). Residents in these poorer states have fared worse than the average. Revenues in those state have barely kept up with obligations. Officials in poorer states with older populations anticipate that funding difficulties will continue now that the first of the Boomer generation has turned 70. Given the political pressure to expand, how much longer will some of these states resist expansion?

Thirteen states that have expanded coverage have adopted new revenue sources to fund the additional costs (Note #4). Most states fund their Medicaid spending, original and expansion, out of general revenues which are falling behind state promises. These include infrastructure repairs – roads, bridges, improvements and repairs to schools and other government buildings – as well as pension obligations. Officials of state and local governments made these promises decades ago, when per capita incomes were growing more than 2%. Annualized growth over a twenty-year period has not been above 2% since 2001.

PerCapIncReal

Tax the rich is one solution offered, but that is a short-term solution. In the long-term, higher income growth is the sustainable solution. Until Democratic politicians can craft a coherent policy message that promises to promote stronger economic growth in these states, the voters will reject them.

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Notes:
1. KFF’s map of states that have turned down Medicaid expansion.
2. KFF’s breakdown of Medicaid costs per state.
3. A summary of inflation adjusted Medicaid spending from 2000-2012 showed a 4.1% annual growth rate – pg. 4. A state by state breakdown is on page 35. A 49 page report from Pew Charitable Trust.
4. A recent article showing the various sources of funding that expansion states are using.

Healthcare Quicksand

July 2, 2017

Last week I looked at the ten year anniversary of the iPhone. This week I’ll take a brief holiday look at a five year anniversary.

In June 2012 the Supreme Court ruled on the constitutionality of Obamacare. As expected, the vote was a close 5-4 decision. Many Republicans expected the five conservative justices to overturn the ACA on the grounds that the Federal government could not force people to buy insurance. John Roberts, the head justice on the court, sided with fellow conservative justices on this position at first, but the arguments of the liberal justices convinced Roberts that, regardless of the language in the ACA, the penalty for not having health insurance was a tax no matter what it was called. Roberts’ vote was the deciding vote in upholding the constitutionality of the act.

This interpretation was not without precedent. In 1937, the cout ruled that the Federal government could force people to pay Social Security insurance premiums. The reasoning was the same. Payments could be called an insurance premium or a penalty or an incentive. No matter the language that legislators used, the payments were a tax and well within the rights of the Federal government.

In 2012, Republicans released a position paper on healthcare legislation. The key features were: Affordable and accessible, no refusal of insurance based on pre-existing conditions, and allow people to keep the plan they have. Five years later, Republicans hold the Presidency, House and Senate, and are discovering the difficulties of implementing those simply stated principles.

Health care is almost 20% of the nation’s economy. There are many stakeholders. They are vocal and well funded. Because Republicans do not have a 60 vote majority in the Senate, the legislation must conform to budget rules that will permit a simple majority vote. In 2009, the Democrats had a 60 seat majority when they began the process of crafting the ACA and found that they had to make a lot of compromises. When Massachusetts Senator Ted Kennedy died in August 2009 and Republican Scott Brown won the special election to replace Kennedy, the Democrats lost their filibuster proof majority and had to make more compromises to get the ACA passed.

For seven years Republicans in both the Senate and House have run quite successfully on repealing Obamacare. Strong and principled opposition to the ACA has become less fervent.  Senators must appeal to a broader constituency than House members.  Some were reluctant to vote for legislation that could jeopardize the availability of health care for vulnerable seniors, children and low income families.

Senate Majority Leader Mitch McConnell had set a deadline for a Senate vote before legislators went to their home districts for the July 4th holiday but could not assemble the votes needed to pass the legislation. McConnell is still committed to the joint task of repeal and replace. He has rejected calls from some in his party to pass a repeal bill now and continue to work on replacement legislation.

There remain more legislative hurdles in the next few months but the most pressing is the raising of the debt limit.  The Treasury is already doing a few accounting tricks to pay bills but has notified Congress that even those tricks will no longer suffice by October.  For now, the market continues to shrug.

Last week I finished up with a teaser and I hope to have that fully developed by next week. For now, Happy Independence Day!

U.S.S. Obamacare Sails On

In March 2000, I cursed myself as I watched the SP500 cross the 1500 mark for the first time. Almost a year earlier, I had given in to my conservative instincts and paid off the mortgage with some savings. In 1999, my choice had been partially driven by a suspicion that the stock market was a bit overvalued. In 2000, I could see I was wrong; that I just didn’t understand the new economy. Had I invested the money in the stock market, I would have made 15% in less than a year.

When I set the time machine to election day 2016, I see that the index stood at about 2130, 40% higher than the 2000 benchmark. But wait. An asset is only worth what I can trade it for. Year by year, inflation erodes the real value of that asset. When I compare real values (BLS inflation calculator), the SP500 index on election day was almost exactly what it was in March 2000.

As the year 2000 passed into 2001 and the stock market fell from its heights, my decision to invest in real estate exemplified a golden word in investing: diversify.

Since the election, the SP500 has risen about 10%, as investors speculated that Republicans will usher in a new era of de-regulation and lower taxes. By mid-March, banking stocks had shot up over 25%. This past Monday, the 20th, the Freedom Caucus confirmed that they had the “no” votes necessary to block Thursday’s scheduled House vote on the Republican health care bill, AHCA. Banking and financial stocks, thought to be the biggest beneficiaries of less regulation, higher interest rates, and infrastructure spending, lost 5% over several days.

The Freedom Caucus is a group of 30-40 Republican House members who came to office in 2010 on the Tea Party wave. Led by North Carolina Representative Mark Meadows, the Caucus adheres strongly to conservative principles as they define them. They are chiefly responsible for driving out the former House Speaker, John Boehner. While strict adherence to principle – “my way or no way” – worked well as an opposition movement when Obama was President, the Caucus’ unwillingness to compromise is problematic under the current one-party rule. Can Republicans govern?

Paul Ryan, the current Speaker of the House, delayed the vote until Friday. House leadership and the White House tried to come to some compromise that would bring the Freedom Caucus on board without alienating the more moderate Republican members. With no support from Democrats, the additional no votes from the Freedom Caucus meant that Ryan could not muster the majority needed to pass the bill. Shortly before the scheduled vote at 4 PM on Friday, Ryan called off the vote.

The stock market is a herd attempt to predict and price what the world will be like in six months. As events catch up with forecasts, stock prices correct. Passage of the bill was supposed to be a key step toward tax reform if the Republicans want to pass a tax bill using Reconciliation rules, which require only a majority in the Senate.

With more than a half hour left in the trading day, the market had time to sell off 2 – 3%. And? Nothing. Did the bulls and bears cancel each other out in a flurry of trading? Nope. There was no unusual surge of volume in stocks. Either the market had already priced in the defeat of the AHCA, or buyers and sellers were left undecided.

Investors take a “risk off” approach during periods of uncertainty, moving toward gold (GLD) and long dated treasuries (TLT). Both have risen a few percent in the past two weeks but each is short of their January and February highs. Since mid-March, the SP500 (SPY) has lost a few percent. This tells me that investors had already adopted a more cautious stance.

President Trump has indicated that he wants to move on to tax reform and an infrastructure bill as well as the building of some type of defense perimeter on the border with Mexico. Perhaps investors hope that the lack of cohesion among Republicans on the health care bill will not sidetrack them from passage of these other bills.
The defeat of this bill is sure to empower the Freedom Caucus on further legislation. They were a thorn in John Boehner’s side and will no doubt frustrate Paul Ryan as well.

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Existing Home Sales

We had a warm February in most of the country. Realtors reported good foot traffic but, but, but…a lack of affordable housing has turned away many first time home buyers. Home prices have been rising at double the growth in wages. While Feb’s numbers declined from a strong January, YTD existing home sales are more than 5% ahead of last year’s pace.

Regional declines varied: the northeast at -14% and the midwest at -7% led the list. The decline in the west was almost -4% but cities in California and Colorado report the fastest turnaround times from listing to sale. The San Jose region reported an average of 23 days.

Here’s February’s report from the National Assn of Realtors

Replace, Beta Version

This week Republicans released their preliminary version of the replacement for the Affordable Care Act, aka Obamacare. Preliminary is the key word. The debate has started. The bill still needs to be scored by the Congressional Budget Office, which will estimate the total cost over the next decade. If the CBO estimate is high, we can expect major revisions in an attempt to rein in the costs.

Democrats and conservative Republicans have both criticized the bill, which is emerging from two committees in the House of Representatives.  The bill will pass through several steps of bargaining before it is voted on in the House. The Senate will have a different version of the bill but will contain some of the same elements. The Republicans have only a three vote majority in the Senate so the bill is likely to undergo revisions if it is to make it through the higher body.

If it does pass the Senate, that po’ little bill will be exhausted, but it will then have to pass through a committee that will reconcile differences in the House and Senate versions. Finally, it will head to the White House for President Trump’s signature.

The Republican version is AHCA.  Obamacare was ACA. We’ll hear these abbreviations a lot in the coming weeks.   People with employer group insurance will see few changes.  About 11 million people pay for their own insurance under a non-group private plan. Lower income enrollees receive subsidies under Obamacare. Many complained of rapidly escalating premiums, and insurance companies have been dropping out of the market, particularly in rural areas. 14.5 million people with really low incomes were added to the insurance rolls via Medicaid expansion under Obamacare (Politifact).

Here is a brief synopsis of what is proposed so far.  Popular provisions of Obamacare will remain. Parents can keep a child on their health care policy till the child is 26. Insurers can not refuse a policy because of a pre-existing condition.

Gone are the penalties for not buying insurance. Gone is the employer mandate to provide insurance and the individual mandate to have insurance. Gone are the formulas that employers must use to determine the number of full-time employees.  Gone are the subsidies for lower income working people, gone is the tax on tanning beds and medical equipment.

Instead of government subsidies based primarily on income, tax credits will be based on age first, and will phase out slowly for individuals with incomes above $75K. The credits are refundable, so that they are available to everyone whether they pay any Federal tax or not. This is similar to the Earned Income Tax Credit (EITC) for low income working families. (This provision has raised objections from the Freedom Caucus, a coalition of conservative Republicans.)

The proposed bill blocks any federal funding for Planned Parenthood, whose revenues consists mostly of Medicaid claims for non-controversial medical procedures. This provision will generate a number of discrimination lawsuits should it remain in the bill.

Medicaid funding will be based on each state’s at risk population – the elderly, the poor, the disabled. Each state can decide how to administer the funds. Several governors, including Republicans, are concerned about this provision. Under the ACA’s Medicaid expansion, hundreds of thousands of people were added onto the program. Governors worry that they will be stuck with some hard decisions in the case of a recession, when many more people lose their jobs, including their employer insurance, and qualify for Medicaid. The federal government can legally borrow money to fund promises when tax revenues are insufficient. States must run balanced budgets.

We can be sure that there will be a flurry of unsubstantiated assertions from politicians and surrogates on both sides of the aisle. We will be bombarded with catch phrases. Each politician hopes that their pithy phrase will make it into the 24 hours news cycle.

Here are just two examples from the floor of the Senate this past Tuesday. Each Senator has some good points but they drown those points in partisan drivel.  Both of these Senators are regarded as moderate voices within their party.

From John Cornyn, Texas Senator and Majority Whip, comes a phrase that all Republicans are required to use to describe Obamacare: “unmitigated disaster.”  Republicans didn’t feel that invading Iraq was an unmitigated disaster. Only Obamacare qualifies for that epithet. Republicans have learned that repeating a phrase over and over and over and over again makes it so. Politics reduced to a slogan, like the Wendy’s commercial “Where’s the beef?” (Here are a few excerpts of the speech. Cornyn’s staff doesn’t provide a full transcript.)

How much of an unmitigated disaster is Obamacare?  The Republican version keeps a number of key features of Obamacare so we can be reasonably certain that this is radical rhetoric, typical of what we hear from either party.

Cornyn uses the phrase “broken promise” to describe Obamacare. Over on the other side of the aisle, Washington Senator Patty Murray uses the same phrase to describe the Republican replacement. Maybe they both share the same speech writers.

Murray declared that millions of people will lose health care under the proposed legislation, which returns control of health care to the states. Here’s what passes for math in the Democratic Party, whose estimates of Obamacare enrollment have been  way above actual enrollment. The big  increase in enrollees have come from the Medicaid expansion, not the appeal of private market Obamacare plans.  Democrats could have passed a 100 page Medicaid expansion Act and have achieved the same results.

So, how does Murray justify the statement that millions will lose health care?    It’s not current enrollees, but future enrollees who will lose health care.  Got that?  These are invisible millions. Based on wildly optimistic estimates of future enrollments if Obamacare was left in place, Democrats then estimated that those exuberant estimates will not be met under the new proposal.  In past years, when enrollment figures did not meet projections, Democrats did not lament the fact that “millions” lost health care.  Democratic politicians only use their special math on programs from the other side.  And yes, Republicans do this as well.  (Murray’s staff made a transcript of the whole speech available.)

Like Cornyn, Murray reaches into her box of assertions, pulls out a few and repeats them. Only Obamacare can protect women’s health. 62% of white women, and 42% of all women, voted for Trump and his promise to repeal Obamacare because they wanted to damage their health? Does Murray think those women are stupid, or suicidal?  Maybe a lot of these women are the deplorables, as Hillary Clinton called them.

Like most Democrats, Murray can not understand that people resent the dictates of the Washington crowd and want more local control of their lives, even if it is only an opportunity to make their own mistakes. Politicians in Washington, those of both parties, have made a lot of mistakes. Voters in many states think that their legislatures and governors can’t do any worse.

Whenever we talk health care reform in the U.S., the discussion inevitably turns toward the single payer option, similar to the Canadian and British systems. One of the arguments against single payer systems is that the government rations care with long waiting times for appointments, particularly those for specialists, operations and hospital beds. Proponents of the U.S. system argue that the U.S. is far more responsive to the needs of patients.

Is that true? Several researchers studied {PDF} the waiting time statistics provided by governments in developed countries and found that comparisons of wait times are largely invalid. Why? Because different countries use different start times. From the paper:

“Current national waiting time statistics are of limited use for comparing health care availability among the various countries due to the differences in measurements and data collection.”

In some countries, the wait time to see a specialist might not start till the specialist makes an appointment with the patient. In other countries, the clock starts when the primary care physician writes the referral order that the patient needs to see a specialist. Some start the clock when the specialist receives the referral. Some countries distinguish between ongoing and completed care, while others don’t. The lack of consistency explains the contradictory results when comparisons of wait times are taken at face value.

After six years of stamping their feet and saying “No, no, no, no, no” like a four year old, Republicans have finally put some ideas on the table. We hope for some rational discussion of principles and likely outcomes, but, as each party has drifted to the extremes in the last two to three decades, the voices of moderation have been drowned out by impassioned pleas and slogans.  Moderation is a difficult political position to defend because it requires more than a catch phrase and a belligerent tone.

In the 24 hour media circus, politicians must posture and polemicize for the camera, for their constituents, and most importantly, for their contributors. Have your shovels ready for we shall soon be buried in the muck of debate!

Health Care Right

For some Americans, there is a question fundamental to the debate on health care insurance reform: is health care insurance a right or a privilege? Taking apart the question, the central debate is whether health care itself is a right or privilege.

In 1986, Congress passed the Emergency Medical Treatment and Active Labor Act (EMTALA), requiring hospitals to treat those in need of emergency care. The law, and subsequent amendments, established some universal access for urgent health care. What the law left out was any provision for paying for the care received and about half of emergency room care goes unpaid. The debate over reform involves two issues.

The first is does a person have a right to health care? Legislation and both state and federal court cases ensure that prisoners have a right to adequate medical care. In 2002, a heart transplant for a California inmate prompted a contentious debate over the meaning of “adequate.” If you are a taxpayer who pays to maintain the prisoner, however, you may or may not have a right to health care. It depends on your condition, which has to be assessed by a doctor using a number of guidelines, both local and federal, to determine if you have an EMC, or Emergency Medical Condition. If you do have an EMC, you have a right to health care. That doesn’t mean you have a right to free health care. You’ll have to figure that one out on your own or with the help of a counselor at the hospital.

Among Americans who are not lawyers, the debate often turns on this constitutional and philosophical debate: does a person have a right to health care? Some say that the Declaration of Independence clause citing a right to life and the 5th Amendment protection of life gives one a right to health care. Some argue that these constitutional provisions include only life or death care. People see it one way or another and there is a tall fence between the two camps.

The second debate is partially founded on the first. If someone has a right to health care, does that imply that the government then has an obligation to provide that care at no cost? Some argue yes, some argue no and there is a big wall between these opposing groups.

As a comparison, let’s review a few other rights. The citizens of this country have a right to the protection of life and liberty. Government, then, has an obligation to provide for armies, police and courts to sustain that right of its citizens. Likewise, if health care is a right, shouldn’t that also be provided by government? Some who argue that health care is a right, could also argue that there is a differentiation of rights. Defense is provided to all citizens whether they pay taxes or not. The 2nd amendment gives one the right to own a gun but the government has no obligation to buy any citizen a gun. If health care is a right, is it a right similar to that of owning a gun?

Some argue that there is no right to health care, be it life or death. For those people, the case is closed on both the health care and health care insurance debate. I heard one older man say that when he was growing up, if you didn’t have money for a doctor, you died and that was how it was and everyone got along the way it was.

For some pragmatic Americans, the debate over rights to health care is stupid. There are two camps here as well, some arguing that unhealthy people spread disease and inevitably are a burden to those around them so we, as a community, have to find a way to provide health care to everyone. Some object that simply paying the additional taxes required to provide that health care will make us all more unhealthy, thereby exacerbating the condition we hoped to cure.

In this debate, which camp are you in?

For a look at some of the gripes about the existing health care insurance situation, read a few
real life stories

Health Reform Republican Plan

Republican politicians and conservative talk show hosts have devoted plenty of time slinging arrows at Democratic health insurance reform proposals. Occasionally, I hear a talk show host or a Republican politician on a Sunday morning talk show mention the Republican health care plan but few or no details. Instead they continue to heap scorn on “Obamacare”.

When someone prefers to attack rather than explain their alternative, I get suspicious. Maybe the Republican plan sucks, I thought, and that’s why conservatives don’t offer summaries of the plan. If you, like me, would like to know what the Republican health care plan is, you can check out a Roll Call summary here on the Real Clear Politics website. It has some good features, notably the reduced government “footprint.”

As a small employer with several experiences with state insurance agencies, I am leery of government insurance solutions. In Colorado, Labor Dept employees seem to assume that the employer is at fault or lying, although a spokesman for the Labor Department would probably deny it.

An employee is taken at his or her word and it is up to the employer to prove that the employee is mistaken. Conversations with several other small employers in this state have confirmed this attitude on the part of state agency employees.

While there have been court decisions to clarify “reasonable grounds” or “reasonable suspicion” in criminal cases, there seems to be little precedent to stipulate what “reasonable grounds” are in civil and regulatory matters. If a state auditor feels they have reasonable grounds to believe that an employer is guilty of breaking one of the hundreds of state laws affecting employers, then, unlike criminal cases, the employer must prove their innocence.

I am afraid that this same attitude will prevail when the Federal government injects itself even deeper into health care and insurance in the U.S. Doctors and health care providers will be in the same position as employers, needing to prove their innocence. As patients, we might think that such a presumption of fault on health care providers is a good thing. Such a presumption will only cause more doctors and health care providers to leave the medical field. After all, who needs the aggravation?

Even without health care/insurance reform, there will not be enough doctors and health care providers for the juggernaut of the aging baby boomers. With or without reform, there will be delays in getting medical appointments with primary care physicians and specialists. We need reform and this is the time to do it. I can only hope that our politicans will use some care and sober judgment as they craft a reform bill.

Health Care Debate

Joseph Ellis, a historian and author, recently wrote an op-ed in the L.A. Times that provides a historical perspective on the debate about the role of government.

Whatever our position on health insurance, let’s keep it to a debate. The last time we had an unresolvable debate about the role of government was in 1861 and we don’t want to do that again.

Confrontational Politics

It’s called confrontational politics – the yelling and shouting heard this month at town hall meetings on health care. The tactics were first devised in the 1960s by the SDS, the Students for a Democratic Society, to protest the war and include intimidation, physical and vocal defiance and provocation. An underlying presumption of these tactics is that the ends justify the means.

In a twist of irony that would spark a wry smile in Rod Serling, the creator of the Twilight Zone, these strategies were later adopted by the College Republicans in the 1980s to thwart liberal causes on college campuses. Jack Abramoff, a leader of the movement, crafted a disciplined organization that promoted intimidation as an effective tool for conservative political causes.

In the 90s, environmental groups amended the strategy to include both violent confrontation and the passive resistance tactics espoused by Ghandi.

In the late nineties and early in this decade, an anti-corporate movement adopted these “in your face” stategies at several economic forums to challenge the fiscal policies of governments.

Common to all these movements is the perception that compromise is a betrayal of one’s principles. Compromise complicates issues for it requires that one party understand, to some degree, the other party’s point of view. Complexity is the enemy of those who prefer simplicity in their lives, beliefs and ideologies.

Healthy Americans Act

I’ve been a bit too busy lately to keep up with this blog. This blog is a good update of the continuing saga of health care/insurance reform in this country.

Ron Wyden, a senator from Oregon, initiated Senate bill 334 in 2007 and added several amendments in March 2008. The Congressional Budget Office’s analysis of the proposal found that it was revenue neutral within two years.

Likes: Basic plan is the standard basic Blue Cross/Blue Shield plan offered to federal government employees. State administered private insurance pools to spread the risk to insurers. Individual mandates to purchase insurance. People with low incomes are partly subsidized. Automatic enrollment if an individual makes no choice and no penalty to an individual who fails to make a choice. Ability to buy a more expensive policy if one can afford it. Leaves alone existing insurance policies negotiated as part of a collective bargaining agreement – the unions will like that. The basic plan is indexed to growth in GDP, not medical costs.

Dislikes: The basic plan is indexed to growth in GDP which is sure to grow less than medical costs. Private insurers will surely increase deductibles or reduce coverage for some services to offset the actuarial difference. The plan still involves employers who will pay a sliding scale tax (deductible) on the number of employees they have. However, with medical premiums increasing by 7 – 12% every year, I suppose that a sliding scale tax will at least be a known cost. It also evens up the playing field between larger companies, who pay more than smaller companies.

Of all the proposals I have read, I like this one the best for its fiscal soundness and it’s realistic approach to the competing interests of all.