The Subsidy Solution Won’t Save Obamacare

The Subsidy Solution Won’t Save Obamacare

The Subsidy Solution Won't Save Obamacare

As the election season draws to a close, the Department of Health and Human Services released some news that might qualify as an October Surprise: benchmark premiums for health insurance under the Affordable Care Act (ACA) will rise an average of 25 percent in 2017. These changes range from an increase of 145 percent in Maricopa County (Phoenix), Arizona, to a decline of 12 percent in Marion County (Indianapolis), Indiana. Several states only have one insurer offering plans on the ACA’s exchanges.

Skyrocketing premiums and insurer withdrawals have all the attributes of a death spiral, wherein the benefits of insurance do not exceed the costs for many prospective enrollees. Without healthy people to cover the costs of insuring sick people, insurers must either raise premiums or exit the market altogether. Regulations prohibit insurance companies from pursuing other solutions, such as trimming unnecessary benefits or charging more to the most expensive groups to cover. The end result is a collapse of the marketplace.

"Nothing to Worry About"

The Obama administration argues that fast premium growth is nothing to worry about because most people receive government subsidies to help them cover the cost of insurance. According to the HHS release, 77 percent of ACA enrollees can find a 2017 plan for $100 per month or less after taking subsidies into account.

This is misleading for two reasons. First, taxpayers must pick up the tab for subsidies, so high pre-subsidy premiums are not costless. Second, the ACA enrollees in the HHS subsidy figures refer to actual enrollees, not all potential enrollees.

ACA subsidies are mostly based on household income, and they rapidly phase out as income rises. A single, childless 27-year-old with earnings at exactly the federal poverty line ($11,770 for the 2016 enrollment period) qualifies for $225 in monthly subsidies, reducing his monthly premium to just $20. Yet if his income rises to 300 percent of the poverty line ($35,310), he qualifies for no subsidies and must pay $245 per month ($2,940 per year) for coverage. For this 27-year-old, 200 percent increase in income causes a 1,125 percent increase in premiums.

Note: I calculated these figures using this tool from the Kaiser Family Foundation. They refer to 2016 premiums; 2017 premiums will generally be higher.

Naturally, many people who qualify for little or no subsidy will skip paying thousands of dollars for coverage and instead pay the $695 fine for being uninsured. Since subsidies phase out as income rises, middle-class households make up a sizeable chunk of the uninsured, despite the perception that the uninsured are overwhelmingly poor. Forty-seven percent of the nonelderly uninsured had an income above 200 percent of the poverty line in 2015. Just a quarter of the nonelderly uninsured were below the poverty line.

More Money, Better Health, No Subsidies

According to the Kaiser Family Foundation, three million people who did not enroll in ACA coverage in 2015 were ineligible for subsidies due to their high incomes. Another 5.3 million were eligible for subsidies but did not enroll, possibly because the government assistance did not cover enough of the premium to make purchasing insurance worthwhile.

As there is a well-known correlation between income and health, ACA enrollees are likely to be sicker as a whole and thus more expensive to insure.The result is that the group of uninsured individuals who choose to purchase coverage through the ACA are disproportionately eligible for the most generous subsidies, and are thus likely to have lower incomes. As there is a well-known correlation between income and health, this also means the pool of ACA enrollees is likely to be sicker than the population as a whole, and thus more expensive to insure.

This is why it is misleading to argue that post-subsidy premiums matter more than pre-subsidy premiums. When pre-subsidy premiums increase at a faster rate, richer (and healthier) people will balk at ACA coverage. The group of people who do enroll will skew poorer and thus be eligible for more generous subsidies. As a result, post-subsidy premiums will appear lower. But pre-subsidy premiums will drive a richer and healthier group of people away from the ACA exchanges. The sicker pool of remaining enrollees will contribute to increases in the cost of insurance. Not to mention, many middle-class people will end up uninsured.

The 25 percent premium increase in 2017 will only exacerbate this pattern. People who receive little or no subsidy will disproportionately abandon the ACA exchanges, meaning that the net average premium for people who remain will be lower. The ACA’s defenders will cite that figure as evidence that premium increases are not as bad as they seem. But it will really show that the law is failing, as generous average subsidies (and lower net premiums) are consistent with a poorer, smaller, and sicker pool of enrollees – a recipe for collapse.

To prevent the collapse of the ACA exchanges, Congress would need to either increase individual mandate penalties or pour more taxpayer money into exchange subsidies. In other words, the only “fixes” to the law are either very unpopular or very expensive – and might not even solve the problem. The record shows that it is time to abandon the ACA model altogether.

This first appeared at E21.

Preston Cooper

Preston Cooper is a Policy Analyst at Economics21.

 

This article was originally published on FEE.org. Read the original article.

Why I’m Voting for Gov. Gary Johnson

Why I’m Voting for Gov. Gary Johnson

If I were a Democrat, then I’d be as furious with my fellow partisans for nominating Hillary Clinton as I am at my fellow Republicans for nominating Donald Trump.

Once again, Clinton is in hot water because of her reckless decision-making. Her original sin was setting up a home-brew server. Her second sin was deciding to delete thousands of emails under subpoena. Defenders act perplexed as to why the Democratic nominee set up this email system. I assume she had many, many things she wanted to hide — which is why she lied about the whole arrangement.

The GOP nominee lacks conviction, character and self-control. Trump didn’t keep his promise to release his tax returns. He trash-talks women and minorities. In all my years of covering politics, I’ve never seen a campaign where supporters actively blame the candidate’s lack of self-control — not his advisers or pollsters — for the harebrained things he says. Even his most enthusiastic fans say Trump is his own worst enemy.

Clinton or Trump? I truly have no idea which candidate would be worse. Either nominee would take the oath of office in the face of angry partisan foes itching for payback. Either nominee has ample self-destructive impulses likely to empower an army of detractors.

That’s why I’m voting for Libertarian presidential candidate Gary Johnson. The former GOP governor of New Mexico had the right stuff to win election and re-election in a purple state. Johnson believes in small government. He was not afraid to challenge federal mandates. In his first term, he cut the state workforce by 1,200, capped state budget increases at 4.2 percent (down from 10 percent) and vetoed 388 bills, according to the Almanac of American Politics. When he ran for re-election in 1998, he won 55 percent of the vote.

When I tell people I’m voting for Johnson, wags invariably respond: “You mean the guy who doesn’t know where Aleppo is?” (When an MSNBC talking head asked Johnson what he’d do about Aleppo, Johnson responded, “What is a leppo?”) My quick rejoinder: Running mate Bill Weld, the former GOP Massachusetts governor who won re-election in a blue state, can be in charge of foreign policy.

My more serious answer: Johnson doesn’t answer snap questions well in part because he doesn’t have a staple of canned sound bites he endlessly repeats. When I interviewed Johnson this summer, I asked him to name the first three regulations he’d work to eliminate. He drew a blank — he couldn’t name three. He instead said, “I’ll bet that we’re able to do away with hundreds of regulations in a matter of weeks.” Later he mentioned he would get rid of the federal Department of Education and Department of Housing and Urban Development. He’s not afraid to push for smaller government. He has been a strong critic of the failed federal war on drugs. He supports legalizing recreational use of marijuana. That is, he understands where the federal government should pull back.

What We’re Scared About This Halloween: Prosecutorial Discretion Under Notoriously Vague Computer Crime Statute

What We’re Scared About This Halloween: Prosecutorial Discretion Under Notoriously Vague Computer Crime Statute

Should prosecutors have the ability to take advantage of unclear laws to bring charges for behavior far beyond the problem Congress was trying to address? We don’t think so. When not carefully limited, criminal laws give prosecutors too much power to go after innocent individuals for innocuous behavior, like violating a website's terms of use by using a partner’s password to post something for them or print out a boarding pass. And that’s terrifying. It’s also contrary to a long-held constitutional rule requiring vague criminal statutes to be interpreted narrowly—called the Rule of Lenity—intended to ensure that people have clear and unambiguous notice in the letter of the law itself of what behavior could land them in prison.

But recently released federal guidelines for prosecutions under the Computer Fraud and Abuse Act (CFAA), intended to assist prosecutors in deciding when to bring charges under the notoriously vague federal statute targeting computer break-ins, demonstrate that prosecutors have far too much discretion in applying the CFAA. What’s more, the guidelines all but condone use of the CFAA to prosecute cases for political gain, under the guise of “deterrence.”

The CFAA was enacted back in 1986. Amazingly enough, it was prompted in part by fear generated by a fictional movie—the 1983 techno­thriller WarGames, starring Matthew Broderick. The law’s text makes it illegal to intentionally access a “protected computer”—which includes any computer connected to the Internet—“without authorization” or in excess of authorization. But the CFAA does not define “without authorization.” This has given overzealous prosecutors broad discretion to bring criminal charges against individuals for behavior that goes far beyond WarGames’ break-in of a government nuclear weapons control system. Indeed, the government now maintains that the CFAA can be violated merely by doing something on a computer network that the owner doesn't like and has prohibited in its one-sided terms of service. And this is important, because a violation of the law comes with severe penalties. We’re not talking jaywalking here.

Three federal courts of appeal—the Second Circuit, Fourth Circuit, and Ninth Circuit, the three most recent circuit courts to address the issue—have rejected the government’s broad interpretation of the statute. In the context of corporate computer use restrictions, they’ve held that merely disobeying those restrictions cannot give rise to CFAA liability. Each of these courts, along with numerous district courts across the country, have expressed deep concern about the constitutionality of the government’s attempts to use the CFAA to prosecute violations of computer use restrictions.

Despite widespread concern among courts, the recently released guidelines demonstrate that the Department of Justice isn’t listening. Instead, it seems intent on pursuing an overbroad and constitutionally suspect interpretation of the statute in any jurisdiction that hasn’t yet explicitly rejected it.

In fact, the government submitted the guidelines in a pending ACLU lawsuit, challenging the CFAA on First Amendment grounds, as “evidence” that the government won’t abuse the broad discretion conferred to it under its overbroad reading of the law. But the guidelines actually demonstrate the opposite—they confirm the breadth of discretion the government thinks it has under the CFAA.

First, these are “guidelines.” They do absolutely nothing to reign in prosecutorial discretion under the law. These guidelines merely suggest factors that prosecutors “should consider,” not factors that they must consider, before charging a case. Even if prosecutors were required to consider the listed factors (read: they are not), nothing in the guidelines limits their ability to file charges. The guidelines also offer no help to those prosecuted; they expressly state that defendants cannot rely on them to argue that a prosecutor has gone too far.

Second, the government has already abused its discretion under the CFAA, time and time again. Prosecutors used the law’s harsh maximum punishments as a ploy to capture the public’s attention and induce a plea bargain in their tragic case against Aaron Swartz. Aaron, facing up to 35 years in prison under 13 counts for downloading articles from an academic journal database, took his own life.

Prosecutors also tried to use the CFAA to make an example out of Lori Drew in its campaign against “cyberbullying,” despite that it is far beyond the reach of the statute to construe MySpace’s terms of service, which prevented lying about your age and identity, as the basis for a criminal violation. A California court overturned her conviction, but not until three years later.

Prosecutors again used the law’s draconian penalties to bring public attention to its prosecution of journalist Matthew Keys, a case involving what essentially amounted to Internet vandalism of a single Los Angeles Times article by a third party suspected of having ties to hacktivist group Anonymous. (The changes to the article were live for only about 40 minutes, and the government presented no evidence at trial to suggest that anyone actually saw it.) Keys, who was convicted of three counts of violating the CFAA, faced up to 25 years in prison and was sentenced to two years, essentially for the 40-minute defacement of the article.

The recently released guidelines seem to condone the use of the CFAA for such political ends—i.e., to draw public attention to cases and make examples out of defendants. Indeed, the guideline suggest that prosecutors consider, when deciding whether to file charges, the “increased need for deterrence” given advancements in technology. When the government mentions “deterrence,” it really means the ability to make an example out of people. Indeed, the government fails to include any evidence that CFAA prosecutions have any true deterrent effect. That’s because the evidence increasingly points the other way—“that lengthy prison sentences and mandatory minimum sentencing [like that imposed by the CFAA] cannot be justified on deterrence.”

Perhaps most distributing, the guidelines suggest that advancements in technology generally weigh in favor of more federal prosecutions—and more serious prosecutions. Under this logic, we’ll be seeing more abuse of prosecutorial discretion under the CFAA, not less.

As the Second Circuit recognized last year in rejecting the government’s broad interpretation of the CFAA, “[w]hile the Government might promise that it would not prosecute an individual for checking Facebook at work, we are not at liberty to take prosecutors at their word in such matters. A court should not uphold a highly problematic interpretation of a statute merely because the Government promises to use it responsibly.” We hope other courts feel the same way and continue rejecting the government’s highly problematic interpretation of the CFAA. Otherwise, it’s clear that prosecutors will continue to use the outdated statute in truly scary ways.

How Gary Johnson wants to transform America

How Gary Johnson wants to transform America

Libertarian presidential candidate Gary Johnson has a big idea: smaller government.

Johnson’s campaign is founded on the principle that smaller government will mean greater freedom for citizens, both economically and in their personal lives. It’s the policy glue that holds together his fiscally conservative, socially liberal and noninterventionist message.

 A look at some of his main proposals.

BALANCE THE BUDGET

Johnson predicts that the United States could face hyperinflation if it doesn’t balance its budget soon. He proposes to shrink the federal government by about 20 percent, which would be a historic reduction. But it’s something Congress has not been able to pass under Democratic or Republican control.

He calls for reductions of up to 20 percent in military spending, raising the Social Security retirement age to 72 and eliminating the federal departments of Commerce, Education, Housing and Urban Development and Homeland Security. (Some tasks by those departments would be redistributed to other agencies.)

Johnson’s experience as governor of New Mexico in the 1990s shows how hard it is to cut government. Despite a record 700-plus vetoes, he was unable to shrink the size of the state budget, which was larger when he left office than when he came in. In this campaign, Johnson stresses that some government functions, such as environmental protection, are essential.

ALLOW MARIJUANA LEGALIZATION

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He says that, if elected, he’d take marijuana off the federal government’s list of illegal substances. This wouldn’t automatically make the substance legal but would allow individual states to legalize it.

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REDUCING MILITARY FOOTPRINT

Johnson describes himself as a skeptic of interventions overseas. He opposed the Iraq war and says the U.S. should have withdrawn from Afghanistan shortly after the fall of the Taliban in late 2001.

Today he says the United States should reconsider some of its overseas bases in areas where allies may not need military protection, such as Japan. Johnson says he would not seek to abrogate treaties like NATO, as Republican presidential nominee Donald Trump has suggested doing. This smaller overseas footprint is one way that Johnson would meet his goal of reducing military expenditures by one-fifth.

GREATER LEGAL IMMIGRATION

In a year when Trump rode a wave of anti-immigrant sentiment to become the Republican nominee, Johnson has fiercely defended the value of immigration. He’s mocked Trump’s proposal for a border wall and selected as his running mate Bill Weld, a former Republican governor of Massachusetts who was once nominated to become U.S. ambassador to Mexico.

Johnson proposes making it easier to work in the United States legally, which he argues would cut down on illegal immigration and improve the economy.

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A SINGLE TAX

Johnson advocates a single, simple consumption tax of the sort that most other industrialized nations use. This would replace the progressive federal income tax as well as the complex corporate tax code. Johnson has not released a detailed tax proposal and acknowledges a consumption tax is a distant goal given the complexity of the tax code and political obstacles to a tax overhaul. Consumption taxes tend to burden the poor more than the wealthy because lower income groups spend more of their money on basic goods and services. Johnson would seek to put safeguards in place to prevent any family from paying more in taxes on basic necessities.

He wants to close what he says are special interest loopholes and to simplify business taxes. Johnson was a strong advocate of lower taxes as governor, even vetoing efforts to increase government fees by a few dollars in various remote New Mexico municipalities.