Archive for the ‘ policy evaluation ’ Category

The AHCA: Obamacare Minus Assistance to the Poor and Middle Class

After a week of studying the Republicans’ Obamacare replacement, it is clear that their strategy is to keep many things about Obamacare intact-  the insurance regulations, state based marketplaces, penalty for not having insurance. They just want to cancel the financial assistance that helps people afford insurance and send it to rich people as tax cuts.

After years of complaining about mandates, Medicare cuts, regulation-Oh the regulations!– Republicans decided that they were fine with all of that. No, what’s really bothering them about Obamacare is that it makes insurance too affordable.

Things the Republican bill changes:

Things it does not change:

So, if your view of Obamacare is that it is great, except insurance is too affordable and too many people have it, then this is the bill for you. However, that sentence seems to describe Republican members of Congress and no one else.

The Obamacare Replacement’s Purpose is to Lower Taxes on the Rich

This is one of those conclusions that’s kind of hiding in plain sight, but no one is talking about. The Republican replacement bill for Obamacare, abbreviated AHCA, is so terrible as a health care bill that it has been savaged by everyone who cares about health policy. For instance, doctors and hospitals, even down to conservative wonks and media have all come out against this plan. Conservatives hated Obamacare! Why can’t Republicans design a healthcare plan that at least makes them happy?

The reason is that the AHCA, despite its name and the coverage surrounding it, is not a healthcare bill at all. It is a tax cut bill. Paid for by slashing medical services and assistance.

This is the only lens through which this bill makes sense.  A bill that was concerned about health outcomes could have easily picked a few of these groups and made them happy. However, you can’t even do that when you spend all of your bill’s money on giving tax cuts to the rich. Here’s a breakdown of the plan spends money, per the Congressional Budget Office’s official score of the legislation:

AHCA spending

You can see that the main effect of this bill is to decrease federal spending on healthcare. It replaces Obamacare’s health insurance credits with new credits almost half their size while also taking a huge whack at Medicaid spending. Its no wonder that 24 million people will lose health insurance as a result of this plan.

The largest expenditure item is not even related to health care. It is tax cuts. I separated the tax cuts into two groups. The largest group are non-healthcare related tax cuts. They mostly consist of cuts for people making more than $200,000 per year, with some more for health insurers and other healthcare companies. The second, smaller group (Other Tax Repeals) includes the individual mandate and taxes on other employers, which in fairness, are related in health insurance.

The Center on Budget and Policy Priorities illustrates this dynamic by demonstrating how the top 400 richest Americans fare every year under this bill, versus 800,000 residents of our smaller states:

cbpp aca repeal taxes

If you judge this bill by the effect it has on healthcare in the US, then you will be very disappointed, because taking hundreds of billions of dollars out of our healthcare system will tend to make it worse. However, that is not how Speaker Paul Ryan judges bills. He judges them by their effect on rich people’s pocketbooks. And by that measure, this bill is a resounding success.


Paul Ryan has a debt-reduction plan like Bush had a plan for post-Saddam Iraq

That is to say, Republican Representative Paul Ryan has no debt-reduction plan. He has a wish list, an outline maybe. There are certainly bullet points. But Paul Ryan and his Republican Party have no plan to make a dent in our debt.

So why isn’t Ryan’s much-discussed budgetary “Roadmap” a “plan”? Because it doesn’t actually say how it will achieve the debt-reduction it promises! Like Bush, Ryan will give you all the good stuff up front: “Saddam’s military will be no match for the US” or “We’re giving out big tax cuts!” but when it comes to the next step, they’re both a bit clueless: “Wait, we have to do something with Iraq after Saddam’s dead?” and “Wait, I have to pay for my tax cuts and then find trillions more to reduce the debt?”

Ryan is very specific about how he will increase the debt. He says that he will vastly lower taxes for the richest Americans. For example, Ryan would reduce Mitt Romney’s tax rate to about 0% by getting rid of the taxes on capital gains. Ryan is very detailed and specific about this how to increase debt and income inequality. But when it comes to getting rid of debt, Ryan’s got nothing. Ryan is the Donald Rumsfeld of budgets.

Ryan promises a total of about $5 trillion in tax cuts for the richest Americans over the next decade (in addition to the Bush tax cuts). He says he will pay for this with……. well, he doesn’t actually say how he would pay for it. He says that his plan “eliminates nearly all existing tax deductions, exclusions, and other special provisions” to pay for itself. Really? Which ones? There are a lot of tax breaks that are very near and dear to voters in the country. But of course Ryan won’t say which ones he will eliminate. Its a long road to eliminating an astounding $5 trillion in tax breaks but Ryan won’t say how he plans to get there. Not even a hint.

The weirdest part of Ryan’s budget is his goal to cut spending. Ryan wants to cut spending by $5.3 trillion more than President Obama over the next decade. Only, whenever anyone tries to figure out what, exactly, Ryan is going to cut, Ryan becomes defensive and extremely ambiguous. You see, the trick in Ryan’s budget is that he never actually names programs that he wants to cut. Like with getting rid of tax breaks, Ryan has a broad goal for spending reduction, but few plans to get there.

Turns out, this technicality is a big advantage for Ryan. He can say the popular thing: “I’ll make massive cuts in spending” and whenever anyone asks: “Well wait, will you get rid of my favorite program?” Ryan can respond: “No! We’ll get rid of another program (but I’m not telling you what it is).”

As comical as this sounds, this is actually how Ryan is framing his budget “plans.” Recently, President Obama gave a speech outlining how Ryan’s plan would affect major federal programs saying,

“If this budget became law and the cuts were applied evenly … over 200,000 children would loose their chance to get an early education in the Head Start program,” Obama said. “There would be 45,000 fewer federal grants at the Department of Justice and the FBI” to combat violent crime.

Obama said hundreds of national parks would close.

Predictably, Republicans responded by saying “Where did Obama get these specifics? He imagined them.” Well, yea, what was he supposed to do when handed a plan that makes radical changes to America but contains no specifics? In fact Obama anticipated this come-back and said:

“Republicans may say, well ‘we’ll avoid some of these cuts,’” Obama said. “But they can only avoid some of these cuts if they cut even deeper in other areas.”

Which is exactly right. Eventually the hammer has to fall somewhere or not at all. And for every program you protect, another gets hit twice as hard. Either you’re cutting spending or you’re not. If you are, then real people are going to be hurt and if not, then then you’re not actually reducing the debt. If Paul Ryan is serious about his budget then he needs specifics. For an example of a serious budget with specifics, here’s a good starting point.

(For a overview of Obama’s a Ryan’s budgets, look here)

(Here’s more on Ryan’s spending cuts conundrum from Ezra Klein)

IPAB- The most important part of health care reform (that you’ve never heard of)

Besides the insurance subsidies that will provide every American with access to health insurance, the Independent Payment Advisory Board (IPAB) is the most important part of the Affordable Care Act. Why is this obscure board, buried in the pages of the health care law, so important? It represents the best chance to save and sustain America’s Medicare system for the long term.

When fully implemented, IPAB will be a panel of 14 health care experts who will be nominated by the President and confirmed by the Senate. They will be charged with making changes to Medicare if costs in that program rise too rapidly. The board will have the authority to make changes to Medicare without the approval of Congress (though Congress can overrule it) if Medicare spending rises above the yearly bar that Congress has set. The changes can be something like lowering payments to hospitals that have high rates of readmission, incentivizing preventive treatments or bundling payments to save money and promote more efficient care. Its important to note that the board can’t raise fees or ration care, but has  significant power to tinker around the edges.

You’re probably thinking: well, that sounds good and all, but why is this board so important? Several reasons:

It can succeed in cutting costs where Congress has failed.

Medicare will be a large contributor to the nation’s debts in the future. Even though Medicare is much more efficient than private insurers at controlling costs, health care costs are still rising at an unsustainable rate in the economy as a whole. This affects Medicare as well. So, when health care costs rise in the private sector, Medicare can’t be too far behind.

Congress has tried and failed to control costs in Medicare. It tried to slap a sustainable growth rate (SGR) on Medicare but that has been permanently delayed by later Congresses. Congress caved to special interests when it made Medicare’s prescription drug benefit and the result is that drugs cost much more here than in other countries (which is why people go to Canada for cheap prescription drugs).

It should be no surprise to anyone that Congress is inept at saying “no” to special interests. The IPAB takes responsibility for saying “no” out of Congress’s hands. As a panel of healthcare experts not responsible for raising campaign contributions or dealing with lobbyists, the IPAB can succeed where Congress has failed. The CBO projects that the IPAB will save the country billions in Medicare spending.

IPAB can make all health care cheaper and more effective

Medicare does  not exist in a vacuum. When costs in the private sector go up (and they have been for years), Medicare’s costs must go up as well. IPAB can help by making both Medicare and our health system as a whole, more effective.

Our system is plagued by inefficiencies, and as a result we have the highest healthcare spending per capita in the world. Its important to note that all our extra spending hasn’t bought us any better healthcare than the rest of the world enjoys. Our life expectancy is 36th in the world (right below Cuba). Clearly there are ways to drastically improve healthcare in the US. How are they going to happen?

Because Medicare occupies such a huge part of the health care market, reforms to that program have the ability to spread throughout the healthcare system. Peter Orszag, Obama’s former budget director has said 

If the board realizes its potential to push Medicare toward paying for better quality care, as opposed to paying for more care, “it could well turn out to be perhaps the most important component of the new legislation,”

For example, if Medicare starts lowering payments to hospitals with high re-admission rates, hospitals will have to improve their treatment methods or else lose a lot of money. That will save all health insurers money, not just Medicare. If bundling payments does save money and improve care, private insurers might start copying Medicare, so that their costs go down as well. If Medicare stops paying for new and expensive procedures that have not been proven to work better than older, cheaper procedures, then private insurers will have the cover to do that as well.

Those are just a few ways that innovation in the large Medicare market can spark innovation through the private sector (where the costs really are located) as well.

There is no good alternative to IPAB

The alternative to controlling costs through the IPAB are, as I understand them, thoroughly underwhelming. Adopting a complete single-payer system in the US would work, but it is unlikely to happen. The other options are to

  1. raise taxes until health spending starts slowing, or
  2. shift costs.

I’m no fan of simply raising taxes every time health care spending increases and option 2 seems equally terrible. This is the plan proposed by Republicans. They have proposed giving everyone who would traditionally be covered by Medicare a small voucher that they could use to buy insurance on the private market. Since private insurance is much more expensive than Medicare, seniors would be responsible for almost all of their own costs.

Another alternative would be to raise the Medicare age from 65 to 67. This option, as the graph below shows, would save the federal government money, but would actually increase system-wide costs as a whole. 

Neither of the alternatives would not slow the growth in medical costs. They would just be the equivalent of the federal government saying “somebody else should pay for it!” That “somebody else” would be you, me, employers and state governments.Shifting costs is just a budgetary sleight-of-hand that saves the federal government a nickel but charges everyone else a dime.

If implemented correctly, the IPAB can get our growing federal health care budget under control. It also has the potential to reduce costs and improve quality in the private market. Growing health care costs are the greatest future budgetary threat to the US. The IPAB is the only serious, recent effort that has the potential to both improve care and lower costs in our health care system. We sorely need it.

Long-term versus short-term problems in the US

There are many daunting issues facing the United States. This country has an employment problem, a debt problem, an infrastructure problem and a political problem, to name a few. However, not all of these problems are created equal. Some are causing immediate  pain to the country (unemployment) while others are not currently causing us any pain at all (debt). The crucial distinction that people often forget when they talk about the country’s “problems” is that there are long-term problems and there are short-term problems and the these issues need to be tackled as such.

For instance, the US does not currently have a debt problem. Interest rates are at record lows and investors are actually paying the US to borrow more money. The US government’s debt load is not currently hurting the US economy at all. However, in about ten years or so, we will have a debt problem because around then the world economy will be different and we will not be able to borrow money for free. We will have to bring down our debt over the next decade or so, but for the time being, our debt is not really a even a nuisance. Therefore, our debt is a long-term problem. Solutions to that problem should focus on taming long-term drivers of debt, not on de-funding NPR or other such nonsense.

The US has an immediate employment problem. We have an unemployment rate of 9 percent and millions of people stuck in jobs they don’t want to be. This is a short-term problem that requires a short  term solution. Unfortunately, a solution to our employment issues is likely to involve measures  that temporarily increase the deficit. The government can solve the jobs problem,  but to do so it has to temporarily increase the deficit. That’s OK, because for now we do not have a debt problem– that problem is off in the future– and to a certain extent, we have to solve the jobs problem before we can solve the debt problem. To solve the debt problems we  need more people working and less people on public assistance (the symptoms of our jobs problem). Temporary spending now can solve our jobs problem, while also setting the stage for solving our debt problem down the road.

The US also has an infrastructure problem. Most  of our bridges, dams, schools, levees, highways, power lines and railroad tracks were built before the 1970s. The number of deficient dams in the US tripled from 2001 to 2007, while our roads are crumbling, even as the funding to replace them is dropping. We obviously need infrastructure, and sooner or later the bill to fix our bridges will come due. Call it our second national debt. When you run budget deficits every year, they eventually add up and have to be re-payed. When you underfund your infrastructure  every year, it eventually has to be rebuilt. There’s no way around it. Fixing our infrastructure will cost money and will hurt the deficit whenever it is done. I’d say its a long-term problem, though its  best to fix it now. If we fix it now, while borrowing is free, it will hurt the debt much less than if we do it years from now when borrowing costs us money again. Spending money now on fixing our infrastructure will also put people back to work, helping to solve our jobs crisis. The solutions to all these problems have a way of intermingling.

Finally, our political crisis. This is both a short- and a long-term problem for the US. S&P downgraded US debt because they believe our political system will be unable to solve our debt problem. Businesses won’t invest in the economy because they don’t think our jobs problem will be solved soon. Foreigners are increasingly unwilling to invest in the US  because our infrastructure is lagging behind.

All this leads back to Washington. We have a political system that people have no faith in. Republicans almost caused a default back in August and rejected a proposal that would have solved our debt problem. There’s been almost no movement on jobs since last January, and the political system seems unable to complete even the simplest tasks. I fear this may be the most difficult problem to solve. Its a shame because solving our political problem is also the key to juggling and solving our other impending short-and long-term predicaments.

What “cutting spending” means

Can we just think for a second about Republicans’ plan to “fix” the economy? You know what their plan is. Republicans say we need to lower taxes on the rich (not the poor) and cut spending to create  jobs. Recently, their efforts have been directed toward cutting government spending. And I’m not talking about the old “cutting waste, fraud and abuse” line that every politician uses compulsively. That’s important but its not what Republicans want to do. They just want total government spending cut down.

Here’s  the big question: how does cutting spending create jobs? The thing is, when you cut funding for NPR, the EPA or what have you, that means that the EPA has to cut its budget and Joe the EPA guy loses his job. How does firing Joe help other people get employed?

Its pretty clear how firing Joe hurts other job-seekers. They now have to compete against one more person for their next job! How does the government firing Joe help Best Buy, for instance, hire more workers? Again, its pretty clear how firing Joe will hurt Best Buy. Joe was going to buy a new plasma screen TV for his family, but now that he’s laid off he can’t afford it anymore. I’m seeing plenty of ways that firing Joe and his 1,000 EPA buddies will hurt the economy, so how would it help the economy?

In the GOP’s weekly address on April 23 of this year, Sen. Mike Johanns tried to explain how cutting spending (firing people) would somehow help the economy:

The current record-setting deficits – and the $14 trillion plus in accumulated national debt – are serious impediments to job creation because they have a ripple effect right to Main Street.

Our job creators can’t thrive in an environment where creditors pull back because of our government’s debt, because without credit, small businesses can’t grow.

Our debt threatens to devalue the dollar which will lead to increased costs and interest rates, which has a chilling effect on small business growth.

Ah, so that’s  how firing government workers will somehow “create jobs.” Republicans are saying that, in a roundabout way, eliminating government jobs will “create” jobs in other sectors because our debt is keeping businesses from hiring. Apparently, investors don’t want to lend money and our debt is causing high interest rates. This is what Johanns says is hurting growth. Of course, that’s all nonsense.

from The Washington Post/Ezra Klein

The graph on the left shows what kind of interest rates the US government is paying on its debt. Johanns says that our large amount of debt should be leading to “increased costs and interest rates.” What we are seeing is quite the opposite. Currently, the US has record low interest rates on its debt. How low? Well, once those lines on the graph go below zero, that means that investors are actually paying the US government to hold their money. You read that right. Right now investors want to buy the US government’s debt so badly that they are willing to actually pay the government for the opportunity to hold its debt for a few years. This is the exact opposite of what Johanns says should be happening.

So now we’re back to the start. How does cutting government spending help the economy? It doesn’t. It hurts the economy because cutting government workers just adds more bodies to the legions of the unemployed. Increasing unemployment right now is an economic recipe for disaster. Cutting spending will not lower interest rates (they’re already below zero, how much lower can they go?) or help anybody on “Main Street.”

Cutting spending is not an economic plan. It is an ideological position. If you favor reduced government spending, that’s fine. Just don’t pretend that it will create  jobs. Republicans’ plan will just put more people out of work, take money out of consumers’ hands, raise the number of people drawing unemployment benefits, and increase the number of people looking for even more scarce jobs.

What taxes do Republicans like?

I’ll save you from having to read until the end: whatever you can say about them, Republicans like regressive taxes and dislike progressive taxes. Or perhaps I should say: all the taxes that Republicans are in favor of draw their revenue disproportionately from the poor (regressive taxes) while all the taxes that they want to abolish draw their revenue disproportionately from the rich (progressive taxes). Either way, if you make something north of $200,000 every year, Republicans (who represent most conservatives now) want to lower your taxes. If you make less than that, then Republicans want your taxes to stay the same or increase. Explained below. Continue reading