Don’t Ignore the Sebelius Scandal

Published June 10, 2013

Consumer Power Report #377

Amidst all the other scandals capturing Washington’s attention at this moment, the forgotten one is also one of the most obviously egregious: Health & Human Services Secretary Kathleen Sebelius’s solicitation of donations from entities she holds enormous power over through the regulatory state. Alana Goodman reports:

Health and Human Services Secretary Kathleen Sebelius solicited funding from a foundation that holds a significant share of its assets in Johnson & Johnson stock, a move that appears to run afoul of ethics rules, according to a former chief White House ethics counsel.

Sebelius told Congress on Tuesday that she asked the Robert Wood Johnson Foundation (RWJF) to contribute to a nonprofit organization that is working to implement President Barack Obama’s healthcare law. The Robert Wood Johnson Foundation holds 13 million shares of Johnson & Johnson stock valued upwards of $1 billion, making the foundation one of the pharmaceutical company’s largest shareholders.

Sebelius testified that she had asked RWJF and H&R Block for funds and had talked to Johnson & Johnson, Ascension Health, and Kaiser Permanente about the program but had not asked them for funds. She said she did not solicit funds from any entities under her regulatory authority.

However, former White House chief ethics counsel Richard Painter said RWJF’s large investment in Johnson & Johnson, a company under Sebelius’ regulatory purview, makes the foundation a “prohibited source” that she cannot solicit money from under government ethics rules.

“[The Robert Wood Johnson Foundation] might as well be Johnson & Johnson so far as the ethics rules on solicitation are concerned,” Painter, who served as President George W. Bush’s ethics counsel from 2005 to 2007, told the Washington Free Beacon. “The HHS secretary can’t ask them for money.”

On this, the rules seem clear enough:

According to Office of Government Ethics rules, federal employees cannot solicit money from a source that “does business or seeks to do business with the employee’s agency,” “conducts activities regulated by the employee’s agency,” “has interests that may be substantially affected by performance or nonperformance of the employee’s official duties,” or is “an organization a majority of whose members are described” by the preceding criteria. Many current and former RWJF board members were previously Johnson & Johnson executives or work in the healthcare industry.

The approach the administration has taken to the implementation of Obamacare has routinely led them to twist arms, use the IRS for the tough decisions, and advance demands of governors and agencies. But until this point, most of that just appeared to be hardball politics – now, Sebelius may find there’s a line even she can’t cross without sparking serious ethical inquiries. This sort of thing shouldn’t be allowed, and probably isn’t. It’s incumbent upon the representatives of the people to find out what really happened and whether Sebelius should be personally fined or reprimanded.

— Benjamin Domenech



This is not a coincidence.

Temporary staffing jobs hit a record 2.68 million in May as employers look to lighten the burden of ObamaCare’s regulations and fines for failing to provide full-time workers health coverage.

Temp employment grew by 25,600, eclipsing the previous high seen in April 2000. In the past four months, the temp industry has added 99,000 jobs, a spurt that has outpaced the gains in every other sector, except the restaurant industry.

Temp jobs now account for 1.98% of nonfarm payrolls, just below the prior record of 2.03% – but higher than at any time the jobless rate was above 4.1%. That is a noteworthy development, given that temp employment tends to peak with the economic cycle as tight labor markets make temp agencies more indispensable for filling short-term hiring needs.

The boom in temp employment is no surprise because the industry offers ways to minimize ObamaCare’s fines for firms with at least 50 full-time-equivalent workers.

One way temp firms can help is by helping employers to stay below that 50-worker threshold and free from ObamaCare’s regulations. Firms above that level who don’t provide health coverage will face a $2,000 per-worker fine (minus 30 workers), so the 50th employee could mean a $40,000 fine under ObamaCare.

As Keith Waddell, Robert Half International chief financial officer, said on an earnings call earlier this year, “we can legally help them remain under 50, since we are the employer of record for the temporaries we provide to them.”

Employers that do offer health coverage also can face fines, if that coverage doesn’t meet ObamaCare’s affordability and minimum value tests. In that case, employers will face a $3,000 penalty for each full-time worker who taps ObamaCare subsidies.

The temp industry also offers these firms a route to minimize expenses. Consider an employer who needs to hire a full-time worker for a six-month project. If the firm hired this worker directly, it would have to provide health coverage within 90 days of hiring, under ObamaCare rules.



Avik Roy rebuilds his analysis with new data, and while the amounts are different, the effect is essentially the same: The subsidies won’t hide the significant premium increases, even in one of the best individual insurance markets in the country.

In order to assess the impact of subsidies on this population, I conducted a relatively standard analysis using childless, unmarried young men. (You have to get specific on that point because the federal poverty level, which is used to calculate Obamacare’s subsidies, varies depending on the number of people in your household.) What I found was striking: In the healthy population of 25-year-old non-smoking males – the focus of my original study – more than 90 percent of the subsidy-eligible population would face higher premium costs under Obamacare, even when you take the subsidies into account. As you will see in the chart below, the point at which Obamacare starts to cost more is at 162 percent of the federal poverty level, or $18,558 in 2013 numbers. In other words, if you’re a healthy, non-smoking 25-year-old man, and you make more than $18,558, your health insurance will cost more under Obamacare – possibly a lot more.

You can then see the second break-even point, which is where the adjusted pre-ACA premium hits the post-subsidy, post-ACA premium. That is at 183 percent of FPL, or $21,012. But this adjusted rate is less useful for this analysis, because it’s not a real premium from a real plan. … Remember that in California, everyone under 138 percent of FPL will be enrolled into Medicaid, not the exchange. (Writers who suggest otherwise are misleading you.) This is a critical point. If only sick people and a few poor people have an incentive to enroll in the exchange, and the healthy don’t bother, the exchanges could undergo an adverse selection death spiral, like the one we saw in Washington state in the 1990s. What would be the consequences of such a death spiral? Insurance for the sick and the poor would cost a lot more; that extra cost would be borne by higher taxpayer subsidies. In addition, a lot of normal middle-class people will be priced out of the individual market. In other words: if you want insurance on Obamacare’s exchanges to be affordable for the poor and the sick, it needs also to be a reasonable deal for the healthy and the middle-class.

Doug Holtz-Eakins discusses this further here. This could prove even more problematic in insurance exchanges with fewer competing insurers.

SOURCE: Avik Roy


Sally Pipes:

Right now, the United States is short some 20,000 doctors, according to the Association of American Medical Colleges. The shortage could quintuple over the next decade, thanks to the aging of the American population – and the aging and consequent retirement of many physicians. Nearly half of the 800,000-plus doctors in the United States are over the age of 50.

Obamacare is further thinning the doctor corps. A Physicians Foundation survey of 13,000 doctors found that 60 percent of doctors would retire today if they could, up from 45 percent before the law passed.

Doctors are also becoming choosier about whom they’ll see. They’ve long limited the number of Medicaid patients they’ll treat, thanks to the program’s low reimbursement rates. According to a study published in Health Affairs, only 69 percent of doctors accepted new Medicaid patients in 2011. In Florida, just 59 percent do so. And a survey by the Texas Medical Association of doctors in the Lone Star State found that 68 percent either limit or refuse to take new Medicaid patients.

Medicaid pays about 60 percent as much as private insurance. For many doctors, the costs of treating someone on Medicaid are higher than what the government will pay them.

These underpayments have grown worse over time, as cash-strapped states have tried to rein in spending on Medicaid. Ohio hasn’t increased payments to doctors in three years; Kentucky hasn’t raised them in two decades. Colorado, Nebraska, South Carolina, Arizona, Oregon, and Arizona all cut payments in 2011.

By throwing nine million more people into the program without fixing this fatal flaw, Obamacare will make it even harder for Medicaid patients to find doctors. … If Medicaid patients and new exchange enrollees can’t actually see doctors, they’ll head to emergency rooms for care. But the nation’s ERs are already in crisis. More than half are over capacity, after some 650 shut down over the past two decades.

SOURCE: Sally Pipes


The legislature vs. Brewer.

Facing a looming budget deadline and a bitterly divided Republican caucus, the state House today takes up Gov. Jan Brewer’s plan to expand Medicaid along with a controversial abortion bill some say is designed to kill the governor’s top legislative priority.

The House Appropriations Committee will hold what is expected to be a contentious hearing on the two bills, likely ending with the defeat of Senate Bill 1492, which outlines Brewer’s plan to broaden Medicaid eligibility under the federal health-care overhaul.

A bipartisan coalition of lawmakers supporting expansion is already planning ways to revive the Medicaid-expansion bill on the House floor, probably by tacking it onto another piece of legislation.

Members of that group believe they have enough votes to pass Medicaid expansion, along with the Brewer-supported budget that cleared the Senate last month and included the Medicaid plan.

For the public, today’s hearing is the last chance to weigh in at the Legislature on one of the most significant and divisive public-policy issues Arizona lawmakers have faced in decades, one that will have profound human, fiscal and political impact for years to come.

Expanding Medicaid would provide health insurance for about 350,000 poor Arizonans and would be funded mostly by federal dollars and a so-called bed tax on hospitals.

“This is Medicaid day,” said House Speaker Andy Tobin, R-Paulden. “It’s a very big issue and deserves the time to debate it. I expect it to be a very long day.”

Tobin said the committee will consider the nine remaining bills that make up the fiscal 2014 budget later in the week, perhaps as early as Tuesday.

That sets the stage for House floor debate on the budget and Medicaid later this week and, if the Senate concurs, an end to the 5-month-old legislative session.

The speaker spent weeks trying to sell a plan to put Medicaid expansion to a public vote and increase the amount that hospitals are reimbursed for treating Medicaid patients.

But Tobin conceded last week that he didn’t have enough votes in his GOP caucus, which – like the Senate’s – has been fractured by the Medicaid issue.

SOURCE: Arizona Central


Remember the individual v. family thing?

A congressional mistake that could cause nearly 4 million people to be ineligible for federal subsidies in President Obama’s health care law has prompted Massachusetts officials to launch a new effort to try to close the gap.

Under what has become known as a “glitch” in Obama’s health plan, eligibility for insurance subsidies will be based on how much it costs workers who buy an individual plan, not the far more expensive family plan. The glitch would affect uninsured spouses and an estimated 460,000 children of workers who cannot afford the family coverage offered through employers.

Although that was not what lawmakers say they intended, partisan congressional gridlock has closed off efforts to fix the glitch before the ambitious overhaul aimed at universal coverage kicks in fully next year.

So officials in Massachusetts, where the framework for the national law was first enacted, are stepping in, saying they want to fix the glitch to help those affected in the Bay State. Advocates say they hope Massachusetts’ efforts will focus new national attention on the problem.

Governor Deval Patrick’s administration has proposed a pilot program to allow workers at small businesses who cannot afford family coverage under their employer-sponsored health plans to qualify for subsidies, offered through the state’s Medicaid program, starting in January 2014, said Glen Shor, secretary of the Executive Office for Administration and Finance and former chief of the state’s health insurance exchange program.

The state sent a letter to federal officials last week asking permission for the expansion.

“The pilot program may give us an opportunity to help some people who do fall through the cracks,” Shor said. “In the event this does wind up being a problem for people, we can address it within the resources we have to do so.”

The Massachusetts pilot program, which is estimated to cost $33 million and would be paid for with state and federal dollars, is still a proposal that is winding its way through the state budget process, Shor said.

State officials could not say how many people in Massachusetts will be affected by the glitch.

The failure of Congress to correct the law’s wording to address its own mistake has frustrated health care advocates.

“The problem is Democrats won’t want to open up the law for meddling, and Republicans don’t want it to succeed, so it’s hard to envision making any changes to improve the law in the hyper-partisan Congress we have now,” said Drew Altman, president of the Kaiser Family Foundation, a nonpartisan organization that analyzes health policy.

SOURCE: Boston Globe


The latest rule:

The Internal Revenue Service is making permanent the 10 percent tax on tanning from ObamaCare.

Indoor tanning services have been subject to the excise tax since July of 2010. It was designed to help offset the sweeping healthcare bill’s cost by raising an estimated $2.7 billion in revenue.

The tax had been considered temporary while the IRS collected feedback from the public and interested parties about how it should be applied. As of Tuesday, the tax will be considered permanent.

“After considering the written comments and comments made at the public hearing, the proposed regulations are adopted as final regulations by this Treasury decision and the corresponding temporary regulations are removed,” a notice to be filed in the Federal Register reads.

Following passage of the Affordable Care Act, a group of nearly two dozen GOP House members pressed legislation to scrap the tanning tax.

SOURCE: The Hill


Jim Capretta:

Obamacare’s advocates like to create the impression that the law set in motion a number of reforms that will bring about greater efficiency in the delivery of care. There is absolutely no evidence of this. The only significant reductions to Medicare contained in Obamacare are the across-the-board provider-payment cuts. These cuts, incidentally, generally make no distinctions based on the quality of care provided to patients. They are the same in most cases no matter how well or badly the patients are treated.

So the supposed improvement in the long-run financial outlook for Medicare that Obamacare’s advocates are hailing is entirely dependent on deep and unrealistic reimbursement cuts. In effect, Medicare is now going to pay providers of services a lot less to take care of Medicare patients. The law’s advocates want us to believe these cuts can be imposed without any consequences whatsoever for access or quality of care, which defies basic economics and common sense.

What’s worse, these unrealistic cuts were double counted in Obamcare. They were used to make Medicare’s financial outlook appear better – at least on paper – and to pave the way for Obamacare’s massive entitlement spending expansions, now estimated by the Congressional Budget Office to reach about $1.8 trillion over the coming decade. In other words, the same cuts were spent twice – once on future Medicare claims, and then again on a Medicaid entitlement expansion and premium credits. So, far from improving the nation’s fiscal outlook, Obamacare has made the situation much worse.

In Medicare, Obamacare doubled down on the same kinds of price controls that haven’t worked in the past to improve the efficiency of care delivery. What’s needed instead is a more fundamental reform that relies on consumer choice and market forces to reward high-quality, low-cost systems of care. That’s the way the Medicare drug benefit was designed when passed in 2003, and it is now working far better than anyone ever imagined it would at enactment. The same competitive structure could be adopted in the rest of the Medicare program – with the same favorable financial results as the drug benefit and none of the quality and access problems of Obamacare.

SOURCE: National Review