The Obama Administration's Disingenuous Reaction to Canceled Policies

Let me start by saying that I support the goal of universal health coverage and I supported most aspects of the Affordable Care Act as passed by Congress (though I never accepted a commerce clause power to impose an individual mandate - I'm perfectly comfortable with the mandate operating as a tax penalty). That said, I continue to be troubled by the impact of the Affordable Care Act on the individual market. But I'm bothered more by the disingenuous response from the Obama administration - they're claiming that individual plans were grandfathered and are being canceled by the choice of the insurers. This is not correct. The actual legislation did have  a grandfather provision that should have allowed people to keep their insurance - as the President repeatedly assured the public.

But the implementing regulations (see page 34560), as written by the U.S. Department of Health and Human Services, altered the grandfather provision such that any changes to a grandfathered plan, as small as a $5 increase in co-pays, would require that the plan meet the minimum requirements of the ACA. Plans change yearly - co-pays, deductibles, premiums - so the regulations essentially guaranteed that most grandfathered plans would be canceled by the time of implementation. The proof of this can be found in the regulations as published in the Federal Register. The Department of Health estimated that 50-75% of the 14 million people with insurance on the individual market would lose their coverage. So it's simply untrue for the Administration to deny responsibility - the regulations came from the Executive branch and because they are regulatory and not legislative they could be undone by the Administration. It was a conscious choice to have these insurance plans disappear. And the President continued to assure people they could keep their existing plans even after the estimate of 50-75% cancelation of coverage for the 14 million in the individual market was published. 

 

The other argument from the administration is that these folks who lose their existing coverage will now receive much better coverage than they did under the canceled plans. But this better coverage comes at a price and in many cases very severe price increases. Some of the people will qualify for subsidies while others won't. And premium increases are so steep in some cases that even with the subsidy out of pocket costs will be higher. Of greater concern are the very high deductibles allowed by the ACA. So many people are now facing higher premiums AND thousands in deductible costs. High deductibles have been shown to discourage health care utilization - challenging the claim that people will be better covered.

 

Then there is the argument that folks will get subsidies. The subsidies come in the form of tax credits. Folks have two choices - they can wait until they file their taxes and receive a lump sum subsidy OR they can have the government send the money from the estimated credits to insurers each month. Under option one, you're required to shoulder the full cost throughout the year and then get repaid at tax time (without interest). Under option two, you must estimate your income for the year and then your monthly subsidy will be based on the estimate. If you underestimate, you will be required to repay the government come tax time. Many of the folks in the individual market are self-employed and therefor lack easy to predict income.

The subsidies phase out as income rises and any person earning more than $46,000 per year, or a family earning more than $94,000, receives no subsidy. NBC news provided the example of George Schwab of North Carolina - his existing plan for he and his wife cost $228 per month, but it was canceled. The best price he's been able to find so far is $948 per month. According to the subsidy calculator provided by the Kaiser Family Foundation even if Schwab and his wife earned as little a $45,000 per year - combined - the subsidy would bring the cost of their new plan down to $368 per month. That's a 50% increase even after the subsidy - assuming they earn no more than $45,000 per year. If they earn $55,000 per year their premium costs, after subsidy, would nearly double. The Schwabs would need to have combined earnings of $35,000 per year or less to qualify for a subsidy sufficient to bring the cost of their new plan below that of their canceled plan.  And none of this takes into account the fact that minimum coverage plans allowed under the affordable care act have large deductibles.

 

Based on the Administration's own estimates, the coverage of upwards of 10 million people will be disrupted. The ACA will extend coverage to 32 million of the roughly 50 million uninsured - this is a laudable accomplishment. But to me, the extension of new coverage does not justify the disruption of so many existing plans. Especially given that the disruption of those plans is not essential to the ACA. In fact, it increases the overall cost of the law due to the new subsidies unanticipated during the legislative stage. And these subsidies will simply serve to enrich insurance companies.

 

Legislation is set to be introduced in the House to overrule the regulations and reinstate the grandfather provision. But I doubt Harry Reid will allow a vote in the Senate and at this point, many plans have already been canceled. Ten Democratic Senators have signed a letter requesting a delay of the individual mandate. This should be done to allow time to sort out some of these serious problems. Unfortunately the GOP stance appears to be "no help to fix the law" and the Democratic approach appears to be no willingness to acknowledge this very serious problem. So 10 million Americans will continue to receive cancelation notices.

Quick Thoughts on New Gonzales Poll

Maryland's best pollster, Gonzales Research, has a new survey out looking at the Democratic primary in 2014. I'll have a longer post soon, but here are my quick thoughts.

Brown:
He's clearly the frontrunner, The poll has him topping Gansler 41% to 21%. The Brown folks made a decision last year to start the campaign early and gather endorsements. They knew that Gansler was the presumptive frontrunner and they wanted to upend that conventional wisdom - the succeeded.
But there are warning signs for Brown. After 7 years as Lt. Gov and months of dominating the MD 2014 news, he has a 4% favorability rate and 35% have a neutral opinion of him. Most concerning is the fact that he has 82% name recognition - but is at 41%. Is that his ceiling?

Gansler:
Fire your campaign manager now! The time between Halloween and Thanksgiving is a great time for a campaign shake-up, because people are distracted. Gansler is at 21% in the poll. But Gansler has an opportunity. Fully 37% of Democrats did not recognize his name - so some of Brown's lead may be simple name recognition (there is evidence of a name recognition effect in the poll of Attorney General candidates). Gansler needs to start spending some money and get his name out there. Gansler has to hope that the 37% who don't know his name didn't learn it this weekend with stories about speeding and mistreatment of state troopers, to say nothing of the "henchmen" comment. Gansler has to introduce himself to that 37%, before the Brown campaign introduces him.

Mizeur:
The news is just bad. The poll has her at 5%. Mizeur has been running a clean and positive campaign. An unorthodox campaign centered around community and volunteerism. Mizeur is running the kind of campaign that would make people proud of politicians. But no one knows it. Fully 79% of Democrats did not know her name. Gansler has the money to introduce himself to voters, Mizeur does not.

Summary:
Brown's ahead and his campaign should be proud of what they have accomplished. In a true three person race Brown's 41% would be fantastic. But this doesn't look much like a three person race. And with high name recognition and 7 years on the job, I wonder if Brown is nearing his ceiling at 41%?

Gansler has an opportunity to introduce himself to the 37% who don't know him and to start tapping into the one-third of undecided voters. With Mizeur at 5% this is starting to look like a two person race and Brown's clearest advantage was in a 3 or 4 person race. But before Gansler can recover, and he has plenty of time, he needs to shake up his campaign - the sooner the better. The Brown team has been at least two steps ahead of Gansler and now Gansler needs a team that is up to the challenge.

Do You Think You Can Balance the Budget?

I have decided to share the Budget Simulation that I developed for my Pubic Policy class. I first created the simulation in 2007 to help students understand the various areas of the federal budget and the difficult choices involved in cutting programs or increasing taxes. Over the years I expanded and improved the simulation. It's very easy to use if you follow the directions. Your task is to get the deficit under control. The simulation contains actual budget data for FY 2013. Spending is organized by budget function and subfunction. If you place your mouse over any of the function or subfunction boxes a pop-up box will provide a description of the programs covered. You are free to increase or decrease spending. I have excluded Medicare and Social Security from simple percentage increases or decreases and instead provided specific reform options for you to review later in the simulation.

At the end of the spending changes you will find a tally box that reveals... your changes in spending and resultant changes in your deficit. The original values for each are also presented.

In the next section you are given the opportunity to change revenue by make changes to tax policy. You cannot propose specific tax rates, but what you can do is propose increases or decreases to the tax burden of different income groups - from the bottom 50% to the top 1%. The simulation shows how much income tax revenue is currently collected from each. If you mouse over the boxes for the income groups you will see additional information concerning their current share of income taxes paid. You can also change federal excise taxes and corporate taxes.

Next you're given the option to expand or decrease tax expenditures such as the home mortgage interest deduction, the earned income tax credit, and the employer deduction for health insurance costs. These popular deductions translate into lost revenue. Reducing them means more revenue and expanding them means less. Mouse over each option to learn more.

Finally, you have a selection of possible reforms to Medicare or Social Security. Here your choice is to either leave them alone or enact the specific proposal.

When you're done, return to the tally box to see how much you changed total federal revenue.

On the right side of the screen you'll see a table and graph - each tracks the effects of your changes relative to the total economy.

Give it a try, I'd love to know what you think.

Maryland 2014 and the Nonsense of Geographic Balance

The latest stir in the Maryland governors race is the suggestion that Doug Gansler, from Montgomery county, made a mistake by not balancing his ticket with someone from the Baltimore Region. Gansler picked Jolene Ivey from Prince George's. Don Norris of the University of Maryland, Baltimore County said the pick, coupled with earlier controversies regarding the role of race in the campaign and the recent allegations about Gansler and his use of state vehicles, showed that Gansler is "knee-deep in quicksand."*  I have great respect for Don Norris, but knee-deep in quicksand? Maybe he's up to his ankles in a mud puddle. I've been arguing for two years that Brown is the favorite in this race, but that does not mean that Gansler is out of contention. And his "failure" to pick a Baltimore-based running mate has not placed him deeper in the muck and mire.

No one has suggested that Lt. Gov. Brown, from Prince George's, failed the regional balance test when he picked Howard County Executive Ken Ulman. This is apparently a balanced ticket. Nonsense! Let me be clear, the only folks who would argue that a PG/Howard ticket is geographically balanced while a MoCo/PG ticket is regional are folks who have never looked at a map of Maryland!

The reality is, we have two tickets representing what could best be described as central Maryland and the DC suburbs. The tickets represent the reality of the Democratic party in Maryland - it is comprised of a shrinking Baltimore City core that travels down the I-95 corridor before blossoming around the DC beltway in Montgomery, Prince George's, and Charles counties. Vast swaths of Maryland are essentially foreign turf to the Maryland Democratic party.

Map of Maryland Counties

None of the counties represented by the Gansler/Ivey or Brown/Ulman tickets offer a reasonable representation of the state. Montgomery and Howard counties are incredibly well-off and enjoy great schools and low unemployment - they represent an upper-income privileged Maryland quite unfamiliar to residents in Western Maryland, significant portions of Northern Maryland, and a lot of folks on the Eastern shore.

Demographics of MD, Montgomery, Howard, and Prince George's Counties
	Maryland	Montgomery	Howard	Prince George's
White	53.90%	49.30%	62.20%	19.20%
Black	30.00%	16.60%	17.50%	64.50%
Asian	6.00%	13.90%	14.40%	4.10%
American Indian and Alaska Native	0.50%	0.40%	0.30%	0.50%
Native Hawaiian or Pacific Islander	0.10%	0.10%	0.00%	0.10%
Multi-Racial	2.50%	4.00%	3.60%	3.20%
Hispanic or Latino	6.90%	17.00%	5.80%	14.90%
Number of Schools in Newsweek's Top 20 Best High Schools in the state
		7	4	1
Placement among the 25 wealthiest counties in US		11	3	-
Unemployment (July 2013)	7.10%	5.30%	5.50%	7.10%

More than anything though is the nonsense that a ticket that sought to balance the Baltimore and DC region has been a long standing tradition in Maryland politics - one that Gansler has broken.

For over 100 years between 1867 and 1970 Maryland had no Lt. Governor. The office was abolished. So any tradition can only extend to 1970. In our first election with a restored Lt. Governor in 1970 Marvin Mandel of Baltimore City selected Blair Lee III of Montgomery County - and I guess a noble tradition of balance was born. Like so much else that came from the 1970s though, it's worth asking if we started a tradition or a fad.

Maryland's next governor, Harry Hughes, hailed from Caroline county over on the Eastern Shore (imagine that happening today). His first term Lt. Governor was Samuel Bogley from PG county and his second term Lt. was Joe Curran, Jr. from Baltimore City. So I guess Hughes continued the tradition by picking someone from each region for each of his two terms? I guess Baltimore area voters in 1978 just had to have faith that when he ran for re-election in 1982 he'd dump Bogley and deliver on the tradition of regional balance. We could split hairs and recognize that Hughes relocated to the Baltimore region in 1971 when he became Secretary of Transportation - but the vast majority of his political career was spent and his base were on the Eastern Shore. If we wanted to get that technical then we'd need to discuss Ivey's years in the Baltimore region.

This brings us to 1986 and the election of William Donald Schaefer. Schaefer, then Mayor of Baltimore City, selected as his Lt. Gov. Senate President Mickey Steinberg. Steinberg was from..... Baltimore County.  And how did voters react to this tragically imbalanced and very regional ticket? By electing and re-electing Schaefer with overwhelming margins.

PG county Exec. Parris Glendening returned to the tradition in 1994 and picked Baltimore area attorney Kathleen Kennedy Townsend - but Townsend, lacking any experience as an elected official, was picked based on name recognition and fundraising potential more so than any commitment to geographic balance. Glendening's return to tradition was greeted with a very narrow election victory. The Baltimore/PG combination held for the next two governing teams. Baltimore's Bob Ehrlich picked PG's Michael Steele (though it's unclear why a Republican team would look to the Baltimore/DC balance tradition) and Baltimore's Martin O'Malley picked PG's Anthony Brown.

Based on this history of elections since 1970 there has arisen this mythology of Maryland gubernatorial elections that a ticket must be geographically balanced. The simple reality is Maryland's population is moving. The Baltimore region, and especially Baltimore City, was once the central hub of political power in the state - that is no longer the case. The new power hub in Maryland is wrapped around the DC beltway. Montgomery and PG counties are crucial to any Democrat seeking office - Baltimore is no longer the crucial region it once was. By picking Ken Ulman as his Lt. Governor Anthony Brown very much acknowledged that transition. Howard county borders both 20th Century Maryland to the its north and 21st Century Maryland to its south. With his pick, Brown wanted credit for picking a balanced ticket that held to tradition - and the press has largely given him that credit.

But the simple truth is this - neither ticket is any more geographically balanced than the other. To say Howard county is in the Baltimore region is like saying Montgomery County is in Western Maryland - it doesn't pass the sniff test. I understand that the US Office of Management and Budget places Howard in the Baltimore-Columbia-Towson, MD Metropolitan Statistical Area (MSA), but Anne Arundel and Queen Anne's counties are there as well - I don't think anyone would suggest a running mate from Queen Anne's would've brought the Baltimore region into the race. Howard straddles the line between Baltimore and DC, it's no more one than it is the other. In fact, I miss my days as a Howard resident - I could get the Baltimore and DC stations on my cable and satellite service! Montgomery county is in the Washington–Arlington–Alexandria, DC–VA–MD–WV MSA, but so are Frederick and Calvert - and most folks still consider Frederick and Calvert as distinct from Montgomery and Prince George's. So the MSA groupings are less than useful measuring sticks. Especially given all of the afore mentioned counties are in the larger Baltimore-Washington metropolitan area... confused yet? The map below may or may not help....

Montgomery, Howard, and Prince George's Counties are very different from one another and each ticket offers voters with a team that does represent very different parts of Maryland. But the notion that PG/Howard is balanced while MoCo/PG is not is utter nonsense.

Rather than obsessing over geography we should be looking at the candidates themselves. Both Brown and Gansler have made incredibly impressive choices. Both Brown and Gansler are offering voters an incredibly dynamic team. Both Brown and Gansler have picked future leaders in state politics. The simple reality is this, whether Democrats nominate Brown/Ulman or Gansler/Ivey they will have nominated an impressive team. On many crucial issue there's not a dime's worth of difference between the teams. This is probably why we have been inundated with meaningless stories about the state of the campaign, and hollow scandals, instead of substantive stories about the issues of interest to voters.

Let's hope that changes soon.

*In an earlier version of this post I failed to note that Don Norris identified several factors other than the Ivey pick as evidence of the Gansler campaign troubles. I have now included the larger context of his quote. I regret the error.